UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10-Q/A~~10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-13395

SONIC AUTOMOTIVE, INC.

(Exact name of registrant as specified in its charter)

______________________________________


Delaware						56-2010790
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


4401 Colwick Road		28211
Charlotte,	North Carolina
(Address of principal executive offices)		(Zip Code)

(704) 566-2400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

SAH

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July ~~26, 2022,~~25, 2023, there were ~~27,236,398~~23,412,610 shares of the registrant’s Class A Common Stock, par value $0.01 per share, and 12,029,375 shares of the registrant’s Class B Common Stock, par value $0.01 per share, outstanding.

~~EXPLANATORY NOTE~~

~~Unless the context requires otherwise, references to “we,” “us,” “our,” and “Sonic,” refer to Sonic Automotive, Inc. and its subsidiaries.~~

We have prepared this Amendment No. 1 (this “Amendment”) to our Quarterly Report on Form 10-Q for the quarter and six month periods ended June 30, 2022, which was originally filed with the Securities and Exchange Commission on July 28, 2022 (the “Original 10-Q”) to reflect the restatement of our previously issued Condensed Consolidated Statements of Operations for the quarter ended June 30, 2022.

As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by the Sonic’s principal executive officer and principal financial officer are filed as exhibits 31.1, 31.2, 32.1 and 32.2 to this Form 10-Q/A.

~~Internal Control over Financial Reporting~~

In connection with this restatement, Sonic has re-evaluated the effectiveness of our disclosure controls and procedures for the three months ended June 30, 2022. Management has concluded that, in light of the error described below, a material weakness exists in certain internal controls over financial reporting related to the revenue recognition process at a single dealership acquired in December 2021. Based upon such re-evaluation, and due to such material weakness, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2022.

~~Background of the Restatement~~

On October 28, 2022, we filed a Current Report on Form 8-K under Item 4.02 with the Securities and Exchange Commission relating to previously issued financial statements as described below. As indicated in the Current Report on Form 8-K under Item 4.02, we determined that a restatement was necessary due to the effect of an error in its Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2022. The impact on the 2021 consolidated financial statements was immaterial.

During the quarter ended September 30, 2022, we identified an error related to the revenue recognition process at a single dealership acquired in December 2021. Specifically, we did not apply the guidance in ASC 606 ~~Revenue from Contracts with Customers~~ related to transactions which required net reporting of certain fleet sales transactions within the Condensed Consolidated Statements of Operations. The effect of the error was an overstatement of fleet revenue and an equal overstatement of fleet cost of sales. No other financial statements were affected and there was no impact on note disclosures, unless related to the items in the table below.

~~The tables below reflect the sections of the Sonic’s condensed consolidated statements of operations that were impacted by the error.~~

Three Months Ended June 30, 2022 Six Months Ended June 30, 2022
(Dollars in millions) As Reported Adjustments As Restated As Reported Adjustments As Restated
Revenues:
Fleet new vehicles $ 166.4 $ (146.6) $ 19.8 $ 315.0 $ (277.0) $ 38.0
Total new vehicles $ 1,510.7 $ (146.6) $ 1,364.1 $ 3,010.6 $ (277.0) $ 2,733.6
Total vehicles $ 3,081.5 $ (146.6) $ 2,934.9 $ 6,121.0 $ (277.0) $ 5,844.0
Total revenues $ 3,652.8 $ (146.6) $ 3,506.2 $ 7,239.4 $ (277.0) $ 6,962.4
Cost of sales:
Fleet new vehicles $ (165.5) $ 146.6 $ (18.9) $ (313.2) $ 277.0 $ (36.2)
Total new vehicles $ (1,341.5) $ 146.6 $ (1,194.9) $ (2,672.8) $ 277.0 $ (2,395.8)
Total vehicles $ (2,864.0) $ 146.6 $ (2,717.4) $ (5,685.4) $ 277.0 $ (5,408.4)
Total cost of sales $ (3,064.0) $ 146.6 $ (2,917.4) $ (6,079.3) $ 277.0 $ (5,802.3)

To assist in the review of this filing, this 10-Q/A sets forth the Original 10-Q in its entirety, as amended to reflect the changes described above. We believe that presenting all of the amended and restated information in this 10-Q/A allows readers to review all pertinent data in a single presentation. This 10-Q/A amends and restates the Financial Statements to reflect the restated numbers to correct the error. In addition, in this 10-Q/A, corresponding changes were also made to the Part I, Item 2, under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to reflect the restated numbers and Part I, Item 4, under “Controls and Procedures” to reflect an updated evaluation of our financial controls and procedures.

UNCERTAINTY OF FORWARD-LOOKING STATEMENTS AND INFORMATION

This report contains, and written or oral statements made from time to time by us or by our authorized officers may contain, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address our future objectives, plans and goals, as well as our intent, beliefs and current expectations regarding future operating performance, results and events, and can generally be identified by words such as “may,” “will,” “should,” “could,” “believe,” “expect,” “estimate,” “anticipate,” “intend,” “plan,” “foresee” and other similar words or phrases.

These forward-looking statements are based on our current estimates and assumptions and involve various risks and uncertainties. As a result, you are cautioned that these forward-looking statements are not guarantees of future performance, and that actual results could differ materially from those projected in these forward-looking statements. Factors which may cause actual results to differ materially from our projections include those risks described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and elsewhere in this report, as well as:

•the number of new and used vehicles sold in the United States as compared to our expectations and the expectations of the market;

•our ability to generate sufficient cash flows or to obtain additional financing to fund our EchoPark expansion, capital expenditures, our share repurchase program, dividends on our common stock, acquisitions and general operating activities;

•our business and growth strategies, including, but not limited to, our EchoPark store operations;

•the reputation and financial condition of vehicle manufacturers whose brands we represent, the financial incentives vehicle manufacturers offer and their ability to design, manufacture, deliver and market their vehicles successfully;

•our relationships with vehicle manufacturers, which may affect our ability to obtain desirable new vehicle models in inventory or to complete additional acquisitions or dispositions;

•the adverse resolution of one or more significant legal proceedings against us or our ~~franchised dealerships or EchoPark stores;~~subsidiaries;

•changes in laws and regulations governing the operation of automobile franchises, accounting standards, taxation requirements and environmental ~~laws, including any change in laws or regulations in response to the COVID–19 pandemic;~~laws;

•changes in vehicle and parts import quotas, duties, tariffs or other restrictions, including supply shortages that could be caused by ~~the COVID-19 pandemic,~~ global political and economic factors or other supply chain disruptions;

•the inability of vehicle manufacturers and their suppliers to obtain, produce and deliver vehicles or parts and accessories to meet demand at our franchised dealerships for sale and use in our parts, service and collision repair operations;

•general economic conditions in the markets in which we operate, including fluctuations in interest rates, inflation, vehicle valuations, employment levels, the level of consumer spending and consumer credit availability;

•high levels of competition in the retail automotive industry, which not only create pricing pressures on the products and services we offer, but also on businesses we may seek to acquire;

•our ability to successfully integrate ~~RFJ Auto (as defined herein) and~~recent or future acquisitions;

•the significant control that our principal stockholders exercise over us and our business matters; and

•the rate and timing of overall economic expansion or ~~contraction; and~~contraction.

•the severity and duration of the COVID-19 pandemic and the actions taken by vehicle manufacturers, governmental authorities, businesses or consumers in response to the pandemic, including in response to a worsening or “next wave” of the pandemic as a result of new variants of the virus or otherwise.

These forward-looking statements speak only as of the date of this report or when made, and we undertake no obligation to revise or update these statements to reflect subsequent events or circumstances, except as required under the federal securities laws and the rules and regulations of the U.S. Securities and Exchange Commission.

SONIC AUTOMOTIVE, INC.

QUARTERLY REPORT ON FORM ~~10-Q/A~~10-Q

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, ~~2022~~2023

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			Three Months Ended June 30,				Six Months Ended June 30,
		(Dollars and shares in millions, except per share amounts)									2023		2022		2023		2022
		As Restated				As Restated					(Dollars and shares in millions, except per share amounts)
Revenues:	Revenues:									Revenues:
Retail new vehicles	Retail new vehicles	$	1,344.3	$	1,453.2	$	2,695.6	$	2,587.2	Retail new vehicles	$	1,608.2	$	1,344.3	$	3,051.0	$	2,695.6
Fleet new vehicles	Fleet new vehicles	19.8		9.7		38.0		32.0		Fleet new vehicles	28.3		19.8		47.1		38.0
Total new vehicles	Total new vehicles	1,364.1		1,462.9		2,733.6		2,619.2		Total new vehicles	1,636.5		1,364.1		3,098.1		2,733.6
Used vehicles	Used vehicles	1,449.4		1,281.2		2,820.2		2,384.1		Used vehicles	1,305.9		1,448.3		2,650.8		2,818.4
Wholesale vehicles	Wholesale vehicles	121.4		84.8		290.2		159.6		Wholesale vehicles	91.5		121.4		177.0		290.2
Total vehicles	Total vehicles	2,934.9		2,828.9		5,844.0		5,162.9		Total vehicles	3,033.9		2,933.8		5,925.9		5,842.2
Parts, service and collision repair	Parts, service and collision repair	398.1		346.1		778.7		654.2		Parts, service and collision repair	443.7		399.2		874.2		780.5
Finance, insurance and other, net	Finance, insurance and other, net	173.2		177.2		339.7		321.9		Finance, insurance and other, net	175.3		173.2		344.0		339.7
Total revenues	Total revenues	3,506.2		3,352.2		6,962.4		6,139.0		Total revenues	3,652.9		3,506.2		7,144.1		6,962.4
Cost of sales:	Cost of sales:									Cost of sales:
Retail new vehicles	Retail new vehicles	(1,176.0)		(1,335.1)		(2,359.6)		(2,399.9)		Retail new vehicles	(1,466.8)		(1,176.0)		(2,771.5)		(2,359.6)
Fleet new vehicles	Fleet new vehicles	(18.9)		(9.4)		(36.2)		(31.4)		Fleet new vehicles	(27.0)		(18.9)		(45.0)		(36.2)
Total new vehicles	Total new vehicles	(1,194.9)		(1,344.5)		(2,395.8)		(2,431.3)		Total new vehicles	(1,493.8)		(1,194.9)		(2,816.5)		(2,395.8)
Used vehicles	Used vehicles	(1,402.3)		(1,246.1)		(2,725.0)		(2,318.4)		Used vehicles	(1,274.4)		(1,401.7)		(2,589.3)		(2,724.0)
Wholesale vehicles	Wholesale vehicles	(120.2)		(80.3)		(287.6)		(154.2)		Wholesale vehicles	(92.5)		(120.2)		(174.9)		(287.6)
Total vehicles	Total vehicles	(2,717.4)		(2,670.9)		(5,408.4)		(4,903.9)		Total vehicles	(2,860.7)		(2,716.8)		(5,580.7)		(5,407.4)
Parts, service and collision repair	Parts, service and collision repair	(200.0)		(170.5)		(393.9)		(323.4)		Parts, service and collision repair	(223.3)		(200.6)		(440.9)		(394.9)
Total cost of sales	Total cost of sales	(2,917.4)		(2,841.4)		(5,802.3)		(5,227.3)		Total cost of sales	(3,084.0)		(2,917.4)		(6,021.6)		(5,802.3)
Gross profit	Gross profit	588.8		510.8		1,160.1		911.7		Gross profit	568.9		588.8		1,122.5		1,160.1
Selling, general and administrative expenses	Selling, general and administrative expenses	(402.8)		(320.6)		(789.8)		(610.0)		Selling, general and administrative expenses	(391.9)		(402.8)		(804.7)		(789.8)

Impairment charges										Impairment charges	(62.6)		—		(62.6)		—
Depreciation and amortization	Depreciation and amortization	(31.2)		(24.8)		(61.1)		(48.4)		Depreciation and amortization	(36.1)		(31.2)		(70.5)		(61.1)
Operating income	Operating income	154.8		165.4		309.2		253.3		Operating income	78.3		154.8		184.7		309.2
Other income (expense):	Other income (expense):									Other income (expense):
Interest expense, floor plan	Interest expense, floor plan	(6.1)		(4.3)		(11.1)		(9.4)		Interest expense, floor plan	(17.0)		(6.1)		(31.5)		(11.1)
Interest expense, other, net	Interest expense, other, net	(21.3)		(10.1)		(42.1)		(20.4)		Interest expense, other, net	(28.9)		(21.3)		(57.3)		(42.1)
Other income (expense), net	Other income (expense), net	(0.2)		—		0.1		0.1		Other income (expense), net	0.1		(0.2)		0.2		0.1
Total other income (expense)	Total other income (expense)	(27.6)		(14.4)		(53.1)		(29.7)		Total other income (expense)	(45.8)		(27.6)		(88.6)		(53.1)
Income from continuing operations before taxes		127.2		151.0		256.1		223.6
Provision for income taxes for continuing operations - benefit (expense)		(32.4)		(37.0)		(64.0)		(55.9)
Income from continuing operations		94.8		114.0		192.1		167.7
Discontinued operations:
Income (loss) from discontinued operations before taxes		—		(0.2)		—		0.5
Provision for income taxes for discontinued operations - benefit (expense)		—		—		—		(0.1)
Income (loss) from discontinued operations		—		(0.2)		—		0.4
Income before taxes										Income before taxes	32.5		127.2		96.1		256.1
Provision for income taxes - benefit (expense)										Provision for income taxes - benefit (expense)	(9.1)		(32.4)		(25.0)		(64.0)

Net income	Net income	$	94.8	$	113.8	$	192.1	$	168.1	Net income	$	23.4	$	94.8	$	71.1	$	192.1

Basic earnings per common share:	Basic earnings per common share:									Basic earnings per common share:
Earnings per share from continuing operations		$	2.40	$	2.74	$	4.81	$	4.03
Earnings per share from discontinued operations		—		—		—		0.01

Earnings per common share	Earnings per common share	$	2.40	$	2.74	$	4.81	$	4.04	Earnings per common share	$	0.66	$	2.40	$	2.00	$	4.81
Weighted-average common shares outstanding	Weighted-average common shares outstanding	39.5		41.6		40.0		41.6		Weighted-average common shares outstanding	35.3		39.5		35.6		40.0
Diluted earnings per common share:	Diluted earnings per common share:									Diluted earnings per common share:
Earnings per share from continuing operations		$	2.34	$	2.63	$	4.67	$	3.86
Earnings per share from discontinued operations		—		—		—		0.01

Earnings per common share	Earnings per common share	$	2.34	$	2.63	$	4.67	$	3.87	Earnings per common share	$	0.65	$	2.34	$	1.95	$	4.67
Weighted-average common shares outstanding	Weighted-average common shares outstanding	40.5		43.4		41.2		43.5		Weighted-average common shares outstanding	36.0		40.5		36.5		41.2

See notes to unaudited condensed consolidated financial statements.

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(Dollars in millions)									(Dollars in millions)
Net income	Net income	$	94.8	$	113.8	$	192.1	$	168.1	Net income	$	23.4	$	94.8	$	71.1	$	192.1
Other comprehensive income (loss) before taxes:	Other comprehensive income (loss) before taxes:									Other comprehensive income (loss) before taxes:
Change in fair value and amortization of interest rate cap agreements	Change in fair value and amortization of interest rate cap agreements	0.4		0.5		0.7		0.9		Change in fair value and amortization of interest rate cap agreements	1.3		0.4		1.2		0.7

Total other comprehensive income (loss) before taxes	Total other comprehensive income (loss) before taxes	0.4		0.5		0.7		0.9		Total other comprehensive income (loss) before taxes	1.3		0.4		1.2		0.7
Provision for income tax benefit (expense) related to components of other comprehensive income (loss)	Provision for income tax benefit (expense) related to components of other comprehensive income (loss)	(0.1)		(0.1)		(0.2)		(0.3)		Provision for income tax benefit (expense) related to components of other comprehensive income (loss)	(0.3)		(0.1)		(0.3)		(0.2)
Other comprehensive income (loss)	Other comprehensive income (loss)	0.3		0.4		0.5		0.6		Other comprehensive income (loss)	1.0		0.3		0.9		0.5
Comprehensive income	Comprehensive income	$	95.1	$	114.2	$	192.6	$	168.7	Comprehensive income	$	24.4	$	95.1	$	72.0	$	192.6

See notes to unaudited condensed consolidated financial statements.

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(Dollars in millions)					(Dollars in millions, except per share amounts)
ASSETS	ASSETS					ASSETS
Current Assets:	Current Assets:					Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	327.1	$	299.4	Cash and cash equivalents	$	119.7	$	229.2
Receivables, net	Receivables, net	345.9		401.1		Receivables, net	400.6		462.4
Inventories	Inventories	1,240.4		1,261.2		Inventories	1,448.8		1,216.8
Other current assets	Other current assets	157.5		122.4		Other current assets	328.2		297.9
Total current assets	Total current assets	2,070.9		2,084.1		Total current assets	2,297.3		2,206.3
Property and Equipment, net	Property and Equipment, net	1,491.6		1,458.8		Property and Equipment, net	1,559.4		1,561.7
Goodwill	Goodwill	423.5		416.4		Goodwill	242.5		231.0
Other Intangible Assets, net	Other Intangible Assets, net	486.6		480.2		Other Intangible Assets, net	417.4		396.7
Operating Right-of-Use Lease Assets	Operating Right-of-Use Lease Assets	276.5		293.2		Operating Right-of-Use Lease Assets	203.6		260.7
Finance Right-of-Use Lease Assets	Finance Right-of-Use Lease Assets	211.4		179.9		Finance Right-of-Use Lease Assets	261.7		224.1
Other Assets	Other Assets	63.0		62.5		Other Assets	99.7		97.8
Total Assets	Total Assets	$	5,023.5	$	4,975.1	Total Assets	$	5,081.6	$	4,978.3

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:	Current Liabilities:					Current Liabilities:
Notes payable - floor plan - trade	Notes payable - floor plan - trade	$	77.5	$	89.8	Notes payable - floor plan - trade	$	124.4	$	114.9
Notes payable - floor plan - non-trade	Notes payable - floor plan - non-trade	1,153.7		1,178.6		Notes payable - floor plan - non-trade	1,285.6		1,112.7
Trade accounts payable	Trade accounts payable	134.6		133.3		Trade accounts payable	131.1		138.4
Operating short-term lease liabilities	Operating short-term lease liabilities	36.4		36.2		Operating short-term lease liabilities	32.5		36.4
Finance short-term lease liabilities	Finance short-term lease liabilities	54.2		52.7		Finance short-term lease liabilities	15.0		11.1

Other accrued liabilities	Other accrued liabilities	350.2		350.5		Other accrued liabilities	355.0		352.4
Current maturities of long-term debt	Current maturities of long-term debt	76.5		50.6		Current maturities of long-term debt	60.8		79.5
Total current liabilities	Total current liabilities	1,883.1		1,891.7		Total current liabilities	2,004.4		1,845.4
Long-Term Debt	Long-Term Debt	1,462.0		1,510.7		Long-Term Debt	1,629.5		1,672.2
Other Long-Term Liabilities	Other Long-Term Liabilities	92.5		96.0		Other Long-Term Liabilities	109.8		105.5
Operating Long-Term Lease Liabilities	Operating Long-Term Lease Liabilities	247.3		264.8		Operating Long-Term Lease Liabilities	188.6		231.4
Finance Long-Term Lease Liabilities	Finance Long-Term Lease Liabilities	168.6		135.5		Finance Long-Term Lease Liabilities	272.6		228.6

Commitments and Contingencies	Commitments and Contingencies					Commitments and Contingencies
Stockholders’ Equity:	Stockholders’ Equity:					Stockholders’ Equity:
Class A Convertible Preferred Stock, none issued	Class A Convertible Preferred Stock, none issued	—		—		Class A Convertible Preferred Stock, none issued	—		—
Class A Common Stock, $0.01 par value; 100,000,000 shares authorized; 67,134,072 shares issued and 27,236,398 shares outstanding at June 30, 2022; 66,501,072 shares issued and 28,692,532 shares outstanding at December 31, 2021		0.7		0.7
Class B Common Stock, $0.01 par value; 30,000,000 shares authorized; 12,029,375 shares issued and outstanding at June 30, 2022 and December 31, 2021		0.1		0.1
Class A Common Stock, $0.01 par value; 100,000,000 shares authorized; 68,422,889 shares issued and 23,407,137 shares outstanding at June 30, 2023; 67,574,922 shares issued and 24,204,324 shares outstanding at December 31, 2022						Class A Common Stock, $0.01 par value; 100,000,000 shares authorized; 68,422,889 shares issued and 23,407,137 shares outstanding at June 30, 2023; 67,574,922 shares issued and 24,204,324 shares outstanding at December 31, 2022	0.7		0.7
Class B Common Stock, $0.01 par value; 30,000,000 shares authorized; 12,029,375 shares issued and outstanding at June 30, 2023 and December 31, 2022						Class B Common Stock, $0.01 par value; 30,000,000 shares authorized; 12,029,375 shares issued and outstanding at June 30, 2023 and December 31, 2022	0.1		0.1
Paid-in capital	Paid-in capital	804.6		790.2		Paid-in capital	839.8		819.4
Retained earnings	Retained earnings	1,223.5		1,051.7		Retained earnings	1,151.2		1,100.3
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(0.8)		(1.3)		Accumulated other comprehensive income (loss)	2.5		1.6
Treasury stock, at cost; 39,897,674 Class A Common Stock shares held at June 30, 2022 and 37,808,540 Class A Common Stock shares held at December 31, 2021		(858.1)		(765.0)
Treasury stock, at cost; 45,015,752 Class A Common Stock shares held at June 30, 2023 and 43,370,598 Class A Common Stock shares held at December 31, 2022						Treasury stock, at cost; 45,015,752 Class A Common Stock shares held at June 30, 2023 and 43,370,598 Class A Common Stock shares held at December 31, 2022	(1,117.6)		(1,026.9)
Total Stockholders’ Equity	Total Stockholders’ Equity	1,170.0		1,076.4		Total Stockholders’ Equity	876.7		895.2
Total Liabilities and Stockholders’ Equity	Total Liabilities and Stockholders’ Equity	$	5,023.5	$	4,975.1	Total Liabilities and Stockholders’ Equity	$	5,081.6	$	4,978.3

See notes to unaudited condensed consolidated financial statements.

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

Class A
Common Stock Class A
Treasury Stock Class B
Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity
Shares Amount Shares Amount Shares Amount
(Dollars and shares in millions, except per share amounts)
Balance at March 31, 2021 66.0 $ 0.7 (36.8) $ (713.9) 12.0 $ 0.1 $ 771.1 $ 771.9 $ (3.4) $ 826.5
Shares awarded under stock compensation plans 0.4 — — — — — 6.8 — — 6.8
Purchases of treasury stock — — — — — — — — — —
Effect of cash flow hedge instruments, net of tax expense of $0.1 — — — — — — — — 0.4 0.4
Restricted stock amortization and stock option amortization — — — — — — 3.9 — — 3.9
Net income — — — — — — — 113.8 — 113.8
Class A dividends declared ($0.12 per share) — — — — — — — (3.6) — (3.6)
Class B dividends declared ($0.12
per share)
— — — — — — — (1.4) — (1.4)
Balance at June 30, 2021 66.4 $ 0.7 (36.8) $ (713.9) 12.0 $ 0.1 $ 781.8 $ 880.7 $ (3.0) $ 946.4


	Class A Common Stock			Class A Treasury Stock			Class B Common Stock			Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
	(Dollars and shares in millions, except per share amounts)
Balance at March 31, 2022	67.0	$	0.7	(38.5)	$	(798.7)	12.0	$	0.1	$	795.1	$	1,138.9	$	(1.1)	$	1,135.0
Shares awarded under stock compensation plans	0.1	—		—	—		—	—		0.9		—		—		0.9
Purchases of treasury stock	—	—		(1.4)	(59.4)		—	—		—		—		—		(59.4)
Effect of cash flow hedge instruments, net of tax expense of $0.1	—	—		—	—		—	—		—		—		0.3		0.3
Stock compensation expense	—	—		—	—		—	—		8.6		—		—		8.6
Net income	—	—		—	—		—	—		—		94.8		—		94.8

Class A dividends declared ($0.25 per share)	—	—		—	—		—	—		—		(7.2)		—		(7.2)
Class B dividends declared ($0.25 per share)	—	—		—	—		—	—		—		(3.0)		—		(3.0)
Balance at June 30, 2022	67.1	$	0.7	(39.9)	$	(858.1)	12.0	$	0.1	$	804.6	$	1,223.5	$	(0.8)	$	1,170.0

Class A
Common Stock Class A
Treasury Stock Class B
Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity
Shares Amount Shares Amount Shares Amount
(Dollars and shares in millions, except per share amounts)
Balance at March 31, 2022 67.0 $ 0.7 (38.5) $ (798.7) 12.0 $ 0.1 $ 795.1 $ 1,138.9 $ (1.1) $ 1,135.0
Shares awarded under stock compensation plans 0.1 — — — — — 0.9 — — 0.9
Purchases of treasury stock — — (1.4) (59.4) — — — — — (59.4)
Effect of cash flow hedge instruments, net of tax expense of $0.1 — — — — — — — — 0.3 0.3
Restricted stock amortization and stock option amortization — — — — — — 8.6 — — 8.6
Net income — — — — — — — 94.8 — 94.8
Class A dividends declared ($0.25 per share) — — — — — — — (7.2) — (7.2)
Class B dividends declared ($0.25
per share)
— — — — — — — (3.0) — (3.0)
Balance at June 30, 2022 67.1 $ 0.7 (39.9) $ (858.1) 12.0 $ 0.1 $ 804.6 $ 1,223.5 $ (0.8) $ 1,170.0


	Class A Common Stock			Class A Treasury Stock			Class B Common Stock			Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
	(Dollars and shares in millions, except per share amounts)
Balance at March 31, 2023	68.3	$	0.7	(45.0)	$	(1,117.6)	12.0	$	0.1	$	832.0	$	1,138.1	$	1.5	$	854.8
Shares awarded under stock compensation plans	0.1	—		—	—		—	—		2.4		—		—		2.4

Effect of cash flow hedge instruments, net of tax expense of $0.3	—	—		—	—		—	—		—		—		1.0		1.0
Stock compensation expense	—	—		—	—		—	—		5.4		—		—		5.4
Net income	—	—		—	—		—	—		—		23.4		—		23.4

Class A dividends declared ($0.29 per share)	—	—		—	—		—	—		—		(6.8)		—		(6.8)
Class B dividends declared ($0.29 per share)	—	—		—	—		—	—		—		(3.5)		—		(3.5)
Balance at June 30, 2023	68.4	$	0.7	(45.0)	$	(1,117.6)	12.0	$	0.1	$	839.8	$	1,151.2	$	2.5	$	876.7

See notes to unaudited condensed consolidated financial statements.

~~SONIC AUTOMOTIVE, INC.~~



	Class A Common Stock			Class A Treasury Stock			Class B Common Stock			Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
	(Dollars and shares in millions, except per share amounts)
Balance at December 31, 2021	66.5	$	0.7	(37.8)	$	(765.0)	12.0	$	0.1	$	790.2	$	1,051.7	$	(1.3)	$	1,076.4
Shares awarded under stock compensation plans	0.6	—		—	—		—	—		1.3		—		—		1.3
Purchases of treasury stock	—	—		(2.1)	(93.1)		—	—		—		—		—		(93.1)
Effect of cash flow hedge instruments, net of tax expense of $0.2	—	—		—	—		—	—		—		—		0.5		0.5
Stock compensation expense	—	—		—	—		—	—		13.1		—		—		13.1
Net income	—	—		—	—		—	—		—		192.1		—		192.1

Class A dividends declared ($0.37 per share)	—	—		—	—		—	—		—		(14.3)		—		(14.3)
Class B dividends declared ($0.37 per share)	—	—		—	—		—	—		—		(6.0)		—		(6.0)
Balance at June 30, 2022	67.1	$	0.7	(39.9)	$	(858.1)	12.0	$	0.1	$	804.6	$	1,223.5	$	(0.8)	$	1,170.0

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~(Unaudited)~~

Class A
Common Stock Class A
Treasury Stock Class B
Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity
Shares Amount Shares Amount Shares Amount
(Dollars and shares in millions, except per share amounts)
Balance at December 31, 2020 65.6 $ 0.7 (35.8) $ (671.7) 12.0 $ 0.1 $ 767.5 $ 721.8 $ (3.6) $ 814.8
Shares awarded under stock compensation plans 0.8 — — — — — 6.8 — — 6.8
Purchases of treasury stock — — (1.0) (42.2) — — — — — (42.2)
Effect of cash flow hedge instruments, net of tax expense of $0.3 — — — — — — — — 0.6 0.6
Restricted stock amortization and stock option amortization — — — — — — 7.5 — — 7.5
Net income — — — — — — — 168.1 — 168.1
Class A dividends declared ($0.22 per share) — — — — — — — (6.5) — (6.5)
Class B dividends declared ($0.22 per share) — — — — — — — (2.7) — (2.7)
Balance at June 30, 2021 66.4 $ 0.7 (36.8) $ (713.9) 12.0 $ 0.1 $ 781.8 $ 880.7 $ (3.0) $ 946.4

Class A
Common Stock Class A
Treasury Stock Class B
Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity
Shares Amount Shares Amount Shares Amount
(Dollars and shares in millions, except per share amounts)
Balance at December 31, 2021 66.5 $ 0.7 (37.8) $ (765.0) 12.0 $ 0.1 $ 790.2 $ 1,051.7 $ (1.3) $ 1,076.4
Shares awarded under stock compensation plans 0.6 — — — — — 1.3 — — 1.3
Purchases of treasury stock — — (2.1) (93.1) — — — — — (93.1)
Effect of cash flow hedge instruments, net of tax expense of $0.2 — — — — — — — — 0.5 0.5
Restricted stock amortization and stock option amortization — — — — — — 13.1 — — 13.1
Net income — — — — — — — 192.1 — 192.1
Class A dividends declared ($0.37 per share) — — — — — — — (14.3) — (14.3)
Class B dividends declared ($0.37 per share) — — — — — — — (6.0) — (6.0)
Balance at June 30, 2022 67.1 $ 0.7 (39.9) $ (858.1) 12.0 $ 0.1 $ 804.6 $ 1,223.5 $ (0.8) $ 1,170.0



	Class A Common Stock			Class A Treasury Stock			Class B Common Stock			Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
	(Dollars and shares in millions, except per share amounts)
Balance at December 31, 2022	67.6	$	0.7	(43.4)	$	(1,026.9)	12.0	$	0.1	$	819.4	$	1,100.3	$	1.6	$	895.2
Shares awarded under stock compensation plans	0.8	—		—	—		—	—		10.0		—		—		10.0
Purchases of treasury stock	—	—		(1.6)	(90.7)		—	—		—		—		—		(90.7)
Effect of cash flow hedge instruments, net of tax expense of $0.3	—	—		—	—		—	—		—		—		0.9		0.9
Stock compensation expense	—	—		—	—		—	—		10.4		—		—		10.4
Net income	—	—		—	—		—	—		—		71.1		—		71.1

Class A dividends declared ($0.57 per share)	—	—		—	—		—	—		—		(13.3)		—		(13.3)
Class B dividends declared ($0.57 per share)	—	—		—	—		—	—		—		(6.9)		—		(6.9)
Balance at June 30, 2023	68.4	$	0.7	(45.0)	$	(1,117.6)	12.0	$	0.1	$	839.8	$	1,151.2	$	2.5	$	876.7

See notes to unaudited condensed consolidated financial statements.

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
		(Dollars in millions)					(Dollars in millions)
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	192.1	$	168.1	Net income	$	71.1	$	192.1
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash (used in) provided by operating activities:						Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization of property and equipment	Depreciation and amortization of property and equipment	55.2		45.4		Depreciation and amortization of property and equipment	61.3		55.2

Debt issuance cost amortization	Debt issuance cost amortization	2.3		1.7		Debt issuance cost amortization	3.2		2.3

Stock-based compensation expense	Stock-based compensation expense	13.1		7.5		Stock-based compensation expense	10.4		13.1
Deferred income taxes	Deferred income taxes	(7.4)		(6.0)		Deferred income taxes	(6.7)		(7.4)

Asset impairment charges						Asset impairment charges	62.6		—
Gain on disposal of dealerships and property and equipment						Gain on disposal of dealerships and property and equipment	(20.2)		(1.2)

Other	Other	(0.5)		(0.5)		Other	0.8		0.7
Changes in assets and liabilities that relate to operations:	Changes in assets and liabilities that relate to operations:					Changes in assets and liabilities that relate to operations:
Receivables	Receivables	58.8		14.5		Receivables	62.4		58.8
Inventories	Inventories	29.8		240.2		Inventories	(245.7)		29.8
Other assets	Other assets	1.6		10.5		Other assets	(16.2)		1.6
Notes payable - floor plan – trade	Notes payable - floor plan – trade	(12.3)		(552.4)		Notes payable - floor plan – trade	9.5		(12.3)
Trade accounts payable and other liabilities	Trade accounts payable and other liabilities	(26.4)		36.4		Trade accounts payable and other liabilities	(11.4)		(26.4)
Total adjustments	Total adjustments	114.2		(202.7)		Total adjustments	(90.0)		114.2
Net cash provided by (used in) operating activities		306.3		(34.6)
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(18.9)		306.3
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of businesses, net of cash acquired	Purchases of businesses, net of cash acquired	(28.4)		(28.6)		Purchases of businesses, net of cash acquired	(75.1)		(28.4)
Purchases of land, property and equipment	Purchases of land, property and equipment	(100.4)		(105.1)		Purchases of land, property and equipment	(75.5)		(100.4)
Proceeds from sales of property and equipment	Proceeds from sales of property and equipment	10.0		0.7		Proceeds from sales of property and equipment	5.1		10.0
Proceeds from sales of dealerships	Proceeds from sales of dealerships	—		3.8		Proceeds from sales of dealerships	52.3		—
Net cash used in investing activities	Net cash used in investing activities	(118.8)		(129.2)		Net cash used in investing activities	(93.2)		(118.8)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings on notes payable - floor plan - non-trade		(24.9)		314.3
Borrowings on revolving credit facilities		—		4.9
Repayments on revolving credit facilities		—		(4.9)
Net borrowings (repayments) on notes payable - floor plan - non-trade						Net borrowings (repayments) on notes payable - floor plan - non-trade	172.9		(24.9)

Debt issuance costs	Debt issuance costs	(0.3)		(4.7)		Debt issuance costs	(1.6)		(0.3)
Principal payments of long-term debt	Principal payments of long-term debt	(24.7)		(30.7)		Principal payments of long-term debt	(63.1)		(24.7)
Principal payments of long-term lease liabilities	Principal payments of long-term lease liabilities	(3.1)		(2.1)		Principal payments of long-term lease liabilities	(4.7)		(3.1)
Purchases of treasury stock	Purchases of treasury stock	(93.1)		(42.2)		Purchases of treasury stock	(90.7)		(93.1)

Issuance of shares under stock compensation plans	Issuance of shares under stock compensation plans	1.3		6.8		Issuance of shares under stock compensation plans	10.0		1.3
Dividends paid	Dividends paid	(15.0)		(8.3)		Dividends paid	(20.2)		(15.0)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(159.8)		233.1		Net cash provided by (used in) financing activities	2.6		(159.8)
NET INCREASE IN CASH AND CASH EQUIVALENTS		27.7		69.3
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS						NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(109.5)		27.7
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	299.4		170.3		CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	229.2		299.4
CASH AND CASH EQUIVALENTS, END OF PERIOD	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	327.1	$	239.6	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	119.7	$	327.1

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:	SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:					SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest, including amount capitalized		$	52.6	$	29.6
Interest, including amounts capitalized						Interest, including amounts capitalized	$	84.2	$	52.6
Income taxes	Income taxes	$	59.0	$	54.4	Income taxes	$	46.5	$	59.0

See notes to unaudited condensed consolidated financial statements.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Presentation – The accompanying unaudited condensed consolidated financial statements of Sonic Automotive, Inc. and its wholly owned subsidiaries (“Sonic,” the “Company,” “we,” “us” or “our”) for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (the “U.S.”) (“GAAP”) for interim financial information and applicable rules and regulations of the U.S. Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by ~~U.S.~~ GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all material normal, recurring adjustments necessary to fairly state the financial position, results of operations and cash flows for the periods presented. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

~~COVID-19~~ – The COVID-19 pandemic negatively impacted the global economy beginning in the first quarter of 2020 and continues to affect the global economy and supply chain. The impact on the economy has affected both consumer demand and the supply of manufactured goods, both of which continue to impact our business. The global automotive supply chain has been significantly disrupted since the onset of the pandemic, primarily related to the production of semiconductors and other components that are used in many modern automobiles, in addition to workforce-related production delays and stoppages. As a result, automobile manufacturing has operated for multiple years at lower than usual production levels, reducing the amount of new vehicle inventory and certain parts inventory available to our dealerships. These inventory constraints, coupled with strong consumer demand and elevated levels of consumer savings, have led to low new and used vehicle inventory and a high new and used vehicle pricing environment, which drove retail new vehicle unit sales volumes lower across the industry.

All of our store operations were impacted by the COVID-19 pandemic to varying degrees. State and local governmental restrictions on consumer and business activity may be tightened again if conditions related to the pandemic worsen as a result of future coronavirus variants.

Recent Accounting Pronouncements – ~~In March 2020,~~Please refer to Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Accounting Standards Codification (“ASC”) Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional guidance for a limited period of time to ease the potential accounting impact associated with transitioning away from reference rates that are expected to be discontinued, such as the London InterBank Offered Rate (“LIBOR”). The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The amendments in ASU 2020-04 could be adopted beginning January 1, 2020 and are effective through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, which clarifies that certain optional expedients and exceptions in ASC Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. We do not currently have any contracts that have been modified, amended or renegotiated to accommodate a transition to a new reference rate, but we will continue to evaluate any such modifications or amendments to our contracts to determine the applicability of this standard on our consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, 2022 for further discussion of recent accounting pronouncements.

Change in Accounting Principle – During the first quarter of 2023, Sonic voluntarily changed the date of its annual goodwill impairment test and ~~related~~other intangible assets impairment test from October 1 to April 30. This change is preferable under the circumstances as it provides Sonic with better alignment of the annual impairment test with the availability of final approved prospective financial ~~statement disclosures.~~information for use in projecting future cash flows in our impairment models. We intend to utilize the same valuation approach and do not expect the change in valuation date to produce different impairment results. This change is not applied retrospectively as it is impracticable to do so because retrospective application would require the application of significant estimates and assumptions with the use of hindsight. Accordingly, the change was applied prospectively, beginning with the April 30, 2023 impairment test date.

Principles of Consolidation – All of our dealership and non-dealership subsidiaries are wholly owned and consolidated in the accompanying unaudited condensed consolidated financial statements, except for one 50%-owned dealership that is accounted for under the equity method. All material intercompany balances and transactions have been eliminated in the accompanying unaudited condensed consolidated financial statements. Certain amounts and percentages may not compute due to rounding.

Revenue Recognition – Revenue is recognized when a customer obtains control of promised goods or services and in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. We do not include the cost of obtaining contracts within the related revenue streams since we elected the practical expedient to expense the costs to obtain a contract when incurred.

Management has evaluated our established business processes, revenue transaction streams and accounting policies, and identified our material revenue streams to be: (1) the sale of new vehicles; (2) the sale of used vehicles to retail customers; (3) the sale of wholesale used vehicles at third-party auctions; (4) the arrangement of third-party vehicle financing and the sale of third-party service, warranty and other insurance contracts; and (5) the performance of vehicle maintenance and repair services and the sale of related parts and accessories. Generally, performance obligations are satisfied when the associated vehicle is ~~either~~ delivered to a customer and customer acceptance has occurred, over time as the maintenance and repair services are performed, or at the

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

time of wholesale and retail parts sales. We do not have any revenue streams with significant financing components as payments are typically received within a short period of time following completion of the performance obligation(s).

Retrospective finance and insurance revenues (“F&I retro revenues”) are recognized when the product contract has been executed with the end customer and the transaction price is estimated each reporting period based on the expected value method using historical and projected data. F&I retro revenues can vary based on a variety of factors, including number of contracts and history of cancellations and claims. Accordingly, we utilize this historical and projected data to constrain the consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

We record revenue when vehicles are delivered to customers, as vehicle service work is performed and when parts are delivered. Conditions for completing a sale include having an agreement with the customer, including pricing, and it being probable that the proceeds from the sale will be collected.

The accompanying unaudited condensed consolidated balance sheets as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 include approximately ~~$27.6~~$27.0 million and ~~$34.9~~$38.7 million, respectively, related to contract assets from F&I retro revenues recognition,

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

which are recorded in receivables, net. Changes in contract assets from December 31, ~~2021~~2022 to June 30, ~~2022~~2023 were primarily due to ordinary business activity, including the receipt of cash for amounts earned and recognized in prior periods. Please refer to Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for further discussion of our revenue recognition policies and processes.

Earnings Per Share – The calculation of diluted earnings per share considers the potential dilutive effect of restricted stock units, restricted stock ~~awards~~ and stock options granted under Sonic’s stock compensation plans (and any non-forfeitable dividends paid on such awards).

~~Restatement of Previously Issued Condensed Consolidated Financial Statements~~ –~~Subsequent~~, in addition to the issuance of the condensed consolidated financial statements as of and for the three and six months ended June 30, 2022 in our Quarterly Report on Form 10-Q for the second quarter of 2022, we identified an error in the application of ASC Topic 606, Revenue Recognition, related to principal accounting (gross accounting) versus agent accounting (net accounting) for certain fleet transactions from a newly acquired subsidiary. It was determined that we should have applied net accounting to certain fleet transactions where our previously issued condensed consolidated financial statements accounted for the transactions on a gross accounting basis. The result of this error overstated both fleet new vehicles revenues and fleet new vehicles cost of sales, along with the associated subtotals, in our previously issued condensed consolidated statements of operations. There was no impact to other financial statement line items or disclosures, unless related to the items in the table below. The impact on the 2021 consolidated financial statements was immaterial.Class A Common Stock purchase warrants.

We evaluated the effect of the corrections detailed in the tables below on the previously issued condensed consolidated financial statements, both individually and in the aggregate, in accordance with the guidance in ASC Topic 250, ~~Accounting Changes and Error Corrections~~ and concluded that the effect was material to the condensed consolidated financial statements for the three and six months ended June 30, 2022. The tables below reflect the line items of the Company’s condensed consolidated financial statements that were impacted by the error.

Three Months Ended June 30, 2022 Six Months Ended June 30, 2022
As Reported Adjustments As Restated As Reported Adjustments As Restated
(In millions)
Revenues:
Fleet new vehicles $ 166.4 $ (146.6) $ 19.8 $ 315.0 $ (277.0) $ 38.0
Total new vehicles $ 1,510.7 $ (146.6) $ 1,364.1 $ 3,010.6 $ (277.0) $ 2,733.6
Total vehicles $ 3,081.5 $ (146.6) $ 2,934.9 $ 6,121.0 $ (277.0) $ 5,844.0
Total revenues $ 3,652.8 $ (146.6) $ 3,506.2 $ 7,239.4 $ (277.0) $ 6,962.4
Cost of sales:
Fleet new vehicles $ (165.5) $ 146.6 $ (18.9) $ (313.2) $ 277.0 $ (36.2)
Total new vehicles $ (1,341.5) $ 146.6 $ (1,194.9) $ (2,672.8) $ 277.0 $ (2,395.8)
Total vehicles $ (2,864.0) $ 146.6 $ (2,717.4) $ (5,685.4) $ 277.0 $ (5,408.4)
Total cost of sales $ (3,064.0) $ 146.6 $ (2,917.4) $ (6,079.3) $ 277.0 $ (5,802.3)

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

2. Business Acquisitions and Dispositions

~~We acquired one franchised dealership location during~~During the six months ended June 30, ~~2022~~2023, we acquired one business (consisting of five locations) in our Powersports Segment (as defined below) for an aggregate gross purchase price (including inventory acquired and subsequently funded by floor plan notes payable) of approximately ~~$20.9 million, including a $14.7 million impact of a post-close adjustment related to the acquisition of RFJ Auto Partners, Inc. completed in December 2021.~~$75.1 million. The preliminary allocation of the ~~roughly $6.2~~approximately $75.1 million aggregate gross purchase price ~~for the acquisition completed during~~included inventory of approximately $11.6 million, property and equipment of approximately $0.7 million, franchise assets of approximately $22.6 million, goodwill of approximately $11.4 million, real estate of approximately $29.0 million, other assets of approximately $0.1 million, and other liabilities of approximately $0.3 million.

During the six months ended June 30, 2022, included inventory of approximately $3.1 million, property and equipment of approximately $0.1 million, franchise assets of approximately $2.5 million, and goodwill of approximately $0.5 million. Wewe acquired two ~~businesses to be included~~business in our ~~EchoPark segment during the six months ended June 30, 2021~~Franchised Dealerships Segment (as defined below) for an aggregate gross purchase price (including inventory acquired and subsequently funded by floor plan notes payable) of approximately ~~$28.6 million.~~

~~We did not dispose~~$28.4 million, including the impact of any businesses during the six months ended June 30, 2022. During the six months ended June 30, 2021, we disposed of one luxury franchised dealership, which generated net cash from dispositions of approximately $3.8 million.

~~RFJ Acquisition~~

~~On December 6, 2021 (the “Closing Date”), Sonic completed~~a $14.7 million post-close adjustment related to the acquisition of RFJ Auto Partners, Inc. and its subsidiaries ~~(collectively, “RFJ Auto”). On the Closing Date, RFJ Auto became a direct, wholly owned subsidiary of Sonic~~completed in December 2021 (the “RFJ Acquisition”). The allocation of the approximately $13.7 million aggregate ~~consideration for~~gross purchase price (excluding the $14.7 million post-close adjustment related to the RFJ ~~Acquisition purchase price was~~Acquisition) included inventory of approximately ~~$964.9~~$4.9 million, ~~including a customary post-close adjustment~~property and equipment of ~~$14.7~~approximately $0.1 million, ~~recognized~~franchise assets of approximately $6.4 million, goodwill of approximately $1.3 million, other assets of approximately $1.1 million, and liabilities of approximately $0.1 million.

During the six months ended June 30, 2023, we disposed of one luxury franchised dealership, one domestic franchised dealership, and onemid-line import franchised dealership that generated net cash of approximately $52.3 million. We did not dispose of any stores during the six months ended June 30, 2022.

Revenues and other activities associated with disposed franchised dealerships that remain in continuing operations were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Income (loss) from operations	$	(0.9)	$	2.1	$	0.8	$	3.8
Gain (loss) on disposal	20.7		(0.1)		20.7		(0.1)
Pre-tax income (loss)	19.8		2.0		21.5		3.7
Total Revenues	$	27.4	$	40.6	$	70.1	$	80.4

On June 22, 2023, we announced a plan to indefinitely suspend operations at eight EchoPark locations and 14 related delivery/buy centers. Subsequent to June 30, 2023, we closed three Northwest Motorsport pre-owned locations within the EchoPark Segment (as defined below) (collectively, these 25 locations represent the "closed EchoPark stores"). This decision was made to better align the EchoPark Segment operations with current pre-owned vehicle market conditions that continue to be negatively impacted by lower production of new vehicles over the past three years and historically low lease penetration rates. These conditions have resulted in lower availability of used vehicles and higher wholesale vehicle prices. In connection with this decision, Sonic recorded a charge totaling approximately $75.2 million. This charge included impairments of $32.5 million related to fixed assets, $16.0 million related to right-of-use assets and $14.1 million related to cease-use accruals; $0.4 million related to lease exit charges; $10.0 million of inventory valuation adjustments (of which $5.8 million relates to stores with ongoing operations at EchoPark locations and $1.9 million relates to ongoing operations of Northwest Motorsport locations); and $2.2 million related to severance. The ~~post-close adjustment~~locations within our EchoPark Segment with indefinitely suspended operations or that were closed are not considered disposed and therefore are not included in ~~March 2022 consisted~~the above table disclosing the effect of ~~additional acquired inventory of $4.3 million, other assets of $3.4 million, goodwill of $1.1 million, and a reduction in other liabilities of $5.9 million.~~disposed dealerships on continued operations.

For further discussion of the RFJ Acquisition, see Note 2, “Business Acquisitions and Dispositions,” to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. Inventories

Inventories consist of the following:


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
New vehicles	New vehicles	$	321.5	$	273.1	New vehicles	$	621.0	$	449.3
Used vehicles	Used vehicles	719.8		807.2		Used vehicles	563.2		534.0
Service loaners	Service loaners	118.8		106.3		Service loaners	162.1		143.8
Parts, accessories and other	Parts, accessories and other	80.3		74.6		Parts, accessories and other	102.5		89.7
Net inventories		$	1,240.4	$	1,261.2
Inventories						Inventories	$	1,448.8	$	1,216.8

4. Property and Equipment

Property and equipment, net consists of the following:


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
Land	Land	$	451.2	$	447.4	Land	$	482.5	$	478.2
Buildings and improvements	Buildings and improvements	1,319.5		1,240.5		Buildings and improvements	1,401.5		1,365.3
Furniture, fixtures and equipment	Furniture, fixtures and equipment	485.0		451.2		Furniture, fixtures and equipment	518.1		504.1
Construction in progress	Construction in progress	37.9		68.1		Construction in progress	48.4		57.0
Total, at cost	Total, at cost	2,293.6		2,207.2		Total, at cost	2,450.5		2,404.6
Less accumulated depreciation	Less accumulated depreciation	(796.4)		(746.2)		Less accumulated depreciation	(886.4)		(842.9)
Subtotal	Subtotal	1,497.2		1,461.0		Subtotal	1,564.1		1,561.7
Less assets held for sale (1)	Less assets held for sale (1)	(5.6)		(2.2)		Less assets held for sale (1)	(4.7)		—
Property and equipment, net	Property and equipment, net	$	1,491.6	$	1,458.8	Property and equipment, net	$	1,559.4	$	1,561.7

(1)Classified in other current assets in the accompanying unaudited condensed consolidated balance sheets.

In the three and six months ended June 30, ~~2022,~~2023, capital expenditures were approximately ~~$41.6~~$38.3 million and ~~$100.4~~$75.5 million, respectively, and in the three and six months ended June 30, ~~2021,~~2022, capital expenditures were approximately ~~$37.4~~

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

$41.6 million and ~~$105.1~~$100.4 million, respectively. Capital expenditures in all periods were primarily related to real estate acquisitions, construction of new franchised dealerships and EchoPark and powersports stores, building improvements and equipment purchased for use in our franchised dealerships and EchoPark and powersports stores. ~~Assets held~~

Fixed asset impairment charges for ~~sale as of~~the three and six months ended June 30, ~~2022~~2023 were approximately $32.5 million, the majority of which relate to our decision to indefinitely suspend operations at certain locations with our EchoPark Segment and ~~December 31, 2021 consist of real property not currently used in operations that we expect~~ to ~~dispose of in the next 12 months.~~

close certain Northwest Motorsport stores. There were no fixed asset impairment charges for the three and six months ended June 30, ~~2022 and 2021.~~2022.

5. Goodwill and Intangible Assets

In accordance with ASC Topic 350, “Intangibles - Goodwill and Other,” we test goodwill for impairment at least annually (as of April 30 of each year) or more frequently if indications of impairment exist. The ASC also states that if an entity determines, based on an assessment of certain qualitative factors, that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then a quantitative goodwill impairment test is unnecessary.

In performing a quantitative test for impairment of goodwill, we primarily use the income approach method of valuation that includes the discounted cash flow (“DCF”) method that utilizes inputs, including, projected revenues, margin, terminal growth rates, discount rates and a market capitalization reconciliation.

We have completed our impairment testing as of April 30, 2023 and have determined there was no impairment.

In evaluating the recoverability of our indefinite lived franchise assets, we utilized a multi-period excess earnings method (“MPEEM”) model using unobservable inputs (Level 3) to estimate the fair value of the franchise assets for each of our franchises with recorded franchise assets. The significant assumptions in our MPEEM model include projected revenue,

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

projected operating margins, a discount rate (and estimates in the discount rate inputs) and residual growth rates. We have completed our impairment testing as of April 30, 2023 and have determined there was no impairment.

The changes in the carrying amount of goodwill for June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows:

June 30, 2022 December 31, 2021
(In millions)
Carrying Amount of Goodwill:
Franchised Dealerships Segment $ 219.8 $ 213.5
EchoPark Segment 203.7 202.9
Total goodwill (1) $ 423.5 $ 416.4


	Franchised Dealerships Segment		EchoPark Segment		Powersports Segment		Total
	(In millions)
Balance at December 31, 2021 (1)	$	251.2	$	165.2	$	—	$	416.4
Additions through current year acquisitions	5.1		—		9.2		14.3

Reductions from impairment	—		(202.9)		—		(202.9)
Prior year acquisition allocations	(34.5)		37.7		—		3.2
Balance at December 31, 2022 (2)	$	221.8	$	—	$	9.2	$	231.0
Additions through current year acquisitions	—		—		11.9		11.9
Reductions from dispositions	(1.8)		—		—		(1.8)

Prior year acquisition allocations	—		—		1.4		1.4
Balance at June 30, 2023 (2)	$	220.0	$	—	$	22.5	$	242.5

(1)Net of accumulated impairment losses of $1.1 billion related to the Franchised Dealerships Segment.

(2)~~$1.1 billion.~~Net of accumulated impairment losses of $1.1 billion and $202.9 million related to the Franchised Dealerships Segment and the EchoPark Segment, respectively.

The carrying amount of indefinite lived franchise assets was approximately ~~$486.6~~$417.4 million and ~~$480.2~~$396.7 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. We did not record any impairment charges as of six months ended June 30, ~~2022~~2023 orDecember 31, ~~2021.~~2022.

6. Long-Term Debt

Long-term debt consists of the following:


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
2021 Revolving Credit Facility (1)	2021 Revolving Credit Facility (1)	$	—	$	—	2021 Revolving Credit Facility (1)	$	—	$	—

4.625% Senior Notes due 2029 (the “4.625% Notes”)	4.625% Senior Notes due 2029 (the “4.625% Notes”)	650.0		650.0		4.625% Senior Notes due 2029 (the “4.625% Notes”)	650.0		650.0
4.875% Senior Notes due 2031 (the “4.875% Notes”)	4.875% Senior Notes due 2031 (the “4.875% Notes”)	500.0		500.0		4.875% Senior Notes due 2031 (the “4.875% Notes”)	500.0		500.0
2019 Mortgage Facility (2)	2019 Mortgage Facility (2)	84.5		90.0		2019 Mortgage Facility (2)	319.0		327.0
Mortgage notes to finance companies - fixed rate, bearing interest from 2.05% to 7.03%	Mortgage notes to finance companies - fixed rate, bearing interest from 2.05% to 7.03%	198.5		213.4		Mortgage notes to finance companies - fixed rate, bearing interest from 2.05% to 7.03%	169.5		186.6
Mortgage notes to finance companies - variable rate, bearing interest at 1.50 to 2.90 percentage points above one-month or three-month LIBOR		128.3		132.8
Mortgage notes to finance companies - variable rate, bearing interest at 1.50 to 2.90 percentage points above one-month or three-month LIBOR or SOFR						Mortgage notes to finance companies - variable rate, bearing interest at 1.50 to 2.90 percentage points above one-month or three-month LIBOR or SOFR	77.9		116.0

Subtotal	Subtotal	$	1,561.3	$	1,586.2	Subtotal	$	1,716.4	$	1,779.6
Debt issuance costs	Debt issuance costs	(22.8)		(24.9)		Debt issuance costs	(26.1)		(27.9)
Total debt	Total debt	1,538.5		1,561.3		Total debt	1,690.3		1,751.7
Less current maturities	Less current maturities	(76.5)		(50.6)		Less current maturities	(60.8)		(79.5)
Long-term debt	Long-term debt	$	1,462.0	$	1,510.7	Long-term debt	$	1,629.5	$	1,672.2

(1)The interest rate on the 2021 Revolving Credit Facility (as defined below) was ~~100~~135 basis points above ~~LIBOR~~one-month Term SOFR (as defined below) at ~~both~~ June 30, ~~2022~~2023 and 110 basis points above one-month Term SOFR at December 31, ~~2021.~~2022.

(2)The interest rate on the 2019 Mortgage Facility (as defined below) was ~~150~~160 basis points above ~~LIBOR~~one-month Term SOFR (as defined below) at ~~both~~ June 30, ~~2022~~2023 and 135 basis points above one-month Term SOFR at December 31, ~~2021.~~2022.

2021 Credit Facilities

On April 14, 2021, we entered into an amended and restated syndicated revolving credit facility (the “2021 Revolving Credit Facility”) and amended and restated syndicated new and used vehicle floor plan credit facilities (the “2021 Floor Plan Facilities” and, together with the 2021 Revolving Credit Facility, the “2021 Credit Facilities”). The amendment and restatement

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of the 2021 Credit Facilities extended the scheduled maturity dates to April 14, 2025. On October 8, 2021, we entered into an amendment to the 2021 Credit Facilities (the “Credit Facility Amendment”) to, among other things: (1) increase the aggregate commitments under the 2021 Revolving Credit Facility to the lesser of $350.0 million (which may be increased at the

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Company’s option up to $400.0 million upon satisfaction of certain conditions) and the applicable revolving borrowing base, and the 2021 Floor Plan Facilities to $2.6 billion (which, under certain conditions, may be increased at the Company’s option up to ~~$2.85~~$2.9 billion that may be allocated between the new vehicle revolving floor plan facility and the used vehicle revolving floor plan facility that comprise the 2021 Floor Plan Facilities as the Company requests, with no more than 40% of the aggregate commitments allocated to the commitments under the used vehicle revolving floor plan facility); and (2) permit the issuance of the 4.625% Notes and the 4.875% Notes. On October 7, 2022, we entered into an amendment to the 2021 Credit Facilities (the “Second Credit Facility Amendment”) to, among other things: (i) replace the 2021 Credit Facilities’ London InterBank Offered Rate (“LIBOR”)-based Eurodollar reference interest rate option with a reference interest rate option based upon one-month Term SOFR (as defined in the 2021 Credit Facilities) (the conversion of the interest rate benchmark from LIBOR to one-month Term SOFR included a 10-basis point credit spread adjustment); (ii) amend the provisions relating to the basis for inclusion of real property owned by the Company or certain of its subsidiaries in the borrowing base for the 2021 Revolving Credit Facility; (iii) amend the minimum amount for commitments under the 2021 Revolving Credit Facility and the proportion that such commitments under the 2021 Revolving Credit Facility may compose of the total commitments made by the lenders; and (iv) adjust aspects of the offset account used for voluntary reductions to loans under the 2021 Floor Plan Facilities.

As amended, availability under the 2021 Revolving Credit Facility is calculated as the lesser of $350.0 million or a borrowing base calculated based on certain eligible assets, less the aggregate face amount of any outstanding letters of credit under the 2021 Revolving Credit Facility (the “2021 Revolving Borrowing Base”). The 2021 Revolving Credit Facility may be increased at our option up to $400.0 million upon satisfaction of certain conditions. As of June 30, ~~2022,~~2023, the 2021 Revolving Borrowing Base was approximately ~~$281.8~~$301.1 million based on balances as of such date. As of June 30, ~~2022,~~2023, we had no outstanding borrowings and approximately ~~$12.5~~$12.1 million in outstanding letters of credit under the 2021 Revolving Credit Facility, resulting in ~~$269.3~~$289.0 million remaining borrowing availability under the 2021 Revolving Credit Facility.

Our obligations under the 2021 Credit Facilities are guaranteed by us and certain of our subsidiaries and are secured by a pledge of substantially all of our and our subsidiaries’ assets. As of the dates presented in the accompanying unaudited condensed consolidated financial statements, the amounts outstanding under the 2021 Credit Facilities bear interest at variable rates based on specified percentages above ~~LIBOR.~~LIBOR (subsequent to September 30, 2022, the Second Credit Facility Amendment replaced LIBOR with one-month term SOFR). We have agreed under the 2021 Credit Facilities not to pledge any assets to any third parties (other than those explicitly allowed to be pledged by the amended terms of the 2021 Credit Facilities), including other lenders, subject to certain stated exceptions, including floor plan financing arrangements. In addition, the 2021 Credit Facilities contain certain negative covenants, including ~~certain~~ covenants which could restrict or prohibit indebtedness, liens, the payment of dividends and other restricted payments, capital expenditures and material dispositions and acquisitions of assets, as well as other customary covenants and default provisions. Specifically, the 2021 Credit Facilities permit quarterly cash dividends on our Class A and Class B Common Stock up to ~~$0.25~~$0.12 per share so long as no Event of Default (as defined in the 2021 Credit Facilities) has occurred and is continuing and provided that we remain in compliance with all financial covenants under the 2021 Credit Facilities. Additional dividends are permitted subject to the limitations on restricted payments set forth in the 2021 Credit Facilities.

4.625% Notes

On October 27, 2021, we issued $650.0 million in aggregate principal amount of 4.625% Notes, which will mature on November 15, 2029. Sonic used the net proceeds from the issuance of the 4.625% Notes, along with the net proceeds of the 4.875% Notes, to fund the RFJ Acquisition and to repay existing debt.

The 4.625% Notes were issued under an Indenture, dated as of October 27, 2021 (the “2029 Indenture”), by and among the Company, certain subsidiary guarantors named therein (collectively, the “Guarantors”) and U.S. Bank National Association, as trustee (the “trustee”). The 4.625% Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis initially by all of the Company’s domestic operating ~~domestic~~ subsidiaries. The parent company has no independent assets or operations. The non-domestic operating subsidiary that is not a guarantor is considered minor. Under certain circumstances set forth in the 2029 Indenture, the guarantees of the certain subsidiaries of the Company comprising the EchoPark Business (as defined in the 2029 Indenture) may be released. The 2029 Indenture also provides substantial flexibility for the Company to enter into fundamental transactions involving the EchoPark Business. The 2029 Indenture provides that interest on the 4.625% Notes will be payable semi-annually in arrears on May 15 and November 15 of each year beginning May 15, 2022. The 2029 Indenture also contains other restrictive covenants and default provisions common for an issue of senior notes of this nature. The 4.625%

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Notes are redeemable by the Company under certain circumstances. For further discussion of the 4.625% Notes, see Note 6, “Long-Term Debt,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

4.875% Notes

On October 27, 2021, we issued $500.0 million in aggregate principal amount of 4.875% Notes, which will mature on November 15, 2031. Sonic used the net proceeds from the issuance of the 4.875% Notes, along with the net proceeds of the 4.625% Notes, to fund the RFJ Acquisition and to repay existing debt.

The 4.875% Notes were issued under an Indenture, dated as of October 27, 2021 (the “2031 Indenture”), by and among the Company, the Guarantors and the trustee. The 4.875% Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis initially by all of the Company’s domestic operating ~~domestic~~ subsidiaries. The parent company has no independent assets or operations. The non-domestic operating subsidiary that is not a guarantor is considered minor. Under certain circumstances set forth in the 2031 Indenture, the guarantees of the certain subsidiaries of the Company comprising the EchoPark Business (as defined in the 2031 Indenture) may be released. The

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

2031 Indenture also provides substantial flexibility for the Company to enter into fundamental transactions involving the Echo-Park Business. The 2031 Indenture provides that interest on the 4.875% Notes will be payable semi-annually in arrears on May 15 and November 15 of each year beginning May 15, 2022. The 2031 Indenture also contains other restrictive covenants and default provisions common for an issue of senior notes of this nature. The 4.875% Notes are redeemable by the Company under certain circumstances. For further discussion of the 4.875% Notes, see Note 6, “Long-Term Debt,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

2019 Mortgage Facility

On November 22, 2019, we entered into a delayed draw-term loan credit agreement, which iswas scheduled to mature on November 22, 2024 (the “2019 Mortgage Facility”). On October 11, 2021, we entered into an amendment to the 2019 Mortgage Facility to permit the consummation of the RFJ Acquisition and the issuance of the 4.625% Notes and the 4.875% Notes. On November 17, 2022, we entered into an amendment to the 2019 Mortgage Facility to, among other things, extend the scheduled maturity date to November 17, 2027.

On November 17, 2022, in connection with the closing of the amendment, the Company incurred a term loan under the 2019 Mortgage Facility with a principal amount of $320.0 million, with a portion of the proceeds used to repay the entire $77.6 million principal amount of the prior term loan. The $320.0 million borrowing amortizes on a fixed schedule through the maturity date. In addition, the lenders under the 2019 Mortgage Facility committed to providing, upon the terms set forth in the amendment and upon the pledging of sufficient collateral by the Company, delayed draw-term loans in an aggregate principal amount up to $78.0 million (the “Delayed Draw Credit Facility”), and revolving loans in an aggregate principal amount not to exceed $95.0 million outstanding. On November 18, 2022, the Company incurred a term loan under the Delayed Draw Credit Facility with a principal amount of $7.0 million. The aggregate commitments of the lenders under the 2019 Mortgage Facility equal a total of $500.0 million, upon satisfaction of the conditions set forth in the 2019 Mortgage Facility, including the appraisal and pledging of collateral of a specified value. The amendment also amended the 2019 Mortgage Facility to, among other things: (1) replace the 2019 Mortgage Facility’s LIBOR-based Eurodollar reference interest rate option with a reference interest rate option based upon one-month Term SOFR (as defined in the 2019 Mortgage Facility); and (2) make changes to the pricing grid for loans incurred under the 2019 Mortgage Facility, which price is based on an incremental interest margin calculated based on the Company’s Consolidated Total Lease Adjusted Leverage Ratio (as defined in the 2019 Mortgage Facility).

Under the 2019 Mortgage Facility, Sonic has a maximum borrowing limit of ~~$112.2~~$500.0 million, which varies based on the appraised value of the collateral underlying the 2019 Mortgage Facility. The amount available for borrowing under the 2019 Mortgage Facility is subject to compliance with a borrowing base. The borrowing base is calculated based on 75% of the appraised value of certain eligible real estate designated by Sonic and owned by certain of our subsidiaries. Based on balances as of June 30, ~~2022,~~2023, we had approximately ~~$84.5~~$319.0 million of outstanding borrowings ~~under the 2019 Mortgage Facility, resulting in total remaining borrowing availability of approximately $27.7 million~~ under the 2019 Mortgage Facility.

Amounts outstanding under the 2019 Mortgage Facility bear interest atat: (1) a specified rate above ~~LIBOR (as defined in the 2019 Mortgage Facility),~~one-month Term SOFR, ranging from ~~1.50%~~1.25% to ~~2.75%~~2.25% per annum according to a performance-based pricing grid determined by the Company’s Consolidated Total Lease Adjusted Leverage Ratio ~~(as defined in the 2019 Mortgage Facility)~~ as of the last day of the immediately preceding fiscal quarter (the “Performance Grid”); or (2) a specified rate above the Base Rate (as defined in the 2019 Mortgage Facility), ranging from ~~0.50%~~0.25% to ~~1.75%~~1.25% per annum according to the Performance Grid. Interest on the 2019 Mortgage Facility is paid monthly in arrears calculated using the Base Rate plus the Applicable Rate (as defined in the 2019 Mortgage Facility) according to the Performance Grid. Scheduled repayment of outstanding principal is paid quarterly commencing on March 31, 2023 through December 31, 2024 at a rate of 1.25% of the aggregate initial principal amount, and increases to 1.875% in March 2025 until

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the maturity date at November 17, 2027. A balloon payment of the remaining balance will be due at the November 17, 2027 maturity date. Prior to the November 17, 2027 maturity date, the Company reserves the right to prepay the principal amount outstanding at any time without premium or penalty provided the prepayment amount exceeds $0.5 million. Additional dividends are permitted subject to the limitations on restricted payments set forth in the 2021 Credit Facilities.

For further discussion of the 2019 Mortgage Facility, see Note 6, “Long-Term Debt,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Mortgage Notes to Finance Companies

As of June 30, ~~2022,~~2023, the weighted-average interest rate of our other outstanding mortgage notes (excluding the 2019 Mortgage Facility) was ~~4.14%~~5.16% and the total outstanding mortgage principal balance of these notes (excluding the 2019 Mortgage Facility) was approximately ~~$326.8~~$247.4 million. These mortgage notes require monthly payments of principal and interest through their respective maturities, are secured by the underlying properties and contain certain cross-default provisions. Maturity dates for these mortgage notes range ~~between 2022 and~~from 2024 to 2033.

Covenants

We have agreed under the 2021 Credit Facilities and the 2019 Mortgage Facility not to pledge any assets to any third parties (other than those explicitly allowed to be pledged by the amended terms of the 2021 Credit Facilities and the 2019 Mortgage Facility), including other lenders, subject to certain stated exceptions, including floor plan financing arrangements. In addition, the 2021 Credit Facilities and the 2019 Mortgage Facility contain certain negative covenants, including ~~certain~~ covenants which could restrict or prohibit indebtedness, liens, the payment of dividends and other restricted payments, capital expenditures and material dispositions and acquisitions of assets, as well as other customary covenants and default provisions.

We were in compliance with the financial covenants under the 2021 Credit Facilities and the 2019 Mortgage Facility as of June 30, ~~2022.~~2023. Financial covenants include required specified ratios (as each is defined in the 2021 Credit Facilities and the 2019 Mortgage Facility) of:


		Covenant				Covenant
		Minimum Consolidated Liquidity Ratio	Minimum Consolidated Fixed Charge Coverage Ratio	Maximum Consolidated Total Lease Adjusted Leverage Ratio		Minimum Consolidated Liquidity Ratio	Minimum Consolidated Fixed Charge Coverage Ratio	Maximum Consolidated Total Lease Adjusted Leverage Ratio
Required ratio	Required ratio	1.05	1.20	5.75	Required ratio	1.05	1.20	5.75
June 30, 2022 actual		1.27	2.62	2.17
June 30, 2023 actual					June 30, 2023 actual	1.30	1.62	2.72

The 2021 Credit Facilities and the 2019 Mortgage Facility contain events of default, including cross defaults to other material indebtedness, change of control events and other events of default customary for syndicated commercial credit

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

facilities. Upon the future occurrence of an event of default, we could be required to immediately repay all outstanding amounts under the 2021 Credit Facilities and the 2019 Mortgage Facility.

After giving effect to the applicable restrictions on the payment of dividends under our debt agreements, as of June 30, ~~2022,~~2023, we had approximately ~~$367.6~~$300.6 million of net income and retained earnings free of such restrictions. We were in compliance with all restrictive covenants under our debt agreements as of June 30, ~~2022.~~2023.

In addition, many of our facility leases are governed by a guarantee agreement between the landlord and us that contains financial and operating covenants. The financial covenants under the guarantee agreement are identical to those under the 2021 Credit Facilities and the 2019 Mortgage Facility with the exception of one additional financial covenant related to the ratio of EBTDAR to Rent (as defined in the guarantee agreement) with a required ratio of no less than 1.50 to 1.00. As of June 30, ~~2022,~~2023, the ratio was ~~13.03~~12.40 to 1.00.

7. Commitments and Contingencies

Guarantees and ~~Indemnifications~~Indemnification Obligations

In accordance with the terms of our operating lease agreements, our dealership subsidiaries, acting as lessees, generally agree to indemnify the lessor from certain exposure arising as a result of the use of the leased premises, including environmental exposure and repairs to leased property upon termination of the lease. In addition, we have generally agreed to indemnify the lessor in the event of a breach of the lease by the lessee.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In connection with dealership dispositions and facility relocations, certain of our subsidiaries have assigned or sublet to the buyer their interests in real property leases associated with such dealerships. In general, the subsidiaries retain responsibility for the performance of certain obligations under such leases, including rent payments and repairs to leased property upon termination of the lease, to the extent that the assignee or the sublessee does not perform. In the event an assignee or a sublessee does not perform its obligations, Sonic remains liable for such obligations.

In accordance with the terms of agreements entered into for the sale of our dealerships, we generally agree to indemnify the buyer from certain liabilities and costs arising subsequent to the date of sale, including environmental exposure and exposure resulting from the breach of representations or warranties made in accordance with the agreements. While our exposure with respect to environmental remediation ~~and repairs~~ is difficult to quantify, ~~we did not have any remaining~~our maximum exposure associated with these general indemnifications was approximately $8.0 million as of June 30, ~~2022~~2023 and ~~had~~there was not any material exposure ~~of $4.0 million~~with respect to these indemnifications at December 31, ~~2021.~~2022. These indemnifications typically expire within a period of one to three years following the date of sale. The estimated fair value of these indemnifications was not material and the amount recorded for this contingency was not significant at June 30, ~~2022.~~2023.

We also guarantee the floor plan commitments of our 50%-owned joint venture, and the amount of such guarantee at both June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was approximately $4.3 million.

Legal Matters

Sonic is involved, and expects to continue to be involved, in various legal and administrative proceedings arising out of the conduct of its business, including regulatory investigations and private civil actions brought by plaintiffs purporting to represent a potential class or for which a class has been certified. Although Sonic ~~vigorously defends itself~~is unable to predict with certainty the eventual outcome of any litigation, regulatory investigation or inquiry, in ~~all~~the opinion of management, Sonic does not believe it is reasonably possible that its current and threatened legal ~~and administrative~~ proceedings the outcomes of pending and future proceedings arising out of the conduct of Sonic’s business, including litigation with customers, employment-related lawsuits, contractual disputes, class actions, purported class actions and actions brought by governmental authorities, cannot be predicted with certainty. An unfavorable resolution of one or more of these matters couldwill have a material adverse effect on Sonic’s business, financial ~~condition,~~position or consolidated results of ~~operations, cash flows or prospects.~~operations. Given the inherent unpredictability of these types of proceedings, however, it is possible that future adverse outcomes could have a material effect on Sonic’s financial results.

~~Included in other accrued~~

There were no significant liabilities ~~and other long-term liabilities in the accompanying unaudited condensed consolidated balance sheet~~recorded related to legal matters as of June 30, ~~2022 were approximately $1.6 million~~2023 and $0.3 million, respectively, in reserves that Sonic was holding for pending proceedings. Included in other accrued liabilities and other long-term liabilities in the accompanying unaudited condensed consolidated balance sheet as of December 31, 2021 were approximately $1.5 million and $0.3 million, respectively, for such reserves. Except as reflected in such reserves, Sonic is currently unable to estimate a range of reasonably possible loss, or a range of reasonably possible loss in excess of the amount accrued, for pending proceedings.2022.

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

8. Fair Value Measurements

Assets and liabilities recorded at fair value in the accompanying unaudited condensed consolidated balance sheets as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows:


		Fair Value Based on Significant Other Observable Inputs (Level 2)					Fair Value Based on Significant Other Observable Inputs (Level 2)
		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
Assets:	Assets:					Assets:
Cash surrender value of life insurance policies (1)	Cash surrender value of life insurance policies (1)	$	37.2	$	39.5	Cash surrender value of life insurance policies (1)	$	40.1	$	38.2

Interest rate caps designated as hedges (2)						Interest rate caps designated as hedges (2)	2.9		—
Total assets	Total assets	$	37.2	$	39.5	Total assets	$	43.0	$	38.2

Liabilities:	Liabilities:					Liabilities:

Deferred compensation plan ~~(2)~~(3)	Deferred compensation plan ~~(2)~~(3)	$	22.2	$	24.4	Deferred compensation plan ~~(2)~~(3)	$	23.0	$	21.1
Total liabilities	Total liabilities	$	22.2	$	24.4	Total liabilities	$	23.0	$	21.1

(1)Included in other assets in the accompanying unaudited condensed consolidated balance sheets.

(2)As of June 30, 2023, approximately $1.9 million and $1.0 million were included in other current assets and other assets, respectively, in the accompanying unaudited condensed consolidated balance sheets.

(3)Included in other long-term liabilities in the accompanying unaudited condensed consolidated balance sheets.

~~There were no instances~~In conjunction with the approximately $75.2 million charge recorded during the three and six months ended June 30, ~~2022 which~~2023 related to the decision to indefinitely suspend operations at certain EchoPark locations and to close certain Northwest Motorsport stores discussed above, Sonic was required ~~a fair value measurement of~~to adjust certain real estate assets ~~ordinarily measured at~~to fair value on a non-recurring basis. ~~These~~After adjustments of $5.7 million, the recorded balances were $55.5 million at June 30, 2023. The book value of such assets ~~will~~may be ~~evaluated~~reevaluated as ~~of the annual valuation assessment date of October 1, 2022 or as events or~~ changes in circumstances require.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the fair values of Sonic’s financial instruments, including receivables, notes receivable from finance contracts, notes payable – floor plan, trade accounts payable, borrowings under the revolving credit facilities and certain mortgage notes, approximated their carrying values due either to length of maturity or existence of variable interest rates that approximate prevailing market rates.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the fair value and the carrying value of Sonic’s significant fixed rate long-term debt were as follows:


		June 30, 2022				December 31, 2021					June 30, 2023				December 31, 2022
		Fair Value		Carrying Value		Fair Value		Carrying Value			Fair Value		Carrying Value		Fair Value		Carrying Value
		(In millions)									(In millions)

4.875% Notes (1)	4.875% Notes (1)	$	376.3	$	500.0	$	504.8	$	500.0	4.875% Notes (1)	$	408.8	$	500.0	$	390.3	$	500.0
4.625% Notes (1)	4.625% Notes (1)	$	503.8	$	650.0	$	655.9	$	650.0	4.625% Notes (1)	$	544.4	$	650.0	$	519.5	$	650.0
Mortgage Notes (2)										Mortgage Notes (2)	$	161.8	$	169.5	$	174.0	$	186.6

(1)As determined by market quotations from similar securities as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively (Level 2).

(2)As determined by the DCF method (Level 2)

For further discussion of Sonic’s fair value measurements, see Note 11, “Fair Value Measurements,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

9. Segment Information

As of June 30, ~~2022,~~2023, Sonic had ~~two~~three operating segments: (1) retail automotive franchises that sell new vehicles and buy and sell used vehicles, sell replacement parts, perform vehicle maintenance, warranty and repair services, and arrange finance and insurance products (the “Franchised Dealerships Segment”); ~~and~~ (2) pre-owned vehicle specialty retail locations that provide guests an opportunity to search our nationwide inventory, purchase a pre-owned vehicle, select finance and insurance products and sell their current vehicle to us (the “EchoPark Segment”); and (3) retail locations that sell new and used powersports vehicles, perform vehicle maintenance, warranty and repair services, and arrange finance and insurance products (the “Powersports Segment”). Sonic has determined that its operating segments also represent its reportable segments.

The reportable segments identified above are the business activities of Sonic for which discrete financial information is available and for which operating results are regularly reviewed by Sonic’s chief operating decision maker to assess operating performance and allocate resources. Sonic’s chief operating decision maker is a group of three individuals consisting of: (1) the Company’s Chief Executive Officer; (2) the Company’s President; and (3) the Company’s Chief Financial Officer.

1415

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Reportable segment financial information for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 were as ~~follows (as restated, see Note 1, “Summary of Significant Accounting Policies”:~~follows:


		Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			Three Months Ended June 30,				Six Months Ended June 30,
		(In millions)									2023		2022		2023		2022
		As Restated				As Restated					(In millions)
Revenues:	Revenues:									Revenues:
Franchised Dealerships Segment revenues:	Franchised Dealerships Segment revenues:									Franchised Dealerships Segment revenues:
Retail new vehicles	Retail new vehicles	$	1,341.7	$	1,452.3	$	2,687.4	$	2,586.3	Retail new vehicles	$	1,583.3	$	1,341.7	$	3,004.3	$	2,687.4
Fleet new vehicles	Fleet new vehicles	19.9		9.7		38.0		32.0		Fleet new vehicles	28.3		19.9		47.1		38.0
Total new vehicles	Total new vehicles	$	1,361.6	$	1,462.0	$	2,725.4	$	2,618.3	Total new vehicles	1,611.6		1,361.6		3,051.4		2,725.4
Used vehicles	Used vehicles	871.9		761.5		1,725.7		1,423.1		Used vehicles	774.5		871.9		1,542.0		1,725.7
Wholesale vehicles	Wholesale vehicles	79.2		63.0		185.5		119.1		Wholesale vehicles	55.6		79.2		114.0		185.5
Parts, service and collision repair	Parts, service and collision repair	398.1		346.1		778.7		654.2		Parts, service and collision repair	433.4		398.1		857.2		778.7
Finance, insurance and other, net	Finance, insurance and other, net	129.8		124.0		256.2		221.6		Finance, insurance and other, net	132.2		129.8		249.4		256.2
Franchised Dealerships Segment revenues	Franchised Dealerships Segment revenues	$	2,840.6	$	2,756.6	$	5,671.5	$	5,036.3	Franchised Dealerships Segment revenues	$	3,007.3	$	2,840.6	$	5,814.0	$	5,671.5

EchoPark Segment revenues:	EchoPark Segment revenues:									EchoPark Segment revenues:
Retail new vehicles	Retail new vehicles	$	2.5	$	0.9	$	8.2	$	0.9	Retail new vehicles	$	—	$	1.3	$	1.0	$	5.7
Used vehicles	Used vehicles	577.5		519.7		1,094.5		961.0		Used vehicles	524.0		574.5		1,096.5		1,089.8
Wholesale vehicles	Wholesale vehicles	42.2		21.8		104.7		40.5		Wholesale vehicles	35.5		42.0		62.5		104.5

Finance, insurance and other, net	Finance, insurance and other, net	43.4		53.2		83.5		100.3		Finance, insurance and other, net	41.1		43.1		91.1		83.0
EchoPark Segment revenues	EchoPark Segment revenues	$	665.6	$	595.6	$	1,290.9	$	1,102.7	EchoPark Segment revenues	$	600.6	$	660.9	$	1,251.1	$	1,283.0

Powersports Segment revenues:										Powersports Segment revenues:
Retail new vehicles										Retail new vehicles	$	24.9	$	1.2	$	45.7	$	2.5

Used vehicles										Used vehicles	7.4		1.9		12.3		2.9
Wholesale vehicles										Wholesale vehicles	0.4		0.2		0.5		0.2
Parts, service and collision repair										Parts, service and collision repair	10.3		1.1		17.0		1.8
Finance, insurance and other, net										Finance, insurance and other, net	2.0		0.3		3.5		0.5
Powersports Segment revenues										Powersports Segment revenues	$	45.0	$	4.7	$	79.0	$	7.9

Total consolidated revenues	Total consolidated revenues	$	3,506.2	$	3,352.2	$	6,962.4	$	6,139.0	Total consolidated revenues	$	3,652.9	$	3,506.2	$	7,144.1	$	6,962.4


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(In millions)									(In millions)
Income (Loss) (1):
Segment Income (Loss) (1):										Segment Income (Loss) (1):
Franchised Dealerships Segment	Franchised Dealerships Segment	$	162.1	$	165.4	$	326.0	$	236.0	Franchised Dealerships Segment	$	145.9	$	162.1	$	255.8	$	326.0
EchoPark Segment	EchoPark Segment	(34.9)		(14.4)		(69.9)		(12.4)		EchoPark Segment	(52.8)		(34.2)		(99.7)		(69.6)
Powersports Segment										Powersports Segment	2.0		(0.7)		2.6		(0.3)

Income from continuing operations before taxes		$	127.2	$	151.0	$	256.1	$	223.6
Income before taxes										Income before taxes	$	32.5	$	127.2	$	96.1	$	256.1

(1)Segment income (loss) for each segment is defined as income (loss) ~~from continuing operations~~ before taxes and impairment charges.

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(In millions)
Depreciation and Amortization:
Franchised Dealerships Segment $ 25.3 $ 20.6 $ 50.1 $ 41.0
EchoPark Segment 5.9 4.2 11.0 7.4
Total depreciation and amortization $ 31.2 $ 24.8 $ 61.1 $ 48.4


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Depreciation and Amortization:
Franchised Dealerships Segment	$	27.9	$	25.3	$	54.5	$	50.0
EchoPark Segment	7.4		5.8		14.4		10.9
Powersports Segment	0.8		0.1		1.6		0.2
Total depreciation and amortization	$	36.1	$	31.2	$	70.5	$	61.1

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(In millions)
Floor Plan Interest Expense:
Franchised Dealerships Segment $ 3.9 $ 3.2 $ 7.2 $ 7.3
EchoPark Segment 2.2 1.1 3.9 2.1
Total floor plan interest expense $ 6.1 $ 4.3 $ 11.1 $ 9.4

1516

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(In millions)									(In millions)
Interest Expense, Other, Net:
Floor Plan Interest Expense:										Floor Plan Interest Expense:
Franchised Dealerships Segment(1)	Franchised Dealerships Segment(1)	$	20.2	$	9.7	$	40.3	$	19.7	Franchised Dealerships Segment(1)	$	11.9	$	3.9	$	21.8	$	7.2
EchoPark Segment	EchoPark Segment	1.1		0.4		1.8		0.7		EchoPark Segment	4.8		2.2		9.3		3.9
Total interest expense, other, net		$	21.3	$	10.1	$	42.1	$	20.4
Powersports Segment										Powersports Segment	0.3		—		0.4		—
Total floor plan interest expense										Total floor plan interest expense	$	17.0	$	6.1	$	31.5	$	11.1

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(In millions)
Capital Expenditures:
Franchised Dealerships Segment $ 21.9 $ 25.5 $ 52.0 $ 71.7
EchoPark Segment 19.7 11.9 48.4 33.4
Total capital expenditures $ 41.6 $ 37.4 $ 100.4 $ 105.1

June 30, 2022 December 31, 2021
(In millions)
Assets:
Franchised Dealerships Segment $ 4,031.9 $ 3,934.9
EchoPark Segment 664.5 740.6
Corporate and other:
Cash and cash equivalents 327.1 299.4
Other corporate assets — 0.2
Total assets $ 5,023.5 $ 4,975.1
(1)Amount is net of interest earned on the floor plan deposit balance of $4.6 million and $0.8 million in the three months ended June 30, 2023 and 2022, respectively, and $8.7 million and $1.4 million in the six months ended June 30, 2023 and 2022, respectively.


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Interest Expense, Other, Net:
Franchised Dealerships Segment	$	27.5	$	20.2	$	54.4	$	40.3
EchoPark Segment	0.9		1.1		1.8		1.8
Powersports Segment	0.5		—		1.1		—
Total interest expense, other, net	$	28.9	$	21.3	$	57.3	$	42.1

~~10. Subsequent Events~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Capital Expenditures:
Franchised Dealerships Segment	$	34.4	$	21.9	$	65.4	$	52.0
EchoPark Segment	2.8		19.7		8.5		48.4
Powersports Segment	1.1		—		1.6		—
Total capital expenditures	$	38.3	$	41.6	$	75.5	$	100.4


	June 30, 2023		December 31, 2022
	(In millions)
Assets:
Franchised Dealerships Segment	$	4,439.3	$	4,091.7
EchoPark Segment	28.1		267.6
Powersports Segment	207.5		117.8
Corporate and other:
Cash and cash equivalents	119.7		229.2
Floor plan deposit balance	287.0		272.0



Total assets	$	5,081.6	$	4,978.3

1617

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes thereto, as well as the consolidated financial statements and related notes thereto, “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Unless otherwise noted, we present the discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations on a consolidated basis. To the extent that we believe a discussion of the differences among reportable segments will enhance a reader’s understanding of our financial condition, cash flows and other changes in financial condition and results of operations, the differences are discussed separately. Certain amounts and percentages may not compute due to rounding.

Unless otherwise noted, all discussion of increases or decreases are for the three and six months ended June 30, ~~2022~~2023 compared to the three and six months ended June 30, ~~2021. The three months ended June 30,~~ 2022, ~~was the second full quarterly period to include the results of the locations acquired in the RFJ Auto Acquisition.~~respectively. The following discussion of Franchised Dealerships Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted. All currently operating franchised dealership stores are included within the same store group as of the first full month following the first anniversary of the store’s opening or acquisition. The following discussion of EchoPark segment used vehicles, wholesale vehicles, and finance, insurance, and other, net is on a reported basis, except where otherwise noted. All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening.

~~Restatement~~ The following discussion of ~~Previously Issued Financial Statements~~

~~As discussed in Note 1, “Summary of Significant Accounting Policies,” we have restated our previously issued condensed consolidated financial statements for the three~~Powersports Segment new vehicles, used vehicles, wholesale vehicles, parts, service and ~~six months ended June 30, 2022. Accordingly,~~ ~~Management's Discussion~~collision repair, and ~~Analysis of Financial Condition~~finance, insurance and ~~Results of Operations have been revised for the effects of the restatement.~~other, net is on a reported basis, except where otherwise noted.

Overview

We are one of the largest automotive retailers in the U.S. (as measured by reported total revenue). As a result of the way we manage our business, we had ~~two~~three reportable segments as of June 30, ~~2022:~~2023: (1) the Franchised Dealerships ~~Segment and~~Segment; (2) the EchoPark Segment; and (3) the Powersports Segment. For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As of ~~June 30, 2022,~~July 27, 2023, we operated ~~111~~108 stores in the Franchised Dealerships Segment, ~~and 50~~25 stores in the EchoPark Segment and 13 stores in the Powersports Segment. The Franchised Dealerships Segment consists of ~~141~~134 new vehicle franchises (representing 28 different brands of cars and light trucks) and 1716 collision repair centers in 18 states. As of ~~June 30, 2022,~~July 27, 2023, we operated 5025 EchoPark stores in 2011 states, including 117 Northwest Motorsport pre-owned vehicle stores acquired in the RFJ Acquisition in December 2021 ~~and which~~that are included in the EchoPark Segment. Under our current EchoPark growth plan, we plan to continue to increase our physical and digital footprint as we build out a nationwide EchoPark distribution network expected to reach 90% of the U.S. population by 2025.

The Franchised Dealerships Segment provides comprehensive sales and services, including (1) sales of both new and used cars and light trucks; (2) sales of replacement parts and performance of vehicle maintenance, manufacturer warranty repairs, and paint and collision repair services (collectively, “Fixed Operations”); and (3) arrangement of third-party financing, extended warranties, service contracts, ~~financing,~~ insurance and other aftermarket products (collectively, ~~“finance and insurance” or~~ “F&I”) for our guests. The EchoPark Segment sells used cars and light trucks and arranges third-party F&I product sales for our guests in pre-owned vehicle specialty retail ~~locations. Our EchoPark business~~locations, and does not offer customer-facing Fixed Operations services. The Powersports Segment offers guests: (1) sales of both new and used powersports vehicles (such as motorcycles, personal watercraft and all-terrain vehicles); (2) Fixed Operations activities; and (3) F&I services. All three segments generally ~~operates~~operate independently ~~from our franchised dealerships business (except for~~of one another with the exception of certain shared back-office functions and corporate overhead ~~costs).~~costs.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

Retail Automotive Industry Performance

The U.S. retail automotive industry’s total new vehicle (retail and fleet combined) ~~seasonally adjusted annual rate of~~unit sales ~~(“SAAR”) decreased 21%~~volume increased 16% and ~~18%~~11%, to approximately 15.6 million and 15.4 million vehicles for the three and six months ended June 30, 2023, respectively, compared to approximately 13.5 million and 13.9 million vehicles for the three and six months ended June 30, 2022, respectively, ~~compared to 17.0 million vehicles in both the three and six months ended June 30, 2021,~~ according to ~~data from~~the Power Information Network (“PIN”) from J.D. Power. We currently estimate the 2023 new vehicle industry volume will be between 15.0 million vehicles (an increase of 9.5% compared to 2022) and 16.0 million vehicles (an increase of 16.8% compared to 2022). The ongoing effects of supply chain disruptions as a result of the COVID-19 pandemic, availability of new and used vehicle inventory, interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of natural disasters or other unforeseen circumstances could cause the actual ~~2022 total~~2023 new vehicle ~~SAAR~~

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

industry volume to vary from ~~current levels.~~expectations. Many factors, including brand and geographic concentrations as well as the industry sales mix between retail and fleet new vehicle unit sales volume, have caused our past results to differ from the industry’s overall trend. Our new vehicle sales strategy focuses on our retail new vehicle sales (as opposed to fleet new vehicle sales) and, as a result, we believe it is appropriate to compare our retail new vehicle unit sales volume to the industry retail new vehicle ~~SAAR~~unit sales volume (which excludes fleet new vehicle sales). According to ~~the~~ PIN from J.D. Power, industry retail new vehicle ~~SAAR was 11.6~~unit sales volume increased 10% and 5%, to approximately 12.8 million and 12.7 million vehicles for the three and six months ended June 30, ~~2022, a decrease of 26%~~2023, respectively, from ~~15.6~~approximately 11.6 million ~~vehicles in the prior year period,~~ and 12.1 million vehicles for the three and six months ended June 30, ~~2022, a decrease of 19% from 15.0 million vehicles in the prior year period.~~2022.

Impact of COVID-19 and Supply Chain Disruptions

The ongoing effects of the COVID-19 pandemic continue to evolve. A setback in the recovery of the general economy over the course of the pandemic may cause changes in consumer behaviors, including a potential reduction in consumer spending for vehicles and automotive repairs, particularly if the pandemic worsens, interest rates experienced by consumers continue to rise or if the U.S. economy experiences a recession. This may lead to increased asset recovery and valuation risks, such as impairment of additional indefinite lived intangible assets. In addition, uncertainties in the global economy have negatively impacted our suppliers and other business partners, which may interrupt our vehicle and parts inventory supply chain and require other changes to our operations. We have also seen a tightening in the supply of new and used vehicles due, in part, to the COVID-19 pandemic, which is likely to continue throughout 2022 and into 2023. These and other factors may adversely impact our revenues, operating income, earnings per share, and other financial measures.

~~In addition, the~~ global automotive supply chain has been significantly disrupted ~~during~~since the onset of the COVID-19 pandemic, primarily related to the production of semiconductors and other components that are used in many modern automobiles, in addition to workforce-related production delays and stoppages. As a result, automobile manufacturing ~~is operating~~has operated for multiple years at lower than usual production levels, reducing the amount of new vehicle inventory and certain parts inventory available to our dealerships. These inventory constraints ~~coupled with strong consumer demand and elevated levels of consumer savings,~~ have led to low new and used vehicle inventory and a ~~high~~volatile new and used vehicle pricing ~~environment, which drove lower retail new~~environment. New vehicle ~~unit sales volume in the second quarter of 2022. While new vehicle~~ and certain parts production levels ~~began to improve in the first half of 2022,~~have improved; however, there is a risk that higher production levels and new vehicle ~~and certain parts~~ inventory ~~levels remain at a low level or worsen,~~on hand may not result in incremental retail new vehicle sales volume, which could ~~adversely impact~~cause actual 2023 new vehicle industry volume to vary from our ~~revenues, operating income, earnings per share, and other financial measures.~~expectations.

Franchised Dealerships Segment

As a result of the acquisition, disposition, termination or closure of franchised dealership stores since the first quarter of ~~2021, including the RFJ Acquisition in December 2021,~~2022, the change in ~~consolidated~~ reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores.

The following discussion of Franchised Dealerships Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted. All currently operating franchised dealership stores are included within the same store group as of the first full month following the first anniversary of the store’s opening or acquisition. Unless otherwise noted, all comparisons are to the prior year period.

Retail new vehicle revenue ~~decreased 22%~~increased 18% and ~~13%~~11% during the three and six months ended June 30, ~~2022,~~2023, respectively, primarily driven by a ~~33%~~12% and ~~25% decrease~~6% increase in retail new vehicle unit sales volume, respectively, and a 5% and 6% increase in retail new vehicle average selling prices, respectively. Retail new vehicle gross profit ~~increased 18%~~decreased 16% and ~~49%~~17% during the three and six months ended June 30, ~~2022,~~2023, respectively, due primarily to higher inventory invoice costs and increased price competition as a ~~16% increase in retail new vehicle average selling prices for both the three and six months ended June 30, 2022,~~result of higher levels of available inventory, which drove ~~higher~~lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit ~~increased $3,008~~decreased $1,700 per unit, or ~~77%~~25%, to ~~$6,905~~$4,986 per unit during the three months ended June 30, ~~2022,~~2023, and ~~increased $3,393~~decreased $1,409 per unit, or ~~98%~~21%, to ~~$6,851~~$5,215 per unit during the six months ended June 30, 2022, due primarily to higher average selling prices due in part to inventory shortages as a result of vehicle manufacturer supply chain disruptions and production delays. Many of our new vehicles are being pre-ordered and delivered to customers shortly after the vehicles arrive at our stores.2023. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment ~~days’ supply of~~ new vehicle inventory days’ supply was approximately 31 and 21 days as of June 30, 2023 and 2022, ~~compared to 15 days as of June 30, 2021.~~respectively.

Retail used vehicle revenue decreased 1%11% during both the three and six months ended June 30, ~~2022,~~2023, driven primarily by ~~lower~~a 10% and 9% decrease in retail used vehicle unit sales ~~volume. Retail used vehicle revenue increased 4% during the six months ended June 30, 2022, driven by higher average selling prices.~~volume, respectively. Retail used vehicle gross profit decreased ~~30%~~13% and ~~13%~~16% during the three and six months ended June 30, ~~2022,~~2023, respectively, due to lower retail used vehicle gross profit per unit and a decrease in retail used vehicle unit sales volume. Retail used vehicle gross profit per unit decreased ~~$293~~$45 per unit, or ~~15%~~3%, to ~~$1,622~~$1,618 per unit during the three months ended June 30, ~~2022, due primarily to lower retail used vehicle unit sales volume. Retail used vehicle gross profit per unit increased $72~~2023, and decreased $125 per unit, or 4%7%, to ~~$1,674~~$1,593 per unit during the six months ended June 30, ~~2022,~~2023, due primarily to higher ~~average selling prices due in part to shortages of new~~inventory acquisition costs and lower retail used vehicle ~~inventory. Wholesale vehicle gross profit decreased by approximately $4.5 million in the three months ended June 30, 2022,~~

1819

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

average selling prices. Wholesale vehicle gross profit decreased by approximately $0.3 million and $2.3 million in the three and six months ended June 30, 2023, respectively, due primarily to a ~~$694~~$43 per unit, or ~~112%~~41%, decrease in wholesale vehicle gross profit per ~~unit. Wholesale~~unit during the three months ended June 30, 2023 and a $203 per unit, or 282%, increase in wholesale vehicle gross profit ~~decreased by approximately $5.7 million in~~per unit during the six months ended June 30, ~~2022, due primarily to a $435 per unit, or 120%, decrease in wholesale vehicle gross profit per unit. In the past, we have focused~~2023. We generally focus on maintaining Franchised Dealerships Segment used vehicle inventory days’ supply in the 25- to 35-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment used vehicle inventory days’ supply was approximately 31 days as of both June 30, ~~2022~~2023 and ~~2021.~~2022.

Fixed Operations revenue increased 5%9% and 8%10% during the three and six months ended June 30, ~~2022,~~2023, respectively, and Fixed Operations gross profit increased 4%9% and 7%10% during the three and six months ended June 30, ~~2022,~~2023, respectively. Fixed Operations gross margin decreased 6010 basis points, to ~~50.0%~~49.6%, during the three months ended June 30, ~~2022. Fixed Operations gross margin decreased 80~~2023, and increased 10 basis points, to ~~49.6%~~49.5%, during the six months ended June 30, ~~2022.~~2023.

F&I revenue ~~decreased 14%~~increased 4% and 5%remained flat during the three and six months ended June 30, ~~2022,~~2023, respectively, driven primarily by ~~a decrease in F&I unit sales volume.~~higher retail new vehicle average selling prices. F&I gross profit per retail unit increased ~~$327~~$100 per unit, ~~or 15%,~~ to ~~$2,440~~$2,522, and increased $45 per unit, to $2,452 per unit, during the three ~~months ended June 30, 2022. F&I gross profit per retail unit increased $392 per unit, or 19%, to $2,412 per unit during the~~and six months ended June 30, ~~2022.~~2023, respectively. We believe that our proprietary software applications, playbook processes and guest-centric selling approach enable us to optimize F&I gross profit and penetration rates (the number of F&I products sold per vehicle) across our F&I product lines.

EchoPark Segment

The following discussion of EchoPark Segment used vehicles, wholesale vehicles, and finance, insurance and other, net is on a reported basis, except where otherwise noted. All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening. Unless otherwise noted, all comparisons are to the prior year period.

On June 22, 2023, Sonic announced a plan to indefinitely suspend operations at eight EchoPark locations and 14 related delivery/buy centers. In addition, we subsequently closed three Northwest Motorsport pre-owned locations within the EchoPark segment (collectively, these 25 locations represent the “closed EchoPark stores”). This decision was made to better align the EchoPark Segment operations with current pre-owned vehicle market conditions that continue to be negatively impacted by lower production of new vehicles over the past three years and historically low lease penetration rates. These conditions have resulted in lower availability of used vehicles and higher wholesale vehicle prices. In connection with this decision, Sonic recorded a charge totaling approximately $75.2 million. This charge included impairments of $32.5 million related to fixed assets, $16.0 million related to right-of-use assets and $14.1 million related to cease-use accruals; $0.4 million related to lease exit charges; $10.0 million of inventory valuation adjustments (of which $5.8 million relates to stores with ongoing operations at EchoPark locations and $1.9 million relates to ongoing operations of Northwest Motorsport locations); and $2.2 million related to severance.

Reported total revenue ~~increased 12%~~decreased 9% and ~~17%~~3% during the three and six months ended June 30, ~~2022,~~2023, respectively, driven primarily by ~~continued expansion of our nationwide distribution network and higher average~~a decrease in retail used vehicle average selling ~~prices.~~prices, offset partially by an increase in retail used vehicle unit sales volume. Reported total gross profit ~~increased 37%~~decreased 44% and ~~14%~~27% during the three and six months ended June 30, ~~2022,~~2023, respectively, primarily due to ~~higher average retail used vehicle selling prices and improvement~~a decrease in retail used vehicle gross profit (loss) per ~~unit.~~unit as a result of higher inventory acquisition costs.

Reported retail used vehicle revenue decreased 9% and increased ~~11% and 14%~~1% during the three and six months ended June 30, ~~2022, respectively. F&I revenue decreased 18% and 17% during the three and six months ended June 30, 2022,~~2023, respectively, driven primarily by a ~~22% and 23%~~ decrease in retail used vehicle average selling prices, partially offset by an increase in retail used vehicle unit sales ~~volume~~volume. F&I revenue decreased 5% during the three months ended June 30, 2023, driven by lower retail used vehicle average selling prices, and increased 10% during the six months ended June 30, ~~2022, respectively, as we strategically adjusted our~~2023, driven primarily by an 18% increase in retail used vehicle unit sales ~~volume to manage overall segment income (loss) levels.~~volume. Reported combined retail used vehicle and F&I gross profit per unit ~~increased $1,267~~decreased $1,182 per unit, or ~~82%~~43%, to ~~$2,804,~~$1,569 per unit during the three months ended June 30, ~~2022, due primarily to strategic actions taken to reduce used vehicle inventory acquisition costs, benefiting retail used vehicle gross profit per unit. Reported combined retail used vehicle~~2023, and ~~F&I gross profit per unit increased $852~~decreased $980 per unit, or ~~44%~~36%, to ~~$2,774,~~$1,750 per unit during the six months ended June 30, ~~2022,~~2023, due primarily to ~~strategic actions taken to reduce used vehicle~~higher inventory acquisition costs ~~benefiting retail used vehicle gross profit per unit.~~as a result of increases in wholesale auction prices during the three and six months ended June 30, 2023.

~~Wholesale~~Reported wholesale vehicle gross profit decreased by approximately ~~$1.3~~$1.7 million and $2.2 million during the three and six months ended June 30, ~~2022,~~2023, respectively, due primarily to a decrease in wholesale vehicle ~~unit sales volume. Wholesale vehicle~~ gross profit ~~increased by approximately $0.3 million during the six months ended June 30, 2022, due in part to higher average wholesale prices as a result of increased demand for used vehicles at auction.~~per unit. We generally focus on maintaining EchoPark Segment used vehicle inventory days’ supply in the 30- to 40-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. ~~Our used vehicle inventory days’ supply at~~On a trailing quarter cost of sales basis, our reported EchoPark ~~stores was approximately 53 and 47 days as of June 30, 2022 and 2021, respectively. The elevated level of~~Segment used vehicle inventory days’ supply was ~~due primarily to the opening of new EchoPark stores, which require additional inventory on hand but are not yet generating retail used vehicle sales at the rate of a more mature store.~~

~~All currently operating EchoPark stores in a local geographic market are included within the same market group~~approximately 39 and 53 days as of ~~the first full month following the first anniversary of the market’s opening. EchoPark same market total revenues decreased 20% and 16% during the three and six months ended~~ June 30, 2023 and 2022, respectively, driven primarily by a decrease in retail used vehicle unit sales volume as we strategically adjusted our retail used vehicle unit sales volume to manage overall segment income (loss) levels. EchoPark same market total gross profit decreased 20% during the three months ended June 30, 2022, due primarily to lower retail used vehicle unit sales volume, offset partially by a 41% increase in total gross profit per unit, to $2,171 per unit. EchoPark same market total gross profit decreased 35% during the six months ended June 30, 2022, due primarily to lower retail used vehicle unit sales volume, offset partially by a 7% increase in total gross profit per unit, to $2,048 per unit.

~~Results of Operations – Consolidated~~

respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Same market total revenues increased 23% and 34% during the three and six months ended June 30, 2023, respectively, driven primarily by an increase retail used vehicle and wholesale vehicle unit sales volume. Same market total gross profit increased 27% and 42% during the three and six months ended June 30, 2023, respectively, driven primarily by an increase in retail used vehicle and wholesale vehicle unit sales volume.

Powersports Segment

The following discussion of Powersports Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a reported basis, except where otherwise noted. In the first quarter of 2023, we acquired one powersports business with five locations.

In the three and six months ended June 30, 2023, reported total revenue was $45.0 million and $79.0 million, respectively, and reported total gross profit was $12.8 million and $22.6 million, respectively.

Reported retail new vehicle revenue for the three and six months ended June 30, 2023 was $24.9 million and $45.7 million, respectively, and reported retail new vehicle gross profit was $4.5 million and $8.5 million, respectively, based on a retail new vehicle average selling price of $17,827 and $18,254, respectively, and a retail new vehicle gross profit per unit of $3,235 per unit and $3,385 per unit, respectively. On a trailing quarter cost of sales basis, our reported Powersports Segment new vehicle inventory days’ supply was approximately 111 days as of June 30, 2023. We believe that in a normal production environment, the level of new vehicle inventory days’ supply in our Powersports Segment should be in the 90- to 120-day range, depending on seasonality.

Reported retail used vehicle revenue for the three and six months ended June 30, 2023 was $7.4 million and $12.3 million, respectively, and reported retail used vehicle gross profit was $1.3 million and $2.4 million, respectively, based on a retail used vehicle average selling price of $10,765 and $10,804, respectively, and a retail used vehicle gross profit per unit of $1,942 per unit and $2,093 per unit, respectively. On a trailing quarter cost of sales basis, our reported Powersports Segment used vehicle inventory days’ supply was approximately 50 days as of June 30, 2023. Going forward, we generally expect to maintain a used vehicle inventory days’ supply in our Powersports Segment in the 75- to 100-day range, depending on seasonality.

Reported Fixed Operations revenue for the three and six months ended June 30, 2023 was $10.3 million and $17.0 million, respectively, and reported Fixed Operations gross profit was $5.0 million and $8.3 million, respectively. Customer pay revenue for the three and six months ended June 30, 2023 was $3.5 million and $6.0 million, respectively, and customer pay gross profit was $1.9 million and $3.3 million, respectively. Warranty revenue for the three and six months ended June 30, 2023 was $0.4 million and $0.8 million, respectively, and warranty gross profit was $0.3 million and $0.4 million, respectively. Wholesale parts revenue for the three and six months ended June 30, 2023 was $0.2 million and $0.3 million, respectively. There was no wholesale parts gross profit for the three months ended June 30, 2023 and wholesale parts gross profit for the six months ended June 30, 2023 was $0.1 million. Internal, sublet and other revenue for the three and six months ended June 30, 2023 was $6.2 million and $9.9 million, respectively, and internal, sublet and other gross profit was $2.8 million and $4.5 million, respectively.

Reported F&I revenue for the three and six months ended June 30, 2023 was $2.0 million and $3.5 million, respectively, based on F&I gross profit per retail unit of $952 and $964, respectively.

Results of Operations – Consolidated

As a result of the acquisition, disposition, termination or closure of franchised dealership stores since the first quarter of 2022, the change in consolidated reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores.

New Vehicles – Consolidated

New vehicle revenues include the sale of new vehicles, including new powersports vehicles, to retail customers, as well as the sale of fleet ~~vehicles.~~vehicles to businesses for use in their operations. New vehicle revenues and gross profit can be influenced by vehicle manufacturer incentives to consumers (which vary from cash-back incentives to low interest rate financing, among other things), the availability of consumer credit and the level and type of manufacturer-to-dealer incentives, as well as manufacturers providing adequate inventory allocations to our dealerships to meet ~~customer demands.~~consumer demand. The automobile manufacturing industry is cyclical and historically has experienced periodic downturns characterized by oversupply and ~~weakening~~weak demand, both within specific brands and in the industry as a whole. As an automotive retailer, we seek to mitigate the effects of

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

this sales cycle by maintaining a diverse brand mix of dealerships. Our brand diversity allows us to offer a broad range of products at a wide range of prices from ~~lower-priced/~~lower-priced economy vehicles to luxury vehicles and powersports vehicles.

The following table depicts the breakdown of our Franchised Dealerships Segment new vehicle revenues by brand for the three and six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			Three Months Ended June 30,				Six Months Ended June 30,
Brand	Brand	As Restated				As Restated				Brand	2023		2022		2023		2022
Luxury:	Luxury:									Luxury:
BMW	BMW	23.9	%	26.6	%	24.5	%	25.4	%	BMW	24.7	%	23.9	%	25.1	%	24.5	%
Mercedes	Mercedes	12.6	%	12.2	%	11.9	%	12.4	%	Mercedes	14.8	%	12.6	%	14.2	%	11.9	%
Audi	Audi	6.3	%	7.6	%	5.7	%	7.4	%	Audi	6.0	%	6.3	%	5.9	%	5.7	%
Lexus	Lexus	4.9	%	4.7	%	4.8	%	4.8	%	Lexus	4.9	%	4.9	%	4.7	%	4.8	%
Porsche	Porsche	4.9	%	3.7	%	3.8	%	3.7	%	Porsche	3.7	%	4.9	%	3.9	%	3.8	%
Land Rover										Land Rover	3.2	%	1.9	%	3.8	%	2.6	%
Cadillac	Cadillac	2.1	%	2.4	%	2.1	%	2.6	%	Cadillac	2.0	%	2.1	%	2.1	%	2.1	%
Land Rover		1.9	%	3.9	%	2.6	%	4.2	%
Volvo	Volvo	1.2	%	—	%	1.1	%	—	%	Volvo	1.1	%	1.2	%	1.1	%	1.1	%
MINI	MINI	0.8	%	1.2	%	0.8	%	1.1	%	MINI	1.0	%	0.8	%	1.0	%	0.8	%
Other Luxury (1)	Other Luxury (1)	0.5	%	3.0	%	0.5	%	2.9	%	Other Luxury (1)	0.1	%	0.5	%	0.4	%	0.5	%
Total Luxury	Total Luxury	59.1	%	65.3	%	57.8	%	64.5	%	Total Luxury	61.5	%	59.1	%	62.2	%	57.8	%
Mid-line Import:	Mid-line Import:									Mid-line Import:
Honda										Honda	10.9	%	8.2	%	10.6	%	8.8	%
Toyota	Toyota	9.0	%	7.6	%	9.1	%	8.3	%	Toyota	8.5	%	9.0	%	8.2	%	9.1	%
Honda		8.2	%	14.7	%	8.8	%	14.0	%
Volkswagen	Volkswagen	2.0	%	1.5	%	1.8	%	1.4	%	Volkswagen	1.4	%	2.0	%	1.5	%	1.8	%
Hyundai	Hyundai	1.8	%	1.0	%	1.6	%	1.0	%	Hyundai	1.3	%	1.8	%	1.4	%	1.6	%
Other Mid-line Import (2)	Other Mid-line Import (2)	1.5	%	0.8	%	1.7	%	0.5	%	Other Mid-line Import (2)	1.5	%	1.5	%	1.4	%	1.7	%
Total Mid-line Import	Total Mid-line Import	22.5	%	25.6	%	23.0	%	25.2	%	Total Mid-line Import	23.6	%	22.5	%	23.1	%	23.0	%
Domestic:	Domestic:									Domestic:
General Motors (3)	General Motors (3)	7.6	%	4.5	%	7.4	%	5.1	%	General Motors (3)	5.5	%	7.6	%	6.0	%	7.4	%
Chrysler, Dodge, Jeep and Ram		5.6	%	—	%	6.4	%	—	%
Chrysler										Chrysler	5.1	%	5.6	%	4.3	%	6.4	%
Ford	Ford	5.2	%	4.6	%	5.4	%	5.2	%	Ford	4.3	%	5.2	%	4.4	%	5.4	%
Total Domestic	Total Domestic	18.4	%	9.1	%	19.2	%	10.3	%	Total Domestic	14.9	%	18.4	%	14.7	%	19.2	%
Total	Total	100.0	%	100.0	%	100.0	%	100.0	%	Total	100.0	%	100.0	%	100.0	%	100.0	%

(1)Includes ~~Acura,~~ Alfa Romeo, Infiniti, Jaguar and Maserati.

(2)Includes Mazda, Nissan and Subaru.

(3)Includes Buick, Chevrolet and GMC.

The U.S. retail automotive industry’s new vehicle unit sales volume reflects all brands marketed or sold in the U.S. This industry sales volume includes brands we do not sell and markets in which we do not operate, therefore, changes in our new vehicle unit sales volume may not trend directly in line with changes in the industry new vehicle unit sales volume. We believe that the industry retail new vehicle ~~industry~~unit sales volume is a more meaningful metric for comparing our new vehicle unit sales volume to the industry due to our minimal fleet vehicle business.

2022

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Beginning in the middle of March 2020, the COVID-19 pandemic began to adversely impact the retail automotive industry and consequentially also our business operations by severely impacting the demand portion of our business. Disruptions in the automotive supply chain have caused lower than expected levels of vehicle production, which, combined with consumer demand for new vehicles, drove lower than typical levels of new vehicle inventory during 2021 and in 2022 to date. Low levels of new vehicle inventory have resulted in higher average selling prices for new vehicles and we believe had a negative impact onU.S. retail new vehicle ~~SAAR for the three and six months ended June 30, 2022.~~

~~Retail new vehicle SAAR,~~industry volume, fleet new vehicle ~~SAAR~~industry volume and total new vehicle ~~SAAR~~industry volume were as follows:

Three Months Ended June 30, Better / (Worse) Six Months Ended June 30, Better / (Worse)
2022 2021 % Change 2022 2021 % Change
(In millions of vehicles)
Retail new vehicle SAAR (1) 11.6 15.6 (25.6) % 12.1 15.0 (19.3) %
Fleet new vehicle SAAR 1.9 1.4 35.7 % 1.8 2.0 (10.0) %
Total new vehicle SAAR (1) 13.5 17.0 (20.6) % 13.9 17.0 (18.2) %


	Three Months Ended June 30,		Better / (Worse)		Six Months Ended June 30,		Better / (Worse)
	2023	2022	% Change		2023	2022	% Change
	(In millions of vehicles)
U.S. industry volume – Retail new vehicle (1)	12.8	11.6	10	%	12.7	12.1	5	%
U.S. industry volume – Fleet new vehicle	2.8	1.9	47	%	2.7	1.8	50	%
U.S. industry volume – Total new vehicle (1)	15.6	13.5	16	%	15.4	13.9	11	%

(1)Source: PIN from J.D. Power

Our consolidated reported new vehicle results (combined retail and fleet data) were as follows:

Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
As Restated
Reported new vehicle:
Retail new vehicle revenue $ 1,344.3 $ 1,453.2 $ (108.9) (7) %
Fleet new vehicle revenue 19.8 9.7 10.1 104.1 %
Total new vehicle revenue $ 1,364.1 $ 1,462.9 $ (98.8) (7) %
Retail new vehicle gross profit $ 168.3 $ 118.1 $ 50.2 43 %
Fleet new vehicle gross profit 0.9 0.3 0.6 200 %
Total new vehicle gross profit $ 169.2 $ 118.4 $ 50.8 43 %
Retail new vehicle unit sales 24,427 30,257 (5,830) (19) %
Fleet new vehicle unit sales 422 245 177 72.2 %
Total new vehicle unit sales 24,849 30,502 (5,653) (19) %
Revenue per new retail unit $ 55,031 $ 48,029 $ 7,002 15 %
Revenue per new fleet unit $ 46,919 $ 39,487 $ 7,432 19 %
Total revenue per new unit $ 54,896 $ 47,961 $ 6,935 14 %
Gross profit per new retail unit $ 6,890 $ 3,903 $ 2,987 77 %
Gross profit per new fleet unit $ 2,133 $ 1,319 $ 814 62 %
Total gross profit per new unit $ 6,809 $ 3,883 $ 2,926 75 %
Retail gross profit as a % of revenue 12.5 % 8.1 % 440 bps
Fleet gross profit as a % of revenue 4.5 % 3.1 % 140 bps
Total new vehicle gross profit as a % of revenue 12.4 % 8.1 % 430 bps

~~NM = Not Meaningful~~


	Three Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported new vehicle:
Retail new vehicle revenue	$	1,608.2		$	1,344.3		$	263.9	20	%
Fleet new vehicle revenue	28.3			19.8			8.5		43	%
Total new vehicle revenue	$	1,636.5		$	1,364.1		$	272.4	20	%

Retail new vehicle gross profit	$	141.4		$	168.3		$	(26.9)	(16)	%
Fleet new vehicle gross profit	1.3			0.9			0.4		44	%
Total new vehicle gross profit	$	142.7		$	169.2		$	(26.5)	(16)	%

Retail new vehicle unit sales	28,754			24,427			4,327		18	%
Fleet new vehicle unit sales	590			422			168		40	%
Total new vehicle unit sales	29,344			24,849			4,495		18	%

Revenue per new retail unit	$	55,929		$	55,031		$	898	2	%
Revenue per new fleet unit	$	48,038		$	47,150		$	888	2	%
Total revenue per new unit	$	55,771		$	54,898		$	873	2	%

Gross profit per new retail unit	$	4,918		$	6,890		$	(1,972)	(29)	%
Gross profit per new fleet unit	$	2,099		$	2,235		$	(136)	(6)	%
Total gross profit per new unit	$	4,861		$	6,811		$	(1,950)	(29)	%

Retail gross profit as a % of revenue	8.8		%	12.5		%	(370)		bps
Fleet gross profit as a % of revenue	4.4		%	4.7		%	(30)		bps
Total new vehicle gross profit as a % of revenue	8.7		%	12.4		%	(370)		bps

2123

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
As Restated
Reported new vehicle:
Retail new vehicle revenue $ 2,695.6 $ 2,587.2 $ 108.4 4 %
Fleet new vehicle revenue 38.0 32.0 6.0 19 %
Total new vehicle revenue $ 2,733.6 $ 2,619.2 $ 114.4 4 %
Retail new vehicle gross profit $ 336.0 $ 187.3 $ 148.7 79 %
Fleet new vehicle gross profit 1.8 0.6 1.2 200 %
Total new vehicle gross profit $ 337.8 $ 187.9 $ 149.9 80 %
Retail new vehicle unit sales 49,114 54,074 (4,960) (9) %
Fleet new vehicle unit sales 782 786 (4) (1) %
Total new vehicle unit sales 49,896 54,860 (4,964) (9) %
Revenue per new retail unit $ 54,884 $ 47,846 $ 7,038 15 %
Revenue per new fleet unit $ 48,593 $ 40,686 $ 7,907 19 %
Total revenue per new unit $ 54,786 $ 47,744 $ 7,042 15 %
Gross profit per new retail unit $ 6,841 $ 3,464 $ 3,377 97 %
Gross profit per new fleet unit $ 2,302 $ 727 $ 1,575 217 %
Total gross profit per new unit $ 6,770 $ 3,425 $ 3,345 98 %
Retail gross profit as a % of revenue 12.5 % 7.2 % 530 bps
Fleet gross profit as a % of revenue 4.7 % 1.9 % 280 bps
Total new vehicle gross profit as a % of revenue 12.4 % 7.2 % 520 bps

~~NM = Not Meaningful~~



	Six Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported new vehicle:
Retail new vehicle revenue	$	3,051.0		$	2,695.6		$	355.4	13	%
Fleet new vehicle revenue	47.1			38.0			9.1		24	%
Total new vehicle revenue	$	3,098.1		$	2,733.6		$	364.5	13	%

Retail new vehicle gross profit	$	279.5		$	336.0		$	(56.5)	(17)	%
Fleet new vehicle gross profit	2.1			1.8			0.3		17	%
Total new vehicle gross profit	$	281.6		$	337.8		$	(56.2)	(17)	%

Retail new vehicle unit sales	54,411			49,114			5,297		11	%
Fleet new vehicle unit sales	1,031			782			249		32	%
Total new vehicle unit sales	55,442			49,896			5,546		11	%

Revenue per new retail unit	$	56,073		$	54,884		$	1,189	2	%
Revenue per new fleet unit	$	45,746		$	48,640		$	(2,894)	(6)	%
Total revenue per new unit	$	55,881		$	54,786		$	1,095	2	%

Gross profit per new retail unit	$	5,137		$	6,841		$	(1,704)	(25)	%
Gross profit per new fleet unit	$	2,065		$	2,287		$	(222)	(10)	%
Total gross profit per new unit	$	5,080		$	6,770		$	(1,690)	(25)	%

Retail gross profit as a % of revenue	9.2		%	12.5		%	(330)		bps
Fleet gross profit as a % of revenue	4.5		%	4.7		%	(20)		bps
Total new vehicle gross profit as a % of revenue	9.1		%	12.4		%	(330)		bps

For further analysis of new vehicle results, see the tables and discussion under the ~~heading~~headings “New Vehicles –- Franchised Dealerships Segment” and “New Vehicles - Powersports Segment” in the Franchised Dealerships Segment ~~section~~and Powersports Segment sections, respectively, below.

Used Vehicles – Consolidated

Used vehicle revenues include the sale of used vehicles, including used powersports vehicles, to retail customers and at wholesale. Used vehicle revenues are directly affected by a number of factors, including consumer demand for used vehicles, the pricing and level of manufacturer incentives on new vehicles, the number and quality of trade-ins and lease turn-ins available to our dealerships, the availability and pricing of used vehicles acquired at wholesale auction and the availability of consumer credit.

As a result of low levels of new vehicle inventory and a heightened demand for used vehicles ~~(both by~~(by retail consumers and automobile dealers and rental car companies at wholesale auction), used vehicle prices reached an all-time high ~~during the first quarter of~~in 2022 and ~~remained at~~remain elevated ~~levels during the second quarter of 2022.~~above historical levels. Depending on the mix of inventory sourcing ~~(trade-in~~(trade-ins or purchases from customers versus wholesale auction), the days’ supply of used vehicle inventory, and the pricing strategy employed by the dealership, retail used vehicle gross profit per unit and retail used vehicle gross profit as a percentage of revenue may vary significantly from historical levels given the current used vehicle environment.

2224

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our consolidated reported retail used vehicle results were as follows:


		Three Months Ended June 30,						Better / (Worse)					Three Months Ended June 30,						Better / (Worse)
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(In millions, except unit and per unit data)											(In millions, except unit and per unit data)
Reported retail used vehicle:	Reported retail used vehicle:											Reported retail used vehicle:
Revenue	Revenue	$	1,449.4		$	1,281.2		$	168.2	13	%	Revenue	$	1,305.9		$	1,448.3		$	(142.4)	(10)	%
Gross profit	Gross profit	$	47.1		$	35.1		$	12.0	34	%	Gross profit	$	31.5		$	46.6		$	(15.1)	(32)	%
Unit sales	Unit sales	44,764			49,811			(5,047)		(10)	%	Unit sales	42,972			44,764			(1,792)		(4)	%
Revenue per unit	Revenue per unit	$	32,379		$	25,430		$	6,949	27	%	Revenue per unit	$	30,390		$	32,355		$	(1,965)	(6)	%
Gross profit per unit	Gross profit per unit	$	1,053		$	698		$	355	51	%	Gross profit per unit	$	732		$	1,041		$	(309)	(30)	%
Gross profit as a % of revenue	Gross profit as a % of revenue	3.3		%	2.7		%	60		bps		Gross profit as a % of revenue	2.4		%	3.2		%	(80)		bps


		Six Months Ended June 30,						Better / (Worse)					Six Months Ended June 30,						Better / (Worse)
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(In millions, except unit and per unit data)											(In millions, except unit and per unit data)
Reported retail used vehicle:	Reported retail used vehicle:											Reported retail used vehicle:
Revenue	Revenue	$	2,820.2		$	2,384.1		$	436.1	18	%	Revenue	$	2,650.8		$	2,818.4		$	(167.6)	(6)	%
Gross profit	Gross profit	$	95.2		$	65.7		$	29.5	45	%	Gross profit	$	61.5		$	94.4		$	(32.9)	(35)	%
Unit sales	Unit sales	86,837			96,717			(9,880)		(10)	%	Unit sales	88,503			86,837			1,666		2	%
Revenue per unit	Revenue per unit	$	32,477		$	24,368		$	8,109	33	%	Revenue per unit	$	29,952		$	32,457		$	(2,505)	(8)	%
Gross profit per unit	Gross profit per unit	$	1,097		$	679		$	418	62	%	Gross profit per unit	$	695		$	1,087		$	(392)	(36)	%
Gross profit as a % of revenue	Gross profit as a % of revenue	3.4		%	2.8		%	60		bps		Gross profit as a % of revenue	2.3		%	3.3		%	(100)		bps

For further analysis of used vehicle results, see the tables and discussion under the headings “Used Vehicles –- Franchised Dealerships Segment,” “Used Vehicles and F&I - EchoPark Segment” and “Used Vehicles ~~and F&I – EchoPark~~- Powersports Segment” in the Franchised Dealerships Segment, EchoPark Segment and ~~EchoPark~~Powersports Segment sections, respectively, below.

Wholesale Vehicles – Consolidated

Wholesale vehicle revenues are affected by retail new and used vehicle unit sales volume and the associated trade-in volume, as well as short-term, temporary and seasonal fluctuations in wholesale auction pricing. Since ~~the beginning of the COVID-19 pandemic in~~ March 2020, wholesale vehicle prices and supply at auction have experienced periods of volatility, impacting our wholesale vehicle revenues and related gross profit (loss), as well as our retail used vehicle revenues and related gross profit. We believe that the current wholesale vehicle price environment is not sustainable in the ~~long-term~~long term and expect that average wholesale vehicle pricing and related gross profit (loss) may begin to return toward long-term normalized levels in the second half of ~~2022~~2023, but may continue to experience volatility into 2024 or ~~early 2023.~~beyond. Wholesale vehicle revenues are also significantly affected by our corporate inventory management strategy and policies, which are designed to optimize our total used vehicle inventory and expected gross profit levels and minimize inventory carrying risks.

2325

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our consolidated reported wholesale vehicle results were as follows:


	Three Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue	$	91.5		$	121.4		$	(29.9)	(25)	%
Gross profit (loss)	$	(1.0)		$	1.2		$	(2.2)	(183)	%
Unit sales	8,801			8,545			256		3	%
Revenue per unit	$	10,386		$	14,205		$	(3,819)	(27)	%
Gross profit (loss) per unit	$	(111)		$	129		$	(240)	(186)	%
Gross profit (loss) as a % of revenue	(1.1)		%	1.0		%	(210)		bps

Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue $ 121.4 $ 84.8 $ 36.6 43 %
Gross profit (loss) $ 1.2 $ 4.5 $ (3.3) (73) %
Unit sales 8,545 9,631 (1,086) (11) %
Revenue per unit $ 14,207 $ 8,806 $ 5,401 61 %
Gross profit (loss) per unit $ 129 $ 470 $ (341) (73) %
Gross profit (loss) as a % of revenue 1.0 % 5.3 % (430) bps


		Six Months Ended June 30,						Better / (Worse)					Six Months Ended June 30,						Better / (Worse)
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(In millions, except unit and per unit data)											(In millions, except unit and per unit data)
Reported wholesale vehicle:	Reported wholesale vehicle:											Reported wholesale vehicle:
Revenue	Revenue	$	290.2		$	159.6		$	130.6	82	%	Revenue	$	177.0		$	290.2		$	(113.2)	(39)	%
Gross profit (loss)	Gross profit (loss)	$	2.6		$	5.4		$	(2.8)	(52)	%	Gross profit (loss)	$	2.1		$	2.5		$	(0.4)	(16)	%
Unit sales	Unit sales	18,966			19,324			(358)		(2)	%	Unit sales	17,207			18,966			(1,759)		(9)	%
Revenue per unit	Revenue per unit	$	15,301		$	8,260		$	7,041	85	%	Revenue per unit	$	10,280		$	15,301		$	(5,021)	(33)	%
Gross profit (loss) per unit	Gross profit (loss) per unit	$	139		$	278		$	(139)	(50)	%	Gross profit (loss) per unit	$	119		$	139		$	(20)	(14)	%
Gross profit (loss) as a % of revenue	Gross profit (loss) as a % of revenue	0.9		%	3.4		%	(250)		bps		Gross profit (loss) as a % of revenue	1.2		%	0.9		%	30		bps

For further analysis of wholesale vehicle results, see the tables and discussion under the headings “Wholesale Vehicles – Franchised Dealerships Segment,” “Wholesale Vehicles – EchoPark Segment” and “Wholesale Vehicles – ~~EchoPark~~Powersports Segment” in the Franchised Dealerships Segment, EchoPark Segment and ~~EchoPark~~Powersports Segment sections, respectively, below.

Fixed Operations – Consolidated

Parts, service and collision repair revenues consist of ~~customer~~repairs and maintenance requested ~~repair orders~~and paid by customers (“customer pay”), warranty repairs (manufacturer-paid), wholesale parts (sales of parts and accessories to third-party automotive repair businesses) and internal, sublet and other. Parts and service revenue is driven by the volume and mix of warranty repairs versus customer pay repairs, available service capacity (a combination of service bay count and technician availability), vehicle quality, manufacturer recalls, customer loyalty, and prepaid or manufacturer-paid maintenance programs. Internal, sublet and other primarily ~~relates~~relate to preparation and reconditioning work performed on vehicles in inventory that are later sold to a third party and may vary based on used vehicle inventory and sales volume from period to period. When that work is performed by one of our dealerships or stores, the work is classified as internal. In the event the work is performed by a third party on our behalf, it is classified as sublet.

We believe that, over time, vehicle quality will continue to improve, but vehicle complexity and the associated demand for repairs by qualified technicians at manufacturer-affiliated dealerships may result in market share gains that could offset any revenue lost from improvement in vehicle quality. We also believe that, over the long term, we have the ability to continue to optimize service capacity and customer retention at our dealerships and stores to further increase Fixed Operations revenues. Manufacturers continue to extend new vehicle warranty periods (in particular for battery electric vehicles, or “BEVs”) and have also begun to include regular maintenance items in the warranty or complimentary maintenance program coverage. These factors, over the long term, combined with the extended manufacturer warranties on certified pre-owned vehicles, should facilitate growth in our parts and service business. Barriers to long-term growth may include reductions in the rate paid by manufacturers to dealers for warranty repair work performed, as well as the improved quality and design of vehicles that may affect the level and frequency of future customer pay or warranty-related repair revenues.

2426

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our consolidated reported Fixed Operations results were as follows:



	Three Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions)
Reported Fixed Operations:
Revenue
Customer pay	$	228.6		$	169.0		$	59.6	35	%
Warranty	59.0			54.7			4.3		8	%
Wholesale parts	53.4			50.2			3.2		6	%
Internal, sublet and other	102.7			125.3			(22.6)		(18)	%
Total revenue	$	443.7		$	399.2		$	44.5	11	%

Gross profit
Customer pay	$	123.4		$	97.3		$	26.1	27	%
Warranty	34.5			32.5			2.0		6	%
Wholesale parts	9.4			9.0			0.4		4	%
Internal, sublet and other	53.1			59.8			(6.7)		(11)	%
Total gross profit	$	220.4		$	198.6		$	21.8	11	%

Gross profit as a % of revenue
Customer pay	54.0		%	57.6		%	(360)		bps
Warranty	58.5		%	59.4		%	(90)		bps
Wholesale parts	17.7		%	18.0		%	(30)		bps
Internal, sublet and other	51.7		%	47.7		%	400		bps
Total gross profit as a % of revenue	49.7		%	49.8		%	(10)		bps

Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions)
Reported Fixed Operations:
Revenue
Customer pay $ 168.0 $ 152.1 $ 15.9 10 %
Warranty 54.7 58.2 (3.5) (6) %
Wholesale parts 50.2 39.6 10.6 27 %
Internal, sublet and other 125.2 96.2 29.0 30 %
Total revenue $ 398.1 $ 346.1 $ 52.0 15 %
Gross profit
Customer pay $ 96.3 $ 87.4 $ 8.9 10 %
Warranty 32.5 33.9 (1.4) (4) %
Wholesale parts 9.0 6.9 2.1 30 %
Internal, sublet and other 60.3 47.4 12.9 27 %
Total gross profit $ 198.1 $ 175.6 $ 22.5 13 %
Gross profit as a % of revenue
Customer pay 57.3 % 57.5 % (20) bps
Warranty 59.4 % 58.4 % 100 bps
Wholesale parts 18.0 % 17.4 % 60 bps
Internal, sublet and other 48.2 % 49.3 % (110) bps
Total gross profit as a % of revenue 49.8 % 50.7 % (90) bps


		Six Months Ended June 30,						Better / (Worse)					Six Months Ended June 30,						Better / (Worse)
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(In millions)											(In millions)
Reported Fixed Operations:	Reported Fixed Operations:											Reported Fixed Operations:
Revenue	Revenue											Revenue
Customer pay	Customer pay	$	327.5		$	285.6		$	41.9	15	%	Customer pay	$	411.4		$	329.2		$	82.2	25	%
Warranty	Warranty	107.8			111.3			(3.5)		(3)	%	Warranty	118.1			107.8			10.3		10	%
Wholesale parts	Wholesale parts	100.0			74.3			25.7		35	%	Wholesale parts	108.0			100.0			8.0		8	%
Internal, sublet and other	Internal, sublet and other	243.4			183.0			60.4		33	%	Internal, sublet and other	236.7			243.5			(6.8)		(3)	%
Total revenue	Total revenue	$	778.7		$	654.2		$	124.5	19	%	Total revenue	$	874.2		$	780.5		$	93.7	12	%

Gross profit	Gross profit											Gross profit
Customer pay	Customer pay	$	187.6		$	163.4		$	24.2	15	%	Customer pay	$	230.0		$	189.4		$	40.6	21	%
Warranty	Warranty	64.1			64.9			(0.8)		(1)	%	Warranty	69.2			64.1			5.1		8	%
Wholesale parts	Wholesale parts	17.9			13.0			4.9		38	%	Wholesale parts	19.2			17.9			1.3		7	%
Internal, sublet and other	Internal, sublet and other	115.2			89.5			25.7		29	%	Internal, sublet and other	114.9			114.3			0.6		1	%
Total gross profit	Total gross profit	$	384.8		$	330.8		$	54.0	16	%	Total gross profit	$	433.3		$	385.7		$	47.6	12	%

Gross profit as a % of revenue	Gross profit as a % of revenue											Gross profit as a % of revenue
Customer pay	Customer pay	57.3		%	57.2		%	10		bps		Customer pay	55.9		%	57.5		%	(160)		bps
Warranty	Warranty	59.5		%	58.3		%	120		bps		Warranty	58.6		%	59.5		%	(90)		bps
Wholesale parts	Wholesale parts	17.9		%	17.5		%	40		bps		Wholesale parts	17.8		%	17.9		%	(10)		bps
Internal, sublet and other	Internal, sublet and other	47.3		%	48.9		%	(160)		bps		Internal, sublet and other	48.5		%	47.0		%	150		bps
Total gross profit as a % of revenue	Total gross profit as a % of revenue	49.4		%	50.6		%	(120)		bps		Total gross profit as a % of revenue	49.6		%	49.4		%	20		bps

2527

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For further analysis of Fixed Operations results, see the tables and discussion under the ~~heading~~headings “Fixed Operations –- Franchised Dealerships Segment” and “Fixed Operations - Powersports Segment” in the Franchised Dealerships Segment ~~section,~~and Powersports Segment sections, respectively, below.

F&I – Consolidated

Finance, insurance and other, net revenues include commissions for arranging third-party vehicle financing and insurance, sales of third-party extended warranties and service contracts for vehicles, and sales of other aftermarket products. In connection with vehicle financing, extended warranties and service contracts, other aftermarket products and insurance contracts, we receive commissions from the third-party providers for originating these contracts. F&I revenues are recognized net of actual and estimated future chargebacks and other costs associated with originating contracts (as a result, reported F&I revenues and F&I gross profit are the same amount, resulting in a 100% gross margin for F&I). F&I revenues are affected by the level of new and retail used vehicle unit sales volume, the age and average selling price of vehicles sold, the level of manufacturer financing specials or leasing incentives, and our F&I penetration ~~rate.~~rate for each type of F&I product. The F&I penetration rate represents the number of finance contracts, extended warranties and service contracts, other aftermarket products or insurance contracts that we are able to originate per vehicle sold, expressed as a percentage.

Yield spread premium is another term for the commission earned by our dealerships for arranging vehicle financing for consumers. The amount of the commission could be zero, a flat fee or an actual spread between the interest rate charged to the consumer and the interest rate provided by the third-party direct financing source (e.g., a commercial bank, credit union or manufacturer captive finance company). We have established caps on the potential yield spread premium our dealerships can earn with all finance sources. We believe the yield spread premium we earn for arranging vehicle financing represents value to the consumer in numerous ways, including the following:

•lower cost, below-market financing is often available only from the manufacturers’ captives and franchised dealers;

•ease of access to multiple high-quality lending sources;

•lease-financing alternatives are largely available only from manufacturers’ captives or other indirect lenders;

•guests with substandard credit frequently do not have direct access to potential sources of sub-prime financing; and

•guests with significant “negative equity” in their current vehicle (i.e., the guest’s current vehicle is worth less than the balance of their vehicle loan or lease obligation) frequently are unable to pay off the loan on their current vehicle and finance the purchase or lease of a replacement new or used vehicle without the assistance of a franchised dealership’s network of lending sources.

Our consolidated reported F&I results were as follows:


		Three Months Ended June 30,				Better / (Worse)					Three Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(In millions, except unit and per unit data)									(In millions, except unit and per unit data)
Reported F&I:	Reported F&I:									Reported F&I:
Revenue	Revenue	$	173.2	$	177.2	$	(4.0)	(2)	%	Revenue	$	175.3	$	173.2	$	2.1	1	%
Total combined new and used vehicle retail unit sales		69,191		80,068		(10,877)		(14)	%
Total combined retail new and used vehicle unit sales										Total combined retail new and used vehicle unit sales	71,726		69,191		2,535		4	%
Gross profit per retail unit (excludes fleet)	Gross profit per retail unit (excludes fleet)	$	2,503	$	2,214	$	289	13	%	Gross profit per retail unit (excludes fleet)	$	2,445	$	2,503	$	(58)	(2)	%


		Six Months Ended June 30,				Better / (Worse)					Six Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(In millions, except unit and per unit data)									(In millions, except unit and per unit data)
Reported F&I:	Reported F&I:									Reported F&I:
Revenue	Revenue	$	339.7	$	321.9	$	17.8	6	%	Revenue	$	344.0	$	339.7	$	4.3	1	%
Total combined new and used vehicle retail unit sales		135,951		150,791		(14,840)		(10)	%
Total combined retail new and used vehicle unit sales										Total combined retail new and used vehicle unit sales	142,914		135,951		6,963		5	%
Gross profit per retail unit (excludes fleet)	Gross profit per retail unit (excludes fleet)	$	2,499	$	2,135	$	364	17	%	Gross profit per retail unit (excludes fleet)	$	2,407	$	2,499	$	(92)	(4)	%

For further analysis of F&I results, see the tables and discussion under the headings “F&I –- Franchised Dealerships ~~Segment” and~~Segment,” “Used Vehicles and F&I –- EchoPark Segment” and “F&I - Powersports Segment” in the Franchised Dealerships Segment, EchoPark Segment and ~~EchoPark~~Powersports Segment sections, respectively, below.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations – Franchised Dealerships Segment

As a result of the acquisition, disposition, termination or closure of franchised dealership stores since the first quarter of ~~2021, including the RFJ Acquisition in December 2021,~~2022, the change in reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores. Please refer to the same store tables and discussion on the following pages for more meaningful comparison and discussion of financial results on a comparable store basis.

2629

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

New Vehicles – Franchised Dealerships Segment

The following tables provide a reconciliation of Franchised Dealerships Segment reported basis and same store basis for new vehicles:


		Three Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			Three Months Ended June 30,				Better / (Worse)
		(In millions, except unit data)									2023		2022		Change		% Change
		As Restated									(In millions, except unit data)
Retail new vehicle revenue:	Retail new vehicle revenue:									Retail new vehicle revenue:
Same store	Same store	$	1,126.3	$	1,447.5	$	(321.2)	(22)	%	Same store	$	1,558.2	$	1,323.9	$	234.3	18	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	215.4		4.8		210.6		NM		Acquisitions, open points, dispositions and holding company	25.1		17.8		7.3		NM
Total as reported	Total as reported	$	1,341.7	$	1,452.3	$	(110.6)	(8)	%	Total as reported	$	1,583.3	$	1,341.7	$	241.6	18	%

Fleet new vehicle revenue:	Fleet new vehicle revenue:									Fleet new vehicle revenue:
Same store	Same store	$	17.5	$	9.7	$	7.8	80	%	Same store	$	28.4	$	19.9	$	8.5	43	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	2.4		—		2.4		NM		Acquisitions, open points, dispositions and holding company	(0.1)		—		(0.1)		NM
Total as reported	Total as reported	$	19.9	$	9.7	$	10.2	105.2	%	Total as reported	$	28.3	$	19.9	$	8.4	42	%

Total new vehicle revenue:	Total new vehicle revenue:									Total new vehicle revenue:
Same store	Same store	$	1,143.8	$	1,457.2	$	(313.4)	(22)	%	Same store	$	1,586.6	$	1,343.8	$	242.8	18	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	217.8		4.8		213.0		NM		Acquisitions, open points, dispositions and holding company	25.0		17.8		7.2		40.4	%
Total as reported	Total as reported	$	1,361.6	$	1,462.0	$	(100.4)	(7)	%	Total as reported	$	1,611.6	$	1,361.6	$	250.0	18	%

Retail new vehicle gross profit:	Retail new vehicle gross profit:									Retail new vehicle gross profit:
Same store	Same store	$	139.0	$	117.4	$	21.6	18	%	Same store	$	133.8	$	160.0	$	(26.2)	(16)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	28.3		0.6		27.7		NM		Acquisitions, open points, dispositions and holding company	3.1		7.3		(4.2)		NM
Total as reported	Total as reported	$	167.3	$	118.0	$	49.3	42	%	Total as reported	$	136.9	$	167.3	$	(30.4)	(18)	%

Fleet new vehicle gross profit:	Fleet new vehicle gross profit:									Fleet new vehicle gross profit:
Same store	Same store	$	0.8	$	0.3	$	0.5	167	%	Same store	$	1.2	$	0.9	$	0.3	33	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	0.1		—		0.1		NM		Acquisitions, open points, dispositions and holding company	0.1		—		0.1		NM
Total as reported	Total as reported	$	0.9	$	0.3	$	0.6	200	%	Total as reported	$	1.3	$	0.9	$	0.4	44	%

Total new vehicle gross profit:	Total new vehicle gross profit:									Total new vehicle gross profit:
Same store	Same store	$	139.8	$	117.7	$	22.1	19	%	Same store	$	135.1	$	161.0	$	(25.9)	(16)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	28.4		0.6		27.8		NM		Acquisitions, open points, dispositions and holding company	3.1		7.2		(4.1)		NM
Total as reported	Total as reported	$	168.2	$	118.3	$	49.9	42	%	Total as reported	$	138.2	$	168.2	$	(30.0)	(18)	%

Retail new vehicle unit sales:	Retail new vehicle unit sales:									Retail new vehicle unit sales:
Same store	Same store	20,135		30,129		(9,994)		(33)	%	Same store	26,844		23,936		2,908		12	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	4,207		114		4,093		NM		Acquisitions, open points, dispositions and holding company	514		406		108		NM
Total as reported	Total as reported	24,342		30,243		(5,901)		(20)	%	Total as reported	27,358		24,342		3,016		12	%

Fleet new vehicle unit sales:	Fleet new vehicle unit sales:									Fleet new vehicle unit sales:
Same store	Same store	381		245		136		56	%	Same store	590		422		168		40	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	41		—		41		NM		Acquisitions, open points, dispositions and holding company	—		—		—		NM
Total as reported	Total as reported	422		245		177		72	%	Total as reported	590		422		168		40	%

Total new vehicle unit sales:	Total new vehicle unit sales:									Total new vehicle unit sales:
Same store	Same store	20,516		30,374		(9,858)		(32)	%	Same store	27,434		24,358		3,076		13	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	4,248		114		4,134		NM		Acquisitions, open points, dispositions and holding company	514		406		108		NM
Total as reported	Total as reported	24,764		30,488		(5,724)		(19)	%	Total as reported	27,948		24,764		3,184		13	%
NM = Not Meaningful	NM = Not Meaningful									NM = Not Meaningful

2730

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


		Six Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			Six Months Ended June 30,				Better / (Worse)
		(In millions, except unit data)									2023		2022		Change		% Change
		As Restated									(In millions, except unit data)
Retail new vehicle revenue:	Retail new vehicle revenue:									Retail new vehicle revenue:
Same store	Same store	$	2,236.0	$	2,578.2	$	(342.2)	(13)	%	Same store	$	2,953.7	$	2,653.8	$	299.9	11	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	451.4		8.1		443.3		NM		Acquisitions, open points, dispositions and holding company	50.6		33.6		17.0		NM
Total as reported	Total as reported	$	2,687.4	$	2,586.3	$	101.1	4	%	Total as reported	$	3,004.3	$	2,687.4	$	316.9	12	%

Fleet new vehicle revenue:	Fleet new vehicle revenue:									Fleet new vehicle revenue:
Same store	Same store	$	31.0	$	32.0	$	(1.0)	(3)	%	Same store	$	47.2	$	38.0	$	9.2	24	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	7.0		—		7.0		NM		Acquisitions, open points, dispositions and holding company	(0.1)		—		(0.1)		NM
Total as reported	Total as reported	$	38.0	$	32.0	$	6.0	19	%	Total as reported	$	47.1	$	38.0	$	9.1	24	%

Total new vehicle revenue:	Total new vehicle revenue:									Total new vehicle revenue:
Same store	Same store	$	2,267.0	$	2,610.2	$	(343.2)	(13)	%	Same store	$	3,000.9	$	2,691.8	$	309.1	11	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	458.4		8.1		450.3		NM		Acquisitions, open points, dispositions and holding company	50.5		33.6		16.9		50	%
Total as reported	Total as reported	$	2,725.4	$	2,618.3	$	107.1	4	%	Total as reported	$	3,051.4	$	2,725.4	$	326.0	12	%

Retail new vehicle gross profit:	Retail new vehicle gross profit:									Retail new vehicle gross profit:
Same store	Same store	$	276.9	$	186.2	$	90.7	49	%	Same store	$	265.1	$	319.1	$	(54.0)	(17)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	56.9		1.0		55.9		NM		Acquisitions, open points, dispositions and holding company	5.8		14.7		(8.9)		NM
Total as reported	Total as reported	$	333.8	$	187.2	$	146.6	78	%	Total as reported	$	270.9	$	333.8	$	(62.9)	(19)	%

Fleet new vehicle gross profit:	Fleet new vehicle gross profit:									Fleet new vehicle gross profit:
Same store	Same store	$	1.4	$	0.6	$	0.8	133	%	Same store	$	2.1	$	1.8	$	0.3	17	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	0.4		—		0.4		NM		Acquisitions, open points, dispositions and holding company	—		—		—		NM
Total as reported	Total as reported	$	1.8	$	0.6	$	1.2	200	%	Total as reported	$	2.1	$	1.8	$	0.3	17	%

Total new vehicle gross profit:	Total new vehicle gross profit:									Total new vehicle gross profit:
Same store	Same store	$	278.3	$	186.8	$	91.5	49	%	Same store	$	267.2	$	320.9	$	(53.7)	(17)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	57.3		1.0		56.3		NM		Acquisitions, open points, dispositions and holding company	5.8		14.7		(8.9)		NM
Total as reported	Total as reported	$	335.6	$	187.8	$	147.8	79	%	Total as reported	$	273.0	$	335.6	$	(62.6)	(19)	%

Retail new vehicle unit sales:	Retail new vehicle unit sales:									Retail new vehicle unit sales:
Same store	Same store	40,418		53,865		(13,447)		(25)	%	Same store	50,840		48,170		2,670		6	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	8,526		195		8,331		NM		Acquisitions, open points, dispositions and holding company	1,057		774		283		NM
Total as reported	Total as reported	48,944		54,060		(5,116)		(9)	%	Total as reported	51,897		48,944		2,953		6	%

Fleet new vehicle unit sales:	Fleet new vehicle unit sales:									Fleet new vehicle unit sales:
Same store	Same store	658		786		(128)		(16)	%	Same store	1,031		782		249		32	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	124		—		124		NM		Acquisitions, open points, dispositions and holding company	—		—		—		NM
Total as reported	Total as reported	782		786		(4)		(1)	%	Total as reported	1,031		782		249		32	%

Total new vehicle unit sales:	Total new vehicle unit sales:									Total new vehicle unit sales:
Same store	Same store	41,076		54,651		(13,575)		(25)	%	Same store	51,871		48,952		2,919		6	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	8,650		195		8,455		NM		Acquisitions, open points, dispositions and holding company	1,057		774		283		NM
Total as reported	Total as reported	49,726		54,846		(5,120)		(9)	%	Total as reported	52,928		49,726		3,202		6	%
NM = Not Meaningful	NM = Not Meaningful									NM = Not Meaningful

2831

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment reported new vehicle results were as follows:


		Three Months Ended June 30,						Better / (Worse)
		2022			2021			Change		% Change			Three Months Ended June 30,						Better / (Worse)
		(In millions, except unit and per unit data)											2023			2022			Change		% Change
		As Restated											(In millions, except unit and per unit data)
Reported new vehicle:	Reported new vehicle:											Reported new vehicle:
Retail new vehicle revenue	Retail new vehicle revenue	$	1,341.7		$	1,452.3		$	(110.6)	(8)	%	Retail new vehicle revenue	$	1,583.3		$	1,341.7		$	241.6	18	%
Fleet new vehicle revenue	Fleet new vehicle revenue	19.9			9.7			10.2		105	%	Fleet new vehicle revenue	28.3			19.9			8.4		42	%
Total new vehicle revenue	Total new vehicle revenue	$	1,361.6		$	1,462.0		$	(100.4)	(7)	%	Total new vehicle revenue	$	1,611.6		$	1,361.6		$	250.0	18	%

Retail new vehicle gross profit	Retail new vehicle gross profit	$	167.3		$	118.0		$	49.3	42	%	Retail new vehicle gross profit	$	136.9		$	167.3		$	(30.4)	(18)	%
Fleet new vehicle gross profit	Fleet new vehicle gross profit	0.9			0.3			0.6		200	%	Fleet new vehicle gross profit	1.3			0.9			0.4		44	%
Total new vehicle gross profit	Total new vehicle gross profit	$	168.2		$	118.3		$	49.9	42	%	Total new vehicle gross profit	$	138.2		$	168.2		$	(30.0)	(18)	%

Retail new vehicle unit sales	Retail new vehicle unit sales	24,342			30,243			(5,901)		(20)	%	Retail new vehicle unit sales	27,358			24,342			3,016		12	%
Fleet new vehicle unit sales	Fleet new vehicle unit sales	422			245			177		72	%	Fleet new vehicle unit sales	590			422			168		40	%
Total new vehicle unit sales	Total new vehicle unit sales	24,764			30,488			(5,724)		(19)	%	Total new vehicle unit sales	27,948			24,764			3,184		13	%

Revenue per retail unit		$	55,119		$	48,021		$	7,098	15	%
Revenue per fleet unit		$	46,919		$	39,487		$	7,432	19	%
Revenue per new retail unit												Revenue per new retail unit	$	57,875		$	55,120		$	2,755	5	%
Revenue per new fleet unit												Revenue per new fleet unit	$	48,038		$	47,150		$	888	2	%
Total revenue per new unit	Total revenue per new unit	$	54,983		$	47,953		$	7,030	15	%	Total revenue per new unit	$	57,667		$	54,984		$	2,683	5	%

Gross profit per retail unit		$	6,871		$	3,902		$	2,969	76	%
Gross profit per fleet unit		$	2,133		$	1,319		$	814	62	%
Gross profit per new retail unit												Gross profit per new retail unit	$	5,003		$	6,871		$	(1,868)	(27)	%
Gross profit per new fleet unit												Gross profit per new fleet unit	$	2,099		$	2,235		$	(136)	(6)	%
Total gross profit per new unit	Total gross profit per new unit	$	6,792		$	3,881		$	2,911	75	%	Total gross profit per new unit	$	4,942		$	6,792		$	(1,850)	(27)	%

Retail gross profit as a % of revenue	Retail gross profit as a % of revenue	12.5		%	8.1		%	440		bps		Retail gross profit as a % of revenue	8.6		%	12.5		%	(390)		bps
Fleet gross profit as a % of revenue	Fleet gross profit as a % of revenue	4.5		%	3.3		%	120		bps		Fleet gross profit as a % of revenue	4.4		%	4.7		%	(30)		bps
Total new vehicle gross profit as a % of revenue	Total new vehicle gross profit as a % of revenue	12.4		%	8.1		%	430		bps		Total new vehicle gross profit as a % of revenue	8.6		%	12.4		%	(380)		bps

~~NM = Not Meaningful~~



	Six Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported new vehicle:
Retail new vehicle revenue	$	3,004.3		$	2,687.4		$	316.9	12	%
Fleet new vehicle revenue	47.1			38.0			9.1		24	%
Total new vehicle revenue	$	3,051.4		$	2,725.4		$	326.0	12	%

Retail new vehicle gross profit	$	270.9		$	333.8		$	(62.9)	(19)	%
Fleet new vehicle gross profit	2.1			1.8			0.3		17	%
Total new vehicle gross profit	$	273.0		$	335.6		$	(62.6)	(19)	%

Retail new vehicle unit sales	51,897			48,944			2,953		6	%
Fleet new vehicle unit sales	1,031			782			249		32	%
Total new vehicle unit sales	52,928			49,726			3,202		6	%

Revenue per new retail unit	$	57,890		$	54,908		$	2,982	5	%
Revenue per new fleet unit	$	45,746		$	48,617		$	(2,871)	(6)	%
Total revenue per new unit	$	57,654		$	54,809		$	2,845	5	%

Gross profit per new retail unit	$	5,221		$	6,821		$	(1,600)	(23)	%
Gross profit per new fleet unit	$	2,065		$	2,285		$	(220)	(10)	%
Total gross profit per new unit	$	5,159		$	6,749		$	(1,590)	(24)	%

Retail gross profit as a % of revenue	9.0		%	12.4		%	(340)		bps
Fleet gross profit as a % of revenue	4.5		%	4.7		%	(20)		bps
Total new vehicle gross profit as a % of revenue	8.9		%	12.3		%	(340)		bps

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
As Restated
Reported new vehicle:
Retail new vehicle revenue $ 2,687.4 $ 2,586.3 $ 101.1 4 %
Fleet new vehicle revenue 38.0 32.0 6.0 19 %
Total new vehicle revenue $ 2,725.4 $ 2,618.3 $ 107.1 4 %
Retail new vehicle gross profit $ 333.8 $ 187.2 $ 146.6 78 %
Fleet new vehicle gross profit 1.8 0.6 1.2 200 %
Total new vehicle gross profit $ 335.6 $ 187.8 $ 147.8 79 %
Retail new vehicle unit sales 48,944 54,060 (5,116) (9) %
Fleet new vehicle unit sales 782 786 (4) (1) %
Total new vehicle unit sales 49,726 54,846 (5,120) (9) %
Revenue per retail unit $ 54,908 $ 47,841 $ 7,067 15 %
Revenue per fleet unit $ 48,593 $ 40,686 $ 7,907 19 %
Total revenue per new unit $ 54,808 $ 47,739 $ 7,069 15 %
Gross profit per retail unit $ 6,821 $ 3,463 $ 3,358 97 %
Gross profit per fleet unit $ 2,302 $ 727 $ 1,575 217 %
Total gross profit per new unit $ 6,749 $ 3,424 $ 3,325 97 %
Retail gross profit as a % of revenue 12.4 % 7.2 % 520 bps
Fleet gross profit as a % of revenue 4.7 % 1.8 % 290 bps
Total new vehicle gross profit as a % of revenue 12.3 % 7.2 % 510 bps

~~NM = Not Meaningful~~

3032

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment same store new vehicle results were as follows:


	Three Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Same store new vehicle:
Retail new vehicle revenue	$	1,558.2		$	1,323.9		$	234.3	18	%
Fleet new vehicle revenue	28.4			19.9			8.5		43	%
Total new vehicle revenue	$	1,586.6		$	1,343.8		$	242.8	18	%

Retail new vehicle gross profit	$	133.8		$	160.0		$	(26.2)	(16)	%
Fleet new vehicle gross profit	1.2			0.9			0.3		33	%
Total new vehicle gross profit	$	135.1		$	161.0		$	(25.9)	(16)	%

Retail new vehicle unit sales	26,844			23,936			2,908		12	%
Fleet new vehicle unit sales	590			422			168		40	%
Total new vehicle unit sales	27,434			24,358			3,076		13	%

Revenue per new retail unit	$	58,048		$	55,310		$	2,738	5	%
Revenue per new fleet unit	$	48,038		$	47,150		$	888	2	%
Total revenue per new unit	$	57,832		$	55,169		$	2,663	5	%

Gross profit per new retail unit	$	4,986		$	6,686		$	(1,700)	(25)	%
Gross profit per new fleet unit	$	2,099		$	2,235		$	(136)	(6)	%
Total gross profit per new unit	$	4,924		$	6,609		$	(1,685)	(25)	%

Retail gross profit as a % of revenue	8.6		%	12.1		%	(350)		bps
Fleet gross profit as a % of revenue	4.4		%	4.7		%	(30)		bps
Total new vehicle gross profit as a % of revenue	8.5		%	12.0		%	(350)		bps


		Three Months Ended June 30,						Better / (Worse)					Six Months Ended June 30,						Better / (Worse)
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(In millions, except unit and per unit data)											(In millions, except unit and per unit data)
Same store new vehicle:	Same store new vehicle:											Same store new vehicle:
Retail new vehicle revenue	Retail new vehicle revenue	$	1,126.3		$	1,447.5		$	(321.2)	(22)	%	Retail new vehicle revenue	$	2,953.7		$	2,653.8		$	299.9	11	%
Fleet new vehicle revenue	Fleet new vehicle revenue	17.5			9.7			7.8		80	%	Fleet new vehicle revenue	47.2			38.0			9.2		24	%
Total new vehicle revenue	Total new vehicle revenue	$	1,143.8		$	1,457.2		$	(313.4)	(22)	%	Total new vehicle revenue	$	3,000.9		$	2,691.8		$	309.1	11	%

Retail new vehicle gross profit	Retail new vehicle gross profit	$	139.0		$	117.4		$	21.6	18	%	Retail new vehicle gross profit	$	265.1		$	319.1		$	(54.0)	(17)	%
Fleet new vehicle gross profit	Fleet new vehicle gross profit	0.8			0.3			0.5		167	%	Fleet new vehicle gross profit	2.1			1.8			0.3		17	%
Total new vehicle gross profit	Total new vehicle gross profit	$	139.8		$	117.7		$	22.1	19	%	Total new vehicle gross profit	$	267.2		$	320.9		$	(53.7)	(17)	%

Retail new vehicle unit sales	Retail new vehicle unit sales	20,135			30,129			(9,994)		(33)	%	Retail new vehicle unit sales	50,840			48,170			2,670		6	%
Fleet new vehicle unit sales	Fleet new vehicle unit sales	381			245			136		56	%	Fleet new vehicle unit sales	1,031			782			249		32	%
Total new vehicle unit sales	Total new vehicle unit sales	20,516			30,374			(9,858)		(32)	%	Total new vehicle unit sales	51,871			48,952			2,919		6	%

Revenue per new retail unit	Revenue per new retail unit	$	55,938		$	48,043		$	7,895	16	%	Revenue per new retail unit	$	58,098		$	55,092		$	3,006	5	%
Revenue per new fleet unit	Revenue per new fleet unit	$	45,847		$	39,487		$	6,360	16	%	Revenue per new fleet unit	$	45,746		$	48,617		$	(2,871)	(6)	%
Total revenue per new unit	Total revenue per new unit	$	55,751		$	47,974		$	7,777	16	%	Total revenue per new unit	$	57,853		$	54,989		$	2,864	5	%

Gross profit per new retail unit	Gross profit per new retail unit	$	6,905		$	3,897		$	3,008	77	%	Gross profit per new retail unit	$	5,215		$	6,624		$	(1,409)	(21)	%
Gross profit per new fleet unit	Gross profit per new fleet unit	$	1,973		$	1,319		$	654	50	%	Gross profit per new fleet unit	$	2,065		$	2,285		$	(220)	(10)	%
Total gross profit per new unit	Total gross profit per new unit	$	6,813		$	3,876		$	2,937	76	%	Total gross profit per new unit	$	5,152		$	6,555		$	(1,403)	(21)	%

Retail gross profit as a % of revenue	Retail gross profit as a % of revenue	12.3		%	8.1		%	420		bps		Retail gross profit as a % of revenue	9.0		%	12.0		%	(300)		bps
Fleet gross profit as a % of revenue	Fleet gross profit as a % of revenue	4.3		%	3.1		%	120		bps		Fleet gross profit as a % of revenue	4.5		%	4.7		%	(20)		bps
Total new vehicle gross profit as a % of revenue	Total new vehicle gross profit as a % of revenue	12.2		%	8.1		%	410		bps		Total new vehicle gross profit as a % of revenue	8.9		%	11.9		%	(300)		bps

3133

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Same store new vehicle:
Retail new vehicle revenue $ 2,236.0 $ 2,578.2 $ (342.2) (13) %
Fleet new vehicle revenue 31.0 32.0 (1.0) (3) %
Total new vehicle revenue $ 2,267.0 $ 2,610.2 $ (343.2) (13) %
Retail new vehicle gross profit $ 276.9 $ 186.2 $ 90.7 49 %
Fleet new vehicle gross profit 1.4 0.6 0.8 133 %
Total new vehicle gross profit $ 278.3 $ 186.8 $ 91.5 49 %
Retail new vehicle unit sales 40,418 53,865 (13,447) (25) %
Fleet new vehicle unit sales 658 786 (128) (16) %
Total new vehicle unit sales 41,076 54,651 (13,575) (25) %
Revenue per new retail unit $ 55,323 $ 47,864 $ 7,459 16 %
Revenue per new fleet unit $ 47,118 $ 40,686 $ 6,432 16 %
Total revenue per new unit $ 55,191 $ 47,761 $ 7,430 16 %
Gross profit per new retail unit $ 6,851 $ 3,458 $ 3,393 98 %
Gross profit per new fleet unit $ 2,130 $ 727 $ 1,403 193 %
Total gross profit per new unit $ 6,775 $ 3,418 $ 3,357 98 %
Retail gross profit as a % of revenue 12.4 % 7.2 % 520 bps
Fleet gross profit as a % of revenue 4.5 % 1.8 % 270 bps
Total new vehicle gross profit as a % of revenue 12.3 % 7.2 % 510 bps

Same Store Franchised Dealerships Segment Retail New Vehicles – Three Months Ended June 30, ~~2022~~2023 Compared to Three Months Ended June 30, ~~2021~~2022

Retail new vehicle revenue ~~decreased 22%~~increased 18%, due primarily to ~~lower~~a 12% increase in retail new vehicle unit sales volume, as ~~compared to the prior period.~~well as a 5% increase in retail new vehicle average selling prices. Retail new vehicle gross profit ~~increased~~decreased approximately ~~$21.6~~$26.2 million, or ~~18%~~16%, as a result of ~~higher~~lower retail new vehicle gross profit per ~~unit.~~unit, due primarily to higher inventory invoice costs and increased price competition as a result of higher levels of available inventory. Retail new vehicle gross profit per unit ~~increased $3,008~~decreased $1,700 per unit, or ~~77%~~25%, to ~~$6,905~~$4,986 per unit, due primarily to higher inventory ~~shortages~~invoice costs and increased price competition as a result of ~~vehicle manufacturer supply chain and production delays as a result~~higher levels of available inventory than in the ~~COVID-19 pandemic, which have generally increased the average selling prices of such vehicles.~~prior year period.

Same Store Franchised Dealerships Segment Retail New Vehicles – Six Months Ended June 30, ~~2022~~2023 Compared to Six Months Ended June 30, ~~2021~~2022

Retail new vehicle revenue ~~decreased 13%~~increased 11%, due primarily to ~~lower~~a 6% increase in retail new vehicle unit sales volume, ~~partially offset by higher~~as well as a 5% increase in retail new vehicle average selling ~~prices on such vehicles.~~prices. Retail new vehicle gross profit ~~increased~~decreased approximately ~~$90.7~~$54.0 million, or ~~49%~~17%, as a result of ~~higher~~lower retail new vehicle gross profit per ~~unit.~~unit, due primarily to higher inventory invoice costs and increased price competition as a result of higher levels of available inventory. Retail new vehicle gross profit per unit ~~increased $3,393~~decreased $1,409 per unit, or ~~98%~~21%, to ~~$6,851~~$5,215 per unit, due primarily to higher inventory ~~shortages~~invoice costs and increased price competition as a result of ~~vehicle manufacturer supply chain and production delays as a result~~higher levels of available inventory than in the ~~COVID-19 pandemic, which have generally increased the average selling prices of such vehicles.~~prior year period.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Used Vehicles – Franchised Dealerships Segment

The following tables provide a reconciliation of Franchised Dealerships Segment reported basis and same store basis for retail used vehicles:


		Three Months Ended June 30,				Better / (Worse)					Three Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(In millions, except unit data)									(In millions, except unit data)
Retail used vehicle revenue:	Retail used vehicle revenue:									Retail used vehicle revenue:
Same store	Same store	$	751.5	$	758.8	$	(7.3)	(1)	%	Same store	$	761.9	$	857.2	$	(95.3)	(11)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	120.4		2.7		117.7		NM		Acquisitions, open points, dispositions and holding company	12.6		14.7		(2.1)		NM
Total as reported	Total as reported	$	871.9	$	761.5	$	110.4	14	%	Total as reported	$	774.5	$	871.9	$	(97.4)	(11)	%

Retail used vehicle gross profit:	Retail used vehicle gross profit:									Retail used vehicle gross profit:
Same store	Same store	$	38.2	$	54.5	$	(16.3)	(30)	%	Same store	$	40.0	$	45.9	$	(5.9)	(13)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	5.5		0.7		4.8		686	%	Acquisitions, open points, dispositions and holding company	4.5		(2.2)		6.7		NM
Total as reported	Total as reported	$	43.7	$	55.2	$	(11.5)	(21)	%	Total as reported	$	44.5	$	43.7	$	0.8	2	%

Retail used vehicle unit sales:	Retail used vehicle unit sales:									Retail used vehicle unit sales:
Same store	Same store	23,555		28,429		(4,874)		(17)	%	Same store	24,737		27,596		(2,859)		(10)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	4,601		121		4,480		NM		Acquisitions, open points, dispositions and holding company	460		560		(100)		NM
Total as reported	Total as reported	28,156		28,550		(394)		(1)	%	Total as reported	25,197		28,156		(2,959)		(11)	%

NM = Not Meaningful

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit data)
Retail used vehicle revenue:
Same store $ 1,474.5 $ 1,417.9 $ 56.6 4 %
Acquisitions, open points, dispositions and holding company 251.2 5.2 246.0 NM
Total as reported $ 1,725.7 $ 1,423.1 $ 302.6 21 %
Retail used vehicle gross profit:
Same store $ 77.5 $ 89.0 $ (11.5) (13) %
Acquisitions, open points, dispositions and holding company 13.1 (1.8) 14.9 828 %
Total as reported $ 90.6 $ 87.2 $ 3.4 4 %
Retail used vehicle unit sales:
Same store 46,272 55,549 (9,277) (17) %
Acquisitions, open points, dispositions and holding company 8,962 237 8,725 NM
Total as reported 55,234 55,786 (552) (1) %
NM = Not Meaningful

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Our Franchised Dealerships Segment reported retail used vehicle results were as follows:~~
Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue $ 871.9 $ 761.5 $ 110.4 14 %
Gross profit $ 43.7 $ 55.2 $ (11.5) (21) %
Unit sales 28,156 28,550 (394) (1) %
Revenue per unit $ 30,967 $ 26,673 $ 4,294 16 %
Gross profit per unit $ 1,553 $ 1,934 $ (381) (20) %
Gross profit as a % of revenue 5.0 % 7.3 % (230) bps

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue $ 1,725.7 $ 1,423.1 $ 302.6 21 %
Gross profit $ 90.6 $ 87.2 $ 3.4 4 %
Unit sales 55,234 55,786 (552) (1) %
Revenue per unit $ 31,243 $ 25,509 $ 5,734 22 %
Gross profit per unit $ 1,640 $ 1,563 $ 77 5 %
Gross profit as a % of revenue 5.3 % 6.1 % (80) bps

~~Our Franchised Dealerships Segment same store retail used vehicle results were as follows:~~

Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Same store retail used vehicle:
Revenue $ 751.5 $ 758.8 $ (7.3) (1) %
Gross profit $ 38.2 $ 54.5 $ (16.3) (30) %
Unit sales 23,555 28,429 (4,874) (17) %
Revenue per unit $ 31,903 $ 26,690 $ 5,213 20 %
Gross profit per unit $ 1,622 $ 1,915 $ (293) (15) %
Gross profit as a % of revenue 5.1 % 7.2 % (210) bps

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Same store retail used vehicle:
Revenue $ 1,474.5 $ 1,417.9 $ 56.6 4 %
Gross profit $ 77.5 $ 89.0 $ (11.5) (13) %
Unit sales 46,272 55,549 (9,277) (17) %
Revenue per unit $ 31,866 $ 25,525 $ 6,341 25 %
Gross profit per unit $ 1,674 $ 1,602 $ 72 4 %
Gross profit as a % of revenue 5.3 % 6.3 % (100) bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



	Six Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions, except unit data)
Retail used vehicle revenue:
Same store	$	1,513.4	$	1,695.2	$	(181.8)	(11)	%
Acquisitions, open points, dispositions and holding company	28.6		30.5		(1.9)		NM
Total as reported	$	1,542.0	$	1,725.7	$	(183.7)	(11)	%

Retail used vehicle gross profit:
Same store	$	78.5	$	93.0	$	(14.5)	(16)	%
Acquisitions, open points, dispositions and holding company	6.8		(2.4)		9.2		NM
Total as reported	$	85.3	$	90.6	$	(5.3)	(6)	%

Retail used vehicle unit sales:
Same store	49,260		54,099		(4,839)		(9)	%
Acquisitions, open points, dispositions and holding company	1,044		1,135		(91)		NM
Total as reported	50,304		55,234		(4,930)		(9)	%
NM = Not Meaningful

Our Franchised Dealerships Segment reported retail used vehicle results were as follows:


	Three Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue	$	774.5		$	871.9		$	(97.4)	(11)	%
Gross profit	$	44.5		$	43.7		$	0.8	2	%
Unit sales	25,197			28,156			(2,959)		(11)	%
Revenue per unit	$	30,737		$	30,967		$	(230)	(1)	%
Gross profit per unit	$	1,765		$	1,553		$	212	14	%
Gross profit as a % of revenue	5.7		%	5.0		%	70		bps



	Six Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue	$	1,542.0		$	1,725.7		$	(183.7)	(11)	%
Gross profit	$	85.3		$	90.6		$	(5.3)	(6)	%
Unit sales	50,304			55,234			(4,930)		(9)	%
Revenue per unit	$	30,655		$	31,243		$	(588)	(2)	%
Gross profit per unit	$	1,695		$	1,640		$	55	3	%
Gross profit as a % of revenue	5.5		%	5.3		%	20		bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment same store retail used vehicle results were as follows:



	Three Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Same store retail used vehicle:
Revenue	$	761.9		$	857.2		$	(95.3)	(11)	%
Gross profit	$	40.0		$	45.9		$	(5.9)	(13)	%
Unit sales	24,737			27,596			(2,859)		(10)	%
Revenue per unit	$	30,799		$	31,063		$	(264)	(1)	%
Gross profit per unit	$	1,618		$	1,663		$	(45)	(3)	%
Gross profit as a % of revenue	5.3		%	5.4		%	(10)		bps



	Six Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Same store retail used vehicle:
Revenue	$	1,513.4		$	1,695.2		$	(181.8)	(11)	%
Gross profit	$	78.5		$	93.0		$	(14.5)	(16)	%
Unit sales	49,260			54,099			(4,839)		(9)	%
Revenue per unit	$	30,723		$	31,334		$	(611)	(2)	%
Gross profit per unit	$	1,593		$	1,718		$	(125)	(7)	%
Gross profit as a % of revenue	5.2		%	5.5		%	(30)		bps

Same Store Franchised Dealerships Segment Retail Used Vehicles – Three Months Ended June 30, ~~2022~~2023 Compared to Three Months Ended June 30, ~~2021~~2022

Retail used vehicle revenue decreased approximately ~~$7.3~~$95.3 million, or 1%11%, driven primarily by a ~~17%~~10% decrease in retail used vehicle unit sales volume, ~~offset partially by~~as well as a ~~20% increase~~1% decrease in retail used vehicle ~~revenue per unit~~average selling prices. Retail used vehicle gross profit decreased approximately ~~$16.3~~$5.9 million, or ~~30%~~13%, driven primarily by the decrease in retail used vehicle unit sales volume and a ~~$293~~$45 per unit, or 3%, decrease in retail used vehicle gross profit per unit ~~as well as the decrease in retail used vehicle unit sales volume~~ during the second quarter of ~~2022.~~2023.

Same Store Franchised Dealerships Segment Retail Used Vehicles – Six Months Ended June 30, ~~2022~~2023 Compared to Six Months Ended June 30, ~~2021~~2022

Retail used vehicle revenue ~~increased~~decreased approximately ~~$56.6~~$181.8 million, or 4%11%, driven primarily by a ~~25% increase in retail used vehicle revenue per unit, offset partially by a 17%~~9% decrease in retail used vehicle unit sales volume, as well as a 2% decrease in retail used vehicle average selling prices. . Retail used vehicle gross profit decreased approximately ~~$11.5~~$14.5 million, or ~~13%~~16%, driven primarily by the decrease in retail used vehicle unit sales volume ~~during the second quarter of 2022, offset partially by~~and a ~~$72~~$125 per unit, ~~increase~~or 7%, decrease in retail used vehicle gross profit per ~~unit.~~unit during the six months ended June 30, 2023.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Wholesale Vehicles – Franchised Dealerships Segment

The following tables provide a reconciliation of Franchised Dealerships Segment reported basis and same store basis for wholesale vehicles:


		Three Months Ended June 30,				Better / (Worse)					Three Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(In millions, except unit data)									(In millions, except unit data)
Total wholesale vehicle revenue:	Total wholesale vehicle revenue:									Total wholesale vehicle revenue:
Same store	Same store	$	55.4	$	62.7	$	(7.3)	(12)	%	Same store	$	54.5	$	78.3	$	(23.8)	(30)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	23.8		0.3		23.5		NM		Acquisitions, open points, dispositions and holding company	1.1		0.9		0.2		NM
Total as reported	Total as reported	$	79.2	$	63.0	$	16.2	26	%	Total as reported	$	55.6	$	79.2	$	(23.6)	(30)	%

Total wholesale vehicle gross profit (loss):	Total wholesale vehicle gross profit (loss):									Total wholesale vehicle gross profit (loss):
Same store	Same store	$	(0.4)	$	4.1	$	(4.5)	(110)	%	Same store	$	(0.3)	$	(0.6)	$	0.3	50	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	(0.1)		(2.6)		2.5		96	%	Acquisitions, open points, dispositions and holding company	(0.7)		0.1		(0.8)		NM
Total as reported	Total as reported	$	(0.5)	$	1.5	$	(2.0)	(133)	%	Total as reported	$	(1.0)	$	(0.5)	$	(0.5)	(100)	%

Total wholesale vehicle unit sales:	Total wholesale vehicle unit sales:									Total wholesale vehicle unit sales:
Same store	Same store	4,313		6,729		(2,416)		(36)	%	Same store	5,418		5,764		(346)		(6)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	1,538		24		1,514		NM		Acquisitions, open points, dispositions and holding company	98		87		11		NM
Total as reported	Total as reported	5,851		6,753		(902)		(13)	%	Total as reported	5,516		5,851		(335)		(6)	%
NM = Not Meaningful	NM = Not Meaningful									NM = Not Meaningful



	Six Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions, except unit data)
Total wholesale vehicle revenue:
Same store	$	112.0	$	183.0	$	(71.0)	(39)	%
Acquisitions, open points, dispositions and holding company	2.0		2.5		(0.5)		NM
Total as reported	$	114.0	$	185.5	$	(71.5)	(39)	%

Total wholesale vehicle gross profit (loss):
Same store	$	1.4	$	(0.9)	$	2.3	256	%
Acquisitions, open points, dispositions and holding company	(0.4)		—		(0.4)		NM
Total as reported	$	1.0	$	(0.9)	$	1.9	211	%

Total wholesale vehicle unit sales:
Same store	10,790		12,426		(1,636)		(13)	%
Acquisitions, open points, dispositions and holding company	209		197		12		NM
Total as reported	10,999		12,623		(1,624)		(13)	%
NM = Not Meaningful

3537

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit data)
Total wholesale vehicle revenue:
Same store $ 138.1 $ 118.7 $ 19.4 16 %
Acquisitions, open points, dispositions and holding company 47.4 0.4 47.0 NM
Total as reported $ 185.5 $ 119.1 $ 66.4 56 %
Total wholesale vehicle gross profit (loss):
Same store $ (0.8) $ 4.9 $ (5.7) (116) %
Acquisitions, open points, dispositions and holding company (0.1) (2.7) 2.6 96 %
Total as reported $ (0.9) $ 2.2 $ (3.1) (141) %
Total wholesale vehicle unit sales:
Same store 9,675 13,532 (3,857) (29) %
Acquisitions, open points, dispositions and holding company 2,948 53 2,895 NM
Total as reported 12,623 13,585 (962) (7) %
NM = Not Meaningful

Our Franchised Dealerships Segment reported wholesale vehicle results were as follows:


		Three Months Ended June 30,						Better / (Worse)					Three Months Ended June 30,						Better / (Worse)
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(In millions, except unit and per unit data)											(In millions, except unit and per unit data)
Reported wholesale vehicle:	Reported wholesale vehicle:											Reported wholesale vehicle:
Revenue	Revenue	$	79.2		$	63.0		$	16.2	26	%	Revenue	$	55.6		$	79.2		$	(23.6)	(30)	%
Gross profit (loss)	Gross profit (loss)	$	(0.5)		$	1.5		$	(2.0)	(133)	%	Gross profit (loss)	$	(1.0)		$	(0.5)		$	(0.5)	(100)	%
Unit sales	Unit sales	5,851			6,753			(902)		(13)	%	Unit sales	5,516			5,851			(335)		(6)	%
Revenue per unit	Revenue per unit	$	13,537		$	9,323		$	4,214	45	%	Revenue per unit	$	10,057		$	13,537		$	(3,480)	(26)	%
Gross profit (loss) per unit	Gross profit (loss) per unit	$	(91)		$	212		$	(303)	(143)	%	Gross profit (loss) per unit	$	(164)		$	(91)		$	(73)	(80)	%
Gross profit (loss) as a % of revenue	Gross profit (loss) as a % of revenue	(0.6)		%	2.3		%	(290)		bps		Gross profit (loss) as a % of revenue	(1.6)		%	(0.7)		%	(90)		bps

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue $ 185.5 $ 119.1 $ 66.4 56 %
Gross profit (loss) $ (0.9) $ 2.2 $ (3.1) (141) %
Unit sales 12,623 13,585 (962) (7) %
Revenue per unit $ 14,696 $ 8,771 $ 5,925 68 %
Gross profit (loss) per unit $ (74) $ 160 $ (234) (146) %
Gross profit (loss) as a % of revenue (0.5) % 1.8 % (230) bps

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~



	Six Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue	$	114.0		$	185.5		$	(71.5)	(39)	%
Gross profit (loss)	$	1.0		$	(0.9)		$	1.9	211	%
Unit sales	10,999			12,623			(1,624)		(13)	%
Revenue per unit	$	10,346		$	14,696		$	(4,350)	(30)	%
Gross profit (loss) per unit	$	79		$	(74)		$	153	207	%
Gross profit (loss) as a % of revenue	0.8		%	(0.5)		%	130		bps

Our Franchised Dealerships Segment same store wholesale vehicle results were as follows:


	Three Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Same store wholesale vehicle:
Revenue	$	54.5		$	78.3		$	(23.8)	(30)	%
Gross profit (loss)	$	(0.3)		$	(0.6)		$	0.3	50	%
Unit sales	5,418			5,764			(346)		(6)	%
Revenue per unit	$	10,072		$	13,575		$	(3,503)	(26)	%
Gross profit (loss) per unit	$	(61)		$	(104)		$	43	41	%
Gross profit (loss) as a % of revenue	(0.6)		%	(0.8)		%	20		bps

Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Same store wholesale vehicle:
Revenue $ 55.4 $ 62.7 $ (7.3) (12) %
Gross profit (loss) $ (0.4) $ 4.1 $ (4.5) (110) %
Unit sales 4,313 6,729 (2,416) (36) %
Revenue per unit $ 12,860 $ 9,329 $ 3,531 38 %
Gross profit (loss) per unit $ (75) $ 619 $ (694) (112) %
Gross profit (loss) as a % of revenue (0.7) % 6.5 % (720) bps


		Six Months Ended June 30,						Better / (Worse)					Six Months Ended June 30,						Better / (Worse)
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(In millions, except unit and per unit data)											(In millions, except unit and per unit data)
Same store wholesale vehicle:	Same store wholesale vehicle:											Same store wholesale vehicle:
Revenue	Revenue	$	138.1		$	118.7		$	19.4	16	%	Revenue	$	112.0		$	183.0		$	(71.0)	(39)	%
Gross profit (loss)	Gross profit (loss)	$	(0.8)		$	4.9		$	(5.7)	(116)	%	Gross profit (loss)	$	1.4		$	(0.9)		$	2.3	256	%
Unit sales	Unit sales	9,675			13,532			(3,857)		(29)	%	Unit sales	10,790			12,426			(1,636)		(13)	%
Revenue per unit	Revenue per unit	$	14,269		$	8,778		$	5,491	63	%	Revenue per unit	$	10,379		$	14,729		$	(4,350)	(30)	%
Gross profit (loss) per unit	Gross profit (loss) per unit	$	(72)		$	363		$	(435)	(120)	%	Gross profit (loss) per unit	$	131		$	(72)		$	203	282	%
Gross profit (loss) as a % of revenue	Gross profit (loss) as a % of revenue	(0.6)		%	4.1		%	(470)		bps		Gross profit (loss) as a % of revenue	1.3		%	(0.5)		%	180		bps

We generally focus on maintaining Franchised Dealerships Segment used vehicle inventory days’ supply in the 25- to 35-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment used vehicle inventory days’ supply was approximately 31 days as of both June 30, ~~2022~~2023 and ~~2021.~~2022. Wholesale vehicle revenue and wholesale vehicle unit sales volume fluctuations are

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

typically a result of retail new and used vehicle unit sales volumes that generate additional trade-in vehicle volume that we are not always able to sell as retail used vehicles and choose to sell at auction. Whenever possible, we prefer to sell a used vehicle through retail channels rather than wholesaling the vehicle at auction due to the opportunity to sell F&I products and to avoid auction and transportation fees.

Same Store Franchised Dealerships Segment Wholesale Vehicles – Three Months Ended June 30, ~~2022~~2023 Compared to Three Months Ended June 30, ~~2021~~2022

Wholesale vehicle revenue decreased approximately ~~$7.3~~$23.8 million, or ~~12%~~30%, driven primarily by a ~~36%~~26% decrease in wholesale vehicle revenue per unit and a 6% decrease in wholesale vehicle unit sales volume due to fewer trade-ins as a result of decreased retail new and used vehicle sales activity during the second quarter of ~~2022, partially offset by a 38% increase in wholesale vehicle revenue per unit.~~2023. Wholesale vehicle gross ~~profit~~loss decreased approximately ~~$4.5~~$0.3 million, driven primarily by a ~~$694~~$43 per unit, or ~~112%~~41%, decrease in wholesale vehicle gross ~~profit~~loss per unit as a result of ~~lower demand in the~~higher wholesale ~~vehicle market compared to the prior year period.~~auction prices.

Same Store Franchised Dealerships Segment Wholesale Vehicles – Six Months Ended June 30, ~~2022~~2023 Compared to Six Months Ended June 30, ~~2021~~2022

Wholesale vehicle revenue ~~increased~~decreased approximately ~~$19.4~~$71.0 million or ~~16%~~39%, driven primarily by a ~~63% increase~~30% decrease in wholesale vehicle revenue per unit during the first six months of ~~2022.~~2023. Wholesale vehicle gross profit ~~decreased~~(loss) improved approximately ~~$5.7~~$2.3 million, driven primarily by a ~~$435~~$203 per unit, or ~~120%~~282%, ~~decrease~~improvement in wholesale vehicle gross profit (loss) per unit, ~~as well as~~partially offset by a ~~29%~~13% decrease in wholesale vehicle unit sales volume due in part to fewer trade-ins as a result of ~~higher levels of demand in the wholesale~~decreased retail new and used vehicle ~~auction market~~sales activity during the first six months of ~~2021 due to the impact of new vehicle inventory shortages and high levels of consumer demand for both new and used vehicles.~~2023.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Fixed Operations – Franchised Dealerships Segment

The following tables provide a reconciliation of Franchised Dealerships Segment reported basis and same store basis for Fixed Operations:

Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions)
Total Fixed Operations revenue:
Same store $ 362.1 $ 344.9 $ 17.2 5 %
Acquisitions, open points, dispositions and holding company 36.0 1.2 34.8 NM
Total as reported $ 398.1 $ 346.1 $ 52.0 15 %
Total Fixed Operations gross profit:
Same store $ 181.2 $ 174.5 $ 6.7 4 %
Acquisitions, open points, dispositions and holding company 16.9 1.1 15.8 NM
Total as reported $ 198.1 $ 175.6 $ 22.5 13 %

~~NM = Not Meaningful~~


		Six Months Ended June 30,				Better / (Worse)					Three Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(In millions)									(In millions)
Total Fixed Operations revenue:	Total Fixed Operations revenue:									Total Fixed Operations revenue:
Same store	Same store	$	706.8	$	651.8	$	55.0	8	%	Same store	$	427.3	$	392.5	$	34.8	9	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	71.9		2.4		69.5		NM		Acquisitions, open points, dispositions and holding company	6.1		5.6		0.5		NM
Total as reported	Total as reported	$	778.7	$	654.2	$	124.5	19	%	Total as reported	$	433.4	$	398.1	$	35.3	9	%

Total Fixed Operations gross profit:	Total Fixed Operations gross profit:									Total Fixed Operations gross profit:
Same store	Same store	$	350.9	$	328.8	$	22.1	7	%	Same store	$	212.0	$	195.2	$	16.8	9	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	33.9		2.0		31.9		NM		Acquisitions, open points, dispositions and holding company	3.4		2.9		0.5		NM
Total as reported	Total as reported	$	384.8	$	330.8	$	54.0	16	%	Total as reported	$	215.4	$	198.1	$	17.3	9	%

NM = Not Meaningful

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Our Franchised Dealerships Segment reported Fixed Operations results were as follows:~~

Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions)
Reported Fixed Operations:
Revenue
Customer pay $ 186.2 $ 151.6 $ 34.6 23 %
Warranty 54.4 58.0 (3.6) (6) %
Wholesale parts 49.9 39.6 10.3 26 %
Internal, sublet and other 107.6 96.9 10.7 11 %
Total revenue $ 398.1 $ 346.1 $ 52.0 15 %
Gross profit
Customer pay $ 103.2 $ 87.3 $ 15.9 18 %
Warranty 32.3 33.8 (1.5) (4) %
Wholesale parts 9.0 6.9 2.1 30 %
Internal, sublet and other 53.6 47.6 6.0 13 %
Total gross profit $ 198.1 $ 175.6 $ 22.5 13 %
Gross profit as a % of revenue
Customer pay 55.4 % 57.6 % (220) bps
Warranty 59.4 % 58.3 % 110 bps
Wholesale parts 18.0 % 17.4 % 60 bps
Internal, sublet and other 49.8 % 49.1 % 70 bps
Total gross profit as a % of revenue 49.8 % 50.7 % (90) bps

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions)
Reported Fixed Operations:
Revenue
Customer pay $ 362.6 $ 284.9 $ 77.7 27 %
Warranty 107.1 111.1 (4.0) (4) %
Wholesale parts 99.6 74.3 25.3 34 %
Internal, sublet and other 209.4 183.9 25.5 14 %
Total revenue $ 778.7 $ 654.2 $ 124.5 19 %
Gross profit
Customer pay $ 201.0 $ 163.2 $ 37.8 23 %
Warranty 63.7 64.8 (1.1) (2) %
Wholesale parts 17.8 13.0 4.8 37 %
Internal, sublet and other 102.3 89.8 12.5 14 %
Total gross profit $ 384.8 $ 330.8 $ 54.0 16 %
Gross profit as a % of revenue
Customer pay 55.4 % 57.3 % (190) bps
Warranty 59.5 % 58.3 % 120 bps
Wholesale parts 17.9 % 17.5 % 40 bps
Internal, sublet and other 48.9 % 48.8 % 10 bps
Total gross profit as a % of revenue 49.4 % 50.6 % (120) bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



	Six Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions)
Total Fixed Operations revenue:
Same store	$	843.5	$	767.9	$	75.6	10	%
Acquisitions, open points, dispositions and holding company	13.7		10.8		2.9		NM
Total as reported	$	857.2	$	778.7	$	78.5	10	%

Total Fixed Operations gross profit:
Same store	$	417.5	$	379.1	$	38.4	10	%
Acquisitions, open points, dispositions and holding company	7.5		5.7		1.8		NM
Total as reported	$	425.0	$	384.8	$	40.2	10	%

NM = Not Meaningful

Our Franchised Dealerships Segment ~~same store~~reported Fixed Operations results were as follows:

Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions)
Same store Fixed Operations:
Revenue
Customer pay $ 171.0 $ 151.0 $ 20.0 13 %
Warranty 51.7 57.8 (6.1) (11) %
Wholesale parts 46.5 39.4 7.1 18 %
Internal, sublet and other 92.9 96.7 (3.8) (4) %
Total revenue $ 362.1 $ 344.9 $ 17.2 5 %
Gross profit
Customer pay $ 96.2 $ 86.9 $ 9.3 11 %
Warranty 30.3 33.7 (3.4) (10) %
Wholesale parts 8.4 6.9 1.5 22 %
Internal, sublet and other 46.3 47.0 (0.7) (1) %
Total gross profit $ 181.2 $ 174.5 $ 6.7 4 %
Gross profit as a % of revenue
Customer pay 56.2 % 57.6 % (140) bps
Warranty 58.7 % 58.3 % 40 bps
Wholesale parts 18.0 % 17.4 % 60 bps
Internal, sublet and other 49.8 % 48.6 % 120 bps
Total gross profit as a % of revenue 50.0 % 50.6 % (60) bps


													Three Months Ended June 30,						Better / (Worse)
		Six Months Ended June 30,						Better / (Worse)					2023			2022			Change		% Change
		2022			2021			Change		% Change			(In millions)
		(In millions)
Same store Fixed Operations:
Reported Fixed Operations:												Reported Fixed Operations:
Revenue	Revenue											Revenue
Customer pay	Customer pay	$	332.9		$	283.8		$	49.1	17	%	Customer pay	$	204.6		$	186.2		$	18.4	10	%
Warranty	Warranty	102.1			110.8			(8.7)		(8)	%	Warranty	58.7			54.4			4.3		8	%
Wholesale parts	Wholesale parts	92.6			74.0			18.6		25	%	Wholesale parts	53.4			49.9			3.5		7	%
Internal, sublet and other	Internal, sublet and other	179.2			183.2			(4.0)		(2)	%	Internal, sublet and other	116.7			107.6			9.1		8	%
Total revenue	Total revenue	$	706.8		$	651.8		$	55.0	8	%	Total revenue	$	433.4		$	398.1		$	35.3	9	%

Gross profit	Gross profit											Gross profit
Customer pay	Customer pay	$	187.4		$	162.6		$	24.8	15	%	Customer pay	$	115.0		$	103.2		$	11.8	11	%
Warranty	Warranty	60.0			64.5			(4.5)		(7)	%	Warranty	34.3			32.3			2.0		6	%
Wholesale parts	Wholesale parts	16.7			12.9			3.8		29	%	Wholesale parts	9.5			9.0			0.5		6	%
Internal, sublet and other	Internal, sublet and other	86.8			88.8			(2.0)		(2)	%	Internal, sublet and other	56.6			53.6			3.0		6	%
Total gross profit	Total gross profit	$	350.9		$	328.8		$	22.1	7	%	Total gross profit	$	215.4		$	198.1		$	17.3	9	%

Gross profit as a % of revenue	Gross profit as a % of revenue											Gross profit as a % of revenue
Customer pay	Customer pay	56.3		%	57.3		%	(100)		bps		Customer pay	56.2		%	55.4		%	80		bps
Warranty	Warranty	58.8		%	58.2		%	60		bps		Warranty	58.5		%	59.4		%	(90)		bps
Wholesale parts	Wholesale parts	18.0		%	17.4		%	60		bps		Wholesale parts	17.7		%	18.0		%	(30)		bps
Internal, sublet and other	Internal, sublet and other	48.4		%	48.5		%	(10)		bps		Internal, sublet and other	48.5		%	49.8		%	(130)		bps
Total gross profit as a % of revenue	Total gross profit as a % of revenue	49.6		%	50.4		%	(80)		bps		Total gross profit as a % of revenue	49.7		%	49.8		%	(10)		bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



	Six Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions)
Reported Fixed Operations:
Revenue
Customer pay	$	405.3		$	362.6		$	42.7	12	%
Warranty	117.3			107.1			10.2		10	%
Wholesale parts	107.7			99.6			8.1		8	%
Internal, sublet and other	226.9			209.4			17.5		8	%
Total revenue	$	857.2		$	778.7		$	78.5	10	%

Gross profit
Customer pay	$	226.7		$	201.0		$	25.7	13	%
Warranty	68.7			63.7			5.0		8	%
Wholesale parts	19.1			17.8			1.3		7	%
Internal, sublet and other	110.5			102.3			8.2		8	%
Total gross profit	$	425.0		$	384.8		$	40.2	10	%

Gross profit as a % of revenue
Customer pay	55.9		%	55.4		%	50		bps
Warranty	58.6		%	59.5		%	(90)		bps
Wholesale parts	17.7		%	17.9		%	(20)		bps
Internal, sublet and other	48.7		%	49.0		%	(30)		bps
Total gross profit as a % of revenue	49.6		%	49.4		%	20		bps

Our Franchised Dealerships Segment same store Fixed Operations results were as follows:


	Three Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions)
Same store Fixed Operations:
Revenue
Customer pay	$	201.8		$	183.8		$	18.0	10	%
Warranty	57.7			53.4			4.3		8	%
Wholesale parts	53.0			49.5			3.5		7	%
Internal, sublet and other	114.8			105.8			9.0		9	%
Total revenue	$	427.3		$	392.5		$	34.8	9	%

Gross profit
Customer pay	$	113.5		$	102.0		$	11.5	11	%
Warranty	33.8			31.8			2.0		6	%
Wholesale parts	9.4			8.9			0.5		6	%
Internal, sublet and other	55.3			52.5			2.8		5	%
Total gross profit	$	212.0		$	195.2		$	16.8	9	%

Gross profit as a % of revenue
Customer pay	56.3		%	55.5		%	80		bps
Warranty	58.6		%	59.7		%	(110)		bps
Wholesale parts	17.8		%	17.9		%	(10)		bps
Internal, sublet and other	48.2		%	49.6		%	(140)		bps
Total gross profit as a % of revenue	49.6		%	49.7		%	(10)		bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



	Six Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions)
Same store Fixed Operations:
Revenue
Customer pay	$	399.4		$	358.1		$	41.3	12	%
Warranty	114.8			105.2			9.6		9	%
Wholesale parts	106.6			98.7			7.9		8	%
Internal, sublet and other	222.7			205.9			16.8		8	%
Total revenue	$	843.5		$	767.9		$	75.6	10	%

Gross profit
Customer pay	$	223.4		$	198.8		$	24.6	12	%
Warranty	67.3			62.7			4.6		7	%
Wholesale parts	18.9			17.6			1.3		7	%
Internal, sublet and other	107.9			100.0			7.9		8	%
Total gross profit	$	417.5		$	379.1		$	38.4	10	%

Gross profit as a % of revenue
Customer pay	55.9		%	55.5		%	40		bps
Warranty	58.7		%	59.7		%	(100)		bps
Wholesale parts	17.7		%	17.8		%	(10)		bps
Internal, sublet and other	48.5		%	48.6		%	(10)		bps
Total gross profit as a % of revenue	49.5		%	49.4		%	10		bps

Same Store Franchised Dealerships Segment Fixed Operations – Three Months Ended June 30, ~~2022~~2023 Compared to Three Months Ended June 30, ~~2021~~2022

Fixed Operations revenue increased approximately ~~$17.2~~$34.8 million, or 5%9%, and Fixed Operations gross profit increased approximately ~~$6.7~~$16.8 million, or 4%9%. Customer pay gross profit increased approximately ~~$9.3~~$11.5 million, or 11%, warranty gross profit ~~decreased~~increased approximately ~~$3.4~~$2.0 million, or ~~10%~~6%, wholesale parts gross profit increased approximately ~~$1.5~~$0.5 million, or ~~22%~~6%, and internal, sublet and other gross profit ~~decreased~~increased approximately ~~$0.7~~$2.8 million, or 1%5%. As consumer activity and vehicle miles driven have continued to improve from pandemic-induced lows in early 2020, we have experienced a recovery in Fixed Operations activity (in particular, related to customer pay repairs) above pre-pandemic levels, and expect to continue to see elevated levels in the remainder of ~~2022,~~2023, compared to the prior year period.

Same Store Franchised Dealerships Segment Fixed Operations – Six Months Ended June 30, ~~2022~~2023 Compared to Six Months Ended June 30, ~~2021~~2022

Fixed Operations revenue increased approximately ~~$55.0~~$75.6 million, or 8%10%, and Fixed Operations gross profit increased approximately ~~$22.1~~$38.4 million, or 7%10%. Customer pay gross profit increased approximately ~~$24.8~~$24.6 million, or ~~15%~~12%, warranty gross profit ~~decreased~~increased approximately ~~$4.5~~$4.6 million, or 7%, wholesale parts gross profit increased approximately ~~$3.8~~$1.3 million, or ~~29%~~7%, and internal, sublet and other gross profit ~~decreased~~increased approximately ~~$2.0~~$7.9 million, or 2%8%. As consumer activity and vehicle miles driven have continued to improve from pandemic-induced lows in early 2020, we have experienced a recovery in Fixed Operations activity (in particular, related to customer pay repairs) above pre-pandemic levels, and expect to continue to see elevated levels in the remainder of ~~2022,~~2023, compared to the prior year period.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

F&I – Franchised Dealerships Segment

The following tables provide a reconciliation of Franchised Dealerships Segment reported basis and same store basis for F&I:


		Three Months Ended June 30,				Better / (Worse)					Three Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(In millions, except unit and per unit data)									(In millions, except unit and per unit data)
Total F&I revenue:	Total F&I revenue:									Total F&I revenue:
Same store	Same store	$	106.6	$	123.7	$	(17.1)	(14)	%	Same store	$	130.1	$	124.8	$	5.3	4	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	23.2		0.3		22.9		NM		Acquisitions, open points, dispositions and holding company	2.1		5.0		(2.9)		NM
Total as reported	Total as reported	$	129.8	$	124.0	$	5.8	5	%	Total as reported	$	132.2	$	129.8	$	2.4	2	%

Total F&I gross profit per retail unit (excludes fleet):	Total F&I gross profit per retail unit (excludes fleet):									Total F&I gross profit per retail unit (excludes fleet):
Same store	Same store	$	2,440	$	2,113	$	327	15	%	Same store	$	2,522	$	2,422	$	100	4	%
Reported	Reported	$	2,472	$	2,110	$	362	17	%	Reported	$	2,516	$	2,472	$	44	2	%

Total combined retail new and used vehicle unit sales:	Total combined retail new and used vehicle unit sales:									Total combined retail new and used vehicle unit sales:
Same store	Same store	43,690		58,558		(14,868)		(25)	%	Same store	51,581		51,532		49		—	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	8,808		235		8,573		NM		Acquisitions, open points, dispositions and holding company	974		966		8		NM
Total as reported	Total as reported	52,498		58,793		(6,295)		(11)	%	Total as reported	52,555		52,498		57		—	%

NM = Not Meaningful


	Six Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions, except unit and per unit data)
Total F&I revenue:
Same store	$	245.4	$	246.2	$	(0.8)	—	%
Acquisitions, open points, dispositions and holding company	4.0		10.0		(6.0)		NM
Total as reported	$	249.4	$	256.2	$	(6.8)	(3)	%

Total F&I gross profit per retail unit (excludes fleet):
Same store	$	2,452	$	2,407	$	45	2	%
Reported	$	2,440	$	2,460	$	(20)	(1)	%

Total combined retail new and used vehicle unit sales:
Same store	100,100		102,269		(2,169)		(2)	%
Acquisitions, open points, dispositions and holding company	2,101		1,909		192		NM
Total as reported	102,201		104,178		(1,977)		(2)	%

NM = Not Meaningful

4143

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Total F&I revenue:
Same store $ 209.1 $ 221.0 $ (11.9) (5) %
Acquisitions, open points, dispositions and holding company 47.1 0.6 46.5 NM
Total as reported $ 256.2 $ 221.6 $ 34.6 16 %
Total F&I gross profit per retail unit (excludes fleet):
Same store $ 2,412 $ 2,020 $ 392 19 %
Reported $ 2,460 $ 2,017 $ 443 22 %
Total combined retail new and used vehicle unit sales:
Same store 86,690 109,414 (22,724) (21) %
Acquisitions, open points, dispositions and holding company 17,488 432 17,056 NM
Total as reported 104,178 109,846 (5,668) (5) %

~~NM = Not Meaningful~~

Our Franchised Dealerships Segment reported F&I results were as follows:


		Three Months Ended June 30,				Better / (Worse)					Three Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(In millions, except unit and per unit data)									(In millions, except unit and per unit data)
Reported F&I:	Reported F&I:									Reported F&I:
Revenue	Revenue	$	129.8	$	124.0	$	5.8	5	%	Revenue	$	132.2	$	129.8	$	2.4	2	%
Total combined retail new and used vehicle unit sales	Total combined retail new and used vehicle unit sales	52,498		58,793		(6,295)		(11)	%	Total combined retail new and used vehicle unit sales	52,555		52,498		57		—	%
Gross profit per retail unit (excludes fleet)	Gross profit per retail unit (excludes fleet)	$	2,472	$	2,110	$	362	17	%	Gross profit per retail unit (excludes fleet)	$	2,516	$	2,472	$	44	2	%


		Six Months Ended June 30,				Better / (Worse)					Six Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(In millions, except unit and per unit data)									(In millions, except unit and per unit data)
Reported F&I:	Reported F&I:									Reported F&I:
Revenue	Revenue	$	256.2	$	221.6	$	34.6	16	%	Revenue	$	249.4	$	256.2	$	(6.8)	(3)	%
Total combined retail new and used vehicle unit sales	Total combined retail new and used vehicle unit sales	104,178		109,846		(5,668)		(5)	%	Total combined retail new and used vehicle unit sales	102,201		104,178		(1,977)		(2)	%
Gross profit per retail unit (excludes fleet)	Gross profit per retail unit (excludes fleet)	$	2,460	$	2,017	$	443	22	%	Gross profit per retail unit (excludes fleet)	$	2,440	$	2,460	$	(20)	(1)	%

Our Franchised Dealerships Segment same store F&I results were as follows:


		Three Months Ended June 30,				Better / (Worse)					Three Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(In millions, except unit and per unit data)									(In millions, except unit and per unit data)
Same store F&I:	Same store F&I:									Same store F&I:
Revenue	Revenue	$	106.6	$	123.7	$	(17.1)	(14)	%	Revenue	$	130.1	$	124.8	$	5.3	4	%
Total combined retail new and used vehicle unit sales	Total combined retail new and used vehicle unit sales	43,690		58,558		(14,868)		(25)	%	Total combined retail new and used vehicle unit sales	51,581		51,532		49		—	%
Gross profit per retail unit (excludes fleet)	Gross profit per retail unit (excludes fleet)	$	2,440	$	2,113	$	327	15	%	Gross profit per retail unit (excludes fleet)	$	2,522	$	2,422	$	100	4	%


	Six Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions, except unit and per unit data)
Same store F&I:
Revenue	$	245.4	$	246.2	$	(0.8)	(0)	%
Total combined retail new and used vehicle unit sales	100,100		102,269		(2,169)		(2)	%
Gross profit per retail unit (excludes fleet)	$	2,452	$	2,407	$	45	2	%

Same Store Franchised Dealerships Segment F&I – Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

F&I revenue increased approximately $5.3 million, or 4%, due primarily to an increase in F&I gross profit per retail unit. F&I gross profit per retail unit increased $100 per unit, or 4%, to $2,522 per unit, due primarily to an increase in the service contract penetration rate and an increase in gross profit per other aftermarket contract, offset partially by lower used vehicle finance contract penetration rates.

Finance contract revenue for combined new and used vehicles decreased 5%, due primarily due to a 10-basis point decrease in the finance contract penetration rate and a 5% decrease in gross profit per finance contract. We believe the decrease in the finance contract penetration rate is a result of higher average interest rates driving some customers to switch to a cash purchase or to obtain their own outside financing, particularly for used vehicles. Service contract revenue for combined new and used vehicles decreased 5%, due primarily to an 11% decrease in gross profit per service contract, partially offset by a 250-basis point increase in the service contract penetration rate. Other aftermarket contract revenue for combined new and used vehicles increased 13%, due primarily to an 18% increase in gross profit per other aftermarket contract, partially offset by an 820-basis point decrease in the other aftermarket contract penetration rate.

4244

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Same store F&I:
Revenue $ 209.1 $ 221.0 $ (11.9) (5) %
Total combined retail new and used vehicle unit sales 86,690 109,414 (22,724) (21) %
Gross profit per retail unit (excludes fleet) $ 2,412 $ 2,020 $ 392 19 %

Same Store Franchised Dealerships Segment F&I – ~~Three~~Six Months Ended June 30, ~~2022~~2023 Compared to ~~Three~~Six Months Ended June 30, ~~2021~~2022

F&I revenue ~~decreased approximately $17.1 million, or 14%,~~was flat due primarily to a ~~25%~~2% decrease in total combined retail new and used ~~retail~~vehicle unit sales volume, offset ~~partially~~ by ana 2% increase in F&I gross profit per retail unit. F&I gross profit per retail unit increased ~~$327~~$45 per unit, ~~or 15%,~~ to ~~$2,440~~$2,452 per unit, due primarily to an increase in ~~gross profit per~~the service contract penetration rate, offset partially by a decrease in the finance ~~contract as well as an increase in the~~and other aftermarket contract penetration ~~rate and gross profit per aftermarket contract.~~rates.

Finance contract revenue for combined new and used vehicles decreased ~~17%~~10%, due primarily to lower retail unit sales volume, a ~~30% decrease in finance contract volume as well as a 460-basis~~260-basis point decrease in the finance contract penetration rate ~~offset partially by~~and a ~~19% increase~~4% decrease in gross profit per finance contract. We believe the decrease in the finance contract penetration rate is a result of higher average interest rates driving some customers to switch to a cash purchase or to obtain their own outside financing, particularly for used vehicles. Service contract, revenue for combined new and used vehicles decreased 9%, due primarily to a 13% decrease in ~~service contract volume, offset partially by a 4% increase in~~ gross profit per service contract ~~as well as~~partially offset by a ~~620-basis~~260-basis point increase in the service contract penetration rate. Other aftermarket contract revenue ~~decreased 4%~~for combined new and used vehicles increased 11%, due primarily to a ~~14% decrease in other aftermarket contract volume, offset by a 11%~~20% increase in gross profit per other aftermarket contract, ~~as well as a 2,400-basis~~partially offset by an 800-basis point ~~increase~~decrease in the other aftermarket contract penetration rate.

~~Same Store Franchised Dealerships Segment F&I~~ – ~~Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021~~

F&I revenue decreased approximately $11.9 million, or 5%, due primarily to a 21% decrease in total combined new and used vehicle retail unit sales volume, offset partially by an increase in F&I gross profit per retail unit. F&I gross profit per retail unit increased $392 per unit, or 19%, to $2,412 per unit, due primarily to an increase in gross profit per contract (finance, service, and other aftermarket) and an increase in the service contract and other aftermarket contract penetration rates.

Finance contract revenue for new and used vehicles decreased 7%, due primarily to a 24% decrease in finance contract volume as well as a 290-basis point decrease in the finance contract penetration rate, offset partially by a 22% increase in gross profit per finance contract. Service contract revenue for new and used vehicles decreased 5%, due primarily to a 9% decrease in service contract volume, offset partially by a 4% increase in gross profit per service contract as well as a 570-basis point increase in the service contract penetration rate. Other aftermarket contract revenue increased 3%, due primarily to a 11.5% increase in gross profit per other aftermarket contract as well as a 2,460-basis point increase in the other aftermarket contract penetration rate, offset partially by a 8% decrease in other aftermarket contract volume.

Results of Operations – EchoPark Segment

All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening. Due to the ~~ongoing~~historical expansion of our EchoPark Segment, same market results may vary significantly from reported results due to newly opened markets that began operations in the last 13 ~~months.~~months, or due to the closure of stores that are no longer included in same market results.

Used Vehicles and F&I – EchoPark Segment

~~Based on the way we manage the~~Our EchoPark ~~Segment, our~~ operating strategy focuses on maximizing total used vehicle-related gross profit (based on a combination of retail used vehicle unit sales volume, front-end retail used vehicle gross profit (loss) per unit and F&I gross profit per retail unit) rather than realizing traditional levels of front-end retail used vehicle gross profit (loss) per unit. As such, we believe the best per unit measure of gross profit performance at our EchoPark stores is a combined total gross profit per retail unit, which includes both front-end retail used vehicle gross profit (loss) per unit and F&I gross profit per retail unit sold. See the discussion under the heading “Results of Operations – ~~Franchised Dealerships Segment”~~- Consolidated” for additional discussion of the macro drivers of used vehicle revenues and F&I revenues.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~As all~~All Fixed Operations activity at our EchoPark stores ~~support~~supports our used vehicle inventory reconditioning operations and EchoPark stores do not currently perform customer pay repairs or maintenance work and are not permitted to perform manufacturer-paid warranty ~~repairs,~~repairs. As such, reconditioning amounts ~~previously~~that are classified as Fixed Operations revenues and cost of sales ~~for the EchoPark~~in our Franchised Dealerships Segment ~~have been reclassified to~~are presented as used vehicle cost of ~~sales.~~

~~The following tables provide a reconciliation of~~sales for the EchoPark ~~Segment reported basis, same market basis and new market basis for retail used vehicles:~~

Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit data)
Total used vehicle revenue:
Same market $ 406.3 $ 518.6 $ (112.3) (22) %
New markets 171.2 1.1 170.1 NM
Total as reported $ 577.5 $ 519.7 $ 57.8 11 %
Total used vehicle gross profit (loss):
Same market $ (3.6) $ (20.3) $ 16.7 82 %
New markets 7.0 0.2 6.8 NM
Total as reported $ 3.4 $ (20.1) $ 23.5 117 %
Total used vehicle unit sales:
Same market 12,440 21,222 (8,782) (41) %
New markets 4,168 39 4,129 NM
Total as reported 16,608 21,261 (4,653) (22) %
NM = Not Meaningful

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit data)
Total used vehicle revenue:
Same market $ 768.4 $ 960.1 $ (191.7) (20) %
New markets 326.1 0.9 325.2 NM
Total as reported $ 1,094.5 $ 961.0 $ 133.5 14 %
Total used vehicle gross profit (loss):
Same market $ (10.4) $ (21.6) $ 11.2 52 %
New markets 15.0 0.2 14.8 NM
Total as reported $ 4.6 $ (21.4) $ 26.0 121 %
Total used vehicle unit sales:
Same market 23,830 40,892 (17,062) (42) %
New markets 7,773 39 7,734 NM
Total as reported 31,603 40,931 (9,328) (23) %
NM = Not Meaningful
Segment.

4445

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following tables provide a reconciliation of EchoPark Segment reported basis, same market basis and new market/closed market basis for retail used vehicles:


	Three Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions, except unit data)
Total retail used vehicle revenue:
Same market	$	422.3	$	338.7	$	83.6	25	%
New markets/closed markets	101.7		235.8		(134.1)		NM
Total as reported	$	524.0	$	574.5	$	(50.5)	(9)	%

Total retail used vehicle gross profit (loss):
Same market	$	(2.2)	$	(2.1)	$	(0.1)	(5)	%
New markets/closed markets	(12.1)		4.5		(16.6)		NM
Total as reported	$	(14.3)	$	2.4	$	(16.7)	(696)	%

Total retail used vehicle unit sales:
Same market	13,732		10,104		3,628		36	%
New markets/closed markets	3,352		6,392		(3,040)		NM
Total as reported	17,084		16,496		588		4	%
NM = Not Meaningful



	Six Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions, except unit data)
Total retail used vehicle revenue:
Same market	$	875.9	$	621.2	$	254.7	41	%
New markets/closed markets	220.6		468.6		(248.0)		NM
Total as reported	$	1,096.5	$	1,089.8	$	6.7	1	%

Total retail used vehicle gross profit (loss):
Same market	$	(10.6)	$	(5.4)	$	(5.2)	(96)	%
New markets/closed markets	(15.6)		8.5		(24.1)		NM
Total as reported	$	(26.2)	$	3.1	$	(29.3)	(945)	%

Total retail used vehicle unit sales:
Same market	29,823		18,791		11,032		59	%
New markets/closed markets	7,241		12,636		(5,395)		NM
Total as reported	37,064		31,427		5,637		18	%
NM = Not Meaningful

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following tables provide a reconciliation of EchoPark Segment reported basis, same market basis and new market/closed market basis for F&I:
Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions)
Total F&I revenue:
Same market $ 30.8 $ 53.3 $ (22.5) (42) %
New markets 12.6 (0.1) 12.7 NM
Total as reported $ 43.4 $ 53.2 $ (9.8) (18) %
NM = Not Meaningful
Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions)
Total F&I revenue:
Same market $ 59.4 $ 99.9 $ (40.5) (41) %
New markets 24.1 0.4 23.7 NM
Total as reported $ 83.5 $ 100.3 $ (16.8) (17) %
NM = Not Meaningful


	Three Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions)
Total F&I revenue:
Same market	$	33.0	$	25.2	$	7.8	31	%
New markets/closed markets	8.1		17.9		(9.8)		NM
Total as reported	$	41.1	$	43.1	$	(2.0)	(5)	%
NM = Not Meaningful



	Six Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions)
Total F&I revenue:
Same market	$	73.4	$	47.5	$	25.9	55	%
New markets/closed markets	17.7		35.5		(17.8)		NM
Total as reported	$	91.1	$	83.0	$	8.1	10	%
NM = Not Meaningful

Our EchoPark Segment reported retail used vehicle and F&I results were as follows:

Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Reported used vehicle and F&I:
Used vehicle revenue $ 577.5 $ 519.7 $ 57.8 11 %
Used vehicle gross profit (loss) $ 3.4 $ (20.1) $ 23.5 117 %
Used vehicle unit sales 16,608 21,261 (4,653) (22) %
Used vehicle revenue per unit $ 34,772 $ 24,442 $ 10,330 42 %
F&I revenue $ 43.4 $ 53.2 $ (9.8) (18) %
Combined used vehicle gross profit and F&I revenue $ 46.8 $ 33.1 $ 13.7 41 %
Total used vehicle and F&I gross profit per retail unit $ 2,804 $ 1,537 $ 1,267 82 %


	Three Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions, except unit and per unit data)
Reported retail used vehicle and F&I:
Retail used vehicle revenue	$	524.0	$	574.5	$	(50.5)	(9)	%
Retail used vehicle gross profit (loss)	$	(14.3)	$	2.4	$	(16.7)	(696)	%
Retail used vehicle unit sales	17,084		16,496		588		4	%
Retail used vehicle revenue per unit	$	30,672	$	34,828	$	(4,156)	(12)	%
F&I revenue	$	41.1	$	43.1	$	(2.0)	(5)	%
Combined retail used vehicle gross profit and F&I revenue	$	26.8	$	45.5	$	(18.7)	(41)	%
Combined retail used vehicle and F&I gross profit per unit	$	1,569	$	2,751	$	(1,182)	(43)	%

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Reported used vehicle and F&I:
Used vehicle revenue $ 1,094.5 $ 961.0 $ 133.5 14 %
Used vehicle gross profit (loss) $ 4.6 $ (21.4) $ 26.0 121 %
Used vehicle unit sales 31,603 40,931 (9,328) (23) %
Used vehicle revenue per unit $ 34,633 $ 23,479 $ 11,154 48 %
F&I revenue $ 83.5 $ 100.3 $ (16.8) (17) %
Combined used vehicle gross profit and F&I revenue $ 88.1 $ 78.9 $ 9.2 12 %
Total used vehicle and F&I gross profit per retail unit $ 2,774 $ 1,922 $ 852 44 %



	Six Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions, except unit and per unit data)
Reported retail used vehicle and F&I:
Retail used vehicle revenue	$	1,096.5	$	1,089.8	$	6.7	1	%
Retail used vehicle gross profit (loss)	$	(26.2)	$	3.1	$	(29.3)	(945)	%
Retail used vehicle unit sales	37,064		31,427		5,637		18	%
Retail used vehicle revenue per unit	$	29,584	$	34,678	$	(5,094)	(15)	%
F&I revenue	$	91.1	$	83.0	$	8.1	10	%
Combined retail used vehicle gross profit and F&I revenue	$	64.9	$	86.1	$	(21.2)	(25)	%
Combined retail used vehicle and F&I gross profit per unit	$	1,750	$	2,730	$	(980)	(36)	%

4547

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our EchoPark Segment same market retail used vehicle and F&I results were as follows:

Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Same market used vehicle and F&I:
Used vehicle revenue $ 406.3 $ 518.6 $ (112.3) (22) %
Used vehicle gross profit (loss) $ (3.6) $ (20.3) $ 16.7 82 %
Used vehicle unit sales 12,440 21,222 (8,782) (41) %
Used vehicle revenue per unit $ 32,661 $ 24,437 $ 8,224 34 %
F&I revenue $ 30.8 $ 53.3 $ (22.5) (42) %
Combined used vehicle gross profit and F&I revenue $ 27.2 $ 33.0 $ (5.8) (18) %
Total used vehicle and F&I gross profit per retail unit $ 2,171 $ 1,538 $ 633 41 %


	Three Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions, except unit and per unit data)
Same market retail used vehicle and F&I:
Retail used vehicle revenue	$	422.3	$	338.7	$	83.6	25	%
Retail used vehicle gross profit (loss)	$	(2.2)	$	(2.1)	$	(0.1)	(5)	%
Retail used vehicle unit sales	13,732		10,104		3,628		36	%
Retail used vehicle revenue per unit	$	30,751	$	33,518	$	(2,767)	(8)	%
F&I revenue	$	33.0	$	25.2	$	7.8	31	%
Combined retail used vehicle gross profit and F&I revenue	$	30.8	$	23.1	$	7.7	33	%
Combined retail used vehicle and F&I gross profit per unit	$	2,244	$	2,290	$	(46)	(2)	%

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Same market used vehicle and F&I:
Used vehicle revenue $ 768.4 $ 960.1 $ (191.7) (20) %
Used vehicle gross profit (loss) $ (10.4) $ (21.6) $ 11.2 52 %
Used vehicle unit sales 23,830 40,892 (17,062) (42) %
Used vehicle revenue per unit $ 32,245 $ 23,479 $ 8,766 37 %
F&I revenue $ 59.4 $ 99.9 $ (40.5) (41) %
Combined used vehicle gross profit and F&I revenue $ 49.0 $ 78.3 $ (29.3) (37) %
Total used vehicle and F&I gross profit per retail unit $ 2,048 $ 1,914 $ 134 7 %



	Six Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions, except unit and per unit data)
Same market retail used vehicle and F&I:
Retail used vehicle revenue	$	875.9	$	621.2	$	254.7	41	%
Retail used vehicle gross profit (loss)	$	(10.6)	$	(5.4)	$	(5.2)	(96)	%
Retail used vehicle unit sales	29,823		18,791		11,032		59	%
Retail used vehicle revenue per unit	$	29,370	$	33,060	$	(3,690)	(11)	%
F&I revenue	$	73.4	$	47.5	$	25.9	55	%
Combined retail used vehicle gross profit and F&I revenue	$	62.8	$	42.1	$	20.7	49	%
Combined retail used vehicle and F&I gross profit per unit	$	2,107	$	2,241	$	(134)	(6)	%

Same Market EchoPark Segment Retail Used Vehicles and F&I – Three Months Ended June 30, ~~2022~~2023 Compared to Three Months Ended June 30, ~~2021~~2022

Retail used vehicle revenue ~~decreased~~increased approximately ~~$112.3~~$83.6 million, or ~~22%~~25%, due primarily to a ~~41% decrease~~36% increase in retail used vehicle unit sales volume, offset partially by ~~a 34% increase~~an 8% decrease in retail used vehicle revenue per unit. Combined retail used vehicle gross profit and F&I revenue ~~decreased~~increased approximately ~~$5.8~~$7.7 million, or ~~18%~~33%, due primarily to a ~~$22.5~~$7.8 million, or 31% increase in F&I revenue. The decrease in ~~F&I revenue, offset partially by a $16.7 million decrease in~~combined retail ~~used vehicle gross loss. The increase in total~~ used vehicle and F&I gross profit per ~~retail~~ unit was due primarily to higher inventory acquisition costs in the three months ended June 30, 2023 as a result of rising used vehicle prices ~~reaching an all-time high during~~at wholesale auction in the first quarter of ~~2022, and remaining~~2023, followed by a steep decline in used vehicle prices at ~~elevated levels during~~wholesale auction in the second quarter of ~~2022.~~2023.

Same Market EchoPark Segment Retail Used Vehicles and F&I – ~~Three~~Six Months Ended June 30, ~~2022~~2023 Compared to ~~Three~~Six Months Ended June 30, ~~2021~~2022

Retail used vehicle revenue ~~decreased~~increased approximately ~~$191.7~~$254.7 million, or ~~20%~~41%, due primarily to a ~~42% decrease~~59% increase in retail used vehicle unit sales volume, offset partially by ~~a 37% increase~~an 11% decrease in retail used vehicle revenue per unit. Combined retail used vehicle gross profit and F&I revenue ~~decreased~~increased approximately ~~$29.3~~$20.7 million, or ~~37%~~49%, due primarily to a ~~$40.5~~$25.9 million, ~~decrease~~or 55%, increase in F&I revenue, offset partially by a ~~$11.2~~$5.2 million decrease in retail used vehicle gross ~~loss.~~profit. The ~~increase~~decrease in ~~total~~combined retail used vehicle and F&I gross profit per ~~retail~~ unit was due primarily to higher inventory acquisition costs in the six months ended June 30, 2023 as a result of rising used vehicle prices ~~reaching an all-time high during~~at wholesale auction in the first quarter of ~~2022, and remaining~~2023, followed by a steep decline in used vehicle prices at ~~elevated levels during~~wholesale auction in the second quarter of ~~2022.~~2023.

4648

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Wholesale Vehicles – EchoPark Segment

See the discussion under the heading “Results of Operations – ~~Franchised Dealerships Segment”~~Consolidated” for additional discussion of the macro drivers of wholesale vehicle revenues.

The following tables provide a reconciliation of EchoPark Segment reported basis, same market basis and new market/closed market basis for wholesale vehicles:


		Three Months Ended June 30,				Better / (Worse)					Three Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(In millions, except unit data)									(In millions, except unit data)
Total wholesale vehicle revenue:	Total wholesale vehicle revenue:									Total wholesale vehicle revenue:
Same market	Same market	$	35.0	$	21.9	$	13.1	60	%	Same market	$	23.7	$	26.8	$	(3.1)	(12)	%
New markets		7.2		(0.1)		7.3		NM
New markets/closed markets										New markets/closed markets	11.8		15.2		(3.4)		NM
Total as reported	Total as reported	$	42.2	$	21.8	$	20.4	94	%	Total as reported	$	35.5	$	42.0	$	(6.5)	(15)	%

Total wholesale vehicle gross profit (loss):	Total wholesale vehicle gross profit (loss):									Total wholesale vehicle gross profit (loss):
Same market	Same market	$	1.5	$	2.8	$	(1.3)	(46)	%	Same market	$	0.1	$	1.3	$	(1.2)	(92)	%
New markets		0.2		0.2		—		—	%
New markets/closed markets										New markets/closed markets	(0.1)		0.4		(0.5)		NM
Total as reported	Total as reported	$	1.7	$	3.0	$	(1.3)	(43)	%	Total as reported	$	—	$	1.7	$	(1.7)	(100)	%

Total wholesale vehicle unit sales:	Total wholesale vehicle unit sales:									Total wholesale vehicle unit sales:
Same market	Same market	2,286		2,878		(592)		(21)	%	Same market	2,462		1,849		613		33	%
New markets		408		—		408		100	%
New markets/closed markets										New markets/closed markets	773		845		(72)		NM
Total as reported	Total as reported	2,694		2,878		(184)		(6)	%	Total as reported	3,235		2,694		541		20	%

NM = Not Meaningful										NM = Not Meaningful


		Six Months Ended June 30,				Better / (Worse)					Six Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(In millions, except unit data)									(In millions, except unit data)
Total wholesale vehicle revenue:	Total wholesale vehicle revenue:									Total wholesale vehicle revenue:
Same market	Same market	$	89.3	$	40.5	$	48.8	120	%	Same market	$	43.9	$	72.2	$	(28.3)	(39)	%
New markets		15.4		—		15.4		100	%
New markets/closed markets										New markets/closed markets	18.6		32.3		(13.7)		NM
Total as reported	Total as reported	$	104.7	$	40.5	$	64.2	159	%	Total as reported	$	62.5	$	104.5	$	(42.0)	(40)	%

Total wholesale vehicle gross profit (loss):	Total wholesale vehicle gross profit (loss):									Total wholesale vehicle gross profit (loss):
Same market	Same market	$	3.5	$	3.1	$	0.4	13	%	Same market	$	1.1	$	3.0	$	(1.9)	(63)	%
New markets		—		0.1		(0.1)		(100)	%
New markets/closed markets										New markets/closed markets	0.1		0.4		(0.3)		NM
Total as reported	Total as reported	$	3.5	$	3.2	$	0.3	9	%	Total as reported	$	1.2	$	3.4	$	(2.2)	(65)	%

Total wholesale vehicle unit sales:	Total wholesale vehicle unit sales:									Total wholesale vehicle unit sales:
Same market	Same market	5,393		5,739		(346)		(6)	%	Same market	4,736		4,452		284		6	%
New markets		950		—		950		100	%
New markets/closed markets										New markets/closed markets	1,415		1,891		(476)		NM
Total as reported	Total as reported	6,343		5,739		604		11	%	Total as reported	6,151		6,343		(192)		(3)	%

NM = Not Meaningful										NM = Not Meaningful

4749

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our EchoPark Segment reported wholesale vehicle results were as follows:


		Three Months Ended June 30,						Better / (Worse)					Three Months Ended June 30,						Better / (Worse)
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(In millions, except unit and per unit data)											(In millions, except unit and per unit data)
Reported wholesale vehicle:	Reported wholesale vehicle:											Reported wholesale vehicle:
Revenue	Revenue	$	42.2		$	21.8		$	20.4	94	%	Revenue	$	35.5		$	42.0		$	(6.5)	(15)	%
Gross profit (loss)	Gross profit (loss)	$	1.7		$	3.0		$	(1.3)	(43)	%	Gross profit (loss)	$	—		$	1.7		$	(1.7)	(100)	%
Unit sales	Unit sales	2,694			2,878			(184)		(6)	%	Unit sales	3,235			2,694			541		20	%
Revenue per unit	Revenue per unit	$	15,656		$	7,592		$	8,064	106	%	Revenue per unit	$	10,984		$	15,617		$	(4,633)	(30)	%
Gross profit (loss) per unit	Gross profit (loss) per unit	$	608		$	1,075		$	(467)	NM		Gross profit (loss) per unit	$	(11)		$	608		$	(619)	NM
Gross profit (loss) as a % of revenue	Gross profit (loss) as a % of revenue	3.9		%	14.2		%	(1,030)		bps		Gross profit (loss) as a % of revenue	(0.1)		%	3.9		%	(400)		bps
NM = Not Meaningful	NM = Not Meaningful											NM = Not Meaningful

Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue $ 104.7 $ 40.5 $ 64.2 159 %
Gross profit (loss) $ 3.5 $ 3.2 $ 0.3 9 %
Unit sales 6,343 5,739 604 11 %
Revenue per unit $ 16,502 $ 7,049 $ 9,453 134 %
Gross profit (loss) per unit $ 563 $ 558 $ 5 1 %
Gross profit (loss) as a % of revenue 3.4 % 7.9 % (450) bps



	Six Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue	$	62.5		$	104.5		$	(42.0)	(40)	%
Gross profit (loss)	$	1.2		$	3.4		$	(2.2)	(65)	%
Unit sales	6,151			6,343			(192)		(3)	%
Revenue per unit	$	10,176		$	16,474		$	(6,298)	(38)	%
Gross profit (loss) per unit	$	197		$	564		$	(367)	(65)	%
Gross profit (loss) as a % of revenue	1.9		%	3.4		%	(150)		bps

Our EchoPark Segment same market wholesale vehicle results were as follows:


		Three Months Ended June 30,						Better / (Worse)					Three Months Ended June 30,						Better / (Worse)
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(In millions, except unit and per unit data)											(In millions, except unit and per unit data)
Same market wholesale vehicle:	Same market wholesale vehicle:											Same market wholesale vehicle:
Revenue	Revenue	$	35.0		$	21.9		$	13.1	60	%	Revenue	$	23.7		$	26.8		$	(3.1)	(12)	%
Gross profit (loss)	Gross profit (loss)	$	1.5		$	2.8		$	(1.3)	(46)	%	Gross profit (loss)	$	0.1		$	1.3		$	(1.2)	(92)	%
Unit sales	Unit sales	2,286			2,878			(592)		(21)	%	Unit sales	2,462			1,849			613		33	%
Revenue per unit	Revenue per unit	$	15,307		$	7,592		$	7,715	102	%	Revenue per unit	$	9,684		$	14,509		$	(4,825)	(33)	%
Gross profit (loss) per unit	Gross profit (loss) per unit	$	695		$	1,074		$	(379)	(35)	%	Gross profit (loss) per unit	$	52		$	702		$	(650)	(93)	%
Gross profit (loss) as a % of revenue	Gross profit (loss) as a % of revenue	4.5		%	14.2		%	(970)		bps		Gross profit (loss) as a % of revenue	0.5		%	4.8		%	(430)		bps


		Six Months Ended June 30,						Better / (Worse)					Six Months Ended June 30,						Better / (Worse)
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(In millions, except unit and per unit data)											(In millions, except unit and per unit data)
Same market wholesale vehicle:	Same market wholesale vehicle:											Same market wholesale vehicle:
Revenue	Revenue	$	89.3		$	40.5		$	48.8	120	%	Revenue	$	43.9		$	72.2		$	(28.3)	(39)	%
Gross profit (loss)	Gross profit (loss)	$	3.5		$	3.1		$	0.4	13	%	Gross profit (loss)	$	1.1		$	3.0		$	(1.9)	(63)	%
Unit sales	Unit sales	5,393			5,739			(346)		(6)	%	Unit sales	4,736			4,452			284		6	%
Revenue per unit	Revenue per unit	$	16,566		$	7,049		$	9,517	135	%	Revenue per unit	$	9,278		$	16,232		$	(6,954)	(43)	%
Gross profit (loss) per unit	Gross profit (loss) per unit	$	648		$	558		$	90	16	%	Gross profit (loss) per unit	$	230		$	675		$	(445)	(66)	%
Gross profit (loss) as a % of revenue	Gross profit (loss) as a % of revenue	3.9		%	7.7		%	(380)		bps		Gross profit (loss) as a % of revenue	2.5		%	4.2		%	(170)		bps

Same Market EchoPark Segment Wholesale Vehicles – Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Same market wholesale vehicle revenue decreased approximately $3.1 million, or 12%, due primarily to a 33% decrease in wholesale vehicle revenue per unit, offset partially by a 33% increase in wholesale vehicle unit sales volume. As we adjust

4850

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Same Market EchoPark Segment Wholesale Vehicles~~ – ~~Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021~~

Same market wholesale vehicle revenue increased approximately $13.1 million or 60% due primarily to a 102% increase in revenue per wholesale unit, offset partially by a 21% decrease in wholesale vehicle unit sales volume resulting from the ~~stabilization of excess demand in the wholesale vehicle auction market which drove record high wholesale vehicle pricing through the second quarter of 2022. Historically, given EchoPark’s retail~~ inventory mix ~~focused on 1-4-year old vehicles, the majority~~ of vehicles acquired from guests on trade-ins cannot be sold as retail at our EchoPark stores and are subsequently sold at auction or transferred to one of our franchised dealerships to be sold as a retail used vehicle. As we addnearly-new versus older model year vehicles ~~to EchoPark’s inventory~~sold at retail going forward, the levels of wholesale vehicle revenue and gross profit may vary.

Same Market EchoPark Segment Wholesale Vehicles – Six Months Ended June 30, ~~2022~~2023 Compared to Six Months Ended June 30, ~~2021~~2022

Same market wholesale vehicle revenue ~~increased~~decreased approximately ~~$48.8~~$28.3 million, or ~~120%~~39%, due primarily to a ~~135% increase~~43% decrease in wholesale vehicle revenue per ~~wholesale~~ unit, offset partially by a 6% ~~decrease~~increase in wholesale vehicle unit sales ~~volume resulting from~~volume. As we adjust the ~~stabilization of excess demand in the wholesale vehicle auction market which drove record high wholesale vehicle pricing through the first half of 2022. Historically, given EchoPark’s retail~~ inventory mix ~~focused on 1-4-year old vehicles, the majority~~ of vehicles acquired from guests on trade-ins cannot be sold as retail at our EchoPark stores and are subsequently sold at auction or transferred to one of our franchised dealerships to be sold as a retail used vehicle. As we addnearly-new versus older model year vehicles ~~to EchoPark’s inventory~~sold at retail going forward, the levels of wholesale vehicle revenue and gross profit may vary.

Results of Operations – Powersports Segment

Our Powersports Segment consists of eight stores acquired during 2022 and five stores acquired in the first quarter of 2023. The following discussion of new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a reported basis, except where otherwise noted. Our Powersports Segment results are subject to seasonal variations, such that the second and third quarters are expected to contribute higher revenues and segment income than the first and fourth quarters.

New Vehicles – Powersports Segment

Our Powersports Segment reported retail new vehicle results were as follows:


	Three Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported retail new vehicle:
Revenue	$	24.9		$	1.2		$	23.7	NM
Gross profit	$	4.5		$	0.4		$	4.1	NM
Unit sales	1,396			48			1,348		NM
Revenue per unit	$	17,827		$	28,065		$	(10,238)	NM
Gross profit per unit	$	3,235		$	7,401		$	(4,166)	NM
Gross profit as a % of revenue	18.1		%	26.4		%	(830)		bps

NM = Not Meaningful


	Six Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported retail new vehicle:
Revenue	$	45.7		$	2.5		$	43.2	NM
Gross profit	$	8.5		$	0.6		$	7.9	NM
Unit sales	2,503			89			2,414		NM
Revenue per unit	$	18,254		$	28,146		$	(9,892)	NM
Gross profit per unit	$	3,385		$	7,156		$	(3,771)	NM
Gross profit as a % of revenue	18.5		%	25.4		%	(690)		bps

NM = Not Meaningful

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Reported Powersports Segment Retail New Vehicles – Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Reported retail new vehicle revenue increased approximately $23.7 million and reported retail new vehicle gross profit increased approximately $4.1 million, due primarily to the timing of acquisitions. Reported retail new vehicle gross profit per unit decreased $4,166 per unit, to $3,235 per unit, due primarily to the timing of acquisitions and changes in brand mix.

Reported Powersports Segment Retail New Vehicles – Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Reported retail new vehicle revenue increased approximately $43.2 million and reported retail new vehicle gross profit increased approximately $7.9 million, due primarily to the timing of acquisitions. Reported retail new vehicle gross profit per unit decreased $3,771 per unit, to $3,385 per unit, due primarily to the timing of acquisitions and changes in brand mix.

On a trailing quarter cost of sales basis, our reported Powersports Segment new vehicle inventory days’ supply was approximately 111 days as of June 30, 2023. We believe that in a normal production environment, the level of new vehicle inventory days’ supply in our Powersports Segment should be in the 90- to 120-day range, depending on seasonality.

Used Vehicles – Powersports Segment

Our Powersports Segment reported retail used vehicle results were as follows:


	Three Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue	$	7.4		$	1.9		$	5.5	NM
Gross profit	$	1.3		$	0.5		$	0.8	NM
Unit sales	691			112			579		NM
Revenue per unit	$	10,765		$	16,855		$	(6,090)	NM
Gross profit per unit	$	1,942		$	4,196		$	(2,254)	NM
Gross profit as a % of revenue	18.0		%	24.9		%	(690)		bps

NM = Not Meaningful


	Six Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue	$	12.3		$	2.9		$	9.4	NM
Gross profit	$	2.4		$	0.7		$	1.7	NM
Unit sales	1,135			176			959		NM
Revenue per unit	$	10,804		$	16,741		$	(5,937)	NM
Gross profit per unit	$	2,093		$	4,028		$	(1,935)	NM
Gross profit as a % of revenue	19.4		%	24.1		%	(470)		bps

NM = Not Meaningful

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Reported Powersports Segment Retail Used Vehicles – Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Reported retail used vehicle revenue increased approximately $5.5 million and reported retail used vehicle gross profit increased approximately $0.8 million, due primarily to the timing of acquisitions. Reported retail used vehicle gross profit per unit decreased $2,254 per unit, to $1,942 per unit, due primarily to the timing of acquisitions and changes in brand mix.

Reported Powersports Segment Retail Used Vehicles – Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Reported retail used vehicle revenue increased approximately $9.4 million and reported retail used vehicle gross profit increased approximately $1.7 million, due primarily to timing of the acquisitions. Reported retail used vehicle gross profit per unit decreased $1,935 per unit, to $2,093 per unit, due primarily to the timing of acquisitions and changes in brand mix.

On a trailing quarter cost of sales basis, our reported Powersports Segment used vehicle inventory days’ supply was approximately 50 days as of June 30, 2023. Going forward, we generally expect to maintain a used vehicle inventory days’ supply in our Powersports Segment in the 75- to 100-day range, depending on seasonality.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Wholesale Vehicles – Powersports Segment

Our Powersports Segment reported wholesale vehicle results were as follows:


	Three Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue	$	0.4		$	0.2		$	0.2	NM
Gross profit (loss)	$	—		$	—		$	—	NM
Unit sales	50			—			50		NM
Revenue per unit	$	7,947		$	—		$	7,947	NM
Gross profit (loss) per unit	$	(665)		$	—		$	(665)	NM
Gross profit (loss) as a % of revenue	(8.4)		%	0.6		%	NM

NM = Not Meaningful


	Six Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue	$	0.5		$	0.2		$	0.3	NM
Gross profit (loss)	$	(0.1)		$	—		$	(0.1)	NM
Unit sales	57			—			57		NM
Revenue per unit	$	8,689		$	—		$	8,689	NM
Gross profit (loss) per unit	$	(598)		$	—		$	(598)	NM
Gross profit (loss) as a % of revenue	(6.9)		%	(1.2)		%	(570)		bps

NM = Not Meaningful

Reported Powersports Segment Wholesale Vehicles – Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Reported wholesale vehicle revenue increased approximately $0.2 million, due to the timing of acquisitions. Reported wholesale vehicle gross profit was flat.

Reported Powersports Segment Wholesale Vehicles – Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Reported wholesale vehicle revenue increased approximately $0.3 million, due to the timing of acquisitions. Reported wholesale vehicle gross loss increased $0.1 million.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Fixed Operations – Powersports Segment

Our Powersports Segment reported Fixed Operations results were as follows:


	Three Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions)
Reported Fixed Operations:
Revenue
Customer pay	$	3.5		$	0.9		$	2.6	NM
Warranty	0.4			0.1			0.3		NM
Wholesale parts	0.2			—			0.2		NM
Internal, sublet and other	6.2			0.1			6.1		NM
Total revenue	$	10.3		$	1.1		$	9.2	NM

Gross profit
Customer pay	$	1.9		$	0.6		$	1.3	NM
Warranty	0.3			0.1			0.2		NM
Wholesale parts	—			—			—		NM
Internal, sublet and other	2.8			(0.2)			3.0		NM
Total gross profit	$	5.0		$	0.5		$	4.5	NM

Gross profit as a % of revenue
Customer pay	53.7		%	66.8		%	NM
Warranty	61.6		%	79.7		%	NM
Wholesale parts	18.3		%	14.4		%	NM
Internal, sublet and other	45.2		%	(200.0)		%	NM
Total gross profit as a % of revenue	48.5		%	50.0		%	NM

NM = Not Meaningful


	Six Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions)
Reported Fixed Operations:
Revenue
Customer pay	$	6.0		$	1.5		$	4.5	NM
Warranty	0.8			0.1			0.7		NM
Wholesale parts	0.3			—			0.3		NM
Internal, sublet and other	9.9			0.2			9.7		NM
Total revenue	$	17.0		$	1.8		$	15.2	NM

Gross profit
Customer pay	$	3.3		$	1.0		$	2.3	NM
Warranty	0.4			0.1			0.3		NM
Wholesale parts	0.1			—			0.1		NM
Internal, sublet and other	4.5			(0.2)			4.7		NM
Total gross profit	$	8.3		$	0.9		$	7.4	NM

Gross profit as a % of revenue
Customer pay	54.3		%	66.3		%	NM
Warranty	59.4		%	76.9		%	NM
Wholesale parts	19.3		%	12.4		%	NM
Internal, sublet and other	45.5		%	(100.0)		%	NM
Total gross profit as a % of revenue	48.7		%	49.6		%	NM

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Reported Powersports Segment Fixed Operations – Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Reported Fixed Operations revenue increased approximately $9.2 million and reported Fixed Operations gross profit increased approximately $4.5 million. Customer pay revenue increased approximately $2.6 million and customer pay gross profit increased approximately $1.3 million. Warranty revenue increased approximately $0.3 million and warranty gross profit increased approximately $0.2 million. Wholesale parts revenue increased approximately $0.2 million and wholesale parts gross profit was flat. Internal, sublet and other revenue increased approximately $6.1 million and internal, sublet and other gross profit increased approximately $3.0 million.

Reported Powersports Segment Fixed Operations – Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Reported Fixed Operations revenue increased approximately $15.2 million and reported Fixed Operations gross profit increased approximately $7.4 million. Customer pay revenue increased approximately $4.5 million and customer pay gross profit increased approximately $2.3 million. Warranty revenue increased approximately $0.7 million and warranty gross profit increased approximately $0.3 million. Wholesale parts revenue increased approximately $0.3 million and wholesale parts gross profit increased approximately $0.1 million. Internal, sublet and other revenue increased approximately $9.7 million and internal, sublet and other gross profit increased approximately $4.7 million.

F&I – Powersports Segment

Our Powersports Segment reported F&I results were as follows:


	Three Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions, except unit and per unit data)
Reported F&I:
Revenue	$	2.0	$	0.3	$	1.7	NM
Unit sales	2,087		160		1,927		NM
Gross profit per retail unit (excludes fleet)	$	952	$	1,933	$	(981)	NM


	Six Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions, except unit and per unit data)
Reported F&I:
Revenue	$	3.5		$	0.5		$	3.0	NM
Unit sales	3,638		—	265		—	3,373		NM
Gross profit per retail unit (excludes fleet)	$	964		$	1,818		$	(854)	NM

NM = Not Meaningful

Reported Powersports Segment F&I – Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Reported F&I revenue increased $1.7 million and reported F&I gross profit per retail unit decreased $981 per unit, to $952 per unit, due primarily to changes in brand mix. The combined new and used vehicle finance contract penetration rate was 44%, the combined new and used vehicle service contract penetration rate was 26% and the total other aftermarket contract penetration rate was 41%.

Reported Powersports Segment F&I – Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Reported F&I revenue increased $3.0 million and reported F&I gross profit per retail unit decreased $854 per unit, to $964 per unit, due primarily to changes in brand mix. The combined new and used vehicle finance contract penetration rate was 45%, the combined new and used vehicle service contract penetration rate was 27% and the total other aftermarket contract penetration rate was 45%.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Segment Results Summary

In the following ~~tables~~table of financial data, total segment income (loss) (defined as income (loss) before taxes and impairment charges for each reportable segment) of the reportable segments is reconciled to consolidated income ~~from continuing operations~~ before ~~taxes and impairment charges.~~taxes. See above for tables and discussion of results by reportable segment.


		Three Months Ended June 30,				Better / (Worse)					Three Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(In millions, except unit data)									(In millions, except unit data)
		As Restated
Revenues:
Segment Revenues:										Segment Revenues:
Franchised Dealerships Segment revenues:	Franchised Dealerships Segment revenues:									Franchised Dealerships Segment revenues:
Retail new vehicles	Retail new vehicles	$	1,341.7	$	1,452.3	$	(110.6)	(8)	%	Retail new vehicles	$	1,583.3	$	1,341.7	$	241.6	18	%
Fleet new vehicles	Fleet new vehicles	19.9		9.7		10.2		NM		Fleet new vehicles	28.3		19.9		8.4		42	%
Total new vehicles	Total new vehicles	$	1,361.6	$	1,462.0	$	(100.4)	(7)	%	Total new vehicles	1,611.6		1,361.6		250.0		18	%
Used vehicles	Used vehicles	871.9		761.5		110.4		14	%	Used vehicles	774.5		871.9		(97.4)		(11)	%
Wholesale vehicles	Wholesale vehicles	79.2		63.0		16.2		26	%	Wholesale vehicles	55.6		79.2		(23.6)		(30)	%
Parts, service and collision repair	Parts, service and collision repair	398.1		346.1		52.0		15	%	Parts, service and collision repair	433.4		398.1		35.3		9	%
Finance, insurance and other, net	Finance, insurance and other, net	129.8		124.0		5.8		5	%	Finance, insurance and other, net	132.2		129.8		2.4		2	%
Franchised Dealerships Segment revenues	Franchised Dealerships Segment revenues	$	2,840.6	$	2,756.6	$	84.0	3	%	Franchised Dealerships Segment revenues	$	3,007.3	$	2,840.6	$	166.7	6	%

EchoPark Segment revenues:	EchoPark Segment revenues:									EchoPark Segment revenues:
Retail new vehicles	Retail new vehicles	$	2.5	$	0.9	$	1.6	(178)	%	Retail new vehicles	$	—	$	1.3	$	(1.3)	(100)	%
Used vehicles	Used vehicles	577.5		519.7		57.8		11	%	Used vehicles	524.0		574.5		(50.5)		(9)	%
Wholesale vehicles	Wholesale vehicles	42.2		21.8		20.4		94	%	Wholesale vehicles	35.5		42.0		(6.5)		(15)	%

Finance, insurance and other, net	Finance, insurance and other, net	43.4		53.2		(9.8)		(18)	%	Finance, insurance and other, net	41.1		43.1		(2.0)		(5)	%
EchoPark Segment revenues	EchoPark Segment revenues	$	665.6	$	595.6	$	70.0	12	%	EchoPark Segment revenues	$	600.6	$	660.9	$	(60.3)	(9)	%

Powersports Segment revenues:										Powersports Segment revenues:
Retail new vehicles										Retail new vehicles	$	24.9	$	1.2	$	23.7	NM

Used vehicles										Used vehicles	7.4		1.9		5.5		NM
Wholesale vehicles										Wholesale vehicles	0.4		0.2		0.2		NM
Parts, service and collision repair										Parts, service and collision repair	10.3		1.1		9.2		NM
Finance, insurance and other, net										Finance, insurance and other, net	2.0		0.3		1.7		NM
Powersports Segment revenues										Powersports Segment revenues	$	45.0	$	4.7	$	40.3	NM

Total consolidated revenues	Total consolidated revenues	$	3,506.2	$	3,352.2	$	154.0	5	%	Total consolidated revenues	$	3,652.9	$	3,506.2	$	146.7	4	%

Income (Loss) (1):
Segment Income (Loss) (1):										Segment Income (Loss) (1):
Franchised Dealerships Segment	Franchised Dealerships Segment	$	162.1	$	165.4	$	(3.3)	(2)	%	Franchised Dealerships Segment	$	145.9	$	162.1	$	(16.2)	(10)	%
EchoPark Segment	EchoPark Segment	(34.9)		(14.4)		(20.5)		(142)	%	EchoPark Segment	(52.8)		(34.2)		(18.6)		(54)	%
Powersports Segment										Powersports Segment	2.0		(0.7)		2.7		NM
Total segment income (loss)										Total segment income (loss)	95.1		127.2		(32.1)		(25)	%
Impairment charges										Impairment charges	(62.6)		—		(62.6)		100	%
Income before taxes										Income before taxes	$	32.5	$	127.2	$	(94.7)	(74)	%

Income from continuing operations before taxes		$	127.2	$	151.0	$	(23.8)	(16)	%

Retail New and Used Vehicle Unit Sales Volume:
Segment Retail New and Used Vehicle Unit Sales Volume:										Segment Retail New and Used Vehicle Unit Sales Volume:
Franchised Dealerships Segment	Franchised Dealerships Segment	52,498		58,793		(6,295)		(11)	%	Franchised Dealerships Segment	52,555		52,498		57		—	%
EchoPark Segment	EchoPark Segment	16,693		21,275		(4,582)		(22)	%	EchoPark Segment	17,084		16,533		551		3	%
Powersports Segment										Powersports Segment	2,087		160		1,927		NM
Total retail new and used vehicle unit sales volume	Total retail new and used vehicle unit sales volume	69,191		80,068		(10,877)		(14)	%	Total retail new and used vehicle unit sales volume	71,726		69,191		2,535		4	%

NM = Not Meaningful

(1)Segment income (loss) for each segment is defined as income (loss) ~~from continuing operations~~ before taxes and impairment charges.

5057

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


		Six Months Ended June 30,				Better / (Worse)					Six Months Ended June 30,				Better / (Worse)
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(In millions, except unit data)									(In millions, except unit data)
		As Restated
Revenues:
Segment Revenues:										Segment Revenues:
Franchised Dealerships Segment revenues:	Franchised Dealerships Segment revenues:									Franchised Dealerships Segment revenues:
Retail new vehicles	Retail new vehicles	$	2,687.4	$	2,586.3	$	101.1	4	%	Retail new vehicles	$	3,004.3	$	2,687.4	$	316.9	12	%
Fleet new vehicles	Fleet new vehicles	38.0		32.0		6.0		19	%	Fleet new vehicles	47.1		38.0		9.1		24	%
Total new vehicles	Total new vehicles	$	2,725.4	$	2,618.3	$	107.1	4	%	Total new vehicles	3,051.4		2,725.4		326.0		12	%
Used vehicles	Used vehicles	1,725.7		1,423.1		302.6		21	%	Used vehicles	1,542.0		1,725.7		(183.7)		(11)	%
Wholesale vehicles	Wholesale vehicles	185.5		119.1		66.4		56	%	Wholesale vehicles	114.0		185.5		(71.5)		(39)	%
Parts, service and collision repair	Parts, service and collision repair	778.7		654.2		124.5		19	%	Parts, service and collision repair	857.2		778.7		78.5		10	%
Finance, insurance and other, net	Finance, insurance and other, net	256.2		221.6		34.6		16	%	Finance, insurance and other, net	249.4		256.2		(6.8)		(3)	%
Franchised Dealerships Segment revenues	Franchised Dealerships Segment revenues	$	5,671.5	$	5,036.3	$	635.2	13	%	Franchised Dealerships Segment revenues	$	5,814.0	$	5,671.5	$	142.5	3	%

EchoPark Segment revenues:	EchoPark Segment revenues:									EchoPark Segment revenues:
Retail new vehicles	Retail new vehicles	$	8.2	$	0.9	$	7.3	(811)	%	Retail new vehicles	$	1.0	$	5.7	$	(4.7)	(82)	%
Used vehicles	Used vehicles	1,094.5		961.0		133.5		14	%	Used vehicles	1,096.5		1,089.8		6.7		1	%
Wholesale vehicles	Wholesale vehicles	104.7		40.5		64.2		159	%	Wholesale vehicles	62.5		104.5		(42.0)		(40)	%

Finance, insurance and other, net	Finance, insurance and other, net	83.5		100.3		(16.8)		(17)	%	Finance, insurance and other, net	91.1		83.0		8.1		10	%
EchoPark Segment revenues	EchoPark Segment revenues	$	1,290.9	$	1,102.7	$	188.2	17	%	EchoPark Segment revenues	$	1,251.1	$	1,283.0	$	(31.9)	(3)	%

Powersports Segment revenues:										Powersports Segment revenues:
Retail new vehicles										Retail new vehicles	$	45.7	$	2.5	$	43.2	NM

Used vehicles										Used vehicles	12.3		2.9		9.4		NM
Wholesale vehicles										Wholesale vehicles	0.5		0.2		0.3		NM
Parts, service and collision repair										Parts, service and collision repair	17.0		1.8		15.2		NM
Finance, insurance and other, net										Finance, insurance and other, net	3.5		0.5		3.0		NM
Powersports Segment revenues										Powersports Segment revenues	$	79.0	$	7.9	$	71.1	NM

Total consolidated revenues	Total consolidated revenues	$	6,962.4	$	6,139.0	$	823.4	13	%	Total consolidated revenues	$	7,144.1	$	6,962.4	$	181.7	3	%

Income (Loss) (1):
Segment Income (Loss) (1):										Segment Income (Loss) (1):
Franchised Dealerships Segment	Franchised Dealerships Segment	$	326.0	$	236.0	$	90.0	38	%	Franchised Dealerships Segment	$	255.8	$	326.0	$	(70.2)	(22)	%
EchoPark Segment	EchoPark Segment	(69.9)		(12.4)		(57.5)		(464)	%	EchoPark Segment	(99.7)		(69.6)		(30.1)		(43)	%
Powersports Segment										Powersports Segment	2.6		(0.3)		2.9		NM
Total segment income (loss)										Total segment income (loss)	158.7		256.1		(97.4)		(38)	%
Impairment charges										Impairment charges	(62.6)		—		(62.6)		100	%
Income before taxes										Income before taxes	$	96.1	$	256.1	$	(160.0)	(62)	%

Income from continuing operations before taxes		$	256.1	$	223.6	$	32.5	15	%

Retail New and Used Vehicle Unit Sales Volume:
Segment Retail New and Used Vehicle Unit Sales Volume:										Segment Retail New and Used Vehicle Unit Sales Volume:
Franchised Dealerships Segment	Franchised Dealerships Segment	104,178		109,846		(5,668)		(5)	%	Franchised Dealerships Segment	102,201		104,178		(1,977)		(2)	%
EchoPark Segment	EchoPark Segment	31,773		40,945		(9,172)		(22)	%	EchoPark Segment	37,075		31,508		5,567		18	%
Powersports Segment										Powersports Segment	3,638		265		3,373		NM
Total retail new and used vehicle unit sales volume	Total retail new and used vehicle unit sales volume	135,951		150,791		(14,840)		(10)	%	Total retail new and used vehicle unit sales volume	142,914		135,951		6,963		5	%

NM = Not Meaningful

(1)Segment income (loss) for each segment is defined as income (loss) ~~from continuing operations~~ before taxes and impairment charges.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Selling, General and Administrative (“SG&A”) Expenses – Consolidated

Consolidated SG&A expenses are comprised of four major groups: compensation expense, advertising expense, rent expense and other expense. Compensation expense primarily relates to store personnel who are paid a commission or a salary plus commission and support personnel who are generally paid a fixed salary. Commissions paid to store personnel typically vary depending on gross profits realized and sales volume objectives. Due to the salary component for certain store and corporate personnel, gross profits and compensation expense do not change in direct proportion to one another. Advertising expense and other expense vary based on the level of actual or anticipated business activity and the number of dealerships in operation. Rent expense typically varies with the number of store locations owned, investments made for facility improvements and interest rates. Other expense includes various fixed and variable expenses, including gain on the disposal of franchises, certain customer-related costs such as gasoline and service loaners, and insurance, training, legal and IT expenses, which may not change in proportion to gross profit levels. Typically, SG&A expenses as a percentage of gross profit are highest in the first quarter of the year, due to the seasonal nature of our business and the effects of certain payroll taxes and fringe benefits that occur early in the year.

The following tables set forth information related to our consolidated reported SG&A expenses:


	Three Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions)
SG&A expenses:
Compensation	$	261.0		$	266.4		$	5.4	2	%
Advertising	22.8			25.6			2.8		11	%
Rent	11.5			13.7			2.2		16	%
Other	96.6			97.1			0.5		1	%
Total SG&A expenses	$	391.9		$	402.8		$	10.9	3	%

SG&A expenses as a % of gross profit:
Compensation	45.9		%	45.2		%	(70)		bps
Advertising	4.0		%	4.3		%	30		bps
Rent	2.0		%	2.3		%	30		bps
Other	17.0		%	16.6		%	(40)		bps
Total SG&A expenses as a % of gross profit	68.9		%	68.4		%	(50)		bps




	Six Months Ended June 30,						Better / (Worse)
	2023			2022			Change		% Change
	(In millions)
SG&A expenses:
Compensation	$	519.7		$	518.9		$	(0.8)	—	%
Advertising	48.9			51.7			2.8		5	%
Rent	22.8			26.4			3.6		14	%
Other	213.3			192.8			(20.5)		(11)	%
Total SG&A expenses	$	804.7		$	789.8		$	(14.9)	(2)	%

SG&A expenses as a % of gross profit:
Compensation	46.3		%	44.7		%	(160)		bps
Advertising	4.4		%	4.5		%	10		bps
Rent	2.0		%	2.3		%	30		bps
Other	19.0		%	16.6		%	(240)		bps
Total SG&A expenses as a % of gross profit	71.7		%	68.1		%	(360)		bps

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Overall SG&A expenses decreased in dollar amount and increased as a percentage of gross profit, primarily due to the positive impact on profitability from a $20.7 million gain on the disposal of franchises, offset partially by higher IT and

5159

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~The following table sets forth information related~~maintenance expenses, $2.2 million in severance charges, $1.9 million in hail damage, in addition to lower overall gross profit levels. Compensation expense decreased in dollar amount and increased as a percentage of gross profit, primarily due to lower overall gross profit levels. Advertising expense decreased in both dollar amount and as a percentage of gross profit based on adapting our ~~consolidated reported~~advertising spending to the current retail automotive environment. Rent expense decreased in both dollar amount and as a percentage of gross profit, primarily due to the purchase of several properties that were previously leased. Other SG&A ~~expenses:~~expenses decreased in dollar amount and increased as a percentage of gross profit, primarily due to the positive impact on profitability from a $20.7 million gain on the disposal of franchises, offset partially by higher IT and maintenance expenses, $2.2 million in severance charges, $1.9 million in hail damage and lower overall gross profit levels.

Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions)
SG&A expenses:
Compensation $ 266.4 $ 213.8 $ (52.6) (25) %
Advertising 25.6 15.3 (10.3) (67) %
Rent 13.7 13.7 — — %
Other 97.1 77.8 (19.3) (25) %
Total SG&A expenses $ 402.8 $ 320.6 $ (82.2) (26) %
SG&A expenses as a % of gross profit:
Compensation 45.2 % 41.9 % (330) bps
Advertising 4.3 % 3.0 % (130) bps
Rent 2.3 % 2.7 % 40 bps
Other 16.6 % 15.2 % (140) bps
Total SG&A expenses as a % of gross profit 68.4 % 62.8 % (560) bps
Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions)
SG&A expenses:
Compensation $ 518.9 $ 402.3 $ (116.6) (29) %
Advertising 51.7 27.5 (24.2) (88) %
Rent 26.4 27.4 1.0 4 %
Other 192.8 152.8 (40.0) (26) %
Total SG&A expenses $ 789.8 $ 610.0 $ (179.8) (29) %
SG&A expenses as a % of gross profit:
Compensation 44.7 % 44.1 % (60) bps
Advertising 4.5 % 3.0 % (150) bps
Rent 2.3 % 3.0 % 70 bps
Other 16.6 % 16.8 % 20 bps
Total SG&A expenses as a % of gross profit 68.1 % 66.9 % (120) bps

~~Three~~Six Months Ended June 30, ~~2022~~2023 Compared to ~~Three~~Six Months Ended June 30, ~~2021~~2022

Overall SG&A expenses increased in both dollar amount and as a percentage of gross profit, primarily as a result of higher IT and maintenance expenses, $2.2 million in severance charges, $1.9 million in hail damage and lower overall gross profit levels, offset partially by the positive impact on profitability from a $20.7 million gain on the disposal of franchises. Compensation expense increased in both dollar amount and as a percentage of gross profit, primarily due to lower overall gross profit levels. Advertising expense decreased in both dollar amount and as a percentage of gross profit based on adapting our advertising spending to the current retail automotive environment. Rent expense decreased in both dollar amount and as a percentage of gross profit, primarily due to the purchase of several properties that were previously leased. Other SG&A expenses increased in both dollar amount and as a percentage of gross profit, primarily due to higher ~~compensation levels as a result of the RFJ Acquisition~~IT and ~~higher~~maintenance expenses, $2.2 million in severance charges, $1.9 million in hail damage and lower overall gross profit ~~levels. Compensation expense increased in both dollar amount and as~~levels, offset partially by the positive impact on profitability from a ~~percentage~~$20.7 million gain on the disposal of gross profit, primarily due to the RFJ Acquisition and higher overall gross profit levels. Advertising expense increased in both dollar amount and as a percentage of gross profit, as a result of our continued investment in EchoPark and the effect of the RFJ Acquisition. Rent expense was flat in dollar amount and decreased as a percentage of gross profit primarily due to higher levels of overall gross profit. Other SG&A expenses increased in both dollar amount and as a percentage of gross profit, primarily due to the effect of our EchoPark growth plan and the RFJ Acquisition.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021~~

Overall SG&A expenses increased in both dollar amount and as a percentage of gross profit, primarily due to higher compensation levels as a result of the RFJ Acquisition and higher overall gross profit levels. Compensation expense increased in both dollar amount and as a percentage of gross profit, primarily due to the RFJ Acquisition and higher overall gross profit levels. Advertising expense increased in both dollar amount and as a percentage of gross profit, due primarily to a focused marketing strategy particularly at EchoPark and the effects of the RFJ Acquisition. Rent expense decreased in both dollar amount and as a percentage of gross profit, primarily due to the buyout of certain previously leased properties and higher levels of overall gross profit. Other SG&A expenses increased in dollar amount but decreased as a percentage of gross profit, primarily due to higher gross profit levels.franchises.

Impairment Charges – Consolidated

~~We did not record any~~Impairment charges were approximately $62.6 million for both the three and six months ended June 30, 2023, related to fixed assets, lease right-of-use assets, and other contractual obligations related to abandoned property as a result of our decision to close 22 EchoPark locations during the second quarter of 2023. There were no impairment charges for the three and six months ended June 30, ~~2022 or 2021.~~2022.

Depreciation and Amortization – Consolidated

Depreciation and amortization expense increased approximately ~~$6.4~~$4.9 million, or ~~26%~~16%, and ~~$12.7~~$9.4 million, or ~~26%~~15%, during the three and six months ended June 30, ~~2022,~~2023, respectively, due primarily to acquisitions and completed construction projects and purchases of fixed assets for use in our franchised dealerships and EchoPark stores.

Interest Expense, Floor Plan – Consolidated

Three Months Ended June 30, ~~2022~~2023 Compared to Three Months Ended June 30, ~~2021~~2022

We participate in a program with two of our lender partners wherein we maintain a floor plan deposit balance (as shown in the table below under the heading “Liquidity and Capital Resources”) with the lender that earns interest based on the agreed upon floor plan interest rate, effectively reducing the net used vehicle floor plan interest expense with the lender. The below discussion of interest expense, floor plan includes the effect of interest earned on the floor plan deposit balance, unless otherwise noted.

Interest expense, floor plan for new vehicles ~~decreased~~increased approximately ~~$0.5~~$5.7 million, ~~or 21%~~including the effect of interest income earned on the floor plan deposit balance (which reduced the increase by approximately $3.8 million). ~~The~~Excluding the effect of interest income earned on the floor plan deposit balance, interest expense, floor plan for new vehicles increased approximately $9.5 million. Excluding the effect of interest income earned on the floor plan deposit balance, the average new vehicle floor plan interest rate was ~~0.62%~~3.51% in the three months ended June 30, 2023, up from 0.90% in the three months ended June 30, 2022, ~~down from 0.81% in the three months ended June 30, 2021,~~ resulting in ~~a decrease~~an increase in new vehicle floor plan interest expense of approximately ~~$0.6~~$9.0 million. The average new vehicle floor plan notes payable balance increased approximately ~~$42.7~~$212.3 million, which increased new vehicle floor plan interest expense by approximately ~~$0.1~~$0.5 million.

Interest expense, floor plan for used vehicles increased approximately ~~$2.3 million, or 112%.~~$5.2 million. The average used vehicle floor plan interest rate was 7.13% in the three months ended June 30, 2023, up from 2.91% in the three months ended June 30, 2022, ~~up from 1.67% in the three months ended June 30, 2021,~~ resulting in an increase in used vehicle floor plan interest expense of approximately ~~$1.9~~$5.6 million. The average used vehicle floor plan notes payable balance ~~increased~~decreased approximately ~~$102.9~~$62.3 million, which ~~increased~~decreased used vehicle floor plan interest expense by approximately $0.4 million.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Six Months Ended June 30, ~~2022~~2023 Compared to Six Months Ended June 30, ~~2021~~2022

Interest expense, floor plan for new vehicles ~~decreased~~increased approximately ~~$2.3~~$10.1 million, ~~or 41%~~including the effect of interest income earned on the floor plan deposit balance (which reduced the increase by approximately $7.3 million). ~~The~~Excluding the effect of interest income earned on the floor plan deposit balance, interest expense, floor plan for new vehicles increased approximately $17.4 million. Excluding the effect of interest income earned on the floor plan deposit balance, the average new vehicle floor plan interest rate was ~~0.57%~~3.67%, ~~down~~in the six months ended June 30, 2023, up from ~~1.00%~~0.81% in the six months ended June 30, 2022, resulting in an increase in new vehicle floor plan interest expense of approximately ~~$2.5~~$17.4 million. The average new vehicle floor plan notes payable balance increased approximately ~~$32.8~~$35.6 million, which ~~increased~~had no effect on the new vehicle floor plan interest ~~expense by approximately $0.2 million.~~expense.

Interest expense, floor plan for used vehicles increased approximately ~~$3.9 million, or 105%.~~$10.4 million. The average used vehicle floor plan interest rate was ~~2.52%,~~6.65% in the six months ended June 30, 2023, up from ~~1.71%~~2.52% in the six months ended June 30, 2022, resulting in an increase in used vehicle floor plan interest expense of approximately ~~$2.5~~$11.3 million. The average used vehicle floor plan notes payable balance ~~increased~~decreased approximately ~~$170.9~~$67.4 million, which ~~increase~~decreased used vehicle floor plan interest expense by approximately ~~$1.4~~$0.9 million.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Interest Expense, Other, Net – Consolidated

Interest expense, other, net is summarized in the tables below:
Three Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions)
Stated/coupon interest $ 17.0 $ 7.5 $ (9.5) (127) %
Deferred loan cost amortization 1.1 0.8 (0.3) (38) %
Interest rate hedge expense (benefit) 0.4 0.5 0.1 20 %
Capitalized interest (0.3) (0.6) (0.3) (50) %
Interest on finance lease liabilities 2.9 1.7 (1.2) (71) %
Other interest 0.2 0.2 — — %
Total interest expense, other, net $ 21.3 $ 10.1 $ (11.2) (111) %
Six Months Ended June 30, Better / (Worse)
2022 2021 Change % Change
(In millions)
Stated/coupon interest $ 34.0 $ 15.2 $ (18.8) (124) %
Discount/premium amortization — — — — %
Deferred loan cost amortization 2.3 1.7 (0.6) (35) %
Interest rate hedge expense (benefit) 0.7 0.9 0.2 22 %
Capitalized interest (0.8) (1.0) (0.2) (20) %
Interest on finance lease liabilities 5.6 3.3 (2.3) (70) %
Other interest 0.3 0.3 — — %
Total interest expense, other, net $ 42.1 $ 20.4 $ (21.7) (106) %


	Three Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions)
Stated/coupon interest	$	22.6	$	17.0	$	(5.6)	(33)	%

Deferred loan cost amortization	1.6		1.1		(0.5)		(45)	%
Interest rate hedge expense (benefit)	0.3		0.4		0.1		25	%
Capitalized interest	(0.5)		(0.3)		0.2		67	%
Interest on finance lease liabilities	4.8		2.9		(1.9)		(66)	%
Other interest	0.1		0.2		0.1		50	%
Total interest expense, other, net	$	28.9	$	21.3	$	(7.6)	(36)	%



	Six Months Ended June 30,				Better / (Worse)
	2023		2022		Change		% Change
	(In millions)
Stated/coupon interest	$	45.4	$	34.0	$	(11.4)	(34)	%

Deferred loan cost amortization	3.2		2.3		(0.9)		(39)	%
Interest rate hedge expense (benefit)	0.7		0.7		—		—	%
Capitalized interest	(1.1)		(0.8)		0.3		38	%
Interest on finance lease liabilities	9.0		5.6		(3.4)		(61)	%
Other interest	0.1		0.3		0.2		67	%
Total interest expense, other, net	$	57.3	$	42.1	$	(15.2)	(36)	%

Interest expense, other, net increased approximately ~~$11.2~~$7.6 million, or ~~111%~~36%, during the three months ended June 30, ~~2022,~~2023 and increased approximately ~~$21.7~~$15.2 million, or ~~106%~~36%, during the six months ended June 30, ~~2022.~~2023. These increases were primarily ~~due~~related to ~~the issuance of the 4.625% Notes and the 4.875% Notes in October 2021, increases~~higher interest rates on variable rate mortgage debt and higher interest on finance lease liabilities as a result of a rising interest rate ~~environment.~~environment, combined with increased borrowings under the 2019 Mortgage Facility.

Income Taxes

The overall effective income tax rate ~~from continuing operations~~ was 28.0% and 26.0% for the three and six months ended June 30, 2023, respectively, and 25.5% and 25.0% for the three and six months ended June 30, 2022, ~~respectively, and 24.5% and 25.0% for the three and six months ended June 30, 2021,~~ respectively. Sonic’s effective income tax rate varies from year to year based on the level of taxable income, the distribution of taxable income between states in which the Company operates and other tax adjustments.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

We require cash to fund debt service, lease obligations, working capital requirements, facility improvements and other capital improvements, and dividends on our common stock and to finance acquisitions and otherwise invest in our business. We rely on cash flows from operations, borrowings under our revolving credit and floor plan borrowing arrangements, real estate mortgage financing, asset sales and offerings of debt and equity securities to meet these requirements. We were in compliance with all restrictive covenants under our debt agreements as of June 30, ~~2022~~2023 and expect to be in compliance for at least the next 12 months. We closely monitor our available liquidity and projected future operating results in order to remain in compliance with the restrictive covenants under the 2021 Credit Facilities, the 2019 Mortgage Facility, the indentures governing the 4.625% Notes and the 4.875% Notes, and our other debt obligations and lease arrangements. However, our liquidity could be negatively affected if we fail to comply with the financial covenants in our existing debt obligations or lease arrangements. After giving effect to the applicable restrictions on the payment of dividends under our debt agreements, as of June 30, ~~2022,~~2023, we had approximately ~~$367.6~~$300.6 million of net income and retained earnings free of such restrictions. Cash flows provided by our dealerships are derived from various sources. The primary sources include individual consumers, automobile manufacturers, automobile manufacturers’ captive finance subsidiaries and other financial institutions. Disruptions in these cash flows could have a material adverse impact on our operations and overall liquidity.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Because the majority of our consolidated assets are held by our dealership subsidiaries, the majority of our cash flows from operations are generated by these subsidiaries. As a result, our cash flows and our ability to service our obligations depend to a substantial degree on the results of operations of these subsidiaries, their contractual obligations and capital requirements, and their ability to provide us with cash.

We had the following liquidity resources available as of June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
Cash and cash equivalents	Cash and cash equivalents	$	327.1	$	299.4	Cash and cash equivalents	$	119.7	$	229.2
Floor plan deposit balance						Floor plan deposit balance	287.0		272.0
Availability under the 2021 Revolving Credit Facility	Availability under the 2021 Revolving Credit Facility	269.3		281.4		Availability under the 2021 Revolving Credit Facility	289.0		292.9

Availability under the 2019 Mortgage Facility	Availability under the 2019 Mortgage Facility	27.7		22.2		Availability under the 2019 Mortgage Facility	173.0		—

Floor plan deposit balance		125.5		99.8
Total available liquidity resources	Total available liquidity resources	$	749.6	$	702.8	Total available liquidity resources	$	868.7	$	794.1

We participate in a program with two of our lender partners wherein we maintain a floor plan deposit balance (as shown in the table above) with the lender that earns interest based on the agreed upon rate, effectively reducing the net new vehicle floor plan interest expense with the lender. This deposit balance is not designated as a prepayment of notes payable - floor plan, nor is it our intent to use this amount to offset principal amounts owed under notes payable - floor plan in the future, although we have the right and ability to do so. The deposit balances of approximately ~~$125.5 million and $99.8~~$287.0 million as of June 30, ~~2022~~2023 and $272.0 million as of December 31, ~~2021, respectively,~~2022 are classified as other current assets in the accompanying unaudited condensed consolidated balance sheets as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Floor Plan Facilities

We finance all of our new and certain of our used vehicle inventory through standardized floor plan facilities with (1) certain manufacturer captive finance companies (classified as notes payable - floor plan - trade in the accompanying unaudited condensed consolidated balance sheets) and (2) a syndicate of manufacturer-affiliated finance companies and commercial ~~banks.~~banks (classified as notes payable - floor plan - non-trade in the accompanying unaudited condensed consolidated balance sheets). These floor plan facilities are due on demand and currently bear interest at variable rates based on ~~LIBOR~~either one-month Term SOFR or prime plus an additional spread, as applicable. The weighted-average interest rate for our combined new and used vehicle floor plan facilities was ~~1.39%~~3.56% and ~~1.07%~~1.39% for the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~1.24%~~3.60% and ~~1.20%~~1.24% for the six months ended June 30, 2023 and 2022, respectively. Excluding the effect of interest income earned on the floor plan deposit balance, the weighted-average interest rate for our combined new and ~~2021,~~used vehicle floor plan facilities was 4.53% and 1.58% for the three months ended June 30, 2023 and 2022, respectively, and 4.60% and 1.40% for the six months ended June 30, 2023 and 2022, respectively.

We receive floor plan assistance in the form of direct payments or credits from certain manufacturers. Floor plan assistance received is capitalized in inventory and recorded as a reduction of cost of sales when the associated inventory is sold. We received approximately ~~$12.7~~$15.1 million and ~~$11.5~~$12.7 million in manufacturer assistance in the three months ended June 30, 2023 and 2022, ~~and 2021,~~ respectively, and approximately ~~$25.5~~$28.2 million a~~nd $22.3~~ and $22.5 million in manufacturer assistance in the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. We recognized in cost of sales approximately $15.0 million and $12.5 million ~~and $13.7 million~~ in

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

manufacturer assistance in the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and approximately ~~$25.2~~$28.1 million and ~~$25.0~~$25.2 million in manufacturer assistance in the six months ended June 30, 2023 and 2022, ~~and 2021, respectively~~respectively.. Interest payments under each of our floor plan facilities are due monthly and we are generally not required to make principal repayments prior to the sale of the associated vehicles.

Long-Term Debt and Credit Facilities

See Note 6, “Long-Term Debt,” to the accompanying unaudited condensed consolidated financial statements for a discussion of our long-term debt, mortgage notes and credit facilities and compliance with debt covenants.

Capital Expenditures

Our capital expenditures include the purchase of land and buildings, the construction of new franchised dealerships, EchoPark and powersports stores and collision repair centers, building improvements and equipment purchased for use in our franchised dealerships and EchoPark and powersports stores. We selectively construct new or improve existing franchised dealership facilities to maintain compliance with manufacturers’ image requirements. We typically finance these projects through cash flows from operations, new mortgages or our credit facilities.

Capital expenditures in the six months ended June 30, ~~2022~~2023 were approximately ~~$100.4~~$75.5 million, including approximately ~~$52.0~~$65.4 million related to our Franchised Dealerships Segment, ~~and~~ approximately ~~$48.4~~$8.5 million related to our EchoPark Segment and approximately $1.6 million related to our Powersports Segment. Of the total capital expenditures, approximately ~~$59.0~~$43.2 million was related to facility construction projects, approximately ~~$19.1~~$6.1 million was related to acquisitions of real estate (land and buildings) and approximately ~~$22.3~~$26.2 million was for other fixed assets utilized in our ~~store~~ operations.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

All of the ~~$100.4~~$75.5 million in gross capital expenditures in the six months ended June 30, ~~2022~~2023 was funded through existing cash ~~from operations.~~balances. As of June 30, ~~2022,~~2023, commitments for facility construction projects totaled approximately ~~$22.0~~$20.6 million, nearly all of which is expected to be completed in the next 12 months.

Share Repurchase Program

Our Board of Directors has authorized us to repurchase shares of our Class A Common Stock. Historically, we have used our share repurchase authorization to offset dilution caused by the exercise of stock options or the vesting of equity compensation awards and to maintain our desired capital structure. During the three months ended June 30, ~~2022,~~2023, we did not repurchase any shares of our Class A Common Stock. During the six months ended June 30, 2023, we repurchased approximately ~~1.4~~1.6 million shares of our Class A Common Stock for approximately ~~$59.4~~$90.7 million in open-market transactions at prevailing market prices and in connection with tax withholding on the vesting of equity compensation awards. As of June 30, ~~2022,~~2023, our total remaining share repurchase authorization was approximately $133.1 million. Subsequent to June 30, 2022, our Board of Directors approved an additional $500.0 million of share repurchase authorization, resulting in current remaining availability of approximately $633.1$373.6 million. Under the 2021 Credit Facilities, share repurchases are permitted to the extent that no event of default exists and we do not exceed the restrictions set forth in our debt agreements. After giving effect to the applicable restrictions on share repurchases and certain other transactions under our debt agreements, as of June 30, ~~2022,~~2023, we had approximately ~~$367.6~~$300.6 million of net income and retained earnings free of such restrictions.

Our share repurchase activity is subject to the business judgment of our Board of Directors and management, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements and covenant compliance, the current economic environment and other factors considered by our Board of Directors and management to be relevant. These factors are considered each quarter and will be scrutinized as our Board of Directors and management determine our share repurchase policy in the future.

Dividends

During the three months ended June 30, ~~2022,~~2023, our Board of Directors approved a cash dividend of ~~$0.25~~$0.29 per share on all outstanding shares of Class A and Class B Common Stock as of June 15, ~~2022,~~2023, which was paid on July ~~15, 2022. Subsequent~~14, 2023. [Subsequent to June 30, ~~2022,~~2023, our Board of Directors approved a cash dividend of ~~$0.25~~$0.29 per share on all outstanding shares of Class A and Class B Common Stock as of September 15, ~~2022~~2023 to be paid on October ~~14, 2022. Under~~13, 2023.] The 2021 Credit Facilities permit quarterly cash dividends on our Class A and Class B Common Stock up to $0.12 per share so long as no Event of Default has occurred and is continuing and provided that we remain in compliance with all financial covenants under the 2021 Credit ~~Facilities,~~Facilities. Additional dividends are permitted subject to the ~~extent that no event of default exists and we are~~limitations on restricted payments set forth in ~~compliance with~~ the ~~financial covenants contained therein.~~2021 Credit Facilities. The 2029 Indenture and the 2031 Indenture also contain restrictions on our ability to pay dividends. After giving effect to the applicable restrictions on share repurchases and certain other transactions under our debt agreements, as of June 30, ~~2022,~~2023, we had approximately ~~$367.6~~$300.6 million of net income and retained earnings free of such restrictions. The declaration and payment of any future dividend is subject to the business judgment of our Board of Directors, taking into consideration our ~~historic~~historical and projected results of operations, financial condition, cash flows, capital requirements, covenant compliance and share

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

repurchases, the current economic environment and other factors considered by our Board of Directors to be relevant. These factors are considered each quarter and will be scrutinized as our Board of Directors determines our future dividend ~~policy.~~policy in the future. There is no guarantee that additional dividends will be declared and paid at any time in the future. See Note 6, “Long-Term Debt,” to the accompanying unaudited condensed consolidated financial statements for a description of restrictions on the payment of dividends.

Cash Flows

Cash Flows from Operating Activities – Net cash used in operating activities in the six months ended June 30, 2023 was approximately $18.9 million. This use of cash was comprised primarily of an increase in inventories, offset partially by net income less non-cash items, decrease in receivables, and an increase in trade accounts payable and other liabilities. Net cash provided by operating activities in the six months ended June 30, 2022 was approximately $306.3 million. This provision of cash was comprised primarily of net income less non-cash items, a decrease in inventories, a decrease in receivables, and an increase in trade accounts payable and other liabilities, offset partially by a decrease in notes payable – floor plan – trade.

Cash Flows from Investing Activities – Net cash used in ~~operating~~investing activities in the six months ended June 30, ~~2021~~2023 was approximately ~~$34.6~~$93.2 million. This use of cash was comprised primarily of the purchase of a powersports business (including real property), net ~~income less non-cash items~~of cash acquired, and ~~a decrease in notes payable – floor plan – trade,~~purchases of land, property and equipment, partially offset ~~partially~~ by ~~a decrease in inventories and an increase in trade accounts payable and other liabilities.~~

~~Cash Flows~~the proceeds from ~~Investing Activities~~ –the sale of four franchised dealerships. Net cash used in investing activities in the six months ended June 30, 2022 was approximately $118.8 million. This use of cash was comprised primarily of purchases of land, property and equipment and purchases of businesses, net of cash acquired. Net cash used in investing activities in the six months ended June 30, 2021 was approximately $129.2 million. This use of cash was comprised primarily of purchases of land, property and equipment and purchases of businesses, net of cash acquired.

Cash Flows from Financing Activities – Net cash provided by financing activities in the six months ended June 30, 2023 was approximately $2.6 million. This provision of cash was comprised primarily of net borrowings on notes payable – floor plan – non-trade, offset partially by purchases of treasury stock and payments on long-term debt. Net cash used in financing activities in the six months ended June 30, 2022 was approximately $159.8 million. This use of cash was comprised primarily of net repayments on notes payable – floor plan – non-trade, purchases of treasury stock and payments on long-term debt. ~~Net cash provided by financing activities in the six months ended June 30, 2021 was approximately $233.1 million. This provision of cash was comprised primarily of net~~

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~borrowings on notes payable – floor plan – non-trade, offset partially by purchases of treasury stock and payments on long-term debt.~~

We arrange our inventory floor plan financing through both manufacturer captive finance companies and a syndicate of manufacturer-affiliated finance companies and commercial banks. Our floor plan financed with manufacturer captives is recorded in the accompanying unaudited condensed consolidated balance sheets as ~~trade~~notes payable - floor plan ~~liabilities~~- trade (with the ~~resulting~~ change in balance being reflected asin operating cash flows). Our dealerships that obtain floor plan financing from a syndicate of manufacturer-affiliated finance companies and commercial banks record their obligation in the accompanying unaudited condensed consolidated balance sheets as ~~non-trade~~notes payable - floor plan ~~liabilities~~- non-trade (with the ~~resulting~~ change in balance being reflected asin financing cash flows). Due to the presentation differences for changes in trade floor plan financing and non-trade floor plan financing in the accompanying unaudited condensed consolidated statements of cash flows, decisions made by us to move dealership floor plan financing arrangements from one finance source to another may cause significant variations in operating and financing cash flows without affecting our overall liquidity, working capital or cash flows. Net cash provided by combined trade and non-trade floor plan financing was approximately $182.4 million in the six months ended June 30, 2023. Net cash used in combined trade and non-trade floor plan financing was approximately $37.2 million in the six months ended June 30, 2022. ~~Net cash used in combined trade and non-trade floor plan financing was approximately $238.1 million in the six months ended June 30, 2021.~~ Accordingly, if all changes in floor plan notes payable were classified as an operating activity (to align changes in floor plan liability balances with the associated changes in inventory balances for cash flow classification), the result would have been net cash provided by operating activities of approximately $154.0 million in the six months ended June 30, 2023 and net cash provided by operating activities of approximately $281.4 million in the six months ended June 30, ~~2022 and net cash provided by operating activities of approximately $279.7 million in the six months ended June 30, 2021.~~2022.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

One metric that management uses to measure operating performance is Adjusted EBITDA, a non-GAAP financial measure, for each of the Company’s reportable segments and on a consolidated basis. This non-GAAP financial measure is ~~provided and~~ reconciled to net income (the ~~nearest~~most directly comparable GAAP financial measure) in the ~~tables~~table below:


		Three Months Ended June 30, 2022								Three Months Ended June 30, 2021									Three Months Ended June 30, 2023								Three Months Ended June 30, 2022
		Franchised Dealerships Segment		EchoPark Segment		Discontinued Operations		Total		Franchised Dealerships Segment		EchoPark Segment		Discontinued Operations		Total			Franchised Dealerships Segment		EchoPark Segment		Powersports Segment		Total		Franchised Dealerships Segment		EchoPark Segment		Powersports Segment		Total
		(In millions)																	(In millions)
Net income	Net income							$	94.8							$	113.8	Net income							$	23.4							$	94.8
Provision for income taxes	Provision for income taxes							32.4								37.0		Provision for income taxes							9.1								32.4
Income (loss) before taxes	Income (loss) before taxes	$	162.1	$	(34.9)	$	—	$	127.2	$	165.4	$	(14.4)	$	(0.2)	$	150.8	Income (loss) before taxes	$	145.9	$	(115.4)	$	2.0	$	32.5	$	162.1	$	(34.2)	$	(0.7)	$	127.2
Non-floor plan interest (1)	Non-floor plan interest (1)	19.1		1.0		—		20.1		8.9		0.3		—		9.2		Non-floor plan interest (1)	25.8		0.8		0.6		27.2		19.1		1.0		—		20.1
Depreciation & amortization (2)	Depreciation & amortization (2)	26.4		6.0		—		32.4		21.4		4.2		—		25.6		Depreciation & amortization (2)	29.5		7.4		0.8		37.7		26.4		5.9		0.1		32.4
Stock-based compensation expense	Stock-based compensation expense	4.2		—		—		4.2		4.0		—		—		4.0		Stock-based compensation expense	5.6		—		—		5.6		4.2		—		—		4.2
Loss (gain) on exit of leased dealerships																		Loss (gain) on exit of leased dealerships	—		0.4		—		0.4		—		—		—		—
Impairment charges																		Impairment charges	—		62.6		—		62.6		—		—		—		—

Long-term compensation charges		4.4		—		—		4.4		—		0.5		—		0.5
Loss (gain) on franchise and real estate disposals		0.1		—		—		0.1		(0.4)		—		—		(0.4)
Severance and long-term compensation charges																		Severance and long-term compensation charges	—		2.2		—		2.2		4.4		—		—		4.4
Acquisition and disposition related (gain) loss																		Acquisition and disposition related (gain) loss	(20.9)		0.2		—		(20.7)		0.1		—		—		0.1
Hail and storm damage charges																		Hail and storm damage charges	1.9		—		—		1.9		—		—		—		—
Used vehicle inventory valuation adjustment																		Used vehicle inventory valuation adjustment	—		10.0		—		10.0		—		—		—		—
Adjusted EBITDA (3)	Adjusted EBITDA (3)	$	216.3	$	(27.9)	$	—	$	188.4	$	199.3	$	(9.4)	$	(0.2)	$	189.7	Adjusted EBITDA (3)	$	187.8	$	(31.8)	$	3.4	$	159.4	$	216.3	$	(27.3)	$	(0.6)	$	188.4

(1)Includes the following line items from the accompanying unaudited condensed consolidated statements of operations, net of any amortization of debt issuance costs or net debt discount/premium included in footnote (2) below: interest expense, other, net.

(2)Includes the following line items from the accompanying unaudited condensed consolidated statements of cash flows: depreciation and amortization of property and equipment; debt issuance cost amortization; and debt discount amortization, net of premium and other amortization.

(3)Adjusted EBITDA is a non-GAAP financial measure.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~


		Six Months Ended June 30, 2022								Six Months Ended June 30, 2021									Six Months Ended June 30, 2023								Six Months Ended June 30, 2022
		Franchised Dealerships Segment		EchoPark Segment		Discontinued Operations		Total		Franchised Dealerships Segment		EchoPark Segment		Discontinued Operations		Total			Franchised Dealerships Segment		EchoPark Segment		Discontinued Operations		Total		Franchised Dealerships Segment		EchoPark Segment		Discontinued Operations		Total
		(In millions)																	(In millions)
Net income	Net income							$	192.1							$	168.1	Net income							$	71.1							$	192.1
Provision for income taxes	Provision for income taxes							64.0								56.0		Provision for income taxes							25.0								64.0
Income (loss) before taxes	Income (loss) before taxes	$	326.0	$	(69.9)	$	—	$	256.1	$	236.0	$	(12.4)	$	0.5	$	224.1	Income (loss) before taxes	$	255.8	$	(162.3)	$	2.6	$	96.1	$	326.0	$	(69.6)	$	(0.3)	$	256.1
Non-floor plan interest (1)	Non-floor plan interest (1)	38.1		1.7		—��		39.8		18.0		0.7		—		18.7		Non-floor plan interest (1)	51.2		1.7		1.2		54.1		38.1		1.7		—		39.8
Depreciation & amortization (2)	Depreciation & amortization (2)	52.3		11.2		—		63.5		42.7		7.5		—		50.2		Depreciation & amortization (2)	57.7		14.4		1.5		73.6		52.3		11.0		0.2		63.5
Stock-based compensation expense	Stock-based compensation expense	8.6		—		—		8.6		7.5		—		—		7.5		Stock-based compensation expense	10.6		—		—		10.6		8.6		—		—		8.6

Long-term compensation charges		4.4		—		—		4.4		—		1.0		—		1.0
Loss (gain) on franchise and real estate disposals		(1.0)		—		—		(1.0)		(0.5)		—		—		(0.5)
Loss (gain) on exit of leased dealerships																		Loss (gain) on exit of leased dealerships	—		0.4		—		0.4		—		—		—		—
Impairment charges																		Impairment charges	—		62.6		—		62.6		—		—		—		—
Severance and long-term compensation charges																		Severance and long-term compensation charges	—		4.2		—		4.2		4.4		—		—		4.4
Acquisition and disposition related (gain) loss																		Acquisition and disposition related (gain) loss	(20.9)		0.2		—		(20.7)		(1.0)		—		—		(1.0)
Hail and storm damage charges																		Hail and storm damage charges	1.9		—		—		1.9		—		—		—		—
Used vehicle inventory valuation adjustment																		Used vehicle inventory valuation adjustment	—		10.0		—		10.0		—		—		—		—
Adjusted EBITDA (3)	Adjusted EBITDA (3)	$	428.4	$	(57.0)	$	—	$	371.4	$	303.7	$	(3.2)	$	0.5	$	301.0	Adjusted EBITDA (3)	$	356.3	$	(68.8)	$	5.3	$	292.8	$	428.4	$	(56.9)	$	(0.1)	$	371.4

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(3)Adjusted EBITDA is a non-GAAP financial measure.

Seasonality

Our operations are subject to seasonal variations. Due in part to our brand mix and the seasonal nature of automotive retail, the first quarter historically has contributed less operating profit than the second and third quarters, while the fourth quarter historically has contributed the highest operating profit of any quarter. Due to the abnormal effects of the COVID-19 pandemic on the automotive supply chain and inventory levels, in addition to the effects of a potential economic recession, this historical seasonality did not play out in 2022 and may not hold true for the year ending December 31, 2023. Weather conditions and the timing of manufacturer incentive programs and model changeovers cause seasonality and may adversely affect vehicle demand and, consequently, our profitability. Comparatively, parts and service demand has historically remained stable throughout the year.

Future Liquidity Outlook

We believe our best sources of liquidity for operations and debt service remain cash flows generated from operations combined with the availability of borrowings under our floor plan facilities (or any replacements thereof), the 2021 Credit Facilities (or any replacements thereof), the 2019 Mortgage Facility (or any replacements thereof) and real estate mortgage financing, selected dealership and other asset sales and our ability to raise funds in the capital markets through offerings of debt or equity securities. Because the majority of our consolidated assets are held by our dealership subsidiaries, the majority of our cash flows from operations are generated by these subsidiaries. As a result, our cash flows and our ability to service our obligations depend to a substantial degree on the results of operations of these subsidiaries, their contractual obligations and capital requirements, and their ability to provide us with cash.

We do not currently anticipate any materially negative changes to our cost of, or access to, capital over the next 12 ~~months or after.~~

~~Seasonality~~

Our operations are subject to seasonal variations. The first quarter historically has contributed less operating profit than the second and third quarters, while the fourth quarter historically has contributed the highest operating profit of any quarter. Due to the abnormal effects of the COVID-19 pandemic on the automotive supply chain and inventory levels, this historical seasonality may not hold true for the year ending December 31, 2022. Weather conditions and the timing of manufacturer incentive programs and model changeovers cause seasonality and may adversely affect vehicle demand and, consequently, our profitability. Comparatively, parts and service demand has historically remained stable throughout the year.months.

Off-Balance Sheet Arrangements

Guarantees and Indemnification Obligations

In connection with the operation and disposition of our dealerships, we have entered into various guarantees and indemnification obligations. When we sell dealerships, we attempt to assign any related lease to the buyer of the dealership to eliminate any future liability. However, if we are unable to assign the related leases to the buyer, we will attempt to sublease the leased properties to the buyer at a rate equal to the terms of the original leases. In the event we are unable to sublease the properties to the buyer with terms at least equal to our leases, we may be required to record lease exit accruals. As of June 30, ~~2022,~~2023, our future gross minimum lease payments related to properties subleased to buyers of sold dealerships totaled approximately ~~$12.0~~$8.8 million. Future sublease payments expected to be received related to these lease payments were approximately ~~$12.1~~$8.7 million at June 30, ~~2022.~~

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

2023.

In accordance with the terms of agreements entered into for the sale of our dealerships, we generally agree to indemnify the buyer from certain liabilities and costs arising subsequent to the date of sale, including environmental exposure and exposure resulting from the breach of representations or warranties made in accordance with the agreements. While our exposure with respect to environmental remediation is difficult to quantify, our maximum exposure associated with these general indemnifications was approximately $8.0 million as of June 30, 2023 and there was not any material exposure with respect to these indemnifications as of December 31, 2022. These indemnifications typically expire within a period of one to three years following the date of sale. ~~We did~~The estimated fair value of these indemnifications was not ~~have any~~ material ~~exposure with respect to environmental remediation~~and the amount recorded for this contingency was not significant at June 30, ~~2022.~~2023.

We also guarantee the floor plan commitments of our 50%-owned joint venture, and the amount of such guarantee ~~was approximately $4.3 million~~ at both June 30, ~~2022~~2023 and December 31, ~~2021.~~2022 was approximately $4.3 million. We expect the aggregate amount of the obligations we guarantee to fluctuate based on dealership disposition activity. Although we seek to mitigate our exposure in connection with these matters, these guarantees and indemnification obligations, including environmental exposures and the financial performance of lease assignees and sublessees, cannot be predicted with certainty. An unfavorable resolution of one or more of these matters could have a material adverse effect on our liquidity and capital resources.

See Note 7, “Commitments and Contingencies,” to the accompanying unaudited condensed consolidated financial statements and Note 12, “Commitments and Contingencies,” to the consolidated financial statements in our Annual Report on

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Form 10-K for the year ended December 31, ~~2021~~2022 for further discussion regarding these guarantees and indemnification ~~obligations and legal proceedings.~~obligations.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

Our variable rate floor plan facilities, the 2021 Revolving Credit Facility, the 2019 Mortgage Facility and our other variable rate notes expose us to risks caused by fluctuations in the applicable interest rates. The total outstanding balance of ~~such~~our variable ~~instruments, after considering the effect of outstanding cash flow hedge~~rate instruments was approximately ~~$1.2~~$1.8 billion at June 30, ~~2022.~~2023. A ~~change~~decrease of 100 basis points in the underlying interest ~~rate~~rates would ~~have caused a change in~~reduce interest expense ofby approximately ~~$10.5~~$6.5 million while a 100 basis point rise in rates would increase interest expense by approximately $8.4 million in the six months ended June 30, ~~2022.~~2023. The difference between these amounts results from the mitigating effect of our interest rate hedges. Of the total change in interest expense, approximately ~~$9.4~~$4.5 million would have resulted from our floor plan facilities.

In addition to our variable rate debt, certain of our dealership lease facilities have monthly lease payments that fluctuate based on LIBOR or one-month Term SOFR interest rates. An increase in interest rates of 100 basis points would not have had a significant impact on rent expense in the six months ended June 30, ~~2022 due to the leases containing LIBOR floors which were above the LIBOR rate during the six months ended June 30, 2022.~~2023.

Foreign Currency Risk

We purchase certain of our new vehicle and parts inventories from foreign manufacturers. Although we purchase our inventories in U.S. Dollars, our business is subject to foreign exchange rate risk that may influence automobile manufacturers’ ability to provide their products at competitive prices in the U.S. To the extent that we cannot recapture this exchange rate volatility in prices charged to customers or if this volatility negatively impacts consumer demand for our products, this volatility could adversely affect our future operating results.

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Item 4. Controls and Procedures.

~~Evaluation of~~ Disclosure Controls and Procedures

– Under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), we evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, ~~2022.~~2023. Based upon that evaluation, ~~and due to the material weakness described below,~~ our CEO and our CFO concluded that our disclosure controls and procedures were ~~not~~ effective as of June 30, ~~2022.~~2023.

During the quarter ended September 30, 2022, we identified a material weakness in certain internal controls over financial reporting related to the revenue recognition process at a single dealership acquired in December 2021. We have determined that the material weakness also existed as of June 30, 2022. The acquired entity did not have an adequate risk assessment process to ensure appropriate internal controls were in place for all of their revenue streams. Specifically, the internal controls at this single dealership were not designed to assess principal-agent considerations in accordance with ASC 606 ~~Revenue from Contracts with Customers.~~ The deficiency was identified in conjunction with our integration of this dealership’s processes and controls into our internal control framework during the year following acquisition. The material weakness resulted in an overstatement of both new vehicle fleet revenues and fleet cost of sales for the same amount for the three and six months ended June 30, 2022.

Management performed procedures to ensure that the misstatement has been corrected and the financial statement balances included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

~~Remediation Plan~~

Sonic and its Board of Directors are committed to maintaining a strong internal control environment. Management, with the oversight of the Audit Committee, has evaluated the material weakness described above and designed a remediation plan to address the material weakness and enhance Sonic’s internal control environment. The remediation plan is being implemented and includes incorporation of the acquired entity into our pre-existing risk assessment process and implementing incremental controls, or improving the design of existing controls, to respond to the result of our risk assessment process. We expect the material weakness will be remediated by December 31, 2022.

Changes in Internal Control ~~over~~Over Financial Reporting

~~Except as noted above, there was~~ – There were no ~~change~~changes in our internal control over financial reporting ~~identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred~~ during the ~~period covered by this Quarterly Report on Form 10-Q~~quarter ended June 30, 2023, that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance that the objectives of the control system are met and may not prevent or detect misstatements. In addition, any evaluation of the effectiveness of internal control over financial reporting in future periods is subject to risk that those internal controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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SONIC AUTOMOTIVE, INC.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

For information regarding legal proceedings, see the discussion under the heading “Legal Matters” in Note 7, “Commitments and Contingencies,” to the accompanying unaudited condensed consolidated financial statements.

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SONIC AUTOMOTIVE, INC.

Item 1A. Risk Factors.

There have been no material changes in our risk factors from those included in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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SONIC AUTOMOTIVE, INC.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~The following table sets forth information about~~See Note 6, “Long-Term Debt,” to the ~~shares of Class A Common Stock we repurchased during the three months ended June 30, 2022.~~

Issuer Purchases of Equity Securities
Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
(In millions, except per share data)
April 2022 1.2 $ 42.41 1.2 $ 141.2
May 2022 0.2 $ 42.88 0.2 $ 133.1
June 2022 — $ — — $ 133.1
Total 1.4 1.4

~~(1)On July 31, 2020 and April 29, 2021, we announced that our Board of Directors had increased the dollar amount authorized~~accompanying unaudited condensed consolidated financial statements for us to repurchase shares of our Class A Common Stock pursuant to our share repurchase program. Our share repurchase program does not have an expiration date and current remaining availability under the program is as follows:


	~~(In millions)~~
~~July 2020 authorization~~	$	~~60.0~~
~~April 2021 authorization~~	~~250.0~~
~~Total active program repurchases prior to June 30, 2022~~	~~(176.9)~~
~~Current remaining availability as of June 30, 2022~~	$	~~133.1~~

Subsequent to June 30, 2022, Sonic’s Board of Directors increased the Company’s share repurchase authorization by $500.0 million, resulting in current remaining availability of approximately $633.1 million. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussiona description of restrictions on ~~share repurchases and~~the payment of dividends.

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Item 6. Exhibits.


Exhibit No.						Description


3.1						Amended and Restated Certificate of Incorporation of Sonic Automotive, Inc., dated August 7, 1997 (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K for the year ended December 31, 2020 (File No. 001-13395)).
3.2						Certificate of Designation, Preferences and Rights of Class A Convertible Preferred Stock, dated March 20, 1998 (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (File No. 001-13395)).
3.3						Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sonic Automotive, Inc., dated June 16, 1999 (incorporated by reference to Exhibit 3.3 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (File No. 001-13395)).
3.4						Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sonic Automotive, Inc., dated April 18, 2017 (incorporated by reference to Exhibit 3.4 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (File No. 001-13395)).
3.5						Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sonic Automotive, Inc., dated May 3, 2021 (incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-8 filed June 8, 2021 (File No. 333-256891)).
~~3.6~~3.6*						Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sonic Automotive, Inc., dated May 16, 2023.
3.7						Amended and Restated Bylaws of Sonic Automotive, Inc., dated February 10, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed February 12, 2021 (File No. 001-13395)).













31.1*						Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**						Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						Inline XBRL Instance Document.
101.SCH*						Inline XBRL Taxonomy Extension Schema Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

_______________________________

*Filed herewith.

**Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	SONIC AUTOMOTIVE, INC.

~~October 28, 2022~~July 27, 2023	By:	/s/ DAVID BRUTON SMITH
		David Bruton Smith
		Chairman and Chief Executive Officer

~~October 28, 2022~~July 27, 2023	By:	/s/ HEATH R. BYRD
		Heath R. Byrd
		Executive Vice President and Chief Financial Officer

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		Page
PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Statements of Operations ~~(As restated)~~	1
	Condensed Consolidated Statements of Comprehensive Operations	2
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations ~~(As restated)~~	1718
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6068
Item 4.	Controls and Procedures	6169
PART II – OTHER INFORMATION		6270
Item 1.	Legal Proceedings	6270
Item 1A.	Risk Factors	6371
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6472
Item 6.	Exhibits	6573
SIGNATURES		6674


	Three Months Ended June 30, 2022						Six Months Ended June 30, 2022
	As Reported		Adjustments		As Restated		As Reported		Adjustments		As Restated
	(In millions)
Revenues:
Fleet new vehicles	$	166.4	$	(146.6)	$	19.8	$	315.0	$	(277.0)	$	38.0
Total new vehicles	$	1,510.7	$	(146.6)	$	1,364.1	$	3,010.6	$	(277.0)	$	2,733.6
Total vehicles	$	3,081.5	$	(146.6)	$	2,934.9	$	6,121.0	$	(277.0)	$	5,844.0
Total revenues	$	3,652.8	$	(146.6)	$	3,506.2	$	7,239.4	$	(277.0)	$	6,962.4

Cost of sales:
Fleet new vehicles	$	(165.5)	$	146.6	$	(18.9)	$	(313.2)	$	277.0	$	(36.2)
Total new vehicles	$	(1,341.5)	$	146.6	$	(1,194.9)	$	(2,672.8)	$	277.0	$	(2,395.8)
Total vehicles	$	(2,864.0)	$	146.6	$	(2,717.4)	$	(5,685.4)	$	277.0	$	(5,408.4)
Total cost of sales	$	(3,064.0)	$	146.6	$	(2,917.4)	$	(6,079.3)	$	277.0	$	(5,802.3)


Issuer Purchases of Equity Securities
	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
	(In millions, except per share data)
April 2022	1.2	$	42.41	1.2	$	141.2
May 2022	0.2	$	42.88	0.2	$	133.1
June 2022	—	$	—	—	$	133.1
Total	1.4			1.4