Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Jul. 23, 2019 | |
Document Information [Line Items] | ||
Entity Registrant Name | SONIC AUTOMOTIVE INC | |
Entity Central Index Key | 0001043509 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Current Fiscal Year End Date | --12-31 | |
Document Period End Date | Jun. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | SAH | |
Amendment Flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
City Area Code | (704) | |
Entity Address, Address Line One | 4401 Colwick Road | |
Entity Address, Postal Zip Code | 28211 | |
Entity Tax Identification Number | 56-2010790 | |
Local Phone Number | 566-2400 | |
Entity File Number | 1-13395 | |
Entity Shell Company | false | |
Entity Current Reporting Status | Yes | |
Entity Address, City or Town | Charlotte, | |
Entity Address, State or Province | NC | |
Document Quarterly Report | true | |
Class A Common Stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 31,099,439 | |
Class B common stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 12,029,375 |
Details
Details | 6 Months Ended |
Jun. 30, 2019 | |
Cover page. | |
Entity Current Reporting Status | Yes |
Document Information [Line Items] | |
Entity Interactive Data Current | Yes |
Entity Filer Category | Large Accelerated Filer |
Security Exchange Name | NYSE |
Entity Incorporation, State or Country Code | DE |
Document Transition Report | false |
Title of 12(b) Security | Class A Common Stock, par value $0.01 per share |
Entity Small Business | false |
Entity Emerging Growth Company | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) shares in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Revenues: | ||||
Revenues | $ 2,614,081,000 | $ 2,505,749,000 | $ 5,003,219,000 | $ 4,906,523,000 |
Cost of Sales: | ||||
Cost of Sales | (2,232,770,000) | (2,143,374,000) | (4,262,897,000) | (4,191,649,000) |
Gross profit | 381,311,000 | 362,375,000 | 740,322,000 | 714,874,000 |
Selling, general and administrative expenses | (294,532,000) | (277,462,000) | (541,626,000) | (582,387,000) |
Impairment charges | 0 | (10,317,000) | (1,952,000) | (13,960,000) |
Depreciation and amortization | (23,806,000) | (23,949,000) | (46,456,000) | (47,692,000) |
Operating income (loss) | 62,973,000 | 50,647,000 | 150,288,000 | 70,835,000 |
Other income (expense): | ||||
Interest expense, floor plan | (12,518,000) | (11,945,000) | (25,744,000) | (22,622,000) |
Interest expense, other, net | (13,628,000) | (13,375,000) | (26,481,000) | (26,831,000) |
Other income (expense), net | (5,000) | 17,000 | 95,000 | 106,000 |
Total other income (expense) | (26,151,000) | (25,303,000) | (52,130,000) | (49,347,000) |
Income (loss) from continuing operations before taxes | 36,822,000 | 25,344,000 | 98,158,000 | 21,488,000 |
Provision for income taxes for continuing operations - benefit (expense) | (10,071,000) | (8,222,000) | (29,058,000) | (6,380,000) |
Income (loss) from continuing operations | 26,751,000 | 17,122,000 | 69,100,000 | 15,108,000 |
Discontinued operations: | ||||
Income (loss) from discontinued operations before taxes | (213,000) | (297,000) | (393,000) | (545,000) |
Provision for income taxes for discontinued operations - benefit (expense) | 61,000 | 80,000 | 114,000 | 148,000 |
Income (loss) from discontinued operations | (152,000) | (217,000) | (279,000) | (397,000) |
Net income (loss) | $ 26,599,000 | $ 16,905,000 | $ 68,821,000 | $ 14,711,000 |
Basic earnings (loss) per common share: | ||||
Earnings (loss) per share from continuing operations (usd per share) | $ 0.62 | $ 0.40 | $ 1.61 | $ 0.35 |
Earnings (loss) per share from discontinued operations (usd per share) | 0 | 0 | (0.01) | (0.01) |
Earnings (loss) per common share (usd per share) | $ 0.62 | $ 0.40 | $ 1.60 | $ 0.34 |
Weighted average common shares outstanding | 43,066 | 42,662 | 42,953 | 42,725 |
Diluted earnings (loss) per common share: | ||||
Earnings (loss) per share from continuing operations (usd per share) | $ 0.62 | $ 0.40 | $ 1.60 | $ 0.35 |
Earnings (loss) per share from discontinued operations (usd per share) | (0.01) | (0.01) | 0 | (0.01) |
Earnings (loss) per common share (usd per share) | $ 0.61 | $ 0.39 | $ 1.60 | $ 0.34 |
Weighted average common shares outstanding | 43,230 | 42,920 | 43,060 | 42,948 |
Total vehicles | ||||
Revenues: | ||||
Revenues | $ 2,140,420,000 | $ 2,054,891,000 | $ 4,081,890,000 | $ 4,010,182,000 |
Cost of Sales: | ||||
Cost of Sales | (2,048,004,000) | (1,963,671,000) | (3,899,937,000) | (3,829,816,000) |
New vehicles | ||||
Revenues: | ||||
Revenues | 1,204,754,000 | 1,238,571,000 | 2,271,088,000 | 2,419,416,000 |
Cost of Sales: | ||||
Cost of Sales | (1,148,354,000) | (1,181,303,000) | (2,160,892,000) | (2,305,349,000) |
Used vehicles | ||||
Revenues: | ||||
Revenues | 885,627,000 | 762,572,000 | 1,705,992,000 | 1,471,618,000 |
Cost of Sales: | ||||
Cost of Sales | (848,898,000) | (725,263,000) | (1,632,256,000) | (1,397,538,000) |
Wholesale vehicles | ||||
Revenues: | ||||
Revenues | 50,039,000 | 53,748,000 | 104,810,000 | 119,148,000 |
Cost of Sales: | ||||
Cost of Sales | (50,752,000) | (57,105,000) | (106,789,000) | (126,929,000) |
Parts, service and collision repair | ||||
Revenues: | ||||
Revenues | 355,312,000 | 346,754,000 | 696,742,000 | 698,512,000 |
Cost of Sales: | ||||
Cost of Sales | (184,766,000) | (179,703,000) | (362,960,000) | (361,833,000) |
Finance, insurance and other, net | ||||
Revenues: | ||||
Revenues | $ 118,349,000 | $ 104,104,000 | $ 224,587,000 | $ 197,829,000 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 26,599 | $ 16,905 | $ 68,821 | $ 14,711 |
Other comprehensive income (loss) before taxes: | ||||
Change in fair value of interest rate swap and interest rate cap agreements | (1,400) | 1,197 | (3,748) | 5,203 |
Amortization of terminated interest rate swap agreements | (632) | 0 | (921) | 0 |
Total other comprehensive income (loss) before taxes | (2,032) | 1,197 | (4,669) | 5,203 |
Provision for income tax benefit (expense) related to components of other comprehensive income (loss) | 620 | (326) | 1,396 | (1,418) |
Other comprehensive income (loss) | (1,412) | 871 | (3,273) | 3,785 |
Comprehensive income (loss) | $ 25,187 | $ 17,776 | $ 65,548 | $ 18,496 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Current Assets: | ||
Cash and cash equivalents | $ 2,140 | $ 5,854 |
Receivables, net | 364,026 | 438,186 |
Inventories | 1,521,567 | 1,528,461 |
Other current assets | 133,445 | 20,886 |
Total current assets | 2,021,178 | 1,993,387 |
Property and Equipment, net | 1,130,942 | 1,178,489 |
Goodwill | 487,306 | 509,592 |
Other Intangible Assets, net | 64,300 | 69,705 |
Other Assets | 43,148 | 45,634 |
Right-of-Use Assets | 0 | |
Total Assets | 4,119,327 | 3,796,807 |
Current Liabilities: | ||
Notes payable - floor plan - trade | 753,239 | 821,074 |
Notes payable - floor plan - non-trade | 714,609 | 712,966 |
Trade accounts payable | 128,579 | 114,263 |
Current lease liabilities | 0 | |
Accrued interest | 12,518 | 13,417 |
Other accrued liabilities | 243,869 | 257,823 |
Current maturities of long-term debt | 62,968 | 26,304 |
Total current liabilities | 1,965,409 | 1,945,847 |
Long-Term Debt | 851,283 | 918,779 |
Other Long-Term Liabilities | 68,265 | 75,887 |
Long-Term Lease Liabilities | 0 | |
Deferred Income Taxes | 23,416 | 33,178 |
Commitments and Contingencies | ||
Stockholders' Equity: | ||
Class A convertible preferred stock, none issued | 0 | 0 |
Paid-in capital | 750,532 | 745,052 |
Retained earnings | 723,469 | 670,691 |
Accumulated other comprehensive income (loss) | 960 | 4,233 |
Treasury stock, at cost; 33,476,159 Class A common stock shares held at September 30, 2018 and 32,290,493 Class A common stock shares held at December 31, 2017 | (600,004) | (597,623) |
Total Stockholders' Equity | 875,725 | 823,116 |
Total Liabilities and Stockholders' Equity | 4,119,327 | 3,796,807 |
Other Assets | 43,148 | 45,634 |
Right-of-Use Assets | 0 | |
Class A Common Stock | ||
Stockholders' Equity: | ||
Common stock, value | 647 | 642 |
Class B common stock | ||
Stockholders' Equity: | ||
Common stock, value | $ 121 | $ 121 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Jun. 30, 2019 | Dec. 31, 2018 |
Convertible preferred stock issued | 0 | 0 |
Class A Common Stock | ||
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 64,728,106 | 64,197,385 |
Common stock, shares outstanding | 31,099,439 | 30,721,226 |
Treasury stock, shares | 33,628,667 | 33,476,159 |
Class B common stock | ||
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 12,029,375 | 12,029,375 |
Common stock, shares outstanding | 12,029,375 | 12,029,375 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) shares in Thousands, $ in Thousands | Total | Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Class A Common Stock | Class A Common StockCommon Stock | Class A Common StockTreasury Stock | Class A Common StockRetained Earnings | Class B Common Stock | Class B Common StockCommon Stock | Class B Common StockRetained Earnings | |
Beginning balance at Dec. 31, 2017 | $ 786,760 | $ 732,854 | $ 625,356 | $ 1,307 | $ 635 | $ (573,513) | $ 121 | |||||
Beginning balance (shares) at Dec. 31, 2017 | 63,457 | 32,290 | 12,029 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Shares awarded under stock compensation plan | 353 | 347 | $ 6 | |||||||||
Shares awarded under stock compensation plan (shares) | 669 | |||||||||||
Purchase of treasury stock | (23,468) | $ (23,468) | ||||||||||
Purchases of treasury stock (shares) | (1,154) | |||||||||||
Change in fair value of interest rate swap and interest rate cap agreements, net of tax expense of $1,563 | 3,785 | 3,785 | ||||||||||
Restricted stock amortization | 6,011 | 6,011 | ||||||||||
Net income (loss) | 14,711 | 14,711 | ||||||||||
Dividends, Common Stock | $ 3,646 | $ 3,646 | $ 1,444 | $ 1,444 | ||||||||
Ending balance at Jun. 30, 2018 | 786,980 | 739,212 | 638,895 | 5,092 | $ 641 | $ (596,981) | $ 121 | |||||
Ending balance (shares) at Jun. 30, 2018 | 64,126 | 33,444 | 12,029 | |||||||||
Beginning balance at Mar. 31, 2018 | 768,717 | 736,161 | 624,535 | 4,221 | $ 641 | $ (596,962) | $ 121 | |||||
Beginning balance (shares) at Mar. 31, 2018 | 64,085 | 33,443 | 12,029 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Shares awarded under stock compensation plan | 2 | 2 | $ 0 | |||||||||
Shares awarded under stock compensation plan (shares) | 41 | |||||||||||
Purchase of treasury stock | (19) | $ (19) | ||||||||||
Purchases of treasury stock (shares) | (1) | |||||||||||
Change in fair value of interest rate swap and interest rate cap agreements, net of tax expense of $1,563 | 871 | 871 | ||||||||||
Restricted stock amortization | 3,049 | 3,049 | ||||||||||
Net income (loss) | 16,905 | 16,905 | ||||||||||
Dividends, Common Stock | 1,537 | 1,537 | 1,008 | 1,008 | ||||||||
Ending balance at Jun. 30, 2018 | 786,980 | 739,212 | 638,895 | 5,092 | $ 641 | $ (596,981) | $ 121 | |||||
Ending balance (shares) at Jun. 30, 2018 | 64,126 | 33,444 | 12,029 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Cumulative effect of change in accounting principle | [1] | 3,918 | 3,918 | |||||||||
Beginning balance at Dec. 31, 2018 | 823,116 | 745,052 | 670,691 | 4,233 | $ 642 | $ (597,623) | $ 121 | |||||
Beginning balance (shares) at Dec. 31, 2018 | 64,197 | 33,476 | 12,029 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Shares awarded under stock compensation plan | 59 | 54 | $ 5 | |||||||||
Shares awarded under stock compensation plan (shares) | 531 | |||||||||||
Purchase of treasury stock | (2,381) | $ (2,381) | ||||||||||
Purchases of treasury stock (shares) | (153) | |||||||||||
Change in fair value of interest rate swap and interest rate cap agreements, net of tax expense of $1,563 | (3,273) | (3,273) | ||||||||||
Restricted stock amortization | 5,426 | 5,426 | ||||||||||
Net income (loss) | 68,821 | 68,821 | ||||||||||
Dividends, Common Stock | 6,209 | 6,209 | 2,406 | 2,406 | ||||||||
Ending balance at Jun. 30, 2019 | 875,725 | 750,532 | 723,469 | 960 | $ 647 | $ (600,004) | $ 121 | |||||
Ending balance (shares) at Jun. 30, 2019 | 64,728 | 33,629 | 12,029 | |||||||||
Beginning balance at Mar. 31, 2019 | 852,286 | 747,920 | 701,182 | 2,372 | $ 647 | $ (599,956) | $ 121 | |||||
Beginning balance (shares) at Mar. 31, 2019 | 64,677 | 33,625 | 12,029 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Shares awarded under stock compensation plan | 0 | 0 | $ 0 | |||||||||
Shares awarded under stock compensation plan (shares) | 51 | |||||||||||
Purchase of treasury stock | (48) | $ (48) | ||||||||||
Purchases of treasury stock (shares) | (4) | |||||||||||
Change in fair value of interest rate swap and interest rate cap agreements, net of tax expense of $1,563 | (1,412) | (1,412) | ||||||||||
Restricted stock amortization | 2,612 | 2,612 | ||||||||||
Net income (loss) | 26,599 | 26,599 | ||||||||||
Dividends, Common Stock | $ 3,109 | $ 3,109 | $ 1,203 | $ 1,203 | ||||||||
Ending balance at Jun. 30, 2019 | 875,725 | $ 750,532 | 723,469 | $ 960 | $ 647 | $ (600,004) | $ 121 | |||||
Ending balance (shares) at Jun. 30, 2019 | 64,728 | 33,629 | 12,029 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Cumulative effect of change in accounting principle | [1] | $ (7,428) | $ (7,428) | |||||||||
[1] | See Note 1, “Summary of Significant Accounting Policies,” for further discussion. |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income (loss) | $ 68,821 | $ 14,711 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization of property and equipment | 44,881 | 47,689 |
Provision for bad debt expense | 205 | 283 |
Other amortization | 3 | 310 |
Debt issuance cost amortization | 1,189 | 1,217 |
Stock-based compensation expense | 5,426 | 6,011 |
Deferred income taxes | (5,560) | (6,188) |
Net distributions from equity investee | 205 | 162 |
Asset impairment charges | 1,952 | 13,960 |
Loss (gain) on disposal of dealerships and property and equipment | (46,065) | (41,439) |
Loss (gain) on exit of leased dealerships | (170) | 2,564 |
Changes in assets and liabilities that relate to operations: | ||
Receivables | 82,537 | 151,391 |
Inventories | (31,566) | (73,100) |
Other assets | (65,637) | 500 |
Notes payable - floor plan - trade | (67,835) | (59,738) |
Trade accounts payable and other liabilities | (45,245) | (20,225) |
Total adjustments | (125,680) | 23,397 |
Net cash provided by (used in) operating activities | (56,859) | 38,108 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of land, property and equipment | (51,234) | (99,602) |
Proceeds from sales of property and equipment | 2,301 | 12,584 |
Proceeds from sales of dealerships | 121,337 | 122,404 |
Net cash provided by (used in) investing activities | 72,404 | 35,386 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Net (repayments) borrowings on notes payable - floor plan - non-trade | (1,643) | 11,135 |
Borrowings on revolving credit facilities | 303,235 | 514,915 |
Repayments on revolving credit facilities | (303,235) | (572,519) |
Proceeds from issuance of long-term debt | 0 | 21,072 |
Debt issuance costs | (2) | (131) |
Principal payments and repurchase of long-term debt | (11,715) | (18,344) |
Purchases of treasury stock | (2,381) | (23,468) |
Issuance of shares under stock compensation plans | 59 | 353 |
Dividends paid | (6,867) | (4,705) |
Net cash provided by (used in) financing activities | (19,259) | (71,692) |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (3,714) | 1,802 |
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 5,854 | |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 2,140 | |
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES: | ||
Change in fair value of interest rate swap and interest rate cap agreements (net of tax expense of $1,563 and $1,099 in the nine months ended September 30, 2018 and 2017, respectively) | (3,273) | 3,785 |
Cash paid (received) during the period for: | ||
Interest, including amount capitalized | 53,143 | 48,355 |
Income taxes | $ 41,305 | $ 18,682 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Parenthetical) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Statement of Cash Flows [Abstract] | ||
Tax effect on fair value of interest rate swap and rate cap agreements | $ (1,396) | $ 1,418 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation – The accompanying condensed consolidated financial statements of Sonic Automotive, Inc. and its wholly owned subsidiaries (“Sonic,” the “Company,” “we,” “us” and “our”) for the three and six months ended June 30, 2019 and 2018 are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and applicable rules and regulations of the 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 operating results for interim periods are not necessarily indicative of the results to be expected for the entire fiscal year or future interim periods, because the first quarter historically has contributed less operating profit than the second, third and fourth quarters. 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, 2018. Recent Accounting Pronouncements – In February 2016, the Financial Accounting Standards Board (the “FASB”) established Accounting Standards Codification (“ASC”) 842, “Leases,” by issuing Accounting Standards Update (“ASU”) 2016-02 (and subsequent amendments via ASU 2018-01, ASU 2018-10 and ASU 2018-11) in order to increase transparency and comparability among organizations by recognizing operating lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Prior to adoption of the new lease standard, only leases classified as capital leases under ASC 840, “Leases,” were recorded in the consolidated balance sheets. Under ASC 842, “Leases,” an entity must classify leases as either finance leases (formerly capital leases) or operating leases, and a right-of-use asset (“ROU asset”) and lease liability are required to be recognized in the consolidated balance sheets for both finance and operating leases with a term longer than 12 months. The new lease standard requires a modified retrospective transition approach and provides an optional transition method to either (1) record current existing leases as of the effective date; or (2) record leases existing as of the earliest comparative period presented in the financial statements by recasting comparative period financial statements. We adopted the new lease standard as of January 1, 2019 using the effective date as our date of application. As such, financial statement information and disclosures required under the new lease standard have not been provided for dates and periods prior to January 1, 2019. The new lease standard provides for a number of optional practical expedients in transition, which include: (1) not requiring an entity to reassess prior conclusions about lease identification, lease classification or initial direct costs; (2) allowing an entity to use a portfolio approach for similar lease assets; (3) allowing an entity to elect an accounting policy to choose not to separate non-lease components of an agreement from lease components (by asset class); (4) allowing the use of hindsight in estimating lease term or assessing impairment of ROU assets; and (5) not requiring an entity to reassess prior conclusions about land easements. We have elected all of the practical expedients permitted under the transition guidance within the new lease standard. The new lease standard also provides practical expedients for ongoing accounting. We have elected the short-term lease recognition exemption for our real estate and equipment leases, which means that for those leases that qualify (less than 1-year term), we will not recognize ROU assets or lease liabilities. We have also elected not to separate non-lease components of an agreement from lease components (by asset class). The cumulative effect of the adoption of ASC 842, “Leases,” on our unaudited condensed consolidated balance sheet as of January 1, 2019 was the recognition of ROU assets of approximately $406.9 million (including approximately $18.9 million related to capital leases that was reclassified from property and equipment, net in the accompanying unaudited condensed consolidated balance sheet as of December 31, 2018) and lease liabilities of approximately $419.5 million (including approximately $20.6 million related to capital leases that was reclassified from current maturities of long-term debt and long-term debt in the accompanying unaudited condensed consolidated balance sheet as of December 31, 2018). Upon adoption of ASC 842, “Leases,” we evaluated ROU assets for impairment and determined that approximately $10.5 million of impairment was required related to newly recognized ROU assets that would have been impaired in previous periods. This impairment of the ROU asset as of January 1, 2019 was recorded, net of related income tax effects, as a $7.4 million reduction of beginning retained earnings. The adoption of ASC 842, “Leases,” did not have a material effect on our unaudited condensed consolidated statements of income or our unaudited condensed consolidated statements of cash flows. The effect of the adoption of ASC 842, “Leases,” on our unaudited condensed consolidated balance sheets as of January 1, 2019 and June 30, 2019 was as follows: Before Impact of ASC 842 Effects of Adoption of ASC 842 After Impact of ASC 842 December 31, 2018 January 1, 2019 Balance Sheet (In thousands) Assets: Property and Equipment, net $ 1,178,489 $ (18,948) $ 1,159,541 Other Intangible Assets, net 69,705 (4,005) 65,700 Right-of-Use Assets — 406,918 406,918 Liabilities: Current lease liabilities $ — $ 48,832 $ 48,832 Other accrued liabilities 257,823 (1,987) 255,836 Long-Term Debt 918,779 (20,557) 898,222 Long-Term Lease Liabilities — 370,647 370,647 Other Long-Term Liabilities 75,887 (2,508) 73,379 Deferred Income Taxes 33,178 (3,034) 30,144 Stockholders' Equity: Retained earnings $ 670,691 $ (7,428) $ 663,263 Adoption New Modifications (1) Amortization As Reported June 30, 2019 (In thousands) Right-of-Use Assets: Finance Leases $ 18,948 $ 38 $ 21,514 $ (1,572) $ 38,928 Operating Leases 387,970 — (33,710) (20,735) 333,525 Total Right-of-Use Assets $ 406,918 $ 38 $ (12,196) $ (22,307) $ 372,453 Current Lease Liabilities: Finance Leases $ 728 $ 3 $ 4,552 $ (133) $ 5,150 Operating Leases 48,104 89 (1,615) (2,101) 44,477 Total Current Lease Liabilities $ 48,832 $ 92 $ 2,937 $ (2,234) $ 49,627 Long-Term Lease Liabilities: Finance Leases $ 19,829 $ 35 $ 16,935 $ (579) $ 36,220 Operating Leases 350,818 — (32,200) (19,609) 299,009 Total Long-Term Lease Liabilities $ 370,647 $ 35 $ (15,265) $ (20,188) $ 335,229 (1) Includes the impact of remeasurements related to lease terminations and changes in assumptions around the probability of exercise of extension options. Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Lease Expense (In thousands) Finance lease expense: Amortization of right-of-use assets $ 862 $ 1,572 Interest on lease liabilities 1,339 2,515 Operating lease expense (1) 17,057 35,054 Short-term lease expense (1) 473 900 Variable lease expense 683 797 Sublease income (3,806) (7,384) Total $ 16,608 $ 33,454 (1) Included in operating cash flows in the accompanying unaudited condensed consolidated statements of cash flows. Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 (In thousands) Other Information Cash paid for amounts included in the measurement of lease liabilities: Financing cash flows for finance leases $ 502 $ 782 Operating cash flows for finance leases $ 1,339 $ 2,515 Operating cash flows for operating leases $ 18,315 $ 36,784 Right-of-use assets obtained in exchange for lease liabilities: Finance leases $ 9,290 $ 19,273 Operating leases (1) $ 1,541 $ (9,170) (1) Includes the impact of reclassification of right-of-use assets from operating leases to finance leases due to remeasurement. June 30, 2019 Other Information Weighted-average remaining lease term (in years): Finance leases 11.22 Operating leases 9.66 Weighted-average discount rate: Finance leases 18.33 % Operating leases 6.87 % Undiscounted Lease Cash Flows Under ASC 842 as of June 30, 2019 Finance Operating Receipts from Subleases Year Ending December 31, (In thousands) 2019 $ 6,965 $ 33,956 $ (8,045) 2020 6,535 63,257 (11,545) 2021 6,667 55,960 (9,299) 2022 6,667 48,103 (6,612) 2023 6,719 46,335 (6,612) Thereafter 49,922 235,548 (9,744) Total $ 83,475 $ 483,159 $ (51,857) Less: Present value discount (42,105) (139,673) Lease liabilities $ 41,370 $ 343,486 For comparison purposes the following table provides the future minimum lease payments as presented in our Annual Report on Form 10-K for the year ended December 31, 2018 in accordance with ASC 840, “Leases,”. Undiscounted Lease Cash Flows Under ASC 842 as of December 31, 2018 Finance Operating Receipts from Subleases Year Ending December 31, (In thousands) 2019 $ 6,985 $ 82,177 $ (13,430) 2020 7,165 66,023 (10,508) 2021 7,357 51,501 (8,534) 2022 7,374 37,152 (7,232) 2023 7,609 33,486 (7,013) Thereafter 482,390 127,026 (13,116) Total minimum lease payments (receipts) $ 518,880 $ 397,365 $ (59,833) Less: Present value discount (498,291) Lease liabilities $ 20,589 Current portion of lease liabilities $ 643 Long-term portion of lease liabilities $ 19,946 The majority of our leases are related to dealership properties that are subject to long-term lease arrangements. In addition, we have certain equipment leases and contracts containing embedded leased assets that have been evaluated and included in the ROU assets and lease liabilities above as appropriate. We recognize a ROU asset and a lease liability at the lease commencement date. For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases, and is subsequently measured at amortized cost using the effective interest method. The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred or previously recognized favorable lease assets, less any lease incentives received or previously recognized lease exit accruals. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of its useful life or the end of the lease term unless the lease transfers ownership of the underlying asset to us or we are reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is recognized and presented separately from interest expense on the lease liability. Variable lease payments associated with our leases are recognized when the event, activity or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are presented as operating expense in our consolidated financial statements of income in the same line item as expense arising from fixed lease payments (operating leases) or amortization of the ROU asset (finance leases). ROU assets for operating and finance leases are periodically reduced by impairment losses. We use the long-lived assets impairment guidance in ASC 360, “Property, Plant, and Equipment,” to determine whether an ROU asset is impaired and, if so, the amount of the impairment loss to recognize. The Company monitors for events or changes in circumstances that require a reassessment of one of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance, is recorded in profit or loss. Key estimates and judgments include how we determine: (1) the discount rate used to discount the unpaid lease payments to present value; (2) the expected lease term, including any extension options; and (3) future lease payments. ASC 842, “Leases,” requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, we cannot determine the interest rate implicit in the lease because we do not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs. Therefore, we generally use our incremental borrowing rate as the discount rate for the lease. We determined the discount rate for our leases based on the risk-free rate as of the measurement date for varying maturities corresponding to the remaining lease term, adjusted for the risk-premium attributed to Sonic’s corporate credit rating for a secured or collateralized instrument. Many of our lease arrangements have one or multiple options to extend the lease term (typically five- to ten-year options), which were considered in the calculation of the ROU assets and lease liabilities if it was reasonably certain that an extension option would be exercised. The lease term for all of the Company’s leases includes the noncancellable period of the lease plus any additional periods covered by our option to extend the lease that we are reasonably certain to exercise. We determined the probability of the exercise of a lease extension option based on our long-term strategic business outlook and the condition and remaining useful life of the fixed assets at the location subject to the lease agreement, among other factors. The majority of our lease agreements require fixed monthly payments (subject to either specific or index-based escalations in future periods) while other agreements require variable lease payments based on changes in the London Interbank Offer Rate (“LIBOR”). Lease payments included in the measurement of the lease liability comprise the: (1) fixed payments, including in-substance fixed payments, owed over the lease term, which include termination penalties we would owe if the lease term assumes Company exercise of a termination option; (2) variable lease payments that depend on an index or rate, initially measured using the index or rate at the lease commencement date; and (3) the exercise price of our option to purchase the underlying asset if we are reasonably certain to exercise the option. Our leases do not typically contain residual value guarantees. In certain situations, we have entered into sublease agreements whereby we sublease all or a portion of a leased real estate asset to a third party. To the extent that we have a sublease related to a lease agreement for an asset that we are no longer using in operations, we have reduced the ROU asset by the net deficiency in expected cash flows from that sublease (either due to partial monthly sublease proceeds or a sublease term less than the remaining master lease term). As of December 31, 2018, the net liability related to these lease exit accruals was approximately $4.6 million as discussed in Note 7, “Commitments and Contingencies.” Upon the adoption of ASC 842, “Leases,” this balance was reclassified from other accrued liabilities and other long-term liabilities to a reduction in right-of-use assets in the accompanying unaudited condensed consolidated balance sheets. Prior to the adoption of ASC 842, “Leases,” we had recorded definite life intangible assets related to favorable lease assets acquired in business combinations. As of December 31, 2018, the net unamortized balance related to these definite life intangible assets was approximately $4.0 million. Upon adoption of ASC 842, “Leases,” this balance was reclassified from other intangible assets, net to right-of-use assets in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2019 and continues to be amortized over the remaining lease term. As part of the lease standard implementation process, we assessed our existing real estate and equipment lease agreements, identified certain lease components embedded within existing service contracts, evaluated transition guidance and practical expedient elections, implemented lease accounting software and designed internal controls over lease accounting under the new standard. In August 2017, the FASB issued ASU 2017-12, which amends the hedge accounting recognition and presentation requirements in ASC 815, “Derivatives and Hedging.” This ASU expands and refines hedge accounting for both non-financial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. It also includes certain targeted improvements to simplify the application of current guidance related to hedge accounting. For public companies, this ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The effects of this ASU did not materially impact our consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, which allows the reclassification of stranded tax effects, as a result of the Tax Cuts and Jobs Acts of 2017, from accumulated other comprehensive income to retained earnings. For public companies, this ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The effects of this ASU did not materially impact our consolidated financial statements. In June 2018, the FASB issued ASU 2018-07 to expand the scope of ASC 718, Compensation - “Stock - Compensation,” to include share-based payment transactions for acquiring goods and services from non-employees. For public companies, this ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The effects of this ASU did not materially impact our consolidated financial statements. Principles of Consolidation – All of our 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. Revenue from Contracts with Customers – As of January 1, 2018, we adopted ASC 606, “Revenue from Contracts with Customers.” Under this standard, 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. The standard applies a five-step model that includes: (1) identifying the contract(s) with the customer; (2) identifying the performance obligation(s) in the contract(s); (3) determining the transaction price; (4) allocating the transaction price to the performance obligation(s) in the contract(s); and (5) recognizing revenue as the performance obligation(s) are satisfied. The standard also requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. 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 vehicle financing and the sale of service and other insurance contracts; and (5) the performance of vehicle maintenance and repair services and the sale of related parts and accessories. Generally, performance conditions are satisfied when the associated vehicle is either delivered or returned to a customer and customer acceptance has occurred, or over time as the maintenance and repair services are performed. 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). Upon adoption, we accelerated the timing of revenue recognition related to: (1) service and collision repair orders that are incomplete as of a reporting date (“work in process”) and (2) certain retrospective finance and insurance revenue earned in periods subsequent to the completion of the initial performance obligation (“F&I retro revenues”). Work in process revenues are recognized over time based on the completed work to date and F&I retro revenues are recognized when the product contract has been executed with the end customer and are estimated each reporting period based on the expected value method using historical and projected data. F&I retro revenues, which represent variable consideration, subject to constraint, are to be included in the transaction price and recognized when or as the performance obligation is satisfied. 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. Receivables, net in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2019 and December 31, 2018 include approximately $4.8 million and $4.7 million, respectively, related to work in process and contract assets related to F&I retro revenues of approximately $5.9 million and $5.4 million, respectively. Changes in contract assets from December 31, 2018 to June 30, 2019 were primarily due to ordinary business activity. 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, 2018 for further discussion of our revenue recognition policies and processes. Income Tax Expense – The overall effective tax rate from continuing operations was 27.4% and 29.6% for the three and six months ended June 30, 2019, respectively, and 32.4% and 29.7% for the three and six months ended June 30, 2018. Income tax expense for the three months ended June 30, 2019 includes a $0.4 million discrete benefit related to the favorable resolution of certain tax matters. Income tax expense for the six months ended June 30, 2019 includes a $1.5 million discrete charge for non-deductible executive officer compensation related to executive transition costs, a $0.2 million discrete charge related to changes in uncertain tax positions and a $0.2 million discrete charge related to vested or exercised stock compensation awards, offset partially by a $0.4 million discrete benefit related to the favorable resolution of certain tax matters. Income tax expense for the three months ended June 30, 2018 includes a $0.6 million discrete charge for non-deductible book goodwill related to dealership dispositions during the period. Income tax expense for the six months ended June 30, 2018 includes a $0.9 million discrete benefit related to vested or exercised stock compensation awards, offset partially by a $0.2 million discrete charge related to changes in uncertain tax positions and a $0.6 million discrete charge for non-deductible book goodwill related to dealership dispositions during the period. Sonic’s effective 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 expects the annual effective tax rate in future periods to fall within a range of 26.0% to 29.0% before the impact, if any, of changes in valuation allowances related to deferred income tax assets or discrete tax adjustments. 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, in addition to Class A Common Stock purchase warrants. |
Business Acquisitions and Dispo
Business Acquisitions and Dispositions | 6 Months Ended |
Jun. 30, 2019 | |
Business Combinations [Abstract] | |
Business Acquisitions and Dispositions | Business Dispositions We disposed of one luxury franchised dealership and three mid-line import franchised dealerships during the six months ended June 30, 2019 that generated net cash of approximately $121.3 million. We disposed of two luxury franchised dealerships and four mid-line import franchised dealerships during the six months ended June 30, 2018 that generated net cash of approximately $122.4 million. Additionally, we terminated one luxury franchised dealership and ceased operations at a previously acquired pre-owned store in Florida during the six months ended June 30, 2018. 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, 2019 2018 2019 2018 (In thousands) Income (loss) from operations $ (339) $ 739 $ (1,842) $ (5,505) Gain (loss) on disposal (356) 38,422 46,394 39,613 Lease exit accrual adjustments and charges — 2 169 (18) Pre-tax income (loss) $ (695) $ 39,163 $ 44,721 $ 34,090 Total revenues $ — $ 30,751 $ 26,473 $ 108,777 Revenues and other activities associated with disposed franchised dealerships classified as discontinued operations were as follows: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 (In thousands) Income (loss) from operations $ (213) $ (191) $ (393) $ (330) Lease exit accrual adjustments and charges — (106) — (215) Pre-tax income (loss) $ (213) $ (297) $ (393) $ (545) Total revenues $ — $ — $ — $ — |
Inventories
Inventories | 6 Months Ended |
Jun. 30, 2019 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories consist of the following: June 30, 2019 December 31, 2018 (In thousands) New vehicles $ 1,001,471 $ 1,027,727 Used vehicles 311,417 293,179 Service loaners 147,451 141,542 Parts, accessories and other 61,228 66,013 Net inventories $ 1,521,567 $ 1,528,461 |
Property and Equipment
Property and Equipment | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment Property and equipment, net consists of the following: June 30, 2019 December 31, 2018 (In thousands) Land $ 382,349 $ 381,527 Building and improvements (1) 994,101 989,872 Software and computer equipment 97,258 116,348 Parts and service equipment 119,895 108,040 Office equipment and fixtures 107,392 96,622 Company vehicles 9,207 9,139 Construction in progress 32,390 59,523 Total, at cost 1,742,592 1,761,071 Less accumulated depreciation (589,108) (575,720) Subtotal 1,153,484 1,185,351 Less assets held for sale (2) (22,542) (6,862) Property and equipment, net $ 1,130,942 $ 1,178,489 (1) As discussed in Note 1, “Summary of Significant Accounting Policies,” due to the adoption of ASC 842, “Leases,” effective January 1, 2019, previously existing capital lease assets have been reclassified from property and equipment, net, to right-of-use assets in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2019. (2) Classified in other current assets in the accompanying unaudited condensed consolidated balance sheets. In the three and six months ended June 30, 2019, capital expenditures were approximately $20.6 million and $51.2 million, respectively, and in the three and six months ended June 30, 2018, capital expenditures were approximately $33.9 million and $99.6 million, respectively. Capital expenditures in all periods were primarily related to real estate acquisitions, construction of new franchised dealerships and EchoPark stores, building improvements and equipment purchased for use in our franchised dealerships and EchoPark stores. Assets held for sale as of June 30, 2019 and December 31, 2018 consists of real property not currently used in operations that we expect to dispose of in the next 12 months. There were no impairment charges for the three months ended June 30, 2019. Impairment charges for the six months ended June 30, 2019 were approximately $2.0 million, related to the fair value adjustment of long-lived assets held for sale |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 6 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Goodwill and Intangible Assets The carrying amount of goodwill was approximately $487.3 million and $509.6 million as of June 30, 2019 and December 31, 2018 , respectively. The carrying amount of goodwill is net of accumulated impairment losses of approximately $797.6 million as of both June 30, 2019 and December 31, 2018 . The carrying amount of franchise assets was approximately $64.3 million and $65.7 million as of June 30, 2019 and December 31, 2018 , respectively. The changes in the carrying amount of both goodwill and franchise assets are related to the disposition of several franchised dealerships during the six months ended June 30, 2019. At December 31, 2018, we had approximately $4.0 million of d efinite life intangible assets related to favorable lease agreements. As discussed in Note 1, “Summary of Significant Accounting Policies,” due to the adoption of ASC 842, “Leases,” effective January 1, 2019, previously existing definite life intangible assets have been reclassified from other intangible assets, net to right-of-use assets in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2019. |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt Long-term debt consists of the following: June 30, 2019 December 31, 2018 (In thousands) 2016 Revolving Credit Facility (1) $ — $ — 5.0% Senior Subordinated Notes due 2023 (the “5.0% Notes”) 289,273 289,273 6.125% Senior Subordinated Notes due 2027 (the “6.125% Notes”) 250,000 250,000 Mortgage notes to finance companies - fixed rate, bearing interest from 3.51% to 7.03% 208,788 215,196 Mortgage notes to finance companies - variable rate, bearing interest at 1.50 to 2.90 percentage points above one-month or three-month LIBOR 175,933 180,959 Other (2) — 20,589 Subtotal $ 923,994 $ 956,017 Debt issuance costs (9,743) (10,934) Total debt $ 914,251 $ 945,083 Less current maturities of long-term debt (62,968) (26,304) Long-term debt $ 851,283 $ 918,779 (1) The interest rate on the 2016 Revolving Credit Facility (as defined below) was 200 basis points and 250 basis points above LIBOR at June 30, 2019 and December 31, 2018, respectively. (2) As discussed in Note 1, “Summary of Significant Accounting Policies,” due to the adoption of ASC 842, “Leases,” effective January 1, 2019, previously existing capital lease liabilities have been reclassified from current maturities of long-term debt and long-term debt to current lease liabilities and long-term lease liabilities in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2019. 2016 Credit Facilities On November 30, 2016, we entered into an amended and restated syndicated revolving credit facility (the “2016 Revolving Credit Facility”) and amended and restated syndicated new and used vehicle floor plan credit facilities (the “2016 Floor Plan Facilities” and, together with the 2016 Revolving Credit Facility, the “2016 Credit Facilities”), which are scheduled to mature on November 30, 2021. Availability under the 2016 Revolving Credit Facility is calculated as the lesser of $250.0 million or a borrowing base calculated based on certain eligible assets, less the aggregate face amount of any outstanding letters of credit under the 2016 Revolving Credit Facility (the “2016 Revolving Borrowing Base”). The 2016 Revolving Credit Facility may be increased at our option up to $300.0 million upon satisfaction of certain conditions. As of June 30, 2019, the 2016 Revolving Borrowing Base was approximately $217.2 million based on balances as of such date. As of June 30, 2019, we had no outstanding borrowings and approximately $14.6 million in outstanding letters of credit under the 2016 Revolving Credit Facility, resulting in total borrowing availability of approximately $202.6 million under the 2016 Revolving Credit Facility. The 2016 Floor Plan Facilities are comprised of a new vehicle revolving floor plan facility (the “2016 New Vehicle Floor Plan Facility”) and a used vehicle revolving floor plan facility (the “2016 Used Vehicle Floor Plan Facility”), subject to a borrowing base, in a combined amount of up to $1.015 billion. We may, under certain conditions, request an increase in the 2016 Floor Plan Facilities to a maximum borrowing limit of up to $1.265 billion, which shall be allocated between the 2016 New Vehicle Floor Plan Facility and the 2016 Used Vehicle Floor Plan Facility as we request, with no more than 30% of the aggregate commitments allocated to the commitments under the 2016 Used Vehicle Floor Plan Facility. Outstanding obligations under the 2016 Floor Plan 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. The amounts outstanding under the 2016 Credit Facilities bear interest at variable rates based on specified percentages above LIBOR. We agreed under the 2016 Credit Facilities not to pledge any assets to any third parties (other than those explicitly allowed under the amended terms of the 2016 Credit Facilities), including other lenders, subject to certain stated exceptions, including floor plan financing arrangements. In addition, the 2016 Credit Facilities contain certain negative covenants, including covenants which could restrict or prohibit indebtedness, liens, the payment of dividends, capital expenditures and material dispositions and acquisitions of assets, as well as other customary covenants and default provisions. Specifically, the 2016 Credit Facilities permit cash dividends on our Class A and Class B Common Stock so long as no event of default (as defined in the 2016 Credit Facilities) has occurred and is continuing and provided that we remain in compliance with all financial covenants under the 2016 Credit Facilities. 5.0% Notes On May 9, 2013, we issued $300.0 million in aggregate principal amount of unsecured senior subordinated 5.0% Notes which mature on May 15, 2023. The 5.0% Notes were issued at a price of 100.0% of the principal amount thereof. Balances outstanding under the 5.0% Notes are guaranteed by all of our domestic operating subsidiaries. These guarantees are full and unconditional and joint and several. The parent company has no independent assets or operations. The non-domestic operating subsidiary that is not a guarantor is considered to be minor. Interest on the 5.0% Notes is payable semi-annually in arrears on May 15 and November 15 of each year. During 2016, we repurchased approximately $10.7 million of the outstanding 5.0% Notes for approximately $10.6 million in cash, plus accrued and unpaid interest related thereto. We may redeem the remaining outstanding 5.0% Notes, in whole or in part, at any time on at the following redemption prices, which are expressed as percentages of the principal amount: Redemption Price Beginning on May 15, 2019 101.667 % Beginning on May 15, 2020 100.833 % Beginning on May 15, 2021 and thereafter 100.000 % The indenture governing the 5.0% Notes provides that holders of the 5.0% Notes may require us to repurchase the 5.0% Notes at a purchase price equal to 101.0% of the aggregate principal amount of the 5.0% Notes, plus accrued and unpaid interest, if any, to the date of purchase if we undergo a Change of Control (as defined in the indenture governing the 5.0% Notes). The indenture governing the 5.0% Notes contains certain specified restrictive covenants. We have agreed not to pledge any assets to any third-party lender of senior subordinated debt except under certain limited circumstances. We also have agreed to certain other limitations or prohibitions concerning the incurrence of other indebtedness, guarantees, liens, certain types of investments, certain transactions with affiliates, mergers, consolidations, issuance of preferred stock, cash dividends to stockholders, distributions, redemptions and the sale, assignment, lease, conveyance or disposal of certain assets. Specifically, the indenture governing the 5.0% Notes limits our ability to pay quarterly cash dividends on our Class A and Class B Common Stock in excess of $0.10 per share. We may only pay quarterly cash dividends on our Class A and Class B Common Stock if we comply with the terms of the indenture governing the 5.0% Notes. We were in compliance with all restrictive covenants in the indenture governing the 5.0% Notes as of June 30, 2019. Our obligations under the 5.0% Notes may be accelerated by the holders of 25% of the outstanding principal amount of the 5.0% Notes then outstanding if certain events of default occur, including: (1) defaults in the payment of principal or interest when due; (2) defaults in the performance, or breach, of our covenants under the 5.0% Notes; and (3) certain defaults under other agreements under which we or our subsidiaries have outstanding indebtedness in excess of $50.0 million. 6.125% Notes On March 10, 2017, we issued $250.0 million in aggregate principal amount of unsecured senior subordinated 6.125% Notes which mature on March 15, 2027. The 6.125% Notes were issued at a price of 100.0% of the principal amount thereof. Balances outstanding under the 6.125% Notes are guaranteed by all of our domestic operating subsidiaries. These guarantees are full and unconditional and joint and several. The parent company has no independent assets or operations. The non-domestic operating subsidiary that is not a guarantor is considered to be minor. Interest on the 6.125% Notes is payable semi-annually in arrears on March 15 and September 15 of each year. We may redeem the 6.125% Notes, in whole or in part, at any time on or after March 15, 2022 at the following redemption prices, which are expressed as percentages of the principal amount: Redemption Price Beginning on March 15, 2022 103.063 % Beginning on March 15, 2023 102.042 % Beginning on March 15, 2024 101.021 % Beginning on March 15, 2025 and thereafter 100.000 % Before March 15, 2022, we may redeem all or a part of the 6.125% Notes at a redemption price equal to 100.0% of the principal amount of the 6.125% Notes redeemed, plus the Applicable Premium (as defined in the indenture governing the 6.125% Notes) and any accrued and unpaid interest, if any, to the redemption date. In addition, on or before March 15, 2020, we may redeem up to 35% of the aggregate principal amount of the 6.125% Notes at a redemption price equal to 106.125% of the aggregate principal amount of the 6.125% Notes redeemed, plus accrued and unpaid interest, if any, to the redemption date with proceeds from certain equity offerings. The indenture governing the 6.125% Notes also provides that holders of the 6.125% Notes may require us to repurchase the 6.125% Notes at a purchase price equal to 101.0% of the aggregate principal amount of the 6.125% Notes, plus accrued and unpaid interest, if any, to the date of purchase if we undergo a Change of Control (as defined in the indenture governing the 6.125% Notes). The indenture governing the 6.125% Notes contains certain specified restrictive covenants. We have agreed not to pledge any assets to any third-party lender of senior subordinated debt except under certain limited circumstances. We also have agreed to certain other limitations or prohibitions concerning the incurrence of other indebtedness, guarantees, liens, certain types of investments, certain transactions with affiliates, mergers, consolidations, issuance of preferred stock, cash dividends to stockholders, distributions, redemptions and the sale, assignment, lease, conveyance or disposal of certain assets. Specifically, the indenture governing the 6.125% Notes limits our ability to pay quarterly cash dividends on our Class A and Class B Common Stock in excess of $0.12 per share. We may only pay quarterly cash dividends on our Class A and Class B Common Stock if we comply with the terms of the indenture governing the 6.125% Notes. We were in compliance with all restrictive covenants in the indenture governing the 6.125% Notes as of June 30, 2019. Our obligations under the 6.125% Notes may be accelerated by the holders of 25% of the outstanding principal amount of the 6.125% Notes then outstanding if certain events of default occur, including: (1) defaults in the payment of principal or interest when due; (2) defaults in the performance, or breach, of our covenants under the 6.125% Notes; and (3) certain defaults under other agreements under which we or our subsidiaries have outstanding indebtedness in excess of $50.0 million. Mortgage Notes As of June 30, 2019, the weighted-average interest rate was 4.64% and the total outstanding mortgage principal balance was approximately $384.7 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 2019 and 2033. Covenants Under the 2016 Credit Facilities, we agreed not to pledge any assets to any third parties (other than those explicitly allowed under the amended terms of the 2016 Credit Facilities), including other lenders, subject to certain stated exceptions, including floor plan financing arrangements. In addition, the 2016 Credit Facilities contain certain negative covenants, including covenants which could restrict or prohibit indebtedness, liens, the payment of dividends, 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 2016 Credit Facilities as of June 30, 2019. The financial covenants include required specified ratios (as each is defined in the 2016 Credit Facilities) of: Covenant Minimum Consolidated Liquidity Ratio Minimum Consolidated Fixed Charge Coverage Ratio Maximum Consolidated Total Lease Adjusted Leverage Ratio Required ratio 1.05 1.20 5.75 June 30, 2019 actual 1.17 1.55 4.20 The 2016 Credit Facilities 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 facilities. Upon the future occurrence of an event of default, we could be required to immediately repay all outstanding amounts under the 2016 Credit Facilities. After giving effect to the applicable restrictions on the payment of dividends under our debt agreements, as of June 30, 2019, we had approximately $206.8 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, 2019. 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 2016 Credit Facilities with the exception of one 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, 2019, the ratio was 4.50 to 1.00. Derivative Instruments and Hedging Activities Prior to March 9, 2018, we had outstanding interest rate cash flow swap agreements to effectively convert a portion of our LIBOR-based variable rate debt to a fixed rate (these interest rate cash flow swap agreements were terminated on March 9, 2018 with a net $4.8 million payment to us from the counterparties that is being amortized into interest expense, other, net in the accompanying unaudited condensed consolidated statements of income over the initial term of the interest rate swap agreements). As of both June 30, 2019 and December 31, 2018, we had interest rate cap agreements to limit our exposure to increases in LIBOR rates above certain levels. Under the terms of these interest rate cash flow swap agreements and interest rate cap agreements, interest rates reset monthly. We paid cash premiums of approximately $2.8 million and $1.9 million in the years ended December 31, 2018 and 2017, respectively, upon entering into new interest rate cap agreements. The total unamortized premium amounts related to the outstanding interest rate caps were approximately $4.3 million and $4.6 million as of June 30, 2019 and December 31, 2018, respectively, and will be amortized into interest expense, other, net in the accompanying unaudited condensed consolidated statements of income over the remaining term of the interest rate cap agreements. The fair value of the outstanding interest rate cap positions at June 30, 2019 was a net asset of approximately $0.7 million, with approximately $0.4 million included in other current assets and approximately $0.3 million included in other assets in the accompanying unaudited condensed consolidated balance sheets. The fair value of the outstanding interest rate cap positions at December 31, 2018 was a net asset of approximately $4.8 million, with approximately $1.8 million included in other current assets and approximately $3.0 million included in other assets in the accompanying unaudited condensed consolidated balance sheets. Under the terms of the interest rate cap agreements, we will receive interest based on the following: Notional Cap Rate (1) Receive Rate (2) Start Date End Date (In millions) $ 375.0 2.000% one-month LIBOR July 1, 2018 June 30, 2019 $ 375.0 3.000% one-month LIBOR July 1, 2018 June 30, 2019 $ 312.5 2.000% one-month LIBOR July 1, 2019 June 30, 2020 $ 250.0 3.000% one-month LIBOR July 1, 2019 June 30, 2020 $ 225.0 3.000% one-month LIBOR July 1, 2020 June 30, 2021 $ 150.0 2.000% one-month LIBOR July 1, 2020 July 1, 2021 $ 250.0 3.000% one-month LIBOR July 1, 2021 July 1, 2022 (1) Under these interest rate cap agreements, no payment from the counterparty will occur unless the stated receive rate exceeds the stated cap rate, in which case a net payment to us from the counterparty, based on the spread between the receive rate and the cap rate, will be recognized as a reduction of interest expense, other, net in the accompanying unaudited condensed consolidated statements of income. (2) The one-month LIBOR rate was approximately 2.398% at June 30, 2019. The interest rate caps are designated as cash flow hedges, and the changes in the fair value of these instruments are recorded in other comprehensive income (loss) in the accompanying unaudited condensed consolidated statements of comprehensive income and are disclosed in the supplemental schedule of non-cash financing activities in the accompanying unaudited condensed consolidated statements of cash flows. The incremental interest income (the excess of interest received above the cap rate) related to interest rate caps was approximately $0.5 million and $0.9 million for the three and six months ended June 30, 2019, respectively, and is included in interest expense, other, net in the accompanying unaudited condensed consolidated statements of income and disclosed in the supplemental disclosures of cash flow information in the accompanying unaudited condensed consolidated statements of cash flows. The incremental interest expense (the excess of interest paid over interest received on interest rate swaps, offset partially by interest received above the cap rate) related to interest rate swaps and interest rate caps was approximately $0 and $0.1 million for the three and six months ended June 30, 2018, respectively, and is included in interest expense, other, net in the accompanying unaudited condensed consolidated statements of income, and disclosed in the supplemental disclosures of cash flow information in the accompanying unaudited condensed consolidated statements of cash flows. The estimated net benefit expected to be reclassified out of accumulated other comprehensive income (loss) into results of operations during the next 12 months is approximately $2.4 million. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Lease Exit Accruals A significant number of our dealership properties are leased under long-term operating lease arrangements. Prior to January 1, 2019, when leased properties were no longer utilized in operations, we recorded lease exit accruals. These situations could include the relocation of an existing facility or the sale of a dealership when the buyer will not be subleasing the property for either the remaining term of the lease or for an amount equal to our obligation under the lease, or situations in which a facility is closed as a result of the associated franchise being terminated by us or the manufacturer and no other operations continue on the leased property. The lease exit accruals represent the present value of the lease payments, net of estimated sublease rentals, for the remaining life of the operating leases and other accruals necessary to satisfy lease commitments to the landlords. As of December 31, 2018, the net liability related to these lease exit accruals was approximately $4.6 million. As discussed in Note 1, “Summary of Significant Accounting Policies,” due to the adoption of ASC 842, “Leases,” effective January 1, 2019, previously existing lease exit accruals have been reclassified from other accrued liabilities and other long-term liabilities to a reduction in right-of-use assets in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2019. Since January 1, 2019, ROU assets have been evaluated for impairment consistent with the guidance of ASC 842, “Leases,” which is similar to our historical practice of recording lease exit accruals. However, since January 1, 2019, instead of recording lease exit accruals, the result has been the reduction of the related ROU asset as an impairment charge. A summary of the activity of operating lease exit accruals consists of the following: (In thousands) Balance at December 31, 2018 $ 4,634 Effect of adoption of ASC 842, “Leases” (4,634) Balance at June 30, 2019 $ — Legal and Other Proceedings 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 in all 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 could have a material adverse effect on Sonic’s business, financial condition, results of operations, cash flows or prospects. Included in other accrued liabilities and other long-term liabilities in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2019 was approximately $1.4 million 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, 2018 was approximately $2.1 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. Guarantees and Indemnification Obligations In accordance with the terms of Sonic’s operating lease agreements, Sonic’s 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, Sonic has generally agreed to indemnify the lessor in the event of a breach of the lease by the lessee. In connection with dealership dispositions and facility relocations, certain of Sonic’s 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 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 Sonic’s dealerships, Sonic generally agrees 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 Sonic’s exposure with respect to environmental remediation and repairs is difficult to quantify, Sonic’s maximum exposure associated with these general indemnifications was approximately $28.0 million and $13.2 million at June 30, 2019 and December 31, 2018, respectively. These indemnifications typically expire within a period of one Sonic also guarantees the floor plan commitments of its 50%-owned joint venture, the amount of which was approximately $4.3 million at both June 30, 2019 and December 31, 2018. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements In determining fair value, Sonic uses various valuation approaches, including market, income and/or cost approaches. “Fair Value Measurements and Disclosures” in the ASC establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of Sonic. Unobservable inputs are inputs that reflect Sonic’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows: Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that Sonic has the ability to access. Assets utilizing Level 1 inputs include marketable securities that are actively traded, including Sonic’s stock or public bonds. Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Assets and liabilities utilizing Level 2 inputs include cash flow swap instruments and deferred compensation plan balances. Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Asset and liability measurements utilizing Level 3 inputs include those used in estimating fair value of non-financial assets and non-financial liabilities in purchase acquisitions, those used in assessing impairment of property, plant and equipment and other intangibles and those used in the reporting unit valuation in the annual goodwill impairment evaluation. The availability of observable inputs can vary and is affected by a wide variety of factors. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment required by Sonic in determining fair value is greatest for assets and liabilities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input (Level 3 being the lowest level) that is significant to the fair value measurement. Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, Sonic’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. Sonic uses inputs that are current as of the measurement date, including during periods when the market may be abnormally high or abnormally low. Accordingly, fair value measurements can be volatile based on various factors that may or may not be within Sonic’s control. Assets and liabilities recorded at fair value in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2019 and December 31, 2018 are as follows: Fair Value Based on Significant Other Observable Inputs (Level 2) June 30, 2019 December 31, 2018 (In thousands) Assets: Cash surrender value of life insurance policies (1) $ 31,836 $ 31,395 Interest rate caps designated as hedges (2) 703 4,839 Total assets $ 32,539 $ 36,234 Liabilities: Deferred compensation plan (3) $ 17,602 $ 19,848 Total liabilities $ 17,602 $ 19,848 (1) Included in other assets in the accompanying unaudited condensed consolidated balance sheets. (2) As of June 30, 2019, approximately $0.4 million and $0.3 million were included in other current assets and other assets, respectively, in the accompanying unaudited condensed consolidated balance sheets. As of December 31, 2018, approximately $1.8 million and $3.0 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 during the six months ended June 30, 2019 which required a fair value measurement of assets ordinarily measured at fair value on a non-recurring basis. Therefore, the carrying value of assets measured at fair value on a non-recurring basis in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2019 has not changed since December 31, 2018. These assets will be evaluated as of the annual valuation assessment date of October 1, 2019 or as events or changes in circumstances require. As of June 30, 2019 and December 31, 2018, 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. At June 30, 2019 and December 31, 2018, the fair value and carrying value of Sonic’s significant fixed rate long-term debt were as follows: June 30, 2019 December 31, 2018 Fair Value Carrying Value Fair Value Carrying Value (In thousands) 5.0% Notes (1) $ 290,719 $ 289,273 $ 262,515 $ 289,273 6.125% Notes (1) $ 246,250 $ 250,000 $ 216,250 $ 250,000 Mortgage Notes (2) $ 210,435 $ 208,788 $ 218,402 $ 215,196 Other (2) (3) $ — $ — $ 20,437 $ 20,588 (1) As determined by market quotations as of June 30, 2019 and December 31, 2018, respectively (Level 1). (2) As determined by discounted cash flows (Level 3) based on estimated current market interest rates for comparable instruments. (3) As discussed in Note 1, “Summary of Significant Accounting Policies,” due to the adoption of ASC 842, “Leases,” effective January 1, 2019, previously existing capital lease liabilities have been reclassified from current maturities of long-term debt and long-term debt to current lease liabilities and long-term lease liabilities in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2019. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 6 Months Ended |
Jun. 30, 2019 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss) The changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2019 are as follows: Gains and Defined Total (In thousands) Balance at December 31, 2018 $ 3,034 $ 1,199 $ 4,233 Other comprehensive income (loss) before reclassifications (1) (1,988) — (1,988) Amounts reclassified out of accumulated other comprehensive income (loss) (2) (1,285) — (1,285) Net current-period other comprehensive income (loss) (3,273) — (3,273) Balance at June 30, 2019 $ (239) $ 1,199 $ 960 (1) Net of tax benefit of $871 related to losses on cash flow hedges. (2) Net of tax benefit of $525 related to losses on cash flow hedges. See the heading “Derivative Instruments and Hedging Activities” in Note 6, “Long-Term Debt,” for further discussion of Sonic’s cash flow hedges. For further discussion of Sonic’s defined benefit pension plan, see Note 10, “Employee Benefit Plans,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, 2018. |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information As of June 30, 2019, Sonic had two operating segments comprised of: (1) retail automotive franchises that sell new vehicles and buy and sell used vehicles, sell replacement parts, perform vehicle repair and maintenance services, and arrange finance and insurance products (the “Franchised Dealerships Segment”) and (2) pre-owned vehicle specialty retail locations that provide customers an opportunity to search, buy, service, finance and sell pre-owned vehicles (the “EchoPark Segment”). The operating 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. Sonic has determined that its operating segments also represent its reportable segments. Reportable segment revenues and segment income (loss) for the three and six months ended June 30, 2019 and 2018 are as follows: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 (In thousands) Revenues: Franchised Dealerships Segment $ 2,322,400 $ 2,325,583 $ 4,461,971 $ 4,594,852 EchoPark Segment 291,681 180,166 541,248 311,671 Total consolidated revenues $ 2,614,081 $ 2,505,749 $ 5,003,219 $ 4,906,523 Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 (In thousands) Segment income (loss) (1): Franchised Dealerships Segment (2) $ 48,326 $ 66,049 $ 121,856 $ 89,885 EchoPark Segment (3) 2,129 (27,347) 2,688 (41,672) Total segment income (loss) 50,455 38,702 124,544 48,213 Interest expense, other, net (13,628) (13,375) (26,481) (26,831) Other income (expense), net (5) 17 95 106 Income (loss) from continuing operations before taxes $ 36,822 $ 25,344 $ 98,158 $ 21,488 (1) Segment income (loss) for each segment is defined as operating income (loss) less interest expense, floor plan. (2) For the three months ended June 30, 2018, the above amount includes approximately $38.0 million of net gain on the disposal of franchised dealerships and approximately $2.6 million of benefit related to lease exit adjustments, offset partially by approximately $10.3 million of impairment expense and approximately $3.1 million of storm-related physical damage and legal costs. For the six months ended June 30, 2019, the above amount includes approximately $46.7 million of net gain on the disposal of franchised dealerships and approximately $6.3 million of executive transition costs. For the six months ended June 30, 2018, the above amount includes approximately $39.2 million of net gain on the disposal of franchised dealerships, offset partially by approximately $4.6 million of storm-related physical damage and legal costs, approximately $2.2 million of lease exit charges and approximately $14.0 million of impairment expense. (3) For the three months ended June 30, 2018, the above amount includes approximately $23.3 million of non-recurring compensation-related charges. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation – The accompanying condensed consolidated financial statements of Sonic Automotive, Inc. and its wholly owned subsidiaries (“Sonic,” the “Company,” “we,” “us” and “our”) for the three and six months ended June 30, 2019 and 2018 are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and applicable rules and regulations of the 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 operating results for interim periods are not necessarily indicative of the results to be expected for the entire fiscal year or future interim periods, because the first quarter historically has contributed less operating profit than the second, third and fourth quarters. 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, 2018. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements – In February 2016, the Financial Accounting Standards Board (the “FASB”) established Accounting Standards Codification (“ASC”) 842, “Leases,” by issuing Accounting Standards Update (“ASU”) 2016-02 (and subsequent amendments via ASU 2018-01, ASU 2018-10 and ASU 2018-11) in order to increase transparency and comparability among organizations by recognizing operating lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Prior to adoption of the new lease standard, only leases classified as capital leases under ASC 840, “Leases,” were recorded in the consolidated balance sheets. Under ASC 842, “Leases,” an entity must classify leases as either finance leases (formerly capital leases) or operating leases, and a right-of-use asset (“ROU asset”) and lease liability are required to be recognized in the consolidated balance sheets for both finance and operating leases with a term longer than 12 months. The new lease standard requires a modified retrospective transition approach and provides an optional transition method to either (1) record current existing leases as of the effective date; or (2) record leases existing as of the earliest comparative period presented in the financial statements by recasting comparative period financial statements. We adopted the new lease standard as of January 1, 2019 using the effective date as our date of application. As such, financial statement information and disclosures required under the new lease standard have not been provided for dates and periods prior to January 1, 2019. The new lease standard provides for a number of optional practical expedients in transition, which include: (1) not requiring an entity to reassess prior conclusions about lease identification, lease classification or initial direct costs; (2) allowing an entity to use a portfolio approach for similar lease assets; (3) allowing an entity to elect an accounting policy to choose not to separate non-lease components of an agreement from lease components (by asset class); (4) allowing the use of hindsight in estimating lease term or assessing impairment of ROU assets; and (5) not requiring an entity to reassess prior conclusions about land easements. We have elected all of the practical expedients permitted under the transition guidance within the new lease standard. The new lease standard also provides practical expedients for ongoing accounting. We have elected the short-term lease recognition exemption for our real estate and equipment leases, which means that for those leases that qualify (less than 1-year term), we will not recognize ROU assets or lease liabilities. We have also elected not to separate non-lease components of an agreement from lease components (by asset class). The cumulative effect of the adoption of ASC 842, “Leases,” on our unaudited condensed consolidated balance sheet as of January 1, 2019 was the recognition of ROU assets of approximately $406.9 million (including approximately $18.9 million related to capital leases that was reclassified from property and equipment, net in the accompanying unaudited condensed consolidated balance sheet as of December 31, 2018) and lease liabilities of approximately $419.5 million (including approximately $20.6 million related to capital leases that was reclassified from current maturities of long-term debt and long-term debt in the accompanying unaudited condensed consolidated balance sheet as of December 31, 2018). Upon adoption of ASC 842, “Leases,” we evaluated ROU assets for impairment and determined that approximately $10.5 million of impairment was required related to newly recognized ROU assets that would have been impaired in previous periods. This impairment of the ROU asset as of January 1, 2019 was recorded, net of related income tax effects, as a $7.4 million reduction of beginning retained earnings. The adoption of ASC 842, “Leases,” did not have a material effect on our unaudited condensed consolidated statements of income or our unaudited condensed consolidated statements of cash flows. The effect of the adoption of ASC 842, “Leases,” on our unaudited condensed consolidated balance sheets as of January 1, 2019 and June 30, 2019 was as follows: Before Impact of ASC 842 Effects of Adoption of ASC 842 After Impact of ASC 842 December 31, 2018 January 1, 2019 Balance Sheet (In thousands) Assets: Property and Equipment, net $ 1,178,489 $ (18,948) $ 1,159,541 Other Intangible Assets, net 69,705 (4,005) 65,700 Right-of-Use Assets — 406,918 406,918 Liabilities: Current lease liabilities $ — $ 48,832 $ 48,832 Other accrued liabilities 257,823 (1,987) 255,836 Long-Term Debt 918,779 (20,557) 898,222 Long-Term Lease Liabilities — 370,647 370,647 Other Long-Term Liabilities 75,887 (2,508) 73,379 Deferred Income Taxes 33,178 (3,034) 30,144 Stockholders' Equity: Retained earnings $ 670,691 $ (7,428) $ 663,263 Adoption New Modifications (1) Amortization As Reported June 30, 2019 (In thousands) Right-of-Use Assets: Finance Leases $ 18,948 $ 38 $ 21,514 $ (1,572) $ 38,928 Operating Leases 387,970 — (33,710) (20,735) 333,525 Total Right-of-Use Assets $ 406,918 $ 38 $ (12,196) $ (22,307) $ 372,453 Current Lease Liabilities: Finance Leases $ 728 $ 3 $ 4,552 $ (133) $ 5,150 Operating Leases 48,104 89 (1,615) (2,101) 44,477 Total Current Lease Liabilities $ 48,832 $ 92 $ 2,937 $ (2,234) $ 49,627 Long-Term Lease Liabilities: Finance Leases $ 19,829 $ 35 $ 16,935 $ (579) $ 36,220 Operating Leases 350,818 — (32,200) (19,609) 299,009 Total Long-Term Lease Liabilities $ 370,647 $ 35 $ (15,265) $ (20,188) $ 335,229 (1) Includes the impact of remeasurements related to lease terminations and changes in assumptions around the probability of exercise of extension options. Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Lease Expense (In thousands) Finance lease expense: Amortization of right-of-use assets $ 862 $ 1,572 Interest on lease liabilities 1,339 2,515 Operating lease expense (1) 17,057 35,054 Short-term lease expense (1) 473 900 Variable lease expense 683 797 Sublease income (3,806) (7,384) Total $ 16,608 $ 33,454 (1) Included in operating cash flows in the accompanying unaudited condensed consolidated statements of cash flows. Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 (In thousands) Other Information Cash paid for amounts included in the measurement of lease liabilities: Financing cash flows for finance leases $ 502 $ 782 Operating cash flows for finance leases $ 1,339 $ 2,515 Operating cash flows for operating leases $ 18,315 $ 36,784 Right-of-use assets obtained in exchange for lease liabilities: Finance leases $ 9,290 $ 19,273 Operating leases (1) $ 1,541 $ (9,170) (1) Includes the impact of reclassification of right-of-use assets from operating leases to finance leases due to remeasurement. June 30, 2019 Other Information Weighted-average remaining lease term (in years): Finance leases 11.22 Operating leases 9.66 Weighted-average discount rate: Finance leases 18.33 % Operating leases 6.87 % Undiscounted Lease Cash Flows Under ASC 842 as of June 30, 2019 Finance Operating Receipts from Subleases Year Ending December 31, (In thousands) 2019 $ 6,965 $ 33,956 $ (8,045) 2020 6,535 63,257 (11,545) 2021 6,667 55,960 (9,299) 2022 6,667 48,103 (6,612) 2023 6,719 46,335 (6,612) Thereafter 49,922 235,548 (9,744) Total $ 83,475 $ 483,159 $ (51,857) Less: Present value discount (42,105) (139,673) Lease liabilities $ 41,370 $ 343,486 For comparison purposes the following table provides the future minimum lease payments as presented in our Annual Report on Form 10-K for the year ended December 31, 2018 in accordance with ASC 840, “Leases,”. Undiscounted Lease Cash Flows Under ASC 842 as of December 31, 2018 Finance Operating Receipts from Subleases Year Ending December 31, (In thousands) 2019 $ 6,985 $ 82,177 $ (13,430) 2020 7,165 66,023 (10,508) 2021 7,357 51,501 (8,534) 2022 7,374 37,152 (7,232) 2023 7,609 33,486 (7,013) Thereafter 482,390 127,026 (13,116) Total minimum lease payments (receipts) $ 518,880 $ 397,365 $ (59,833) Less: Present value discount (498,291) Lease liabilities $ 20,589 Current portion of lease liabilities $ 643 Long-term portion of lease liabilities $ 19,946 The majority of our leases are related to dealership properties that are subject to long-term lease arrangements. In addition, we have certain equipment leases and contracts containing embedded leased assets that have been evaluated and included in the ROU assets and lease liabilities above as appropriate. We recognize a ROU asset and a lease liability at the lease commencement date. For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases, and is subsequently measured at amortized cost using the effective interest method. The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred or previously recognized favorable lease assets, less any lease incentives received or previously recognized lease exit accruals. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of its useful life or the end of the lease term unless the lease transfers ownership of the underlying asset to us or we are reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is recognized and presented separately from interest expense on the lease liability. Variable lease payments associated with our leases are recognized when the event, activity or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are presented as operating expense in our consolidated financial statements of income in the same line item as expense arising from fixed lease payments (operating leases) or amortization of the ROU asset (finance leases). ROU assets for operating and finance leases are periodically reduced by impairment losses. We use the long-lived assets impairment guidance in ASC 360, “Property, Plant, and Equipment,” to determine whether an ROU asset is impaired and, if so, the amount of the impairment loss to recognize. The Company monitors for events or changes in circumstances that require a reassessment of one of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance, is recorded in profit or loss. Key estimates and judgments include how we determine: (1) the discount rate used to discount the unpaid lease payments to present value; (2) the expected lease term, including any extension options; and (3) future lease payments. ASC 842, “Leases,” requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, we cannot determine the interest rate implicit in the lease because we do not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs. Therefore, we generally use our incremental borrowing rate as the discount rate for the lease. We determined the discount rate for our leases based on the risk-free rate as of the measurement date for varying maturities corresponding to the remaining lease term, adjusted for the risk-premium attributed to Sonic’s corporate credit rating for a secured or collateralized instrument. Many of our lease arrangements have one or multiple options to extend the lease term (typically five- to ten-year options), which were considered in the calculation of the ROU assets and lease liabilities if it was reasonably certain that an extension option would be exercised. The lease term for all of the Company’s leases includes the noncancellable period of the lease plus any additional periods covered by our option to extend the lease that we are reasonably certain to exercise. We determined the probability of the exercise of a lease extension option based on our long-term strategic business outlook and the condition and remaining useful life of the fixed assets at the location subject to the lease agreement, among other factors. The majority of our lease agreements require fixed monthly payments (subject to either specific or index-based escalations in future periods) while other agreements require variable lease payments based on changes in the London Interbank Offer Rate (“LIBOR”). Lease payments included in the measurement of the lease liability comprise the: (1) fixed payments, including in-substance fixed payments, owed over the lease term, which include termination penalties we would owe if the lease term assumes Company exercise of a termination option; (2) variable lease payments that depend on an index or rate, initially measured using the index or rate at the lease commencement date; and (3) the exercise price of our option to purchase the underlying asset if we are reasonably certain to exercise the option. Our leases do not typically contain residual value guarantees. In certain situations, we have entered into sublease agreements whereby we sublease all or a portion of a leased real estate asset to a third party. To the extent that we have a sublease related to a lease agreement for an asset that we are no longer using in operations, we have reduced the ROU asset by the net deficiency in expected cash flows from that sublease (either due to partial monthly sublease proceeds or a sublease term less than the remaining master lease term). As of December 31, 2018, the net liability related to these lease exit accruals was approximately $4.6 million as discussed in Note 7, “Commitments and Contingencies.” Upon the adoption of ASC 842, “Leases,” this balance was reclassified from other accrued liabilities and other long-term liabilities to a reduction in right-of-use assets in the accompanying unaudited condensed consolidated balance sheets. Prior to the adoption of ASC 842, “Leases,” we had recorded definite life intangible assets related to favorable lease assets acquired in business combinations. As of December 31, 2018, the net unamortized balance related to these definite life intangible assets was approximately $4.0 million. Upon adoption of ASC 842, “Leases,” this balance was reclassified from other intangible assets, net to right-of-use assets in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2019 and continues to be amortized over the remaining lease term. As part of the lease standard implementation process, we assessed our existing real estate and equipment lease agreements, identified certain lease components embedded within existing service contracts, evaluated transition guidance and practical expedient elections, implemented lease accounting software and designed internal controls over lease accounting under the new standard. In August 2017, the FASB issued ASU 2017-12, which amends the hedge accounting recognition and presentation requirements in ASC 815, “Derivatives and Hedging.” This ASU expands and refines hedge accounting for both non-financial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. It also includes certain targeted improvements to simplify the application of current guidance related to hedge accounting. For public companies, this ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The effects of this ASU did not materially impact our consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, which allows the reclassification of stranded tax effects, as a result of the Tax Cuts and Jobs Acts of 2017, from accumulated other comprehensive income to retained earnings. For public companies, this ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The effects of this ASU did not materially impact our consolidated financial statements. In June 2018, the FASB issued ASU 2018-07 to expand the scope of ASC 718, Compensation - “Stock - Compensation,” to include share-based payment transactions for acquiring goods and services from non-employees. For public companies, this ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The effects of this ASU did not materially impact our consolidated financial statements. |
Principles of Consolidation | Principles of Consolidation – All of our 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. |
Revenue from Contract with Customers | Revenue from Contracts with Customers – As of January 1, 2018, we adopted ASC 606, “Revenue from Contracts with Customers.” Under this standard, 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. The standard applies a five-step model that includes: (1) identifying the contract(s) with the customer; (2) identifying the performance obligation(s) in the contract(s); (3) determining the transaction price; (4) allocating the transaction price to the performance obligation(s) in the contract(s); and (5) recognizing revenue as the performance obligation(s) are satisfied. The standard also requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. 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 vehicle financing and the sale of service and other insurance contracts; and (5) the performance of vehicle maintenance and repair services and the sale of related parts and accessories. Generally, performance conditions are satisfied when the associated vehicle is either delivered or returned to a customer and customer acceptance has occurred, or over time as the maintenance and repair services are performed. 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). Upon adoption, we accelerated the timing of revenue recognition related to: (1) service and collision repair orders that are incomplete as of a reporting date (“work in process”) and (2) certain retrospective finance and insurance revenue earned in periods subsequent to the completion of the initial performance obligation (“F&I retro revenues”). Work in process revenues are recognized over time based on the completed work to date and F&I retro revenues are recognized when the product contract has been executed with the end customer and are estimated each reporting period based on the expected value method using historical and projected data. F&I retro revenues, which represent variable consideration, subject to constraint, are to be included in the transaction price and recognized when or as the performance obligation is satisfied. 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. Receivables, net in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2019 and December 31, 2018 include approximately $4.8 million and $4.7 million, respectively, related to work in process and contract assets related to F&I retro revenues of approximately $5.9 million and $5.4 million, respectively. Changes in contract assets from December 31, 2018 to June 30, 2019 were primarily due to ordinary business activity. 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, 2018 for further discussion of our revenue recognition policies and processes. |
Income Tax Expense | Income Tax Expense – The overall effective tax rate from continuing operations was 27.4% and 29.6% for the three and six months ended June 30, 2019, respectively, and 32.4% and 29.7% for the three and six months ended June 30, 2018. Income tax expense for the three months ended June 30, 2019 includes a $0.4 million discrete benefit related to the favorable resolution of certain tax matters. Income tax expense for the six months ended June 30, 2019 includes a $1.5 million discrete charge for non-deductible executive officer compensation related to executive transition costs, a $0.2 million discrete charge related to changes in uncertain tax positions and a $0.2 million discrete charge related to vested or exercised stock compensation awards, offset partially by a $0.4 million discrete benefit related to the favorable resolution of certain tax matters. Income tax expense for the three months ended June 30, 2018 includes a $0.6 million discrete charge for non-deductible book goodwill related to dealership dispositions during the period. Income tax expense for the six months ended June 30, 2018 includes a $0.9 million discrete benefit related to vested or exercised stock compensation awards, offset partially by a $0.2 million discrete charge related to changes in uncertain tax positions and a $0.6 million discrete charge for non-deductible book goodwill related to dealership dispositions during the period. Sonic’s effective 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 expects the annual effective tax rate in future periods to fall within a range of 26.0% to 29.0% before the impact, if any, of changes in valuation allowances related to deferred income tax assets or discrete tax adjustments. 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, in addition to Class A Common Stock purchase warrants. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Cumulative Effect of Adjustments for Adoption of Topic 842 | The adoption of ASC 842, “Leases,” did not have a material effect on our unaudited condensed consolidated statements of income or our unaudited condensed consolidated statements of cash flows. The effect of the adoption of ASC 842, “Leases,” on our unaudited condensed consolidated balance sheets as of January 1, 2019 and June 30, 2019 was as follows: Before Impact of ASC 842 Effects of Adoption of ASC 842 After Impact of ASC 842 December 31, 2018 January 1, 2019 Balance Sheet (In thousands) Assets: Property and Equipment, net $ 1,178,489 $ (18,948) $ 1,159,541 Other Intangible Assets, net 69,705 (4,005) 65,700 Right-of-Use Assets — 406,918 406,918 Liabilities: Current lease liabilities $ — $ 48,832 $ 48,832 Other accrued liabilities 257,823 (1,987) 255,836 Long-Term Debt 918,779 (20,557) 898,222 Long-Term Lease Liabilities — 370,647 370,647 Other Long-Term Liabilities 75,887 (2,508) 73,379 Deferred Income Taxes 33,178 (3,034) 30,144 Stockholders' Equity: Retained earnings $ 670,691 $ (7,428) $ 663,263 Adoption New Modifications (1) Amortization As Reported June 30, 2019 (In thousands) Right-of-Use Assets: Finance Leases $ 18,948 $ 38 $ 21,514 $ (1,572) $ 38,928 Operating Leases 387,970 — (33,710) (20,735) 333,525 Total Right-of-Use Assets $ 406,918 $ 38 $ (12,196) $ (22,307) $ 372,453 Current Lease Liabilities: Finance Leases $ 728 $ 3 $ 4,552 $ (133) $ 5,150 Operating Leases 48,104 89 (1,615) (2,101) 44,477 Total Current Lease Liabilities $ 48,832 $ 92 $ 2,937 $ (2,234) $ 49,627 Long-Term Lease Liabilities: Finance Leases $ 19,829 $ 35 $ 16,935 $ (579) $ 36,220 Operating Leases 350,818 — (32,200) (19,609) 299,009 Total Long-Term Lease Liabilities $ 370,647 $ 35 $ (15,265) $ (20,188) $ 335,229 |
Lease Expenses | Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Lease Expense (In thousands) Finance lease expense: Amortization of right-of-use assets $ 862 $ 1,572 Interest on lease liabilities 1,339 2,515 Operating lease expense (1) 17,057 35,054 Short-term lease expense (1) 473 900 Variable lease expense 683 797 Sublease income (3,806) (7,384) Total $ 16,608 $ 33,454 (1) Included in operating cash flows in the accompanying unaudited condensed consolidated statements of cash flows. Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 (In thousands) Other Information Cash paid for amounts included in the measurement of lease liabilities: Financing cash flows for finance leases $ 502 $ 782 Operating cash flows for finance leases $ 1,339 $ 2,515 Operating cash flows for operating leases $ 18,315 $ 36,784 Right-of-use assets obtained in exchange for lease liabilities: Finance leases $ 9,290 $ 19,273 Operating leases (1) $ 1,541 $ (9,170) (1) Includes the impact of reclassification of right-of-use assets from operating leases to finance leases due to remeasurement. June 30, 2019 Other Information Weighted-average remaining lease term (in years): Finance leases 11.22 Operating leases 9.66 Weighted-average discount rate: Finance leases 18.33 % Operating leases 6.87 % |
Lessee, Operating Lease, Liability, Maturity | Undiscounted Lease Cash Flows Under ASC 842 as of June 30, 2019 Finance Operating Receipts from Subleases Year Ending December 31, (In thousands) 2019 $ 6,965 $ 33,956 $ (8,045) 2020 6,535 63,257 (11,545) 2021 6,667 55,960 (9,299) 2022 6,667 48,103 (6,612) 2023 6,719 46,335 (6,612) Thereafter 49,922 235,548 (9,744) Total $ 83,475 $ 483,159 $ (51,857) Less: Present value discount (42,105) (139,673) Lease liabilities $ 41,370 $ 343,486 For comparison purposes the following table provides the future minimum lease payments as presented in our Annual Report on Form 10-K for the year ended December 31, 2018 in accordance with ASC 840, “Leases,”. Undiscounted Lease Cash Flows Under ASC 842 as of December 31, 2018 Finance Operating Receipts from Subleases Year Ending December 31, (In thousands) 2019 $ 6,985 $ 82,177 $ (13,430) 2020 7,165 66,023 (10,508) 2021 7,357 51,501 (8,534) 2022 7,374 37,152 (7,232) 2023 7,609 33,486 (7,013) Thereafter 482,390 127,026 (13,116) Total minimum lease payments (receipts) $ 518,880 $ 397,365 $ (59,833) Less: Present value discount (498,291) Lease liabilities $ 20,589 Current portion of lease liabilities $ 643 Long-term portion of lease liabilities $ 19,946 |
Finance Lease, Liability, Maturity | Undiscounted Lease Cash Flows Under ASC 842 as of June 30, 2019 Finance Operating Receipts from Subleases Year Ending December 31, (In thousands) 2019 $ 6,965 $ 33,956 $ (8,045) 2020 6,535 63,257 (11,545) 2021 6,667 55,960 (9,299) 2022 6,667 48,103 (6,612) 2023 6,719 46,335 (6,612) Thereafter 49,922 235,548 (9,744) Total $ 83,475 $ 483,159 $ (51,857) Less: Present value discount (42,105) (139,673) Lease liabilities $ 41,370 $ 343,486 For comparison purposes the following table provides the future minimum lease payments as presented in our Annual Report on Form 10-K for the year ended December 31, 2018 in accordance with ASC 840, “Leases,”. Undiscounted Lease Cash Flows Under ASC 842 as of December 31, 2018 Finance Operating Receipts from Subleases Year Ending December 31, (In thousands) 2019 $ 6,985 $ 82,177 $ (13,430) 2020 7,165 66,023 (10,508) 2021 7,357 51,501 (8,534) 2022 7,374 37,152 (7,232) 2023 7,609 33,486 (7,013) Thereafter 482,390 127,026 (13,116) Total minimum lease payments (receipts) $ 518,880 $ 397,365 $ (59,833) Less: Present value discount (498,291) Lease liabilities $ 20,589 Current portion of lease liabilities $ 643 Long-term portion of lease liabilities $ 19,946 |
Business Acquisitions and Dis_2
Business Acquisitions and Dispositions (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Business Combinations [Abstract] | |
Revenues and Other Activities Associated with Disposed Dealerships Classified as Discontinued Operations | Revenues and other activities associated with disposed franchised dealerships classified as discontinued operations were as follows: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 (In thousands) Income (loss) from operations $ (213) $ (191) $ (393) $ (330) Lease exit accrual adjustments and charges — (106) — (215) Pre-tax income (loss) $ (213) $ (297) $ (393) $ (545) Total revenues $ — $ — $ — $ — |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Inventory Disclosure [Abstract] | |
Components of Inventories | Inventories consist of the following: June 30, 2019 December 31, 2018 (In thousands) New vehicles $ 1,001,471 $ 1,027,727 Used vehicles 311,417 293,179 Service loaners 147,451 141,542 Parts, accessories and other 61,228 66,013 Net inventories $ 1,521,567 $ 1,528,461 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Components of Property and Equipment, Net | Property and equipment, net consists of the following: June 30, 2019 December 31, 2018 (In thousands) Land $ 382,349 $ 381,527 Building and improvements (1) 994,101 989,872 Software and computer equipment 97,258 116,348 Parts and service equipment 119,895 108,040 Office equipment and fixtures 107,392 96,622 Company vehicles 9,207 9,139 Construction in progress 32,390 59,523 Total, at cost 1,742,592 1,761,071 Less accumulated depreciation (589,108) (575,720) Subtotal 1,153,484 1,185,351 Less assets held for sale (2) (22,542) (6,862) Property and equipment, net $ 1,130,942 $ 1,178,489 (1) As discussed in Note 1, “Summary of Significant Accounting Policies,” due to the adoption of ASC 842, “Leases,” effective January 1, 2019, previously existing capital lease assets have been reclassified from property and equipment, net, to right-of-use assets in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2019. (2) Classified in other current assets in the accompanying unaudited condensed consolidated balance sheets. |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Debt Instrument [Line Items] | |
Long-Term Debt | Long-term debt consists of the following: June 30, 2019 December 31, 2018 (In thousands) 2016 Revolving Credit Facility (1) $ — $ — 5.0% Senior Subordinated Notes due 2023 (the “5.0% Notes”) 289,273 289,273 6.125% Senior Subordinated Notes due 2027 (the “6.125% Notes”) 250,000 250,000 Mortgage notes to finance companies - fixed rate, bearing interest from 3.51% to 7.03% 208,788 215,196 Mortgage notes to finance companies - variable rate, bearing interest at 1.50 to 2.90 percentage points above one-month or three-month LIBOR 175,933 180,959 Other (2) — 20,589 Subtotal $ 923,994 $ 956,017 Debt issuance costs (9,743) (10,934) Total debt $ 914,251 $ 945,083 Less current maturities of long-term debt (62,968) (26,304) Long-term debt $ 851,283 $ 918,779 (1) The interest rate on the 2016 Revolving Credit Facility (as defined below) was 200 basis points and 250 basis points above LIBOR at June 30, 2019 and December 31, 2018, respectively. (2) As discussed in Note 1, “Summary of Significant Accounting Policies,” due to the adoption of ASC 842, “Leases,” effective January 1, 2019, previously existing capital lease liabilities have been reclassified from current maturities of long-term debt and long-term debt to current lease liabilities and long-term lease liabilities in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2019. |
Financial Covenants Include Required Specified Ratios | were in compliance with the financial covenants under the 2016 Credit Facilities as of June 30, 2019. The financial covenants include required specified ratios (as each is defined in the 2016 Credit Facilities) of: Covenant Minimum Consolidated Liquidity Ratio Minimum Consolidated Fixed Charge Coverage Ratio Maximum Consolidated Total Lease Adjusted Leverage Ratio Required ratio 1.05 1.20 5.75 June 30, 2019 actual 1.17 1.55 4.20 |
Summary of Interest Received and Paid under Term of Cash Flow Swap | Under the terms of the interest rate cap agreements, we will receive interest based on the following: Notional Cap Rate (1) Receive Rate (2) Start Date End Date (In millions) $ 375.0 2.000% one-month LIBOR July 1, 2018 June 30, 2019 $ 375.0 3.000% one-month LIBOR July 1, 2018 June 30, 2019 $ 312.5 2.000% one-month LIBOR July 1, 2019 June 30, 2020 $ 250.0 3.000% one-month LIBOR July 1, 2019 June 30, 2020 $ 225.0 3.000% one-month LIBOR July 1, 2020 June 30, 2021 $ 150.0 2.000% one-month LIBOR July 1, 2020 July 1, 2021 $ 250.0 3.000% one-month LIBOR July 1, 2021 July 1, 2022 (1) Under these interest rate cap agreements, no payment from the counterparty will occur unless the stated receive rate exceeds the stated cap rate, in which case a net payment to us from the counterparty, based on the spread between the receive rate and the cap rate, will be recognized as a reduction of interest expense, other, net in the accompanying unaudited condensed consolidated statements of income. (2) The one-month LIBOR rate was approximately 2.398% at June 30, 2019. |
5.0% Notes | |
Debt Instrument [Line Items] | |
Debt Instrument Redemption | We may redeem the remaining outstanding 5.0% Notes, in whole or in part, at any time on at the following redemption prices, which are expressed as percentages of the principal amount: Redemption Price Beginning on May 15, 2019 101.667 % Beginning on May 15, 2020 100.833 % Beginning on May 15, 2021 and thereafter 100.000 % |
6.125% Notes | |
Debt Instrument [Line Items] | |
Debt Instrument Redemption | We may redeem the 6.125% Notes, in whole or in part, at any time on or after March 15, 2022 at the following redemption prices, which are expressed as percentages of the principal amount: Redemption Price Beginning on March 15, 2022 103.063 % Beginning on March 15, 2023 102.042 % Beginning on March 15, 2024 101.021 % Beginning on March 15, 2025 and thereafter 100.000 % |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Summary of Lease Exit Accruals | A summary of the activity of operating lease exit accruals consists of the following: (In thousands) Balance at December 31, 2018 $ 4,634 Effect of adoption of ASC 842, “Leases” (4,634) Balance at June 30, 2019 $ — |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Assets and Liabilities Recorded at Fair Value | Assets and liabilities recorded at fair value in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2019 and December 31, 2018 are as follows: Fair Value Based on Significant Other Observable Inputs (Level 2) June 30, 2019 December 31, 2018 (In thousands) Assets: Cash surrender value of life insurance policies (1) $ 31,836 $ 31,395 Interest rate caps designated as hedges (2) 703 4,839 Total assets $ 32,539 $ 36,234 Liabilities: Deferred compensation plan (3) $ 17,602 $ 19,848 Total liabilities $ 17,602 $ 19,848 (1) Included in other assets in the accompanying unaudited condensed consolidated balance sheets. (2) As of June 30, 2019, approximately $0.4 million and $0.3 million were included in other current assets and other assets, respectively, in the accompanying unaudited condensed consolidated balance sheets. As of December 31, 2018, approximately $1.8 million and $3.0 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. |
Fair Value and Carrying Value of Significant Fixed Rate Long-Term Debt | At June 30, 2019 and December 31, 2018, the fair value and carrying value of Sonic’s significant fixed rate long-term debt were as follows: June 30, 2019 December 31, 2018 Fair Value Carrying Value Fair Value Carrying Value (In thousands) 5.0% Notes (1) $ 290,719 $ 289,273 $ 262,515 $ 289,273 6.125% Notes (1) $ 246,250 $ 250,000 $ 216,250 $ 250,000 Mortgage Notes (2) $ 210,435 $ 208,788 $ 218,402 $ 215,196 Other (2) (3) $ — $ — $ 20,437 $ 20,588 (1) As determined by market quotations as of June 30, 2019 and December 31, 2018, respectively (Level 1). (2) As determined by discounted cash flows (Level 3) based on estimated current market interest rates for comparable instruments. (3) As discussed in Note 1, “Summary of Significant Accounting Policies,” due to the adoption of ASC 842, “Leases,” effective January 1, 2019, previously existing capital lease liabilities have been reclassified from current maturities of long-term debt and long-term debt to current lease liabilities and long-term lease liabilities in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2019. |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Loss) (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Equity [Abstract] | |
Summary of Changes in Accumulated Other Comprehensive Income (Loss) | The changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2019 are as follows: Gains and Defined Total (In thousands) Balance at December 31, 2018 $ 3,034 $ 1,199 $ 4,233 Other comprehensive income (loss) before reclassifications (1) (1,988) — (1,988) Amounts reclassified out of accumulated other comprehensive income (loss) (2) (1,285) — (1,285) Net current-period other comprehensive income (loss) (3,273) — (3,273) Balance at June 30, 2019 $ (239) $ 1,199 $ 960 (1) Net of tax benefit of $871 related to losses on cash flow hedges. |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
Summary of Reportable Operating Segment | Reportable segment revenues and segment income (loss) for the three and six months ended June 30, 2019 and 2018 are as follows: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 (In thousands) Revenues: Franchised Dealerships Segment $ 2,322,400 $ 2,325,583 $ 4,461,971 $ 4,594,852 EchoPark Segment 291,681 180,166 541,248 311,671 Total consolidated revenues $ 2,614,081 $ 2,505,749 $ 5,003,219 $ 4,906,523 Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 (In thousands) Segment income (loss) (1): Franchised Dealerships Segment (2) $ 48,326 $ 66,049 $ 121,856 $ 89,885 EchoPark Segment (3) 2,129 (27,347) 2,688 (41,672) Total segment income (loss) 50,455 38,702 124,544 48,213 Interest expense, other, net (13,628) (13,375) (26,481) (26,831) Other income (expense), net (5) 17 95 106 Income (loss) from continuing operations before taxes $ 36,822 $ 25,344 $ 98,158 $ 21,488 (1) Segment income (loss) for each segment is defined as operating income (loss) less interest expense, floor plan. (2) For the three months ended June 30, 2018, the above amount includes approximately $38.0 million of net gain on the disposal of franchised dealerships and approximately $2.6 million of benefit related to lease exit adjustments, offset partially by approximately $10.3 million of impairment expense and approximately $3.1 million of storm-related physical damage and legal costs. For the six months ended June 30, 2019, the above amount includes approximately $46.7 million of net gain on the disposal of franchised dealerships and approximately $6.3 million of executive transition costs. For the six months ended June 30, 2018, the above amount includes approximately $39.2 million of net gain on the disposal of franchised dealerships, offset partially by approximately $4.6 million of storm-related physical damage and legal costs, approximately $2.2 million of lease exit charges and approximately $14.0 million of impairment expense. (3) For the three months ended June 30, 2018, the above amount includes approximately $23.3 million of non-recurring compensation-related charges. |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Cumulative Effect of Adjustments for Adoption of ASC 606 (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Jan. 01, 2019 | Dec. 31, 2018 | |
Revenues: | ||||||
Revenues | $ 2,614,081,000 | $ 2,505,749,000 | $ 5,003,219,000 | $ 4,906,523,000 | ||
Cost of Sales: | ||||||
Cost of Sales | (2,232,770,000) | (2,143,374,000) | (4,262,897,000) | (4,191,649,000) | ||
Operating income (loss) | 62,973,000 | 50,647,000 | 150,288,000 | 70,835,000 | ||
Assets: | ||||||
Receivables, net | 364,026,000 | 364,026,000 | $ 438,186,000 | |||
Liabilities: | ||||||
Other accrued liabilities | 243,869,000 | 243,869,000 | $ 255,836,000 | 257,823,000 | ||
Deferred income taxes | 23,416,000 | 23,416,000 | 33,178,000 | |||
Stockholders' Equity: | ||||||
Retained earnings | 723,469,000 | 723,469,000 | $ 663,263,000 | 670,691,000 | ||
Parts, service and collision repair | ||||||
Revenues: | ||||||
Revenues | 355,312,000 | 346,754,000 | 696,742,000 | 698,512,000 | ||
Cost of Sales: | ||||||
Cost of Sales | (184,766,000) | (179,703,000) | (362,960,000) | (361,833,000) | ||
Finance, insurance and other, net | ||||||
Revenues: | ||||||
Revenues | 118,349,000 | $ 104,104,000 | 224,587,000 | $ 197,829,000 | ||
ASU 2014-09 | Finance, insurance and other, net | ||||||
Assets: | ||||||
Contract assets | $ 5,900,000 | $ 5,900,000 | $ 5,400,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) - USD ($) | Jan. 01, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Leases, right-of-use asset | $ 406,900,000 | ||
Right-of-use asset | 18,948,000 | $ 38,928,000 | $ 18,900,000 |
Lease liabilities | 419,500,000 | 343,486 | |
Lease liabilities | 20,600,000 | 41,370 | |
Lease exit costs accrual | 0 | 4,634,000 | |
Intangible assets | 65,700,000 | 64,300,000 | 69,705,000 |
Right-of-use asset | 387,970,000 | $ 333,525,000 | 0 |
ASU 2016-02 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Impairment loss | 10,500,000 | ||
Intangible assets | $ (4,005,000) | $ (4,000,000) |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Balance Sheets (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
Assets: | |||
Property and Equipment, net | $ 1,130,942 | $ 1,159,541 | $ 1,178,489 |
Other Intangible Assets, net | 64,300 | 65,700 | 69,705 |
Right-of-Use Assets | 406,918 | 0 | |
Liabilities: | |||
Current lease liabilities | 48,832 | 0 | |
Other accrued liabilities | 243,869 | 255,836 | 257,823 |
Long-Term Debt | 851,283 | 898,222 | 918,779 |
Long-Term Lease Liabilities | 370,647 | 0 | |
Other Long-Term Liabilities | 68,265 | 73,379 | 75,887 |
Deferred Income Taxes | 30,144 | 33,178 | |
Stockholders' Equity: | |||
Retained earnings | $ 723,469 | 663,263 | 670,691 |
ASU 2016-02 | |||
Assets: | |||
Property and Equipment, net | (18,948) | ||
Other Intangible Assets, net | (4,005) | $ (4,000) | |
Right-of-Use Assets | 406,918 | ||
Liabilities: | |||
Current lease liabilities | 48,832 | ||
Other accrued liabilities | (1,987) | ||
Long-Term Debt | (20,557) | ||
Long-Term Lease Liabilities | 370,647 | ||
Other Long-Term Liabilities | (2,508) | ||
Deferred Income Taxes | (3,034) | ||
Stockholders' Equity: | |||
Retained earnings | $ (7,428) |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Activity (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2019 | Jan. 01, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||||
Finance Lease, Right-of-Use Asset | $ 38,928 | $ 38,928 | $ 18,948 | $ 18,900 |
Operating Lease, Right-of-Use Asset | 333,525 | 333,525 | 387,970 | 0 |
Leases, Right-of-Use Asset | 406,900 | |||
Finance Lease, Liability, Current | 5,150 | 5,150 | 728 | 0 |
Operating Lease, Liability, Current | 44,477 | 44,477 | 48,104 | 0 |
Finance Lease, Liability, Noncurrent | 36,220 | 36,220 | 19,829 | 0 |
Operating Lease, Liability, Noncurrent | 299,009 | 299,009 | 350,818 | $ 0 |
Finance Lease, Right-of-Use Asset, New Leases | 38 | |||
Operating Lease, Right-of-Use Asset, New Leases | 0 | |||
Finance Lease, Liability, Current, New Leases | 3 | |||
Operating Lease, Liability, Current, New Leases | 89 | |||
Finance Lease, Liability, Noncurrent, New Leases | 35 | |||
Operating Lease, Liability, Noncurrent, New Leases | 0 | |||
Finance Lease, Right-of-Use Asset, Modifications | 21,514 | |||
Operating Lease, Right-of-Use Asset, Modifications | (33,710) | |||
Finance Lease, Liability, Current, Modifications | 4,552 | |||
Operating Lease, Liability, Current, Modifications | (1,615) | |||
Finance Lease, Liability, Noncurrent, Modifications | 16,935 | |||
Operating Lease, Liability, Noncurrent, Modifications | $ (32,200) | |||
Finance Lease, Right-of-Use Asset, Amortization | $ (862) | (1,572) | ||
Operating Lease, Right-of-Use Asset, Amortization | (20,735) | |||
Finance Lease, Liability, Current, Amortization | (133) | |||
Operating Lease, Liability, Current, Amortization | (2,101) | |||
Finance Lease, Liability, Noncurrent, Amortization | (579) | |||
Operating Lease, Liability, Noncurrent, Amortization | $ (19,609) |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Lease Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Lease, Cost [Abstract] | ||
Total | $ 16,608 | $ 33,454 |
Sublease income | (3,806) | (7,384) |
Variable lease expense | 683 | 797 |
Short-term lease expense (1) | 473 | 900 |
Interest on lease liabilities | 1,339 | 2,515 |
Amortization of right-of-use assets | 862 | 1,572 |
Operating lease expense (1) | $ 17,057 | $ 35,054 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Other Information (Details) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019USD ($) | Jun. 30, 2019USD ($) | |
Accounting Policies [Abstract] | ||
Financing cash flows for finance leases | $ 502 | $ 782 |
Operating cash flows for finance leases | 1,339 | 2,515 |
Operating cash flows for operating leases | 18,315 | 36,784 |
Right-of-use assets obtained in exchange for new lease liabilities: Finance leases | 9,290 | 19,273 |
Right-of-use assets obtained in exchange for new lease liabilities: Operating leases | $ (1,541) | $ (9,170) |
Weighted-average remaining lease term (in years): Finance leases | 11 years 2 months 19 days | 11 years 2 months 19 days |
Weighted-average remaining lease term (in years): Operating leases | 9 years 7 months 28 days | 9 years 7 months 28 days |
Weighted-average discount rate: Finance leases | 18.33% | 18.33% |
Weighted-average discount rate: Operating leases | 6.87% | 6.87% |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Undiscounted Lease Cash Flows (Details) - USD ($) | Jun. 30, 2019 | Jan. 01, 2019 |
Finance | ||
2019 | $ 6,965 | |
2020 | 6,535 | |
2021 | 6,667 | |
2022 | 6,667 | |
2023 | 6,719 | |
Thereafter | 49,922 | |
Total | 83,475 | |
Less: Present value discount | (42,105) | |
Lease liabilities | 41,370 | $ 20,600,000 |
Operating | ||
2019 | 33,956 | |
2020 | 63,257 | |
2021 | 55,960 | |
2022 | 48,103 | |
2023 | 46,335 | |
Thereafter | 235,548 | |
Total | 483,159 | |
Less: Present value discount | 139,673 | |
Lease liabilities | 343,486 | $ 419,500,000 |
Lessor, Operating Lease, Payments, Fiscal Year Maturity [Abstract] | ||
Lessor, Operating Lease, Payments to be Received, Next Twelve Months | 8,045,000 | |
Lessor, Operating Lease, Payments to be Received, Two Years | 11,545,000 | |
Lessor, Operating Lease, Payments to be Received, Three Years | 9,299,000 | |
Lessor, Operating Lease, Payments to be Received, Four Years | 6,612,000 | |
Lessor, Operating Lease, Payments to be Received, Five Years | 6,612,000 | |
Lessor, Operating Lease, Payments to be Received, Thereafter | 9,744,000 | |
Lessor, Operating Lease, Payments to be Received | $ 51,857,000 |
Summary of Significant Accou_11
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 |
Schedule of Equity Method Investments [Line Items] | |||||
Effective Income Tax Rate Reconciliation, Tax Settlement, State and Local, Amount | $ 400 | $ 400 | |||
Discrete charge for non-deductible disposition | $ 600 | $ 600 | |||
Percentage of dealership that is accounted for under the equity method | 50.00% | 50.00% | 50.00% | ||
Contract work in process | $ 4,700 | $ 4,800 | |||
Effective tax rate from continuing operations | 27.40% | 32.40% | 29.60% | 29.70% | |
Discrete charge for non-deductible executive compensation, transition costs | $ 1,500 | $ 1,500 | |||
Tax expense for uncertain tax positions | 200 | $ 200 | |||
Discrete benefit related to vested or exercised stock compensation | 200 | 900 | |||
Income benefit | $ (10,071) | $ (8,222) | $ (29,058) | $ (6,380) | |
Minimum | |||||
Schedule of Equity Method Investments [Line Items] | |||||
Expected annual effective tax rate in future periods | 26.00% | ||||
Maximum | |||||
Schedule of Equity Method Investments [Line Items] | |||||
Expected annual effective tax rate in future periods | 29.00% | ||||
Dealership | |||||
Schedule of Equity Method Investments [Line Items] | |||||
Percentage of dealership that is accounted for under the equity method | 50.00% | 50.00% | |||
ASU 2014-09 | Finance, insurance and other, net | |||||
Schedule of Equity Method Investments [Line Items] | |||||
Contract assets | $ 5,400 | $ 5,900 | $ 5,900 |
Summary of Significant Accou_12
Summary of Significant Accounting Policies - Topic 840 (Details) $ in Thousands | Dec. 31, 2018USD ($) |
Finance | |
2019 | $ 6,985 |
2020 | 7,165 |
2021 | 7,357 |
2022 | 7,374 |
2023 | 7,609 |
Thereafter | 482,390 |
Finance Leases, Future Minimum Payments Due, Total | 518,880 |
Finance Lease, Interest Expense ASC 840 | (498,291) |
Finance Lease, PV of Min Pmts ASC 840 | 20,589 |
Finance Lease, ST Lease Liabilities ASC 840 | 643 |
Finance Lease, LT Lease Liabilities ASC 840 | 19,946 |
Operating | |
2019 | (82,177) |
2020 | (66,023) |
2021 | (51,501) |
2022 | (37,152) |
2023 | (33,486) |
2024 | (127,026) |
Operating Leases, Future Minimum Payments Due | 397,365 |
Operating Leases, Future Minimum Payments Receivable [Abstract] | |
Operating Leases, Future Minimum Payments Receivable, Current | 13,430 |
Operating Leases, Future Minimum Payments Receivable, in Two Years | 10,508 |
Operating Leases, Future Minimum Payments Receivable, in Three Years | 8,534 |
Operating Leases, Future Minimum Payments Receivable, in Four Years | 7,232 |
Operating Leases, Future Minimum Payments Receivable, in Five Years | 7,013 |
Operating Leases, Future Minimum Payments Receivable, Thereafter | 13,116 |
Operating Leases, Future Minimum Payments Receivable | $ 59,833 |
Business Acquisitions and Dis_3
Business Acquisitions and Dispositions - Additional Information (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2018USD ($)Business | Jun. 30, 2019USD ($)Business | Jun. 30, 2018USD ($)Business | |
Business Combinations [Abstract] | |||
Number of acquired franchises | Business | 0 | ||
Business Acquisition [Line Items] | |||
Number of franchises disposed | Business | 3 | 4 | |
Net cash generated from disposition | $ | $ 121,300 | ||
Proceeds from sales of dealerships | $ | $ 121,337 | $ 122,404 | |
Luxury franchise | |||
Business Acquisition [Line Items] | |||
Number of franchises terminated | Business | 1 | 2 | |
Mid-line import franchise | |||
Business Acquisition [Line Items] | |||
Net cash generated from disposition | $ | $ 122,400 |
Business Acquisitions and Dis_4
Business Acquisitions and Dispositions - Revenues and Other Activities Associated with Disposed Dealerships Classified as Discontinued Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Pre-tax income (loss) | $ (213) | $ (297) | $ (393) | $ (545) |
Disposed dealerships classified as discontinued operations | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Income (loss) from operations | (213) | (191) | (393) | (330) |
Lease exit accrual adjustments and charges | 0 | (106) | 0 | (215) |
Pre-tax income (loss) | (213) | (297) | (393) | (545) |
Total revenues | $ 0 | $ 0 | $ 0 | $ 0 |
Business Acquisitions and Dis_5
Business Acquisitions and Dispositions - Revenues and Other Activities Associated with Disposed Dealerships That Remain in Continuing Operations (Details) - Disposed dealerships that remain in continuing operations - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Income (loss) from operations | $ (339) | $ 739 | $ (1,842) | $ (5,505) |
Gain (loss) on disposal | (356) | 38,422 | 46,394 | 39,613 |
Lease exit accrual adjustments and charges | 0 | 2 | 169 | (18) |
Pre-tax income (loss) | (695) | 39,163 | 44,721 | 34,090 |
Total revenues | $ 0 | $ 30,751 | $ 26,473 | $ 108,777 |
Inventories - Components of Inv
Inventories - Components of Inventories (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
New vehicles | $ 1,001,471 | $ 1,027,727 |
Used vehicles | 311,417 | 293,179 |
Service loaners | 147,451 | 141,542 |
Parts, accessories and other | 61,228 | 66,013 |
Net inventories | $ 1,521,567 | $ 1,528,461 |
Property and Equipment - Compon
Property and Equipment - Components of Property and Equipment, Net (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Line Items] | |||
Property and equipment | $ 1,742,592 | $ 1,761,071 | |
Less accumulated depreciation | (589,108) | (575,720) | |
Subtotal | 1,153,484 | 1,185,351 | |
Less assets held for sale | (22,542) | (6,862) | |
Property and equipment, net | 1,130,942 | $ 1,159,541 | 1,178,489 |
Land | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment | 382,349 | 381,527 | |
Building and improvements | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment | 994,101 | 989,872 | |
Software and computer equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment | 97,258 | 116,348 | |
Parts and service equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment | 119,895 | 108,040 | |
Office equipment and fixtures | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment | 107,392 | 96,622 | |
Company vehicles | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment | 9,207 | 9,139 | |
Construction in progress | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment | $ 32,390 | $ 59,523 |
Property and Equipment - Additi
Property and Equipment - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | ||||
Capital expenditures | $ 20,600 | $ 33,900 | $ 51,200 | $ 99,600 |
Impairment charges | $ 0 | $ 10,317 | $ 1,952 | $ 13,960 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets - Additional Information (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill | $ 487,306 | $ 509,592 |
Net of accumulated impairment losses | 797,600 | 797,600 |
Lease agreements | ||
Finite-Lived Intangible Assets [Line Items] | ||
Definite life intangibles | 4,000 | |
Franchise assets | ||
Finite-Lived Intangible Assets [Line Items] | ||
Franchise assets | $ 64,300 | $ 65,700 |
Long-Term Debt - Long-Term Debt
Long-Term Debt - Long-Term Debt (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Jan. 01, 2019 | Dec. 31, 2018 | Mar. 10, 2017 | May 09, 2013 |
Debt Instrument [Line Items] | |||||
Other | $ 0 | $ 20,589 | |||
Subtotal | 923,994 | 956,017 | |||
Debt issuance costs | (9,743) | (10,934) | |||
Total debt | 914,251 | 945,083 | |||
Less current maturities | (62,968) | (26,304) | |||
Long-term debt | 851,283 | $ 898,222 | 918,779 | ||
Mortgage notes | |||||
Debt Instrument [Line Items] | |||||
Mortgage notes to finance companies - fixed rate, bearing interest from 3.51% to 7.03% | 208,788 | 215,196 | |||
Mortgage notes to finance companies - variable rate, bearing interest at 1.50 to 2.90 percentage points above one-month or three-month LIBOR | 175,933 | 180,959 | |||
Subtotal | $ 384,700 | ||||
Mortgage notes | Minimum | |||||
Debt Instrument [Line Items] | |||||
Mortgage notes to finance companies-fixed rate, percentage | 3.51% | ||||
Mortgage notes to finance companies-variable rate, percentage | 1.50% | ||||
Mortgage notes | Maximum | |||||
Debt Instrument [Line Items] | |||||
Mortgage notes to finance companies-fixed rate, percentage | 7.03% | ||||
Mortgage notes to finance companies-variable rate, percentage | 2.90% | ||||
2016 Revolving Credit Facility | |||||
Debt Instrument [Line Items] | |||||
2016 Revolving Credit Facility | $ 0 | $ 0 | |||
Interest rate | 2.50% | 2.25% | |||
5.0% Senior Subordinate Notes due 2023 | |||||
Debt Instrument [Line Items] | |||||
Senior Subordinated Notes | $ 289,273 | $ 289,273 | |||
Total debt | $ 289,273 | 289,273 | |||
Stated interest rate | 5.00% | 5.00% | |||
6.125% Senior Subordinate Notes due 2027 | |||||
Debt Instrument [Line Items] | |||||
Senior Subordinated Notes | $ 250,000 | 250,000 | |||
Total debt | $ 250,000 | $ 250,000 | |||
Stated interest rate | 6.125% | 6.125% |
Long-Term Debt - Debt Redemptio
Long-Term Debt - Debt Redemption (Details) | 6 Months Ended |
Jun. 30, 2019 | |
5.0% Notes | Period Two | |
Debt Instrument, Redemption [Line Items] | |
Redemption percentage of principal amount | 101.667% |
5.0% Notes | Period Three | |
Debt Instrument, Redemption [Line Items] | |
Redemption percentage of principal amount | 100.833% |
5.0% Notes | Period Four | |
Debt Instrument, Redemption [Line Items] | |
Redemption percentage of principal amount | 100.00% |
6.125% Notes | Period One | |
Debt Instrument, Redemption [Line Items] | |
Redemption percentage of principal amount | 103.063% |
6.125% Notes | Period Two | |
Debt Instrument, Redemption [Line Items] | |
Redemption percentage of principal amount | 102.042% |
6.125% Notes | Period Three | |
Debt Instrument, Redemption [Line Items] | |
Redemption percentage of principal amount | 101.021% |
6.125% Notes | Period Four | |
Debt Instrument, Redemption [Line Items] | |
Redemption percentage of principal amount | 100.00% |
Long-Term Debt - 2016 Credit Fa
Long-Term Debt - 2016 Credit Facilities (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Dec. 31, 2018 | |
2016 Revolving Credit Facility | ||
Line of Credit Facility [Line Items] | ||
2016 Revolving Credit Facility | $ 0 | $ 0 |
Revolving Credit Facility | 2016 Revolving Credit Facility | ||
Line of Credit Facility [Line Items] | ||
Current borrowing capacity | 250,000,000 | |
Maximum borrowing capacity | 300,000,000 | |
Borrowing base | 217,200,000 | |
Letters of credit outstanding amount | 14,600,000 | |
Borrowing availability amount | 202,600,000 | |
Revolving Credit Facility | 2016 Credit Facilities | ||
Line of Credit Facility [Line Items] | ||
2016 Revolving Credit Facility | 0 | |
Revolving Credit Facility | 2016 New Vehicle Floor Plan Facility and 2016 Used Vehicle Floor Plan Facility | ||
Line of Credit Facility [Line Items] | ||
Current borrowing capacity | 1,015,000,000 | |
Maximum borrowing capacity | $ 1,265,000,000 | |
Maximum aggregate commitments allocated to commitments under the 2016 Used Vehicle Floor Plan Facility | 30.00% |
Long-Term Debt - Notes Narrativ
Long-Term Debt - Notes Narrative (Details) - USD ($) | Mar. 10, 2017 | Sep. 30, 2016 | May 09, 2013 | Jun. 30, 2019 | Dec. 31, 2018 |
Debt Instrument [Line Items] | |||||
Debt Instrument Percentage Of Outstanding Principal Amount Redeemable Upon Event Of Default | 25.00% | ||||
Debt outstanding | $ 923,994,000 | $ 956,017,000 | |||
Mortgage notes | |||||
Debt Instrument [Line Items] | |||||
Debt weighted average interest rate on note | 4.64% | ||||
Debt outstanding | $ 384,700,000 | ||||
5.0% Notes | |||||
Debt Instrument [Line Items] | |||||
Notes Redemption Price Percentage Of Par Value Due To Change Of Control | 101.00% | ||||
Stated interest rate | 5.00% | 5.00% | |||
Principal amount | $ 300,000,000 | ||||
Notes issued, percent of principal | 100.00% | ||||
Outstanding notes repurchased amount | $ 10,700,000 | ||||
Repurchase amount paid in cash, plus accrued and unpaid interest related thereto | $ 10,600,000 | ||||
Maximum dividend (usd per share) | $ 0.10 | ||||
6.125% Notes | |||||
Debt Instrument [Line Items] | |||||
Debt Instrument, Redemption Price, Percentage | 106.125% | ||||
Notes Redemption Price Percentage Of Par Value Due To Change Of Control | 101.00% | ||||
Stated interest rate | 6.125% | 6.125% | |||
Principal amount | $ 250,000,000 | ||||
Notes issued, percent of principal | 100.00% | ||||
Maximum dividend (usd per share) | $ 0.12 | ||||
Minimum | 5.0% Notes | |||||
Debt Instrument [Line Items] | |||||
Debt Instrument Other Outstanding Indebtedness In Excess | $ 50,000,000 | ||||
Maximum | 6.125% Notes | |||||
Debt Instrument [Line Items] | |||||
Redemption percentage of principal amount | 35.00% |
Long-Term Debt - Covenants (Det
Long-Term Debt - Covenants (Details) $ in Millions | Jun. 30, 2019USD ($) |
Line of Credit Facility [Line Items] | |
Minimum Consolidated Liquidity Ratio | 117.00% |
Minimum Consolidated Fixed Charge Coverage Ratio | 155.00% |
Maximum Consolidated Total Lease Adjusted Leverage Ratio | 420.00% |
2016 Credit Facilities | |
Line of Credit Facility [Line Items] | |
Net income and retained earnings free of restrictions | $ 206.8 |
Minimum EBTDAR to rent ratio | 450.00% |
Required ratio | |
Line of Credit Facility [Line Items] | |
Minimum Consolidated Liquidity Ratio | 105.00% |
Minimum Consolidated Fixed Charge Coverage Ratio | 120.00% |
Maximum Consolidated Total Lease Adjusted Leverage Ratio | 575.00% |
Required ratio | 2016 Credit Facilities | |
Line of Credit Facility [Line Items] | |
Minimum EBTDAR to rent ratio | 150.00% |
Long-Term Debt - Derivative Ins
Long-Term Debt - Derivative Instruments and Hedging Activities (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Derivatives, Fair Value [Line Items] | |||||||
Derivative Cash Premium Paid | $ 2.8 | $ 1.9 | |||||
Derivative Instrument, Unamortized Premium | $ 4.3 | $ 4.3 | $ 4.6 | ||||
Incremental interest expense | 0.5 | $ 0 | 0.9 | $ 0.1 | |||
Net benefit expected to be reclassified | 2.4 | 2.4 | |||||
Interest rate swap and interest rate cap | Derivative instruments and hedging activities | |||||||
Derivatives, Fair Value [Line Items] | |||||||
Fair value of derivative | 0.7 | 0.7 | 4.8 | ||||
Net cash proceeds | 4.8 | ||||||
Interest rate swap and interest rate cap | Derivative instruments and hedging activities | Other assets | |||||||
Derivatives, Fair Value [Line Items] | |||||||
Derivative asset, fair value of interest rate swap and cap positions | 0.4 | 0.4 | 1.8 | ||||
Interest rate swap and interest rate cap | Derivative instruments and hedging activities | Other current assets | |||||||
Derivatives, Fair Value [Line Items] | |||||||
Derivative asset, fair value of interest rate swap and cap positions | $ 0.3 | $ 0.3 | |||||
Interest rate swap | Derivative instruments and hedging activities | Other current assets | |||||||
Derivatives, Fair Value [Line Items] | |||||||
Derivative liability, fair value of interest rate swap and cap positions | $ 3 |
Long-Term Debt - Summary of Int
Long-Term Debt - Summary of Interest Received and Paid under Term of Cash Flow Swap (Details) | Jun. 30, 2019USD ($) |
Derivatives, Fair Value [Line Items] | |
One month LIBOR rate | 2.398% |
Cash Flow Swap B | |
Derivatives, Fair Value [Line Items] | |
Notional Amount | $ 375,000,000 |
Pay Rate | 2.00% |
Cash Flow Swap C | |
Derivatives, Fair Value [Line Items] | |
Notional Amount | $ 375,000,000 |
Pay Rate | 3.00% |
Cash Flow Swap D | |
Derivatives, Fair Value [Line Items] | |
Notional Amount | $ 312,500,000 |
Pay Rate | 2.00% |
Cash Flow Swap E | |
Derivatives, Fair Value [Line Items] | |
Notional Amount | $ 250,000,000 |
Pay Rate | 3.00% |
Cash Flow Swap F | |
Derivatives, Fair Value [Line Items] | |
Notional Amount | $ 225,000,000 |
Pay Rate | 3.00% |
Cash Flow Swap G | |
Derivatives, Fair Value [Line Items] | |
Notional Amount | $ 150,000,000 |
Pay Rate | 2.00% |
Cash Flow Swap H | |
Derivatives, Fair Value [Line Items] | |
Notional Amount | $ 250,000,000 |
Pay Rate | 3.00% |
Per Share Data and Stockholders
Per Share Data and Stockholders' Equity - Dilutive Effect on Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Weighted Average Shares | ||||
Weighted average common shares outstanding | 43,066 | 42,662 | 42,953 | 42,725 |
Diluted earnings (loss) (shares) | 43,230 | 42,920 | 43,060 | 42,948 |
From Continuing Operations | ||||
Earnings (loss) | $ 26,751 | $ 17,122 | $ 69,100 | $ 15,108 |
Basic earnings (loss) per share (usd per share) | $ 0.62 | $ 0.40 | $ 1.61 | $ 0.35 |
From Discontinued Operations | ||||
Earnings (loss) | $ (152) | $ (217) | $ (279) | $ (397) |
Basic earnings (loss) per share (usd per share) | $ 0 | $ 0 | $ (0.01) | $ (0.01) |
Net Income (Loss) | ||||
Earnings (loss) | $ 26,599 | $ 16,905 | $ 68,821 | $ 14,711 |
Basic earnings (loss) per share (usd per share) | $ 0.62 | $ 0.40 | $ 1.60 | $ 0.34 |
Effect of dilutive securities: | ||||
Earnings (loss) per share from continuing operations (usd per share) | 0.62 | 0.40 | 1.60 | 0.35 |
Earnings (loss) per share from discontinued operations (usd per share) | (0.01) | (0.01) | 0 | (0.01) |
Earnings (loss) per common share (usd per share) | $ 0.61 | $ 0.39 | $ 1.60 | $ 0.34 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Dec. 31, 2018 | |
Other Commitments [Line Items] | ||
Lease exit costs accrual | $ 0 | $ 4,634 |
Maximum exposure associated with general indemnifications | $ 28,000 | $ 13,200 |
General indemnifications minimum expiration period | 1 year | |
General indemnifications maximum expiration period | 3 years | |
Percentage of dealership that is accounted for under the equity method | 50.00% | 50.00% |
Contingent liability reserve balance after reduction | $ 4,300 | $ 4,300 |
Other accrued liabilities | ||
Other Commitments [Line Items] | ||
Amount reserved for pending proceedings | 1,400 | 2,100 |
Other long-term liabilities | ||
Other Commitments [Line Items] | ||
Amount reserved for pending proceedings | $ 300 | $ 300 |
Commitments and Contingencies_2
Commitments and Contingencies - Summary of Lease Exit Accruals (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Lease Exit [Roll Forward] | |
Balance at December 31, 2018 | $ 4,634 |
Effect of adoption of ASC 842, “Leases” | (4,634) |
Balance at June 30, 2019 | $ 0 |
Fair Value Measurements - Asset
Fair Value Measurements - Assets and Liabilities Recorded at Fair Value (Details) - Fair Value Based on Significant Other Observable Inputs (Level 2) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Assets: | ||
Cash surrender value of life insurance policies | $ 31,836 | $ 31,395 |
Cash flow swaps and interest rate caps designated as hedges | 703 | 4,839 |
Total assets | 32,539 | 36,234 |
Liabilities: | ||
Deferred compensation plan | 17,602 | 19,848 |
Total liabilities | 17,602 | 19,848 |
Other current assets | ||
Assets: | ||
Cash flow swaps and interest rate caps designated as hedges | 400 | 1,800 |
Other assets | ||
Assets: | ||
Cash flow swaps and interest rate caps designated as hedges | $ 300 | 3,000 |
Other accrued liabilities | ||
Liabilities: | ||
Cash flow swaps and interest rate caps designated as hedges | 0 | |
Other long-term liabilities | ||
Liabilities: | ||
Cash flow swaps and interest rate caps designated as hedges | $ 0 |
Fair Value Measurements - Fair
Fair Value Measurements - Fair Value and Carrying Value of Significant Fixed Rate Long-Term Debt (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 | Mar. 10, 2017 | May 09, 2013 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Carrying Value | $ 914,251 | $ 945,083 | ||
Mortgage Notes | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Fair Value | 210,435 | 218,402 | ||
Carrying Value | 208,788 | 215,196 | ||
Other | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Fair Value | 0 | 20,437 | ||
Carrying Value | 0 | 20,588 | ||
5.0% Notes | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Fair Value | 290,719 | 262,515 | ||
Carrying Value | $ 289,273 | 289,273 | ||
Stated interest rate | 5.00% | 5.00% | ||
6.125% Notes | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Fair Value | $ 246,250 | 216,250 | ||
Carrying Value | $ 250,000 | $ 250,000 | ||
Stated interest rate | 6.125% | 6.125% |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Loss) - Summary of Changes in Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||||
Beginning balance | $ 852,286 | $ 768,717 | $ 823,116 | $ 786,760 | |
Other comprehensive income (loss) before reclassifications | (1,988) | ||||
Amounts reclassified out of accumulated other comprehensive income (loss) | (1,285) | ||||
Other comprehensive income (loss) | (1,412) | 871 | (3,273) | 3,785 | |
Ending balance | 875,725 | 786,980 | 875,725 | 786,980 | |
Other comprehensive income (loss) before reclassifications, tax expense | (871) | ||||
Amounts reclassified out of accumulated other comprehensive income (loss), tax expense | (525) | ||||
Operating Leases, Future Minimum Payments Due, Next Twelve Months | $ 82,177 | ||||
Gains and Losses on Cash Flow Hedges | |||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||||
Beginning balance | 3,034 | ||||
Other comprehensive income (loss) before reclassifications | (1,988) | ||||
Amounts reclassified out of accumulated other comprehensive income (loss) | (1,285) | ||||
Other comprehensive income (loss) | (3,273) | ||||
Ending balance | (239) | (239) | |||
Defined Benefit Pension Plan | |||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||||
Beginning balance | 1,199 | ||||
Other comprehensive income (loss) before reclassifications | 0 | ||||
Amounts reclassified out of accumulated other comprehensive income (loss) | 0 | ||||
Other comprehensive income (loss) | 0 | ||||
Ending balance | 1,199 | 1,199 | |||
Total Accumulated Other Comprehensive Income (Loss) | |||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||||
Beginning balance | 2,372 | 4,221 | 4,233 | 1,307 | |
Other comprehensive income (loss) | (1,412) | 871 | (3,273) | 3,785 | |
Ending balance | $ 960 | $ 5,092 | $ 960 | $ 5,092 |
Segment Information - Additiona
Segment Information - Additional Information (Details) | 6 Months Ended |
Jun. 30, 2019individualSegment | |
Segment Reporting [Abstract] | |
Number of operating segments | Segment | 2 |
Chief operating decision maker group | individual | 3 |
Segment Information - Summary o
Segment Information - Summary of Reportable Operating Segment (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Revenues: | ||||
Total consolidated revenues | $ 2,614,081,000 | $ 2,505,749,000 | $ 5,003,219,000 | $ 4,906,523,000 |
Segment income (loss): | ||||
Segment income (loss) | 62,973,000 | 50,647,000 | 150,288,000 | 70,835,000 |
Interest expense, other, net | (13,628,000) | (13,375,000) | (26,481,000) | (26,831,000) |
Other income (expense), net | (5,000) | 17,000 | 95,000 | 106,000 |
Income (loss) from continuing operations before taxes | 36,822,000 | 25,344,000 | 98,158,000 | 21,488,000 |
Asset impairment charges | 0 | 10,317,000 | 1,952,000 | 13,960,000 |
Franchised Dealerships Segment | ||||
Revenues: | ||||
Total consolidated revenues | 2,322,400,000 | 2,325,583,000 | 4,461,971,000 | 4,594,852,000 |
EchoPark Segment | ||||
Revenues: | ||||
Total consolidated revenues | 291,681,000 | 180,166,000 | 541,248,000 | 311,671,000 |
Operating segments | ||||
Segment income (loss): | ||||
Segment income (loss) | 50,455,000 | 38,702,000 | 124,544,000 | 48,213,000 |
Operating segments | Franchised Dealerships Segment | ||||
Segment income (loss): | ||||
Segment income (loss) | 48,326,000 | 66,049,000 | 121,856,000 | 89,885,000 |
Operating segments | Franchised Dealerships Segment | Income (loss) from continuing operations before taxes | ||||
Segment income (loss): | ||||
Gain on disposal | 38,000,000 | 46,700,000 | 39,200,000 | |
Executive transition costs | 6,300,000 | |||
Excluded storm-related physical damage and legal costs | 3,100,000 | 4,600,000 | ||
Asset impairment charges | 10,300,000 | 1,900,000 | 14,000,000 | |
Lease exit charges | (2,600,000) | (2,200,000) | ||
Operating segments | EchoPark Segment | ||||
Segment income (loss): | ||||
Segment income (loss) | 2,129,000 | (27,347,000) | 2,688,000 | (41,672,000) |
Operating segments | EchoPark Segment | Income (loss) from continuing operations before taxes | ||||
Segment income (loss): | ||||
Excluded non-recurring compensation-related charges | 23,300,000 | 32,500,000 | ||
Reconciling items | ||||
Segment income (loss): | ||||
Interest expense, other, net | (13,628,000) | (13,375,000) | (26,481,000) | (26,831,000) |
Other income (expense), net | $ (5,000) | $ 17,000 | $ 95,000 | $ 106,000 |