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What changed in SONIC AUTOMOTIVE INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of SONIC AUTOMOTIVE INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+425 added−424 removedSource: 10-K (2025-02-19) vs 10-K (2024-02-22)

Top changes in SONIC AUTOMOTIVE INC's 2024 10-K

425 paragraphs added · 424 removed · 358 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur Business The following charts depict the multiple sources of revenue and gross profit for the year ended December 31, 2023: As of December 31, 2023, we operated in the following states: Market Number of Stores in Franchised Dealerships Segment Number of Stores in EchoPark Segment Number of Stores in Powersports Segment Percent of 2023 Total Revenue Texas 29 6 8 27.1 % California 18 1 — 22.8 % Colorado 7 3 — 8.6 % Tennessee 9 1 — 7.3 % Florida 9 — — 5.3 % Alabama 7 1 — 4.7 % North Carolina 3 2 — 4.1 % Georgia 4 1 — 3.7 % Idaho 3 — — 3.0 % Maryland 4 — — 2.1 % Virginia 1 — — 1.8 % Washington 1 7 — 1.8 % Nevada 2 1 — 1.6 % South Carolina 2 — — 1.4 % Indiana 3 — — 1.2 % Missouri 3 1 — 1.0 % New Mexico 2 — — 0.8 % New York 1 — — 0.5 % Arizona — 1 — 0.4 % South Dakota — — 5 0.3 % Disposed stores and holding companies — — — 0.5 % Total 108 25 13 100.0 % 2 SONIC AUTOMOTIVE, INC.
Biggest changeOur Business The following charts depict the multiple sources of revenue and gross profit for the year ended December 31, 2024: As of December 31, 2024, we operated in the following states: Market Number of Stores in Franchised Dealerships Segment Number of Stores in EchoPark Segment Number of Stores in Powersports Segment Percent of 2024 Total Revenue Texas 29 6 8 27.3 % California 18 1 — 23.8 % Colorado 7 3 — 8.4 % Tennessee 9 1 — 7.4 % Florida 9 — — 5.5 % Alabama 7 1 — 4.6 % North Carolina 3 2 2 4.1 % Georgia 5 1 — 4.1 % Idaho 3 — — 3.0 % Maryland 4 — — 1.9 % Virginia 1 — — 2.0 % Washington — — — 0.1 % Nevada 2 1 — 1.8 % South Carolina 2 — — 1.3 % Indiana 3 — — 1.2 % Missouri 3 1 — 1.1 % New Mexico 1 — — 0.7 % New York 1 — — 0.3 % Arizona — 1 — 0.5 % South Dakota — — 5 0.3 % Louisiana 1 — — — % Disposed stores and holding companies — — — 0.6 % Total 108 18 15 100.0 % 2 SONIC AUTOMOTIVE, INC.
Automotive consumers have become increasingly more comfortable using technology to research their vehicle buying alternatives, communicate with store personnel, and complete a portion or all of a vehicle purchase online. The internet presents a marketing, advertising and sales channel that we will continue to utilize to drive value for our stores and enhance the guest experience.
Automotive consumers have become increasingly comfortable using technology to research their vehicle buying alternatives, communicate with store personnel, and complete a portion or all of a vehicle purchase online. The internet presents a marketing, advertising and sales channel that we will continue to utilize to drive value for our stores and enhance the guest experience.
For 2023, approximately 86% of our total new vehicle revenue was generated by luxury and mid-line import dealerships, which typically have higher operating margins, more stable Fixed Operations departments, lower associate turnover and lower inventory levels than other brand categories. We actively evaluate acquisition opportunities and other strategic transactions that we believe will strengthen or diversify our brand portfolio.
For 2024, approximately 86% of our total new vehicle revenue was generated by luxury and mid-line import dealerships, which typically have higher operating margins, more stable Fixed Operations departments, lower associate turnover and lower inventory levels than other brand categories. We actively evaluate acquisition opportunities and other strategic transactions that we believe will strengthen or diversify our brand portfolio.
The Powersports Segment offers guests: (1) sales of both new and used powersports vehicles (such as motorcycles, personal watercraft and all-terrain vehicles); (2) Fixed Operations activities; and (3) F&I services. All three segments generally operate independently of one another, with the exception of certain shared back-office functions and corporate overhead costs.
The Powersports Segment offers guests: (1) sales of both new and used powersports vehicles (such as motorcycles, personal watercraft and all-terrain vehicles); (2) Fixed Operations activities; and (3) third party F&I services. All three segments generally operate independently of one another, with the exception of certain shared back-office functions and corporate overhead costs.
Approximately 220 of our associates, primarily service technicians in northern California, are represented by a labor union. Although only a small percentage of our associates is represented by a labor union, we may be affected by labor strikes, work slowdowns and walkouts at automobile manufacturers’ manufacturing facilities. As we manage our workforce, we focus on associate satisfaction, turnover and training.
Approximately 230 of our associates, primarily service technicians in northern California, are represented by a labor union. Although only a small percentage of our associates is represented by a labor union, we may be affected by labor strikes, work slowdowns and walkouts at automobile manufacturers’ manufacturing facilities. As we manage our workforce, we focus on associate satisfaction, turnover and training.
In addition to new automobile sales, our revenue sources include used automobile sales (including through our EchoPark Segment), which we believe are generally less sensitive to economic cycles and other factors that may affect new automobile sales. Our Powersports Segment further diversifies our vehicle sales offerings to include motorcycles, personal watercraft and all-terrain vehicles.
In addition to new automobile sales, our revenue sources include used automobile sales (including through our EchoPark Segment), which we believe are generally less sensitive to economic cycles, production challenges and other factors that may affect new automobile sales. Our Powersports Segment further diversifies our vehicle sales offerings to include motorcycles, personal watercraft and all-terrain vehicles.
In the future, we may acquire dealerships or open new stores that we believe will strengthen our brand portfolio and divest dealerships or close stores that we believe will not yield acceptable returns over the long term. The retail automotive industry remains highly fragmented, and we believe that further consolidation may occur.
In the future, we expect to acquire dealerships and open new stores that we believe will strengthen our brand portfolio and divest dealerships or close stores that we believe will not yield acceptable returns over the long term. The retail automotive industry remains highly fragmented, and we believe that further consolidation may occur.
Byrd 57 Executive Vice President and Chief Financial Officer David Bruton Smith was elected as Chairman of the Board in July 2022 and as Chief Executive Officer of Sonic in September 2018. Previously, Mr.
Byrd 58 Executive Vice President and Chief Financial Officer David Bruton Smith was elected as Chairman of the Board in July 2022 and as Chief Executive Officer of Sonic in September 2018. Previously, Mr.
The following table depicts the breakdown of our Franchised Dealerships Segment new vehicle revenues by brand: Percentage of New Vehicle Revenues Year Ended December 31, Brand 2023 2022 2021 Luxury: BMW 25 % 26 % 26 % Mercedes 14 % 13 % 12 % Audi 6 % 6 % 6 % Lexus 5 % 5 % 5 % Land Rover 4 % 3 % 4 % Porsche 4 % 4 % 4 % Cadillac 2 % 2 % 2 % MINI 1 % 1 % 1 % Other luxury (1) 2 % 1 % 3 % Total Luxury 63 % 61 % 63 % Mid-line Import: Honda 10 % 9 % 13 % Toyota 9 % 9 % 8 % Volkswagen 2 % 2 % 2 % Hyundai 1 % 1 % 1 % Other mid-line imports (2) 1 % 1 % 1 % Total Mid-line Import 23 % 22 % 25 % Domestic: General Motors (3) 6 % 7 % 5 % Chrysler Dodge Jeep RAM 4 % 6 % 1 % Ford 4 % 4 % 6 % Total Domestic 14 % 17 % 12 % Total 100 % 100 % 100 % (1) Includes Acura, Alfa Romeo, Infiniti, Jaguar, Maserati and Volvo.
The following table depicts the breakdown of our Franchised Dealerships Segment new vehicle revenues by brand: Percentage of New Vehicle Revenues Year Ended December 31, Brand 2024 2023 2022 Luxury: BMW 25 % 25 % 26 % Mercedes 14 % 14 % 13 % Audi 5 % 6 % 6 % Lexus 5 % 5 % 5 % Land Rover 5 % 4 % 3 % Porsche 4 % 4 % 4 % Cadillac 2 % 2 % 2 % MINI 1 % 1 % 1 % Other luxury (1) 2 % 2 % 1 % Total Luxury 63 % 63 % 61 % Mid-line Import: Honda 11 % 10 % 9 % Toyota 9 % 9 % 9 % Volkswagen 2 % 2 % 2 % Hyundai 1 % 1 % 1 % Other mid-line imports (2) — % 1 % 1 % Total Mid-line Import 23 % 23 % 22 % Domestic: General Motors (3) 6 % 6 % 7 % Chrysler Dodge Jeep RAM 4 % 4 % 6 % Ford 4 % 4 % 4 % Total Domestic 14 % 14 % 17 % Total 100 % 100 % 100 % (1) Includes Alfa Romeo, Infiniti, Jaguar, Maserati and Volvo.
As a result of the way we manage our business, we had three reportable segments as of December 31, 2023: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and (3) the Powersports Segment.
As a result of the way we manage our business, we had three reportable segments as of December 31, 2024: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and (3) the Powersports Segment.
Byrd served as a Manager in the Management Consulting Division of Ernst & Young LLP. Human Capital Resources As of December 31, 2023, we had approximately 10,500 employees, which we refer to as associates or teammates, with whom we strive to maintain good relationships, which benefit both our Company and our teammates.
Byrd served as a Manager in the Management Consulting Division of Ernst & Young LLP. Human Capital Resources As of December 31, 2024, we had approximately 10,800 employees, which we refer to as associates or teammates, with whom we strive to maintain good relationships, which benefit both our Company and our teammates.
Each executive officer of the Company is elected by our Board of Directors and holds office from the date of election until thereafter removed by the Board. Name Age Position(s) and Office(s) with Sonic David Bruton Smith 49 Chairman and Chief Executive Officer Jeff Dyke 56 President and Director Heath R.
Each executive officer of the Company is elected by our Board of Directors and holds office from the date of election until thereafter removed by the Board. Name Age Position(s) and Office(s) with Sonic David Bruton Smith 50 Chairman and Chief Executive Officer Jeff Dyke 57 President and Director Heath R.
As of December 31, 2023, our total remaining share repurchase authorization was approximately $286.7 million. 3 SONIC AUTOMOTIVE, INC. Maximize Asset Returns Through Process Execution. We have developed standardized operating processes that are documented in operating playbooks for our stores.
As of December 31, 2024, our total remaining share repurchase authorization was approximately $252.3 million. 3 SONIC AUTOMOTIVE, INC. Maximize Asset Returns Through Process Execution. We have developed standardized operating processes that are documented in operating playbooks for our stores.
Sales operations for EchoPark began in 2014, and, as of December 31, 2023, we operated 25 stores in the EchoPark Segment in 11 states. Under our current EchoPark long-term growth strategy, we plan to continue to enhance our nationwide EchoPark distribution network to reach 90% of the U.S. population at maturity. Expand Our Omnichannel Capabilities.
Sales operations for EchoPark began in 2014, and, as of December 31, 2024, we operated 18 stores in the EchoPark Segment in 10 states. Under our current EchoPark long-term growth strategy, we plan to continue to enhance our nationwide EchoPark distribution network to reach 90% of the U.S. population at maturity. Expand Our Omnichannel Capabilities.
The supply of late-model used vehicles in 2023 continued to be affected by shortfalls in new vehicle manufacturing which occurred during the COVID-19 pandemic, which caused fewer vehicles to be manufactured in the affected years. According to industry sources, there were approximately 286.0 million light vehicles in operation in the U.S. as of December 31, 2023.
The supply of late-model used vehicles in 2024 continued to be affected by shortfalls in new vehicle manufacturing which occurred during the COVID-19 pandemic, which caused fewer vehicles to be manufactured in the affected years. According to industry sources, there were approximately 291.1 million light vehicles in operation in the U.S. as of December 31, 2024.
We regularly review repurchase activity and consider a number of factors in determining when to execute repurchases, including, but not limited to, historical and projected results of operations, the current economic environment and the market price of our Class A Common Stock. During 2023, we repurchased approximately 3.3 million shares of our Class A Common Stock for approximately $177.6 million.
We regularly review repurchase activity and consider a number of factors in determining when to execute repurchases, including, but not limited to, historical and projected results of operations, the current economic environment and the market price of our Class A Common Stock. During 2024, we repurchased approximately 0.6 million shares of our Class A Common Stock for approximately $34.4 million.
For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As of December 31, 2023, we operated 108 stores in the Franchised Dealerships Segment, 25 stores in the EchoPark Segment, and 13 stores in the Powersports Segment.
For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As of December 31, 2024, we operated 108 stores in the Franchised Dealerships Segment, 18 stores in the EchoPark Segment, and 15 stores in the Powersports Segment.
During calendar year 2023, approximately 15.5 million new cars and 36.2 million used cars were sold at retail, many of which were accompanied by trade-ins that could then be resold as used vehicles. Competition The retail automotive industry is highly competitive.
During calendar year 2024, approximately 16.1 million new cars and 13.1 million used cars were sold at retail, many of which were accompanied by trade-ins that could then be resold as used vehicles. Competition The retail automotive industry is highly competitive.
The Franchised Dealerships Segment consists of 134 new vehicle franchises (representing 28 different brands of cars and light trucks) and 16 collision repair centers in 18 states. The EchoPark Segment operates in 11 states and the Powersports Segment operates in two states.
The Franchised Dealerships Segment consists of 133 new vehicle franchises (representing 25 different brands of cars and light trucks) and 16 collision repair centers in 18 states. The EchoPark Segment operates in 10 states and the Powersports Segment operates in three states.
The majority of our revenue is related to our Franchised Dealerships Segment. In 2023, EchoPark Segment revenue represented approximately 16.9% of total revenue (compared to 17.6% in 2022). In 2023, Powersports Segment revenue represented approximately 1.1% of total revenue (compared to 0.4% in 2022).
The majority of our revenue is related to our Franchised Dealerships Segment. In 2024, Franchised Dealerships Segment revenue represented approximately 83.9% of total revenue (compared to 82.0% in 2023). In 2024, EchoPark Segment revenue represented approximately 15.0% of total revenue (compared to 16.9% in 2023).
See Note 14, “Segment Information,” to the accompanying consolidated financial statements for additional financial information regarding our three reportable segments. 1 SONIC AUTOMOTIVE, INC.
In 2024, Powersports Segment revenue represented approximately 1.1% of total revenue (compared to 1.1% in 2023). See Note 14, “Segment Information,” to the accompanying consolidated financial statements for additional financial information regarding our three reportable segments. 1 SONIC AUTOMOTIVE, INC.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRISK FACTORS The market for qualified employees remains highly competitive, may impact our ability to identify and attract new employees and retain existing employees, and may subject us to increased labor costs. The loss of the services of key employees or the inability to attract additional qualified managers could have a material adverse effect on our results of operations.
Biggest changeConsequently, the loss of the services of one or more of these key employees could have a material adverse effect on our results of operations. The market for qualified employees remains highly competitive, may impact our ability to identify and attract new employees and retain existing employees, and may subject us to increased labor costs.
As a result, our operations are subject to risks of importing merchandise, including fluctuations in the relative values of currencies, import duties or tariffs, exchange controls, trade restrictions, work stoppages, supply chain disruptions or production delays, inflation, increases in interest rates, and general political and socioeconomic conditions in other countries.
As a result, our operations are subject to risks of importing merchandise, including in the relative values of currencies, import duties or tariffs, exchange controls, trade restrictions, fluctuations in the relative values of currencies, work stoppages, supply chain disruptions or production delays, inflation, increases in interest rates, and general political and socioeconomic conditions in other countries.
Our ability to obtain additional sources of financing may be limited by the fact that substantially all of the assets of our dealerships are pledged to secure the indebtedness under the 2021 Credit Facilities and the Silo Floor Plan Facilities (as defined below). These pledges may impede our ability to borrow from other sources.
Our ability to obtain additional sources of financing may be limited by the fact that substantially all of the assets of our dealerships are pledged to secure the indebtedness under the Credit Facilities and the Silo Floor Plan Facilities (as defined below). These pledges may impede our ability to borrow from other sources.
RISK FACTORS Our business is dependent on global supply chains that could be adversely affected by natural and man-made disasters, including the effects of pandemics like the COVID-19 pandemic. The automotive manufacturing supply chain spans the globe.
RISK FACTORS Our business is dependent on global economies and supply chains that could be adversely affected by natural and man-made disasters, including the effects of pandemics like the COVID-19 pandemic. The automotive manufacturing supply chain spans the globe.
In addition, we are dependent to a significant extent on our ability to finance our new and certain of our used vehicle inventory under the 2021 Floor Plan Facilities (as defined below) or the Silo Floor Plan Facilities (collectively, “Floor Plan Financing”).
In addition, we are dependent to a significant extent on our ability to finance our new and certain of our used vehicle inventory under the Floor Plan Facilities (as defined below) or the Silo Floor Plan Facilities (collectively, “Floor Plan Financing”).
Pursuant to the 2021 Credit Facilities (as defined below), we are restricted from making dealership acquisitions without lender consent in any fiscal year if the aggregate cost of all such acquisitions is in excess of certain amounts.
Pursuant to the Credit Facilities (as defined below), we are restricted from making dealership acquisitions without lender consent in any fiscal year if the aggregate cost of all such acquisitions is in excess of certain amounts.
Many of these operating leases require compliance with financial and operating covenants similar to those under the 2021 Credit Facilities and require monthly payments of rent that may fluctuate based on interest rates and local consumer price indices.
Many of these operating leases require compliance with financial and operating covenants similar to those under the Credit Facilities and require monthly payments of rent that may fluctuate based on interest rates and local consumer price indices.
We are able to borrow under the 2021 Revolving Credit Facility only if, at the time of the borrowing, we have met all representations and warranties and are in compliance with all financial and other covenants contained therein.
We are able to borrow under the Revolving Credit Facility only if, at the time of the borrowing, we have met all representations and warranties and are in compliance with all financial and other covenants contained therein.
We have capacity to finance new and used vehicle inventory purchases under floor plan agreements with various manufacturer-affiliated captive finance companies and other lending institutions (the “Silo Floor Plan Facilities”) as well as the 2021 Floor Plan Facilities.
We have capacity to finance new and used vehicle inventory purchases under floor plan agreements with various manufacturer-affiliated captive finance companies and other lending institutions (the “Silo Floor Plan Facilities”) as well as the Floor Plan Facilities.
RISK FACTORS While the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions requiring claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether courts in other jurisdictions will enforce provisions such as those contemplated in our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws, including whether a court would enforce the provision requiring claims arising under the Securities Act or the Exchange Act to be brought in the United States District Court for the District of Delaware.
While the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions requiring claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether courts in other jurisdictions will enforce provisions such as those contemplated in our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws, including whether a court would enforce the provision requiring claims arising under the Securities Act or the Exchange Act to be brought in the United States District Court for the District of Delaware.
The franchised dealer’s participation in that potential future transaction type is unclear and our operations and financial results may be negatively impacted if the role of franchised dealers diminishes. 11 SONIC AUTOMOTIVE, INC. RISK FACTORS Our dealers depend upon new vehicle sales and, therefore, their success depends in large part upon consumer demand for and manufacturer supply of particular vehicles.
The franchised dealer’s participation in that potential future transaction type is unclear and our operations and financial results may be negatively impacted if the role of franchised dealers diminishes. 9 SONIC AUTOMOTIVE, INC. RISK FACTORS Our dealers depend upon new vehicle sales and, therefore, their success depends in large part upon consumer demand for and manufacturer supply of particular vehicles.
Moreover, many of our mortgage notes’ principal and interest payments are based on an amortization period longer than the actual terms (maturity dates) of the notes. We will be required to repay or refinance the remaining principal balances for certain of our mortgages with balloon payments at the notes’ maturity dates, which range from 2024 to 2033.
Moreover, many of our mortgage notes’ principal and interest payments are based on an amortization period longer than the actual terms (maturity dates) of the notes. We will be required to repay or refinance the remaining principal balances for certain of our mortgages with balloon payments at the notes’ maturity dates, which range from 2025 to 2033.
As of December 31, 2023, we had interest rate cap agreements related to a portion of our Secured Overnight Financing Rate (“SOFR”)-based variable rate debt to limit our exposure to rising interest rates. See the heading “Derivative Instruments and Hedging Activities” under Note 6, “Long-Term Debt,” to the accompanying consolidated financial statements.
As of December 31, 2024, we had interest rate cap agreements related to a portion of our Secured Overnight Financing Rate (“SOFR”)-based variable rate debt to limit our exposure to rising interest rates. See the heading “Derivative Instruments and Hedging Activities” under Note 6, “Long-Term Debt,” to the accompanying consolidated financial statements.
Used vehicle inventory is subject to depreciation risk. Accordingly, if we develop excess inventory, the inability to liquidate such inventory at prices that allow us to meet desirable profit margins or to recover our costs could have a material adverse effect on our results of operations. 12 SONIC AUTOMOTIVE, INC.
Used vehicle inventory is subject to depreciation risk. Accordingly, if we develop excess inventory, the inability to liquidate such inventory at prices that allow us to meet desirable profit margins or to recover our costs could have a material adverse effect on our results of operations. 10 SONIC AUTOMOTIVE, INC.
RISK FACTORS The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which was signed into law on July 21, 2010, established the Consumer Financial Protection Bureau (the “CFPB”), an independent federal agency funded by the U.S. Federal Reserve with broad regulatory powers and limited oversight from the U.S. Congress.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which was signed into law on July 21, 2010, established the Consumer Financial Protection Bureau (the “CFPB”), an independent federal agency funded by the U.S. Federal Reserve with broad regulatory powers and limited oversight from the U.S. Congress.
Our failure to meet a manufacturer’s customer satisfaction, financial and sales performance or facility requirements may adversely affect our profitability and our ability to acquire new dealerships. A manufacturer may condition its allotment of vehicles, our participation in bonus programs or our acquisition of additional franchises upon our compliance with its brand and facility standards.
RISK FACTORS Our failure to meet a manufacturer’s customer satisfaction, financial and sales performance or facility requirements may adversely affect our profitability and our ability to acquire new dealerships. A manufacturer may condition its allotment of vehicles, our participation in bonus programs or our acquisition of additional franchises upon our compliance with its brand and facility standards.
Our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws designate the state and federal courts of Delaware as the exclusive forums for certain claims against the Company, which could increase the costs of bringing a claim or limit the ability of a stockholder to bring a claim in a judicial forum viewed by a stockholder as favorable.
RISK FACTORS Our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws designate the state and federal courts of Delaware as the exclusive forums for certain claims against the Company, which could increase the costs of bringing a claim or limit the ability of a stockholder to bring a claim in a judicial forum viewed by a stockholder as favorable.
Tax positions may exist related to our tax filings that could be challenged by governmental agencies and result in higher income tax expenses and affect our overall liquidity if we are unable to successfully defend these tax positions. We are subject to audits by federal and state governmental income tax agencies on a continual basis.
RISK FACTORS Tax positions may exist related to our tax filings that could be challenged by governmental agencies and result in higher income tax expenses and affect our overall liquidity if we are unable to successfully defend these tax positions. We are subject to audits by federal and state governmental income tax agencies on a continual basis.
RISK FACTORS In addition, many manufacturers attempt to measure customers’ satisfaction with their sales and warranty service experiences through manufacturer-determined CSI scores. The components of CSI vary by manufacturer and are modified periodically. Franchise and dealer agreements may also impose financial and sales performance standards.
In addition, many manufacturers attempt to measure customers’ satisfaction with their sales and warranty service experiences through manufacturer-determined CSI scores. The components of CSI vary by manufacturer and are modified periodically. Franchise and dealer agreements may also impose financial and sales performance standards.
Manufacturer stock ownership restrictions may impair our ability to maintain or renew franchise or dealer agreements or to issue additional equity. Certain of our franchise and dealer agreements prohibit transfers of any ownership interests of a dealership and, in some cases, its parent, without prior approval of the applicable manufacturer.
RISK FACTORS Manufacturer stock ownership restrictions may impair our ability to maintain or renew franchise or dealer agreements or to issue additional equity. Certain of our franchise and dealer agreements prohibit transfers of any ownership interests of a dealership and, in some cases, its parent, without prior approval of the applicable manufacturer.
Risks Related to the Ownership of Our Common Stock Concentration of voting power and anti-takeover provisions of our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws, Delaware law and our franchise and dealer agreements may reduce the likelihood of a potential change of control from a third party.
RISK FACTORS Risks Related to the Ownership of Our Common Stock Concentration of voting power and anti-takeover provisions of our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws, Delaware law and our franchise and dealer agreements may reduce the likelihood of a potential change of control from a third party.
RISK FACTORS There can be no assurance that we would have sufficient resources available to satisfy all of our obligations under these debt instruments should all or substantial portions of the principal become immediately due and payable.
There can be no assurance that we would have sufficient resources available to satisfy all of our obligations under these debt instruments should all or substantial portions of the principal become immediately due and payable.
RISK FACTORS We are also required to test for impairment of other long-lived assets in the event certain conditions exist that may indicate the recorded value of the assets is not recoverable through future operating cash flows.
We are also required to test for impairment of other long-lived assets in the event certain conditions exist that may indicate the recorded value of the assets is not recoverable through future operating cash flows.
To the extent that the market share for PHEVs, BEVs and other non-internal combustion engine vehicles increases rapidly or such vehicles comprise a significant percentage of new or used vehicles being sold or operated nationwide, we may experience a disruption in our parts, service and collision repair revenues or revenues from certain warranty and maintenance products that we sell, any of which could have a material adverse effect on our overall business and results of operations.
To the extent that the market share for PHEVs, BEVs and other non-internal combustion engine vehicles increases rapidly or such vehicles comprise a significant percentage of new or used vehicles being sold or operated nationwide, we may experience a disruption in our parts, service and collision repair revenues or revenues from certain warranty and maintenance products that we sell, any of which could have a material adverse effect on our overall business and results of operations. 12 SONIC AUTOMOTIVE, INC.
The outcome of legal and administrative proceedings we are or may become involved in could have a material adverse effect on our business, financial condition, results of operations, cash flows or prospects.
RISK FACTORS The outcome of legal and administrative proceedings we are or may become involved in could have a material adverse effect on our business, financial condition, results of operations, cash flows or prospects.
The U.S. or the countries from which our products are imported may, from time to time, impose new quotas, duties, tariffs or other restrictions, or adjust presently prevailing quotas, duties or tariffs, which may affect our operations and our ability to purchase imported vehicles and/or parts at reasonable prices, which may negatively affect affordability to consumers of certain new vehicles and reduce demand for certain vehicle makes and models.
The U.S. or the countries from which our products are imported may, in the future, impose new quotas, duties, tariffs or other restrictions, or adjust presently prevailing quotas, duties or tariffs, which may affect our operations and our ability to purchase imported vehicles and/or parts at reasonable prices, which may negatively affect affordability to consumers of certain new vehicles and reduce demand for certain vehicle makes and models.
We cannot assure you that manufacturers will approve future acquisitions or do so on a timely basis, which could impair the execution of our acquisition strategy. 9 SONIC AUTOMOTIVE, INC.
We cannot assure you that manufacturers will approve future acquisitions or do so on a timely basis, which could impair the execution of our acquisition strategy. 13 SONIC AUTOMOTIVE, INC.
Three of our dealership subsidiaries actively contribute to the AI Pension Plan under collective bargaining agreements with the IAM. These subsidiaries employ approximately 160 individuals, which constitutes less than 2% of our total workforce.
Three of our dealership subsidiaries actively contribute to the AI Pension Plan under collective bargaining agreements with the IAM. These subsidiaries employ approximately 160 individuals, which constitutes less than 1% of our total workforce.
In addition, armed conflict and increased international political or economic instability may cause disruptions to foreign and domestic supply chains and manufacturing operations—including as a result of economic sanctions imposed by the U.S.—or result in price increases that adversely impact automotive manufacturers or our new vehicle business.
In addition, armed conflict and increased international political or economic instability, including the escalation of trade tensions, may cause disruptions to foreign and domestic supply chains and manufacturing operations—including as a result of economic sanctions imposed by the U.S.—or result in price increases that adversely impact automotive manufacturers or our new vehicle business.
RISK FACTORS We may be subject to substantial withdrawal liability assessments in the future related to a multiemployer pension plan to which certain of our dealerships make contributions pursuant to collective bargaining agreements.
We may be subject to substantial withdrawal liability assessments in the future related to a multiemployer pension plan to which certain of our dealerships make contributions pursuant to collective bargaining agreements.
RISK FACTORS In the future, certain PHEVs and BEVs may require less frequent or less costly maintenance and repairs than traditional internal combustion engine vehicles due to their mechanical design and features.
In the future, certain PHEVs and BEVs may require less frequent or less costly maintenance and repairs than traditional internal combustion engine vehicles due to their mechanical design and features.
We may not have sufficient funds to meet our obligation to repay all or a substantial portion of the outstanding principal amount of our indebtedness when it becomes due.
RISK FACTORS We may not have sufficient funds to meet our obligation to repay all or a substantial portion of the outstanding principal amount of our indebtedness when it becomes due.
If we are found to be in violation of, or subject to liabilities under, any of these laws or regulations or if new laws or regulations are enacted that adversely affect our operations, then our business, operating results, financial condition, cash flows and prospects could suffer.
Our facilities and operations are subject to extensive governmental laws and regulations. If we are found to be in violation of, or subject to liabilities under, any of these laws or regulations or if new laws or regulations are enacted that adversely affect our operations, then our business, operating results, financial condition, cash flows and prospects could suffer.
In the event that interest rates rise further, lenders tighten their credit standards, or there is a decline in the availability of credit in the consumer lending market, the costs of financing could influence consumer buying decisions and the ability of consumers to purchase vehicles could be limited, which could have a material adverse effect on our business, revenues and profitability.
In the event that interest rates remain at elevated levels or rise further, lenders tighten their credit standards, or there is a decline in the availability of credit in the consumer lending market, the costs of financing could influence consumer buying decisions and the ability of consumers to purchase vehicles could be limited, which could have a material adverse effect on our business, revenues and profitability.
Further, it is difficult to predict whether such a model may be adopted by manufacturers or permitted by state laws in the U.S. Adoption of this sales model by manufacturers in the geographic markets in which we operate could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Further, it is difficult to predict whether such a model may be adopted by manufacturers or permitted by state laws in the U.S. Adoption of this sales model by manufacturers in the geographic markets in which we operate could have a material adverse effect on our business, results of operations, financial condition and cash flows. 14 SONIC AUTOMOTIVE, INC.
The inability of manufacturers to produce such vehicles at levels consistent with the overall level of customer demand actually experienced, or our inability to tailor our inventory levels and sales practices to meet fluctuations in demand for these vehicles, could disrupt our ongoing business or have a material adverse effect on our overall business and results of operations. 13 SONIC AUTOMOTIVE, INC.
The inability of manufacturers to produce such vehicles at levels consistent with the overall level of customer demand actually experienced, or our inability to tailor our inventory levels and sales practices to meet fluctuations in demand for these vehicles, could disrupt our ongoing business or have a material adverse effect on our overall business and results of operations.
Additionally, any such bankruptcy may result in us being required to incur impairment charges with respect to the inventory, fixed assets and intangible assets related to certain dealerships, which could adversely impact our results of operations and financial condition and our ability to remain in compliance with the financial ratios contained in our debt agreements.
Additionally, any such bankruptcy may result in us being required to incur impairment charges with respect to the inventory, fixed assets and intangible assets related to certain dealerships, which could adversely impact our results of operations and financial condition and our ability to remain in compliance with the financial ratios contained in our debt agreements. 16 SONIC AUTOMOTIVE, INC.
Events such as labor strikes or other disruptions in production, including those caused by natural disasters, that may adversely affect a manufacturer may also adversely affect us. In particular, labor strikes at a manufacturer that continue for a substantial period of time could have a material adverse effect on our business.
Events such as stop-sale orders, labor strikes or other disruptions in production, including those caused by natural disasters, which may adversely affect a manufacturer may also adversely affect us. In particular, labor strikes at a manufacturer that continue for a substantial period of time could have a material adverse effect on our business.
As of December 31, 2023, we had approximately $173.0 million of total remaining availability under our delayed draw-term loan credit agreement entered into in November 2019 (the "2019 Mortgage Facility") based on the borrowing base calculation which varies in borrowing limit based on the appraised value of the collateral underlying the 2019 Mortgage Facility.
As of December 31, 2024, we had approximately $120.0 million of total remaining availability under our delayed draw-term loan credit agreement entered into in November 2019 (the "Mortgage Facility") based on the borrowing base calculation which varies in borrowing limit based on the appraised value of the collateral underlying the Mortgage Facility.
The Delaware courts or the United States District Court for the District of Delaware may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than to our stockholders. 19 SONIC AUTOMOTIVE, INC.
The Delaware courts or the United States District Court for the District of Delaware may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than to our stockholders.
In addition, severe or sustained changes in gasoline prices or overall shifts in consumer sentiment toward alternative fuel vehicles may lead to a shift in consumer buying patterns. Availability of preferred models may not exist in sufficient quantities to satisfy consumer demand and allow our stores to meet sales expectations.
In addition, severe or sustained changes in gasoline prices or overall shifts in consumer sentiment toward alternative fuel vehicles may lead to a shift in consumer buying patterns. Availability of preferred models may not exist in sufficient quantities to satisfy consumer demand and allow our stores to meet sales expectations. 20 SONIC AUTOMOTIVE, INC.
Our business may be adversely affected by import product restrictions and foreign trade risks that may impair our ability to sell foreign vehicles profitably. A significant portion of our new vehicle business involves the sale of vehicles, parts or vehicles composed of parts that are manufactured outside the U.S.
Our business may be adversely affected by tariffs, import product restrictions and foreign trade risks that may impair our ability to sell the products that we offer profitably. A significant portion of our new vehicle business involves the sale of vehicles, parts or vehicles composed of parts that are manufactured outside the U.S.
Our failure to comply with certain covenants in these agreements could materially adversely affect our ability to access our borrowing capacity, subject us to acceleration of our outstanding debt, result in a cross default on other indebtedness and have a material adverse effect on our ability to continue our business.
Our failure to comply with certain covenants in these agreements could materially adversely affect our ability to access our borrowing capacity, subject us to acceleration of our outstanding debt, result in a cross default on other indebtedness and have a material adverse effect on our ability to continue our business. 17 SONIC AUTOMOTIVE, INC.
This may put us in a competitive disadvantage with other competing dealerships and may ultimately result in our decision to sell a franchise when we believe it may be difficult to recover the cost of the required investment to reach the manufacturer’s brand and facility standards. 14 SONIC AUTOMOTIVE, INC.
This may put us in a competitive disadvantage with other competing dealerships and may ultimately result in our decision to sell a franchise when we believe it may be difficult to recover the cost of the required investment to reach the manufacturer’s brand and facility standards.
Although we have substantial insurance, subject to certain deductibles, limitations and exclusions, we may be exposed to uninsured or under insured losses that could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Although we have substantial insurance, subject to certain deductibles, limitations and exclusions, we may be exposed to uninsured or under insured losses that could have a material adverse effect on our business, financial condition, results of operations or cash flows. 21 SONIC AUTOMOTIVE, INC.
RISK FACTORS Adverse conditions affecting one or more key manufacturers or lenders may negatively impact our results of operations.
Adverse conditions affecting one or more key manufacturers or lenders may negatively impact our results of operations.
The success of our dealerships depends in large part on the overall success of the vehicle lines they carry. New vehicle sales generate the majority of our total revenue and lead to sales of higher-margin products and services such as finance, insurance, vehicle protection products and other aftermarket products, and parts and service operations.
The success of our dealerships depends in large part on the overall success of the vehicle lines they carry. New vehicle sales are the largest component of our total revenue and lead to sales of higher-margin products and services such as finance, insurance, vehicle protection products and other aftermarket products, and parts and service operations.
Because these companies have the ability to connect with each individual consumer easily through their existing or future technology platforms, we may ultimately be at a competitive disadvantage in marketing, selling, financing and servicing vehicles. In addition, certain automobile manufacturers have expressed interest in or begun selling directly to customers.
Because these companies have the ability to connect with individual consumers easily through technology platforms, we may ultimately be at a competitive disadvantage in marketing, selling, financing and servicing vehicles. In addition, certain automobile manufacturers have expressed interest in or begun selling directly to customers.
For 2023, approximately 13.9% of our Fixed Operations revenues was for work covered by manufacturer warranties and complimentary maintenance programs. To the extent a manufacturer reduces the labor rates or markup of replacement parts for such warranty repair work, our Fixed Operations revenues and margins could be adversely affected. 15 SONIC AUTOMOTIVE, INC.
For 2024, approximately 15.9% of our Fixed Operations revenues was for work covered by manufacturer warranties and complimentary maintenance programs. To the extent a manufacturer reduces the labor rates or markup of replacement parts for such warranty repair work, our Fixed Operations revenues and margins could be adversely affected.
Any cybersecurity breach or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties or damage to our reputation, and cause a loss of confidence in our services, which could materially adversely affect our competitive position, results of operations and financial condition. 21 SONIC AUTOMOTIVE, INC.
Any cybersecurity breach or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, lost sales or damage to our reputation, and otherwise cause a loss of confidence in our services, which could materially adversely affect our competitive position, results of operations and financial condition.
Potential conflicts of interest could arise in the future between us and our officers or directors in the enforcement, amendment or termination of arrangements existing between them.
Potential conflicts of interest could arise in the future between us and our officers or directors in the enforcement, amendment or termination of arrangements existing between them. 19 SONIC AUTOMOTIVE, INC.
The majority of our dealership properties are subject to long-term operating lease arrangements that commonly have initial terms of 10 to 20 years with renewal options generally ranging from five to 10 years.
A significant number of our dealership properties are subject to long-term operating lease arrangements that commonly have initial terms of 10 to 20 years with renewal options generally ranging from five to 10 years.
RISK FACTORS We have up to $350.0 million of maximum borrowing availability under an amended and restated syndicated revolving credit facility (the “2021 Revolving Credit Facility”) and up to $2.6 billion of maximum borrowing availability for combined syndicated new and used vehicle inventory floor plan financing (the “2021 Floor Plan Facilities” and, together with the 2021 Revolving Credit Facility, the “2021 Credit Facilities”).
We have up to $350.0 million of maximum borrowing availability under an amended and restated syndicated revolving credit facility (the “Revolving Credit Facility”) and up to $2.6 billion of maximum borrowing availability for combined syndicated new and used vehicle inventory floor plan financing (the “Floor Plan Facilities” and, together with the Revolving Credit Facility, the “Credit Facilities”).
In 2023, higher consumer retail automotive lending rates negatively impacted finance and insurance product penetration rates and the negative impact to affordability reduced new and used retail unit volumes industry-wide.
In 2024, sustained high consumer retail automotive lending rates negatively impacted finance and insurance product penetration rates and the negative impact to affordability reduced new and used retail unit volumes industry-wide.
A failure on our part to effectively hedge interest rate exposure may adversely affect our financial condition and results of operations.
A failure on our part to effectively hedge interest rate exposure may adversely affect our financial condition and results of operations. 18 SONIC AUTOMOTIVE, INC.
As of December 31, 2023, we had approximately $298.6 million available for additional borrowings under the 2021 Revolving Credit Facility based on the borrowing base calculation, which is affected by numerous factors, including eligible asset balances.
As of December 31, 2024, we had approximately $338.5 million available for additional borrowings under the Revolving Credit Facility based on the borrowing base calculation, which is affected by numerous factors, including eligible asset balances.
As of December 31, 2023, our total outstanding indebtedness was approximately $3.3 billion, which includes floor plan notes payable, long-term debt and short-term debt. 16 SONIC AUTOMOTIVE, INC.
As of December 31, 2024, our total outstanding indebtedness was approximately $3.5 billion, which includes floor plan notes payable, long-term debt and short-term debt.
We obtain a significant percentage of our used vehicle inventory through our proprietary trade-in appraisal system as this sourcing outlet is generally more profitable and more convenient for our guests and potential guests. A significant portion of our used vehicle inventory is sourced through trade-ins for purchases of new vehicles, which remain limited in supply.
We obtain a significant percentage of our used vehicle inventory through our proprietary trade-in appraisal system as this sourcing outlet is generally more profitable and more convenient for our guests and potential guests.
The frequency and severity of cybersecurity incidents has increased in recent years and adversely impacted organizations of varying sizes. Although we have attempted to mitigate the cybersecurity risk of both our internal and outsourced functions by implementing various cybersecurity controls, an internal framework for the oversight of cybersecurity risks and other security measures, specifically as described in “Item 1C.
Although we have attempted to mitigate the cybersecurity risk of both our internal and outsourced functions by implementing various cybersecurity controls, an internal framework for the oversight of cybersecurity risks and other security measures, specifically as described in “Item 1C.
Even if new financing were available, it may not be on terms acceptable to us. If a default were to occur, we may be unable to adequately finance our operations because of acceleration and cross-default provisions and the value of our common stock would be materially adversely affected.
If a default were to occur, we may be unable to adequately finance our operations because of acceleration and cross-default provisions and the value of our common stock would be materially adversely affected.
Our stockholders and prospective investors should consider these risks, uncertainties and other factors prior to making an investment decision. Risks Related to Our Growth Strategy Our investment in new business strategies, services and technologies is inherently risky, and could disrupt our ongoing business or have a material adverse effect on our overall business and results of operations.
RISK FACTORS Risks Related to Our Growth Strategy Our investment in new business strategies, services and technologies is inherently risky and could disrupt our ongoing business or have a material adverse effect on our overall business and results of operations.
In addition, the lack of qualified management or employees employed by potential acquisition candidates may limit our ability to consummate future acquisitions. Natural disasters, adverse weather and other events can disrupt our business.
The loss of the services of key employees or the inability to attract additional qualified managers could have a material adverse effect on our results of operations. In addition, the lack of qualified management or employees employed by potential acquisition candidates may limit our ability to consummate future acquisitions. Natural disasters, adverse weather and other events can disrupt our business.
Until we actually assume control of business assets and their operations, we may not be able to ascertain the actual value or understand the potential liabilities of the acquired entities and their operations. Risks Related to the Retail Automotive Industry Our facilities and operations are subject to extensive governmental laws and regulations.
Until we actually assume control of business assets and their operations, we may not be able to ascertain the actual value or understand the potential liabilities of the acquired entities and their operations.
In certain circumstances, an employer can be assessed withdrawal liability for a partial withdrawal from a multiemployer pension plan. If any of these adverse events were to occur in the future, it could result in a substantial withdrawal liability assessment that could have a material adverse effect on our business, financial condition, results of operations or cash flows.
If any of these adverse events were to occur in the future, it could result in a substantial withdrawal liability assessment that could have a material adverse effect on our business, financial condition, results of operations or cash flows. 22 SONIC AUTOMOTIVE, INC.
The violation of other laws and regulations to which we are subject also can result in administrative, civil or criminal sanctions against us, which may include a cease and desist order against the subject operations or even revocation or suspension of our license to operate the subject business, as well as significant liability, fines and penalties.
The violation of other laws and regulations to which we are subject also can result in administrative, civil or criminal sanctions against us, which may include a cease and desist order against the subject operations 11 SONIC AUTOMOTIVE, INC.
The instruments that govern our long-term indebtedness contain certain provisions that may cause all or a substantial portion of the outstanding principal amount of our indebtedness to become immediately due and payable.
The instruments that govern our long-term indebtedness contain certain provisions that may cause all or a substantial portion of the outstanding principal amount of our indebtedness to become immediately due and payable. The Credit Facilities, the Mortgage Facility, the indentures governing the 4.625% Notes and the 4.875% Notes, and many of our operating leases contain numerous financial and operating covenants.
Cybersecurity,” our information technology and infrastructure may be vulnerable to attacks by hackers or breaches due to employee error, malfeasance or other disruptions.
Cybersecurity,” our information technology and infrastructure, including the systems that are provided to us by third-parties, have been, and may in the future be, vulnerable to attacks by hackers or breaches due to employee error, malfeasance or other disruptions.
The rate at which our customers will demand such vehicles, as well as the ability of manufacturers to accurately predict and meet such demand, is dependent on various factors.
Manufacturers have also increased production focus on the manufacture of fuel-efficient plug-in hybrid electric vehicles (“PHEVs”) and battery electric vehicles (“BEVs”). The rate at which our customers will demand such vehicles, as well as the ability of manufacturers to accurately predict and meet such demand, is dependent on various factors.
These cybersecurity risks include vulnerability to cyberattack of our internal or externally hosted business applications; interruption of service or access to systems may affect our ability to deliver vehicles or complete transactions with customers; unauthorized access or theft of customer or employee personal confidential information, including financial information, or strategically sensitive data; disruption of communications (both internally and externally) that may affect the quality of information used to make informed business decisions; and damage to our reputation as a result of a breach in security that could affect the financial security of our customers.
We remain exposed to the risk of additional interruptions of service or loss of access to systems (including our internal or externally hosted business applications) supporting our critical business functions and processes, which may negatively affect our ability to deliver vehicles or complete transactions with customers; unauthorized access or theft of customer or employee personal confidential information, including financial information, or strategically sensitive data; disruption of communications (both internally and externally) that may affect the quality of information used to make informed business decisions; additional costs and expenses; and damage to our reputation.
In the ordinary course of business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our customers and employees. Moreover, significant technology-related business functions of ours are outsourced.
We have invested in internal and external business applications to execute our strategy of employing technology to benefit our business. In the ordinary course of business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our customers and employees.
As of December 31, 2023, our balance sheet reflected a carrying amount of approximately $253.8 million in goodwill and approximately $417.4 million in other intangible assets, net. 22 SONIC AUTOMOTIVE, INC.
As of December 31, 2024, our balance sheet reflected a carrying amount of approximately $358.5 million in goodwill and approximately $430.3 million in other intangible assets, net.
Manufacturers routinely modify their incentive programs in response to changing market conditions. A reduction or discontinuation of a manufacturer’s incentive programs may materially adversely impact vehicle demand and affect our results of operations. Our sales volume may be materially adversely affected if manufacturer-affiliated captive finance companies change their customer financing programs or are unable to provide floor plan financing.
Manufacturers routinely modify their incentive programs in response to changing market conditions. A reduction or discontinuation of a manufacturer’s incentive programs may materially adversely impact vehicle demand and affect our results of operations. 15 SONIC AUTOMOTIVE, INC.
The events that constitute a change of control under the indentures governing the 4.625% Notes and the 4.875% Notes may also constitute a default under the 2021 Credit Facilities and the 2019 Mortgage Facility.
The events that constitute a change of control under the indentures governing the 4.625% Notes and the 4.875% Notes may also constitute a default under the Credit Facilities and the Mortgage Facility. The agreements or instruments governing any future debt that we may incur may contain similar provisions regarding repurchases in the event of a change of control triggering event.
Although for some such liabilities we believe we are entitled to indemnification from other entities, we cannot assure that such entities will view their obligations as we do or will be able to satisfy them.
Although for some such liabilities we believe we are entitled to indemnification from other entities, we cannot assure that such entities will view their obligations as we do or will be able to satisfy them. Failure to comply with applicable laws and regulations may have an adverse effect on our business, operating results, financial condition, cash flows and prospects.
In addition, a default under one agreement could result in a cross default and acceleration of our repayment obligations under the other agreements or prevent us from borrowing under such other agreements. If a default or cross default were to occur, we may not be able to pay our debts or to borrow sufficient funds to refinance them.
A breach of any of these covenants could result in a default under the applicable agreement. In addition, a default under one agreement could result in a cross default and acceleration of our repayment obligations under the other agreements or prevent us from borrowing under such other agreements.
Variability in consumer behavior, including volatile fuel prices and initiatives to increase the use of fuel-efficient and electric vehicles, has affected and may continue to affect consumer preferences for new and used vehicles. Manufacturers have also announced increased production focus on the manufacture of fuel-efficient plug-in hybrid electric vehicles (“PHEVs”) and battery electric vehicles (“BEVs”).
Variability in consumer behavior, volatile fuel prices and the availability of manufacturer initiatives and federal and state tax credits and incentives to increase the use of fuel-efficient and electric vehicles have affected and may continue to affect consumer preferences for new and used vehicles.
One of the primary finance sources used by consumers in connection with the purchase or lease of a new or used vehicle is the manufacturer-affiliated captive finance companies. These captive finance companies rely, to a certain extent, on the public debt markets to provide the capital necessary to support their financing programs.
These captive finance companies rely, to a certain extent, on the public debt markets to provide the capital necessary to support their financing programs.
Our business is highly dependent on consumer demand and preferences, including with respect to new technologies such as alternative fuel vehicles. Events such as manufacturer safety recalls and negative publicity or legal proceedings related to these events may have a negative impact on the products we sell.
In addition, events such as stop-sale orders, manufacturer safety recalls and negative publicity or legal proceedings related to these events may have a negative impact on the products we sell.
The perception among the public that these sales or transfers may occur could also contribute to a decline in the market price of our Class A Common Stock. 18 SONIC AUTOMOTIVE, INC.
The perception among the public that these sales or transfers may occur could also contribute to a decline in the market price of our Class A Common Stock. Our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws make it more difficult for our stockholders to take corporate actions at stockholders’ meetings.
In recent years, we experienced an imbalance between consumer demand for new vehicles and available supply of new vehicle inventory due to supply chain disruptions and manufacturing delays, and it is uncertain when new vehicle inventories will stabilize and at what level.
In recent years, we experienced an imbalance between consumer demand for new vehicles and available supply of new vehicle inventory due to supply chain disruptions and manufacturing delays. However, vehicle availability has largely recovered, and as inventory levels build, profit margins may be adversely affected.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe have experienced, and may in the future experience, whether directly or through our supply chain or other channels, cybersecurity incidents.
Biggest changeWe have experienced, and may in the future experience, whether directly or through our supply chain or other channels, cybersecurity incidents. Specifically, on June 19, 2024, CDK, a third-party provider of certain information systems, notified us that CDK had suspended certain systems used by us in response to a cybersecurity incident impacting CDK.
By following industry best practices, the team has established a recognized baseline for engaging external firms to audit and test the resiliency of the cybersecurity program.
By following industry best practices, the team has established a recognized baseline for engaging external firms to audit and test the resiliency of the cybersecurity program. 24 SONIC AUTOMOTIVE, INC.
While prior incidents have not materially affected our business strategy, results of operations or financial condition, and although our processes are designed to help prevent, detect, respond to, and mitigate the impact of such incidents, there is no guarantee that a future cyber incident would not materially affect our business strategy, results of operations or financial condition.
Although we have been working with CDK and other information technology vendors and taking steps to strengthen our systems infrastructure, and our processes are designed to help prevent, detect, respond to, and mitigate the impact of such incidents, there is no guarantee that another cyber incident would not materially affect our business strategy, results of operations or financial condition.
Added
As a result, we experienced disruptions to our dealer management system (the “DMS”), our customer relationship management system (the “CRM”) and other systems that support sales, inventory and accounting functions (collectively with the DMS and CRM the “Affected Systems”). On June 26, 2024, CDK began restoring access to certain of the Affected Systems.
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We performed internal risk assessments and data validation procedures on the Affected Systems, and beginning June 30, 2024, we resumed processing transactions in the DMS. As of July 31, 2024, we regained access to all of the Affected Systems, including the CRM and inventory management applications.
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As a result of the CDK outage, our business and results of operations during the second and third fiscal quarters of 2024 were adversely affected.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe prefer to acquire dealerships or build dealership facilities located along major thoroughfares, which can be easily visited by prospective guests. For information regarding the states in which we operate and the breakdown of our stores among our operating segments, see the discussion under the heading “Our Business” in “Item 1. Business.” 24 SONIC AUTOMOTIVE, INC.
Biggest changeWe prefer to acquire dealerships or build dealership facilities located along major thoroughfares, which can be easily visited by prospective guests. For information regarding the states in which we operate and the breakdown of our stores among our operating segments, see the discussion under the heading “Our Business” in “Item 1.
We lease a significant number of the properties utilized by our dealership operations from affiliates of Capital Automotive Real Estate Services, Inc. and other individuals and entities. Under the terms of our franchise and dealer agreements, each of our dealerships must maintain an appropriate appearance and design of its dealership facility and is restricted in its ability to relocate.
Business.” We lease a significant number of the properties utilized by our dealership operations from affiliates of Capital Automotive Real Estate Services, Inc. and other individuals and entities. Under the terms of our franchise and dealer agreements, each of our dealerships must maintain an appropriate appearance and design of its dealership facility and is restricted in its ability to relocate.
The properties utilized by our dealership operations that are owned by us or one of our subsidiaries are pledged as security for the 2021 Credit Facilities, the 2019 Mortgage Facility or other mortgage financing arrangements. We believe that our facilities are adequate for our current needs.
The properties utilized by our dealership operations that are owned by us or one of our subsidiaries are pledged as security for the Credit Facilities, the Mortgage Facility or other mortgage financing arrangements. We believe that our facilities are adequate for our current needs.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 25 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. [Reserved] 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 76
Biggest changeItem 4. Mine Safety Disclosures 25 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. [Reserved] 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 77

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities The following table sets forth information about the shares of Class A Common Stock we repurchased during the three months ended December 31, 2023: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (In millions, except per share data) October 2023 — $ — — $ 286.8 November 2023 — $ 51.27 — $ 286.8 December 2023 — $ 54.14 — $ 286.7 Total — — (1) On July 28, 2022, we announced that our Board of Directors had increased the dollar amount authorized for us to repurchase shares of our Class A Common Stock pursuant to our share repurchase program.
Biggest changeIssuer Purchases of Equity Securities The following table sets forth information about the shares of Class A Common Stock we repurchased during the three months ended December 31, 2024: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (In millions, except per share data) October 2024 — $ — — $ 259.6 November 2024 123.5 $ — 123.5 $ 252.3 December 2024 — $ — — $ 252.3 Total 123.5 123.5 (1) On July 28, 2022, we announced that our Board of Directors had increased the dollar amount authorized for us to repurchase shares of our Class A Common Stock pursuant to our share repurchase program.
Our Board of Directors issued four quarterly cash dividends on all outstanding shares of Class A and Class B Common Stock totaling $1.16 per share, $1.03 per share and $0.46 per share for each of the years ended December 31, 2023, 2022 and 2021, respectively.
Our Board of Directors issued four quarterly cash dividends on all outstanding shares of Class A and Class B Common Stock totaling $1.25 per share, $1.16 per share and $1.03 per share for each of the years ended December 31, 2024, 2023 and 2022, respectively.
Our share repurchase program does not have an expiration date and current remaining availability under the program is as follows: (In millions) July 2022 authorization $ 500.0 Total active program repurchases prior to December 31, 2023 (213.3) Current remaining availability as of December 31, 2023 $ 286.7 26 SONIC AUTOMOTIVE, INC.
Our share repurchase program does not have an expiration date and current remaining availability under the program is as follows: (In millions) July 2022 authorization $ 500.0 Total active program repurchases prior to December 31, 2024 (247.7) Current remaining availability as of December 31, 2024 $ 252.3 26 SONIC AUTOMOTIVE, INC.
Subsequent to December 31, 2023, our Board of Directors approved a cash dividend on all outstanding shares of Class A and Class B Common Stock of $0.30 per share for stockholders of record on March 15, 2024 to be paid on April 15, 2024.
Subsequent to December 31, 2024, our Board of Directors approved a cash dividend on all outstanding shares of Class A and Class B Common Stock of $0.35 per share for stockholders of record on March 14, 2025 to be paid on April 15, 2025.
As of February 8, 2024, there were 21,953,134 shares of our Class A Common Stock and 12,029,375 shares of our Class B Common Stock outstanding. As of February 8, 2024, there were 632 record holders of the Class A Common Stock and two record holders of the Class B Common Stock.
As of February 7, 2025, there were 21,692,669 shares of our Class A Common Stock and 12,029,375 shares of our Class B Common Stock outstanding. As of February 7, 2025, there were 545 record holders of the Class A Common Stock and two record holders of the Class B Common Stock.
The closing stock price for the Class A Common Stock on February 8, 2024 was $55.20.
The closing stock price for the Class A Common Stock on February 7, 2025 was $72.97.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table provides a reconciliation of EchoPark Segment reported basis, same market basis and new market/closed market basis for retail used vehicles: Year Ended December 31, Better / (Worse) 2023 2022 Change % Change (In millions, except unit data) Total retail used vehicle revenue: Same market $ 1,754.7 $ 1,129.2 $ 625.5 55 % New markets/closed markets 389.1 987.6 (598.5) NM Total as reported $ 2,143.8 $ 2,116.8 $ 27.0 1 % Total retail used vehicle gross profit (loss): Same market $ (5.2) $ (17.2) $ 12.0 70 % New markets/closed markets (11.9) 21.6 (33.5) NM Total as reported $ (17.1) $ 4.4 $ (21.5) (489) % Total retail used vehicle unit sales: Same market 65,969 39,933 26,036 65 % New markets/closed markets 7,707 24,174 (16,467) NM Total as reported 73,676 64,107 9,569 15 % NM = Not Meaningful The following table provides a reconciliation of EchoPark Segment reported basis, same market basis and new market/ closed market basis for F&I: Year Ended December 31, Better / (Worse) 2023 2022 Change % Change (In millions) Total F&I revenue: Same market $ 160.1 $ 101.1 $ 59.0 58 % New markets/closed markets 17.8 65.3 (47.5) (73) % Total as reported $ 177.9 $ 166.4 $ 11.5 7 % Our EchoPark Segment reported retail used vehicle and F&I results were as follows: Year Ended December 31, Better / (Worse) 2023 2022 Change % Change (In millions, except unit and per unit data) Reported retail used vehicle and F&I: Retail used vehicle revenue $ 2,143.8 $ 2,116.8 $ 27.0 1 % Retail used vehicle gross profit (loss) $ (17.1) $ 4.4 $ (21.5) (489) % Retail used vehicle unit sales 73,676 64,107 9,569 15 % Retail used vehicle revenue per unit $ 29,098 $ 33,019 $ (3,921) (12) % F&I revenue $ 177.9 $ 166.4 $ 11.5 7 % Combined retail used vehicle gross profit and F&I revenue $ 160.8 $ 170.8 $ (10.0) (6) % Total retail used vehicle and F&I gross profit per unit $ 2,183 $ 2,657 $ (474) (18) % 48 SONIC AUTOMOTIVE, INC.
Biggest changeMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table provides a reconciliation of EchoPark Segment reported basis, same market basis and new market/ closed market basis for F&I: Year Ended December 31, Better / (Worse) 2024 2023 Change % Change (In millions) Total F&I revenue: Same market $ 195.5 $ 149.4 $ 46.1 31 % New markets/closed markets (1.5) 28.5 (30.0) (105) % Total as reported $ 194.0 $ 177.9 $ 16.1 9 % Our EchoPark Segment reported retail used vehicle and F&I results were as follows: Year Ended December 31, Better / (Worse) 2024 2023 Change % Change (In millions, except unit and per unit data) Reported retail used vehicle and F&I: Retail used vehicle revenue $ 1,838.0 $ 2,143.8 $ (305.8) (14) % Retail used vehicle gross profit (loss) $ 15.2 $ (17.1) $ 32.3 189 % Retail used vehicle unit sales 69,053 73,676 (4,623) (6) % Retail used vehicle revenue per unit $ 26,617 $ 29,098 $ (2,481) (9) % F&I revenue $ 194.0 $ 177.9 $ 16.1 9 % Combined retail used vehicle gross profit and F&I revenue $ 209.2 $ 160.8 $ 48.4 30 % Total retail used vehicle and F&I gross profit per unit $ 3,029 $ 2,183 $ 846 39 % Our EchoPark Segment same market retail used vehicle and F&I results were as follows: Year Ended December 31, Better / (Worse) 2024 2023 Change % Change (In millions, except unit and per unit data) Same market retail used vehicle and F&I: Retail used vehicle revenue $ 1,828.3 $ 1,788.6 $ 39.7 2 % Retail used vehicle gross profit (loss) $ 15.6 $ (8.3) $ 23.9 288 % Retail used vehicle unit sales 68,690 62,605 6,085 10 % Retail used vehicle revenue per unit $ 26,617 $ 28,569 $ (1,952) (7) % F&I revenue $ 195.5 $ 149.4 $ 46.1 31 % Combined retail used vehicle gross profit and F&I revenue $ 211.1 $ 141.1 $ 70.0 50 % Total retail used vehicle and F&I gross profit per unit $ 3,074 $ 2,253 $ 821 36 % Used vehicle revenue increased approximately $39.7 million, or 2%, due to a 10% increase in used vehicle unit sales volume, partially offset by a 7% decrease in used vehicle revenue per unit.
Upon entering into the 2021 Floor Plan Facilities in April 2021, the majority of our outstanding floor plan liabilities were reclassified from trade floor plan liabilities to non-trade floor plan liabilities, resulting in a significant reclassification of related floor plan liability cash flows from operating activities to financing activities.
Upon entering into the Floor Plan Facilities in April 2021, the majority of our outstanding floor plan liabilities were reclassified from trade floor plan liabilities to non-trade floor plan liabilities, resulting in a significant reclassification of related floor plan liability cash flows from operating activities to financing activities.
The 2021 Credit Facilities permit quarterly cash dividends on our Class A and Class B Common Stock up to $0.12 per share so long as no Event of Default has occurred and is continuing and provided that we remain in compliance with all financial covenants under the 2021 Credit Facilities.
The Credit Facilities permit quarterly cash dividends on our Class A and Class B Common Stock up to $0.12 per share so long as no Event of Default has occurred and is continuing and provided that we remain in compliance with all financial covenants under the Credit Facilities.
Same market results may vary significantly from reported results due to store closures during 2023, as the closed stores are not included in same market results. On June 22, 2023, Sonic announced a plan to indefinitely suspend operations at eight EchoPark locations and 14 related delivery/buy centers.
Same market results may vary significantly from reported results due to store closures during 2023 and 2024, as the closed stores are not included in same market results. On June 22, 2023, Sonic announced a plan to indefinitely suspend operations at eight EchoPark locations and 14 related delivery/buy centers.
We have agreed under the 2021 Credit Facilities not to pledge any assets to any third parties (other than those explicitly allowed to be pledged by the amended terms of the 2021 Credit Facilities), including other lenders, subject to certain stated exceptions, including floor plan financing arrangements.
We have agreed under the Credit Facilities not to pledge any assets to any third parties (other than those explicitly allowed to be pledged by the amended terms of the Credit Facilities), including other lenders, subject to certain stated exceptions, including floor plan financing arrangements.
In addition, the 2021 Credit Facilities contain certain negative covenants, including covenants which could restrict or prohibit indebtedness, liens, the payment of dividends and other restricted payments, capital expenditures and material dispositions and acquisitions of assets, as well as other customary covenants and default provisions.
In addition, the Credit Facilities contain certain negative covenants, including covenants which could restrict or prohibit indebtedness, liens, the payment of dividends and other restricted payments, capital expenditures and material dispositions and acquisitions of assets, as well as other customary covenants and default provisions.
Under the 2021 Credit Facilities, share repurchases are permitted to the extent that no event of default exists and we do not exceed the restrictions set forth in our debt agreements.
Under the Credit Facilities, share repurchases are permitted to the extent that no event of default exists and we do not exceed the restrictions set forth in our debt agreements.
The effects of availability of new and used vehicle inventory, interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual 2024 new vehicle industry volume to vary from expectations.
The effects of availability of new and used vehicle inventory, interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual 2025 new vehicle industry volume to vary from expectations.
More recently acquired franchise assets are at a greater risk of impairment than older franchise assets which have significant clearance between fair value and recorded balances. Many factors affect the valuation of franchise assets such as the discount rate and projected revenue amounts. Unfavorable changes in these factors increases the risk of future impairments. 63 SONIC AUTOMOTIVE, INC.
More recently acquired franchise assets are at a greater risk of impairment than older franchise assets which have significant clearance between fair value and recorded balances. Many factors affect the valuation of franchise assets such as the discount rate and projected revenue amounts. Unfavorable changes in these factors increases the risk of future impairments. 64 SONIC AUTOMOTIVE, INC.
The effects of interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual 2024 new vehicle industry volume to vary from expectations.
The effects of interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual 2025 new vehicle industry volume to vary from expectations.
Changes in contract assets from December 31, 2022 to December 31, 2023 were primarily due to ordinary business activity, including the receipt of cash for amounts earned and recognized in prior periods. Historically, our actual F&I retro revenue amounts earned have not been materially different from our recorded estimates.
Changes in contract assets from December 31, 2023 to December 31, 2024 were primarily due to ordinary business activity, including the receipt of cash for amounts earned and recognized in prior periods. Historically, our actual F&I retro revenue amounts earned have not been materially different from our recorded estimates.
Results of Operations - Franchised Dealerships Segment As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2022 and 2023, the change in reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores.
Results of Operations - Franchised Dealerships Segment As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2023 and 2024, the change in reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores.
We believe that the current wholesale vehicle price environment is not sustainable in the long term and expect that average wholesale vehicle pricing and related gross profit (loss) will continue to return toward long-term normalized levels in the long run, but may continue to experience volatility into 2024 or beyond.
We believe that the current wholesale vehicle price environment is not sustainable in the long term and expect that average wholesale vehicle pricing and related gross profit (loss) will continue to return toward long-term normalized levels in the long run, but may continue to experience volatility into 2025 or beyond.
In evaluating goodwill for impairment, if the fair value of a reporting unit is less than its carrying value, the difference would represent the amount of the required goodwill impairment. As a result of our April 30, 2023 annual test, we determined no impairment existed for any of our reporting units as of April 30, 2023.
In evaluating goodwill for impairment, if the fair value of a reporting unit is less than its carrying value, the difference would represent the amount of the required goodwill impairment. As a result of our April 30, 2024 annual test, we determined no impairment existed for any of our reporting units as of April 30, 2024.
Due to the abnormal effects of the COVID-19 pandemic on the automotive supply chain and a subsequent recovery of inventory levels, in addition to the effects of other macroeconomic conditions, this historical seasonality did not play out in 2023 and may not hold true in 2024.
Due to the abnormal effects of the COVID-19 pandemic on the automotive supply chain and a subsequent recovery of inventory levels, in addition to the effects of other macroeconomic conditions, this historical seasonality did not play out in 2023 or 2024 and may not hold true in 2025.
We believe our best sources of liquidity for operations and debt service remain cash flows generated from operations combined with the availability of borrowings under our floor plan facilities (or any replacements thereof), the 2021 Credit Facilities (or any replacements thereof), the 2019 Mortgage Facility (or any replacements thereof) and real estate mortgage financing, selected dealership and other asset sales and our ability to raise funds in the capital markets through offerings of debt or equity securities.
We believe our best sources of liquidity for operations and debt service remain cash flows generated from operations combined with the availability of borrowings under our floor plan facilities (or any replacements thereof), the Credit Facilities (or any replacements thereof), the Mortgage Facilities (or any replacements thereof) and real estate mortgage financing, selected dealership and other asset sales and our ability to raise funds in the capital markets through offerings of debt or equity securities.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following table summarizes the percentages of total revenues represented by certain items reflected in our consolidated statements of operations: Percentage of Total Revenues Year Ended December 31, 2023 2022 2021 Revenues: New vehicles 44.5 % 40.9 % 41.3 % Used vehicles 36.3 % 39.4 % 39.3 % Wholesale vehicles 2.2 % 3.5 % 3.0 % Parts, service and collision repair 12.2 % 11.4 % 11.3 % Finance, insurance and other, net 4.8 % 4.8 % 5.1 % Total revenues 100.0 % 100.0 % 100.0 % Cost of sales 84.4 % 83.5 % 84.6 % Gross profit 15.6 % 16.5 % 15.4 % Selling, general and administrative expenses 11.1 % 11.1 % 10.3 % Impairment charges 0.6 % 2.3 % — % Depreciation and amortization 1.0 % 0.9 % 0.8 % Operating income 2.9 % 2.2 % 4.3 % Interest expense, floor plan 0.5 % 0.2 % 0.1 % Interest expense, other, net 0.8 % 0.6 % 0.4 % Other income (expense), net — % — % 0.1 % Income (loss) before taxes 1.7 % 1.4 % 3.7 % Provision for income taxes - benefit (expense) 0.4 % 0.7 % 0.9 % Net income (loss) 1.2 % 0.6 % 2.8 % Results of Operations - Consolidated As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2022 and 2023, the change in consolidated reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following table summarizes the percentages of total revenues represented by certain items reflected in our consolidated statements of operations: Percentage of Total Revenues Year Ended December 31, 2024 2023 2022 Revenues: New vehicles 46.4 % 44.5 % 40.9 % Used vehicles 33.6 % 36.3 % 39.4 % Wholesale vehicles 2.0 % 2.2 % 3.5 % Parts, service and collision repair 13.0 % 12.2 % 11.4 % Finance, insurance and other, net 5.0 % 4.8 % 4.8 % Total revenues 100.0 % 100.0 % 100.0 % Cost of sales 84.6 % 84.4 % 83.5 % Gross profit 15.4 % 15.6 % 16.5 % Selling, general and administrative expenses 11.1 % 11.1 % 11.1 % Impairment charges — % 0.6 % 2.3 % Depreciation and amortization 1.1 % 1.0 % 0.9 % Operating income 3.2 % 2.9 % 2.2 % Interest expense, floor plan 0.6 % 0.5 % 0.2 % Interest expense, other, net 0.8 % 0.8 % 0.6 % Income (loss) before taxes 1.8 % 1.7 % 1.4 % Provision for income taxes - benefit (expense) 0.3 % 0.4 % 0.7 % Net income (loss) 1.5 % 1.2 % 0.6 % Results of Operations - Consolidated As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2023 and 2024, the change in consolidated reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores.
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 from 2024 to 2033.
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 from 2025 to 2033.
Unless otherwise noted, all discussion of increases or decreases are for 2023 compared to 2022. The following discussion is on a same store basis (which excludes results from disposed stores), except where otherwise noted.
Unless otherwise noted, all discussion of increases or decreases are for 2024 compared to 2023. The following discussion is on a same store basis (which excludes results from disposed stores), except where otherwise noted.
As a result of our impairment testing as of April 30, 2023, each of our franchise assets’ fair value exceeded its carrying value and no franchise asset impairment charges were recorded in the accompanying consolidated statements of operations.
As a result of our impairment testing as of April 30, 2024, each of our franchise assets’ fair value exceeded its carrying value and no franchise asset impairment charges were recorded in the accompanying consolidated statements of operations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our share repurchase activity is subject to the business judgment of our Board of Directors and management, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements and covenant compliance, the current economic environment and other factors considered by our Board of Directors and management to be relevant.
Our share repurchase activity is subject to the business judgment of our Board of Directors and management, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements and covenant compliance, the current economic environment and other factors considered by our Board of Directors and management to be relevant.
As a result of the way we manage our business, we had three reportable segments as of December 31, 2023: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and (3) the Powersports Segment.
As a result of the way we manage our business, we had three reportable segments as of December 31, 2024: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and (3) the Powersports Segment.
The effects on our consolidated financial statements of income tax uncertainties are discussed in Note 7, “Income Taxes,” to the accompanying consolidated financial statements. 64 SONIC AUTOMOTIVE, INC.
The effects on our consolidated financial statements of income tax uncertainties are discussed in Note 7, “Income Taxes,” to the accompanying consolidated financial statements. 65 SONIC AUTOMOTIVE, INC.
The significant components of capital expenditures relate primarily to dealership renovations, the purchase of certain existing dealership facilities which had previously been financed under long-term operating leases, and the purchase and development of new real estate parcels for the relocation of existing dealerships and the construction of EchoPark stores.
The significant components of capital expenditures relate primarily to dealership renovations, the purchase of certain existing dealership facilities which had previously been financed under long-term operating leases, and the purchase and development of new real estate parcels for the relocation of existing dealerships.
As of December 31, 2023 and 2022, we had recorded a valuation allowance amount of approximately $6.3 million and $5.6 million, respectively, related to certain state net operating loss carryforward deferred tax assets as we determined that we would not be able to generate sufficient state taxable income in the related entities to realize the accumulated net operating loss carryforward balances.
As of December 31, 2024 and 2023, we had recorded a valuation allowance amount of approximately $6.2 million and $6.3 million, respectively, related to certain state net operating loss carryforward deferred tax assets as we determined that we would not be able to generate sufficient state taxable income in the related entities to realize the accumulated net operating loss carryforward balances.
Unless otherwise noted, all discussion of increases or decreases are for the year ended December 31, 2023 (“2023”) compared to 2022. The following discussion of Franchised Dealerships Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted.
Unless otherwise noted, all discussion of increases or decreases are for the year ended December 31, 2024 (“2024”) compared to 2023. The following discussion of Franchised Dealerships Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted.
Specifically, the 2019 Mortgage Facility permits quarterly cash dividends on our Class A and Class B Common Stock up to $0.12 per share so long as no Event of Default (as defined in the 2019 Mortgage Facility) has occurred and is continuing and provided that we remain in compliance with all financial covenants under the 2019 Mortgage Facility.
Specifically, the Mortgage Facilities permits quarterly cash dividends on our Class A and Class B Common Stock up to $0.18 per share so long as no Event of Default (as defined in the Mortgage Facility) has occurred and is continuing and provided that we remain in compliance with all financial covenants under the Mortgage Facility.
Impairment charges for 2023 included approximately $78.3 million in the EchoPark Segment related to fixed assets, lease right-of-use assets, and other contractual obligations related to abandoned property as a result of our decisions to indefinitely suspend operations at certain EchoPark locations, and approximately $1.0 million of property and equipment impairment charges related to the Franchised Dealerships Segment.
Impairment charges for 2023 included approximately $78.3 million in the EchoPark Segment related to fixed assets, lease right-of-use assets, and other contractual obligations related to abandoned property as a result of our decisions to indefinitely suspend operations at certain EchoPark locations, and approximately $1.0 million of property and equipment impairment charges related to the Franchised Dealerships Segment. 29 SONIC AUTOMOTIVE, INC.
Depending on the mix of inventory sourcing (trade-ins or purchases from customers versus wholesale auction), the days’ supply of used vehicle inventory, and the pricing strategy employed by the dealership, retail used vehicle gross profit per unit and retail used vehicle gross profit as a percentage of revenue may vary significantly from historical levels given the current used vehicle environment.
Depending on the mix of inventory sourcing (trade-ins or purchases from customers versus wholesale auction), the days’ supply of used vehicle inventory, and the pricing strategy employed by the dealership, retail used vehicle gross profit per unit and retail used vehicle gross profit as a percentage of revenue may vary significantly from historical levels given recent trends in the used vehicle environment.
These factors are considered each quarter and will be scrutinized as our Board of Directors and management determine our share repurchase policy in the future. Dividends Our Board of Directors approved four quarterly cash dividends on all outstanding shares of Class A and Class B Common Stock totaling $1.16 per share during 2023.
These factors are considered each quarter and will be scrutinized as our Board of Directors and management determine our share repurchase policy in the future. Dividends Our Board of Directors approved four quarterly cash dividends on all outstanding shares of Class A and Class B Common Stock totaling $1.25 per share during 2024.
In the event we are unable to sublease the properties to the buyer with terms at least equal to our leases, we may be required to record lease exit accruals. As of December 31, 2023, our future gross minimum lease payments related to properties subleased to buyers of sold dealerships totaled approximately $7.2 million.
In the event we are unable to sublease the properties to the buyer with terms at least equal to our leases, we may be required to record lease exit accruals. As of December 31, 2024, our future gross minimum lease payments related to properties subleased to buyers of sold dealerships totaled approximately $3.7 million.
An unfavorable resolution of one or more of these matters could have a material adverse effect on our business, financial condition, results of operations, cash flows or prospects. There were no significant liabilities related to legal matters as of December 31, 2023 and December 31, 2022. 75 SONIC AUTOMOTIVE, INC.
An unfavorable resolution of one or more of these matters could have a material adverse effect on our business, financial condition, results of operations, cash flows or prospects. There were no significant liabilities related to legal matters as of December 31, 2024 and December 31, 2023. 76 SONIC AUTOMOTIVE, INC.
The 2029 Indenture provides that interest on the 4.625% Notes will be payable semi-annually in arrears on May 15 and November 15 of each year beginning May 15, 2022. The 2029 Indenture also contains other restrictive covenants and default provisions common for an issue of senior notes of this nature.
The 2029 Indenture provides that interest on the 4.625% Notes will be payable semi-annually in arrears on May 15 and November 15 of each year beginning May 15, 2022. The 2029 Indenture also contains other restrictive covenants and default provisions common for an issue of senior notes of this nature. 68 SONIC AUTOMOTIVE, INC.
Other expense includes various fixed and variable expenses, including gain on disposal of franchises, certain customer-related costs such as gasoline and service loaners, and insurance, training, legal and information technology expenses, which may not change in proportion to gross profit levels.
Other expense includes various fixed and variable expenses, including gain on disposal of franchises, certain customer-related costs such as gasoline and service loaners, and insurance, training, legal and information technology expenses, which may not change in proportion to gross profit levels. 61 SONIC AUTOMOTIVE, INC.
On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment used vehicle inventory days’ supply was approximately 29 and 26 days as of December 31, 2023 and 2022, respectively.
On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment used vehicle inventory days’ supply was approximately 31 and 29 days as of December 31, 2024 and 2023, respectively.
The following discussion of Powersports Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a reported basis, except where otherwise noted.
The following discussion of Powersports Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted.
For comparison and discussion of our results of operations for the year ended December 31, 2022 (“2022”) to our results of operations for the year ended December 31, 2021 (“2021”), please refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for 2022.
For comparison and discussion of our results of operations for the year ended December 31, 2023 (“2023”) to our results of operations for the year ended December 31, 2022 (“2022”), please refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for 2023.
(2) Includes the following line items from the accompanying consolidated statements of cash flows: depreciation and amortization of property and equipment; debt issuance cost amortization; and debt discount amortization, net of premium amortization. (3) Adjusted EBITDA is a non-GAAP financial measure. 73 SONIC AUTOMOTIVE, INC.
(2) Includes the following line items from the accompanying consolidated statements of cash flows: depreciation and amortization of property and equipment; debt issuance cost amortization; and debt discount amortization, net of premium amortization. (3) Adjusted EBITDA is a non-GAAP financial measure.
On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment new vehicle inventory days’ supply was approximately 37 and 24 days as of December 31, 2023 and 2022, respectively. 40 SONIC AUTOMOTIVE, INC.
On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment new vehicle inventory days’ supply was approximately 46 and 37 days as of December 31, 2024 and 2023, respectively. 40 SONIC AUTOMOTIVE, INC.
Specifically, the 2021 Credit Facilities permit quarterly cash dividends on our Class A and Class B Common Stock up to $0.12 per share so long as no Event of Default (as defined in the 2021 Credit Facilities) has occurred and is continuing and provided that we remain in compliance with all financial covenants under the 2021 Credit Facilities.
Specifically, the Credit Facilities permit quarterly cash dividends on our Class A and Class B Common Stock up to $0.18 per share so long as no Event of Default (as defined in the Sixth A&R Credit Agreement) has occurred and is continuing and provided that we remain in compliance with all financial covenants under the Credit Facilities.
Impairment charges for 2023 primarily related to fixed assets, lease right-of-use assets, and other contractual obligations related to abandoned property as a result of our decisions to indefinitely suspend operations at certain EchoPark locations and to close certain Northwest Motorsport stores during 2023.
Impairment charges for 2024 primarily related to fixed assets, lease right-of-use assets, and other contractual obligations related to abandoned property as a result of our decisions to indefinitely suspend operations at certain EchoPark locations and to close certain Northwest Motorsport stores during 2023 and 2024. 62 SONIC AUTOMOTIVE, INC.
While expected chargeback rates vary depending on the type of contract sold, a 100-basis point change in the estimated chargeback rates used in determining our estimates of future chargebacks would have changed our estimated reserve for chargebacks at December 31, 2023 by approximately $3.3 million.
While expected chargeback rates vary depending on the type of contract sold, a 100-basis point change in the estimated chargeback rates used in determining our estimates of future chargebacks would have changed our estimated reserve for chargebacks at December 31, 2024 by approximately $4.2 million.
The carrying value of our franchise assets totaled approximately $417.4 million at December 31, 2023, and is included in other intangible assets, net in the accompanying consolidated balance sheet as of such date. See Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the accompanying consolidated financial statements for further discussion.
The carrying value of our franchise assets totaled approximately $430.3 million at December 31, 2024, and is included in other intangible assets, net in the accompanying consolidated balance sheet as of such date. See Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the accompanying consolidated financial statements for further discussion.
On a trailing quarter cost of sales basis, our reported used vehicle inventory days’ supply in our EchoPark Segment was approximately 36 and 40 days as of December 31, 2023 and 2022, respectively.
On a trailing quarter cost of sales basis, our reported used vehicle inventory days’ supply in our EchoPark Segment was approximately 38 and 36 days as of December 31, 2024 and 2023, respectively.
The financial covenants under the guarantee agreement are identical to those under the 2021 Credit Facilities and the 2019 Mortgage Facility with the exception of one additional financial covenant related to the ratio of EBTDAR to Rent (as defined in the guarantee agreement) with a required ratio of no less than 1.50 to 1.00.
The financial covenants under the guarantee agreement are identical to those under the Credit Facilities and the Mortgage Facilities with the exception of one additional financial covenant related to the ratio of EBITDAR to Rent (as defined in the guarantee agreement) with a required ratio of no less than 1.50 to 1.00.
On a trailing quarter cost of sales basis, our reported Powersports Segment new vehicle inventory days’ supply was approximately 183 days as of December 31, 2023, compared to 119 days as of December 31, 2022.
On a trailing quarter cost of sales basis, our reported Powersports Segment new vehicle inventory days’ supply was approximately 178 days as of December 31, 2024, compared to 183 days as of December 31, 2023.
On a trailing quarter cost of sales basis, our reported Powersports Segment used vehicle inventory days’ supply was approximately 118 days as of December 31, 2023, compared to 141 days as of December 31, 2022.
On a trailing quarter cost of sales basis, our reported Powersports Segment used vehicle inventory days’ supply was approximately 115 days as of December 31, 2024, compared to 118 days as of December 31, 2023.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Summary Retail Automotive Industry Performance The U.S. retail automotive industry’s total new vehicle (retail and fleet combined) unit sales volume was approximately 15.5 million vehicles in 2023, an increase of 13%, compared to approximately 13.7 million vehicles in 2022, according to the Power Information Network (“PIN”) from J.D.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Summary Retail Automotive Industry Performance The U.S. retail automotive industry’s total new vehicle (retail and fleet combined) unit sales volume was approximately 16.1 million vehicles in 2024, an increase of 4%, compared to approximately 15.5 million vehicles in 2023, according to the Power Information Network (“PIN”) from J.D.
The 4.625% Notes will be redeemable at the Company’s option, in whole or in part, at any time on or after November 15, 2024 at the redemption prices (expressed as percentages of the principal amount thereof) set forth below, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date, if redeemed during the 12-month period beginning on November 15 of the years set forth below: Year Redemption Price 2024 102.313 % 2025 101.156 % 2026 100.000 % Before November 15, 2024, the Company may redeem all or a part of the 4.625% Notes, subject to payment of a make-whole premium.
The 4.875% Notes will be redeemable at the Company’s option, in whole or in part, at any time on or after November 15, 2026 at the redemption prices (expressed as percentages of the principal amount thereof) set forth below, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date, if redeemed during the 12-month period beginning on November 15 of the years set forth below: Year Redemption Price 2026 102.438 % 2027 101.625 % 2028 100.813 % 2029 100.000 % Before November 15, 2026, the Company may redeem all or a part of the 4.875% Notes, subject to payment of a make-whole premium.
Our obligations under the 2021 Credit Facilities are guaranteed by the Company and certain of our subsidiaries and are secured by a pledge of substantially all of our and our subsidiaries’ assets.
Our obligations under the Credit Facilities are guaranteed by the Company and certain of our subsidiaries and are secured by a pledge of substantially all of the assets of the Company and the guarantors.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (ASC Topic 820): Improvements to Reportable Segment Disclosures.” The amendments require the disclosure of significant segment expenses as well as expanded interim disclosures, along with other changes to segment disclosure requirements.
Recent Accounting Pronouncements In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (ASC Topic 280): Improvements to Reportable Segment Disclosures.” The amendments require the disclosure of significant segment expenses as well as expanded interim disclosures, along with other changes to segment disclosure requirements.
Subsequent to December 31, 2023, our Board of Directors approved a cash dividend on all outstanding shares of Class A and Class B Common Stock of $0.30 per share for stockholders of record on March 15, 2024 to be paid on April 15, 2024.
Subsequent to December 31, 2024, our Board of Directors approved a cash dividend on all outstanding shares of Class A and Class B Common Stock of $0.35 per share for stockholders of record on March 14, 2025 to be paid on April 15, 2025.
Estimated interest payments were calculated using the December 31, 2023 floor plan facility balance, the weighted-average interest rate for the three months ended December 31, 2023 of 5.21% and the assumption that floor plan balances at December 31, 2023 would be relieved within 60 days in connection with the sale of the associated vehicle inventory.
Estimated interest payments were calculated using the December 31, 2024 floor plan facility balance, the weighted-average interest rate for the three months ended December 31, 2024 of 6.09% and the assumption that floor plan balances at December 31, 2024 would be relieved within 60 days in connection with the sale of the associated vehicle inventory.
As such, reconditioning amounts that are classified as Fixed Operations revenues and cost of sales in our Franchised Dealerships Segment are presented as used vehicle cost of sales for the EchoPark Segment. 47 SONIC AUTOMOTIVE, INC.
As such, reconditioning amounts that are classified as Fixed Operations revenues and cost of sales in our Franchised Dealerships Segment are presented as used vehicle cost of sales for the EchoPark Segment.
Our effective tax rate varies from year to year based on the level of taxable income, the distribution of taxable income between states in which the Company operates and other tax adjustments.
Our effective tax rate varies from year to year based on the level of taxable income, the distribution of taxable income between states in which the Company operates and other tax adjustments. 63 SONIC AUTOMOTIVE, INC.
Manufacturers continue to extend new vehicle warranty periods (in particular for BEVs) and have also begun to include regular maintenance items in the warranty or complimentary maintenance program coverage. These factors, over the long term, combined with the extended manufacturer warranties on CPO vehicles, should facilitate growth in our parts and service business.
Manufacturers continue to extend new vehicle warranty periods (in particular for battery electric vehicles) and have also begun to include regular maintenance items in the warranty or complimentary maintenance program coverage. These factors, over the long term, combined with the extended manufacturer warranties on certified pre-owned vehicles, should facilitate growth in our parts and service business.
Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires Sonic’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the accompanying consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires Sonic’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the accompanying consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
These floor plan facilities are due on demand and currently bear interest at variable rates based on either one-month Term SOFR or prime plus an additional spread, as applicable. The weighted-average interest rate for our new and used vehicle floor plan facilities was 6.52% and 3.31% for 2023 and 2022, respectively.
These floor plan facilities are due on demand and currently bear interest at variable rates based on either one-month Term SOFR or prime plus an additional spread, as applicable. The weighted-average interest rate for our new and used vehicle floor plan facilities was 6.51% and 6.49% for 2024 and 2023, respectively.
While our exposure with respect to environmental remediation is difficult to quantify, our maximum exposure associated with these general indemnifications was approximately $8.0 million as of December 31, 2023 and there was not any material exposure with respect to these indemnifications as of December 31, 2022.
While our exposure with respect to environmental remediation is difficult to quantify, our maximum exposure associated with these general indemnifications was approximately $2.2 million as of December 31, 2024 and there was not any material exposure with respect to these indemnifications as of December 31, 2023.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS U.S. retail new vehicle industry volume, fleet new vehicle industry volume, and total new vehicle industry volume were as follows: Year Ended December 31, Better / (Worse) 2023 2022 % Change (In millions of vehicles) U.S. industry volume - Retail new vehicle (1) 12.7 11.7 9 % U.S. industry volume - Fleet new vehicle 2.8 2.0 38 % U.S. industry volume - Total new vehicle (1) 15.5 13.7 13 % (1) Source: PIN from J.D.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS U.S. retail new vehicle industry volume, fleet new vehicle industry volume, and total new vehicle industry volume were as follows: Year Ended December 31, Better / (Worse) 2024 2023 % Change (In millions of vehicles) U.S. industry volume - Retail new vehicle (1) 13.1 12.7 3 % U.S. industry volume - Fleet new vehicle 3.0 2.8 7 % U.S. industry volume - Total new vehicle (1) 16.1 15.5 4 % (1) Source: PIN from J.D.
Legal Proceedings We are involved, and expect to continue to be involved, in various legal and administrative proceedings arising out of the conduct of our 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.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Legal Proceedings We are involved, and expect to continue to be involved, in various legal and administrative proceedings arising out of the conduct of our 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.
For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As of December 31, 2023, we operated 108 stores in the Franchised Dealerships Segment, 25 stores in the EchoPark Segment, and 13 stores in the Powersports Segment.
For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As of December 31, 2024, we operated 108 stores in the Franchised Dealerships Segment, 18 stores in the EchoPark Segment, and 15 stores in the Powersports Segment.
After giving effect to the applicable restrictions on share repurchases and certain other transactions under our debt agreements, as of December 31, 2023, we had approximately $270.4 million of net income and retained earnings free of such restrictions.
After giving effect to the applicable restrictions on share repurchases and certain other transactions under our debt agreements, as of December 31, 2024, we had approximately $340.9 million of net income and retained earnings free of such restrictions.
See Note 12, “Commitments and Contingencies,” to the accompanying consolidated financial statements for further discussion regarding these guarantees and indemnification obligations.
See Note 12, “Commitments and Contingencies,” to the accompanying consolidated financial statements for further discussion regarding these guarantees and indemnification obligations. 75 SONIC AUTOMOTIVE, INC.
Results of Operations - EchoPark Segment All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening or acquisition.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - EchoPark Segment All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening or acquisition.
In a ddition, dividends greater than $0.12 per share are permitted subject to the limitations on restricted payments set forth in the 2021 Credit Facilities. The 2029 Indenture and the 2031 Indenture also contain restrictions on our ability to pay dividends.
In addition, dividends greater than $0.18 per share are permitted subject to the limitations on restricted payments set forth in the Credit Facilities. The 2029 Indenture and the 2031 Indenture also contain restrictions on our ability to pay dividends.
The standard will be effective for fiscal years beginning after December 15, 2024, and interim periods for fiscal years beginning after December 15, 2025. We are currently evaluating the impact that the adoption of the provisions of the ASU will have on our consolidated financial statements. 65 SONIC AUTOMOTIVE, INC.
The standard will be effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. We are currently evaluating the impact that the adoption of the provisions of the ASU will have on our consolidated financial statements. 66 SONIC AUTOMOTIVE, INC.
Receivables, net in the accompanying consolidated balance sheets as of December 31, 2023 and 2022 include approximately $31.8 million and $38.7 million, respectively, related to contract assets from F&I retro revenue recognition.
Receivables, net in the accompanying consolidated balance sheets as of December 31, 2024 and 2023 include approximately $8.0 million and $12.0 million, respectively, related to contract assets from F&I retro revenue recognition.
Our estimate of chargebacks was approximately $57.5 million as of December 31, 2023, compared to approximately $54.1 million as of December 31, 2022, with the increase primarily driven by higher F&I revenues and higher projected cancellation rates.
Our estimate of chargebacks was approximately $62.9 million as of December 31, 2024, compared to approximately $57.5 million as of December 31, 2023, with the increase primarily driven by higher F&I revenues and higher projected cancellation rates.
Accordingly, if all changes in floor plan notes payable were classified as an operating activity (to align changes in floor plan liability balances with the associated changes in inventory balances for cash flow classification), the result would have been net cash provided by operating activities of approximately $319.2 million and $340.2 million for 2023 and 2022, respectively. 72 SONIC AUTOMOTIVE, INC.
Accordingly, if all changes in floor plan notes payable were classified as an operating activity (to align changes in floor plan liability balances with the associated changes in inventory balances for cash flow classification), the result would have been net cash provided by operating activities of approximately $367.3 million and $319.2 million for 2024 and 2023, respectively.
Franchised Dealerships Segment As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2022 and 2023, the change in consolidated reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Franchised Dealerships Segment As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2023 and 2024, the change in consolidated reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores.
Net cash used in financing activities was approximately $0.2 billion for 2022. For 2023, cash provided by financing activities was comprised primarily of net borrowings on notes payable - floor plan - non-trade, offset partially by the repurchases of treasury stock and scheduled principal payments of long-term debt.
For 2023, cash provided by financing activities was comprised primarily of net borrowings on notes payable - floor plan - non-trade, offset partially by the repurchases of treasury stock and scheduled principal payments of long-term debt.
On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment used vehicle inventory days’ supply was approximately 29 days as of December 31, 2023, compared to 26 days as of December 31, 2022. 29 SONIC AUTOMOTIVE, INC.
On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment used vehicle inventory days’ supply was approximately 31 days as of December 31, 2024, compared to 29 days as of December 31, 2023.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • guests with significant “negative equity” in their current vehicle (i.e., the guest’s current vehicle is worth less than the balance of their vehicle loan or lease obligation) frequently are unable to pay off the loan on their current vehicle and finance the purchase or lease of a replacement new or used vehicle without the assistance of a franchised dealership’s network of lending sources.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • guests with substandard credit frequently do not have direct access to potential sources of sub-prime financing; and • guests with significant “negative equity” in their current vehicle (i.e., the guest’s current vehicle is worth less than the balance of their vehicle loan or lease obligation) frequently are unable to pay off the loan on their current vehicle and finance the purchase or lease of a replacement new or used vehicle without the assistance of a franchised dealership’s network of lending sources.
At December 31, 2023, there were approximately $10.9 million in reserves that we had provided for these matters (including estimates related to possible interest and penalties) with approximately $6.3 million included in other accrued liabilities and approximately $4.6 million recorded in other long-term liabilities in the accompanying consolidated balance sheet as of such date.
At December 31, 2024, there were approximately $5.5 million in reserves that we had provided for these matters (including estimates related to possible interest and penalties) with approximately $0.5 million included in other accrued liabilities and approximately $5.0 million recorded in other long-term liabilities in the accompanying consolidated balance sheet as of such date.
During 2023, we repurchased approximately 3.3 million shares of our Class A Common Stock for approximately $177.6 million in open-market transactions at prevailing market prices and in connection with tax withholding on the vesting of equity compensation awards. As of December 31, 2023, our total remaining repurchase authorization was approximately $286.7 million.
During 2024, we repurchased approximately 0.6 million shares of our Class A Common Stock for approximately $34.4 million in open-market transactions at prevailing market prices and in connection with tax withholding on the vesting of equity compensation awards. As of December 31, 2024, our total remaining repurchase authorization was approximately $252.3 million.
We believe the yield spread premium we earn for arranging vehicle financing represents value to the consumer in numerous ways, including the following: • lower cost, below-market financing is often available only from the manufacturers’ captives and franchised dealers; • ease of access to multiple high-quality lending sources; • lease-financing alternatives are largely available only from manufacturers’ captives or other indirect lenders; • guests with substandard credit frequently do not have direct access to potential sources of sub-prime financing; and 36 SONIC AUTOMOTIVE, INC.
We believe the yield spread premium we earn for arranging vehicle financing represents value to the consumer in numerous ways, including the following: • lower cost, below-market financing is often available only from the manufacturers’ captives and franchised dealers; • ease of access to multiple high-quality lending sources; • lease-financing alternatives are largely available only from manufacturers’ captives or other indirect lenders; 36 SONIC AUTOMOTIVE, INC.
As of December 31, 2023, commitments for facility construction projects totaled approximately $27.9 million. Share Repurchase Program Our Board of Directors has authorized us to repurchase shares of our Class A Common Stock.
As of December 31, 2024, commitments for facility construction projects totaled approximately $23.3 million. Share Repurchase Program Our Board of Directors has authorized us to repurchase shares of our Class A Common Stock.
(4) For 2023, amount includes approximately $1.0 million of pre-tax property and equipment impairment charges for the Franchised Dealerships Segment and approximately $78.3 million of pre-tax impairment charges related to property and equipment, lease right-of-use assets, and other assets for the EchoPark Segment.
For 2023, amount includes approximately $1.0 million of pre-tax franchise asset and property and equipment impairment charges for the Franchised Dealerships Segment and approximately $78.3 million of pre-tax impairment charges related to fixed assets, lease right-of-use assets, and other contractual obligations related to abandoned property for the EchoPark Segment.
Same store internal, sublet and other revenue increased approximately $0.3 million and same store internal, sublet and other gross profit increased approximately $0.5 million. 57 SONIC AUTOMOTIVE, INC.
Same store internal, sublet and other revenue decreased approximately $0.6 million and same store internal, sublet and other gross profit decreased approximately $0.3 million. 57 SONIC AUTOMOTIVE, INC.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAbsent the acceleration of payments of principal that may result from non-compliance with financial and operational covenants under our various indebtedness, future principal maturities of variable and fixed rate debt and related interest rate caps are as follows: 2024 2025 2026 2027 2028 Thereafter Total Asset (Liability) Fair Value (In millions) Long-term debt: Fixed rate maturities $ 34.1 $ 72.8 $ 26.0 $ 5.7 $ 15.7 $ 1,158.7 $ 1,313.0 Fixed rate outstanding (1) $ 1,313.0 $ 1,278.9 $ 1,206.1 $ 1,180.1 $ 1,174.5 $ 1,158.7 $ 1,195.6 Average rate on fixed outstanding debt (1) 4.67 % 4.67 % 4.71 % 4.73 % 4.73 % 4.73 % Variable rate maturities $ 26.0 $ 40.4 $ 27.1 $ 286.6 $ 6.8 $ — $ 386.9 Variable rate outstanding (1) $ 386.6 $ 360.6 $ 320.2 $ 293.1 $ 6.5 $ — $ 386.9 Average rate on variable outstanding debt (1) 6.97 % 6.97 % 6.96 % 6.96 % 7.09 % N/A Cash flow hedge instruments: Interest rate cap notional maturities $ 375.0 $ 500.0 $ — $ — $ — $ — Interest rate cap notional outstanding (1) $ 375.0 $ 500.0 $ — $ — $ — $ — $ 1.0 Average interest income rate on interest rate cap notional outstanding (1) — % — % — % — % — % N/A (1) Based on amounts outstanding at January 1 of each respective period. 77 SONIC AUTOMOTIVE, INC.
Biggest changeAbsent the acceleration of payments of principal that may result from non-compliance with financial and operational covenants under our various indebtedness, future principal maturities of variable and fixed rate debt and related interest rate caps are as follows: 2025 2026 2027 2028 2029 Thereafter Total Asset (Liability) Fair Value (In millions) Long-term debt: Fixed rate maturities $ 55.9 $ 21.8 $ 1.9 $ 14.2 $ 651.0 $ 501.4 $ 1,246.2 Fixed rate outstanding (1) $ 1,246.1 $ 1,190.2 $ 1,168.5 $ 1,166.6 $ 1,152.4 $ 501.4 $ 1,135.6 Average rate on fixed outstanding debt (1) 4.66 % 4.70 % 4.73 % 4.73 % 4.73 % 4.87 % Variable rate maturities $ 20.2 $ 30.4 $ 316.2 $ — $ — $ — $ 366.8 Variable rate outstanding (1) $ 366.8 $ 346.5 $ 316.2 $ — $ — $ — $ 366.8 Average rate on variable outstanding debt (1) 5.83 % 5.83 % 5.83 % — % — % N/A Cash flow hedge instruments: Interest rate cap notional maturities $ 500.0 $ — $ — $ — $ — $ — Interest rate cap notional outstanding (1) $ 500.0 $ — $ — $ — $ — $ — $ — Average interest income rate on interest rate cap notional outstanding (1) — % — % — % — % — % N/A (1) Based on amounts outstanding at January 1 of each respective period. 78 SONIC AUTOMOTIVE, INC.
The fair value of the outstanding interest rate cap position was a net asset of approximately $1.0 million at December 31, 2023 and $0.5 million at December 31, 2022, included in other assets in the accompanying consolidated balance sheet as of such date.
The fair value of the outstanding interest rate cap position was $0.0 million at December 31, 2024 and a net asset of approximately $1.0 million at December 31, 2023, included in other assets in the accompanying consolidated balance sheet as of such date.
Under the terms of these agreements, we will receive and pay interest based on the following: Notional Amount Cap Rate (1) Receive Rate (1) (2) Start Date Maturing Date (In millions) $ 250.0 5.000% one-month SOFR February 26, 2023 February 25, 2024 $ 125.0 5.000% one-month SOFR October 26, 2023 October 26, 2024 $ 500.0 5.000% one-month SOFR February 26, 2024 February 26, 2025 (1) Under these interest rate caps, no payment from the counterparty will occur unless the stated receive rate exceeds the stated cap rate, in which case a net payment to us from the counterparty, based on the spread between the receive rate and the cap rate, will be recognized as a reduction of interest expense, other, net in the accompanying consolidated statements of operations.
Under the terms of these agreements, we will receive and pay interest based on the following: Notional Amount Cap Rate (1) Receive Rate (1) (2) Start Date Maturing Date (In millions) $ 500.0 5.000% one-month Term SOFR February 26, 2024 February 26, 2025 (1) Under these interest rate caps, no payment from the counterparty will occur unless the stated receive rate exceeds the stated cap rate, in which case a net payment to us from the counterparty, based on the spread between the receive rate and the cap rate, will be recognized as a reduction of interest expense, other, net in the accompanying consolidated statements of operations.
As of both December 31, 2023 and 2022, we had interest rate cap agreements designated as hedging instruments to limit our exposure to increases in one-month Term SOFR (as of December 31, 2023) or LIBOR (as of December 31, 2022) above certain levels. Under the terms of the interest rate cap agreements, interest rates reset monthly.
As of both December 31, 2024 and 2023, we had interest rate cap agreements designated as hedging instruments to limit our exposure to increases in one-month Term SOFR above certain levels. Under the terms of the interest rate cap agreements, interest rates reset monthly.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk Our variable rate floor plan facilities, the 2021 Revolving Credit Facility, the 2019 Mortgage Facility and our other variable rate notes expose us to risks caused by fluctuations in the applicable interest rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk Our variable rate floor plan facilities, Revolving Credit Facility, and Mortgage Facilities expose us to risks caused by fluctuations in the applicable interest rates.
(2) One-month SOFR was approximately 5.344% at December 31, 2023. The interest rate caps have been designated and qualify as cash flow hedges and, as a result, changes in the fair value of these instruments are recorded in total other comprehensive income (loss) before taxes in the accompanying consolidated statements of comprehensive operations. 76 SONIC AUTOMOTIVE, INC.
(2) One-month Term SOFR was approximately 4.332% at December 31, 2024. The interest rate caps have been designated and qualify as cash flow hedges and, as a result, changes in the fair value of these instruments are recorded in total other comprehensive income (loss) before taxes in the accompanying consolidated statements of comprehensive operations. 77 SONIC AUTOMOTIVE, INC.
Based on that amount along with the notional value of interest rate caps in place on that date, a 100 basis point decrease in the underlying interest rates would have reduced interest expense by approximately $16.1 million while a 100 basis point increase would have resulted in approximately $13.6 million of additional interest expense for the 12 months ended December 31, 2023.
Based on that amount along with the notional value of interest rate caps in place on that date, a decrease of 100 basis points in the underlying interest rates would have reduced interest expense by approximately $19.9 million while a 100 basis point increase in rates would have resulted in approximately $18.2 million of additional interest expense for the 12 months ended December 31, 2024.
Of those changes, approximately $12.2 million of the decrease and approximately $9.7 million of the increase would have resulted from the floor plan, net of offset. The difference between the increases and decreases results from the mitigating effect of the interest rate caps.
Of those changes, approximately $16.2 million of the decrease and approximately $14.5 million of the increase would have resulted from the floor plan, net of offset. The difference between the increases and decreases results from the mitigating effect of the interest rate caps discussed below.
The total outstanding balance of such variable instruments, after considering the effect of outstanding cash flow hedge instruments, was approximately $1.7 billion at December 31, 2023 and $1.4 billion at December 31, 2022.
The total outstanding balance of such variable instruments, after considering the effect of outstanding cash flow hedge instruments, was approximately $2.0 billion at December 31, 2024.

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