##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 (Mark One)
 ý
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission files number 1-13395
 
 SONIC AUTOMOTIVE, INC.
 (Exact name of registrant as specified in its charter)
 
 DELAWARE
    
    56-2010790(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)6415 Idlewild Road, Suite 109, Charlotte, North Carolina
    
    28212(Address of principal executive offices)
    
    (Zip Code)
 (704) 566-2400
 (Registrants telephone number, including area code)
 
 ý o
  o o
  Large Accelerated Filer o
Accelerated Filer ý
Non-Accelerated Filer o
(Do not check if a smaller reporting company)
Smaller Reporting Company o o ý




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##### 



INDEX TO FORM 10-Q
 PagePART I  FINANCIAL INFORMATIONITEM 1.  Unaudited Condensed Consolidated Financial Statements
    
    
    3Condensed Consolidated Statements of Income 
Quarters ended March 31, 2011 and March 31, 2010
    
    
    3Condensed Consolidated Balance Sheets 
March 31, 2011 and December 31, 2010
    
    
    4Condensed Consolidated Statement of Stockholders Equity 
Three-month period ended March 31, 2011
    
    
    5Condensed Consolidated Statements of Cash Flows 
Three-month periods ended March 31, 2011 and March 31, 2010
    
    
    6Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    7ITEM 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk
    
    
    28ITEM 4.  Controls and Procedures
    
    
    29PART II  OTHER INFORMATIONITEM 1.     Legal Proceedings
    
    
    30ITEM 1A.  Risk Factors
    
    
    32ITEM 2.     Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35ITEM 6.     Exhibits
    
    
    36SIGNATURES
    
    
    38EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I - FINANCIAL INFORMATION
 
 Item 1: Unaudited Condensed Consolidated Financial Statements.
 SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (Dollars and shares in thousands, except per share amounts)
 (Unaudited)
 First Quarter EndedMarch 31,2011
    
    2010Revenues:New vehicles
    
    $
    980,745
    
    
    $
    778,244Used vehicles
    
    
    482,031
    
    
    
    418,849Wholesale vehicles
    
    
    35,362
    
    
    
    30,806Total vehicles
    
    
    1,498,138
    
    
    
    1,227,899Parts, service and collision repair
    
    
    291,770
    
    
    
    275,172Finance, insurance and other
    
    
    49,468
    
    
    
    40,595Total revenues
    
    
    1,839,376
    
    
    
    1,543,666Cost of Sales:New vehicles
    
    
    (920,686
    )
    
    
    (725,663
    )Used vehicles
    
    
    (443,787
    )
    
    
    (384,071
    )Wholesale vehicles
    
    
    (35,818
    )
    
    
    (31,464
    )Total vehicles
    
    
    (1,400,291
    )
    
    
    (1,141,198
    )Parts, service and collision repair
    
    
    (147,917
    )
    
    
    (136,589
    )Total cost of sales
    
    
    (1,548,208
    )
    
    
    (1,277,787
    )Gross profit
    
    
    291,168
    
    
    
    265,879Selling, general and administrative expenses
    
    
    (232,514
    )
    
    
    (220,653
    )Impairment charges
    
    
    (17
    )
    
    
    (44
    )Depreciation and amortization
    
    
    (9,992
    )
    
    
    (8,418
    )Operating income
    
    
    48,645
    
    
    
    36,764Other income (expense):Interest expense, floor plan
    
    
    (5,436
    )
    
    
    (4,798
    )Interest expense, other, net
    
    
    (15,447
    )
    
    
    (17,151
    )Interest expense, non-cash, convertible debt
    
    
    (1,694
    )
    
    
    (1,677
    )Interest expense / amortization, non-cash, cash flow swaps
    
    
    178
    
    
    
    (1,683
    )Other income, net
    
    
    73
    
    
    
    64Total other expense
    
    
    (22,326
    )
    
    
    (25,245
    )Income from continuing operations before taxes
    
    
    26,319
    
    
    
    11,519Provision for income taxes
    
    
    (10,528
    )
    
    
    (4,953
    )Income from continuing operations
    
    
    15,791
    
    
    
    6,566Discontinued operations:Loss from operations and the sale of discontinued franchises
    
    
    (1,273
    )
    
    
    (3,980
    )Income tax benefit
    
    
    446
    
    
    
    1,568Loss from discontinued operations
    
    
    (827
    )
    
    
    (2,412
    )Net income
    
    $
    14,964
    
    
    $
    4,154Basic earnings (loss) per common share:Earnings per share from continuing operations
    
    $
    0.30
    
    
    $
    0.13Loss per share from discontinued operations
    
    
    (0.02
    )
    
    
    (0.05
    )Earnings per common share
    
    $
    0.28
    
    
    $
    0.08Weighted average common shares outstanding
    
    
    52,416
    
    
    
    51,889Diluted earnings (loss) per common share:Earnings per share from continuing operations
    
    $
    0.27
    
    
    $
    0.12Loss per share from discontinued operations
    
    
    (0.01
    )
    
    
    (0.04
    )Earnings per common share
    
    $
    0.26
    
    
    $
    0.08Weighted average common shares outstanding
    
    
    65,950
    
    
    
    52,579Dividends declared per common share
    
    $
    0.025
    
    
    $
    -
  3




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Dollars in
thousands)
(Unaudited)
 March 31,
    
    
    December 31,2011
    
    2010ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    8,355
    
    
    $
    21,842Receivables, net
    
    
    215,546
    
    
    
    239,634Inventories
    
    
    931,236
    
    
    
    903,221Other current assets
    
    
    31,742
    
    
    
    25,653Total current assets
    
    
    1,186,879
    
    
    
    1,190,350Property and Equipment, net
    
    
    515,657
    
    
    
    436,260Goodwill
    
    
    468,465
    
    
    
    468,516Other Intangible Assets, net
    
    
    78,735
    
    
    
    79,149Other Assets
    
    
    74,813
    
    
    
    76,489Total Assets
    
    $
    2,324,549
    
    
    $
    2,250,764LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Notes payable - floor plan - trade
    
    $
    461,787
    
    
    $
    478,834Notes payable - floor plan - non-trade
    
    
    386,824
    
    
    
    383,151Trade accounts payable
    
    
    87,486
    
    
    
    59,719Accrued interest
    
    
    10,590
    
    
    
    14,070Other accrued liabilities
    
    
    161,027
    
    
    
    160,763Current maturities of long-term debt
    
    
    9,863
    
    
    
    9,050Total current liabilities
    
    
    1,117,577
    
    
    
    1,105,587Long-Term Debt
    
    
    598,969
    
    
    
    546,401Other Long-Term Liabilities
    
    
    129,732
    
    
    
    134,081Commitments and ContingenciesStockholders Equity:Class A convertible preferred stock, none issued
    
    
    -
    
    
    
    -Class A common stock, $.01 par value; 100,000,000 shares
authorized; 56,160,588 shares issued and 40,888,015 shares
outstanding at March 31, 2011; 55,738,639 shares issued and 40,757,999 shares
outstanding at December 31, 2010
    
    
    562
    
    
    
    557Class B common stock; $.01 par value; 30,000,000 shares authorized;
12,029,375 shares outstanding at March 31, 2011 and December 31, 2010
    
    
    121
    
    
    
    121Paid-in capital
    
    
    668,762
    
    
    
    666,961Retained earnings
    
    
    67,066
    
    
    
    53,427Accumulated other comprehensive loss
    
    
    (16,649
    )
    
    
    (18,683
    )Treasury stock, at cost (15,272,573 Class A shares held at March 31, 2011
and 14,980,640 Class A shares held at December 31, 2010)
    
    
    (241,591
    )
    
    
    (237,688
    )Total stockholders equity
    
    
    478,271
    
    
    
    464,695Total Liabilities and Stockholders Equity
    
    $
    2,324,549
    
    
    $
    2,250,764
  4




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 (Dollars and shares in thousands)
 (Unaudited)
 AccumulatedClass A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Total
    
    
    Compre-Common Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Treasury
    
    
    Comprehensive
    
    
    Stockholders
    
    
    hensiveShares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Earnings
    
    Stock
    
    Income (Loss)
    
    Equity
    
    IncomeBALANCE AT DECEMBER 31, 2010
    
    
    55,739
    
    
    $
    557
    
    
    
    12,029
    
    
    $
    121
    
    
    $
    666,961
    
    
    $
    53,427
    
    
    $
    (237,688
    )
    
    $
    (18,683
    )
    
    $
    464,695
    
    
    $
    93,596Shares awarded under stock compensation plans
    
    
    282
    
    
    
    3
    
    
    
    -
    
    
    
    -
    
    
    
    645
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    648
    
    
    
    -Purchases of treasury stock
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (3,903
    )
    
    
    -
    
    
    
    (3,903
    )
    
    
    -Income tax benefit associated with stock
compensation plans
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    498
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    498
    
    
    
    -Fair value of interest rate swap agreements, net
of tax expense of $1,247
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    2,034
    
    
    
    2,034
    
    
    
    2,034Stock-based compensation expense
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    108
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    108
    
    
    
    -Restricted stock amortization, net of forfeitures
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    552
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    552
    
    
    
    -Net income
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    14,964
    
    
    
    -
    
    
    
    -
    
    
    
    14,964
    
    
    
    14,964Dividends ($0.025 per share)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (1,325
    )
    
    
    -
    
    
    
    -
    
    
    
    (1,325
    )
    
    
    -Other
    
    
    140
    
    
    
    2
    
    
    
    -
    
    
    
    -
    
    
    
    (2
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -BALANCE AT MARCH 31, 2011
    
    
    56,161
    
    
    $
    562
    
    
    
    12,029
    
    
    $
    121
    
    
    $
    668,762
    
    
    $
    67,066
    
    
    $
    (241,591
    )
    
    $
    (16,649
    )
    
    $
    478,271
    
    
    $
    16,998
  5




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
 (Unaudited)
 Three Months EndedMarch 31,2011
    
    2010CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    14,964
    
    
    $
    4,154Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization of property, plant and equipment
    
    
    9,966
    
    
    
    8,510Provision for bad debt expense
    
    
    111
    
    
    
    332Other amortization
    
    
    414
    
    
    
    414Debt issuance cost amortization
    
    
    987
    
    
    
    1,012Debt discount amortization, net of premium amortization
    
    
    1,274
    
    
    
    1,266Stock - based compensation expense
    
    
    107
    
    
    
    164Amortization of restricted stock
    
    
    551
    
    
    
    641Deferred income taxes
    
    
    (251
    )
    
    
    (244
    )Equity interest in earnings of investees
    
    
    (143
    )
    
    
    (195
    )Asset impairment charges
    
    
    17
    
    
    
    44Loss (gain) on disposal of franchises and property and equipment
    
    
    11
    
    
    
    (21
    )Loss on exit of leased dealerships
    
    
    1,045
    
    
    
    1,461Non-cash adjustments - cash flow swaps
    
    
    (178
    )
    
    
    1,683Changes in assets and liabilities that relate to operations:Receivables
    
    
    23,977
    
    
    
    17,574Inventories
    
    
    (28,105
    )
    
    
    (35,881
    )Other assets
    
    
    (6,754
    )
    
    
    (12,562
    )Notes payable - floor plan - trade
    
    
    (17,047
    )
    
    
    195,202Trade accounts payable and other liabilities
    
    
    23,434
    
    
    
    (9,258
    )Total adjustments
    
    
    9,416
    
    
    
    170,142Net cash provided by operating activities
    
    
    24,380
    
    
    
    174,296CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of land, property and equipment
    
    
    (90,587
    )
    
    
    (7,766
    )Proceeds from sales of property and equipment
    
    
    284
    
    
    
    (41
    )Proceeds from sale of franchises
    
    
    134
    
    
    
    504Distributions from equity investees
    
    
    600
    
    
    
    -Net cash used in investing activities
    
    
    (89,569
    )
    
    
    (7,303
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net (repayments) borrowings on notes payable floor plan - non-trade
    
    
    3,673
    
    
    
    (190,942
    )Borrowings on revolving credit facilities
    
    
    122,735
    
    
    
    40,000Repayments on revolving credit facilities
    
    
    (122,735
    )
    
    
    (40,000
    )Proceeds from issuance of long-term debt
    
    
    53,950
    
    
    
    209,839Principal payments on long-term debt
    
    
    (1,844
    )
    
    
    (1,538
    )Purchases of treasury stock
    
    
    (3,903
    )
    
    
    (783
    )Income tax benefit associated with stock compensation plans
    
    
    498
    
    
    
    218Income tax benefit associated with convertible hedge
    
    
    -
    
    
    
    66Issuance of shares under stock compensation plans
    
    
    648
    
    
    
    175Dividends paid
    
    
    (1,320
    )
    
    
    -Net cash provided by financing activities
    
    
    51,702
    
    
    
    17,035NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (13,487
    )
    
    
    184,028CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    21,842
    
    
    
    30,035CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    8,355
    
    
    $
    214,063SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:Change in fair value of cash flow hedging instruments
(net of tax expense of $1,247 and $644 in 2011 and 2010, respectively)
    
    $
    2,034
    
    
    $
    868SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid (received) during the period for:Interest, including amount capitalized
    
    $
    25,801
    
    
    $
    26,663Income taxes
    
    $
    1,097
    
    
    $
    (123
    )
  6




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1.
Summary of Significant Accounting Policies
 Basis
of Presentation Form 10-K.
 Reclassifications
 Lease Exit Accruals
 (In thousands)Balance, December 31, 2010
    
    $
    43,534Lease exit expense (1)
    
    
    1,045Payments
    
    
    (2,165
    )Balance, March 31, 2011
    
    $
    42,414
 (1)
    
    Approximately $0.9 million is recorded in interest expense, other, net, and the remaining $0.1
million is recorded in selling, general and administrative expenses in the accompanying Unaudited
Condensed Consolidated Statements of Income.
 Income Tax Expense
 2.
Discontinued Operations
 Dispositions
  7




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 First Quarter Ended March 31,2011
    
    2010(In thousands)Loss from operations
    
    $
    (373
    )
    
    $
    (2,605
    )Gain on disposal of businesses
    
    
    25
    
    
    
    270Lease exit charges
    
    
    (925
    )
    
    
    (1,645
    )Pre-tax loss
    
    $
    (1,273
    )
    
    $
    (3,980
    )Total revenues
    
    $
    -
    
    
    $
    25,272
  3.
Inventories
  March 31,
    
    December 31,2011
    
    2010(In thousands)New vehicles
    
    $
    619,237
    
    
    $
    628,939Used vehicles
    
    
    201,872
    
    
    
    165,039Parts and accessories
    
    
    51,923
    
    
    
    50,854Other
    
    
    58,204
    
    
    
    58,389Inventories
    
    $
    931,236
    
    
    $
    903,221
 4.
Property and Equipment
  March 31,
    
    December 31,2011
    
    2010(In thousands)Land
    
    $
    120,237
    
    
    $
    76,357Building and improvements
    
    
    398,279
    
    
    
    353,088Office equipment and fixtures
    
    
    79,631
    
    
    
    77,654Parts and service equipment
    
    
    57,619
    
    
    
    56,651Company vehicles
    
    
    8,261
    
    
    
    8,137Construction in progress
    
    
    44,440
    
    
    
    48,230Total, at cost
    
    
    708,467
    
    
    
    620,117Less: accumulated depreciation
    
    
    (190,790
    )
    
    
    (181,837
    )Subtotal
    
    
    517,677
    
    
    
    438,280Less: assets held for sale (1)
    
    
    (2,020
    )
    
    
    (2,020
    )Property and equipment, net
    
    $
    515,657
    
    
    $
    436,260
 (1)
    
    Included in other current assets in the accompanying Unaudited Condensed Consolidated
Balance Sheets.
  8




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##### Table of Contents



SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  5.
Goodwill and Intangible Assets
 Franchise
    
    
    
    
    
    AccumulatedAgreements
    
    Gross Goodwill
    
    Impairment
    
    Net Goodwill(In
thousands)Balance, December 31, 2010
    
    $
    64,835
    
    
    $
    1,265,241
    
    
    $
    (796,725
    )
    
    $
    468,516Reductions from sales of businesses
    
    
    -
    
    
    
    (51
    )
    
    
    -
    
    
    
    (51
    )Balance, March 31, 2011
    
    $
    64,835
    
    
    $
    1,265,190
    
    
    $
    (796,725
    )
    
    $
    468,465
  6.
Long-Term Debt
  March 31,
    
    December 31,2011
    
    2010(In
thousands)2010 Revolving Credit Facility (1)
    
    $
    -
    
    
    $
    -Senior Subordinated Notes bearing interest at 9.0% (9.0% Notes)
    
    
    210,000
    
    
    
    210,000Senior Subordinated Notes bearing interest at 8.625% (8.625% Notes)
    
    
    42,855
    
    
    
    42,855Convertible Senior Notes bearing interest at 5.0% (5.0% Convertible Notes)
    
    
    172,500
    
    
    
    172,500Notes payable to a finance company bearing interest from 9.52% to 10.52% (with
a weighted average of 10.19%)
    
    
    15,048
    
    
    
    15,618Mortgage notes to finance companies-fixed rate, bearing interest from 4.50% to 7.03%
    
    
    123,926
    
    
    
    88,262Mortgage notes to finance companies-variable rate, bearing interest at 1.25 to 3.50 percentage
points above one-month LIBOR
    
    
    62,697
    
    
    
    45,639Net debt discount and premium (2)
    
    
    (24,180
    )
    
    
    (25,482
    )Other
    
    
    5,986
    
    
    
    6,059$
    608,832
    
    
    $
    555,451Less current maturities
    
    
    (9,863
    )
    
    
    (9,050
    )Long-term debt
    
    $
    598,969
    
    
    $
    546,401
 (1)
    
    Interest rate on the revolving credit facility was 3.50% above LIBOR at March 31, 2011 and
December 31, 2010.(2)
    
    March 31, 2011 includes $1.3 million discount associated with the 9.0% Notes, $0.2 million
discount associated with the 8.625% Notes, $23.3 million discount associated with the 5.0%
Convertible Notes, $1.7 million premium associated with notes payable to a finance company and $1.0
million discount associated with mortgage notes payable.
December 31, 2010 includes $1.4 million discount associated with the 9.0% Notes, $0.2 million
discount associated with the 8.625% Notes, $24.7 million discount associated with the 5.0%
Convertible Notes, $1.8 million premium associated with notes payable to a finance company and $1.0
million discount associated with mortgage notes payable.
 2010 Credit Facilities
   9




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
       Covenants
  CovenantConsolidated
    
    ConsolidatedConsolidated
    
    Fixed Charge
    
    Total SeniorLiquidity
    
    Coverage
    
    Secured Debt toRatio
    
    Ratio
    
    EBITDA RatioThrough March 30, 2011
    
    
    ≥ 1.00
    
    
    
    ≥   1.10
    
    
    
    ≤  2.25March 31, 2011 through and including March 30, 2012
    
    
    ≥  1.05
    
    
    
    ≥ 1.15
    
    
    
    ≤ 2.25March 31, 2012 and thereafter
    
    
    ≥ 1.10
    
    
    
    ≥ 1.20
    
    
    
    ≤ 2.25March 31, 2011 actual
    
    
    1.15
    
    
    
    1.45
    
    
    
    1.50
 10




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   9.0% Senior Subordinated Notes (9.0% Notes)
  RedemptionBeginning on March 15, 2014
    
    
    104.50
    %Beginning on March 15, 2015
    
    
    102.25
    %Beginning on March 15, 2016 and thereafter
    
    
    100.00
    %
     8.625% Senior Subordinated Notes (8.625% Notes)
   11




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 5.0% Convertible Senior Notes (5.0% Convertible Notes)
     Mortgage Notes
  Derivative Instruments and Hedging Activities
  12




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Notional
    
    

    

Pay
Rate
    

Receive
Rate (1)
    

Maturing
Date(In millions)$
    200.0
    

    
    
    4.935%
    
    one-month LIBOR
    
    May 1, 2012$
    100.0
    

    
    
    5.265%
    
    one-month LIBOR
    
    June 1, 2012$
    3.5
    

    
    
    7.100%
    
    one-month LIBOR
    
    July 10, 2017$
    25.0
    

    (2)
    
    5.160%
    
    one-month LIBOR
    
    September 1, 2012$
    15.0
    

    (2)
    
    4.965%
    
    one-month LIBOR
    
    September 1, 2012$
    25.0
    

    (2)
    
    4.885%
    
    one-month LIBOR
    
    October 1, 2012$
    11.1
    

    
    
    4.655%
    
    one-month LIBOR
    
    December 10, 2017$
    8.6
    

    
    
    6.860%
    
    one-month LIBOR
    
    August 1, 2017$
    6.8
    

    
    
    4.330%
    
    one-month LIBOR
    
    July 1, 2013$
    100.0
    

    (3)
    
    3.280%
    
    one-month LIBOR
    
    July 1, 2015$
    100.0
    

    (3)
    
    3.300%
    
    one-month LIBOR
    
    July 1, 2015$
    7.3
    

    
    
    6.410%
    
    one-month LIBOR
    
    September 12, 2017$
    50.0
    

    (3)
    
    2.767%
    
    one-month LIBOR
    
    July 1, 2014$
    50.0
    

    (3)
    
    3.240%
    
    one-month LIBOR
    
    July 1, 2015$
    50.0
    

    (3)
    
    2.610%
    
    one-month LIBOR
    
    July 1, 2014$
    50.0
    

    (3)
    
    3.070%
    
    one-month LIBOR
    
    July 1, 2015
       7.
Per Share Data and Stockholders Equity
  13




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 For the First Quarter Ended March 31, 2011Income

    
    LossFrom Continuing
    
    From DiscontinuedOperations
    
    Operations
    
    Net IncomeWeighted
    
    
    
    
    
    Per

    
    
    
    
    
    Per

    
    
    
    
    
    PerAverage Shares
    
    Amount
    
    Share Amount
    
    Amount
    
    Share Amount
    
    Amount
    
    Share Amount(In thousands, except
per share amounts)Earnings (Loss) and Shares
    
    
    52,416
    
    
    $
    15,791
    
    
    
    
    
    
    $
    (827
    )
    
    
    
    
    
    $
    14,964Effect of Participating Securities:Non-vested Restricted Stock
and Stock Units
    
    
    -
    
    
    
    (206
    )
    
    
    
    
    
    
    -
    
    
    
    
    
    
    
    (206
    )Basic Earnings (Loss) and Shares
    
    
    52,416
    
    
    $
    15,585
    
    
    $
    0.30
    
    
    $
    (827
    )
    
    $
    (0.02
    )
    
    $
    14,758
    
    
    $
    0.28Effect of Dilutive Securities:Contingently Convertible
Debt ( 5.0% Convertible Notes)
    
    
    12,890
    
    
    
    2,310
    
    
    
    
    
    
    
    -
    
    
    
    
    
    
    
    2,310Stock Compensation Plans
    
    
    644Diluted Earnings (Loss) and Shares
    
    
    65,950
    
    
    $
    17,895
    
    
    $
    0.27
    
    
    $
    (827
    )
    
    $
    (0.01
    )
    
    $
    17,068
    
    
    $
    0.26For the First Quarter Ended March 31, 2010Income
    
    LossFrom Continuing
    
    From DiscontinuedOperations
    
    Operations
    
    Net IncomeWeighted
    

    
    
    
    
    Per
    
    
    
    
    
    Per

    
    
    
    
    
    PerAverage Shares
    
    Amount
    
    Share Amount
    
    Amount
    
    Share Amount
    
    Amount
    
    Share Amount(In thousands, except
per share amounts)Earnings (Loss) and Shares
    
    
    51,889
    
    
    $
    6,566
    
    
    
    
    
    
    $
    (2,412
    )
    
    
    
    
    
    $
    4,154Effect of Participating Securities:Non-vested Restricted Stock
and Stock Units
    
    
    -
    
    
    
    (79
    )
    
    
    
    
    
    
    -
    
    
    
    
    
    
    
    (79
    )Basic Earnings (Loss) and Shares
    
    
    51,889
    
    
    $
    6,487
    
    
    $
    0.13
    
    
    $
    (2,412
    )
    
    $
    (0.05
    )
    
    $
    4,075
    
    
    $
    0.08Effect of Dilutive Securities:Stock Compensation Plans
    
    
    690Diluted Earnings (Loss) and Shares
    
    
    52,579
    
    
    $
    6,487
    
    
    $
    0.12
    
    
    $
    (2,412
    )
    
    $
    (0.04
    )
    
    $
    4,075
    
    
    $
    0.08
  8.
Contingencies
 Legal and Other Proceedings:
  14




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
     Guarantees and Indemnification Obligations:
  15




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   9.
Fair Value Measurements
        16




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Fair Value at Reporting Date Using:SignificantQuoted Prices in
    
    
    Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsTotal

    
    (Level 1)
    
    (Level 2)
    
    (Level 3)(In millions)Cash Flow Swaps Designated as Hedges (1)
    
    $
    (22.8
    )
    
    $
    -
    
    
    $
    (22.8
    )
    
    $
    -Cash Flow Swaps not Designated as Hedges (1)
    
    
    (6.4
    )
    
    
    -
    
    
    
    (6.4
    )
    
    
    -Total
    
    $
    (29.2
    )
    
    $
    -
    
    
    $
    (29.2
    )
    
    $
    -
 (1) - Included in Other Long-Term Liabilities in the accompanying Unaudited Condensed Consolidated
Balance Sheets.
   March 31, 2011

    
    December 31, 2010Fair Value
    
    Carrying Value
    
    Fair Value
    
    Carrying Value(In thousands)9.0% Senior
Subordinated Notes (1)
    
    $
    224,175
    
    
    $
    208,663
    
    
    $
    220,836
    
    
    $
    208,6308.625% Senior
Subordinated Notes (1)
    
    $
    43,498
    
    
    $
    42,688
    
    
    $
    43,498
    
    
    $
    42,6735.0% Convertible
Senior Notes (1)
    
    $
    230,503
    
    
    $
    149,192
    
    
    $
    215,453
    
    
    $
    147,824Mortgage Notes (2)
    
    $
    121,248
    
    
    $
    123,926
    
    
    $
    88,119
    
    
    $
    88,262Notes Payable to a
Finance Company (2)
    
    $
    15,100
    
    
    $
    16,700
    
    
    $
    15,676
    
    
    $
    17,427Other (2)
    
    $
    5,272
    
    
    $
    5,703
    
    
    $
    5,311
    
    
    $
    5,751
 (1)
    
    As determined by market quotations as of March 31, 2011 and December 31, 2010 (Level 1).(2)
    
    As determined by discounted cash flows (Level 3).
 17




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
 Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Overview
    18




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Percentage of New
Vehicle RevenueFirst
Quarter Ended March 31,2011
    

2010Brand
(1)BMW
    
    16.6%
    
    16.1%Honda
    
    14.7%
    
    14.3%Toyota
    
    10.6%
    
    11.0%Ford
    
    8.9%
    
    9.0%Mercedes
    
    8.5%
    
    10.7%General Motors (2)
    
    8.2%
    
    6.5%Cadillac
    
    5.4%
    
    5.4%Lexus
    
    5.1%
    
    6.5%Other (3)
    
    4.6%
    
    3.2%Audi
    
    3.1%
    
    3.1%Volkswagen
    
    2.5%
    
    2.1%Hyundai
    
    2.1%
    
    2.0%Land Rover
    
    2.0%
    
    1.9%Porsche
    
    1.7%
    
    1.7%Volvo
    
    1.4%
    
    1.3%Infiniti
    
    1.2%
    
    1.5%Nissan
    
    1.2%
    
    1.6%Acura
    
    1.0%
    
    1.0%Other Luxury (4)
    
    0.9%
    
    0.9%Chrysler (5)
    
    0.3%
    
    0.2%Total
    
    100.0%
    
    100.0%
 (1)
    
    In accordance with the provisions of Presentation of Financial Statements in the Accounting
Standards Codification (the ASC), prior period income statement data reflects reclassifications
to (i) exclude franchises sold, identified for sale, or terminated subsequent to March 31, 2010
which had not been previously included in discontinued operations or (ii) include franchises
previously held for sale which subsequently were reclassified to held and used. See Notes 1 and 2
to our accompanying Unaudited Condensed Consolidated Financial Statements which discuss these and
other factors that affect the comparability of the information for the periods presented.(2)
    
    Includes Buick, Chevrolet and GMC.(3)
    
    Includes Kia, Mini, Scion and Subaru.(4)
    
    Includes Hummer, Jaguar and Saab.(5)
    
    Includes Chrysler, Dodge and Jeep.
 Results of Operations
  New Vehicles
  First
Quarter Ended March 31,2011
    

2010
    

%
ChangeSAAR (in millions of vehicles)
    
    
    13.0
    
    
    
    11.0
    
    
    
    18.2
    %
 Source: Bloomberg Financial Markets, via Stephens Inc.
 19




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
  For
the First Quarter Ended March 31,

    

Better
/ (Worse)2011

    

2010
    

Change
    

%
Change(in thousands, except units and per unit data)Revenue
    
    $
    980,745
    
    
    $
    778,244
    
    
    $
    202,501
    
    
    
    26.0
    %Gross profit
    
    $
    60,059
    
    
    $
    52,581
    
    
    $
    7,478
    
    
    
    14.2
    %Unit sales
    
    
    29,384
    
    
    
    23,132
    
    
    
    6,252
    
    
    
    27.0
    %Revenue per unit
    
    $
    33,377
    
    
    $
    33,644
    
    
    $
    (267
    )
    
    
    (0.8
    %)Gross profit per unit
    
    $
    2,044
    
    
    $
    2,273
    
    
    $
    (229
    )
    
    
    (10.1
    %)Gross profit as a % of revenue
    
    
    6.1%
    
    
    
    6.8%
    
    
    
    (70
    )
    
    bps
      20




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Used Vehicles
  For
the First Quarter Ended March 31,
    

Better
/ (Worse)2011

    

2010

    

Change

    

%
Change(in thousands, except units and per unit data)Revenue
    
    $
    482,031
    
    
    $
    418,849
    
    
    $
    63,182
    
    
    
    15.1
    %Gross profit
    
    $
    38,244
    
    
    $
    34,778
    
    
    $
    3,466
    
    
    
    10.0
    %Unit sales
    
    
    25,245
    
    
    
    21,492
    
    
    
    3,753
    
    
    
    17.5
    %Revenue per unit
    
    $
    19,094
    
    
    $
    19,489
    
    
    $
    (395
    )
    
    
    (2.0
    %)Gross profit per unit
    
    $
    1,515
    
    
    $
    1,618
    
    
    $
    (103
    )
    
    
    (6.4
    %)Gross profit as a % of revenue
    
    
    7.9%
    
    
    
    8.3%
    
    
    
    (40
    )
    
    bpsCPO revenue
    
    $
    209,433
    
    
    $
    204,199
    
    
    $
    5,234
    
    
    
    2.6
    %CPO unit sales
    
    
    7,914
    
    
    
    7,611
    
    
    
    303
    
    
    
    4.0
    %
   Wholesale Vehicles
  For
the First Quarter Ended March 31,

    

Better
/ (Worse)2011

    

2010

    

Change

    

%
Change(in thousands, except units and per unit data)Revenue
    
    $
    35,362
    
    
    $
    30,806
    
    
    $
    4,556
    
    
    
    14.8
    %Gross loss
    
    $
    (456
    )
    
    $
    (658
    )
    
    $
    202
    
    
    
    30.7
    %Unit sales
    
    
    5,644
    
    
    
    5,128
    
    
    
    516
    
    
    
    10.1
    %Revenue per unit
    
    $
    6,265
    
    
    $
    6,007
    
    
    $
    258
    
    
    
    4.3
    %Gross loss per unit
    
    $
    (81
    )
    
    $
    (128
    )
    
    $
    47
    
    
    
    36.7
    %Gross loss as a % of revenue
    
    
    (1.3%
    )
    
    
    (2.1%
    )
    
    
    80
    
    
    bps
  21




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Parts, Service and Collision Repair (Fixed Operations)
  For
the First Quarter Ended March 31,
    

Better
/ (Worse)2011
    

2010
    

Change
    

%
Change(In thousands)RevenueParts
    
    $
    154,713
    
    
    $
    146,030
    
    
    $
    8,683
    
    
    
    5.9
    %Service
    
    
    125,506
    
    
    
    117,104
    
    
    
    8,402
    
    
    
    7.2
    %Collision repair
    
    
    11,551
    
    
    
    12,038
    
    
    
    (487
    )
    
    
    (4.0
    %)Total
    
    $
    291,770
    
    
    $
    275,172
    
    
    $
    16,598
    
    
    
    6.0
    %Gross profitParts
    
    $
    50,472
    
    
    $
    48,889
    
    
    $
    1,583
    
    
    
    3.2
    %Service
    
    
    86,944
    
    
    
    83,002
    
    
    
    3,942
    
    
    
    4.7
    %Collision repair
    
    
    6,437
    
    
    
    6,692
    
    
    
    (255
    )
    
    
    (3.8
    %)Total
    
    $
    143,853
    
    
    $
    138,583
    
    
    $
    5,270
    
    
    
    3.8
    %Gross profit as a % of revenueParts
    
    
    32.6
    %
    
    
    33.5
    %
    
    
    (90
    )
    
    bpsService
    
    
    69.3
    %
    
    
    70.9
    %
    
    
    (160
    )
    
    bpsCollision repair
    
    
    55.7
    %
    
    
    55.6
    %
    
    
    10
    
    
    bpsTotal
    
    
    49.3
    %
    
    
    50.4
    %
    
    
    (110
    )
    
    bps
    Finance, Insurance and Other (F&I)
  For
the First Quarter Ended March 31,
    

Better
/ (Worse)2011
    

2010
    

Change
    

%
Change(In thousands, except per unit data)Revenue
    
    $
    49,468
    
    
    $
    40,595
    
    
    $
    8,873
    
    
    
    21.9
    %Gross profit per retail unit (excluding fleet)
    
    $
    949
    
    
    $
    947
    
    
    $
    2
    
    
    
    0.2
    %
  22




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Selling, General and Administrative (SG&A) Expenses
  For
the First Quarter Ended March 31,
    

Better
/ (Worse)2011
    

2010
    

Change
    

%
Change(In thousands)Compensation
    
    $
    136,565
    
    
    $
    128,890
    
    
    $
    (7,675
    )
    
    
    (6.0
    %)Advertising
    
    
    13,782
    
    
    
    11,175
    
    
    
    (2,607
    )
    
    
    (23.3
    %)Rent and rent related
    
    
    30,416
    
    
    
    32,850
    
    
    
    2,434
    
    
    
    7.4
    %Other
    
    
    51,751
    
    
    
    47,738
    
    
    
    (4,013
    )
    
    
    (8.4
    %)Total
    
    $
    232,514
    
    
    $
    220,653
    
    
    $
    (11,861
    )
    
    
    (5.4
    %)SG&A as a % of gross profitCompensation
    
    
    46.9
    %
    
    
    48.5
    %
    
    
    (160
    )
    
    bpsAdvertising
    
    
    4.7
    %
    
    
    4.2
    %
    
    
    (50
    )
    
    bpsRent and rent related
    
    
    10.4
    %
    
    
    12.4
    %
    
    
    200
    
    
    bpsOther
    
    
    17.9
    %
    
    
    17.9
    %
    
    
    (0
    )
    
    bpsTotal
    
    
    79.9
    %
    
    
    83.0
    %
    
    
    310
    
    
    bps
      Depreciation and Amortization
  23




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Interest Expense, Floor Plan
   Interest Expense, Other, Net
  First QuarterEnded
March 31Increase (Decrease)in
Interest Expense(In millions)Debt
balances - Increase (decrease) in debt balances
    
    $
    (0.5
    )Other
factors - (Increase) decrease in capitalized interest
    
    
    (0.4
    )- Incremental interest expense (benefit) related to variable to fixed rate swaps (1)
    
    
    (0.6
    )- (Increase) decrease in interest expense allocation to discontinued operations
    
    
    0.1- Increase (decrease) in other expense, net
    
    
    (0.3
    )Total
    
    $
    (1.7
    )
 
 (1)
    
    Represent difference in cash payments to and from the counterparty.
  Interest Expense, Non-Cash, Convertible Debt
  Interest Expense/Amortization, Non-Cash, Cash Flow Swaps
  24




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
   Income Taxes
  Discontinued Operations
  First Quarter Ended March 31,2011

    

2010(In thousands)Loss from operations
    
    $
    (373
    )
    
    $
    (2,605
    )Gain on disposal of businesses
    
    
    25
    
    
    
    270Lease exit charges
    
    
    (925
    )
    
    
    (1,645
    )Pre-tax loss
    
    $
    (1,273
    )
    
    $
    (3,980
    )Total revenues
    
    $
    
    
    
    $
    25,272
  Liquidity and Capital Resources
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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
  Floor Plan Facilities
   Long-Term Debt and Credit Facilities
  Capital Expenditures
   Stock Repurchase Program
  Dividends
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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
  Cash Flows
    Guarantees and Indemnification Obligations
  Future Liquidity Outlook
  Off-Balance Sheet Arrangements
  Seasonality
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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
 
 Item 3: Quantitative and Qualitative Disclosures About Market Risk.
 Interest Rate Risk
    Notional
Amount
    

Pay
Rate
    

Receive
Rate (1)
    

Maturing
Date(In millions)$
    200.0
    
    
    4.935%
    
    one-month LIBOR
    
    May 1, 2012$
    100.0
    
    
    5.265%
    
    one-month LIBOR
    
    June 1, 2012$
    3.5
    
    
    7.100%
    
    one-month LIBOR
    
    July 10, 2017$
    25.0
    (2)
    
    5.160%
    
    one-month LIBOR
    
    September 1, 2012$
    15.0
    (2)
    
    4.965%
    
    one-month LIBOR
    
    September 1, 2012$
    25.0
    (2)
    
    4.885%
    
    one-month LIBOR
    
    October 1, 2012$
    11.1
    
    
    4.655%
    
    one-month LIBOR
    
    December 10, 2017$
    8.6
    
    
    6.860%
    
    one-month LIBOR
    
    August 1, 2017$
    6.8
    
    
    4.330%
    
    one-month LIBOR
    
    July 1, 2013$
    100.0
    (3)
    
    3.280%
    
    one-month LIBOR
    
    July 1, 2015$
    100.0
    (3)
    
    3.300%
    
    one-month LIBOR
    
    July 1, 2015$
    7.3
    
    
    6.410%
    
    one-month LIBOR
    
    September 12, 2017$
    50.0
    (3)
    
    2.767%
    
    one-month LIBOR
    
    July 1, 2014$
    50.0
    (3)
    
    3.240%
    
    one-month LIBOR
    
    July 1, 2015$
    50.0
    (3)
    
    2.610%
    
    one-month LIBOR
    
    July 1, 2014$
    50.0
    (3)
    
    3.070%
    
    one-month LIBOR
    
    July 1, 2015
 (1)
    
    The one-month LIBOR rate was 0.244% at March 31, 2011.(2)
    
    After December 31, 2009 changes in fair value are recorded through earnings.(3)
    
    The effective date of these forward-starting swaps is July 2, 2012.
 Foreign Currency Risk
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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
 
 Item 4: Controls and Procedures.
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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
 
 PART
II  OTHER INFORMATION
 
 Item 1: Legal Proceedings.
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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
 PART
II  OTHER INFORMATION
  31




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
RISK FACTORS
 
 Item 1A: Risk Factors
  Disruptions in the supply-chain of automotive manufacturers and related parts suppliers may
negatively impact our profitability.
   
    
    Lower supply of new vehicle inventory beginning in the second quarter;
    
    Higher cost of certain automotive parts while the supply-chain is disrupted;
    
    Higher cost of certain new vehicle inventory (sourced either directly from manufacturers or
from other franchised dealers) while supply is lower;
    
    Increased demand for certain used or certified vehicles which may increase the acquisition
cost of those vehicles either through trade or auction; and
    
    The supply and manufacturing disruptions may also affect other major automotive
manufacturers in some manner due to the reliance on certain components that are sourced in
Japan.
 Our significant indebtedness could materially adversely affect our financial health, limit our
ability to finance future acquisitions and capital expenditures and prevent us from fulfilling our
financial obligations.
  
    
    $848.6 million under the secured new and used inventory floor plan facilities;
    
    $208.7 million in 9.0% Senior Subordinated Notes due 2018 (the 9.0% Notes),
representing $210.0 million in aggregate principal amount outstanding less unamortized
discount of approximately $1.3 million
    
    $42.7 million in 8.625% Senior Subordinated Notes due 2013 (the 8.625% Notes),
representing $42.9 million in aggregate principal amount outstanding less unamortized net
discount of approximately $0.2 million;
    
    $149.2 million in 5.0% Convertible Senior Notes due 2029 which are redeemable by us
and which may be put to us by the holders after October 1, 2014 under certain
circumstances (the 5.0% Convertible Notes), representing $172.5 million in aggregate
principal amount outstanding less unamortized discount of approximately $23.3 million;
    
    $185.6 million of mortgage notes, representing $186.6 million in aggregate principal
amount less unamortized net discount of approximately $1.0 million, due from June 2013 to
December 2031, with a weighted average interest rate of 4.99%; and
    
    $22.7 million of other secured debt, representing $21.0 million in aggregate
principal amount plus unamortized premium of approximately $1.7 million.
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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
RISK FACTORS
   The outcome of legal and administrative proceedings we are or may become involved in could have a
material adverse effect on our future business, results of operations, financial condition and
cash flows.
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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
RISK FACTORS
    34




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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
 
 Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
 (In thousands, except
per share data)Total Number of
    
    
    Approximate DollarShares Purchased as
    
    
    Value of Shares ThatTotal Number of
    
    
    Average
    
    
    Part of Publicly
    
    
    May Yet Be PurchasedShares Purchased
    
    
    Price Paid
    
    
    Announced Plans or
    
    
    Under the Plans or(1)
    
    
    per Share
    
    
    Programs (2)
    
    
    ProgramsJanuary 2011
    
    
    
    
    $
    
    
    
    
    
    
    $
    43,511February 2011
    
    3
    
    
    
    14.38
    
    
    3
    
    
    
    43,475March 2011
    
    289
    
    
    
    13.36
    
    
    289
    
    
    
    39,608Total
    
    292
    
    
    $
    13.37
    
    
    292
    
    
    $
    39,608
   (amounts in thousands)November 1999
    
    $
    25,000February 2000
    
    
    25,000December 2000
    
    
    25,000May 2001
    
    
    25,000August 2002
    
    
    25,000February 2003
    
    
    20,000December 2003
    
    
    20,000July 2004
    
    
    20,000July 2007
    
    
    30,000October 2007
    
    
    40,000April 2008
    
    
    40,000Total
    
    $
    295,000
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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
 
 Item 6: Exhibits.
 (a) Exhibits:
 ExhibitNo.
    
    Description31.1
    
    Certification of Mr. David P. Cosper pursuant to rule 13a-14(a)31.2
    
    Certification of Mr. O. Bruton Smith pursuant to rule 13a-14(a)32.1
    
    Certification of Mr. David P. Cosper pursuant to 18 U.S.C.
Section 1350, as adopted pursuant toSection 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification of Mr. O. Bruton Smith pursuant to 18 U.S.C.
Section 1350, as adopted pursuant toSection 906 of the
Sarbanes-Oxley Act of 2002
 
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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
 Forward Looking Statements
  
    
    the effect of the earthquake and tsunami in Japan on our operations;
    
    vehicle sales rates and same store sales growth;
    
    future liquidity trends or needs;
    
    our business and growth strategies;
    
    future covenant compliance;
    
    our financing plans and our ability to repay or refinance existing debt when due;
    
    future acquisitions or dispositions;
    
    level of fuel prices;
    
    industry trends; and
    
    general economic trends, including employment rates and consumer confidence levels.
  
    
    the number of new and used cars sold in the United States generally and as compared
to our expectations and the expectations of the market;
    
    our ability to generate sufficient cash flows or obtain additional financing to fund
acquisitions, capital expenditures, our share repurchase program, dividends on our Common
Stock and general operating activities;
    
    the reputation and financial condition of vehicle manufacturers whose brands we
represent, the financial incentives vehicle manufacturers offer and their ability to
design, manufacture, deliver and market their vehicles successfully;
    
    our relationships with manufacturers, which may affect our ability to complete
additional acquisitions;
    
    adverse resolutions of one or more significant legal proceedings against us or our
dealerships;
    
    changes in laws and regulations governing the operation of automobile franchises,
accounting standards, taxation requirements and environmental laws;
    
    general economic conditions in the markets in which we operate, including
fluctuations in interest rates, employment levels, the level of consumer spending and
consumer credit availability;
    
    the terms of any refinancing of our existing indebtedness;
    
    high competition in the automotive retailing industry, which not only creates pricing
pressures on the products and services we offer, but on businesses we seek to acquire;
    
    our ability to successfully integrate potential future acquisitions; and
    
    the rate and timing of overall economic recovery or decline.
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SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
 
 SIGNATURES
  SONIC AUTOMOTIVE, INC.Date: April 28, 2011
    
    By:
    
    /s/ O. BRUTON SMITHO. Bruton SmithChairman and Chief Executive OfficerDate: April 28, 2011
    
    By:
    
    /s/ DAVID P. COSPERDavid P. CosperVice Chairman and Chief Financial Officer(Principal Financial Officer)
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##### Table of Contents



SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
  ExhibitNo.
    
    Description31.1
    
    Certification of Mr. David P. Cosper pursuant to rule 13a-14(a)31.2
    
    Certification of Mr. O. Bruton Smith pursuant to rule 13a-14(a)32.1
    
    Certification of Mr. David P. Cosper pursuant to 18 U.S.C.
Section 1350, as adopted pursuant toSection 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification of Mr. O. Bruton Smith pursuant to 18 U.S.C.
Section 1350, as adopted pursuant toSection 906 of the
Sarbanes-Oxley Act of 2002
 
  39