##### 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, 2009ORo

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

56-2010790(State or Other Jurisdiction
    of

(I.R.S. EmployerIncorporation or
    Organization)

Identification No.)6415 IDLEWILD ROAD, SUITE 109
    CHARLOTTE, NORTH CAROLINA

28212(Zip Code)(Address of Principal Executive
    Offices)   (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.


27Item 2.

Properties.


27Item 3.

Legal Proceedings.


27Item 4.

Submission of Matters to a Vote of Security
    Holders.


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


31Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk


67Item 8.

Financial Statements and Supplementary Data


68Item 9.

Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


68Item 9A.

Controls and Procedures


68Item 9B.

Other Information


69PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


69Item 11.

Executive Compensation


69Item 12.

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


69Item 13.

Certain Relationships and Related Transactions,
    and Director Independence


69Item 14.

Principal Accountant Fees and Services


69PART IVItem 15.

Exhibits and Financial Statement Schedules


69SIGNATURES


75CONSOLIDATED FINANCIAL STATEMENTS


F-8EX-10.45EX-10.46EX-10.47EX-10.48EX-10.49EX-10.50EX-10.51EX-10.52EX-10.53EX-10.54EX-10.55EX-10.56EX-10.57EX-10.58EX-10.59EX-10.60EX-10.61EX-10.62EX-10.63EX-10.64EX-10.65EX-10.66EX-10.67EX-12.1EX-21.1EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2   2




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##### Table of Contents



Form 10-K
  
    future acquisitions or dispositions;
    industry trends;
    future liquidity trends or needs;
    general economic trends, including employment rates and consumer
    confidence levels;
    vehicle sales rates and same store sales growth;
    future covenant compliance;
    our financing plans and our ability to repay or refinance
    existing debt when due; and
    our business and growth strategies.  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;
    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 future acquisitions or
    complete disposition activities; and
    the rate and timing of overall economic recovery or further
    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


2009 TotalMarket

Dealerships


Franchises


RevenueHouston


19



25



20.9
%North/South Carolina/Georgia


15



16



10.2
%Alabama/Tennessee


16



23



10.2
%Los Angeles South/San Diego


6



6



8.2
%North Bay (San Francisco)


10



9



7.3
%Los Angeles North


9



12



6.9
%Dallas


6



8



6.4
%Florida


9



10



6.3
%South Bay (San Francisco)


8



9



6.1
%Mid-Atlantic


5



6



6.0
%Oklahoma


6



6



3.4
%Ohio


4



6



2.5
%Colorado


2



2



2.0
%Michigan


5



5



1.9
%Las Vegas


3



3



1.7
%Total


123



146



100.0
%  4




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Business
    Strategy
  Diverse Revenue Streams.
  Process Execution.
  Portfolio Management.
 5




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##### Table of Contents



Percentage of New Vehicle RevenueYear Ended December 31,2007


2008


2009Brand(1)BMW


16.9
%


18.4
%


17.1
%Honda


14.1
%


14.2
%


14.4
%Toyota


12.2
%


11.7
%


11.8
%Mercedes


10.4
%


10.4
%


9.6
%Ford


7.4
%


8.6
%


9.3
%General Motors(2)


7.8
%


7.3
%


7.0
%Lexus


7.0
%


5.9
%


6.1
%Cadillac


6.9
%


5.8
%


4.8
%Other(3)


2.4
%


3.4
%


3.9
%Audi


1.3
%


1.7
%


2.6
%Volkswagen


1.4
%


1.8
%


2.1
%Hyundai


1.5
%


1.4
%


1.8
%Land Rover


1.5
%


1.2
%


1.7
%Porsche


1.3
%


1.4
%


1.5
%Volvo


1.9
%


1.2
%


1.4
%Nissan


1.3
%


1.3
%


1.3
%Infiniti


1.3
%


1.2
%


1.2
%Other Luxury(4)


1.2
%


1.1
%


1.0
%Acura


1.2
%


1.1
%


0.8
%Chrysler(5)


1.0
%


0.9
%


0.6
%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 exclude franchises
    sold, identified for sale, or terminated subsequent to
    December 31, 2008 which had not been previously included in
    discontinued operations or includes previously held for sale
    which subsequently were reclassed to held and used. See
    Notes 1 and 2 to our accompanying Consolidated Financial
    Statements which discusses these and other factors that affect
    the comparability of the information for the periods presented.(2)
    
    Includes Buick, Chevrolet, GMC and Pontiac(3)
    
    Includes Isuzu, KIA, Mini, Scion and Subaru(4)
    
    Includes Hummer, Jaguar and Saab(5)
    
    Includes Chrysler, Dodge and Jeep  Increase Sales of Higher Margin Products and
    Services.
  Finance, Insurance and Other Aftermarket Products
    (F&I):
 6




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Parts, Service & Repair:
  Certified Pre-Owned Vehicles.
  Value Used Vehicles.
  Expand our eCommerce Capabilities.
  Achieve High Levels of Customer
    Satisfaction.
  Train, Develop and Retain Associates.
  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


83


Chairman, Chief Executive Officer and DirectorB. Scott Smith.


42


President, Chief Strategic Officer and DirectorJeff Dyke


42


Executive Vice President of OperationsDavid P. Cosper


55


Vice Chairman and Chief Financial OfficerDavid B. Smith


35


Executive Vice President and Director   O. Bruton Smith,
  B. Scott Smith,
  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.
    
    $766.7 million under the secured new and used inventory
    floor plan facilities, including $3.3 million classified as
    liabilities associated with assets held for sale;
    $142.7 million in 5.0% Convertible Senior Notes due
    2029 which are redeemable by us and putable by the holders after
    October 1, 2014 (the 5.0% Convertible
    Notes), representing $172.5 million in aggregate
    principal amount outstanding less unamortized discount of
    approximately $29.8 million;
    $16.4 million in 4.25% Senior Subordinated Convertible
    Notes due 2015 (the 4.25% Convertible Notes),
    representing $17.0 million in aggregate principal amount
    outstanding less unamortized discount of approximately
    $0.6 million, all of which is classified as current;
    $273.5 million in 8.625% Senior Subordinated Notes due
    2013 (the8.625% Notes), representing
    $275.0 million in aggregate principal amount outstanding
    less unamortized net discount of approximately $1.5 million;
    $116.9 million of mortgage notes, representing
    $116.7 million in aggregate principal amount plus
    unamortized premium of approximately $0.2 million, due from
    June 2013 to December 2029, with a weighted average interest
    rate of 5.1%; and
    $26.6 million of other secured debt, representing
    $24.1 million in aggregate principal amount plus
    unamortized premium of approximately $2.5 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.
   12




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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.
    The
    conversion of the 5.0% Convertible Notes and
    4.25% Convertible Notes, if triggered, may adversely affect
    our liquidity and financial condition and results of
    operations.
  and/or
  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; 13




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
    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 credit quality of the party owing money on the hedge may be
    downgraded to such an extent that it impairs our ability to sell
    or assign our side of the hedging transaction; and
    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.    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.
        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.   14




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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.
    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.
    Adverse
    conditions affecting one or more key manufacturers may
    negatively impact our profitability.
   15




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##### Table of Contents




    The termination of the franchise agreement no earlier than
    January 1, 2010 and no later than October 31, 2010 (we
    were allowed to terminate six franchises at six dealership
    locations during the fourth quarter of 2009);
    The assignment and assumption of the franchise agreement by the
    purchaser of General Motors assets;
    The payment of financial assistance to the franchisee in
    installments in connection with the orderly winding down of the
    franchise operations;
    The waiver of any other termination assistance of any kind that
    may have been required under the franchise agreement;
    The release of claims against General Motors or the purchaser of
    General Motors assets and their related parties;
    The continuation of franchise operations pursuant to the
    franchise agreement, as supplemented by the termination
    agreement, through the effective date of termination of the
    franchise agreement, except that we shall not be entitled to
    order any new vehicles from General Motors or the purchaser of
    General Motors assets; and
    A restriction on our ability to transfer the franchise agreement
    to another party.           16




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##### Table of Contents



December 31,2009(Dollars in millions)General MotorsNew Vehicle Inventory

$
77.8Parts Inventory


9.8Factory Receivables


8.9Property and Equipment, net


15.9Franchise Assets


15.9ChryslerNew Vehicle Inventory


4.9Parts Inventory


1.0Factory Receivables


0.3Property and Equipment, net


1.3Franchise Assets


       Manufacturer
    stock ownership restrictions may impair our ability to maintain
    or renew franchise agreements or issue additional
    equity.
    and/or
  Our
    dealers depend upon new vehicle sales and, therefore, their
    success depends in large part upon customer demand for the
    particular vehicles they carry.
   17




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##### Table of Contents



Our
    failure to meet a manufacturers customer satisfaction,
    financial and sales performance and facility requirements may
    adversely affect our ability to acquire new dealerships and our
    profitability.
      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
  Risks
    Related to Our Acquisition Strategy
  Pursuant
    to the terms of the 2010 Credit Facilities, our ability to make
    acquisitions is restricted.
   18




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##### Table of Contents



We may
    not be able to capitalize on acquisition opportunities because
    our ability to obtain capital to fund these acquisitions is
    limited.
        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. 19




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##### Table of Contents



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;
    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.
   20




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##### Table of Contents



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 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.
            Our
    business will be harmed if overall consumer demand continues to
    suffer from a severe or sustained downturn.
   21




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##### Table of Contents



A
    decline of available financing in the lending market has, and
    may continue to, adversely affect our vehicle sales
    volume.
  Sub-prime
  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
  The
    seasonality of our business magnifies the importance of second
    and third quarter 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. 22




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##### Table of Contents



The
    outcome of legal and administrative proceedings we are or may
    become involved in could have an adverse effect on our business,
    results of operations and profitability.
      Herron, et al. v
    CarMax, et al. Herron Herron
 23




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##### Table of Contents



Galura, et
    al. v. Sonic Automotive, Inc.
  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.
    The
    loss of key personnel and limited management and personnel
    resources could adversely affect our operations and
    growth.
   24




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##### Table of Contents



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.
   25




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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.
  and/or
 26




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##### Table of Contents



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.     27




---



##### Table of Contents



Item 4:
    Submission
    of Matters to a Vote of Security Holders.   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
 28




---



##### Table of Contents



CashMarket Price


DividendHigh


Low


Declared2009First Quarter

$
4.16


$
0.95


$
Second Quarter


11.03



1.06



Third Quarter


14.77



8.35



Fourth Quarter


13.04



8.54



2008First Quarter

$
21.29


$
16.45


$
0.12Second Quarter


21.58



12.89



0.12Third Quarter


12.84



8.39



0.12Fourth Quarter


7.99



1.52



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


per Share


Programs(2)


Programs(Amounts in thousands, except price per share amounts)October 2009


0


$




0


$
44,624November 2009


0


$




0


$
44,624December 2009


0


$




0


$
44,624Total


0


$




0


$
44,624     (1)
    
    All shares repurchased were part of publicly announced share
    repurchase programs 29




---



##### Table of Contents



(2)
    
    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   Item 6:
    Selected
    Financial Data.  Form 10-K.
    Year Ended December 31,2005


2006


2007


2008


2009(In millions, except per share data)Income Statement Data(1)(2):Total revenues

$
6,872.6


$
7,534.0


$
7,907.1


$
7,008.1


$
6,131.7Impairment charges

$
0.6


$
4.8


$
1.0


$
823.0


$
24.5Income (loss) from continuing operations before income taxes

$
152.6


$
141.0


$
173.6


$
(771.0
)

$
22.4Income (loss) from continuing operations

$
96.3


$
84.1


$
105.7


$
(645.6
)

$
55.6Basic earnings (loss) per share from continuing operations

$
2.30


$
1.97


$
2.47


$
(16.00
)

$
1.26Diluted earnings (loss) per share from continuing operations

$
2.25


$
1.92


$
2.37


$
(16.00
)

$
1.05Consolidated Balance Sheet Data(2):Total assets

$
3,025.5


$
3,124.8


$
3,282.7


$
2,405.5


$
2,068.9Current maturities of long-term debt

$
2.7


$
2.7


$
4.2


$
738.4


$
24.0Total long-term debt

$
672.5


$
567.8


$
678.4


$
738.4


$
576.1Total long-term liabilities (including long-term debt)

$
851.4


$
768.2


$
915.8


$
809.6


$
717.2Cash dividends declared per common share

$
0.48


$
0.48


$
0.48


$
0.48


$
  30




---



##### Table of Contents



(1)
    
    Income statement data reflect reclassifications from the prior
    years presentation to exclude franchises sold, identified
    for sale, or terminated subsequent to December 31, 2008
    which had not been previously included in discontinued
    operations or includes previously held for sale which
    subsequently were reclassed to held and used. See Note 2 to our
    accompanying consolidated financial statements, Business
    Acquisitions and Dispositions, which discusses 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 Note 2 to our accompanying consolidated financial
    statements, business combinations and dispositions have had a
    material impact on our reported financial information.  Item 7:
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  2009
    Events
            
    Executed amendments to our 2006 Credit Facility in the first
    quarter of 2009 which contained restrictive operating provisions; 31




---



##### Table of Contents




    In the second quarter of 2009, we paid the holders of our
    5.25% Convertible Notes $15.7 million in cash, issued
    $85.6 million in aggregate principal of 6.0% Senior
    Secured Convertible Notes due 2012 (the
    6.0% Convertible Notes) and issued
    860,723 shares of Class A common stock in private
    placements exempt from registration requirements in full
    satisfaction of our obligations under our 5.25% Convertible
    Notes. We executed additional amendments to our 2006 Credit
    Facility further increasing the restrictions on our activities;
    Chrysler LLC filed for bankruptcy protection in the second
    quarter of 2009 and Fiat SpA purchased a substantial portion of
    Chrysler LLCs assets (including rights related to our
    franchise agreements) which ultimately resulted in the
    involuntary termination of three of our Chrysler dealership
    franchises affecting one dealership location;
    General Motors Corp. filed for bankruptcy protection in the
    second quarter of 2009 and emerged from bankruptcy in the third
    quarter of 2009. Six of our General Motors dealerships,
    representing 12 franchises, including three Hummer franchises at
    multi-franchise dealerships, two Saab franchises at
    multi-franchise dealerships and one additional General Motors
    franchise at a multi-franchise dealership received letters
    stating that the franchise agreements between General Motors and
    us will not be continued on a long-term basis. All of these
    terminations, with the exception of the Hummer and Saab
    franchises, were completed by December 31, 2009;
    Concurrently completed a debt and equity offering in the third
    quarter of 2009, generating net proceeds of $266.4 million
    through the issuance of $172.5 million principal of
    5.0% Convertible Notes due 2029 which are redeemable by us
    and putable by the holders after October 1, 2014 (the
    5.0% Convertible Notes) and issuance of
    10,350,000 shares of Class A common stock. The net
    proceeds were used to repay in full the $85.6 million in
    aggregate principal amount of 6.0% Convertible Notes issued
    in May 2009, plus accrued interest, repurchase
    $143.0 million of our 4.25% Convertible Notes, plus
    accrued interest, and repay amounts outstanding on our 2006
    Credit Facility;
    U.S. Government CARS program ran from late July to early
    September creating a spike in the SAAR in August to
    14.1 million units;
    Completed the refinancing of our 2006 Credit Facility by
    entering into the 2010 Credit Facilities and the Silo Floor Plan
    Facilities.       32




---



##### Table of Contents



Form 10-K.
  Overview
      year-over-year
  Form 10-K Form 10-K
 33




---



##### Table of Contents



Use of
    Estimates and Critical Accounting Policies
      Finance,
    Insurance and Service Contracts
      Goodwill
    and Franchise Assets
     34




---



##### Table of Contents



Insurance
    Reserves
   35




---



##### Table of Contents



Lease
    Exit Accruals
    Legal
    Proceedings
    Classification
    of Franchises in Continuing and Discontinued
    Operations
    Income
    Taxes
   36




---



##### Table of Contents



Recent
    Accounting Pronouncements
     37




---



##### Table of Contents



Twelve Months Ended December 31,2002


2003


2004


2005


2006


2007


2008


2009(Dollars in thousands)Increase in Interest Expense


(2,108
)


(3,530
)


(3,899
)


(4,656
)


(9,044
)


(9,898
)


(10,704
)


(6,205
)Tax Benefit


843



1,412



1,560



1,862



3,617



3,959



4,282



2,482Effect on Net Income


(1,265
)


(2,118
)


(2,339
)


(2,794
)


(5,427
)


(5,939
)


(6,422
)


(3,723
)        38




---



##### Table of Contents



39




---



##### Table of Contents



Results
    of Operations
    Percentage of Total Revenue(1)for the Year Ended December 31,2007


2008


2009Revenues:New vehicles


61.2
%


58.0
%


53.2
%Used vehicles


17.3
%


19.5
%


24.1
%Wholesale vehicles


4.9
%


4.0
%


2.5
%Parts, service and collision repair


14.0
%


15.9
%


17.8
%Finance, insurance and other


2.6
%


2.6
%


2.4
%Total revenue


100.0
%


100.0
%


100.0
%Cost of sales(2)


84.6
%


84.0
%


83.0
%Gross profit


15.4
%


16.0
%


17.0
%Selling, general and administrative expenses


11.4
%


13.1
%


13.8
%Impairment charges


0.1
%


11.7
%


0.4
%Depreciation and amortization


0.3
%


0.6
%


0.5
%Operating income


3.6
%


(9.4
%)


2.3
%Interest expense, floor plan


0.8
%


0.6
%


0.3
%Interest expense, other, net


0.5
%


0.8
%


1.4
%Interest expense, non-cash, convertible debt


0.1
%


0.2
%


0.0
%Interest expense, non-cash, cash flow swaps


0.0
%


0.0
%


0.1
%Other expense, net


0.0
%


0.0
%


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


2.2
%


(11.0
%)


0.4
%Income tax expense (benefit)


0.9
%


(1.8
%)


(0.5
%)Income (loss) from continuing operations


1.3
%


(9.2
%)


0.9
%     (1)
    
    Prior years income statement data reflects
    reclassifications to exclude additional franchises sold,
    identified for sale or terminated subsequent to
    December 31, 2008 which had not been previously included in
    discontinued operations or include franchises previously held
    for sale which subsequently were reclassed to held and used. See
    Note 2 to the accompanying consolidated financial
    statements, Business Acquisitions and Dispositions, which
    discusses 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.     40




---



##### Table of Contents



Impairments
    and Other Charges
             41




---



##### Table of Contents



Continuing Operationsfor the Year Ended December 31,2007


2008


2009Gross profit, selling, general & administrative
    expensesHurricane and hail storm related expenses






8.0



Lease exit and other accruals


1.5



13.5



1.1Impairment chargesProperty impairment charges


1.0



14.6



19.1Goodwill impairment charges






795.6



1.1Franchise agreement and other asset impairment charges






12.8



4.3Interest ExpenseCash-flow swap ineffectiveness charges










4.8Debt restructuring charges










12.0Income tax related adjustmentsValuation allowances and other tax adjustment expense/(benefit)


0.4



109.6



(43.3
)   Discontinued Operationsfor the Year Ended December 31,2007


2008


2009Gross profit, selling, general & administrative
    expensesLease exit and other accruals

$
1.8


$
12.8


$
27.6Impairment chargesProperty impairment charges


2.0



10.3



3.9Goodwill impairment charges






1.8



1.6Franchise agreement and other asset impairment charges


3.1



14.4



Favorable lease asset impairment charges






1.9



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


0.9



5.4



(4.1
)   New
    Vehicles
   42




---



##### Table of Contents



SAAR

2008


2009


% Change


2007


2008


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


13.2



10.4



(21.2
%)


16.1



13.2



(18.0
%)     For the Year-Ended December 31,


Better/(Worse)2008


2009


Change


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

$
4,064,167


$
3,260,086


$
(804,081
)


(19.8
%)Gross profit

$
269,628


$
225,558


$
(44,070
)


(16.3
%)Unit sales


125,105



100,102



(25,003
)


(20.0
%)Revenue per Unit

$
32,486


$
32,568


$
82



0.3
%Gross profit per unit

$
2,155


$
2,253


$
98



4.5
%Gross profit as a % of revenue


6.6
%


6.9
%


30
bps   For the Year-Ended December 31,


Better/(Worse)2007


2008


Change


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

$
4,842,427


$
4,064,167


$
(778,260
)


(16.1
%)Gross profit

$
331,792


$
269,628


$
(62,164
)


(18.7
%)Unit sales


147,809



125,105



(22,704
)


(15.4
%)Revenue per Unit

$
32,761


$
32,486


$
(275
)


(0.8
%)Gross profit per unit

$
2,245


$
2,155


$
(90
)


(4.0
%)Gross profit as a % of revenue


6.9
%


6.6
%


(30
)bps   43




---



##### Table of Contents



For the Year-Ended December 31,


Better/(Worse)2008


2009


Change


% Change(In thousands except units and per unit data)Same Store:Revenue

$
4,064,167


$
3,256,889


$
(807,278
)


(19.9
%)Gross profit

$
270,912


$
221,914


$
(48,998
)


(18.1
%)Unit sales


125,105



100,049



(25,056
)


(20.0
%)Revenue per unit

$
32,486


$
32,553


$
67



0.2
%Gross profit per unit

$
2,165


$
2,218


$
53



2.4
%Gross profit as a % of revenue


6.7
%


6.8
%


10
bps   For the Year-Ended December 31,


Better/(Worse)2007


2008


Change


% Change(In thousands except units and per unit data)Same Store:Revenue

$
4,816,806


$
3,880,168


$
(936,638
)


(19.4
%)Gross profit

$
329,680


$
258,702


$
(70,978
)


(21.5
%)Unit sales


147,220



121,170



(26,050
)


(17.7
%)Revenue per unit

$
32,718


$
32,023


$
(695
)


(2.1
%)Gross profit per unit

$
2,239


$
2,135


$
(104
)


(4.6
%)Gross profit as a % of revenue


6.8
%


6.7
%


(10
)bps          44




---



##### Table of Contents



Used
    Vehicles
    For the Year-Ended December 31,


Better/(Worse)2008


2009


Change


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

$
1,368,596


$
1,475,395


$
106,799



7.8
%Gross profit

$
119,215


$
120,264


$
1,049



0.9
%Unit sales


68,808



77,323



8,515



12.4
%Revenue per Unit

$
19,890


$
19,081


$
(809
)


(4.1
%)Gross profit per unit

$
1,733


$
1,555


$
(178
)


(10.3
%)Gross profit as a % of revenue


8.7
%


8.2
%


(50
)bpsCPO revenue

$
715,974


$
741,866


$
25,892



3.6
%CPO unit sales


28,260



28,942



682



2.4
%   For the Year-Ended December 31,


Better/(Worse)2007


2008


Change


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

$
1,370,890


$
1,368,596


$
(2,294
)


(0.2
%)Gross profit

$
127,858


$
119,215


$
(8,643
)


(6.8
%)Unit sales


68,205



68,808



603



0.9
%Revenue per Unit

$
20,100


$
19,890


$
(210
)


(1.0
%)Gross profit per unit

$
1,875


$
1,733


$
(142
)


(7.6
%)Gross profit as a % of revenue


9.3
%


8.7
%


(60
)bpsCPO revenue

$
611,914


$
715,974


$
104,060



17.0
%CPO unit sales


23,670



28,260



4,590



19.4
%   For the Year-Ended December 31,


Better/(Worse)2008


2009


Change


% Change(In thousands except units and per unit data)Same Store:Revenue

$
1,368,596


$
1,474,443


$
105,847



7.7
%Gross profit

$
117,805


$
119,960


$
2,155



1.8
%Unit sales


68,808



77,278



8,470



12.3
%Revenue per unit

$
19,890


$
19,080


$
(810
)


(4.1
%)Gross profit per unit

$
1,712


$
1,552



(160
)


(9.3
%)Gross profit as a % of revenue


8.6
%


8.1
%


(50
)bpsCPO revenue

$
715,974


$
741,468


$
25,494



3.6
%CPO unit sales


28,260



28,926



666



2.4
%  45




---



##### Table of Contents



For the Year-Ended December 31,


Better/(Worse)2007


2008


Change


% Change(In thousands except units and per unit data)Same Store:Revenue

$
1,364,380


$
1,322,791


$
(41,589
)


(3.0
%)Gross profit

$
127,999


$
114,629


$
(13,370
)


(10.4
%)Unit sales


68,003



67,165



(838
)


(1.2
%)Revenue per unit

$
20,064


$
19,695


$
(369
)


(1.8
%)Gross profit per unit

$
1,882


$
1,707



(175
)


(9.3
%)Gross profit as a % of revenue


9.4
%


8.7
%


(70
)bpsCPO revenue

$
608,743


$
682,815


$
74,072



12.2
%CPO unit sales


23,577



27,217



3,640



15.4
%       Wholesale
    Vehicles
    For the Year-EndedDecember 31,


Better/(Worse)2008


2009


Change


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

$
277,559


$
150,695


$
(126,864
)


(45.7
%)Gross loss

$
(6,873
)

$
(6,021
)

$
852



12.4
%Unit sales


36,674



25,866



(10,808
)


(29.5
%)Revenue per Unit

$
7,568


$
5,826


$
(1,742
)


(23.0
%)Gross loss per unit

$
(187
)

$
(233
)

$
(46
)


(24.6
%)Gross loss as a % of revenue


(2.5
%)


(4.0
%)


(150
)bps   46




---



##### Table of Contents



For the Year-EndedDecember 31,


Better/(Worse)2007


2008


Change


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

$
384,251


$
277,559


$
(106,692
)


(27.8
%)Gross loss

$
(4,685
)

$
(6,873
)

$
(2,188
)


(46.7
%)Unit sales


43,227



36,674



(6,553
)


(15.2
%)Revenue per Unit

$
8,889


$
7,568


$
(1,321
)


(14.9
%)Gross loss per unit

$
(108
)

$
(187
)

$
(79
)


(73.1
%)Gross loss as a % of revenue


(1.2
%)


(2.5
%)


(130
)bps   For the Year-EndedDecember 31,


Better/(Worse)2008


2009


Change


% Change(In thousands except units and per unit data)Same Store:Revenue

$
277,559


$
150,677


$
(126,882
)


(45.7
%)Gross loss

$
(6,873
)

$
(6,021
)

$
852



12.4
%Unit sales


36,674



25,864



(10,810
)


(29.5
%)Revenue per unit

$
7,568


$
5,826


$
(1,742
)


(23.0
%)Gross loss per unit

$
(187
)

$
(233
)

$
(46
)


(24.6
%)Gross loss as a % of revenue


(2.5
%)


(4.0
%)


(150
)bps   For the Year-EndedDecember 31,


Better/(Worse)2007


2008


Change


% Change(In thousands except units and per unit data)Same Store:Revenue

$
382,200


$
269,117


$
(113,083
)


(29.6
%)Gross loss

$
(4,702
)

$
(6,811
)

$
(2,109
)


(44.9
%)Unit sales


43,092



35,986



(7,106
)


(16.5
%)Revenue per unit

$
8,869


$
7,478


$
(1,391
)


(15.7
%)Gross loss per unit

$
(109
)

$
(189
)

$
(80
)


(73.4
%)Gross loss as a % of revenue


(1.2
%)


(2.5
%)


(130
)bps       Parts,
    Service and Collision Repair (Fixed
    Operations)
   47




---



##### Table of Contents



For the Year-Ended December 31,


Better/(Worse)2008


2009


Change


% Change(In thousands)Reported:RevenueParts

$
599,445


$
589,638


$
(9,807
)


(1.6
%)Service


459,610



448,764



(10,846
)


(2.4
%)Collision Repair


55,022



50,320



(4,702
)


(8.5
%)Total

$
1,114,077


$
1,088,722


$
(25,355
)


(2.3
%)Gross profitParts

$
205,753


$
201,950


$
(3,803
)


(1.8
%)Service


319,785



317,383



(2,402
)


(0.8
%)Collision Repair


30,851



28,422



(2,429
)


(7.9
%)Total

$
556,389


$
547,755


$
(8,634
)


(1.6
%)Gross profit as a % of revenueParts


34.3
%


34.2
%


(10
)bpsService


69.6
%


70.7
%


110
bpsCollision Repair


56.1
%


56.5
%


40
bpsTotal


49.9
%


50.3
%


40
bps   48




---



##### Table of Contents



For the Year-Ended December 31,


Better/(Worse)2007


2008


Change


% Change(In thousands)Reported:RevenueParts

$
590,288


$
599,445


$
9,157



1.6
%Service


461,013



459,610



(1,403
)


(0.3
%)Collision Repair


55,150



55,022



(128
)


(0.2
%)Total

$
1,106,451


$
1,114,077


$
7,626



0.7
%Gross profitParts

$
205,072


$
205,753


$
681



0.3
%Service


321,869



319,785



(2,084
)


(0.6
%)Collision Repair


31,625



30,851



(774
)


(2.4
%)Total

$
558,566


$
556,389


$
(2,177
)


(0.4
%)Gross profit as a % of revenueParts


34.7
%


34.3
%


(40
)bpsService


69.8
%


69.6
%


(20
)bpsCollision Repair


57.3
%


56.1
%


(120
)bpsTotal


50.5
%


49.9
%


(60
)bps   For the Year-Ended December 31,


Better/(Worse)2008


2009


Change


% Change(In thousands)Same Store:RevenueParts

$
599,445


$
588,702


$
(10,743
)


(1.8
%)Service


459,610



448,061



(11,549
)


(2.5
%)Collision Repair


55,022



50,320



(4,702
)


(8.5
%)Total

$
1,114,077


$
1,087,083


$
(26,994
)


(2.4
%)Gross profitParts

$
205,753


$
201,279


$
(4,474
)


(2.2
%)Service


319,785



316,885



(2,900
)


(0.9
%)Collision Repair


30,851



28,423



(2,428
)


(7.9
%)Total

$
556,389


$
546,587


$
(9,802
)


(1.8
%)Gross profit as a % of revenueParts


34.3
%


34.2
%


(10
)bpsService


69.6
%


70.7
%


110
bpsCollision Repair


56.1
%


56.5
%


40
bpsTotal


49.9
%


50.3
%


40
bps   49




---



##### Table of Contents



For the Year-Ended December 31,


Better/(Worse)2007


2008


Change


% Change(In thousands)Same Store:RevenueParts

$
585,941


$
577,025


$
(8,916
)


(1.5
%)Service


458,562



444,278



(14,284
)


(3.1
%)Collision Repair


55,151



55,023



(128
)


(0.2
%)Total

$
1,099,654


$
1,076,326


$
(23,328
)


(2.1
%)Gross profitParts

$
203,205


$
198,043


$
(5,162
)


(2.5
%)Service


320,060



309,149



(10,911
)


(3.4
%)Collision Repair


31,626



30,853



(773
)


(2.4
%)Total

$
554,891


$
538,045


$
(16,846
)


(3.0
%)Gross profit as a % of revenueParts


34.7
%


34.3
%


(40
)bpsService


69.8
%


69.6
%


(20
)bpsCollision Repair


57.3
%


56.1
%


(120
)bpsTotal


50.5
%


50.0
%


(50
)bps       Finance,
    Insurance and Other
   50




---



##### Table of Contents




    Lower cost, below-market financing is often available only from
    the manufacturers captives and franchised dealers;
    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-Ended December 31,


Better/(Worse)2008


2009


Change


% Change(In thousands except per unit data)Reported:Revenue

$
183,709


$
156,811


$
(26,898
)


(14.6
%)Gross profit per retail unit (excluding fleet)

$
1,018


$
929


$
(89
)


(8.7
%)   For the Year-Ended December 31,


Better/(Worse)2007


2008


Change


% Change(In thousands except per unit data)Reported:Revenue

$
203,093


$
183,709


$
(19,384
)


(9.5
%)Gross profit per retail unit (excluding fleet)

$
1,013


$
1,018


$
5



0.5
%   For the Year-Ended December 31,


Better/(Worse)2008


2009


Change


% Change(In thousands except per unit data)Same Store:Revenue

$
182,037


$
155,999


$
(26,038
)


(14.3
%)Gross profit per retail unit (excluding fleet)

$
1,009


$
925


$
(84
)


(8.3
%)   51




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##### Table of Contents



For the Year-Ended December 31,


Better/(Worse)2007


2008


Change


% Change(In thousands except per unit data)Same Store:Revenue

$
198,588


$
176,510


$
(22,078
)


(11.1
%)Gross profit per retail unit (excluding fleet)

$
995


$
1,007


$
12



1.2
%       Selling,
    General and Administrative Expenses
    For the Year-Ended December 31,


Better/(Worse)2008


2009


Change


% Change(In thousands)Reported Expense:Compensation

$
503,122


$
480,106


$
23,016



4.6
%Advertising


58,378



46,318



12,060



20.7
%Rent and Rent Related


142,044



141,241



803



0.6
%Other


217,823



176,129



41,694



19.1
%Total

$
921,367


$
843,794


$
77,573



8.4
%SG&A as a % of grossCompensation


44.8
%


46.0
%


(120
)bpsAdvertising


5.2
%


4.4
%


80
bpsRent and Rent Related


12.7
%


13.5
%


(80
)bpsOther


19.4
%


16.8
%


260
bpsTotal


82.1
%


80.7
%


140
bps   52




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##### Table of Contents



For the Year-Ended December 31,


Better/(Worse)2007


2008


Change


% Change(In thousands)Reported Expense:Compensation

$
513,289


$
503,122


$
10,167



2.0
%Advertising


64,246



58,378



5,868



9.1
%Rent and Rent Related


139,766



142,044



(2,278
)


(1.6
%)Other


186,343



217,823



(31,480
)


(16.9
%)Total

$
903,644


$
921,367


$
(17,723
)


(2.0
%)SG&A as a % of grossCompensation


42.2
%


44.8
%


(260
)bpsAdvertising


5.3
%


5.2
%


10
bpsRent and Rent Related


11.5
%


12.7
%


(120
)bpsOther


15.3
%


19.4
%


(410
)bpsTotal


74.3
%


82.1
%


(780
)bps   2009
    Compared to 2008
            2008
    Compared to 2007
   53




---



##### Table of Contents



Impairment
    Charges
      Depreciation
    and Amortization
    Interest
    Expense, Floor Plan
       54




---



##### Table of Contents



Interest
    Expense, Other, Net
    2008


2009Increase/(Decrease)


Increase/(Decrease)in Interest Expense


in Interest Expense(In millions)


(In millions)Interest rates - Changes in the average interest rate on the revolving
    facilities (7.29% in 2007 and 5.26% in 2008 and 3.33% in 2009)

$
(1.0
)

$
(1.6
)Debt balances - Increase (decrease) in debt balances


6.7



(0.4
)Other factors - Decrease in capitalized interest


0.9



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


12.9



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


(2.0
)


0.8- Interest expense (benefit) allocation to discontinued
    operations


0.7



(0.2
)- Increase (decrease) in deferred loan cost amortization(2)


0.1



11.7- Increase (decrease) in other expense, net


1.8



1.1$
20.1


$
25.3     (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
  mark-to-market
 55




---



##### Table of Contents



2008


2009Increase/(Decrease)


Increase/(Decrease)in Interest Expense


in Interest Expense(In millions)


(In millions)Factors - Increase (decrease) in amortization of discount recorded as a
    result of adoption of Debt with Conversion and Other
    Options in the ASC

$
0.8


$
(3.3
)- Increase (decrease) in deferred loan cost amortization






0.5- Increase (decrease) in convertible note discount amortization






4.1- Increase (decrease) in
    mark-to-market
    on derivatives and swaps






(11.3
)$
0.8


$
(10.0
)   Interest
    Expense, Non-Cash, Cash Flow Swaps
     56




---



##### Table of Contents



Other
    Income/Expense, Net
    Provision
    for Income Taxes
    Discontinued
    Operations
    Year Ended December 31,2007


2008


2009(Dollars in thousands)Loss from operations

$
(14,188
)

$
(16,201
)

$
(7,044
)Gain (loss) on disposal of franchises


178



(2,325
)


(293
)Lease exit charges


(1,787
)


(13,747
)


(31,850
)Property impairment charges


(1,957
)


(10,251
)


(3,938
)Goodwill impairment charges






(1,839
)


(1,586
)Franchise agreement and other asset impairment charges


(3,100
)


(14,400
)


Favorable lease asset impairment charges






(1,903
)


Pre-tax loss

$
(20,854
)

$
(60,666
)

$
(44,711
)Total revenues

$
941,983


$
479,894


$
218,022     Liquidity
    and Capital Resources
     57




---



##### Table of Contents



Long-Term
    Debt and Credit Facilities
  2010
    Credit Facilities
    Sub-Facility), Sub-Facility)
        Sub-Facility, Sub-Facility,
 58




---



##### Table of Contents



8.625% Notes
    5.0% Convertible
    Notes
       59




---



##### Table of Contents



4.25% Convertible
    Notes
    Notes
    Payable to a Finance Company
    Mortgage
    Notes
     60




---



##### Table of Contents



Sub-Facility.
  Floor
    Plan Facilities
    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, 2009 actual


1.12



1.44



1.29      61




---



##### Table of Contents



Acquisitions
    and Dispositions
    Cash Portion ofSubsequent Year


Purchase PriceYear of Acquisition

Revenues


(net of cash acquired)(In millions)2006

$
231.0


$
110.42007

$
471.7


$
212.52008

$
30.9


$
22.4       Capital
    Expenditures
      Stock
    Repurchase Program
     62




---



##### Table of Contents



Dividends
    Cash
    Flows
  Cash Flows from Operating Activities 
          Cash Flows from Investing Activities 
 63




---



##### Table of Contents



Sub-Facility.
  Sub-Facility.
  Cash Flows from Financing Activities 
  Cash Flows from Discontinued Operations 
  Guarantees
    and Indemnification Obligations
   64




---



##### Table of Contents



Future
    Liquidity Outlook
    2010


2011


2012


2013


2014


Thereafter


Total(Amounts in thousands)Floor Plan Facilities(1)

$
766,710


$



$



$



$



$



$
766,710Long-Term Debt(2)


23,934



7,903



8,055



289,292



183,944



92,212



605,340Letters of Credit


96,621























96,621Estimated Interest Payments on Floor Plan Facilities(3)


3,537























3,537Estimated Interest Payments on Long-Term Debt(4)


66,359



62,720



49,352



31,455



12,776



30,346



253,008Operating Leases (Net of Sublease Rentals)


119,850



111,827



103,965



97,941



92,584



464,702



990,869Construction Contracts


39,045























39,045Other Purchase Obligations(5)


6,738























6,738FIN 48 Liability(6)


500



















30,729



31,229Total

$
1,123,294


$
182,450


$
161,372


$
418,688


$
289,304


$
617,989


$
2,793,097     (1)
    
    Floor plan facilities include amounts classified as liabilities
    associated with assets held for sale.(2)
    
    Amounts outstanding under the 8.625% Notes are redeemable
    at our option but have been classified in this schedule
    according to contractual maturity. The 4.25% Convertible
    Notes and 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 dates, which are November
    2010 for the 4.25% Convertible Notes and October 2014 for
    the 5.0% Convertible Notes. All amounts represent
    outstanding principal only.(3)
    
    Floor plan facilities balances (including amounts classified as
    liabilities associated with assets held for sale) 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, 2009 floor plan
    facilities balance, the weighted average interest rate for the
    fourth quarter of 2009 of 2.8% and the assumption that floor
    plan facilities balances at December 31, 2009 would be
    relieved within 60 days in connection with the sale of the
    associated vehicle inventory.(4)
    
    Estimated interest payments calculated based on assumed or
    stated maturities consistent discussion in (2) above.
    Estimated interest payments include payments related to interest
    rate swaps.(5)
    
    Other Purchase Obligations include contracts for office
    supplies, utilities, and various other items or services.(6)
    
    Amount represents recorded liability, including interest and
    penalties, related to FIN 48. See Notes 1 and 7 to the
    accompanying consolidated financial statements.   65




---



##### Table of Contents



Seasonality
    Off-Balance
    Sheet Arrangements
  Guarantees
    and Indemnification Obligations
  sub-lessees,
  5.0% Convertible
    Notes
    4.25% Convertible
    Notes, Hedge and Warrants
     66




---



##### Table of Contents



Item 7A:
    Quantitative
    and Qualitative Disclosures About Market Risk.  Interest
    Rate Risk
      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$
3.8



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$
11.9



4.655
%

one-month LIBOR

December 10, 2017$
9.0



6.860
%

one-month LIBOR

August 1, 2017$
7.3



4.330
%

one-month LIBOR

July 1, 2013     (1)
    
    The one-month LIBOR rate was 0.231% at December 31, 2009.(2)
    
    After December 31, 2009 changes in fair value will be
    recorded through earnings.   67




---



##### Table of Contents



2010


2011


2012


2013


2014


Thereafter


Total


Fair Value(Amounts in thousands, except for interest rates)LiabilitiesLong-term Debt:Fixed Rate

$
21,783


$
5,314


$
5,673


$
281,169


$
181,938


$
71,212


$
567,089


$
572,833Average Stated Interest Rate


5.13
%


8.08
%


8.26
%


8.62
%


5.15
%


6.83
%


7.14
%Variable Rate


2,151



2,589



2,382



8,123



2,006



21,000



38,251



33,386Average Stated Interest Rate


1.99
%


2.25
%


2.14
%


2.66
%


2.01
%


2.32
%


2.34
%Variable to Fixed


1,540



1,558



366,575



7,338



1,234



18,756



397,001



(32,499
)Average pay rate


5.30
%


5.32
%


5.04
%


4.56
%


5.72
%


5.88
%


5.07
%Receive rate


One month
    LIBOR



One month
    LIBOR



One month
    LIBOR



One month
    LIBOR



One month
    LIBOR



One month
    LIBOR



One month
    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.
  Report on
    Internal Control Over Financial Reporting
  Rules 13a-15(f).
  Internal Control 
    Integrated Framework Internal
 68




---



##### Table of Contents



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.   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules.  Form 10-K,
   69




---



##### Table of Contents



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 4.25% Convertible Senior Subordinated Note due 2015
    (incorporated by reference to Exhibit 4.2 to the November
    2005
    Form 8-K).4
.5*

Subordinated Indenture, dated as of May 7, 2002, among
    Sonic, the guarantors named there in and U.S. Bank National
    Association, as trustee (incorporated by reference to
    Exhibit 4.1 to Sonics Current Report on
    Form 8-K
    filed November 21, 2005).4
.6*

Second Supplemental Indenture dated as of November 23,
    2005, between Sonic and U.S. Bank National Association
    (incorporated by reference to Exhibit 4.1 to the November
    2005
    Form 8-K).4
.7*

Form of 5.0% Convertible Senior Note due October 2029
    (incorporated by reference to Exhibit 4.2 to the September
    2009
    Form 8-K
    (Reg.
    No. 333-1691519)).4
.8*

Indenture dated as of September 23, 2009 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 2009
    Form 8-K).4
.9*

First Supplemental Indenture dated as of September 23, 2009
    to the Base Indenture between Sonic and the Trustee (the
    Supplemental Indenture and together with the Base
    Indenture, the Indenture) (incorporated by reference
    to Exhibit 4.2 to the September 2009
    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) 70




---



##### Table of Contents



ExhibitNo.

Description10
.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*

Warrant confirmation, dated November 18, 2005, between
    Sonic and JPMorgan Chase Bank, National Association
    (incorporated by reference to Exhibit 10.4 to the November
    2005
    Form 8-K).10
.7*

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
.8*

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
.9*

Credit Agreement, dated as of February 17, 2006 (the
    Credit Agreement), among Sonic; the subsidiaries of
    Sonic named therein; Bank of America, N.A., as Administrative
    Agent, Lender and L/C Issuer; JPMorgan Chase Bank, N.A., as
    Syndication Agent and Lender, Toyota Motor Credit Corporation,
    as Documentation Agent and Lender; and BMW Financial Services
    NA, LLC, Carolina First Bank, Comerica Bank, Fifth Third Bank,
    General Electric Capital Corporation, KeyBank National
    Association, Nissan Motor Acceptance Corporation, Sovereign
    Bank, SunTrust Bank, Wachovia Bank, National Association and
    World Omni Financial Corp., each as a Lender and, collectively,
    the Lenders (incorporated by reference to
    Exhibit 10.2 to the March 2006
    Form 10-Q).10
.10*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of Bank of
    America, N.A., pursuant to the Credit Agreement (incorporated by
    reference to Exhibit 10.32 to the March 2006
    Form 10-Q).10
.11*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of JPMorgan
    Chase Bank, N.A., pursuant to the Credit Agreement (incorporated
    by reference to Exhibit 10.4 to the March 2006
    Form 10-Q).10
.12*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of Toyota
    Motor Credit Corporation pursuant to the Credit Agreement
    (incorporated by reference to Exhibit 10.5 to the March
    2006
    Form 10-Q).10
.13*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of BMW
    Financial Services NA, LLC, pursuant to the Credit Agreement
    (incorporated by reference to Exhibit 10.6 to the March
    2006
    Form 10-Q).10
.14*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of Carolina
    First Bank pursuant to the Credit Agreement (incorporated by
    reference to Exhibit 10.7 to the March 2006
    Form 10-Q).10
.15*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of Comerica
    Bank pursuant to the Credit Agreement (incorporated by reference
    to Exhibit 10.8 to the March 2006
    Form 10-Q).10
.16*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of Fifth
    Third Bank pursuant to the Credit Agreement (incorporated by
    reference to Exhibit 10.9 to the March 2006
    Form 10-Q).10
.17*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of General
    Electric Capital Corporation pursuant to the Credit Agreement
    (incorporated by reference to Exhibit 10.10 to the March
    2006
    Form 10-Q).10
.18*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of KeyBank
    National Association pursuant to the Credit Agreement
    (incorporated by reference to Exhibit 10.11 to the March
    2006
    Form 10-Q).10
.19*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of Nissan
    Motor Acceptance Corporation pursuant to the Credit Agreement
    (incorporated by reference to Exhibit 10.12 to the March
    2006
    Form 10-Q). 71




---



##### Table of Contents



ExhibitNo.

Description10
.20*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of
    Sovereign Bank pursuant to the Credit Agreement (incorporated by
    reference to Exhibit 10.13 to the March 2006
    Form 10-Q).10
.21*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of SunTrust
    Bank pursuant to the Credit Agreement (incorporated by reference
    to Exhibit 10.14 to the March 2006
    Form 10-Q).10
.22*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of Wachovia
    Bank, National Association, pursuant to the Credit Agreement
    (incorporated by reference to Exhibit 10.15 to the March
    2006
    Form 10-Q).10
.23*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of World
    Omni Financial Corp. pursuant to the Credit Agreement
    (incorporated by reference to Exhibit 10.16 to the March
    2006
    Form 10-Q).10
.24*

Security Agreement, dated as of February 17, 2006, by
    Sonic, the subsidiaries of Sonic named therein and Bank of
    America, N.A., as Administrative Agent for the Lenders under the
    Credit Agreement (incorporated by reference to
    Exhibit 10.17 to the March 2006
    Form 10-Q).10
.25*

Company Guaranty Agreement, dated as of February 17, 2006,
    by Sonic, as Guarantor, to Bank of America, N.A., as
    Administrative Agent for the Lenders under the Credit Agreement
    (incorporated by reference to Exhibit 10.18 to the March
    2006
    Form 10-Q).10
.26*

Subsidiary Guaranty Agreement, dated as of February 17,
    2006, by the subsidiaries of Sonic named therein, as Guarantors,
    to Bank of America, N.A, as Administrative Agent for the Lenders
    under the Credit Agreement (incorporated by reference to
    Exhibit 10.19 to the March 2006
    Form 10-Q).10
.27*

Securities Pledge Agreement, dated as of February 17, 2006,
    by Sonic, the subsidiaries of Sonic named therein and Bank of
    America, N.A., as Administrative Agent for the Lenders under the
    Credit Agreement (incorporated by reference to
    Exhibit 10.20 to the March 2006
    Form 10-Q).10
.28*

Sonic Automotive, Inc. 2004 Stock Incentive Plan Form of
    Performance-Based Restricted Stock Unit Award Agreement.(1)10
.29*

Sonic Automotive, Inc. 2004 Stock Incentive Plan Form of
    Performance-Based Restricted Stock Award Agreement.(1)10
.30*

Sonic Automotive, Inc. Incentive Compensation Plan, Amended and
    Restated as of December 4, 2008.(1)10
.31*

Amendment No. 1 to Credit Agreement dated May 25, 2006
    (incorporated by reference to Exhibit 10.35 to Sonics
    Annual Report on
    Form 10-K
    for the year ended December 31, 2008).10
.32*

Amendment No. 2 to Credit Agreement dated April 24,
    2007 (incorporated by reference to Exhibit 10.36 to
    Sonics Annual Report on
    Form 10-K
    for the year ended December 31, 2008).10
.33*

Amendment No. 3 to Credit Agreement dated June 3, 2008
    (incorporated by reference to exhibit 99.1 to Sonics
    Quarterly report on
    form 10-Q
    for the quarter ended March 31, 2008).10
.34*

(A) Limited Short-Term Amendment to Credit Agreement Until
    May 4, 2009 and(B) Amendment No. 4 to Credit
    Agreement and Consolidated Amendment to Other Loan Documents
    dated March 31, 2009 (incorporated by reference to
    Exhibit 10.1 to Sonics quarterly report on
    Form 10-Q
    for the quarter ended March 31, 2009).10
.35*

Amendment No. 5 to Credit Agreement dated May 4, 2009
    (incorporated by reference to Exhibit 10.1 to Sonics
    quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2009).(1)10
.36*

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
.37*

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
.38*

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). 72




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##### Table of Contents



ExhibitNo.

Description10
.39*

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
.40*

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
.41*

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
.42*

Amendment No. 6 to Credit Agreement dated
    September 11, 2009 (incorporated by reference to
    Exhibit 10.1 to Sonics quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2009).10
.43*

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 September 17, 2009
    Form 8-K).10
.44*

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 17, 2009
    Form 8-K).10
.45

Amendment No. 1 to Sonic Automotive, Inc. Formula Stock
    Option Plan for Independent Directors.(1)10
.46

Sonic Automotive, Inc. Incentive Compensation Plan Amended and
    Restated as of December 4, 2008.(1)10
.47

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 Faro Bank, National
    Association, as an L/C Issuer.10
.48

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Bank of America, N.A., pursuant to the Credit
    Agreement.10
.49

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of DCFS USA LLC, pursuant to the Credit Agreement.10
.50

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of BMW Financial Services NA, LLC, pursuant to the
    Credit Agreement.10
.51

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Toyota Motor Credit Corporation, pursuant to the
    Credit Agreement.10
.52

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of JPMorgan Chase Bank, N.A., pursuant to the Credit
    Agreement.10
.53

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Wachovia Bank, National Association, pursuant to the
    Credit Agreement.10
.54

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Comerica Bank, pursuant to the Credit Agreement.10
.55

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of World Omni Financial Corp., pursuant to the Credit
    Agreement.10
.56

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
.57

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
.58

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
.59

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. 73




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##### Table of Contents



ExhibitNo.

Description10
.60

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
.61

Syndicated New and Used Vehicle Floorplan 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
.62

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 Floorplan Credit Agreement.10
.63

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 Floorplan Credit Agreement.10
.64

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Wachovia Bank, National Association, pursuant to the
    Syndicated New and Used Vehicle Floorplan Credit Agreement.10
.65

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Comerica Bank, pursuant to the Syndicated New and
    Used Vehicle Floorplan Credit Agreement.10
.66

Company Guaranty Agreement, dated January 15, 2010, by
    Sonic Automotive, Inc. and Bank of America, N.A., as
    administrative agent for the lenders.10
.67

Subsidiary Guaranty Agreement, dated as of January 15,
    2010, by the Floorplan Subsidiary Guarantor, as Guarantors, to
    Bank of America, N.A, as administrative agent for the lenders.12
.1

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

Subsidiaries of Sonic.23
.1

Consent of Deloitte & Touche LLP.23
.2

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. 74




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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 (principalexecutive officer)
    and Director

February 24, 2010/s/  B.
    SCOTT SMITHB.
    Scott Smith

President, Chief Strategic Officer and Director

February 24, 2010/s/  DAVID
    P. COSPERDavid
    P. Cosper

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

February 24, 2010/s/  DAVID
    B. SMITHDavid
    B. Smith

Executive Vice President and Director

February 24, 2010/s/  WILLIAM
    R. BROOKSWilliam
    R. Brooks

Director

February 24, 2010/s/  WILLIAM
    I. BELKWilliam
    I. Belk

Director

February 24, 2010/s/  ROBERT
    HELLERRobert
    Heller

Director

February 24, 2010/s/  ROBERT
    L. REWEYRobert
    L. Rewey

Director

February 24, 2010/s/  VICTOR
    H. DOOLANVictor
    H. Doolan

Director

February 24, 2010/s/  DAVID
    C. VORHOFFDavid
    C. Vorhoff

Director

February 24, 2010  75




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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 4.25% Convertible Senior Subordinated Note due 2015
    (incorporated by reference to Exhibit 4.2 to the November
    2005
    Form 8-K).4
.5*

Subordinated Indenture, dated as of May 7, 2002, among
    Sonic, the guarantors named there in and U.S. Bank National
    Association, as trustee (incorporated by reference to
    Exhibit 4.1 to Sonics Current Report on
    Form 8-K
    filed November 21, 2005).4
.6*

Second Supplemental Indenture dated as of November 23,
    2005, between Sonic and U.S. Bank National Association
    (incorporated by reference to Exhibit 4.1 to the November
    2005
    Form 8-K).4
.7*

Form of 5.0% Convertible Senior Note due October 2029
    (incorporated by reference to Exhibit 4.2 to the September
    2009
    Form 8-K
    (Reg.
    No. 333-1691519)).4
.8*

Indenture dated as of September 23, 2009 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 2009
    Form 8-K).4
.9*

First Supplemental Indenture dated as of September 23, 2009
    to the Base Indenture between Sonic and the Trustee (the
    Supplemental Indenture and together with the Base
    Indenture, the Indenture) (incorporated by reference
    to Exhibit 4.2 to the September 2009
    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)10
.6*

Warrant confirmation, dated November 18, 2005, between
    Sonic and JPMorgan Chase Bank, National Association
    (incorporated by reference to Exhibit 10.4 to the November
    2005
    Form 8-K). 76




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##### Table of Contents



ExhibitNo.

Description10
.7*

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
.8*

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
.9*

Credit Agreement, dated as of February 17, 2006 (the
    Credit Agreement), among Sonic; the subsidiaries of
    Sonic named therein; Bank of America, N.A., as Administrative
    Agent, Lender and L/C Issuer; JPMorgan Chase Bank, N.A., as
    Syndication Agent and Lender, Toyota Motor Credit Corporation,
    as Documentation Agent and Lender; and BMW Financial Services
    NA, LLC, Carolina First Bank, Comerica Bank, Fifth Third Bank,
    General Electric Capital Corporation, KeyBank National
    Association, Nissan Motor Acceptance Corporation, Sovereign
    Bank, SunTrust Bank, Wachovia Bank, National Association and
    World Omni Financial Corp., each as a Lender and, collectively,
    the Lenders (incorporated by reference to
    Exhibit 10.2 to the March 2006
    Form 10-Q).10
.10*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of Bank of
    America, N.A., pursuant to the Credit Agreement (incorporated by
    reference to Exhibit 10.32 to the March 2006
    Form 10-Q).10
.11*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of JPMorgan
    Chase Bank, N.A., pursuant to the Credit Agreement (incorporated
    by reference to Exhibit 10.4 to the March 2006
    Form 10-Q).10
.12*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of Toyota
    Motor Credit Corporation pursuant to the Credit Agreement
    (incorporated by reference to Exhibit 10.5 to the March
    2006
    Form 10-Q).10
.13*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of BMW
    Financial Services NA, LLC, pursuant to the Credit Agreement
    (incorporated by reference to Exhibit 10.6 to the March
    2006
    Form 10-Q).10
.14*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of Carolina
    First Bank pursuant to the Credit Agreement (incorporated by
    reference to Exhibit 10.7 to the March 2006
    Form 10-Q).10
.15*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of Comerica
    Bank pursuant to the Credit Agreement (incorporated by reference
    to Exhibit 10.8 to the March 2006
    Form 10-Q).10
.16*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of Fifth
    Third Bank pursuant to the Credit Agreement (incorporated by
    reference to Exhibit 10.9 to the March 2006
    Form 10-Q).10
.17*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of General
    Electric Capital Corporation pursuant to the Credit Agreement
    (incorporated by reference to Exhibit 10.10 to the March
    2006
    Form 10-Q).10
.18*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of KeyBank
    National Association pursuant to the Credit Agreement
    (incorporated by reference to Exhibit 10.11 to the March
    2006
    Form 10-Q).10
.19*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of Nissan
    Motor Acceptance Corporation pursuant to the Credit Agreement
    (incorporated by reference to Exhibit 10.12 to the March
    2006
    Form 10-Q).10
.20*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of
    Sovereign Bank pursuant to the Credit Agreement (incorporated by
    reference to Exhibit 10.13 to the March 2006
    Form 10-Q).10
.21*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of SunTrust
    Bank pursuant to the Credit Agreement (incorporated by reference
    to Exhibit 10.14 to the March 2006
    Form 10-Q). 77




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##### Table of Contents



ExhibitNo.

Description10
.22*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of Wachovia
    Bank, National Association, pursuant to the Credit Agreement
    (incorporated by reference to Exhibit 10.15 to the March
    2006
    Form 10-Q).10
.23*

Promissory Note, dated February 17, 2006, executed by Sonic
    and the subsidiaries of Sonic named therein in favor of World
    Omni Financial Corp. pursuant to the Credit Agreement
    (incorporated by reference to Exhibit 10.16 to the March
    2006
    Form 10-Q).10
.24*

Security Agreement, dated as of February 17, 2006, by
    Sonic, the subsidiaries of Sonic named therein and Bank of
    America, N.A., as Administrative Agent for the Lenders under the
    Credit Agreement (incorporated by reference to
    Exhibit 10.17 to the March 2006
    Form 10-Q).10
.25*

Company Guaranty Agreement, dated as of February 17, 2006,
    by Sonic, as Guarantor, to Bank of America, N.A., as
    Administrative Agent for the Lenders under the Credit Agreement
    (incorporated by reference to Exhibit 10.18 to the March
    2006
    Form 10-Q).10
.26*

Subsidiary Guaranty Agreement, dated as of February 17,
    2006, by the subsidiaries of Sonic named therein, as Guarantors,
    to Bank of America, N.A, as Administrative Agent for the Lenders
    under the Credit Agreement (incorporated by reference to
    Exhibit 10.19 to the March 2006
    Form 10-Q).10
.27*

Securities Pledge Agreement, dated as of February 17, 2006,
    by Sonic, the subsidiaries of Sonic named therein and Bank of
    America, N.A., as Administrative Agent for the Lenders under the
    Credit Agreement (incorporated by reference to
    Exhibit 10.20 to the March 2006
    Form 10-Q).10
.28*

Sonic Automotive, Inc. 2004 Stock Incentive Plan Form of
    Performance-Based Restricted Stock Unit Award Agreement.(1)10
.29*

Sonic Automotive, Inc. 2004 Stock Incentive Plan Form of
    Performance-Based Restricted Stock Award Agreement.(1)10
.30*

Sonic Automotive, Inc. Incentive Compensation Plan, Amended and
    Restated as of December 4, 2008.(1)10
.31*

Amendment No. 1 to Credit Agreement dated May 25, 2006
    (incorporated by reference to Exhibit 10.35 to Sonics
    Annual Report on
    Form 10-K
    for the year ended December 31, 2008).10
.32*

Amendment No. 2 to Credit Agreement dated April 24,
    2007 (incorporated by reference to Exhibit 10.36 to
    Sonics Annual Report on
    Form 10-K
    for the year ended December 31, 2008).10
.33*

Amendment No. 3 to Credit Agreement dated June 3, 2008
    (incorporated by reference to exhibit 99.1 to Sonics
    Quarterly report on
    form 10-Q
    for the quarter ended March 31, 2008).10
.34*

(A) Limited Short-Term Amendment to Credit Agreement Until
    May 4, 2009 and(B) Amendment No. 4 to Credit
    Agreement and Consolidated Amendment to Other Loan Documents
    dated March 31, 2009 (incorporated by reference to
    Exhibit 10.1 to Sonics quarterly report on
    Form 10-Q
    for the quarter ended March 31, 2009).10
.35*

Amendment No. 5 to Credit Agreement dated May 4, 2009
    (incorporated by reference to Exhibit 10.1 to Sonics
    quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2009).(1)10
.36*

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
.37*

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
.38*

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
.39*

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
.40*

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) 78




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##### Table of Contents



ExhibitNo.

Description10
.41*

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
.42*

Amendment No. 6 to Credit Agreement dated
    September 11, 2009 (incorporated by reference to
    Exhibit 10.1 to Sonics quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2009).10
.43*

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 September 17, 2009
    Form 8-K).10
.44*

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 17, 2009
    Form 8-K).10
.45

Amendment No. 1 to Sonic Automotive, Inc. Formula Stock
    Option Plan for Independent Directors.(1)10
.46

Sonic Automotive, Inc. Incentive Compensation Plan Amended and
    Restated as of December 4, 2008.(1)10
.47

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 Faro Bank, National
    Association, as an L/C Issuer.10
.48

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Bank of America, N.A., pursuant to the Credit
    Agreement.10
.49

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of DCFS USA LLC, pursuant to the Credit Agreement.10
.50

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of BMW Financial Services NA, LLC, pursuant to the
    Credit Agreement.10
.51

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Toyota Motor Credit Corporation, pursuant to the
    Credit Agreement.10
.52

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of JPMorgan Chase Bank, N.A., pursuant to the Credit
    Agreement.10
.53

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Wachovia Bank, National Association, pursuant to the
    Credit Agreement.10
.54

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Comerica Bank, pursuant to the Credit Agreement.10
.55

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of World Omni Financial Corp., pursuant to the Credit
    Agreement.10
.56

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
.57

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
.58

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
.59

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
.60

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
.61

Syndicated New and Used Vehicle Floorplan 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. 79




---



##### Table of Contents



ExhibitNo.

Description10
.62

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 Floorplan Credit Agreement.10
.63

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 Floorplan Credit Agreement.10
.64

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Wachovia Bank, National Association, pursuant to the
    Syndicated New and Used Vehicle Floorplan Credit Agreement.10
.65

Promissory Note, dated January 15, 2010, executed by Sonic
    in favor of Comerica Bank, pursuant to the Syndicated New and
    Used Vehicle Floorplan Credit Agreement.10
.66

Company Guaranty Agreement, dated January 15, 2010, by
    Sonic Automotive, Inc. and Bank of America, N.A., as
    administrative agent for the lenders.10
.67

Subsidiary Guaranty Agreement, dated as of January 15,
    2010, by the Floorplan Subsidiary Guarantor, as Guarantors, to
    Bank of America, N.A, as administrative agent for the lenders.12
.1

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

Subsidiaries of Sonic.23
.1

Consent of Deloitte & Touche LLP.23
.2

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. 80




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                  DELOITTE &
    TOUCHE LLP
   
 F-3




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
 December 31,
    2008 and 2009
  December 31,2008


2009(Dollars in thousands)ASSETSCurrent Assets:Cash and cash equivalents

$
6,971


$
30,035Receivables, net


247,025



232,969Inventories


916,837



795,275Assets held for sale


406,576



12,167Other current assets


16,822



14,937Total current assets


1,594,231



1,085,383Property and Equipment, net


369,892



382,085Goodwill


327,007



469,482Other Intangible Assets, net


82,328



80,806Other Assets


32,087



51,099Total Assets

$
2,405,545


$
2,068,855LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Notes payable  floor plan  trade

$
208,438


$
214,871Notes payable  floor plan  non-trade


712,585



548,493Trade accounts payable


53,215



55,345Accrued interest


17,096



16,146Other accrued liabilities


207,627



144,709Liabilities associated with assets held for sale 
    trade


65,405



Liabilities associated with assets held for sale 
    non-trade


134,077



3,346Current maturities of long-term debt


738,447



23,991Total current liabilities


2,136,890



1,006,901Long-Term Debt






552,150Other Long-Term Liabilities


71,132



141,052Commitments and ContingenciesStockholders Equity:Class A convertible preferred stock, none issued






Class A common stock, $.01par value;
    100,000,000 shares authorized; 42,922,557 shares
    issued and 28,063,141 shares outstanding at December 31,
    2008; 54,986,875 shares issued and 40,099,559 shares
    outstanding at December 31, 2009


429



550Class B common stock; $.01 par value;
    30,000,000 shares authorized; 12,029,375 shares issued
    and outstanding at December 31, 2008 and December 31,
    2009


121



121Paid-in capital


537,022



662,186Accumulated deficit


(66,900
)


(35,180
)Accumulated other comprehensive loss


(36,635
)


(22,350
)Treasury stock, at cost (14,859,416 Class A shares held at
    December 31, 2008 and 14,887,316 Class A shares held
    at December 31, 2009)


(236,514
)


(236,575
)Total stockholders equity


197,523



368,752Total Liabilities and Stockholders Equity

$
2,405,545


$
2,068,855    F-4




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF INCOME
 Years
    Ended December 31, 2007, 2008 and 2009
  Year Ended December 31,2007


2008


2009(Dollars and shares in thousands,except per share amounts)Revenues:New vehicles

$
4,842,427


$
4,064,167


$
3,260,086Used vehicles


1,370,890



1,368,596



1,475,395Wholesale vehicles


384,251



277,559



150,695Total vehicles


6,597,568



5,710,322



4,886,176Parts, service and collision repair


1,106,451



1,114,077



1,088,722Finance, insurance and other


203,093



183,709



156,811Total revenues


7,907,112



7,008,108



6,131,709Cost of Sales:New vehicles


(4,510,635
)


(3,794,539
)


(3,034,528
)Used vehicles


(1,243,032
)


(1,249,381
)


(1,355,130
)Wholesale vehicles


(388,936
)


(284,432
)


(156,716
)Total vehicles


(6,142,603
)


(5,328,352
)


(4,546,374
)Parts, service and collision repair


(547,885
)


(557,688
)


(540,967
)Total cost of sales


(6,690,488
)


(5,886,040
)


(5,087,341
)Gross profit


1,216,624



1,122,068



1,044,368Selling, general and administrative expenses


(903,644
)


(921,367
)


(843,794
)Impairment charges


(975
)


(822,952
)


(24,514
)Depreciation and amortization


(24,927
)


(33,554
)


(35,576
)Operating income


287,078



(655,805
)


140,484Other income (expense):Interest expense, floor plan


(63,461
)


(44,923
)


(20,415
)Interest expense, other, net


(40,204
)


(60,276
)


(85,586
)Interest expense, non-cash, convertible debt


(9,898
)


(10,704
)


(679
)Interest expense, non-cash, cash flow swaps










(4,775
)Other income (expense), net


69



742



(6,670
)Total other expense


(113,494
)


(115,161
)


(118,125
)Income (loss) from continuing operations before taxes


173,584



(770,966
)


22,359Provision for income taxes  benefit/(expense)


(67,854
)


125,399



33,251Income (loss) from continuing operations


105,730



(645,567
)


55,610Discontinued operations:Loss from operations and the sale of discontinued franchises


(20,854
)


(60,666
)


(44,711
)Income tax benefit


4,687



13,884



20,649Loss from discontinued operations


(16,167
)


(46,782
)


(24,062
)Net income (loss)

$
89,563


$
(692,349
)

$
31,548Basic earnings (loss) per common share:Earnings (loss) per share from continuing operations

$
2.47


$
(16.00
)

$
1.26Loss per share from discontinued operations


(0.38
)


(1.16
)


(0.55
)Earnings (loss) per common share

$
2.09


$
(17.16
)

$
0.71Weighted average common shares outstanding


42,479



40,356



43,836Diluted earnings (loss) per common share:Earnings (loss) per share from continuing operations

$
2.37


$
(16.00
)

$
1.05Loss per share from discontinued operations


(0.36
)


(1.16
)


(0.43
)Earnings (loss) per common share

$
2.01


$
(17.16
)

$
0.62Weighted average common shares outstanding


44,165



40,356



55,832Dividends declared per common share

$
0.48


$
0.48


$
    F-5




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
 Years
    Ended December 31, 2007, 2008 and 2009
  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, 2006


41,890


$
416



12,029


$
121


$
498,048


$
584,351


$
(159,001
)

$



$
923,935


$
75,641Adoption of FIN 48






















(8,582
)










(8,582
)


Shares awarded under stock compensation plans


524



8











13,436















13,444



Purchases of treasury stock


























(48,865
)






(48,865
)


Income tax benefit associated with stock compensation plans


















3,147















3,147



Income tax benefit associated with convertible note hedge


















1,914















1,914



Fair value of interest rate swap agreements, net of tax benefit
    of $9,071






























(14,800
)


(14,800
)


(14,800
)Unrealized loss on
    available-for-sale
    securities, net of tax benefit of $193






























(314
)


(314
)


(314
)Stock-based compensation expense


















5,589















5,589



Restricted stock amortization


















886















886



Net income






















89,563











89,563



89,563Dividends ($0.48 per share)






















(20,933
)










(20,933
)


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 expense 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


$
45,833    F-6




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Years Ended December 31,2007


2008


2009(Dollars in thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income

$
89,563


$
(692,349
)

$
31,548Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization of property, plant and equipment


27,438



36,378



36,091Provision for bad debt expense


3,169



2,488



1,491Other amortization


1,156



1,912



1,656Debt issuance cost amortization


1,147



1,256



13,435Debt discount amortization, net of premium amortization


10,705



11,712



11,755Stock  based compensation expense


5,589



2,211



603Amortization of restricted stock


3,313



5,280



1,511Restricted stock forfeiture


(2,427
)


(1,360
)


(182
)Deferred income taxes


18,764



(253,846
)


23,153Valuation allowance  deferred income taxes


1,305



108,421



(53,743
)Equity interest in earnings of investees


(645
)


(399
)


(713
)Asset impairment charges


6,032



851,655



30,038Loss (gain) on disposal of franchises and property and equipment


1,145



1,604



(804
)Loss on exit of leased dealerships


2,275



18,037



33,013(Gain) loss on retirement of debt






(647
)


6,745Derivative liability fair value adjustments










(11,300
)Discontinuance of cash flow swaps










4,502Changes in assets and liabilities that relate to operations:Receivables


18,753



101,126



23,424Inventories


(17,003
)


5,204



307,803Other assets


(18,093
)


9,909



(1,393
)Notes payable  floor plan  trade


(108,739
)


(49,590
)


(58,972
)Trade accounts payable and other liabilities


(9,396
)


(38,363
)


3,920Total adjustments


(55,512
)


812,988



372,033Net cash provided by operating activities


34,051



120,639



403,581CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of businesses, net of cash acquired


(212,472
)


(22,945
)


Purchases of property and equipment


(78,295
)


(137,094
)


(43,277
)Proceeds from sales of property and equipment


31,369



6,295



6,018Proceeds from sale of franchises


62,882



37,803



27,276Distributions from equity investees


900



600



300Net cash used in investing activities


(195,616
)


(115,341
)


(9,683
)CASH FLOWS FROM FINANCING ACTIVITIES:Net (repayments) borrowings on notes payable floor
    plan  non-trade


122,251



(4,167
)


(294,823
)Borrowings on revolving credit facilities


1,057,915



890,838



558,011Repayments on revolving credit facilities


(1,008,001
)


(889,996
)


(628,853
)Proceeds from long-term debt


46,667



56,913



178,751Debt issuance costs










(18,387
)Principal payments on long-term debt


(2,158
)


(4,348
)


(5,458
)Settlement of cash flow swaps










(16,454
)Repurchase of debt securities






(24,203
)


(244,258
)Purchases of treasury stock


(48,865
)


(28,648
)


(61
)Income tax benefit associated with stock compensation plans


3,147



607



Income tax benefit associated with convertible hedge


1,914



2,120



4,293Issuance of shares under stock compensation plans


13,444



5,149



Issuance of common stock










101,265Dividends paid


(20,931
)


(19,106
)


(4,860
)Net cash provided by (used in) financing activities


165,383



(14,841
)


(370,834
)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


3,818



(9,543
)


23,064CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR


12,696



16,514



6,971CASH AND CASH EQUIVALENTS, END OF YEAR

$
16,514


$
6,971


$
30,035SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:Change in fair value of cash flow hedging instruments
    (net of tax benefit of $9,071, $13,383 and tax expense of$7,045
    in 2007, 2008 and 2009, respectively)

$
(14,800
)

$
(21,835
)

$
11,494SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the year for:Interest, net of amount capitalized

$
113,834


$
114,003


$
110,420Income taxes

$
46,683


$
13,351


$
23,507    F-7




---



##### 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 
  Recent Developments 
  Principles of Consolidation 
  Reclassifications 
  Recent Accounting Pronouncements 
     F-8




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Twelve Months Ended December 31,2002


2003


2004


2005


2006


2007


2008


2009(Dollars in thousands)Increase in Interest Expense

$
(2,108
)

$
(3,530
)

$
(3,899
)

$
(4,656
)

$
(9,044
)

$
(9,898
)

$
(10,704
)

$
(6,205
)Tax Benefit


843



1,412



1,560



1,862



3,617



3,959



4,282



2,482Effect on Net Income


(1,265
)


(2,118
)


(2,339
)


(2,794
)


(5,427
)


(5,939
)


(6,422
)


(3,723
)          F-9




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Use of Estimates 
  Cash and Cash Equivalents 
  Revenue Recognition 
     F-10




---



##### 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 
  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  F-11




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Derivative Instruments and Hedging Activities 
  Goodwill 
        Other Intangible Assets 
 F-12




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Insurance Reserves 
  Lease Exit Accruals
  Income Taxes 
    Concentrations of Credit and Business Risk 
 F-13




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      December 31,2009(Dollars in millions)General MotorsNew Vehicle Inventory

$
77.8Parts Inventory


9.8Factory Receivables


8.9Property and Equipment, net


15.9Franchise Assets


15.9ChryslerNew Vehicle Inventory


4.9Parts Inventory


1.0Factory Receivables


0.3Property and Equipment, net


1.3Franchise Assets


   Financial Instruments and Market Risks 
  Sonic has variable rate notes payable
  Advertising 
   F-14




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Segment Information
  2.
    Business
    Acquisitions and Dispositions  Acquisitions
        Dispositions
       F-15




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##### Table of Contents



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


December 31,2008


2009(Dollars in thousands)Inventories

$
207,308


$
4,528Property and equipment, net


39,094



4,838Goodwill


154,940



2,801Franchise assets


5,234



Assets held for sale

$
406,576


$
12,167     Year Ended December 31,2007


2008


2009(Dollars in thousands)Loss from operations

$
(14,188
)

$
(16,201
)

$
(7,044
)Gain (loss) on disposal of franchises


178



(2,325
)


(293
)Lease exit charges


(1,787
)


(13,747
)


(31,850
)Property impairment charges


(1,957
)


(10,251
)


(3,938
)Goodwill impairment charges






(1,839
)


(1,586
)Franchise agreement and other asset impairment charges


(3,100
)


(14,400
)


Favorable lease asset impairment charges






(1,903
)


Pre-tax loss

$
(20,854
)

$
(60,666
)

$
(44,711
)Total revenues

$
941,983


$
479,894


$
218,022     3.
    Inventories
    and Related Notes Payable  Floor Plan    December 31,2008


2009(Dollars in thousands)New vehicles

$
910,462


$
557,319Used vehicles


87,895



138,401Parts and accessories


57,057



51,470Other


68,731



52,613$
1,124,145


$
799,803Less inventories classified as assets held for sale


(207,308
)


(4,528
)Inventories

$
916,837


$
795,275  F-16




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        4.
    Property
    and Equipment    December 31,2008


2009(Dollars in thousands)Land

$
63,153


$
61,886Building and improvements


308,530



322,632Office equipment and fixtures


68,054



75,801Parts and service equipment


54,577



54,981Company vehicles


8,700



8,440Construction in progress


30,989



40,000Total, at cost


534,003



563,740Less accumulated depreciation


(125,017
)


(176,817
)Subtotal


408,986



386,923Less assets held for sale


(39,094
)


(4,838
)Property and equipment, net

$
369,892


$
382,085    F-17




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##### Table of Contents



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


DiscontinuedYear Ended December 31,

Operations


Operations(Dollars in millions)2009

$
19.1


$
3.92008

$
14.6


$
10.32007

$
1.0


$
2.0       5.
    Intangible
    Assets and Goodwill    Franchise





AccumulatedAgreements


Gross Goodwill


Impairment


Net Goodwill(Dollars in thousands)Balance, December 31, 2007

$
89,900


$
1,276,074


$



$
1,276,074Additions through current year acquisitions


3,200



6,164







6,164Prior year acquisition allocations






517







517Impairment of domestic dealerships


(22,565
)






(5,611
)


(5,611
)Impairment of import dealerships


(1,600
)






(5,251
)


(5,251
)Impairment of goodwill










(786,463
)


(786,463
)Reductions from sales of franchises


(1,400
)


(12,261
)






(12,261
)Reclassification to assets held for sale, net


(2,834
)


(146,162
)






(146,162
)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
)

$
469,482    F-18




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        December 31,2008


2009(Dollars in thousands)Lease agreements

$
21,987


$
21,987Less accumulated amortization


(4,360
)


(6,016
)Definite life intangibles, net

$
17,627


$
15,971         Year Ending December 31,(Dollars in thousands)2010

$
1,6562011


1,6562012


1,6562013


1,6562014


1,290Thereafter


8,057Total

$
15,971  F-19




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   6.
    Long-Term
    Debt    December 31,


December 31,2008


2009(Dollars in thousands)2006 Revolving Credit
    Sub-Facility(1)

$
70,842


$
Senior Subordinated Notes bearing interest at 8.625%


275,000



275,000Convertible Senior Subordinated Notes bearing interest at 5.25%


105,250



Convertible Senior Notes bearing interest at 5.0%






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


160,000



17,045Notes payable to a finance company bearing interest from 9.52%
    to 10.52% (with a weighted average of 10.19%)


19,726



17,778Mortgage notes to finance companies-fixed rate, bearing interest
    from 5.80% to 7.03%


80,622



78,424Mortgage notes to finance companies-variable rate, bearing
    interest at 1.25 to 3.30 percentage points above one-month
    LIBOR


33,505



38,251Net debt discount and premium(2)


(13,127
)


(29,199
)Other


6,629



6,342$
738,447


$
576,141Less current maturities(3)


(738,447
)


(23,991
)Long-term debt

$



$
552,150     (1)
    
    Interest rate on the revolving credit
    sub-facility
    was 2.00% above LIBOR at December 31, 2008 and 3.50% above
    LIBOR at December 31, 2009.(2)
    
    December 31, 2008 includes $1.9 million discount
    associated with the 8.625% Notes, $2.3 million
    discount associated with the 5.25% Convertible Notes,
    $12.5 million discount associated with the
    4.25% Convertible Notes, $3.2 million premium
    associated with notes payable to a finance company and
    $0.3 million premium associated with mortgage notes
    payable. 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.(3)
    
    At December 31, 2008, as a result of the uncertainty
    related to Sonics compliance with the covenants under its
    2006 Credit Facility for the fiscal year 2009, Sonic classified
    all its indebtedness as current in the accompanying Consolidated
    Balance Sheets due to cross default provisions governing its
    other indebtedness. At December 31, 2009, current
    maturities include 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.  Form S-4 No. 333-109426).
 F-20




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##### Table of Contents



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

Principal


Net(Dollars in thousands)2010

$
23,934


$
23,9912011


7,903



8,5682012


8,055



8,5932013


289,292



288,1702014


183,944



154,475Thereafter


92,212



92,344Total

$
605,340


$
576,141   2006
    Credit Facility
  Sub-Facility), Sub-Facility) Sub-Facility). Sub-Facility Sub-Facility Sub-Facility
  Sub-Facility sub-facility sub-facility
  Sub-Facility sub-facilities
  Sub-Facility, Sub-Facility Sub-Facility Sub-Facility
 F-21




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2010
    Credit Facilities
    Sub-Facility), Sub-Facility Sub-Facility,
        Sub-Facility, Sub-Facility,
   F-22




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Senior
    Subordinated 8.625% Notes
    Form S-4 No. 333-109426).
    5.25% Convertible
    Senior Subordinated Notes and 6.0% Senior Secured
    Convertible Notes
   F-23




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        5.0% Convertible
    Senior Notes
       F-24




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      4.25% Convertible
    Senior Subordinated Notes
         F-25




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Notes
    Payable to a Finance Company
    Mortgage
    Notes
  Sub-Facility.
  Covenants
    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, 2009 actual


1.12



1.44



1.29   Derivative
    Instruments and Hedging Activities
   F-26




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    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$
3.8



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$
11.9



4.655
%

one-month LIBOR

December 10, 2017$
9.0



6.860
%

one-month LIBOR

August 1, 2017$
7.3



4.330
%

one-month LIBOR

July 1, 2013     (1)
    
    The one-month LIBOR rate was 0.231% at December 31, 2009.(2)
    
    After December 31, 2009 changes in fair value will be
    recorded through earnings.         F-27




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        7.
    Income
    Taxes    2007


2008


2009(Amounts in thousands)Current:Federal

$
39,306


$
(14,180
)

$
1,055State


8,569



3,328



7,79747,875



(10,852
)


8,852Deferred


19,979



(114,547
)


(42,103
)Total provision for income taxes for continuing operations

$
67,854


$
(125,399
)

$
(33,251
)  F-28




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007


2008


2009Statutory federal rate


35.00
%


35.00
%


35.00
%Effective state income tax rate


4.01



3.57



5.87Valuation allowance and other account adjustments






(14.26
)


(193.74
)Non-deductible goodwill






(8.35
)


Other


0.08



0.31



4.16Effective tax rate


39.09
%


16.27
%


(148.71
%)     2008


2009(Dollars in thousands)Deferred tax assets:Allowance for bad debts

$
517


$
158Accruals and reserves


43,409



49,524Basis difference in property and equipment


287



Basis difference in goodwill


55,340



30,266Net operating loss carryforwards


16,724



15,869Fair value of Fixed Swaps


22,454



13,698Interest and state taxes associated with Accounting for
    Uncertain Income Tax Positions in the ASC liability


7,132



7,777Other


3



3Total deferred tax assets


145,866



117,295Deferred tax liabilities:Basis difference in inventory


(2,309
)


(3,340
)Basis difference in property and equipment






(3,938
)Basis difference in debt


(5,156
)


(11,748
)Other


(1,963
)


(4,396
)Total deferred tax liability


(9,428
)


(23,422
)Valuation allowance


(116,330
)


(61,868
)Net deferred tax asset (liability)

$
20,108


$
32,005    F-29




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      (In thousands)Unrecognized tax benefit liability, January 1, 2009(1)

$
17,131Prior period positions:Increases


8,883Decreases


(134
)Current period positions


1,629Settlements


(456
)Lapse of statute of limitations


(2,072
)Other


(191
)Unrecognized tax benefit liability, December 31, 2009(2)

$
24,790     (1)
    
    Excludes accrued interest and penalties of $6.1 million at
    January 1, 2009(2)
    
    Excludes accrued interest and penalties of $6.4 million at
    December 31, 2009      8.
    Related
    Parties   F-30




---



##### 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
  Hedge and Warrants on 4.25% Convertible
    Notes
  Share Repurchases
  Per Share Data
 F-31




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the Year Ended December 31, 2007Incomefrom Continuing


Loss from DiscontinuedOperations


Operations


Net IncomePer Share





Per Share





Per ShareShares


Amount


Amount


Amount


Amount


Amount


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


42,479


$
105,730


$
2.47


$
(16,167
)

$
(0.38
)

$
89,563Effect of Participating Securities:Unvested Restriced Stock and Stock Units






(976
)














(976
)Basic Earnings (Loss) Per Share


42,479


$
104,754


$
2.47


$
(16,167
)

$
(0.38
)

$
88,587


$
2.09Effect of Dilutive Securities:Contingently Convertible Debt (4.25% Convertible Notes)


819Stock Compensation Plans


867Diluted Earnings (Loss) Per Share


44,165


$
104,754


$
2.37


$
(16,167
)

$
(0.36
)

$
88,587


$
2.01   For the Year Ended December 31, 2009Incomefrom Continuing


Loss from DiscontinuedOperations


Operations


Net IncomePer Share





Per Share





Per ShareShares


Amount


Amount


Amount


Amount


Amount


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


43,836


$
55,610


$
1.26


$
(24,062
)

$
(0.55
)

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






(395
)














(395
)Basic Earnings (Loss) Per Share


43,836


$
55,215


$
1.26


$
(24,062
)

$
(0.55
)

$
31,153


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


7,833



921







18







939Contingently Convertible Debt (5.0% Convertible Notes)


3,496



2,237







43







2,280Stock Compensation Plans


667Diluted Earnings (Loss) Per Share


55,832


$
58,373


$
1.05


$
(24,001
)

$
(0.43
)

$
34,372


$
0.62    F-32




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    Employee
    Benefit Plans    Stock
    Compensation Plans
        WeightedWeighted


AverageAverage


Remaining


AggregateOptions


Exercise


Exercise


Contractual


IntrinsicOutstanding


Price per Share


Price


Term


Value(In thousands)














(In years)


(In thousands)Balance  December 31, 2008


3,339


$
7.80



-



37.50


$
21.90



4.6


$
Granted


1,398



1.81



-



2.99



1.81Forfeited


(723
)


1.81



-



37.50



18.69Balance  December 31, 2009


4,014


$
1.81



-



37.50


$
15.48



5.9


$
12,349Exercisable


2,599


$
7.80



-



37.50


$
22.65



4.1


$
435   F-33




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31,2007


2008


2009(Amounts in thousands, except per option data)Weighted Average Grant-Date Fair Value of Options Granted

$
8.24



N/A


$
0.99Intrinsic Value of Options Exercised

$
9,226


$
3,146


$
Fair Value of Shares Vested

$
4,499


$
5,867


$
395     Black-Scholes
    Assumptions
    2007

2009Stock Option PlansDividend yield

1.60-2.06%

0.00%Risk free interest rates

4.04-4.91%

1.67-1.87%Expected lives

3.5-5 years

5 yearsVolatility

33.10%

64.13%       Unvested RestrictedStock and


Weighted AverageRestricted Stock


Grant Date FairUnits


Value(In thousands)Balance  December 31, 2008


348


$
22.99Granted


79



7.24Forfeited


(10
)


21.44Vested


(104
)


27.60Balance  December 31, 2009


313


$
17.45    F-34




---



##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    11.
    Fair
    Value Measurements  and/or
  Level 1
  Level 2
  Level 3
     F-35




---



##### Table of Contents



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


Significant Other


Significant UnobservableTotal


Assets (Level 1)


Observable Inputs (Level 2)


Inputs (Level 3)2008


2009


2008


2009


2008


2009


2008


2009(Amounts in millions)Trading Securities(1)

$
2.6


$



$
2.6


$



$



$



$



$
Cash Flow Swaps(2)


(60.9
)


(32.5
)










(60.9
)


(32.5
)






Total

$
(58.3
)

$
(32.5
)

$
2.6


$



$
(60.9
)

$
(32.5
)

$



$
     (1)
    
    - Included within other current assets in the accompanying
    Consolidated Balance Sheets.(2)
    
    - Included in Other Long-Term Liabilities in the accompanying
    Consolidated Balance Sheets.    (Dollars in millions)December 31, 2008

$
Initial Issuance/Recognition(1)


11.3Change in Fair Value(2)


(11.3
)December 31, 2009

$
     (1)
    
    Embedded derivatives related to the 6.0% Convertible Notes(2)
    
    Included in interest expense, non-cash, convertible debt (see
    Note 6)  and/or
    SignificantUnobservableYear Ended


Inputs


Total12/31/2009


(Level 3)


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

$
382.1


$
382.1


$
(18.5
)Goodwill(2)


469.5



469.5



(1.1
)Franchise assets(2)


64.8



64.8



(4.3
)Long-lived assets held for sale(3)


7.6



7.6



(6.1
)     (1)
    
    See Note 4 for discussion.(2)
    
    See Note 5 for discussion.(3)
    
    Includes Property and Equipment, Goodwill and Franchise Assets.
    See Notes 4 and 5 for discussion. F-36




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         December 31, 2008


December 31, 2009Fair Value


Carrying Value


Fair Value


Carrying Value(Dollars in thousands)8.625% Senior
    Subordinated Notes(1)

$
104,500


$
273,116


$
266,750


$
273,4555.25% Convertible Senior
    Subordinated Notes(1)

$
97,883


$
102,990


$



$
5.0% Convertible
    Senior Notes(1)

$



$



$
188,072


$
142,7434.25% Convertible Senior
    Subordinated Notes(1)

$
53,600


$
147,538


$
16,363


$
16,423Mortgage Notes(2)

$
80,530


$
80,622


$
78,333


$
78,424Notes Payable to a
    Finance Company(2)

$
18,629


$
22,946


$
17,859


$
20,260     (1)
    
    As determined by market quotations as of December 31, 2009.(2)
    
    As determined by discounted cash flows.  12.
    Commitments
    and Contingencies  Facility
    and Equipment Leases
    (Dollars in thousands)Balance, December 31, 2008

$
19,882Lease exit expense


33,035Payments


(5,092
)Reversals


Balance, December 31, 2009

$
47,825  F-37




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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(Dollars in thousands)2010

$
119,850


$
(13,540
)2011


111,827



(12,839
)2012


103,965



(12,077
)2013


97,941



(11,079
)2014


92,584



(10,629
)Thereafter


464,702



(45,868
)       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



31.50March 31, 2012 and thereafter


31.10



31.20



£2.25



31.50December 31, 2009 actual


1.12



1.44



1.29



1.74  F-38




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Guarantees
    and Indemnifications
    sub-lessee sub-lessees sub-lessees sub-lessees
    Legal
    Matters
     F-39




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      13.
    Subsequent
    Events   F-40




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##### Table of Contents



SONIC
    AUTOMOTIVE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   14.
    Summary
    of Quarterly Financial Data (Unaudited)    First

Second

Third

FourthQuarter

Quarter

Quarter

Quarter(Dollars in thousands, except per share amounts)Year Ended December 31, 2008Total revenues

$
1,855,443


$
1,949,118


$
1,754,449


$
1,449,098Gross profit

$
295,896


$
304,916


$
280,643


$
240,613Net income (loss)

$
12,625


$
9,217


$
(26,966
)

$
(687,225
)Earnings (loss) per common share  Basic

$
0.30


$
0.22


$
(0.67
)

$
(17.14
)Earnings (loss) per common share  Diluted

$
0.30


$
0.22


$
(0.67
)

$
(17.14
)Year Ended December 31, 2009Total revenues

$
1,378,498


$
1,504,424


$
1,653,594


$
1,595,193Gross profit

$
247,467


$
259,933


$
277,908


$
259,060Net 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


$
0.25     (1)
    
    Operations are subject to seasonal variations. The first and
    fourth quarters generally contribute less operating profits than
    the second and third 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-41