Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | Apr. 25, 2018 | |
Document Information [Line Items] | ||
Entity Registrant Name | SONIC AUTOMOTIVE INC | |
Entity Central Index Key | 1,043,509 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | SAH | |
Amendment Flag | false | |
Class A common stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 30,641,717 | |
Class B common stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 12,029,375 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues: | ||
New vehicles | $ 1,180,846 | $ 1,171,932 |
Used vehicles | 709,046 | 634,474 |
Wholesale vehicles | 65,398 | 46,310 |
Total vehicles | 1,955,290 | 1,852,716 |
Parts, service and collision repair | 351,758 | 352,043 |
Finance, insurance and other, net | 93,725 | 83,063 |
Total revenues | 2,400,773 | 2,287,822 |
Cost of Sales: | ||
New vehicles | (1,124,046) | (1,113,654) |
Used vehicles | (672,275) | (593,641) |
Wholesale vehicles | (69,823) | (47,482) |
Total vehicles | (1,866,144) | (1,754,777) |
Parts, service and collision repair | (182,130) | (182,699) |
Total cost of sales | (2,048,274) | (1,937,476) |
Gross profit | 352,499 | 350,346 |
Selling, general and administrative expenses | (304,925) | (292,234) |
Impairment charges | (3,643) | (510) |
Depreciation and amortization | (23,743) | (21,153) |
Operating income (loss) | 20,188 | 36,449 |
Other income (expense): | ||
Interest expense, floor plan | (10,677) | (8,387) |
Interest expense, other, net | (13,456) | (13,409) |
Other income (expense), net | 89 | (14,501) |
Total other income (expense) | (24,044) | (36,297) |
Income (loss) from continuing operations before taxes | (3,856) | 152 |
Provision for income taxes for continuing operations - benefit (expense) | 1,842 | (172) |
Income (loss) from continuing operations | (2,014) | (20) |
Discontinued operations: | ||
Income (loss) from discontinued operations before taxes | (248) | (868) |
Provision for income taxes for discontinued operations - benefit (expense) | 68 | 347 |
Income (loss) from discontinued operations | (180) | (521) |
Net income (loss) | $ (2,194) | $ (541) |
Basic earnings (loss) per common share: | ||
Earnings (loss) per share from continuing operations (usd per share) | $ (0.05) | $ 0 |
Earnings (loss) per share from discontinued operations (usd per share) | 0 | (0.01) |
Earnings (loss) per common share (usd per share) | $ (0.05) | $ (0.01) |
Weighted average common shares outstanding (shares) | 42,789 | 44,791 |
Diluted earnings (loss) per common share: | ||
Earnings (loss) per share from continuing operations (usd per share) | $ (0.05) | $ 0 |
Earnings (loss) per share from discontinued operations (usd per share) | 0 | (0.01) |
Earnings (loss) per common share (usd per share) | $ (0.05) | $ (0.01) |
Weighted average common shares outstanding | 42,789 | 44,791 |
Dividends declared per common share (usd per share) | $ 0.06 | $ 0.05 |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | ||
Net income (loss) | $ (2,194) | $ (541) |
Other comprehensive income (loss) before taxes: | ||
Change in fair value of interest rate swap and interest rate cap agreements | 4,044 | 2,102 |
Provision for income tax benefit (expense) related to components of other comprehensive income (loss) | (1,130) | (799) |
Other comprehensive income (loss) | 2,914 | 1,303 |
Comprehensive income (loss) | $ 720 | $ 762 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash and cash equivalents | $ 9,163 | $ 6,352 |
Receivables, net | 367,895 | 482,126 |
Inventories | 1,550,521 | 1,512,745 |
Other current assets | 30,961 | 18,574 |
Total current assets | 1,958,540 | 2,019,797 |
Property and Equipment, net | 1,178,943 | 1,146,881 |
Goodwill | 525,142 | 525,780 |
Other Intangible Assets, net | 74,361 | 74,589 |
Other Assets | 51,509 | 51,471 |
Total Assets | 3,788,495 | 3,818,518 |
Current Liabilities: | ||
Notes payable - floor plan - trade | 775,287 | 804,238 |
Notes payable - floor plan - non-trade | 705,107 | 709,098 |
Trade accounts payable | 113,705 | 129,903 |
Accrued interest | 12,481 | 12,316 |
Other accrued liabilities | 226,530 | 237,963 |
Current maturities of long-term debt | 53,957 | 61,314 |
Total current liabilities | 1,887,067 | 1,954,832 |
Long-Term Debt | 1,004,657 | 963,389 |
Other Long-Term Liabilities | 73,530 | 61,918 |
Deferred Income Taxes | 54,524 | 51,619 |
Commitments and Contingencies | 0 | 0 |
Stockholders’ Equity: | ||
Class A convertible preferred stock, none issued | 0 | 0 |
Paid-in capital | 736,161 | 732,854 |
Retained earnings | 624,535 | 625,356 |
Accumulated other comprehensive income (loss) | 4,221 | 1,307 |
Treasury stock, at cost; 33,442,987 Class A common stock shares held at March 31, 2018 and 32,290,493 Class A common stock shares held at December 31, 2017 | (596,962) | (573,513) |
Total Stockholders’ Equity | 768,717 | 786,760 |
Total Liabilities and Stockholders’ Equity | 3,788,495 | 3,818,518 |
Class A common stock | ||
Stockholders’ Equity: | ||
Common stock, value | 641 | 635 |
Class B common stock | ||
Stockholders’ Equity: | ||
Common stock, value | $ 121 | $ 121 |
CONDENSED CONSOLIDATED BALANCE5
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2018 | Dec. 31, 2017 |
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 | 64,084,704 | 63,456,698 |
Common stock, shares outstanding | 30,641,717 | 31,166,205 |
Treasury stock, shares | 33,442,987 | 32,290,493 |
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 STATEME6
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) - 3 months ended Mar. 31, 2018 - USD ($) shares in Thousands, $ in Thousands | Total | Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Class A common stockClass A Common Stock | Class A common stockClass A Treasury Stock | Class B common stockClass A Common Stock | |
December 31, 2017 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 | |||||
Shares awarded under stock compensation plans | 351 | 345 | $ 6 | |||||
Shares awarded under stock compensation plans, shares | 628 | |||||||
Purchases of treasury stock | (23,449) | $ (23,449) | ||||||
Purchases of treasury stock, shares | (1,153) | |||||||
Change in fair value of interest rate swap and interest rate cap agreements, net of tax expense of $1,130 | 2,914 | 2,914 | ||||||
Restricted stock amortization | 2,962 | 2,962 | ||||||
Net income (loss) | (2,194) | (2,194) | ||||||
Dividends declared | (2,545) | (2,545) | ||||||
March 31, 2018 at Mar. 31, 2018 | 768,717 | $ 736,161 | 624,535 | $ 4,221 | $ 641 | $ (596,962) | $ 121 | |
Ending Balance, Shares at Mar. 31, 2018 | 64,085 | (33,443) | 12,029 | |||||
Cumulative effect of change in accounting principle | [1] | $ 3,918 | $ 3,918 | |||||
[1] | See Note 1, “Summary of Significant Accounting Policies,” of the notes to condensed consolidated financial statements for further discussion. |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Stockholders' Equity [Abstract] | ||
Tax effect on fair value of interest rate swap and rate cap agreements | $ 1,130 | $ 799 |
CONDENSED CONSOLIDATED STATEME8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income (loss) | $ (2,194) | $ (541) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization of property and equipment | 23,741 | 21,152 |
Provision for bad debt expense | 111 | 399 |
Other amortization | 156 | 162 |
Debt issuance cost amortization | 598 | 605 |
Debt discount amortization, net of premium amortization | 0 | 64 |
Stock-based compensation expense | 2,962 | 2,585 |
Deferred income taxes | (1,069) | (789) |
Net distributions from equity investee | (168) | 337 |
Asset impairment charges | 3,643 | 510 |
Loss (gain) on disposal of dealerships and property and equipment | (1,216) | (39) |
Loss (gain) on exit of leased dealerships | 5,070 | 614 |
Loss (gain) on retirement of debt | 0 | 14,607 |
Changes in assets and liabilities that relate to operations: | ||
Receivables | 120,792 | 132,679 |
Inventories | (42,836) | (29,900) |
Other assets | (3,774) | (16,708) |
Notes payable - floor plan - trade | (28,951) | (36,634) |
Trade accounts payable and other liabilities | (22,043) | (9,628) |
Total adjustments | 57,016 | 80,016 |
Net cash provided by (used in) operating activities | 54,822 | 79,475 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of land, property and equipment | (65,713) | (75,686) |
Proceeds from sales of property and equipment | 2,178 | 170 |
Proceeds from sales of dealerships | 7,461 | 0 |
Net cash provided by (used in) investing activities | (56,074) | (75,516) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Net (repayments) borrowings on notes payable - floor plan - non-trade | (3,991) | (43,699) |
Borrowings on revolving credit facilities | 301,803 | 11,513 |
Repayments on revolving credit facilities | (276,803) | (11,513) |
Proceeds from issuance of long-term debt | 20,960 | 269,855 |
Debt issuance costs | (159) | (4,222) |
Principal payments and repurchase of long-term debt | (12,489) | (5,289) |
Repurchase of debt securities | 0 | (210,914) |
Purchases of treasury stock | (23,449) | (3,996) |
Issuance of shares under stock compensation plans | 351 | 0 |
Dividends paid | (2,160) | (2,237) |
Net cash provided by (used in) financing activities | 4,063 | (502) |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 2,811 | 3,457 |
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 6,352 | 3,108 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 9,163 | 6,565 |
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 $1,130 and $799 in the three months ended March 31, 2018 and 2017, respectively) | 2,914 | 1,303 |
Cash paid (received) during the period for: | ||
Interest, including amount capitalized | 23,360 | 23,295 |
Income taxes | $ 0 | $ 103 |
CONDENSED CONSOLIDATED STATEME9
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Cash Flows [Abstract] | ||
Tax effect on fair value of interest rate swap and rate cap agreements | $ 1,130 | $ 799 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
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 months ended March 31, 2018 and 2017 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 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 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, 2017 . Recent Accounting Pronouncements – In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09 as well as several subsequent amendments to amend the accounting guidance on revenue recognition. The amendments to the revenue accounting guidance are included in Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers,” and are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices and improve disclosure requirements. The amendments to this standard must be applied using either of the following transition methods: (1) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients; or (2) a modified retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which requires additional footnote disclosures). These amendments are effective for reporting periods beginning after December 15, 2017. On January 1, 2018, Sonic adopted ASC 606 (the “new revenue standard”) using the modified retrospective transition approach applied to contracts not completed as of the date of adoption. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative financial information has not been restated and continues to be reported under the accounting standards in effect for that period. We do not expect the adoption of the new revenue standard to have a material impact on our net income on an ongoing basis. Under the new revenue 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 principles apply 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. Sonic does not include the cost of obtaining contracts within the related revenue streams. Sonic has elected the practical expedient to expense the costs to obtain a contract when incurred. During the implementation process, management evaluated its established business processes, revenue transaction streams and accounting policies, and generally expects similar performance obligations to result under the new revenue standard as compared with prior U.S. GAAP. Management identified its material revenue streams to be (1) the sale of new vehicles; (2) the sale of used vehicles to retail customers; (3) the sale of used vehicles at wholesale auction; (4) arrangement of vehicle financing and the sale of service and other insurance contracts; and (5) the performance of vehicle maintenance and repair services and sale of related parts and accessories. As a result of this analysis during the implementation process, management expects the amounts and timing of revenue recognition to generally remain the same, with the exception of 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”), both of which are subject to accelerated recognition under the new revenue standard. Work in process revenues are recognized over-time which is based on the completed work to date and F&I retro revenues are estimated each reporting period based on the expected value method using historical and projected data. F&I retro revenues can vary based on a variety of factors, including number of contracts and history of cancellations and claims. Accordingly, Sonic utilizes this 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. Generally, performance conditions are satisfied when the associated vehicle is either delivered or returned to a customer and customer acceptance has occurred. The Company does 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). The cumulative effect of the adjustments to our March 31, 2018 condensed consolidated statement of income and January 1, 2018 condensed consolidated balance sheet for the adoption of ASC 606 were as follows: Pre-ASC 606 Results Effects of Adoption of ASC 606 As Reported Three months ended Three months ended Income Statement March 31, 2018 March 31, 2018 Revenues: (In thousands) Parts, service and collision repair $ 351,202 $ 556 $ 351,758 Finance, insurance and other, net 93,302 423 93,725 Total revenues $ 444,504 $ 979 $ 445,483 Cost of Sales: Parts, service and collision repair $ (181,842 ) $ (288 ) $ (182,130 ) Selling, general and administrative expenses: Compensation $ (185,000 ) $ (37 ) $ (185,037 ) Operating income (loss): $ 19,534 $ 654 $ 20,188 Balance Sheet December 31, 2017 Effects of Adoption of ASC 606 January 1, 2018 Assets: (In thousands) Receivables, net $ 482,126 $ 4,590 $ 486,716 Contract Assets (1) — 2,082 2,082 Liabilities: Other accrued liabilities $ 237,963 $ (1,286 ) $ 236,677 Deferred income taxes 51,619 (1,468 ) 50,151 Stockholders’ Equity: Retained earnings $ 625,356 $ (3,918 ) $ 621,438 (1) Contract assets are included in Receivables, net in the condensed consolidated balance sheets. Receivables, net, at March 31, 2018 includes approximately $4.7 million related to work in process and a contract asset of approximately $2.6 million related to F&I retro revenue. Changes in contract assets from January 1, 2018 to March 31, 2018 were primarily due to ordinary business activity. In February 2016, the FASB issued ASU 2016-02, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this ASU require that leases are classified as either finance or operating leases, a right-of-use asset and lease liability is recognized in the statement of financial position and repayments are classified within operating activities in the statement of cash flows. The amendments in this ASU are to be applied using a modified retrospective approach and are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 (early adoption is permitted). We plan to adopt this ASU effective January 1, 2019. While management is still evaluating the impact of adopting the provisions of this ASU, management expects that upon adoption of this ASU, the presentation of certain items in our consolidated financial position, cash flows and other disclosures will be materially impacted, primarily due to the recognition of a right-of-use asset and an associated liability and a change in the timing and classification of certain items in our results of operations as a result of the derecognition of the lease liability. In August 2017, the FASB issued ASU 2017-12 which amends the hedge accounting recognition and presentation requirements in ASC 815. 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 (early adoption is permitted). We do not believe the effects of this pronouncement will 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 (early adoption is permitted). We are currently in the process of evaluating the effects of this pronouncement on our consolidated financial statements. Principles of Consolidation – All of our subsidiaries are wholly owned and consolidated in the accompanying 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 condensed consolidated financial statements. Income Tax Expense – Beginning January 1, 2018 , the federal income tax rate changed from 35.0% to 21.0% along with other tax provision changes that affect the deductibility of certain expenses. Sonic has considered these items in its calculation of income tax balances as of March 31, 2018 . The overall effective tax rate from continuing operations was 47.8% and 113.3% for the three months ended March 31, 2018 and 2017, respectively. Income tax expense for the three months ended March 31, 2018 includes a $0.9 million discrete benefit related to vested or exercised stock compensation, offset partially by a $0.2 million discrete charge related to changes in uncertain tax positions in the three months ended March 31, 2018 . Income tax expense for the three months ended March 31, 2017 includes a discrete charge of approximately $0.6 million related to uncertain tax positions, offset partially by a $0.3 million discrete benefit related to vested stock compensation. Sonic’s effective tax rate varies from year to year based on the distribution of taxable income between states in which Sonic operates and other tax adjustments. Sonic expects the annual effective tax rate in future periods to fall within a range of 26% to 28% before the impact, if any, of changes in valuation allowances related to deferred income tax assets or discrete tax adjustments. |
Business Acquisitions and Dispo
Business Acquisitions and Dispositions | 3 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
Business Acquisitions and Dispositions | Business Acquisitions and Dispositions Acquisitions – Sonic did not acquire any businesses during the three months ended March 31, 2018 and 2017 . Dispositions – Sonic disposed of one luxury franchised dealership during the three months ended March 31, 2018 that generated net cash of approximately $7.5 million. Additionally, Sonic terminated one luxury franchised dealership and ceased operations at one of our pre-owned stores in Florida. Sonic did no t dispose of any businesses during the three months ended March 31, 2017 . Revenues and other activities associated with disposed dealerships classified as discontinued operations were as follows: Three Months Ended 2018 2017 (In thousands) Income (loss) from operations $ (139 ) $ (280 ) Lease exit accrual adjustments and charges (109 ) (588 ) Pre-tax income (loss) $ (248 ) $ (868 ) Total revenues $ — $ — Revenues and other activities associated with disposed dealerships that remain in continuing operations were as follows: Three Months Ended 2018 2017 (In thousands) Income (loss) from operations $ (636 ) $ (703 ) Gain (loss) on disposal 1,630 (24 ) Pre-tax income (loss) $ 994 $ (727 ) Total revenues $ 1,919 $ 43,202 |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories consist of the following: March 31, 2018 December 31, 2017 (In thousands) New vehicles $ 1,086,205 $ 1,017,523 Used vehicles 265,164 294,496 Service loaners 131,473 130,406 Parts, accessories and other 67,679 70,320 Net inventories $ 1,550,521 $ 1,512,745 |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment Property and equipment, net consists of the following: March 31, 2018 December 31, 2017 (In thousands) Land $ 383,749 $ 370,828 Building and improvements 942,426 893,768 Software and computer equipment 150,520 147,812 Parts and service equipment 111,497 105,123 Office equipment and fixtures 96,381 96,066 Company vehicles 9,839 9,723 Construction in progress 43,417 54,429 Total, at cost 1,737,829 1,677,749 Less accumulated depreciation (548,958 ) (527,379 ) Subtotal 1,188,871 1,150,370 Less assets held for sale (1) (9,928 ) (3,489 ) Property and equipment, net $ 1,178,943 $ 1,146,881 (1) Classified in other current assets in the accompanying condensed consolidated balance sheets. In the three months ended March 31, 2018 and 2017 , capital expenditures were approximately $65.7 million and $75.7 million , respectively. Capital expenditures in both periods were primarily related to real estate acquisitions, construction of new franchised dealerships and pre-owned stores, building improvements and equipment purchased for use in Sonic’s franchised dealerships and pre-owned stores. Assets held for sale as of March 31, 2018 consists of vacant land that Sonic expects to dispose of in the next 12 months. Impairment charges for the three months ended March 31, 2018 and 2017 were approximately $3.6 million and $0.5 million , respectively. Impairment charges for both periods include the write-off of capitalized costs associated with the abandonment of certain construction projects. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Goodwill and Intangible Assets The carrying amount of goodwill was approximately $525.1 million and $525.8 million , as of March 31, 2018 and December 31, 2017 , respectively. The carrying amount of goodwill is net of accumulated impairment losses of approximately $797.6 million as of March 31, 2018 and December 31, 2017 . The carrying amount of franchise assets was approximately $69.9 million as of March 31, 2018 and December 31, 2017 . At December 31, 2017 , Sonic had approximately $4.7 million of definite life intangibles related to favorable lease agreements. After the effect of amortization of the definite life intangibles, the balance recorded at March 31, 2018 was approximately $4.5 million . Both franchise assets and favorable lease agreement assets are included in other intangible assets, net in the accompanying condensed consolidated balance sheets. |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt Long-term debt consists of the following: March 31, 2018 December 31, 2017 (In thousands) 2016 Revolving Credit Facility (1) $ 100,000 $ 75,000 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% 232,822 199,972 Mortgage notes to finance companies-variable rate, bearing interest at 1.50 to 2.90 percentage points above one-month or three-month LIBOR 195,428 219,719 Debt issuance costs (12,769 ) (13,208 ) Other 3,860 3,947 Total debt $ 1,058,614 $ 1,024,703 Less current maturities (53,957 ) (61,314 ) Long-term debt $ 1,004,657 $ 963,389 (1) The interest rate on the 2016 Revolving Credit Facility (as defined below) was 225 basis points above LIBOR at both March 31, 2018 and December 31, 2017 . 2016 Credit Facilities On November 30, 2016, Sonic 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 Sonic’s option up to $300.0 million upon satisfaction of certain conditions. As of March 31, 2018 , the 2016 Revolving Borrowing Base was approximately $215.4 million based on balances as of such date. As of March 31, 2018 , Sonic had approximately $100.0 million of outstanding borrowings and approximately $16.4 million in outstanding letters of credit under the 2016 Revolving Credit Facility, resulting in total borrowing availability of approximately $99.0 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 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 party (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, Sonic issued $300.0 million in aggregate principal amount of unsecured senior subordinated 5.0% Notes, which are scheduled to mature on May 15, 2023 . The 5.0% Notes were issued at a price of 100.0% of the principal amount thereof. The 5.0% Notes are guaranteed by Sonic’s domestic operating subsidiaries. Interest on the 5.0% Notes is payable semi-annually in arrears on May 15 and November 15 of each year . On September 30, 2016, Sonic 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. The indenture governing the 5.0% Notes contains certain specified restrictive covenants. Sonic has agreed not to pledge any assets to any third-party lender of senior subordinated debt except under certain limited circumstances. Sonic also has 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 Sonic’s ability to pay quarterly cash dividends on Sonic’s Class A and Class B Common Stock in excess of $0.10 per share. Sonic may only pay quarterly cash dividends on Sonic’s Class A and Class B Common Stock if Sonic complies with the terms of the indenture governing the 5.0% Notes. Sonic was in compliance with all restrictive covenants in the indenture governing the 5.0% Notes as of March 31, 2018 . 6.125% Notes On March 10, 2017, Sonic issued $250.0 million in aggregate principal amount of unsecured senior subordinated 6.125% Notes, which are scheduled to mature on March 15, 2027 . The 6.125% Notes were issued at a price of 100.0% of the principal amount thereof. Sonic used the net proceeds from the issuance of the 6.125% Notes to repurchase all of its then outstanding 7.0% Senior Subordinated Notes due 2022 on March 27, 2017. Remaining proceeds from the issuance of the 6.125% Notes were used for general corporate purposes. The 6.125% Notes are guaranteed by Sonic’s domestic operating subsidiaries. Interest on the 6.125% Notes is payable semi-annually in arrears on March 15 and September 15 of each year . Sonic may redeem the 6.125% Notes, in whole or in part, at any time on or after March 15, 2022. The indenture governing the 6.125% Notes contains certain specified restrictive covenants. Sonic has agreed not to pledge any assets to any third-party lender of senior subordinated debt except under certain limited circumstances. Sonic also has 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 Sonic’s ability to pay quarterly cash dividends on Sonic’s Class A and Class B Common Stock in excess of $0.12 per share. Sonic may only pay quarterly cash dividends on Sonic’s Class A and Class B Common Stock if Sonic complies with the terms of the indenture governing the 6.125% Notes. Sonic was in compliance with all restrictive covenants in the indenture governing the 6.125% Notes as of March 31, 2018 . Mortgage Notes During the three months ended March 31, 2018 , Sonic obtained approximately $21.0 million in mortgage financing related to two of its operating locations. As of March 31, 2018 , the weighted average interest rate was 4.39% and the total outstanding mortgage principal balance was approximately $428.2 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 2018 and 2033 . Covenants Under the 2016 Credit Facilities, Sonic agreed not to pledge any assets to any third party (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 the payment of dividends, capital expenditures and material dispositions of assets, as well as other customary covenants and default provisions. Sonic was in compliance with the covenants under the 2016 Credit Facilities as of March 31, 2018 . 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 March 31, 2018 actual 1.09 1.70 4.90 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, Sonic 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 its debt agreements, as of March 31, 2018 , Sonic had approximately $127.4 million of net income and retained earnings free of such restrictions. Sonic was in compliance with all restrictive covenants under its debt agreements as of March 31, 2018 . In addition, many of Sonic’s facility leases are governed by a guarantee agreement between the landlord and Sonic 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 March 31, 2018 , the ratio was 3.82 to 1.00. Derivative Instruments and Hedging Activities Sonic has interest rate cap agreements designated as hedging instruments to limit its exposure to increases in LIBOR rates above certain levels. Under the terms of these interest rate caps, interest rates reset monthly. The fair value of these interest rate cap positions at March 31, 2018 was a net asset of approximately $6.7 million , with approximately $6.1 million included in other assets and approximately $0.6 million included in other current assets in the accompanying condensed consolidated balance sheets. During the three months ended March 31, 2018, Sonic terminated all its previously outstanding interest rate cash flow swap agreements for net cash proceeds of approximately $4.8 million , which will be amortized into income as a reduction of interest expense, other, net on a ratable basis over the original term of these agreements (through July 1, 2020). The fair value of the outstanding interest rate swap and interest rate cap positions at December 31, 2017 was a net asset of approximately $4.7 million , with approximately $5.1 million included in other assets and approximately $0.9 million included in other current assets in the accompanying condensed consolidated balance sheets, offset partially by approximately $1.0 million included in other accrued liabilities and approximately $0.3 million included in other long-term liabilities in the accompanying condensed consolidated balance sheets. Under the terms of the interest rate cap agreements, Sonic will receive and pay interest based on the following: Notional Pay Rate (1) Receive Rate (2) Start Date End Date (In millions) $ 250.0 2.000% one-month LIBOR September 1, 2017 June 30, 2018 $ 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 to or from the counterparty will occur unless the stated receive rate exceeds the stated pay rate, in which case a net payment to Sonic from the counterparty based on the spread between the receive rate and the pay rate will be recognized as a reduction of interest expense, other, net in the accompanying condensed consolidated statements of income. (2) The one-month LIBOR rate was approximately 1.883% at March 31, 2018 . 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 condensed consolidated statements of comprehensive income and are disclosed in the supplemental schedule of non-cash financing activities in the accompanying condensed consolidated statements of cash flows. The incremental interest expense (the difference between interest paid and interest received) related to interest rate cap and interest rate swaps was approximately $0.1 million and $1.2 million for the three months ended March 31, 2018 and 2017 , respectively, and is included in interest expense, other, net in the accompanying condensed consolidated statements of income, and the interest paid amount is disclosed in the supplemental disclosures of cash flow information in the accompanying 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 $1.0 million . |
Per Share Data and Stockholders
Per Share Data and Stockholders' Equity | 3 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
Per Share Data and Stockholders' Equity | Per Share Data and Stockholders’ Equity The calculation of diluted earnings per share considers the potential dilutive effect of stock options and shares under Sonic’s stock compensation plans and Class A Common Stock purchase warrants. Certain of Sonic’s non-vested restricted stock awards contain rights to receive non-forfeitable dividends and, thus, are considered participating securities and are included in the two-class method of computing earnings per share. The following tables illustrate the dilutive effect of such items on earnings per share for the three months ended March 31, 2018 and 2017 : Three Months Ended March 31, 2018 Income (Loss) Income (Loss) From Continuing Operations From Discontinued Operations Net Income (Loss) Weighted Average Shares Amount Per Share Amount Amount Per Share Amount Amount Per Share Amount (In thousands, except per share amounts) Earnings (loss) and shares 42,789 $ (2,014 ) $ (180 ) $ (2,194 ) Effect of participating securities: Non-vested restricted stock — — — Basic earnings (loss) and shares 42,789 $ (2,014 ) $ (0.05 ) $ (180 ) $ — $ (2,194 ) $ (0.05 ) Effect of dilutive securities: Stock compensation plans — Diluted earnings (loss) and shares 42,789 $ (2,014 ) $ (0.05 ) $ (180 ) $ — $ (2,194 ) $ (0.05 ) Three Months Ended March 31, 2017 Income (Loss) Income (Loss) From Continuing Operations From Discontinued Operations Net Income (Loss) Weighted Average Shares Amount Per Share Amount Amount Per Share Amount Amount Per Share Amount (In thousands, except per share amounts) Earnings (loss) and shares 44,791 $ (20 ) $ (521 ) $ (541 ) Effect of participating securities: Non-vested restricted stock — — — Basic earnings (loss) and shares 44,791 $ (20 ) $ — $ (521 ) $ (0.01 ) $ (541 ) $ (0.01 ) Effect of dilutive securities: Stock compensation plans — Diluted earnings (loss) and shares 44,791 $ (20 ) $ — $ (521 ) $ (0.01 ) $ (541 ) $ (0.01 ) In addition to the stock options included in the tables above, options to purchase approximately 0.1 million shares of Sonic’s Class A common stock were outstanding at March 31, 2017, but were not included in the computation of diluted earnings (loss) per share because the options were not dilutive. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Lease Exit Accruals The majority of our dealership properties are leased under long-term operating lease arrangements. When leased properties are no longer utilized in operations, we record 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 store 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 March 31, 2018 , we had approximately $10.8 million accrued for lease exit costs. In addition, based on the terms and conditions negotiated in the sale of dealerships in the future, additional accruals may be necessary if the purchaser of the dealership does not assume any associated lease, or we are unable to negotiate a sublease with the buyer of the dealership on terms that are identical to or better than those associated with the original lease. A summary of the activity of these operating lease exit accruals consists of the following: (In thousands) Balance at December 31, 2017 $ 6,478 Lease exit expense (1) 5,070 Payments (2) (771 ) Balance at March 31, 2018 $ 10,777 (1) Expense of approximately $5.0 million is recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of income. In addition, expense of approximately $0.1 million is recorded in income (loss) from discontinued operations before taxes in the accompanying condensed consolidated statements of income. (2) Amount is recorded as an offset to rent expense, with approximately $0.3 million recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of income and approximately $0.5 million recorded in income (loss) from discontinued operations before taxes in the accompanying condensed consolidated statements of income. 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 at March 31, 2018 was approximately $4.5 million and $0.2 million , respectively, in reserves that Sonic was holding for pending proceedings. Included in other accrued liabilities and other long-term liabilities at December 31, 2017 was approximately $3.0 million and $0.2 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 the lease payments. See Note 12, “Commitments and Contingencies,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, 2017 for further discussion. 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 $5.0 million at both March 31, 2018 and December 31, 2017 . These indemnifications typically expire within a period of one to three years following the date of sale. The estimated fair value of these indemnifications was not material and the amount recorded for this contingency was not significant at March 31, 2018 . Sonic also guarantees the floor plan commitments of its 50% -owned joint venture, the amount of which was approximately $2.8 million at both March 31, 2018 and December 31, 2017 . Earnout Consideration In association with the acquisition of a business in the three months ended September 30, 2017, Sonic entered into an earnout agreement whereby the seller may be entitled to certain variable earnout payments, subject to certain restrictions, based on the acquired business achieving specified earnings targets over a 10 -year period, not to exceed a maximum aggregate earnout payment of $80.0 million . Sonic will recognize the accrual of any such variable earnout payments as compensation expense as earned. There were no amounts accrued related to this agreement at March 31, 2018. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2018 | |
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 condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017 are as follows: Fair Value Based on Significant Other Observable Inputs (Level 2) March 31, 2018 December 31, 2017 (In thousands) Assets: Cash surrender value of life insurance policies (1) $ 33,938 $ 33,747 Cash flow swaps and interest rate caps designated as hedges (2) 6,688 5,968 Total assets $ 40,626 $ 39,715 Liabilities: Cash flow swaps and interest rate caps designated as hedges (3) $ — $ 1,286 Deferred compensation plan (4) 18,958 18,417 Total liabilities $ 18,958 $ 19,703 (1) Included in other assets in the accompanying condensed consolidated balance sheets. (2) As of March 31, 2018 , approximately $0.6 million and $6.1 million were included in other current assets and other assets, respectively, in the accompanying condensed consolidated balance sheets. As of December 31, 2017 , approximately $0.9 million and $5.1 million were included in other current assets and other assets, respectively, in the accompanying condensed consolidated balance sheets. (3) As of December 31, 2017 , approximately $1.0 million and $0.3 million were included in other accrued liabilities and other long-term liabilities, respectively, in the accompanying condensed consolidated balance sheets. (4) Included in other long-term liabilities in the accompanying condensed consolidated balance sheets. There were no instances during the three months ended March 31, 2018 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 condensed consolidated balance sheet as of March 31, 2018 has not changed since December 31, 2017 . These assets will be evaluated as of the annual valuation assessment date of October 1, 2018 or as events or changes in circumstances require. As of March 31, 2018 , and December 31, 2017 , 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 March 31, 2018 and December 31, 2017 , the fair value and carrying value of Sonic’s significant fixed rate long-term debt were as follows: March 31, 2018 December 31, 2017 Fair Value Carrying Value Fair Value Carrying Value (In thousands) 5.0% Notes (1) $ 275,533 $ 289,273 $ 279,148 $ 289,273 6.125% Notes (1) $ 241,875 $ 250,000 $ 248,750 $ 250,000 Mortgage Notes (2) $ 235,991 $ 232,822 $ 203,031 $ 199,972 Other (2) $ 3,682 $ 3,860 $ 3,760 $ 3,947 (1) As determined by market quotations as of March 31, 2018 and December 31, 2017 , respectively (Level 1). (2) As determined by discounted cash flows (Level 3). |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss) The changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2018 are as follows: Gains and Losses on Cash Flow Hedges Defined Benefit Pension Plan Total Accumulated Other Comprehensive Income (Loss) (In thousands) Balance at December 31, 2017 $ 1,750 $ (443 ) $ 1,307 Other comprehensive income (loss) before reclassifications (1) 2,691 — 2,691 Amounts reclassified out of accumulated other comprehensive income (loss) (2) 223 — 223 Net current-period other comprehensive income (loss) 2,914 — 2,914 Balance at March 31, 2018 $ 4,664 $ (443 ) $ 4,221 (1) Net of tax expense of $1,046 . (2) Net of tax expense of $84 . 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, 2017 . |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information As of March 31, 2018 , 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) stand-alone pre-owned vehicle specialty retail locations that buy and sell used vehicles, perform vehicle repair and maintenance services, and arrange finance and insurance products under the EchoPark and other pre-owned brands (the “Pre-Owned Stores 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 and President; (2) the Company’s Executive Vice President and Chief Financial Officer; and (3) the Company’s Executive Vice President of Operations. Sonic has determined that its operating segments also represent its reportable segments. Reportable segment revenues and segment income (loss) for the three months ended March 31, 2018 and 2017 are as follows: Three Months Ended 2018 2017 (In thousands) Revenues: Franchised Dealerships Segment $ 2,269,269 $ 2,246,025 Pre-Owned Stores Segment 131,504 41,797 Total consolidated revenues $ 2,400,773 $ 2,287,822 Three Months Ended 2018 2017 (In thousands) Segment income (loss) (1): Franchised Dealerships Segment $ 23,764 $ 33,470 Pre-Owned Stores Segment (14,253 ) (5,408 ) Total segment income (loss) 9,511 28,062 Interest expense, other, net (13,456 ) (13,409 ) Other income (expense), net 89 (14,501 ) Income (loss) from continuing operations before taxes $ (3,856 ) $ 152 (1) Segment income (loss) for each segment is defined as operating income (loss) less interest expense, floor plan. |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
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 months ended March 31, 2018 and 2017 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 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 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, 2017 . |
Recent Accounting Pronouncements | Recent Accounting Pronouncements – In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09 as well as several subsequent amendments to amend the accounting guidance on revenue recognition. The amendments to the revenue accounting guidance are included in Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers,” and are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices and improve disclosure requirements. The amendments to this standard must be applied using either of the following transition methods: (1) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients; or (2) a modified retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which requires additional footnote disclosures). These amendments are effective for reporting periods beginning after December 15, 2017. On January 1, 2018, Sonic adopted ASC 606 (the “new revenue standard”) using the modified retrospective transition approach applied to contracts not completed as of the date of adoption. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative financial information has not been restated and continues to be reported under the accounting standards in effect for that period. We do not expect the adoption of the new revenue standard to have a material impact on our net income on an ongoing basis. Under the new revenue 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 principles apply 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. Sonic does not include the cost of obtaining contracts within the related revenue streams. Sonic has elected the practical expedient to expense the costs to obtain a contract when incurred. During the implementation process, management evaluated its established business processes, revenue transaction streams and accounting policies, and generally expects similar performance obligations to result under the new revenue standard as compared with prior U.S. GAAP. Management identified its material revenue streams to be (1) the sale of new vehicles; (2) the sale of used vehicles to retail customers; (3) the sale of used vehicles at wholesale auction; (4) arrangement of vehicle financing and the sale of service and other insurance contracts; and (5) the performance of vehicle maintenance and repair services and sale of related parts and accessories. As a result of this analysis during the implementation process, management expects the amounts and timing of revenue recognition to generally remain the same, with the exception of 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”), both of which are subject to accelerated recognition under the new revenue standard. Work in process revenues are recognized over-time which is based on the completed work to date and F&I retro revenues are estimated each reporting period based on the expected value method using historical and projected data. F&I retro revenues can vary based on a variety of factors, including number of contracts and history of cancellations and claims. Accordingly, Sonic utilizes this 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. Generally, performance conditions are satisfied when the associated vehicle is either delivered or returned to a customer and customer acceptance has occurred. The Company does 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). The cumulative effect of the adjustments to our March 31, 2018 condensed consolidated statement of income and January 1, 2018 condensed consolidated balance sheet for the adoption of ASC 606 were as follows: Pre-ASC 606 Results Effects of Adoption of ASC 606 As Reported Three months ended Three months ended Income Statement March 31, 2018 March 31, 2018 Revenues: (In thousands) Parts, service and collision repair $ 351,202 $ 556 $ 351,758 Finance, insurance and other, net 93,302 423 93,725 Total revenues $ 444,504 $ 979 $ 445,483 Cost of Sales: Parts, service and collision repair $ (181,842 ) $ (288 ) $ (182,130 ) Selling, general and administrative expenses: Compensation $ (185,000 ) $ (37 ) $ (185,037 ) Operating income (loss): $ 19,534 $ 654 $ 20,188 Balance Sheet December 31, 2017 Effects of Adoption of ASC 606 January 1, 2018 Assets: (In thousands) Receivables, net $ 482,126 $ 4,590 $ 486,716 Contract Assets (1) — 2,082 2,082 Liabilities: Other accrued liabilities $ 237,963 $ (1,286 ) $ 236,677 Deferred income taxes 51,619 (1,468 ) 50,151 Stockholders’ Equity: Retained earnings $ 625,356 $ (3,918 ) $ 621,438 (1) Contract assets are included in Receivables, net in the condensed consolidated balance sheets. Receivables, net, at March 31, 2018 includes approximately $4.7 million related to work in process and a contract asset of approximately $2.6 million related to F&I retro revenue. Changes in contract assets from January 1, 2018 to March 31, 2018 were primarily due to ordinary business activity. In February 2016, the FASB issued ASU 2016-02, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this ASU require that leases are classified as either finance or operating leases, a right-of-use asset and lease liability is recognized in the statement of financial position and repayments are classified within operating activities in the statement of cash flows. The amendments in this ASU are to be applied using a modified retrospective approach and are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 (early adoption is permitted). We plan to adopt this ASU effective January 1, 2019. While management is still evaluating the impact of adopting the provisions of this ASU, management expects that upon adoption of this ASU, the presentation of certain items in our consolidated financial position, cash flows and other disclosures will be materially impacted, primarily due to the recognition of a right-of-use asset and an associated liability and a change in the timing and classification of certain items in our results of operations as a result of the derecognition of the lease liability. In August 2017, the FASB issued ASU 2017-12 which amends the hedge accounting recognition and presentation requirements in ASC 815. 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 (early adoption is permitted). We do not believe the effects of this pronouncement will 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 (early adoption is permitted). We are currently in the process of evaluating the effects of this pronouncement on our consolidated financial statements. |
Principles of Consolidation | Principles of Consolidation – All of our subsidiaries are wholly owned and consolidated in the accompanying 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 condensed consolidated financial statements. |
Income Tax Expense | Income Tax Expense – Beginning January 1, 2018 , the federal income tax rate changed from 35.0% to 21.0% along with other tax provision changes that affect the deductibility of certain expenses. Sonic has considered these items in its calculation of income tax balances as of March 31, 2018 . The overall effective tax rate from continuing operations was 47.8% and 113.3% for the three months ended March 31, 2018 and 2017, respectively. Income tax expense for the three months ended March 31, 2018 includes a $0.9 million discrete benefit related to vested or exercised stock compensation, offset partially by a $0.2 million discrete charge related to changes in uncertain tax positions in the three months ended March 31, 2018 . Income tax expense for the three months ended March 31, 2017 includes a discrete charge of approximately $0.6 million related to uncertain tax positions, offset partially by a $0.3 million discrete benefit related to vested stock compensation. Sonic’s effective tax rate varies from year to year based on the distribution of taxable income between states in which Sonic operates and other tax adjustments. Sonic expects the annual effective tax rate in future periods to fall within a range of 26% to 28% before the impact, if any, of changes in valuation allowances related to deferred income tax assets or discrete tax adjustments. |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Cumulative Effect of Adjustments for Adoption of ASC 606 | The cumulative effect of the adjustments to our March 31, 2018 condensed consolidated statement of income and January 1, 2018 condensed consolidated balance sheet for the adoption of ASC 606 were as follows: Pre-ASC 606 Results Effects of Adoption of ASC 606 As Reported Three months ended Three months ended Income Statement March 31, 2018 March 31, 2018 Revenues: (In thousands) Parts, service and collision repair $ 351,202 $ 556 $ 351,758 Finance, insurance and other, net 93,302 423 93,725 Total revenues $ 444,504 $ 979 $ 445,483 Cost of Sales: Parts, service and collision repair $ (181,842 ) $ (288 ) $ (182,130 ) Selling, general and administrative expenses: Compensation $ (185,000 ) $ (37 ) $ (185,037 ) Operating income (loss): $ 19,534 $ 654 $ 20,188 Balance Sheet December 31, 2017 Effects of Adoption of ASC 606 January 1, 2018 Assets: (In thousands) Receivables, net $ 482,126 $ 4,590 $ 486,716 Contract Assets (1) — 2,082 2,082 Liabilities: Other accrued liabilities $ 237,963 $ (1,286 ) $ 236,677 Deferred income taxes 51,619 (1,468 ) 50,151 Stockholders’ Equity: Retained earnings $ 625,356 $ (3,918 ) $ 621,438 (1) Contract assets are included in Receivables, net in the condensed consolidated balance sheets. |
Business Acquisitions and Dis23
Business Acquisitions and Dispositions (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
Revenues and Other Activities Associated with Disposed Dealerships Classified as Discontinued Operations | Revenues and other activities associated with disposed dealerships classified as discontinued operations were as follows: Three Months Ended 2018 2017 (In thousands) Income (loss) from operations $ (139 ) $ (280 ) Lease exit accrual adjustments and charges (109 ) (588 ) Pre-tax income (loss) $ (248 ) $ (868 ) Total revenues $ — $ — |
Revenues and Other Activities Associated with Disposed Dealerships That Remain in Continuing Operations | Revenues and other activities associated with disposed dealerships that remain in continuing operations were as follows: Three Months Ended 2018 2017 (In thousands) Income (loss) from operations $ (636 ) $ (703 ) Gain (loss) on disposal 1,630 (24 ) Pre-tax income (loss) $ 994 $ (727 ) Total revenues $ 1,919 $ 43,202 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Components of Inventories | Inventories consist of the following: March 31, 2018 December 31, 2017 (In thousands) New vehicles $ 1,086,205 $ 1,017,523 Used vehicles 265,164 294,496 Service loaners 131,473 130,406 Parts, accessories and other 67,679 70,320 Net inventories $ 1,550,521 $ 1,512,745 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Components of Property and Equipment, Net | Property and equipment, net consists of the following: March 31, 2018 December 31, 2017 (In thousands) Land $ 383,749 $ 370,828 Building and improvements 942,426 893,768 Software and computer equipment 150,520 147,812 Parts and service equipment 111,497 105,123 Office equipment and fixtures 96,381 96,066 Company vehicles 9,839 9,723 Construction in progress 43,417 54,429 Total, at cost 1,737,829 1,677,749 Less accumulated depreciation (548,958 ) (527,379 ) Subtotal 1,188,871 1,150,370 Less assets held for sale (1) (9,928 ) (3,489 ) Property and equipment, net $ 1,178,943 $ 1,146,881 (1) Classified in other current assets in the accompanying condensed consolidated balance sheets. |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-term debt consists of the following: March 31, 2018 December 31, 2017 (In thousands) 2016 Revolving Credit Facility (1) $ 100,000 $ 75,000 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% 232,822 199,972 Mortgage notes to finance companies-variable rate, bearing interest at 1.50 to 2.90 percentage points above one-month or three-month LIBOR 195,428 219,719 Debt issuance costs (12,769 ) (13,208 ) Other 3,860 3,947 Total debt $ 1,058,614 $ 1,024,703 Less current maturities (53,957 ) (61,314 ) Long-term debt $ 1,004,657 $ 963,389 (1) The interest rate on the 2016 Revolving Credit Facility (as defined below) was 225 basis points above LIBOR at both March 31, 2018 and December 31, 2017 . |
Financial Covenants Include Required Specified Ratios | Sonic was in compliance with the covenants under the 2016 Credit Facilities as of March 31, 2018 . 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 March 31, 2018 actual 1.09 1.70 4.90 |
Summary of Interest Received and Paid under Term of Cash Flow Swap | Under the terms of the interest rate cap agreements, Sonic will receive and pay interest based on the following: Notional Pay Rate (1) Receive Rate (2) Start Date End Date (In millions) $ 250.0 2.000% one-month LIBOR September 1, 2017 June 30, 2018 $ 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 to or from the counterparty will occur unless the stated receive rate exceeds the stated pay rate, in which case a net payment to Sonic from the counterparty based on the spread between the receive rate and the pay rate will be recognized as a reduction of interest expense, other, net in the accompanying condensed consolidated statements of income. (2) The one-month LIBOR rate was approximately 1.883% at March 31, 2018 . |
Per Share Data and Stockholde27
Per Share Data and Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
Dilutive Effect on Earnings Per Share | The following tables illustrate the dilutive effect of such items on earnings per share for the three months ended March 31, 2018 and 2017 : Three Months Ended March 31, 2018 Income (Loss) Income (Loss) From Continuing Operations From Discontinued Operations Net Income (Loss) Weighted Average Shares Amount Per Share Amount Amount Per Share Amount Amount Per Share Amount (In thousands, except per share amounts) Earnings (loss) and shares 42,789 $ (2,014 ) $ (180 ) $ (2,194 ) Effect of participating securities: Non-vested restricted stock — — — Basic earnings (loss) and shares 42,789 $ (2,014 ) $ (0.05 ) $ (180 ) $ — $ (2,194 ) $ (0.05 ) Effect of dilutive securities: Stock compensation plans — Diluted earnings (loss) and shares 42,789 $ (2,014 ) $ (0.05 ) $ (180 ) $ — $ (2,194 ) $ (0.05 ) Three Months Ended March 31, 2017 Income (Loss) Income (Loss) From Continuing Operations From Discontinued Operations Net Income (Loss) Weighted Average Shares Amount Per Share Amount Amount Per Share Amount Amount Per Share Amount (In thousands, except per share amounts) Earnings (loss) and shares 44,791 $ (20 ) $ (521 ) $ (541 ) Effect of participating securities: Non-vested restricted stock — — — Basic earnings (loss) and shares 44,791 $ (20 ) $ — $ (521 ) $ (0.01 ) $ (541 ) $ (0.01 ) Effect of dilutive securities: Stock compensation plans — Diluted earnings (loss) and shares 44,791 $ (20 ) $ — $ (521 ) $ (0.01 ) $ (541 ) $ (0.01 ) |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Summary of Lease Exit Accruals | A summary of the activity of these operating lease exit accruals consists of the following: (In thousands) Balance at December 31, 2017 $ 6,478 Lease exit expense (1) 5,070 Payments (2) (771 ) Balance at March 31, 2018 $ 10,777 (1) Expense of approximately $5.0 million is recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of income. In addition, expense of approximately $0.1 million is recorded in income (loss) from discontinued operations before taxes in the accompanying condensed consolidated statements of income. (2) Amount is recorded as an offset to rent expense, with approximately $0.3 million recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of income and approximately $0.5 million recorded in income (loss) from discontinued operations before taxes in the accompanying condensed consolidated statements of income. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Assets and Liabilities Recorded at Fair Value | Assets and liabilities recorded at fair value in the accompanying condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017 are as follows: Fair Value Based on Significant Other Observable Inputs (Level 2) March 31, 2018 December 31, 2017 (In thousands) Assets: Cash surrender value of life insurance policies (1) $ 33,938 $ 33,747 Cash flow swaps and interest rate caps designated as hedges (2) 6,688 5,968 Total assets $ 40,626 $ 39,715 Liabilities: Cash flow swaps and interest rate caps designated as hedges (3) $ — $ 1,286 Deferred compensation plan (4) 18,958 18,417 Total liabilities $ 18,958 $ 19,703 (1) Included in other assets in the accompanying condensed consolidated balance sheets. (2) As of March 31, 2018 , approximately $0.6 million and $6.1 million were included in other current assets and other assets, respectively, in the accompanying condensed consolidated balance sheets. As of December 31, 2017 , approximately $0.9 million and $5.1 million were included in other current assets and other assets, respectively, in the accompanying condensed consolidated balance sheets. (3) As of December 31, 2017 , approximately $1.0 million and $0.3 million were included in other accrued liabilities and other long-term liabilities, respectively, in the accompanying condensed consolidated balance sheets. (4) Included in other long-term liabilities in the accompanying condensed consolidated balance sheets. |
Fair Value and Carrying Value of Significant Fixed Rate Long-Term Debt | At March 31, 2018 and December 31, 2017 , the fair value and carrying value of Sonic’s significant fixed rate long-term debt were as follows: March 31, 2018 December 31, 2017 Fair Value Carrying Value Fair Value Carrying Value (In thousands) 5.0% Notes (1) $ 275,533 $ 289,273 $ 279,148 $ 289,273 6.125% Notes (1) $ 241,875 $ 250,000 $ 248,750 $ 250,000 Mortgage Notes (2) $ 235,991 $ 232,822 $ 203,031 $ 199,972 Other (2) $ 3,682 $ 3,860 $ 3,760 $ 3,947 (1) As determined by market quotations as of March 31, 2018 and December 31, 2017 , respectively (Level 1). (2) As determined by discounted cash flows (Level 3). |
Accumulated Other Comprehensi30
Accumulated Other Comprehensive Income (Loss) (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Summary of Changes in Accumulated Other Comprehensive Income (Loss) | The changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2018 are as follows: Gains and Losses on Cash Flow Hedges Defined Benefit Pension Plan Total Accumulated Other Comprehensive Income (Loss) (In thousands) Balance at December 31, 2017 $ 1,750 $ (443 ) $ 1,307 Other comprehensive income (loss) before reclassifications (1) 2,691 — 2,691 Amounts reclassified out of accumulated other comprehensive income (loss) (2) 223 — 223 Net current-period other comprehensive income (loss) 2,914 — 2,914 Balance at March 31, 2018 $ 4,664 $ (443 ) $ 4,221 (1) Net of tax expense of $1,046 . (2) Net of tax expense of $84 . |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Summary of Reportable Operating Segment | Reportable segment revenues and segment income (loss) for the three months ended March 31, 2018 and 2017 are as follows: Three Months Ended 2018 2017 (In thousands) Revenues: Franchised Dealerships Segment $ 2,269,269 $ 2,246,025 Pre-Owned Stores Segment 131,504 41,797 Total consolidated revenues $ 2,400,773 $ 2,287,822 Three Months Ended 2018 2017 (In thousands) Segment income (loss) (1): Franchised Dealerships Segment $ 23,764 $ 33,470 Pre-Owned Stores Segment (14,253 ) (5,408 ) Total segment income (loss) 9,511 28,062 Interest expense, other, net (13,456 ) (13,409 ) Other income (expense), net 89 (14,501 ) Income (loss) from continuing operations before taxes $ (3,856 ) $ 152 (1) Segment income (loss) for each segment is defined as operating income (loss) less interest expense, floor plan. |
Summary of Significant Accoun32
Summary of Significant Accounting Policies - Cumulative Effect of Adjustments for Adoption of ASC 606 (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Revenues: | |||
Parts, service and collision repair | $ 351,758,000 | $ 352,043,000 | |
Finance, insurance and other, net | 93,725,000 | 83,063,000 | |
Total revenues | 2,400,773,000 | 2,287,822,000 | |
Cost of Sales: | |||
Parts, service and collision repair | (182,130,000) | (182,699,000) | |
Selling, general and administrative expenses: | |||
Operating income (loss) | 20,188,000 | $ 36,449,000 | |
Assets: | |||
Receivables, net | 367,895,000 | $ 482,126,000 | |
Liabilities: | |||
Other accrued liabilities | 226,530,000 | 237,963,000 | |
Deferred Income Taxes | 54,524,000 | 51,619,000 | |
Stockholders’ Equity: | |||
Retained earnings | 624,535,000 | 625,356,000 | |
Contract work in process | 4,700,000 | ||
ASU 2014-09 | |||
Revenues: | |||
Parts, service and collision repair | 351,758,000 | ||
Finance, insurance and other, net | 93,725,000 | ||
Total revenues | 445,483,000 | ||
Cost of Sales: | |||
Parts, service and collision repair | (182,130,000) | ||
Selling, general and administrative expenses: | |||
Compensation | (185,037,000) | ||
Operating income (loss) | 20,188,000 | ||
Assets: | |||
Receivables, net | 486,716,000 | ||
Contract Assets | 2,082,000 | ||
Liabilities: | |||
Other accrued liabilities | 236,677,000 | ||
Deferred Income Taxes | 50,151,000 | ||
Stockholders’ Equity: | |||
Retained earnings | 621,438,000 | ||
ASU 2014-09 | F&I | |||
Assets: | |||
Contract Assets | 2,600,000 | ||
ASU 2014-09 | Previously reported | |||
Assets: | |||
Receivables, net | 482,126,000 | ||
Contract Assets | 0 | ||
Liabilities: | |||
Other accrued liabilities | 237,963,000 | ||
Deferred Income Taxes | 51,619,000 | ||
Stockholders’ Equity: | |||
Retained earnings | 625,356,000 | ||
ASU 2014-09 | Effects of Adoption of ASC 606 | |||
Assets: | |||
Receivables, net | 4,590,000 | ||
Contract Assets | 2,082,000 | ||
Liabilities: | |||
Other accrued liabilities | (1,286,000) | ||
Deferred Income Taxes | (1,468,000) | ||
Stockholders’ Equity: | |||
Retained earnings | $ (3,918,000) | ||
ASU 2014-09 | Pre-ASC 606 Results | |||
Revenues: | |||
Parts, service and collision repair | 351,202,000 | ||
Finance, insurance and other, net | 93,302,000 | ||
Total revenues | 444,504,000 | ||
Cost of Sales: | |||
Parts, service and collision repair | (181,842,000) | ||
Selling, general and administrative expenses: | |||
Compensation | (185,000,000) | ||
Operating income (loss) | 19,534,000 | ||
ASU 2014-09 | Effects of Adoption of ASC 606 | |||
Revenues: | |||
Parts, service and collision repair | 556,000 | ||
Finance, insurance and other, net | 423,000 | ||
Total revenues | 979,000 | ||
Cost of Sales: | |||
Parts, service and collision repair | (288,000) | ||
Selling, general and administrative expenses: | |||
Compensation | (37,000) | ||
Operating income (loss) | $ 654,000 |
Summary of Significant Accoun33
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Schedule of Equity Method Investments [Line Items] | |||
Percentage of dealership that is accounted for under the equity method | 50.00% | 50.00% | |
Effective tax rate from continuing operations | 47.80% | 113.30% | |
Discrete benefit related to vested or exercised stock compensation | $ 0.9 | $ 0.3 | |
Effective Income Tax Rate Reconciliation, Uncertain Tax Position, Amount | $ 0.2 | $ 0.6 | |
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 | 28.00% | ||
Dealership | |||
Schedule of Equity Method Investments [Line Items] | |||
Percentage of dealership that is accounted for under the equity method | 50.00% |
Business Acquisitions and Dis34
Business Acquisitions and Dispositions - Additional Information (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018USD ($)FranchiseBusiness | Mar. 31, 2017USD ($)FranchiseBusiness | |
Business Combinations [Abstract] | ||
Number of acquired franchises | Business | 0 | 0 |
Business Acquisition [Line Items] | ||
Number of franchises disposed | 0 | |
Proceeds from sales of dealerships | $ | $ 7,461 | $ 0 |
Number of franchises terminated | 1 | |
Luxury franchise | ||
Business Acquisition [Line Items] | ||
Number of franchises disposed | 1 | |
Pre-Owned Stores Segment | ||
Business Acquisition [Line Items] | ||
Number of franchises ceased operations | 1 |
Business Acquisitions and Dis35
Business Acquisitions and Dispositions - Revenues and Other Activities Associated with Disposed Dealerships Classified as Discontinued Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Business Combinations [Abstract] | ||
Income (loss) from operations | $ (139) | $ (280) |
Lease exit accrual adjustments and charges | (109) | (588) |
Pre-tax income (loss) | (248) | (868) |
Total revenues | $ 0 | $ 0 |
Business Acquisitions and Dis36
Business Acquisitions and Dispositions - Revenues and Other Activities Associated with Disposed Dealerships That Remain in Continuing Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Business Combinations [Abstract] | ||
Income (loss) from operations | $ (636) | $ (703) |
Gain (loss) on disposal | 1,630 | (24) |
Pre-tax income (loss) | 994 | (727) |
Total revenues | $ 1,919 | $ 43,202 |
Inventories - Components of Inv
Inventories - Components of Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
New vehicles | $ 1,086,205 | $ 1,017,523 |
Used vehicles | 265,164 | 294,496 |
Service loaners | 131,473 | 130,406 |
Parts, accessories and other | 67,679 | 70,320 |
Net inventories | $ 1,550,521 | $ 1,512,745 |
Property and Equipment - Compon
Property and Equipment - Components of Property and Equipment, Net (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Property, Plant and Equipment [Line Items] | ||
Total, at cost | $ 1,737,829 | $ 1,677,749 |
Less accumulated depreciation | (548,958) | (527,379) |
Subtotal | 1,188,871 | 1,150,370 |
Less assets held for sale | (9,928) | (3,489) |
Property and equipment, net | 1,178,943 | 1,146,881 |
Land | ||
Property, Plant and Equipment [Line Items] | ||
Total, at cost | 383,749 | 370,828 |
Building and improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total, at cost | 942,426 | 893,768 |
Software and computer equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total, at cost | 150,520 | 147,812 |
Parts and service equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total, at cost | 111,497 | 105,123 |
Office equipment and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Total, at cost | 96,381 | 96,066 |
Company vehicles | ||
Property, Plant and Equipment [Line Items] | ||
Total, at cost | 9,839 | 9,723 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Total, at cost | $ 43,417 | $ 54,429 |
Property and Equipment - Additi
Property and Equipment - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Capital expenditures | $ 65,700 | $ 75,700 |
Asset impairment charges | $ 3,643 | $ 510 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets - Additional Information (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Finite-Lived Intangible Assets [Line Items] | ||
Goodwill | $ 525,142 | $ 525,780 |
Net of accumulated impairment losses | 797,600 | |
Lease agreements | ||
Finite-Lived Intangible Assets [Line Items] | ||
Definite life intangibles | 4,500 | $ 4,700 |
Franchise assets | ||
Finite-Lived Intangible Assets [Line Items] | ||
Franchise assets | $ 69,900 |
Long-Term Debt - Long-Term Debt
Long-Term Debt - Long-Term Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 10, 2017 | May 09, 2013 |
Debt Instrument [Line Items] | ||||
Debt issuance costs | $ (12,769) | $ (13,208) | ||
Other | 3,860 | 3,947 | ||
Total debt | 1,058,614 | 1,024,703 | ||
Less current maturities | (53,957) | (61,314) | ||
Long-term debt | 1,004,657 | 963,389 | ||
2016 Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
2016 Revolving Credit Facility | $ 100,000 | $ 75,000 | ||
Interest rate | 2.25% | 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 on debt agreement | 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 on debt agreement | 6.125% | 6.125% | ||
Mortgage notes | ||||
Debt Instrument [Line Items] | ||||
Mortgage notes to finance companies-fixed rate, bearing interest from 3.51% to 7.03% | $ 232,822 | 199,972 | ||
Mortgage notes to finance companies-variable rate, bearing interest at 1.50 to 2.90 percentage points above one-month or three-month LIBOR | $ 195,428 | $ 219,719 | ||
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% |
Long-Term Debt - 2016 Credit Fa
Long-Term Debt - 2016 Credit Facilities (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
2016 Revolving Credit Facility | ||
Line of Credit Facility [Line Items] | ||
2016 Revolving Credit Facility | $ 100,000,000 | $ 75,000,000 |
2016 Revolving Credit Facility | Revolving Credit Facility | ||
Line of Credit Facility [Line Items] | ||
Current borrowing capacity | 250,000,000 | |
Maximum borrowing capacity | 300,000,000 | |
Borrowing base | 215,400,000 | |
Letters of credit outstanding amount | 16,400,000 | |
Borrowing availability amount | 99,000,000 | |
2016 Credit Facilities | Revolving Credit Facility | ||
Line of Credit Facility [Line Items] | ||
2016 Revolving Credit Facility | 100,000,000 | |
2016 New Vehicle Floor Plan Facility and 2016 Used Vehicle Floor Plan Facility | Revolving Credit 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) | Mar. 10, 2017USD ($) | Sep. 30, 2016USD ($) | May 09, 2013USD ($) | Mar. 31, 2018USD ($)Location$ / shares |
5.0% Notes | ||||
Debt Instrument [Line Items] | ||||
Stated interest rate on debt agreement | 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) | $ / shares | $ 0.10 | |||
6.125% Notes | ||||
Debt Instrument [Line Items] | ||||
Stated interest rate on debt agreement | 6.125% | 6.125% | ||
Principal amount | $ 250,000,000 | |||
Notes issued, percent of principal | 100.00% | |||
Maximum dividend (usd per share) | $ / shares | $ 0.12 | |||
7.0% Senior Subordinate Notes | ||||
Debt Instrument [Line Items] | ||||
Stated interest rate on debt agreement | 7.00% | |||
Mortgage notes | ||||
Debt Instrument [Line Items] | ||||
Mortgage financing aggregate | $ 21,000,000 | |||
Number of operating locations related to mortgage financing | Location | 2 | |||
Debt weighted average interest rate on note | 4.39% | |||
Outstanding principal balance | $ 428,200,000 |
Long-Term Debt - Covenants (Det
Long-Term Debt - Covenants (Details) $ in Millions | Mar. 31, 2018USD ($) |
Line of Credit Facility [Line Items] | |
Minimum Consolidated Liquidity Ratio | 109.00% |
Minimum Consolidated Fixed Charge Coverage Ratio | 170.00% |
Maximum Consolidated Total Lease Adjusted Leverage Ratio | 490.00% |
2016 Credit Facilities | |
Line of Credit Facility [Line Items] | |
Net income and retained earnings free of restrictions | $ 127.4 |
Minimum EBTDAR to rent ratio | 382.00% |
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 | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Derivatives, Fair Value [Line Items] | |||
Incremental interest expense | $ 0.1 | $ 1.2 | |
Net benefit expected to be reclassified | 1 | ||
Interest rate swap and interest rate cap | Derivative instruments and hedging activities | |||
Derivatives, Fair Value [Line Items] | |||
Derivative asset, fair value of interest rate swap and cap positions | 6.7 | ||
Net cash proceeds | 4.8 | ||
Interest rate swap | Derivative instruments and hedging activities | |||
Derivatives, Fair Value [Line Items] | |||
Fair value of outstanding interest rate swap and interest rate cap | $ 4.7 | ||
Other assets | Interest rate swap and interest rate cap | Derivative instruments and hedging activities | |||
Derivatives, Fair Value [Line Items] | |||
Derivative asset, fair value of interest rate swap and cap positions | 6.1 | 5.1 | |
Other current assets | Interest rate swap and interest rate cap | Derivative instruments and hedging activities | |||
Derivatives, Fair Value [Line Items] | |||
Derivative asset, fair value of interest rate swap and cap positions | $ 0.6 | ||
Other current assets | Interest rate swap | Derivative instruments and hedging activities | |||
Derivatives, Fair Value [Line Items] | |||
Derivative liability, fair value of interest rate swap and cap positions | 0.9 | ||
Other long-term liabilities | Interest rate swap | Derivative instruments and hedging activities | |||
Derivatives, Fair Value [Line Items] | |||
Derivative liability, fair value of interest rate swap and cap positions | 0.3 | ||
Other accrued liabilities | Interest rate swap | Derivative instruments and hedging activities | |||
Derivatives, Fair Value [Line Items] | |||
Derivative liability, fair value of interest rate swap and cap positions | $ 1 |
Long-Term Debt - Summary of Int
Long-Term Debt - Summary of Interest Received and Paid under Term of Cash Flow Swap (Details) | Mar. 31, 2018USD ($) |
Derivatives, Fair Value [Line Items] | |
One month LIBOR rate | 1.883% |
Cash Flow Swap A | |
Derivatives, Fair Value [Line Items] | |
Notional Amount | $ 250,000,000 |
Pay Rate | 2.00% |
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 Stockholde47
Per Share Data and Stockholders' Equity - Dilutive Effect on Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 |
Weighted Average Shares | |||
Weighted average common shares outstanding (shares) | 42,789 | 44,791 | |
Stock compensation plans (shares) | 0 | 0 | |
Diluted earnings (loss) (shares) | 42,789 | 44,791 | |
From Continuing Operations | |||
Income (Loss) | $ (2,014) | $ (20) | |
Non-vested restricted stock | 0 | 0 | |
Basic earnings (loss) | $ (2,014) | $ (20) | |
Earnings (loss) per share from continuing operations (usd per share) | $ (0.05) | $ 0 | |
From Discontinued Operations | |||
Total revenues | $ (180) | $ (521) | |
Non-vested restricted stock | 0 | 0 | |
Basic earnings (loss) | $ (180) | $ (521) | |
Earnings (loss) per share from discontinued operations (usd per share) | $ 0 | $ (0.01) | |
Net Income (Loss) | |||
Earnings (loss) | $ (2,194) | $ (541) | |
Non-vested restricted stock | 0 | 0 | |
Basic earnings (loss) | $ (2,194) | $ (541) | |
Earnings (loss) per common share (usd per share) | $ (0.05) | $ (0.01) | |
Effect of dilutive securities: | |||
Income (Loss) From Continuing Operations, Diluted earnings (loss) | $ (2,014) | $ (20) | |
Income (Loss) From Discontinued Operations, Diluted earnings (loss) | (180) | (521) | |
Net Income (Loss), Diluted earnings (loss) | $ (2,194) | $ (541) | |
Earnings (loss) per share from continuing operations (usd per share) | $ (0.05) | $ 0 | |
Earnings (loss) per share from discontinued operations (usd per share) | 0 | (0.01) | |
Earnings (loss) per common share (usd per share) | $ (0.05) | $ (0.01) | |
Class A common stock | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 100 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Lease exit costs accrual | $ 10,777,000 | $ 6,478,000 |
Other Commitments [Line Items] | ||
Maximum exposure associated with general indemnifications | $ 5,000,000 | $ 6,000,000 |
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 | $ 2,800,000 | $ 2,800,000 |
Acquired business, earnings targets, maximum term | 10 years | |
Maximum aggregate earnout payment | $ 80,000,000 | |
Other accrued liabilities | ||
Other Commitments [Line Items] | ||
Amount reserved for pending proceedings | 4,500,000 | 3,000,000 |
Other long-term liabilities | ||
Other Commitments [Line Items] | ||
Amount reserved for pending proceedings | $ 200,000 | $ 200,000 |
Commitments and Contingencies49
Commitments and Contingencies - Summary of Lease Exit Accruals (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Lease Exit [Roll Forward] | |
Balance at December 31, 2017 | $ 6,478 |
Lease exit expense | 5,070 |
Payments | (771) |
Balance at March 31, 2018 | 10,777 |
Component of lease exit expense in selling, general and administrative expenses | 5,000 |
Component of lease exit expense in income (loss) from operations and the sale of dealerships before tax | 100 |
Component of lease exit payments in selling, general and administrative expenses | 300 |
Component of lease exit payments in income (loss) from operations and the sale of dealerships before tax | $ 500 |
Fair Value Measurements - Asset
Fair Value Measurements - Assets and Liabilities Recorded at Fair Value (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Other current assets | ||
Assets: | ||
Cash flow swaps and interest rate caps designated as hedges | $ 600 | $ 900 |
Other assets | ||
Assets: | ||
Cash flow swaps and interest rate caps designated as hedges | 6,100 | 5,100 |
Other accrued liabilities | ||
Liabilities: | ||
Cash flow swaps and interest rate caps designated as hedges | 1,000 | |
Other long-term liabilities | ||
Liabilities: | ||
Cash flow swaps and interest rate caps designated as hedges | 300 | |
Fair Value Based on Significant Other Observable Inputs (Level 2) | ||
Assets: | ||
Cash surrender value of life insurance policies | 33,938 | 33,747 |
Cash flow swaps and interest rate caps designated as hedges | 6,688 | 5,968 |
Total assets | 40,626 | 39,715 |
Liabilities: | ||
Cash flow swaps and interest rate caps designated as hedges | 0 | 1,286 |
Deferred compensation plan | 18,958 | 18,417 |
Total liabilities | $ 18,958 | $ 19,703 |
Fair Value Measurements - Fair
Fair Value Measurements - Fair Value and Carrying Value of Significant Fixed Rate Long-Term Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 10, 2017 | May 09, 2013 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Carrying Value | $ 1,058,614 | $ 1,024,703 | ||
Mortgage Notes | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Fair Value | 235,991 | 203,031 | ||
Carrying Value | 232,822 | 199,972 | ||
Other | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Fair Value | 3,682 | 3,760 | ||
Carrying Value | 3,860 | 3,947 | ||
5.0% Notes | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Fair Value | 275,533 | 279,148 | ||
Carrying Value | $ 289,273 | 289,273 | ||
Stated interest rate on debt agreement | 5.00% | 5.00% | ||
6.125% Notes | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Fair Value | $ 241,875 | 248,750 | ||
Carrying Value | $ 250,000 | $ 250,000 | ||
Stated interest rate on debt agreement | 6.125% | 6.125% |
Accumulated Other Comprehensi52
Accumulated Other Comprehensive Income (Loss) - Summary of Changes in Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
December 31, 2017 | $ 786,760 | |
Other comprehensive income (loss) before reclassifications | 2,691 | |
Amounts reclassified out of accumulated other comprehensive income (loss) | 223 | |
Other comprehensive income (loss) | 2,914 | $ 1,303 |
March 31, 2018 | 768,717 | |
Other comprehensive income (loss) before reclassifications, tax expense | 1,046 | |
Amounts reclassified out of accumulated other comprehensive income (loss), tax expense | 84 | |
Gains and Losses on Cash Flow Hedges | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
December 31, 2017 | 1,750 | |
Other comprehensive income (loss) before reclassifications | 2,691 | |
Amounts reclassified out of accumulated other comprehensive income (loss) | 223 | |
Other comprehensive income (loss) | 2,914 | |
March 31, 2018 | 4,664 | |
Defined Benefit Pension Plan | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
December 31, 2017 | (443) | |
Other comprehensive income (loss) before reclassifications | 0 | |
Amounts reclassified out of accumulated other comprehensive income (loss) | 0 | |
Other comprehensive income (loss) | 0 | |
March 31, 2018 | (443) | |
Accumulated Other Comprehensive Income (Loss) | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
December 31, 2017 | 1,307 | |
March 31, 2018 | $ 4,221 |
Segment Information - Additiona
Segment Information - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2018Segmentindividual | |
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 ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Segment Reporting Information [Line Items] | ||
Total consolidated revenues | $ 2,400,773 | $ 2,287,822 |
Total segment income (loss) | 9,511 | 28,062 |
Interest expense, other, net | (13,456) | (13,409) |
Other income (expense), net | 89 | (14,501) |
Income (loss) from continuing operations before taxes | (3,856) | 152 |
Franchised Dealerships Segment | ||
Segment Reporting Information [Line Items] | ||
Total consolidated revenues | 2,269,269 | 2,246,025 |
Total segment income (loss) | 23,764 | 33,470 |
Pre-Owned Stores Segment | ||
Segment Reporting Information [Line Items] | ||
Total consolidated revenues | 131,504 | 41,797 |
Total segment income (loss) | $ (14,253) | $ (5,408) |