##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2010ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number 1-13395
 SONIC AUTOMOTIVE,
    INC.
 (Exact Name of Registrant as
    Specified in its Charter)
  DELAWARE(State or Other Jurisdiction
    of
    Incorporation or Organization)

56-2010790(I.R.S. Employer
    Identification No.)6415 IDLEWILD ROAD, SUITE 109
    CHARLOTTE, NORTH CAROLINA(Address of Principal
    Executive Offices)

28212(Zip Code)   (704) 566-2400
 (Registrants telephone
    number, including area code)
  SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
    ACT:
  Title of Each Class

Name of Each Exchange on Which RegisteredClass A Common Stock, $.01 Par Value

New York Stock Exchange   SECURITIES
    REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
    (Title of Class)
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o

Smaller reporting company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ
    Documents incorporated by reference. Form 10-K.




---



##### 





FORM 10-K
    TABLE OF CONTENTS
   
 PagePART IItem 1.

Business


4Item 1A.

Risk Factors


11Item 1B.

Unresolved Staff Comments


26Item 2.

Properties


26Item 3.

Legal Proceedings


26Item 4.

[Removed and Reserved]


28PART IIItem 5.

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


28Item 6.

Selected Financial Data


30Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


30Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk


61Item 8.

Financial Statements and Supplementary Data


63Item 9.

Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


63Item 9A.

Controls and Procedures


63Item 9B.

Other Information


64PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


64Item 11.

Executive Compensation


64Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


64Item 13.

Certain Relationships and Related Transactions,
    and Director Independence


64Item 14.

Principal Accountant Fees and Services


64PART IVItem 15.

Exhibits and Financial Statement Schedules


65SIGNATURES


69CONSOLIDATED FINANCIAL STATEMENTS


F-1EX-10.46EX-10.47EX-12.1EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   2




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##### Table of Contents



Form 10-K
  
    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.  Form 10-K
  
    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;
    changes in laws and regulations governing the operation of
    automobile franchises, accounting standards, taxation
    requirements, and environmental laws;
    adverse resolutions of one or more significant legal proceedings
    against us or our dealerships;
    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 also 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. 3




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##### Table of Contents



PART I  Item 1.
    Business.      Revenue

Gross Profit(PIE CHART)

(PIE CHART)     Percent ofNumber of


Number of


2010 TotalMarket

Dealerships


Franchises


RevenueHouston


21



25



21.7
%Alabama/Tennessee


16



22



10.4
%North/South Carolina/Georgia


13



16



10.4
%South Bay (San Francisco)


6



6



7.5
%Los Angeles North


11



13



7.4
%Los Angeles South


4



4



7.3
%Florida


10



10



6.5
%Mid-Atlantic


5



6



6.3
%North Bay (San Francisco)


10



9



6.0
%Dallas


4



4



5.0
%Oklahoma


5



5



2.9
%Ohio


4



6



2.7
%Colorado


2



2



2.1
%Michigan


4



4



1.9
%Las Vegas


3



3



1.9
%Total


118



135



100.0
%  4




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##### Table of Contents



Business
    Strategy
  Maximize Asset Returns Through Process
    Execution.
  Invest in Dealership Properties.
  Reduce Leverage.
  Diverse Revenue Streams.
  Portfolio Management.
 5




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##### Table of Contents



Percentage of New VehicleRevenueYear Ended December 31,2008


2009


2010Brand(1)BMW


18.6
%


17.2
%


17.4
%Honda


15.0
%


15.2
%


13.9
%Toyota


11.7
%


11.7
%


11.1
%Mercedes


10.5
%


9.7
%


9.8
%Ford


5.0
%


9.6
%


8.8
%General Motors(2)


10.5
%


6.5
%


6.7
%Lexus


5.9
%


6.2
%


6.0
%Cadillac


5.6
%


4.6
%


5.5
%Other(3)


3.6
%


3.8
%


3.3
%Audi


1.8
%


2.6
%


3.1
%Volkswagen


1.8
%


2.1
%


2.3
%Land Rover


1.3
%


1.7
%


2.0
%Hyundai


1.4
%


1.8
%


2.0
%Porsche


1.4
%


1.5
%


1.8
%Infiniti


1.2
%


1.2
%


1.4
%Nissan


0.9
%


1.1
%


1.3
%Volvo


1.2
%


1.4
%


1.2
%Other Luxury(4)


1.1
%


1.0
%


1.1
%Acura


1.1
%


0.8
%


1.0
%Chrysler(5)


0.4
%


0.3
%


0.3
%Total


100.0
%


100.0
%


100.0
%     (1)
    
    In accordance with the provisions of Presentation of
    Financial Statementsin the Accounting Standards
    Codification (the ASC), prior years income
    statement data reflect reclassifications to (i) exclude
    franchises sold, identified for sale, or terminated subsequent
    to December 31, 2009 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
    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 Isuzu, Kia, Mini, Scion and Subaru.(4)
    
    Includes Hummer, Jaguar and Saab.(5)
    
    Includes Chrysler, Dodge and Jeep.  Expand our eCommerce Capabilities.
 6




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Achieve High Levels of Customer
    Satisfaction.
  Train, Develop and Retain Associates.
  Increase Sales of Higher Margin Products and
    Services.
  Finance, Insurance and Other Aftermarket Products
    (F&I):
  Parts, Service & Repair:
  Certified Pre-Owned Vehicles:
  Value Used Vehicle:.
  Relationships
    with Manufacturers
   7




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
    the ability to force the sale of their respective franchises
    upon a change in control of our company or a material change in
    the composition of our Board of Directors;
    the ability to force the sale of their respective franchises if
    an automobile manufacturer or distributor acquires more than 5%
    of the voting power of our securities; and
    the ability to force the sale of their respective franchises if
    an individual or entity (other than an automobile manufacturer
    or distributor) acquires more than 20% of the voting power of
    our securities, and the manufacturer disapproves of such
    individuals or entitys ownership interest.        Competition
       8




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Governmental
    Regulations and Environmental Matters
    wage-hour,
  truth-in-lending,
  clean-up
    and/or
   9




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Executive
    Officers of the Registrant
  Form 10-K,
  Name

Age

Position(s) with SonicO. Bruton Smith


84


Chairman, Chief Executive Officer and DirectorB. Scott Smith


43


President, Chief Strategic Officer and DirectorJeff Dyke


43


Executive Vice President of OperationsDavid P. Cosper


56


Vice Chairman and Chief Financial OfficerDavid B. Smith


36


Executive Vice President and Director   O. Bruton Smith,
  B. Scott Smith, 43,
  Jeff Dyke,
  David P. Cosper,
  David B. Smith,
 10




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Employees
    Company
    Information
  Form 10-K, Form 10-Q, Form 8-K Form 10-K
  Item 1A:
    Risk
    Factors  Risks
    Related to Our Sources of Financing and Liquidity
  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.
    
    $862.0 million under the secured new and used inventory
    floor plan facilities;
    $208.6 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 $1.4 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;
    $147.8 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
    $24.7 million;
    $132.9 million of mortgage notes, representing
    $133.9 million in aggregate principal amount less
    unamortized net discount of approximately $1.0 million, due
    from June 2013 to December 2029, with a weighted average
    interest rate of 4.91%; and
    $23.5 million of other secured debt, representing
    $21.7 million in aggregate principal amount plus
    unamortized premium of approximately $1.8 million.   11




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Form 10-K.
  An
    acceleration of our obligation to repay all or a substantial
    portion of our outstanding indebtedness or lease obligations
    would have a material adverse effect on our business, financial
    condition or results of operations.
    Our
    ability to make interest and principal payments when due to
    holders of our debt securities depends upon our future
    performance.
    Our
    ability to make interest and principal payments when due to
    holders of our debt securities depends upon the receipt of
    sufficient funds from our subsidiaries.
   12




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The
    conversion of the 5.0% Convertible Notes, if triggered, may
    adversely affect our liquidity and financial condition and
    results of operations.
    We
    depend on the performance of sublessees to offset costs related
    to certain of our lease agreements.
  and/or
  Our
    use of hedging transactions could limit our gains and result in
    financial losses.
  Derivative Instruments and
    Hedging Activities
    
    counterparty credit risk;
    available interest rate hedging may not correspond directly with
    the interest rate risk for which we seek protection;
    the duration of the amount of the hedge may not match the
    duration or amount of the related liability;
    the value of derivatives used for hedging may be adjusted from
    time to time in accordance with accounting rules to reflect
    changes in fair-value. Downward adjustments, or
    mark-to-market
    losses, would reduce our stockholders
    equity; and 13




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
    all of our hedging instruments contain terms and conditions with
    which we are required to meet. In the event those terms and
    conditions are not met, we may be required to settle the
    instruments prior to the instruments maturity with cash
    payments which could significantly affect our liquidity.    We may
    not be able to satisfy our debt obligations upon the occurrence
    of a change in control or a fundamental change.
    Although
    O. Bruton Smith, our chairman and chief executive officer, and
    his affiliates have previously assisted us with obtaining
    financing, we cannot assure you that he or they will be willing
    or able to do so in the future.
    Risks
    Related to Our Relationships with Vehicle
    Manufacturers
  Our
    operations may be adversely affected if one or more of our
    manufacturer franchise agreements is terminated or not
    renewed.
       14




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Our
    failure to meet a manufacturers customer satisfaction,
    financial and sales performance and facility requirements may
    adversely affect our profitability and our ability to acquire
    new dealerships.
      If
    state dealer laws are repealed or weakened, our dealerships will
    be more susceptible to termination, non-renewal or renegotiation
    of their franchise agreements.
    and/or
  Our
    sales volume and profit margin on each sale may be materially
    adversely affected if manufacturers discontinue or change their
    incentive programs.
    
    customer rebates or below market financing on new and used
    vehicles;
    employee pricing;
    dealer incentives on new vehicles;
    manufacturer floor plan interest and advertising assistance;
    warranties on new and used vehicles; and
    sponsorship of used vehicle sales by authorized new vehicle
    dealers. 15




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##### Table of Contents



Our
    sales volume may be materially adversely affected if
    manufacturer captives change their customer financing programs
    or are unable to provide floor plan financing.
    Our
    parts and service sales volume and profitability are dependent
    on manufacturer warranty programs.
    Adverse
    conditions affecting one or more key manufacturers may
    negatively impact our profitability.
    
    financial condition;
    marketing;
    vehicle design;
    publicity concerning a particular manufacturer or vehicle model;
    production capabilities;
    management;
    reputation; and
    labor relations.    Manufacturer
    stock ownership restrictions may impair our ability to maintain
    or renew franchise agreements or issue additional
    equity.
   16




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##### Table of Contents



and/or
  We
    depend on manufacturers to supply us with sufficient numbers of
    popular and profitable new models.
    A
    decline in the quality of vehicles we sell, or consumers
    perception of the quality of those vehicles may adversely affect
    our business.
    Risks
    Related to Our Growth Strategy
  Pursuant
    to the terms of the 2010 Credit Facilities, our ability to make
    acquisitions is restricted.
    We may
    not be able to capitalize on real estate and dealership
    franchise acquisition opportunities because our ability to
    obtain capital to fund these acquisitions is
    limited.
     17




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Manufacturers
    restrictions on acquisitions could limit our future
    growth.
        Failure
    to effectively integrate acquired dealerships with our existing
    operations could adversely affect our future operating
    results.
      
    the difficulties of managing operations located in geographic
    areas where we have not previously operated;
    the management time and attention required to integrate and
    manage newly acquired dealerships;
    the difficulties of assimilating and retaining employees;
    the challenges of keeping customers; and
    the challenge of retaining or attracting appropriate dealership
    management personnel.    We may
    not adequately anticipate all of the demands that growth through
    acquisitions will impose.
    
    incurring significantly higher capital expenditures and
    operating expenses;
    failing to assimilate the operations and personnel of acquired
    dealerships;
    entering new markets with which we are unfamiliar;
    potential undiscovered liabilities and operational difficulties
    at acquired dealerships; 18




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##### Table of Contents




    disrupting our ongoing business;
    diverting our management resources;
    failing to maintain uniform standards, controls and policies;
    impairing relationships with employees, manufacturers and
    customers as a result of changes in management;
    increased expenses for accounting and computer systems, as well
    as integration difficulties;
    failure to obtain a manufacturers consent to the
    acquisition of one or more of its dealership franchises or renew
    the franchise agreement on terms acceptable to us; and
    incorrectly valuing entities to be acquired.    We may
    not be able to reinstitute our acquisition strategy without the
    costs of future acquisitions escalating.
    
    the availability of suitable acquisition candidates;
    competition with other dealer groups for suitable acquisitions;
    the negotiation of acceptable terms with the seller and with the
    manufacturer;
    our financial capabilities and ability to obtain financing on
    acceptable terms;
    our stock price; and
    the availability of skilled employees to manage the acquired
    companies.  We may
    not be able to determine the actual financial condition of
    dealerships we acquire until after we complete the acquisition
    and take control of the dealerships.
    Risks
    Related to the Automotive Retail Industry
  Increasing
    competition among automotive retailers reduces our profit
    margins on vehicle sales and related businesses. Further, the
    use of the internet in the vehicle purchasing process could
    materially adversely affect us.
   19




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Our
    dealers depend upon new vehicle sales and, therefore, their
    success depends in large part upon customer demand for the
    particular vehicles they carry.
    Our
    business will be harmed if overall consumer demand suffers from
    a severe or sustained downturn.
      A
    decline of available financing in the lending market may
    adversely affect our vehicle sales volume.
  Sub-prime
 20




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Our
    business may be adversely affected by import product
    restrictions and foreign trade risks that may impair our ability
    to sell foreign vehicles profitably.
  and/or
  Natural
    disasters and adverse weather events can disrupt our
    business.
    The
    seasonality of our business may adversely affect our operating
    results.
    General
    Risks Related to Investing in Our Securities
  Concentration
    of voting power and anti-takeover provisions of our charter,
    bylaws, Delaware law and our dealer agreements may reduce the
    likelihood of any potential change of control.
    
    going private transaction;
    disposition of substantially all of our assets;
    transfer resulting in a change in the nature of our
    business; or
    merger or consolidation in which current holders of common stock
    would own less than 50% of the common stock following such
    transaction.     21




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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.
       22




---



##### Table of Contents



class-based
    Our
    business may be adversely affected by claims alleging violations
    of laws and regulations in our advertising, sales and finance
    and insurance activities.
  and/or truth-in-lending,
  Our
    business may be adversely affected by unfavorable conditions in
    our local markets, even if those conditions are not prominent
    nationally.
   23




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##### Table of Contents



The
    loss of key personnel and limited management and personnel
    resources could adversely affect our operations and
    growth.
      Governmental
    regulation and environmental regulation compliance costs may
    adversely affect our profitability.
  wage-hour,
  and/or
  Climate
    change legislation or regulations restricting emission of
    greenhouse gases could result in increased operating
    costs and reduced demand for the vehicles we sell.
   24




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##### Table of Contents



Potential
    conflicts of interest between us and our officers or directors
    could adversely affect our future performance.
      We may
    be subject to substantial withdrawal liability assessments in
    the future related to a multi-employer pension plan to which
    certain of our dealerships make contributions pursuant to
    collective bargaining agreements.
    A
    change in historical experience and/or assumptions used to
    estimate reserves could have a material impact on our
    earnings.
   25




---



##### Table of Contents



and/or
  Impairment
    of our goodwill could have a material adverse impact on our
    earnings.
    Item 1B:
    Unresolved
    Staff Comments    Item 2:
    Properties.  (704) 566-2400.
        Item 3:
    Legal
    Proceedings.   26




---



##### Table of Contents



class-based
   27




---



##### Table of Contents



Item 4:
    [Removed
    and Reserved] PART II  Item 5:
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.      Managements Discussion and
    Analysis of Financial Condition and Results of Operations
    CashMarket Price

DividendHigh

Low

Declared2010First Quarter

$
12.51


$
9.05


$
Second Quarter


13.18



8.45



Third Quarter


10.23



8.39



Fourth Quarter


13.64



9.50



0.0252009First Quarter

$
4.16


$
0.95


$
Second Quarter


11.03



1.06



Third Quarter


14.77



8.35



Fourth Quarter


13.04



8.54



  28




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##### Table of Contents



Issuer
    Purchases of Equity Securities
    Total Number of


Approximate DollarShares Purchased as


Value of Shares ThatAverage


Part of Publicly


May Yet Be PurchasedTotal Number of


Price Paid


Announced Plans or


Under the Plans orShares Purchased(1)(2)


per Share


Programs(2)(3)


Programs(In thousands, except per share data)October 2010


1


$
10.53



1


$
43,547November 2010














43,547December 2010


2



13.23



2



43,511Total


3


$
12.92



3


$
43,511     (1)
    
    All shares repurchased were part of publicly announced share
    repurchase programs(2)
    
    Shares purchased represent the required tax withholding upon
    issuance of restricted stock.(3)
    
    Our publicly announced Class A Common Stock repurchase
    authorizations occurred as follows:  (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  29




---



##### Table of Contents



Item 6:
    Selected
    Financial Data.  Form 10-K.
    Year Ended December 31,2006


2007


2008


2009


2010(In millions, except per share data)Income Statement Data(1)(2):Total revenues

$
7,376.9


$
7,767.0


$
6,900.2


$
6,055.3


$
6,880.8Impairment charges

$
4.7


$
0.9


$
812.0


$
23.5


$
0.2Income (loss) from continuing operations before income taxes

$
139.1


$
172.1


$
(756.1
)

$
27.9


$
78.4Income (loss) from continuing operations

$
82.9


$
104.6


$
(633.8
)

$
57.2


$
95.9Basic earnings (loss) per share from continuing operations

$
1.95


$
2.44


$
(15.70
)

$
1.29


$
1.82Diluted earnings (loss) per share from continuing operations

$
1.91


$
2.36


$
(15.70
)

$
1.07


$
1.58Consolidated Balance Sheet Data(2):Total assets

$
3,124.8


$
3,282.7


$
2,405.5


$
2,068.9


$
2,250.8Current maturities of long-term debt

$
2.7


$
4.2


$
738.4


$
24.0


$
9.1Total long-term debt

$
567.8


$
678.4


$
738.4


$
576.1


$
555.5Total long-term liabilities (including  long-term debt)

$
768.2


$
915.8


$
809.6


$
717.2


$
689.5Cash dividends declared per common share

$
0.48


$
0.48


$
0.48


$



$
0.025     (1)
    
    In accordance with the provisions of Presentation of
    Financial Statements in the ASC, prior years income
    statement data reflect reclassifications to (i) exclude
    franchises sold, identified for sale, or terminated subsequent
    to December 31, 2009 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
    Consolidated Financial Statements which discuss these and other
    factors that affect the comparability of the information for the
    periods presented.(2)
    
    As mentioned in Managements Discussion and Analysis of
    Financial Condition and Results of Operations 
    Liquidity and Capital Resourcesand Notes 2, 5 and 6 to
    our accompanying Consolidated Financial Statements, impairment
    charges, business combinations and dispositions and debt
    refinancings have had a material impact on our reported
    financial information.  Item 7:
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  2010
    Events
   30




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##### Table of Contents



Form 10-K.
  Overview
      year-over-year
 31




---



##### Table of Contents



Use of
    Estimates and Critical Accounting Policies
      Finance,
    Insurance and Service Contracts
      Goodwill
    and Franchise Assets
     32




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33




---



##### Table of Contents



Insurance
    Reserves
    Lease
    Exit Accruals
    Legal
    Proceedings
    Classification
    of Franchises in Continuing and Discontinued
    Operations
   34




---



##### Table of Contents



Income
    Taxes
             35




---



##### Table of Contents



Results
    of Operations
    Percentage of Total Revenue(1)for the Year Ended December 31,2008


2009


2010Revenues:New vehicles


58.1
%


53.3
%


53.0
%Used vehicles


19.5
%


24.0
%


25.8
%Wholesale vehicles


3.9
%


2.4
%


2.2
%Parts, service and collision repair


15.9
%


17.7
%


16.4
%Finance, insurance and other


2.6
%


2.6
%


2.6
%Total revenue


100.0
%


100.0
%


100.0
%Cost of sales(2)


84.0
%


82.9
%


83.8
%Gross profit


16.0
%


17.1
%


16.2
%Selling, general and administrative expenses


13.1
%


13.7
%


13.0
%Impairment charges


11.7
%


0.4
%


0.0
%Depreciation and amortization


0.5
%


0.6
%


0.5
%Operating income


(9.3
%)


2.4
%


2.7
%Interest expense, floor plan


0.6
%


0.3
%


0.3
%Interest expense, other, net


0.9
%


1.3
%


1.0
%Interest expense, non-cash, convertible debt


0.2
%


0.0
%


0.1
%Interest expense, non-cash, cash flow swaps


0.0
%


0.2
%


0.1
%Other expense, net


0.0
%


0.1
%


0.1
%Income (loss) from continuing operations before income taxes


(11.0
%)


0.5
%


1.1
%Income tax expense (benefit)


(1.8
%)


(0.4
%)


(0.3
%)Income (loss) from continuing operations


(9.2
%)


0.9
%


1.4
%     (1)
    
    In accordance with the provisions of Presentation of
    Financial Statements in the ASC, prior years income
    statement data reflect reclassifications to (i) exclude
    franchises sold, identified for sale, or terminated subsequent
    to December 31, 2009 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
    Consolidated Financial Statements which discuss these and other
    factors that affect the comparability of the information for the
    periods presented.(2)
    
    The cost of sales line item includes the cost of new and used
    vehicles, vehicle parts and all costs directly linked to
    servicing customer vehicles.     36




---



##### Table of Contents



Impairments
    and Other Charges
           37




---



##### Table of Contents



38




---



##### Table of Contents



Continuing Operations for the Year Ended December 31,2008


2009


2010(In millions)Selling, general & administrative expensesHurricane and hail storm related expenses


8.0







0.6Lease exit and other accruals


13.5



1.1



Franchise tax assessment






2.9



Total selling, general & administrative expenses


21.5



4.0



0.6Impairment chargesProperty impairment charges


10.0



18.1



0.2Goodwill impairment charges


795.3



1.1



Franchise agreement and other asset impairment charges


6.7



4.3



Total impairment charges


812.0



23.5



0.2Interest expenseCash-flow swap ineffectiveness,
    mark-to-market
    and amortization charges






0.5



4.9Debt restructuring charges






12.0



1.5Total interest expense






12.5



6.4Other (income) expenseLoss on debt extinguishment






6.7



7.7Income tax related adjustmentsValuation allowances and other tax adjustment expense (benefit)


111.6



(41.3
)


(48.2
)   Discontinued Operationsfor the Year Ended December 31,2008


2009


2010(In millions)Gross profit, selling, general & administrative
    expensesLease exit and other accruals

$
12.8


$
27.6


$
0.9Impairment chargesProperty impairment charges


14.9



5.0



Goodwill impairment charges


2.0



1.6



Franchise agreement and other asset impairment charges


20.5







Favorable lease asset impairment charges


1.9







Total impairment charges


39.3



6.6



Income tax related adjustmentsValuation allowances and other tax adjustment expense / (benefit)


3.4



(6.1
)


   New
    Vehicles
   39




---



##### Table of Contents



SAAR

2009


2010


% Change


2008


2009


% Change(In millions of vehicles)Year Ended December 31,


10.4



11.6



11.5
%


13.2



10.4



(21.2
%)       year-over-year
  For the Year-Ended December 31,


Better/(Worse)2009


2010


Change


% Change(In thousands, except units and per unit data)Revenue

$
3,229,948


$
3,646,200


$
416,252



12.9
%Gross profit

$
219,158


$
237,071


$
17,913



8.2
%Unit sales


99,361



107,151



7,790



7.8
%Revenue per unit

$
32,507


$
34,029


$
1,522



4.7
%Gross profit per unit

$
2,206


$
2,212


$
6



0.3
%Gross profit as a % of revenue


6.8
%


6.5
%


(30
)bps   For the Year-Ended December 31,


Better/(Worse)2008


2009


Change


% Change(In thousands, except units and per unit data)Revenue

$
4,009,496


$
3,229,948


$
(779,548
)


(19.4
%)Gross profit

$
264,962


$
219,158


$
(45,804
)


(17.3
%)Unit sales


123,356



99,361



(23,995
)


(19.5
%)Revenue per unit

$
32,503


$
32,507


$
4



0.0
%Gross profit per unit

$
2,148


$
2,206


$
58



2.7
%Gross profit as a % of revenue


6.6
%


6.8
%


20
bps    40




---



##### Table of Contents



Used
    Vehicles
    For the Year-Ended December 31,


Better/(Worse)2009


2010


Change


% Change(In thousands, except units and per unit data)Revenue

$
1,451,870


$
1,776,581


$
324,711



22.4
%Gross profit

$
123,993


$
139,620


$
15,627



12.6
%Unit sales


75,795



90,290



14,495



19.1
%Revenue per unit

$
19,155


$
19,676


$
521



2.7
%Gross profit per unit

$
1,636


$
1,546


$
(90
)


(5.5
%)Gross profit as a % of revenue


8.5
%


7.9
%


(60
)bpsCPO revenue

$
744,244


$
849,323


$
105,079



14.1
%CPO unit sales


29,135



31,933



2,798



9.6
%   For the Year-Ended December 31,


Better/(Worse)2008


2009


Change


% Change(In thousands, except units and per unit data)Revenue

$
1,342,486


$
1,451,870


$
109,384



8.1
%Gross profit

$
119,077


$
123,993


$
4,916



4.1
%Unit sales


67,237



75,795



8,558



12.7
%Revenue per unit

$
19,966


$
19,155


$
(811
)


(4.1
%)Gross profit per unit

$
1,771


$
1,636


$
(135
)


(7.6
%)Gross profit as a % of revenue


8.9
%


8.5
%


(40
)bpsCPO revenue

$
708,663


$
744,244


$
35,581



5.0
%CPO unit sales


27,951



29,135



1,184



4.2
%    41




---



##### Table of Contents



Wholesale
    Vehicles
    For the Year-EndedDecember 31,


Better/(Worse)2009


2010


Change


% Change(In thousands, except units and per unit data)Revenue

$
147,002


$
149,041


$
2,039



1.4
%Gross loss

$
(5,486
)

$
(5,041
)

$
445



8.1
%Unit sales


25,271



24,128



(1,143
)


(4.5
%)Revenue per unit

$
5,817


$
6,177


$
360



6.2
%Gross loss per unit

$
(217
)

$
(209
)

$
8



3.7
%Gross loss as a % of revenue


(3.7
%)


(3.4
%)


30
bps   For the Year-EndedDecember 31,


Better/(Worse)2008


2009


Change


% Change(In thousands, except units and per unit data)Revenue

$
272,172


$
147,002


$
(125,170
)


(46.0
%)Gross loss

$
(6,191
)

$
(5,486
)

$
705



11.4
%Unit sales


35,802



25,271



(10,531
)


(29.4
%)Revenue per unit

$
7,602


$
5,817


$
(1,785
)


(23.5
%)Gross loss per unit

$
(173
)

$
(217
)

$
(44
)


(25.4
%)Gross loss as a % of revenue


(2.3
%)


(3.7
%)


(140
)bps      42




---



##### Table of Contents



Parts,
    Service and Collision Repair (Fixed
    Operations)
      For the Year-Ended December 31,


Better / (Worse)2009


2010


Change


% Change(In thousands)RevenueParts

$
581,056


$
599,348


$
18,292



3.1
%Service


443,247



479,759



36,512



8.2
%Collision Repair


47,522



48,947



1,425



3.0
%Total

$
1,071,825


$
1,128,054


$
56,229



5.2
%Gross profitParts

$
199,193


$
199,850


$
657



0.3
%Service


314,227



335,377



21,150



6.7
%Collision Repair


26,891



26,833



(58
)


(0.2
%)Total

$
540,311


$
562,060


$
21,749



4.0
%Gross profit as a % of revenueParts


34.3
%


33.3
%


(100
)bpsService


70.9
%


69.9
%


(100
)bpsCollision Repair


56.6
%


54.8
%


(180
)bpsTotal


50.4
%


49.8
%


(60
)bps   43




---



##### Table of Contents



For the Year-Ended December 31,


Better/(Worse)2008


2009


Change


% Change(In thousands)RevenueParts

$
589,758


$
581,056


$
(8,702
)


(1.5
%)Service


454,534



443,247



(11,287
)


(2.5
%)Collision Repair


51,482



47,522



(3,960
)


(7.7
%)Total

$
1,095,774


$
1,071,825


$
(23,949
)


(2.2
%)Gross profitParts

$
202,973


$
199,193


$
(3,780
)


(1.9
%)Service


317,212



314,227



(2,985
)


(0.9
%)Collision Repair


28,891



26,891



(2,000
)


(6.9
%)Total

$
549,076


$
540,311


$
(8,765
)


(1.6
%)Gross profit as a % of revenueParts


34.4
%


34.3
%


(10
)bpsService


69.8
%


70.9
%


110
bpsCollision Repair


56.1
%


56.6
%


50
bpsTotal


50.1
%


50.4
%


30
bps   year-over-year
        Finance,
    Insurance and Other (F&I)
   44




---



##### Table of Contents




    Lower cost, below-market financing is often available only from
    the manufacturers captives and franchised dealers;
    Generally easy access to multiple high-quality lending sources;
    Lease-financing alternatives are largely available only from
    manufacturers captives or other indirect lenders;
    Customers with substandard credit frequently do not have direct
    access to potential sources of
    sub-prime
    financing; and
    Customers with significant negative equity in their
    current vehicle (i.e., the customer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 dealer.    For the Year-EndedDecember 31,

Better/(Worse)2009

2010

Change

% Change(In thousands, except per unit data)Revenue

$
154,696


$
180,968


$
26,272



17.0
%Gross profit per retail unit (excluding fleet)

$
929


$
957


$
28



3.0
%   For the Year-EndedDecember 31,

Better/(Worse)2008

2009

Change

% Change(In thousands, except per unit data)Revenue

$
180,274


$
154,696


$
(25,578
)


(14.2
%)Gross profit per retail unit (excluding fleet)

$
1,015


$
929


$
(86
)


(8.5
%)      45




---



##### Table of Contents



Selling,
    General and Administrative (SG&A)
    Expenses
    For the Year-Ended December 31,


Better/(Worse)2009


2010


Change


% Change(In thousands)Compensation

$
470,293


$
526,577


$
(56,284
)


(12.0
%)Advertising


44,736



46,908



(2,172
)


(4.9
%)Rent and Rent Related


131,262



130,739



523



0.4
%Other


182,929



192,473



(9,544
)


(5.2
%)Total

$
829,220


$
896,697


$
(67,477
)


(8.1
%)SG&A as a % of grossCompensation


45.5
%


47.2
%


(170
)bpsAdvertising


4.3
%


4.2
%


10
bpsRent and Rent Related


12.7
%


11.7
%


100
bpsOther


17.8
%


17.3
%


50
bpsTotal


80.3
%


80.4
%


(10
)bps   For the Year-Ended December 31,


Better/(Worse)2008


2009


Change


% Change(In thousands)Compensation

$
489,922


$
470,293


$
19,629



4.0
%Advertising


56,837



44,736



12,101



21.3
%Rent and Rent Related


133,278



131,262



2,016



1.5
%Other


226,206



182,929



43,277



19.1
%Total

$
906,243


$
829,220


$
77,023



8.5
%SG&A as a % of grossCompensation


44.2
%


45.5
%


(130
)bpsAdvertising


5.1
%


4.3
%


80
bpsRent and Rent Related


12.0
%


12.7
%


(70
)bpsOther


20.6
%


17.8
%


280
bpsTotal


81.9
%


80.3
%


160
bps   2010
    Compared to 2009
   46




---



##### Table of Contents



2009
    Compared to 2008
            Impairment
    Charges
      Depreciation
    and Amortization
   47




---



##### Table of Contents



Interest
    Expense, Floor Plan
         48




---



##### Table of Contents



Interest
    Expense, Other, Net
    2009


2010Increase (Decrease)


Increase (Decrease)in Interest Expense


in Interest Expense(In millions)Debt balances - Increase (decrease) in debt balances

$
(2.1
)

$
(3.6
)Other factors - (Increase) decrease in capitalized interest


0.8



(1.6
)- Incremental interest expense (benefit) related to variable to
    fixed rate swaps(1)


6.1



(0.9
)- Incremental interest expense (benefit) related to fixed rate
    to variable swaps(1)


0.8



- Interest expense (benefit) allocation to discontinued
    operations


1.1



1.8- Increase (decrease) in deferred loan cost amortization(2)


11.7



(10.3
)- Increase (decrease) in other expense, net


0.9



(0.3
)$
19.3


$
(14.9
)     (1)
    
    Represent difference in cash payments to and from the
    counterparty.(2)
    
    Includes loan costs related to the issuance of the
    6.0% Convertible Notes and amendments to the 2006 Credit
    Facility.  Interest
    Expense, Non-Cash, Convertible Debt
        Year Ended December 31,2008


2009


2010(In millions)Amortization of debt discount

$
10.7


$
11.5


$
5.6Amortization of deferred loan costs






0.5



1.3Mark-to-market
    on derivative liability






(11.3
)


$
10.7


$
0.7


$
6.9  49




---



##### Table of Contents



Interest
    Expense/Amortization, Non-Cash, Cash Flow Swaps
      Other
    Income (Expense), Net
    Provision
    for Income Taxes
   50




---



##### Table of Contents



Discontinued
    Operations
    Year Ended December 31,2008


2009


2010(In thousands)Loss from operations

$
(20,103
)

$
(12,579
)

$
(6,634
)Gain (loss) on disposal of franchises


(2,325
)


(293
)


2,629Lease exit charges


(13,747
)


(30,794
)


(4,232
)Property impairment charges


(14,912
)


(4,992
)


Goodwill impairment charges


(2,025
)


(1,586
)


Franchise agreement and other asset impairment charges


(20,500
)






Favorable lease asset impairment charges


(1,903
)






Pre-tax loss

$
(75,515
)

$
(50,244
)

$
(8,237
)Total revenues

$
587,801


$
294,390


$
55,077     Adjusted
    Results of Operations
   51




---



##### Table of Contents



Year Ended December 31,2008


2009


2010As





As


As





As


As





AsReported


Adjustments


Adjusted


Reported


Adjustments


Adjusted


Reported


Adjustments


Adjusted($ in millions, shares in thousands, except per share
    data)Revenues

$
6,900.2


$



$
6,900.2


$
6,055.3


$



$
6,055.3


$
6,880.8


$



$
6,880.8Gross profit


1,107.2







1,107.2



1,032.7







1,032.7



1,114.7







1,114.7Selling, general and administrative expenses


(906.3
)


21.5



(884.8
)


(829.2
)


4.0



(825.2
)


(896.8
)


0.6



(896.2
)Impairment charges


(812.0
)


812.0







(23.5
)


23.5







(0.2
)


0.2



Depreciation and amortization


(32.7
)






(32.7
)


(34.9
)






(34.9
)


(35.1
)






(35.1
)Operating income


(643.8
)


833.5



189.7



145.1



27.5



172.6



182.6



0.8



183.4Other income (expense):Interest expense, floor plan


(43.4
)






(43.4
)


(19.8
)






(19.8
)


(21.5
)






(21.5
)Interest expense, other, net


(59.0
)






(59.0
)


(78.3
)


12.0



(66.3
)


(63.3
)


1.5



(61.8
)Interest expense, non-cash


(10.7
)






(10.7
)


(12.5
)


0.5



(12.0
)


(11.8
)


4.9



(6.9
)Other income (expense), net


0.8







0.8



(6.6
)


6.7



0.1



(7.6
)


7.7



0.1Total other expense


(112.3
)






(112.3
)


(117.2
)


19.2



(98.0
)


(104.2
)


14.1



(90.1
)Income (loss) from continuing operations before taxes


(756.1
)


833.5



77.4



27.9



46.7



74.6



78.4



14.9



93.3Income tax benefit (expense)


122.3



(146.3
)(1)


(24.0
)


29.3



(61.5
)(3)


(32.2
)


17.5



(54.0
)(5)


(36.5
)Income (loss) from continuing operations


(633.8
)


687.2



53.4



57.2



(14.8
)


42.4



95.9



(39.1
)


56.8Loss from discontinued operations


(58.5
)


46.9
(2)


(11.6
)


(25.7
)


15.5
(4)


(10.2
)


(6.0
)


0.7
(6)


(5.3
)Net income (loss)

$
(692.3
)

$
734.1


$
41.8


$
31.5


$
0.7


$
32.2


$
89.9


$
(38.4
)

$
51.5Basic earnings (loss) per common share:Earnings (loss) per share from continuing operations

$
(15.70
)

$
17.01


$
1.31


$
1.29


$
(0.33
)

$
0.96


$
1.82


$
(0.74
)

$
1.08Loss per share from discontinued operations


(1.46
)


1.17



(0.29
)


(0.58
)


0.35



(0.23
)


(0.12
)


0.02



(0.10
)Earnings (loss) per common share

$
(17.16
)

$
18.18


$
1.02


$
0.71


$
0.02


$
0.73


$
1.70


$
(0.72
)

$
0.98Weighted average shares outstanding


40,356







40,356



43,836







43,836



52,214







52,214Diluted earnings (loss) per common share:Earnings (loss) per share from continuing operations

$
(15.70
)

$
17.01


$
1.31


$
1.07


$
(0.26
)

$
0.81


$
1.58


$
(0.59
)

$
0.99Loss per share from discontinued operations


(1.46
)


1.17



(0.29
)


(0.45
)


0.27



(0.18
)


(0.09
)


0.01



(0.08
)Earnings (loss) per common share

$
(17.16
)

$
18.18


$
1.02


$
0.62


$
0.01


$
0.63


$
1.49


$
(0.58
)

$
0.91Weighted average shares outstanding


40,356







40,556



55,832







55,832



65,794







65,794     (1)
    
    Tax effect of the pre-tax adjustments above in addition to
    expense of $111.6 million related to valuation allowance
    and other tax adjustments.(2)
    
    Tax-effected adjustments to discontinued operations in addition
    to expense of $3.4 million related to valuation allowance
    and other tax adjustments.(3)
    
    Tax effect of the pre-tax adjustments above in addition to a
    benefit of $41.3 million related to valuation allowance and
    other tax adjustments. 52




---



##### Table of Contents



(4)
    
    Tax-effected adjustments to discontinued operations in addition
    to a benefit of $6.1 million related to valuation allowance
    and other tax adjustments.(5)
    
    Tax effect of the pre-tax adjustments above in addition to a
    benefit of $48.2 million related to valuation allowance and
    other tax adjustments.(6)
    
    Tax-effected adjustments to discontinued operations.  Liquidity
    and Capital Resources
          Long-Term
    Debt and Credit Facilities
  2010
    Credit Facilities
    Sub-Facility), Sub-Facility)
   53




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##### Table of Contents



Sub-Facility, Sub-Facility,
  Sub-Facility
          9.0% Notes
   54




---



##### Table of Contents



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% Notes
    5.0% Convertible
    Notes
         55




---



##### Table of Contents



4.25% Convertible
    Notes
      Notes
    Payable to a Finance Company
    Mortgage
    Notes
    Operating
    Leases
    Floor
    Plan Facilities
   56




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##### Table of Contents



Covenants
    and Default Provisions
  and/or
  CovenantConsolidated


ConsolidatedConsolidated


Fixed Charge


Total SeniorLiquidity


Coverage


Secured Debt toRatio


Ratio


EBITDA RatioThrough March 30, 2011


31.00



31.10



£2.25March 31, 2011 through and including March 30, 2012


31.05



31.15



£2.25March 31, 2012 and thereafter


31.10



31.20



£2.25December 31, 2010 actual


1.17



1.40



1.22       Acquisitions
    and Dispositions
     57




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##### Table of Contents



Capital
    Expenditures
        Stock
    Repurchase Program
      Dividends
    Cash
    Flows
  Cash Flows from Operating Activities 
 58




---



##### Table of Contents



Cash Flows from Investing Activities 
    Cash Flows from Financing Activities 
    Cash Flows from Discontinued Operations 
 59




---



##### Table of Contents



Guarantees
    and Indemnification Obligations
    Future
    Liquidity Outlook
    2011


2012


2013


2014


2015


Thereafter


Total(In thousands)Floor Plan Facilities

$
861,985


$



$



$



$



$



$
861,985Long-Term Debt(1)


8,449



8,991



58,103



184,923



15,383



305,084



580,933Letters of Credit


47,657























47,657Estimated Interest Payments on Floor Plan Facilities(2)


3,980























3,980Estimated Interest Payments on Long-Term Debt(3)


62,586



49,250



38,039



32,701



25,471



64,750



272,797Operating Leases (Net of Sublease Rentals)


107,191



97,935



93,465



90,004



85,609



385,844



860,048Construction Contracts


17,331























17,331Other Purchase Obligations(4)


80,836



4,135



3,500



3,500











91,971FIN 48 Liability(5)


500



















27,099



27,599Total

$
1,190,515


$
160,311


$
193,107


$
311,128


$
126,463


$
782,777


$
2,764,301     (1)
    
    Amounts outstanding under the 8.625% Notes are redeemable
    at our option but have been classified in this schedule
    according to contractual maturity. The 5.0% Convertible
    Notes are redeemable before the stated maturities at both our
    option and the option of the respective holders. The assumed
    maturities of these securities are based on these earlier
    redemption date, which is October 2014 for the
    5.0% Convertible Notes. All amounts represent outstanding
    principal only.(2)
    
    Floor plan facilities balances are correlated with the amount of
    vehicle inventory and are generally due at the time that a
    vehicle is sold. Estimated interest payments were calculated
    using the December 31, 2010 floor plan facilities balance,
    the weighted average interest rate for the fourth quarter of
    2010 of 2.78% and the assumption that floor plan facilities
    balances at December 31, 2010 would be relieved within
    60 days in connection with the sale of the associated
    vehicle inventory.(3)
    
    Estimated interest payments calculated based on assumed or
    stated maturities consistent discussion in (1) above.
    Estimated interest payments include payments related to interest
    rate swaps.(4)
    
    Other Purchase Obligations include contracts for office
    supplies, utilities, and various other items or services. The
    $75.2 million of dealership property discussed under the
    previous heading Capital Expenditures is included in
    the amount for 2011.(5)
    
    Amount represents recorded liability, including interest and
    penalties, related to FIN 48. See Notes 1 and 7 to the
    accompanying Consolidated Financial Statements. 60




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##### Table of Contents



Seasonality
    Off-Balance
    Sheet Arrangements
  Guarantees
    and Indemnification Obligations
  sub-lessees,
  5.0% Convertible
    Notes
    Item 7A:
    Quantitative
    and Qualitative Disclosures About Market Risk.  Interest
    Rate Risk
   61




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##### Table of Contents



Managements Discussion and Analysis of Financial
    Condition and Results of Operations
  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$
3.6



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$
11.3



4.655
%

one-month LIBOR

December 10, 2017$
8.7



6.860
%

one-month LIBOR

August 1, 2017$
6.9



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     (1)
    
    The one-month LIBOR rate was 0.261% at December 31, 2010.(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.     62




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##### Table of Contents



2011


2012


2013


2014


2015


Thereafter


Total


Fair Value($ in thousands)Long-term Debt:Fixed Rate Maturities

$
5,623


$
6,180


$
49,542


$
182,469


$
7,003


$
284,477


$
535,294Fixed Rate Outstanding

$
535,294


$
529,671


$
523,491


$
473,949


$
291,480


$
284,477






$
588,893Average Interest Rate on Outstanding Debt


7.27
%


7.27
%


7.26
%


7.12
%


8.36
%


8.37
%Variable Rate Maturities

$
2,826


$
2,811


$
8,561


$
2,454


$
8,380


$
20,607


$
45,639Variable Rate Outstanding

$
45,639


$
42,813


$
40,002


$
31,441


$
28,987


$
20,607






$
39,962Average Interest Rate on Outstanding Debt


2.34
%


2.35
%


2.36
%


2.27
%


2.28
%


1.88
%Cash Flow Swaps:Variable to Fixed Maturities

$
1,791


$
366,836


$
7,621


$
1,536


$
1,597


$
223,380


$
602,761Variable to Fixed Outstanding

$
402,761


$
35,946


$
28,008


$
26,513


$
24,977


$
223,380






$
(32,675
)Average Pay Rate on Outstanding Swaps


5.10
%


5.69
%


6.00
%


6.00
%


6.01
%


3.58
%Receive Rate


1M LIBOR



1M LIBOR



1M LIBOR



1M LIBOR



1M LIBOR



1M LIBOR   Foreign
    Currency Risk
    Item 8.
    Financial
    Statements and Supplementary Data.  page F-1
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure.    Item 9A.
    Controls
    and Procedures.  Controls
    and Procedures
  Form 10-K. Form 10-K.
  Report on
    Internal Control Over Financial Reporting
  Rules 13a-15(f).
 63




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##### Table of Contents



Internal Control 
    Integrated Framework Internal
    Control  Integrated Framework
  Form 10-K,
  Item 9B.
    Other
    Information.   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance.  Form 10-K
  Item 11.
    Executive
    Compensation.    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services.   64




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##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules.  Form 10-K,
    Form 10-K.
  Form 10-K
  ExhibitNo.

Description3
.1*

Amended and Restated Certificate of Incorporation of Sonic
    (incorporated by reference to Exhibit 3.1 to Sonics
    Registration Statement on
    Form S-1
    (Reg.
    No. 333-33295)
    (the
    Form S-1)).3
.2*

Certificate of Amendment to Sonics Amended and Restated
    Certificate of Incorporation effective June 18, 1999
    (incorporated by reference to Exhibit 3.2 to Sonics
    Annual Report on
    Form 10-K
    for the year ended December 31, 1999 (the 1999
    Form 10-K)).3
.3*

Certificate of Designation, Preferences and Rights of
    Class A Convertible Preferred Stock (incorporated by
    reference to Exhibit 4.1 to Sonics Quarterly Report
    on
    Form 10-Q
    for the quarter ended March 31, 1998).3
.4*

Amended and Restated Bylaws of Sonic (as amended
    February 9, 2006) (incorporated by reference to
    Exhibit 3.1 to Sonics Current Report on
    Form 8-K
    filed February 13, 2006)).4
.1*

Specimen Certificate representing Class A Common Stock
    (incorporated by reference to Exhibit 4.1 to the
    Form S-1)4
.2*

Form of
    85/8% Senior
    Subordinated Note due 2013, Series B (incorporated by
    reference to Exhibit 4.3 to Sonics Registration
    Statement on
    Form S-4
    (Reg. Nos.
    333-109426
    and
    333-109426-1
    through
    109426-261)
    (the 2003 Exchange Offer
    Form S-4)).4
.3*

Indenture dated as of August 12, 2003 among Sonic
    Automotive, Inc., as issuer, the subsidiaries of Sonic named
    therein, as guarantors, and U.S. Bank National Association, as
    trustee (the Trustee), relating to the
    85/8% Senior
    Subordinated Notes due 2013 (incorporated by reference to
    Exhibit 4.4 to the 2003 Exchange Offer
    Form S-4).4
.4*

Form of 5.0% Convertible Senior Note due October 2029
    (included in Exhibit 4.2 to the Current Report on
    Form 8-K
    filed September 25, 2009 (the September 25, 2009
    Form 8-K).4
.5*

Indenture dated as of September 23, 2009 (the Base
    Indenture) by and among Sonic Automotive, Inc, the
    guarantors named therein, and U.S. Bank National Association, as
    trustee (incorporated by reference to Exhibit 4.1 to the
    September 25, 2009
    Form 8-K).4
.6*

First Supplemental Indenture dated as of September 23, 2009
    to the Base Indenture (incorporated by reference to
    Exhibit 4.2 to the September 2009
    Form 8-K).4
.7*

Registration Rights Agreement dated as of March 12, 2010 by
    and among Sonic Automotive, Inc. the guarantors set forth on the
    signature page thereto and Banc of America Securities LLC, as
    representative of the several initial purchasers named on
    Schedule A to the Purchase Agreement (incorporated by
    reference to Exhibit 4.2 to the March 2010
    Form 8-K).4
.8*

Indenture dated as of March 12, 2010 by and among Sonic
    Automotive, Inc, as issuer, the guarantors named therein, and
    U.S. Bank National Association, as trustee, relating to the
    9.0% Senior Subordinated Notes due 2018 (incorporated by
    reference to Exhibit 4.2 to the March 2010
    Form 8-K).4
.9*

Form of 9.0% Senior Subordinated Note due 2018 (included in
    Exhibit 4.2) to Exhibit 4.2 to the March 2010
    Form 8-K). 65




---



##### Table of Contents



ExhibitNo.

Description10
.1*

Sonic Automotive, Inc. 2004 Stock Incentive Plan, Amended and
    Restated as of February 11, 2009 (incorporated by reference
    to Exhibit 4 to Sonics Registration Statement on
    Form S-8
    (Reg.
    No. 333-159674))(1)10
.2*

Sonic Automotive, Inc. 1997 Stock Option Plan, Amended and
    Restated as of April 22, 2003 (incorporated by reference to
    Exhibit 10.10 to Sonics Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2003).(1)10
.3*

Sonic Automotive, Inc. Employee Stock Purchase Plan, Amended and
    Restated as of May 8, 2002 (incorporated by reference to
    Exhibit 10.15 to the 2002 Annual Report).(1)10
.4*

Sonic Automotive, Inc. Nonqualified Employee Stock Purchase
    Plan, Amended and Restated as of October 23, 2002
    (incorporated by reference to Exhibit 10.16 to the 2002
    Annual Report).(1)10
.5*

Sonic Automotive, Inc. 2005 Formula Restricted Stock Plan for
    Non-Employee Directors, Amended and Restated as of May 11,
    2009 (incorporated by reference to Exhibit 4 to
    Sonics Registration Statement on
    Form S-8
    (Reg.
    No. 333-159675))(1)10
.6*

Employment Agreement dated January 30, 2006 between Sonic
    and Mr. David P. Cosper (incorporated by reference to
    Exhibit 10.1 to Sonics Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2006 (the March 2006
    Form 10-Q)).(1)10
.7*

First Amendment to Employment Agreement dated January 30,
    2006 between Sonic and Mr. David P. Cosper. (incorporated
    by reference to Exhibit 10.12 to Sonics Annual Report
    on
    Form 10-K
    for the year ended December 31, 2008)(1)10
.8*

Sonic Automotive, Inc. 2004 Stock Incentive Plan Form of
    Performance-Based Restricted Stock Unit Award Agreement.(1)10
.9*

Sonic Automotive, Inc. 2004 Stock Incentive Plan Form of
    Performance-Based Restricted Stock Award Agreement.(1)10
.10*

Sonic Automotive, Inc. Incentive Compensation Plan, Amended and
    Restated as of December 4, 2008.(1)10
.11*

Standard form of lease executed with Capital Automotive, L.P. or
    its affiliates (incorporated by reference to Exhibit 10.38
    to Sonics Annual Report on
    Form 10-K
    for the year ended December 31, 2008).10
.12*

Standard form of guaranty executed with Capital Automotive, L.P.
    or its affiliates (incorporated by reference to
    Exhibit 10.39 to Sonics Annual Report on
    Form 10-K
    for the year ended December 31, 2008).10
.13*

Amendment to Guaranty and Subordination Agreements, dated as of
    January 1, 2005, by Sonic as Guarantor, to Capital
    Automotive, L.P. and affiliates, as Landlord (incorporated by
    reference to Exhibit 10.40 to Sonics Annual Report on
    Form 10-K
    for the year ended December 31, 2008).10
.14*

Second Amendment to Guaranty and Subordination Agreements, dated
    as of March 11, 2009, by Sonic as Guarantor, to Capital
    Automotive, L.P. and affiliates, as Landlord. (incorporated by
    reference to Exhibit 10.41 to Sonics Annual Report on
    Form 10-K
    for the year ended December 31, 2008).10
.15*

Side letter to Second Amendment to Guaranty and Subordination
    Agreements, dated as of March 11, 2009, by Sonic as
    Guarantor, to Capital Automotive, L.P. and affiliates, as
    Landlord. (incorporated by reference to Exhibit 10.42 to
    Sonics Annual Report on
    Form 10-K
    for the year ended December 31, 2008)10
.16*

Sonic Automotive, Inc. 2004 Stock Incentive Plan, Amended and
    Restated as of February 11, 2009 (incorporated by reference
    to Exhibit 4 to Sonics Registration Statement on
    Form S-8
    (Reg.
    No. 333-159674)).(1)10
.17*

Underwriting Agreement (Class A common stock) dated as of
    September 17, 2009 by and among Sonic Automotive, Inc. and
    J.P. Morgan Securities, Inc. and Merrill Lynch, Pierce,
    Fenner & Smith, Incorporated, as representatives of
    the several underwriters named therein (incorporated by
    reference to Exhibit 1.1 to the Current Report on
    Form 8-K
    filed September 23, 2009 (the September 23, 2009
    Form 8-K)).10
.18*

Underwriting Agreement (convertible senior notes) dated as of
    September 17, 2009 by and among Sonic Automotive, Inc. and
    J.P. Morgan Securities, Inc. and Merrill Lynch, Pierce,
    Fenner & Smith, Incorporated, as representatives of
    the several underwriters named therein (incorporated by
    reference to Exhibit 1.2 to the September 23, 2009
    Form 8-K). 66




---



##### Table of Contents



ExhibitNo.

Description10
.19*

Amendment No. 1 to Sonic Automotive, Inc. Formula Stock
    Option Plan for Independent Directors.(1)10
.20*

Sonic Automotive, Inc. Incentive Compensation Plan Amended and
    Restated as of December 4, 2008.(1)10
.21*

Amended and Restated Credit Agreement, dated as of
    January 15, 2010, among Sonic Automotive, Inc.; each
    lender; Bank of America, N.A, as Administrative Agent, Swing
    Line Lender and an L/C Issuer;, and Wells Fargo Bank, National
    Association, as an L/C Issuer.10
.22*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Bank of America, N.A., pursuant to the Credit
    Agreement.10
.23*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of DCFS USA LLC, pursuant to the Credit Agreement.10
.24*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of BMW Financial Services NA, LLC, pursuant to the
    Credit Agreement.10
.25*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Toyota Motor Credit Corporation, pursuant to the
    Credit Agreement.10
.26*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of JPMorgan Chase Bank, N.A., pursuant to the Credit
    Agreement.10
.27*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Wachovia Bank, National Association, pursuant to the
    Credit Agreement.10
.28*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Comerica Bank, pursuant to the Credit Agreement.10
.29*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of World Omni Financial Corp., pursuant to the Credit
    Agreement.10
.30*

Amended and Restated Subsidiary Guaranty Agreement, dated as of
    January 15, 2010, by the Revolving Subsidiary Guarantor, as
    Guarantors, to Bank of America, N.A, as administrative agent for
    the lenders.10
.31*

Amended and Restated Securities Pledge Agreement, dated as of
    January 15, 2010, by Sonic Automotive, Inc., the
    subsidiaries of Sonic named therein and Bank of America, N.A.,
    as administrative agent for the lenders.10
.32*

Amended and Restated Escrow and Security Agreement, dated as of
    January 15, 2010, by Sonic Automotive, Inc., the
    subsidiaries of Sonic named therein and Bank of America, N.A.,
    as administrative agent for the lenders.10
.33*

Amended and Restated Securities Pledge Agreement, dated as of
    January 15, 2010, by Sonic Financial Corporation and Bank
    of America, N.A., as administrative agent for the lenders.10
.34*

Amended and Restated Security Agreement, dated as of
    January 15, 2010, by Sonic Automotive, Inc., the
    subsidiaries of Sonic named therein and Bank of America, N.A.,
    as administrative agent for the lenders.10
.35*

Syndicated New and Used Vehicle Floor Plan Credit Agreement,
    dated January 15, 2010, among Sonic Automotive, Inc.;
    certain subsidiaries of the Company; each lender; Bank of
    America, N.A., as Administrative Agent, New Vehicle Swing Line
    Lender and Used Vehicle Swing Line Lender; and Bank of America,
    N.A., as Revolving Administrative Agent.10
.36*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Bank of America, N.A., pursuant to the Syndicated
    New and Used Vehicle Floor Plan Credit Agreement.10
.37*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of JPMorgan Chase Bank, N.A., pursuant to the
    Syndicated New and Used Vehicle Floor Plan Credit Agreement.10
.38*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Wachovia Bank, National Association, pursuant to the
    Syndicated New and Used Vehicle Floor Plan Credit Agreement.10
.39*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Comerica Bank, pursuant to the Syndicated New and
    Used Vehicle Floor Plan Credit Agreement.10
.40*

Company Guaranty Agreement, dated January 15, 2010, by
    Sonic Automotive, Inc. and Bank of America, N.A., as
    administrative agent for the lenders.10
.41*

Subsidiary Guaranty Agreement, dated as of January 15,
    2010, by the Floor Plan Subsidiary Guarantor, as Guarantors, to
    Bank of America, N.A, as administrative agent for the lenders. 67




---



##### Table of Contents



ExhibitNo.

Description10
.42*

Promissory Note, dated August 12, 2010, executed by Sonic
    in favor of VW Credit, Inc., pursuant to the Credit Agreement.10
.43*

Purchase Agreement (the Purchase Agreement) dated as
    of March 9, 2010 by and among Sonic Automotive, Inc., the
    guarantors named therein and Banc of America Securities LLC on
    behalf of itself and as representative of the initial purchasers
    named therein (incorporated by reference to Exhibit 1.1 to
    the Current Report on
    Form 8-K
    filed March 15, 2010 (the March 2010
    Form 8-K)).10
.44*

Amendment No. 1 to Amended and Restated Credit Agreement
    dated as of February 25, 2010 by and among Sonic
    Automotive, Inc., Bank of America, N.A. and each of the
    Subsidiary Guarantors signatory thereto (incorporated by
    reference to Exhibit 10.22 to our Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2010 (the March 2010
    Form 10-Q).10
.45*

Amendment No. 1 to the Syndicated New and Used Vehicle
    Floorplan Credit Agreement dated February 25, 2010 by and
    among Sonic Automotive, Inc., certain of its subsidiaries party
    to the Credit Agreement and Bank of America, N.A. (incorporated
    by reference to Exhibit 10.23 to the March 2010
    Form 10-Q).10
.46

Sonic Automotive, Inc. Supplemental Executive Retirement Plan
    effective January 1, 2010.(1)10
.47

First Amendment to Sonic Automotive, Inc. Supplemental Executive
    Retirement Plan effective December 29, 2010.(1)12
.1

Computation of Ratio of Earnings to Fixed Charges.21
.1

Subsidiaries of Sonic.23
.1

Consent of Ernst & Young LLP.31
.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 to
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2

Certification of Mr. O. Bruton Smith pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     *
    
    Filed Previously(1)
    
    Indicates a management contract or compensatory plan or
    arrangement. 68




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##### Table of Contents



SIGNATURES    SONIC AUTOMOTIVE, INC.
  BY
    /s/  DAVID
    P. COSPER        Signature

Title

Date/s/  O.
    BRUTON SMITHO.
    Bruton Smith

Chairman, Chief Executive Officer (principal executive officer)
    and Director

February 24, 2011/s/  B.
    SCOTT SMITHB.
    Scott Smith

President, Chief Strategic Officer and Director

February 24, 2011/s/  DAVID
    P. COSPERDavid
    P. Cosper

Vice Chairman and Chief Financial Officer (principal financial
    officer and principal accounting officer)

February 24, 2011/s/  DAVID
    B. SMITHDavid
    B. Smith

Executive Vice President and Director

February 24, 2011/s/  WILLIAM
    R. BROOKSWilliam
    R. Brooks

Director

February 24, 2011/s/  WILLIAM
    I. BELKWilliam
    I. Belk

Director

February 24, 2011/s/  ROBERT
    HELLERRobert
    Heller

Director

February 12, 2011/s/  ROBERT
    L. REWEYRobert
    L. Rewey

Director

February 24, 2011/s/  VICTOR
    H. DOOLANVictor
    H. Doolan

Director

February 24, 2011/s/  DAVID
    C. VORHOFFDavid
    C. Vorhoff

Director

February 24, 2011  69




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.

Description3
.1*

Amended and Restated Certificate of Incorporation of Sonic
    (incorporated by reference to Exhibit 3.1 to Sonics
    Registration Statement on
    Form S-1
    (Reg.
    No. 333-33295)
    (the
    Form S-1)).3
.2*

Certificate of Amendment to Sonics Amended and Restated
    Certificate of Incorporation effective June 18, 1999
    (incorporated by reference to Exhibit 3.2 to Sonics
    Annual Report on
    Form 10-K
    for the year ended December 31, 1999 (the 1999
    Form 10-K)).3
.3*

Certificate of Designation, Preferences and Rights of
    Class A Convertible Preferred Stock (incorporated by
    reference to Exhibit 4.1 to Sonics Quarterly Report
    on
    Form 10-Q
    for the quarter ended March 31, 1998).3
.4*

Amended and Restated Bylaws of Sonic (as amended
    February 9, 2006) (incorporated by reference to
    Exhibit 3.1 to Sonics Current Report on
    Form 8-K
    filed February 13, 2006)).4
.1*

Specimen Certificate representing Class A Common Stock
    (incorporated by reference to Exhibit 4.1 to the
    Form S-1)4
.2*

Form of
    85/8% Senior
    Subordinated Note due 2013, Series B (incorporated by
    reference to Exhibit 4.3 to Sonics Registration
    Statement on
    Form S-4
    (Reg. Nos.
    333-109426
    and
    333-109426-1
    through
    109426-261)
    (the 2003 Exchange Offer
    Form S-4)).4
.3*

Indenture dated as of August 12, 2003 among Sonic
    Automotive, Inc., as issuer, the subsidiaries of Sonic named
    therein, as guarantors, and U.S. Bank National Association, as
    trustee (the Trustee), relating to the
    85/8% Senior
    Subordinated Notes due 2013 (incorporated by reference to
    Exhibit 4.4 to the 2003 Exchange Offer
    Form S-4).4
.4*

Form of 5.0% Convertible Senior Note due October 2029
    (included in Exhibit 4.2 to the Current Report on
    Form 8-K
    filed September 25, 2009 (the September 25, 2009
    Form 8-K).4
.5*

Indenture dated as of September 23, 2009 (the Base
    Indenture) by and among Sonic Automotive, Inc, the
    guarantors named therein, and U.S. Bank National Association, as
    trustee (incorporated by reference to Exhibit 4.1 to the
    September 25, 2009
    Form 8-K).4
.6*

First Supplemental Indenture dated as of September 23, 2009
    to the Base Indenture (incorporated by reference to
    Exhibit 4.2 to the September 2009
    Form 8-K).4
.7*

Registration Rights Agreement dated as of March 12, 2010 by
    and among Sonic Automotive, Inc. the guarantors set forth on the
    signature page thereto and Banc of America Securities LLC, as
    representative of the several initial purchasers named on
    Schedule A to the Purchase Agreement (incorporated by
    reference to Exhibit 4.2 to the March 2010
    Form 8-K).4
.8*

Indenture dated as of March 12, 2010 by and among Sonic
    Automotive, Inc, as issuer, the guarantors named therein, and
    U.S. Bank National Association, as trustee, relating to the
    9.0% Senior Subordinated Notes due 2018 (incorporated by
    reference to Exhibit 4.2 to the March 2010
    Form 8-K).4
.9*

Form of 9.0% Senior Subordinated Note due 2018 (included in
    Exhibit 4.2) to Exhibit 4.2 to the March 2010
    Form 8-K).10
.1*

Sonic Automotive, Inc. 2004 Stock Incentive Plan, Amended and
    Restated as of February 11, 2009 (incorporated by reference
    to Exhibit 4 to Sonics Registration Statement on
    Form S-8
    (Reg.
    No. 333-159674))(1)10
.2*

Sonic Automotive, Inc. 1997 Stock Option Plan, Amended and
    Restated as of April 22, 2003 (incorporated by reference to
    Exhibit 10.10 to Sonics Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2003).(1)10
.3*

Sonic Automotive, Inc. Employee Stock Purchase Plan, Amended and
    Restated as of May 8, 2002 (incorporated by reference to
    Exhibit 10.15 to the 2002 Annual Report).(1)10
.4*

Sonic Automotive, Inc. Nonqualified Employee Stock Purchase
    Plan, Amended and Restated as of October 23, 2002
    (incorporated by reference to Exhibit 10.16 to the 2002
    Annual Report).(1)10
.5*

Sonic Automotive, Inc. 2005 Formula Restricted Stock Plan for
    Non-Employee Directors, Amended and Restated as of May 11,
    2009 (incorporated by reference to Exhibit 4 to
    Sonics Registration Statement on
    Form S-8
    (Reg.
    No. 333-159675))(1) 70




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##### Table of Contents



ExhibitNo.

Description10
.6*

Employment Agreement dated January 30, 2006 between Sonic
    and Mr. David P. Cosper (incorporated by reference to
    Exhibit 10.1 to Sonics Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2006 (the March 2006
    Form 10-Q)).(1)10
.7*

First Amendment to Employment Agreement dated January 30,
    2006 between Sonic and Mr. David P. Cosper. (incorporated
    by reference to Exhibit 10.12 to Sonics Annual Report
    on
    Form 10-K
    for the year ended December 31, 2008)(1)10
.8*

Sonic Automotive, Inc. 2004 Stock Incentive Plan Form of
    Performance-Based Restricted Stock Unit Award Agreement.(1)10
.9*

Sonic Automotive, Inc. 2004 Stock Incentive Plan Form of
    Performance-Based Restricted Stock Award Agreement.(1)10
.10*

Sonic Automotive, Inc. Incentive Compensation Plan, Amended and
    Restated as of December 4, 2008.(1)10
.11*

Standard form of lease executed with Capital Automotive, L.P. or
    its affiliates (incorporated by reference to Exhibit 10.38
    to Sonics Annual Report on
    Form 10-K
    for the year ended December 31, 2008).10
.12*

Standard form of guaranty executed with Capital Automotive, L.P.
    or its affiliates (incorporated by reference to
    Exhibit 10.39 to Sonics Annual Report on
    Form 10-K
    for the year ended December 31, 2008).10
.13*

Amendment to Guaranty and Subordination Agreements, dated as of
    January 1, 2005, by Sonic as Guarantor, to Capital
    Automotive, L.P. and affiliates, as Landlord (incorporated by
    reference to Exhibit 10.40 to Sonics Annual Report on
    Form 10-K
    for the year ended December 31, 2008).10
.14*

Second Amendment to Guaranty and Subordination Agreements, dated
    as of March 11, 2009, by Sonic as Guarantor, to Capital
    Automotive, L.P. and affiliates, as Landlord. (incorporated by
    reference to Exhibit 10.41 to Sonics Annual Report on
    Form 10-K
    for the year ended December 31, 2008).10
.15*

Side letter to Second Amendment to Guaranty and Subordination
    Agreements, dated as of March 11, 2009, by Sonic as
    Guarantor, to Capital Automotive, L.P. and affiliates, as
    Landlord. (incorporated by reference to Exhibit 10.42 to
    Sonics Annual Report on
    Form 10-K
    for the year ended December 31, 2008)10
.16*

Sonic Automotive, Inc. 2004 Stock Incentive Plan, Amended and
    Restated as of February 11, 2009 (incorporated by reference
    to Exhibit 4 to Sonics Registration Statement on
    Form S-8
    (Reg.
    No. 333-159674)).(1)10
.17*

Underwriting Agreement (Class A common stock) dated as of
    September 17, 2009 by and among Sonic Automotive, Inc. and
    J.P. Morgan Securities, Inc. and Merrill Lynch, Pierce,
    Fenner & Smith, Incorporated, as representatives of
    the several underwriters named therein (incorporated by
    reference to Exhibit 1.1 to the Current Report on
    Form 8-K
    filed September 17, 2009 (the September 23, 2009
    Form 8-K)).10
.18*

Underwriting Agreement (convertible senior notes) dated as of
    September 17, 2009 by and among Sonic Automotive, Inc. and
    J.P. Morgan Securities, Inc. and Merrill Lynch, Pierce,
    Fenner & Smith, Incorporated, as representatives of
    the several underwriters named therein (incorporated by
    reference to Exhibit 1.2 to the September 23, 2009
    Form 8-K).10
.19*

Amendment No. 1 to Sonic Automotive, Inc. Formula Stock
    Option Plan for Independent Directors.(1)10
.20*

Sonic Automotive, Inc. Incentive Compensation Plan Amended and
    Restated as of December 4, 2008.(1)10
.21*

Amended and Restated Credit Agreement, dated as of
    January 15, 2010, among Sonic Automotive, Inc.; each
    lender; Bank of America, N.A, as Administrative Agent, Swing
    Line Lender and an L/C Issuer;, and Wells Fargo Bank, National
    Association, as an L/C Issuer.10
.22*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Bank of America, N.A., pursuant to the Credit
    Agreement.10
.23*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of DCFS USA LLC, pursuant to the Credit Agreement.10
.24*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of BMW Financial Services NA, LLC, pursuant to the
    Credit Agreement.10
.25*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Toyota Motor Credit Corporation, pursuant to the
    Credit Agreement. 71




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##### Table of Contents



ExhibitNo.

Description10
.26*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of JPMorgan Chase Bank, N.A., pursuant to the Credit
    Agreement.10
.27*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Wachovia Bank, National Association, pursuant to the
    Credit Agreement.10
.28*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Comerica Bank, pursuant to the Credit Agreement.10
.29*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of World Omni Financial Corp., pursuant to the Credit
    Agreement.10
.30*

Amended and Restated Subsidiary Guaranty Agreement, dated as of
    January 15, 2010, by the Revolving Subsidiary Guarantor, as
    Guarantors, to Bank of America, N.A, as administrative agent for
    the lenders.10
.31*

Amended and Restated Securities Pledge Agreement, dated as of
    January 15, 2010, by Sonic Automotive, Inc., the
    subsidiaries of Sonic named therein and Bank of America, N.A.,
    as administrative agent for the lenders.10
.32*

Amended and Restated Escrow and Security Agreement, dated as of
    January 15, 2010, by Sonic Automotive, Inc., the
    subsidiaries of Sonic named therein and Bank of America, N.A.,
    as administrative agent for the lenders.10
.33*

Amended and Restated Securities Pledge Agreement, dated as of
    January 15, 2010, by Sonic Financial Corporation and Bank
    of America, N.A., as administrative agent for the lenders.10
.34*

Amended and Restated Security Agreement, dated as of
    January 15, 2010, by Sonic Automotive, Inc., the
    subsidiaries of Sonic named therein and Bank of America, N.A.,
    as administrative agent for the lenders.10
.35*

Syndicated New and Used Vehicle Floor Plan Credit Agreement,
    dated January 15, 2010, among Sonic Automotive, Inc.;
    certain subsidiaries of the Company; each lender; Bank of
    America, N.A., as Administrative Agent, New Vehicle Swing Line
    Lender and Used Vehicle Swing Line Lender; and Bank of America,
    N.A., as Revolving Administrative Agent.10
.36*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Bank of America, N.A., pursuant to the Syndicated
    New and Used Vehicle Floor Plan Credit Agreement.10
.37*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of JPMorgan Chase Bank, N.A., pursuant to the
    Syndicated New and Used Vehicle Floor Plan Credit Agreement.10
.38*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Wachovia Bank, National Association, pursuant to the
    Syndicated New and Used Vehicle Floor Plan Credit Agreement.10
.39*

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Comerica Bank, pursuant to the Syndicated New and
    Used Vehicle Floor Plan Credit Agreement.10
.40*

Company Guaranty Agreement, dated January 15, 2010, by
    Sonic Automotive, Inc. and Bank of America, N.A., as
    administrative agent for the lenders.10
.41*

Subsidiary Guaranty Agreement, dated as of January 15,
    2010, by the Floor Plan Subsidiary Guarantor, as Guarantors, to
    Bank of America, N.A, as administrative agent for the lenders.10
.42*

Promissory Note, dated August 12, 2010, executed by Sonic
    in favor of VW Credit, Inc., pursuant to the Credit Agreement.10
.43*

Purchase Agreement (the Purchase Agreement) dated as
    of March 9, 2010 by and among Sonic Automotive, Inc., the
    guarantors named therein and Banc of America Securities LLC on
    behalf of itself and as representative of the initial purchasers
    named therein (incorporated by reference to Exhibit 1.1 to
    the Current Report on
    Form 8-K
    filed March 15, 2010 (the March 2010
    Form 8-K)).10
.44*

Amendment No. 1 to Amended and Restated Credit Agreement
    dated as of February 25, 2010 by and among Sonic
    Automotive, Inc., Bank of America, N.A. and each of the
    Subsidiary Guarantors signatory thereto (incorporated by
    reference to Exhibit 10.22 to our Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2010 (the March 2010
    Form 10-Q).10
.45*

Amendment No. 1 to the Syndicated New and Used Vehicle
    Floorplan Credit Agreement dated February 25, 2010 by and
    among Sonic Automotive, Inc., certain of its subsidiaries party
    to the Credit Agreement and Bank of America, N.A. (incorporated
    by reference to Exhibit 10.23 to the March 2010
    Form 10-Q). 72




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##### Table of Contents



ExhibitNo.

Description10
.46

Sonic Automotive, Inc. Supplemental Executive Retirement Plan
    effective January 1, 2010.(1)10
.47

First Amendment to Sonic Automotive, Inc. Supplemental Executive
    Retirement Plan effective December 29, 2010.(1)12
.1

Computation of Ratio of Earnings to Fixed Charges.21
.1

Subsidiaries of Sonic.23
.1

Consent of Ernst & Young LLP.31
.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 to
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2

Certification of Mr. O. Bruton Smith pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     *
    
    Filed Previously(1)
    
    Indicates a management contract or compensatory plan or
    arrangement. 73




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
            ERNST &
    YOUNG LLP
    F-1




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
                ERNST &
    YOUNG LLP
    F-2




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
 December 31,
    2009 and 2010
  December 31,2009


2010(Dollars in thousands)ASSETSCurrent Assets:Cash and cash equivalents

$
30,035


$
21,842Receivables, net


232,969



239,634Inventories


795,275



903,221Assets held for sale


12,167



2,020Other current assets


14,937



23,633Total current assets


1,085,383



1,190,350Property and Equipment, net


382,085



436,260Goodwill


469,482



468,516Other Intangible Assets, net


80,806



79,149Other Assets


51,099



76,489Total Assets

$
2,068,855


$
2,250,764LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Notes payable  floor plan  trade

$
214,871


$
478,834Notes payable  floor plan  non-trade


548,493



383,151Trade accounts payable


55,345



59,719Accrued interest


16,146



14,070Other accrued liabilities


144,709



160,763Liabilities associated with assets held for sale 
    non-trade


3,346



Current maturities of long-term debt


23,991



9,050Total current liabilities


1,006,901



1,105,587Long-Term Debt


552,150



546,401Other Long-Term Liabilities


141,052



134,081Commitments and ContingenciesStockholders Equity:Class A convertible preferred stock, none issued






Class A common stock, $.01 par value;
    100,000,000 shares authorized; 54,986,875 shares
    issued and 40,099,559 shares outstanding at
    December 31, 2009; 55,738,639 shares issued and
    40,757,999 shares outstanding at December 31, 2010


550



557Class B common stock; $.01 par value;
    30,000,000 shares authorized; 12,029,375 shares issued
    and outstanding at December 31, 2009 and December 31,
    2010


121



121Paid-in capital


662,186



666,961Retained earnings (accumulated deficit)


(35,180
)


53,427Accumulated other comprehensive loss


(22,350
)


(18,683
)Treasury stock, at cost (14,887,316 Class A shares held at
    December 31, 2009 and 14,980,640 Class A shares held
    at December 31, 2010)


(236,575
)


(237,688
)Total stockholders equity


368,752



464,695Total Liabilities and Stockholders Equity

$
2,068,855


$
2,250,764    F-3




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF INCOME
 Years
    Ended December 31, 2008, 2009 and 2010
  Year Ended December 31,2008


2009


2010(Dollars and shares in thousands,except per share amounts)Revenues:New vehicles

$
4,009,496


$
3,229,948


$
3,646,200Used vehicles


1,342,486



1,451,870



1,776,581Wholesale vehicles


272,172



147,002



149,041Total vehicles


5,624,154



4,828,820



5,571,822Parts, service and collision repair


1,095,774



1,071,825



1,128,054Finance, insurance and other


180,274



154,696



180,968Total revenues


6,900,202



6,055,341



6,880,844Cost of Sales:New vehicles


(3,744,533
)


(3,010,790
)


(3,409,129
)Used vehicles


(1,223,409
)


(1,327,878
)


(1,636,961
)Wholesale vehicles


(278,364
)


(152,487
)


(154,082
)Total vehicles


(5,246,306
)


(4,491,155
)


(5,200,172
)Parts, service and collision repair


(546,698
)


(531,514
)


(565,994
)Total cost of sales


(5,793,004
)


(5,022,669
)


(5,766,166
)Gross profit


1,107,198



1,032,672



1,114,678Selling, general and administrative expenses


(906,243
)


(829,220
)


(896,697
)Impairment charges


(812,004
)


(23,460
)


(249
)Depreciation and amortization


(32,734
)


(34,879
)


(35,110
)Operating income (loss)


(643,783
)


145,113



182,622Other income (expense):Interest expense, floor plan


(43,392
)


(19,812
)


(21,536
)Interest expense, other, net


(58,980
)


(78,284
)


(63,343
)Interest expense, non-cash, convertible debt


(10,704
)


(679
)


(6,914
)Interest expense / amortization, non-cash, cash flow swaps






(11,769
)


(4,883
)Other income (expense), net


742



(6,677
)


(7,525
)Total other expense


(112,334
)


(117,221
)


(104,201
)Income (loss) from continuing operations before taxes


(756,117
)


27,892



78,421Provision for income taxes  benefit (expense)


122,340



29,275



17,504Income (loss) from continuing operations


(633,777
)


57,167



95,925Discontinued operations:Loss from operations and the sale of discontinued franchises


(75,515
)


(50,244
)


(8,237
)Income tax benefit


16,943



24,625



2,241Loss from discontinued operations


(58,572
)


(25,619
)


(5,996
)Net income (loss)

$
(692,349
)

$
31,548


$
89,929Basic earnings (loss) per common share:Earnings (loss) per share from continuing operations

$
(15.70
)

$
1.29


$
1.82Loss per share from discontinued operations


(1.46
)


(0.58
)


(0.12
)Earnings (loss) per common share

$
(17.16
)

$
0.71


$
1.70Weighted average common shares outstanding


40,356



43,836



52,214Diluted earnings (loss) per common share:Earnings (loss) per share from continuing operations

$
(15.70
)

$
1.07


$
1.58Loss per share from discontinued operations


(1.46
)


(0.45
)


(0.09
)Earnings (loss) per common share

$
(17.16
)

$
0.62


$
1.49Weighted average common shares outstanding


40,356



55,832



65,794Dividends declared per common share

$
0.48


$



$
0.025    F-4




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
 Years
    Ended December 31, 2008, 2009 and 2010
  Accumulated





Compre-Class A


Class B





Retained





Other


Total


hensiveCommon Stock


Common Stock


Paid-In


Earnings /


Treasury


Comprehensive


Stockholders


IncomeShares


Amount


Shares


Amount


Capital


(Deficit)


Stock


(Loss)/Income


Equity


(Loss)(Dollars and shares in thousands)BALANCE AT DECEMBER 31, 2007


42,414


$
424



12,029


$
121


$
523,020


$
644,399


$
(207,866
)

$
(15,114
)

$
944,984


$
74,449Shares awarded under stock compensation plans


509



5











5,144















5,149



Purchases of treasury stock


























(28,648
)






(28,648
)


Income tax benefit associated with stock compensation plans


















607















607



Income tax benefit associated with convertible note hedge


















2,120















2,120



Fair value of interest rate swap agreements, net of tax benefit
    of $13,383






























(21,835
)


(21,835
)


(21,835
)Unrealized gain on
    available-for-sale
    securities, net of tax benefit of $193






























314



314



314Stock-based compensation expense


















2,211















2,211



Restricted stock amortization


















3,920















3,920



Net loss






















(692,349
)










(692,349
)


(692,349
)Dividends ($0.48 per share)






















(18,950
)










(18,950
)


BALANCE AT DECEMBER 31, 2008


42,923


$
429



12,029


$
121


$
537,022


$
(66,900
)

$
(236,514
)

$
(36,635
)

$
197,523


$
(713,870
)Shares awarded under stock compensation plans


104



































Purchases of treasury stock


























(61
)






(61
)


Income tax benefit associated with convertible note hedge


















4,293















4,293



Fair value of interest rate swap agreements, net of tax expense
    of $7,045






























11,494



11,494



11,494Discontinuance of cash flow swaps, net of tax expense of $1,711






























2,791



2,791



2,791Issuance of Common Stock


11,699



117











105,095















105,212



ASC Debt with Conversion and Other Options
    derecognition  4.25% Convertible Notes, net of
    tax benefit of $2,887


















(4,331
)














(4,331
)


ASC Debt with Conversion and Other
    Options  5.0% Convertible Notes, net of
    tax expense of $12,823


















18,146















18,146



Stock-based compensation expense


















603















603



Restricted stock amortization


















1,329















1,329



Other


261



4











29



172











205



Net income






















31,548











31,548



31,548BALANCE AT DECEMBER 31, 2009


54,987


$
550



12,029


$
121


$
662,186


$
(35,180
)

$
(236,575
)

$
(22,350
)

$
368,752


$
45,833Shares awarded under stock compensation plans


396



4











1,737















1,741



Purchases of treasury stock


























(1,113
)






(1,113
)


Income tax benefit associated with stock compensation plans


















(12
)














(12
)


Income tax benefit associated with convertible note hedge


















239















239



Fair value of interest rate swap agreements, net of tax expense
    of $2,247






























3,667



3,667



3,667Stock-based compensation expense


















513















513



Restricted stock amortization


















2,301















2,301



Other


356



3











(3
)


















Net income






















89,929











89,929



89,929Dividends ($0.025 per share)






















(1,322
)










(1,322
)


BALANCE AT DECEMBER 31, 2010


55,739


$
557



12,029


$
121


$
666,961


$
53,427


$
(237,688
)

$
(18,683
)

$
464,695


$
93,596    F-5




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2008


2009


2010(Dollars in thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income

$
(692,349
)

$
31,548


$
89,929Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization of property, plant and equipment


36,378



36,091



35,292Provision for bad debt expense


2,488



1,491



1,449Other amortization


1,912



1,656



1,656Debt issuance cost amortization


1,256



13,435



3,685Debt discount amortization, net of premium amortization


11,712



11,755



5,195Stock  based compensation expense


2,211



603



513Amortization of restricted stock


5,280



1,511



2,301Restricted stock forfeiture


(1,360
)


(182
)


Deferred income taxes


(253,846
)


23,153



22,057Valuation allowance  deferred income taxes


108,421



(53,743
)


(50,388
)Equity interest in earnings of investees


(399
)


(713
)


(752
)Asset impairment charges


851,655



30,038



249Loss (gain) on disposal of franchises and property and equipment


1,604



(804
)


(1,249
)Loss on exit of leased dealerships


18,037



33,013



4,266(Gain) loss on retirement of debt


(647
)


6,745



7,665Derivative liability fair value adjustments






(11,300
)


Non-cash adjustments  cash flow swaps






11,769



4,883Changes in assets and liabilities that relate to operations:Receivables


101,126



23,424



(8,114
)Inventories


5,204



307,803



(121,935
)Other assets


9,909



(1,393
)


(21,315
)Notes payable  floor plan  trade


(49,590
)


(58,972
)


263,963Trade accounts payable and other liabilities


(38,363
)


(3,347
)


15,689Total adjustments


812,988



372,033



165,110Net cash provided by operating activities


120,639



403,581



255,039CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of businesses, net of cash acquired


(22,945
)






Purchases of land, property and equipment


(137,094
)


(43,277
)


(85,194
)Proceeds from sales of property and equipment


6,295



6,018



1,214Proceeds from sale of franchises


37,803



27,276



24,720Distributions from equity investees


600



300



600Net cash used in investing activities


(115,341
)


(9,683
)


(58,660
)CASH FLOWS FROM FINANCING ACTIVITIES:Net (repayments) borrowings on notes payable floor
    plan  non-trade


(4,167
)


(294,823
)


(168,688
)Borrowings on revolving credit facilities


890,838



558,011



40,000Repayments on revolving credit facilities


(889,996
)


(628,853
)


(40,000
)Proceeds from issuance of long-term debt


56,913



178,751



229,775Debt issuance costs






(18,387
)


(10,962
)Principal payments on long-term debt


(4,348
)


(5,458
)


(6,362
)Settlement of cash flow swaps






(16,454
)


Repurchase of debt securities


(24,203
)


(244,258
)


(249,190
)Purchases of treasury stock


(28,648
)


(61
)


(1,113
)Income tax benefit associated with stock compensation plans


607







(12
)Income tax benefit associated with convertible hedge


2,120



4,293



239Issuance of shares under stock compensation plans


5,149







1,741Issuance of common stock






101,265



Dividends paid


(19,106
)


(4,860
)


Net cash provided by (used in) financing activities


(14,841
)


(370,834
)


(204,572
)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


(9,543
)


23,064



(8,193
)CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR


16,514



6,971



30,035CASH AND CASH EQUIVALENTS, END OF YEAR

$
6,971


$
30,035


$
21,842SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:Change in fair value of cash flow hedging instruments
    (net of tax benefit of $13,383, and tax expense of $7,045 and
    $2,247 in 2008, 2009 and 2010, respectively)

$
(21,835
)

$
11,494


$
3,667SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid (received) during the year for:Interest, net of amount capitalized

$
114,003


$
110,420


$
93,598Income taxes

$
13,351


$
(23,507
)

$
(17,098
)    F-6




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (All tables in thousands except per share amounts)
  1.
    Description
    of Business and Summary of Significant Accounting
    Policies  Organization and Business 
  Principles of Consolidation 
  Reclassifications 
  Use of Estimates 
  Cash and Cash Equivalents 
  Revenue Recognition 
   F-7




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Floor Plan Assistance 
  Contracts in Transit 
  Accounts Receivable
  Inventories  first-in, work-in-progress
    Property and Equipment 
 F-8




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Leasehold and land improvements


10-30 yearsBuildings


10-30 yearsParts and service equipment


7-10 yearsOffice equipment and fixtures


3-10 yearsCompany vehicles


3-5 years     Derivative Instruments and Hedging Activities 
  Goodwill 
     F-9




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Other Intangible Assets 
  Insurance Reserves 
  Lease Exit Accruals
  Income Taxes 
   F-10




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Concentrations of Credit and Business Risk 
    Financial Instruments and Market Risks 
    Advertising 
    Segment Information
  2.
    Business
    Acquisitions and Dispositions  Acquisitions
   F-11




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Dispositions
        December 31,


December 31,2009


2010(In thousands)Inventories

$
4,528


$
Property and equipment, net


2,073



Land


2,765



2,020Goodwill


2,801



Franchise assets






Assets held for sale

$
12,167


$
2,020     Year Ended December 31,2008


2009


2010(In thousands)Loss from operations

$
(20,103
)

$
(12,579
)

$
(6,634
)Gain (loss) on disposal of franchises


(2,325
)


(293
)


2,629Lease exit charges


(13,747
)


(30,794
)


(4,232
)Property impairment charges


(14,912
)


(4,992
)


Goodwill impairment charges


(2,025
)


(1,586
)


Franchise agreement and other asset impairment charges


(20,500
)






Favorable lease asset impairment charges


(1,903
)






Pre-tax loss

$
(75,515
)

$
(50,244
)

$
(8,237
)Total revenues

$
587,801


$
294,390


$
55,077  F-12




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    3.
    Inventories
    and Related Notes Payable  Floor Plan    December 31,2009


2010(In thousands)New vehicles

$
557,319


$
628,939Used vehicles


138,401



165,039Parts and accessories


51,956



50,854Other


52,127



58,389$
799,803


$
903,221Less inventories classified as assets held for sale


(4,528
)


Inventories

$
795,275


$
903,221        F-13




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  4.
    Property
    and Equipment    December 31,2009


2010(In thousands)Land

$
61,886


$
76,357Building and improvements


322,632



353,088Office equipment and fixtures


75,801



77,654Parts and service equipment


54,981



56,651Company vehicles


8,440



8,137Construction in progress


40,000



48,230Total, at cost


563,740



620,117Less accumulated depreciation


(176,817
)


(181,837
)Subtotal


386,923



438,280Less assets held for sale


(4,838
)


(2,020
)Property and equipment, net

$
382,085


$
436,260         Continuing

DiscontinuedYear Ended December 31,

Operations

Operations(In millions)2010

$
0.2


$
2009

$
18.1


$
5.02008

$
10.0


$
14.9      F-14




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  5.
    Intangible
    Assets and Goodwill    Franchise


Gross


AccumulatedAgreements


Goodwill


Impairment


Net Goodwill(In thousands)Balance, December 31, 2008

$
64,701


$
1,124,332


$
(797,325
)

$
327,007Impairment of domestic dealerships


(500
)






(929
)


(929
)Impairment of import dealerships


(3,800
)






(1,751
)


(1,751
)Reductions from sales of franchises


(800
)


(10,264
)


3,280



(6,984
)Reclassification from assets held for sale, net


5,234



152,139







152,139Balance, December 31, 2009

$
64,835


$
1,266,207


$
(796,725
)

$
469,482Reductions from sales of franchises






(3,767
)






(3,767
)Reclassification from assets held for sale, net






2,801







2,801Balance, December 31, 2010

$
64,835


$
1,265,241


$
(796,725
)

$
468,516        F-15




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2009


2010(In thousands)Lease agreements

$
21,987


$
21,987Less accumulated amortization


(6,016
)


(7,673
)Definite life intangibles, net

$
15,971


$
14,314       Year Ending December 31,(In thousands)2011

$
1,6562012


1,6562013


1,6562014


1,2902015


924Thereafter


7,132Total

$
14,314   6.
    Long-Term
    Debt    December 31,


December 31,2009


2010(In thousands)2010 Revolving Credit Facility(1)

$



$
2006 Revolving Credit
    Sub-Facility(1)






Senior Subordinated Notes bearing interest at 9.0%






210,000Senior Subordinated Notes bearing interest at 8.625%


275,000



42,855Convertible Senior Notes bearing interest at 5.0%


172,500



172,500Convertible Senior Subordinated Notes bearing interest at 4.25%


17,045



Notes payable to a finance company bearing interest from 9.52%
    to 10.52% (with a weighted average of 10.19)%


17,778



15,618Mortgage notes to finance companies-fixed rate, bearing interest
    from 4.50% to 7.03%


78,424



88,262Mortgage notes to finance companies-variable rate, bearing
    interest at 1.25 to 3.50 percentage points above one-month
    LIBOR


38,251



45,639Net debt discount and premium(2)


(29,199
)


(25,482
)Other


6,342



6,059$
576,141


$
555,451Less current maturities(3)


(23,991
)


(9,050
)Long-term debt

$
552,150


$
546,401  F-16




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (1)
    
    Sonic replaced its 2006 Revolving Credit
    Sub-Facility
    with the 2010 Revolving Credit Facility on January 15,
    2010. Interest rate on the revolving credit facility was 3.5%
    above LIBOR at December 31, 2009 and December 31, 2010.(2)
    
    December 31, 2009 includes $1.5 million discount
    associated with the 8.625% Notes, $29.8 million
    discount associated with the 5.0% Convertible Notes,
    $0.6 million discount associated with the
    4.25% Convertible Notes, $2.5 million premium
    associated with notes payable to a finance company and
    $0.2 million premium 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.(3)
    
    At December 31, 2009, current maturities included amounts
    outstanding related to the 4.25% Convertible Notes as a
    result of these obligations maturing or expected to be
    extinguished within one year of the balance sheet date.    Year Ending December 31,

Principal


Net(In thousands)2011

$
8,449


$
9,0502012


8,991



9,3372013


58,103



58,1542014


184,923



160,3482015


15,383



15,330Thereafter


305,084



303,232Total

$
580,933


$
555,451   2006
    Credit Facility
  Sub-Facility, Sub-Facility Sub-Facility
  2010
    Credit Facilities
     F-17




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
              9.0% Senior
    Subordinated Notes (9.0% Notes)
   F-18




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    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)
       F-19




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      5.25% Convertible
    Senior Subordinated Notes (5.25% Convertible
    Notes) and 6.0% Senior Secured Convertible Notes
    (6.0% Convertible Notes)
          5.0% Convertible
    Senior Notes (5.0% Convertible
    Notes)
   F-20




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            4.25% Convertible
    Senior Subordinated Notes (4.25% Convertible
    Notes)
   F-21




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Notes
    Payable to a Finance Company
    Mortgage
    Notes
    Covenants
   F-22




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    CovenantConsolidated


ConsolidatedConsolidated


Fixed Charge


Total SeniorLiquidity


Coverage


Secured Debt toRatio


Ratio


EBITDA RatioThrough March 30, 2011


31.00



31.10



£2.25March 31, 2011 through and including March 30, 2012


31.05



31.15



£2.25March 31, 2012 and thereafter


31.10



31.20



£2.25December 31, 2010 actual


1.17



1.40



1.22   Derivative
    Instruments and Hedging Activities
    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$
3.6



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$
11.3



4.655
%

one-month LIBOR

December 10, 2017$
8.7



6.860
%

one-month LIBOR

August 1, 2017$
6.9



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     (1)
    
    The one-month LIBOR rate was 0.261% at December 31, 2010.(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.     F-23




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        7.
    Income
    Taxes    2008


2009


2010(In thousands)Current:Federal

$
(13,834
)

$
929


$
8,789State


3,246



6,865



3,345(10,588
)


7,794



12,134Deferred


(111,752
)


(37,069
)


(29,638
)Total provision for income taxes  (benefit) expense

$
(122,340
)

$
(29,275
)

$
(17,504
)     2008


2009


2010Statutory federal rate


35.00
%


35.00
%


35.00
%Effective state income tax rate


3.21



4.83



4.85Valuation allowance and other account adjustments


(13.99
)


(148.12
)


(62.18
)Non-deductible goodwill


(8.35
)






0.29Other


0.31



3.34



(0.28
)Effective tax rate


16.18
%


(104.96
%)


(22.32
%)  F-24




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2009


2010(In thousands)Deferred tax assets:Allowance for bad debts

$
158


$
180Accruals and reserves


49,524



48,497Basis difference in property and equipment






217Basis difference in goodwill


30,266



5,721Net operating loss carryforwards


15,869



13,638Fair value of Fixed Swaps


13,698



9,761Interest and state taxes associated with Accounting for
    Uncertain Income Tax Positions in the ASC liability


7,777



6,694Other


3



3Total deferred tax assets


117,295



84,711Deferred tax liabilities:Basis difference in inventory


(3,340
)


(2,105
)Basis difference in property and equipment


(3,938
)


Basis difference in debt


(11,748
)


(9,749
)Other


(4,396
)


(4,849
)Total deferred tax liability


(23,422
)


(16,703
)Valuation allowance


(61,868
)


(10,875
)Net deferred tax asset (liability)

$
32,005


$
57,133        F-25




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2008


2009


2010(In thousands)Unrecognized tax benefit liability, January 1(1)

$
18,921


$
17,131


$
24,790Prior period positions:Increases


132



8,883



518Decreases


(1,766
)


(134
)


(162
)Current period positions


2,278



1,629



1,212Settlements


(33
)


(456
)


(1,706
)Lapse of statute of limitations


(2,401
)


(2,072
)


(1,762
)Other






(191
)


(355
)Unrecognized tax benefit liability, December 31(2)

$
17,131


$
24,790


$
22,535     (1)
    
    Excludes accrued interest and penalties of $5.6 million at
    January 1, 2008, $6.1 million at January 1, 2009
    and $6.4 million at January 1, 2010.(2)
    
    Excludes accrued interest and penalties of $6.1 million at
    December 31, 2008, $6.4 million at December 31,
    2009 and $5.1 million at December 31, 2010.      8.
    Related
    Parties       F-26




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      9.
    Capital
    Structure and Per Share Data  Preferred Stock
  Common Stock
  Share Repurchases
  Per Share Data
 F-27




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the Year Ended December 31, 2009Incomefrom Continuing


Loss from DiscontinuedWeighted


Operations


Operations


Net IncomeAverage





Per Share





Per Share





Per ShareShares


Amount


Amount


Amount


Amount


Amount


Amount(In thousands except per share amounts)Earnings (Loss) and Shares


43,836


$
57,167


$
1.30


$
(25,619
)

$
(0.58
)

$
31,548Effect of Participating Securities:Unvested Restricted Stock and Stock Units






(406
)














(406
)Basic Earnings (Loss) Per Share


43,836


$
56,761


$
1.29


$
(25,619
)

$
(0.58
)

$
31,142


$
0.71Effect of Dilutive Securities:Contingently Convertible Debt (6.0% Convertible Notes)


7,833



916







23







939Contingently Convertible Debt (5.0% Convertible Notes)


3,496



2,225







55







2,280Stock Compensation Plans


667Diluted Earnings (Loss) Per Share


55,832


$
59,902


$
1.07


$
(25,541
)

$
(0.45
)

$
34,361


$
0.62   For the Year Ended December 31, 2010Incomefrom Continuing


Loss from DiscontinuedWeighted


Operations


Operations


Net IncomeAverage





Per Share





Per Share





Per ShareShares


Amount


Amount


Amount


Amount


Amount


Amount(In thousands, except per share amounts)Earnings (Loss) and Shares


52,214


$
95,925


$
1.84


$
(5,996
)

$
(0.12
)

$
89,929Effect of Participating Securities:Unvested Restricted Stock and Stock Units






(921
)














(921
)Basic Earnings (Loss) Per Share


52,214


$
95,004


$
1.82


$
(5,996
)

$
(0.12
)

$
89,008


$
1.70Effect of Dilutive Securities:Contingently Convertible Debt (5.0% Convertible Notes)


12,890



9,022







31







9,053Stock Compensation Plans


690Diluted Earnings (Loss) Per Share


65,794


$
104,026


$
1.58


$
(5,965
)

$
(0.09
)

$
98,061


$
1.49     10.
    Employee
    Benefit Plans   F-28




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Stock
    Compensation Plans
        Weighted


WeightedAverage


AverageExercise


Remaining


AggregateOptions


Exercise


Price


Contractual


IntrinsicOutstanding


Price per Share


per Share


Term


Value($ in thousands, except per share data, term in years)Balance  December 31, 2009


4,014


$
1.81



-



37.50


$
15.48



5.9


$
12,349Exercised


(357
)


1.81



-



11.19



5.18Forfeited


(228
)


1.81



-



37.50



13.51Balance  December 31, 2010


3,429


$
1.81



-



37.50


$
16.69



5.1


$
13,193Exercisable


2,535


$
1.81



-



37.50


$
21.93



4.0


$
2,976   December 31,2008


2009


2010(In thousands, exceptper option data)Weighted Average Grant-Date Fair Value per Option Granted


N/A


$
0.99



N/AIntrinsic Value of Options Exercised

$
3,146


$



$
2,235Fair Value of Shares Vested

$
5,867


$
395


$
555    F-29




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Black-Scholes
    Assumptions
    2009Stock Option PlansDividend yield

0.00%Risk free interest rates

1.67-1.87%Expected lives

5 yearsVolatility

64.13%       Unvested RestrictedStock and


Weighted AverageRestricted Stock


Grant Date FairUnits


Value(Shares in thousands)Balance  December 31, 2009


313


$
17.45Granted


502



10.30Forfeited


(4
)


10.30Vested


(305
)


17.47Balance  December 31, 2010


506


$
10.58    F-30




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Supplemental
    Executive Retirement Plan
    11.
    Fair
    Value Measurements  and/or
  Level 1
  Level 2
  Level 3
     F-31




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair Value at December 31,Quoted Prices in Active


Significant OtherMarkets for Identical


Observable


Significant UnobservableTotal


Assets (Level1)


Inputs (Level 2)


Inputs (Level 3)2009


2010


2009


2010


2009


2010


2009


2010(In millions)Cash Flow Swaps Designated as Hedges(1)

$
(25.9
)

$
(25.3
)

$



$



$
(25.9
)

$
(25.3
)

$



$
Cash Flow Swaps not Designated as Hedges(1)


(6.6
)


(7.4
)










(6.6
)


(7.4
)






Total

$
(32.5
)

$
(32.7
)

$



$



$
(32.5
)

$
(32.7
)

$



$
     (1)
    
    - Included in Other Long-Term Liabilities in the accompanying
    Consolidated Balance Sheets.    SignificantUnobservableYear Ended

Inputs

Total12/31/2010

(Level 3)

Gains / (Losses)(In millions)Long-lived assets held and used(1)

$
436.3


$
436.3


$
(0.2
)Goodwill(2)


468.5



468.5



Franchise assets(2)


64.8



64.8



Long-lived assets held for sale(3)


2.0



2.0



     (1)
    
    See Note 4 for discussion.(2)
    
    See Note 5 for discussion.(3)
    
    Includes real estate property. See Note 4 for discussion.   F-32




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31, 2009

December 31, 2010Fair Value

Carrying Value

Fair Value

Carrying Value(In thousands)9.0% Convertible Senior
    Subordinated Notes(1)

$



$



$
220,836


$
208,6308.625% Senior
    Subordinated Notes(1)

$
266,750


$
273,455


$
43,498


$
42,6735.0% Convertible
    Senior Notes(1)

$
188,072


$
142,743


$
215,453


$
147,8244.25% Convertible Senior
    Subordinated Notes(1)

$
16,363


$
16,423


$



$
Mortgage Notes(2)

$
78,333


$
78,424


$
88,119


$
88,262Notes Payable to a
    Finance Company(2)

$
17,859


$
20,260


$
15,676


$
17,427Other(2)

$
5,349


$
5,931


$
5,311


$
5,751     (1)
    
    As determined by market quotations as of December 31, 2010
    (Level 1).(2)
    
    As determined by discounted cash flows (Level 3).  12.
    Commitments
    and Contingencies  Facility
    and Equipment Leases
    (In thousands)Balance, December 31, 2009

$
47,825Lease exit expense(1)


4,266Payments(2)


(8,557
)Reversals


Balance, December 31, 2010

$
43,534     (1)
    
    Approximately $4.2 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
    Consolidated Statements of Income.(2)
    
    Amount is recorded as reduction of rent expense in selling,
    general and administrative expenses in the accompanying
    Consolidated Statements of Income.   F-33




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  sub-leases
  FutureMinimum

ReceiptsLease

from FutureYear Ending December 31,

Payments, Net

Subleases(In thousands)2011

$
107,191


$
(14,291
)2012


97,935



(13,759
)2013


93,465



(12,763
)2014


90,004



(12,793
)2015


85,609



(10,805
)Thereafter


385,844



(41,830
)       CovenantConsolidated


ConsolidatedConsolidated


Fixed Charge


Total SeniorLiquidity


Coverage


Secured Debt to


EBTDAR toRatio


Ratio


EBITDA Ratio


Rent RatioThrough March 30, 2011


31.00



31.10



£2.25



31.50March 31, 2011 through and including March 30, 2012


31.05



31.15



£2.25



3
    1.50March 31, 2012 and thereafter


3
    1.10



31.20



£2.25



31.50December 31, 2010 actual


1.17



1.40



1.22



2.11   Guarantees
    and Indemnifications
   F-34




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  sub-lessee sub-lessees sub-lessees sub-lessees
      Legal
    Matters
   F-35




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      class-based
   F-36




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    13.
    Summary
    of Quarterly Financial Data (Unaudited)    First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands, except per share data)Year Ended December 31, 2009Total revenues

$
1,363,074


$
1,485,685


$
1,629,897


$
1,576,685Gross profit

$
244,706


$
257,253


$
274,303


$
256,410Net income (loss)

$
1,678


$
26


$
15,594


$
14,250Earnings (loss) per common share  Basic

$
0.04


$



$
0.37


$
0.27Earnings (loss) per common share  Diluted

$
0.04


$



$
0.17


$
0.25Year Ended December 31, 2010Total revenues

$
1,543,665


$
1,722,026


$
1,770,260


$
1,844,893Gross profit

$
265,878


$
282,476


$
281,799


$
284,525Net income (loss)

$
4,154


$
8,436


$
12,985


$
64,354Earnings (loss) per common share  Basic

$
0.08


$
0.16


$
0.25


$
1.22Earnings (loss) per common share  Diluted

$
0.08


$
0.16


$
0.23


$
1.00     (1)
    
    Operations are subject to seasonal variations. The first quarter
    generally contributes less operating profits than the second,
    third and fourth quarters. Parts and service demand remains more
    stable throughout the year.(2)
    
    The sum of net income per common share for the quarters may not
    equal the full year amount due to weighted average common shares
    being calculated on a quarterly versus annual basis.(3)
    
    Amounts presented differ from amounts previously reported on
    Form 10-Q
    due to the classification of certain franchises in discontinued
    and continuing operations in accordance with Presentation
    of Financial Statements in the ASC (see Note 2).         F-37