Segment Information

12 Months Ended

Dec. 31, 2018

As of December 31, 2018, we had two operating segments: (1) retail automotive franchises that sell new vehicles and buy and sell used vehicles, sell replacement parts, perform vehicle repair and maintenance services, and arrange finance and insurance products (the “Franchised Dealerships Segment”) and (2) pre-owned vehicle specialty retail locations that provide customers an opportunity to search, buy, service, finance and sell pre-owned vehicles (the “EchoPark Segment”).

The operating segments identified above are the business activities of Sonic for which discrete financial information is available and for which operating results are regularly reviewed by our chief operating decision maker to assess operating performance and allocate resources. Our chief operating decision maker is a group of three individuals consisting of: (1) the Company’s Chief Executive Officer; (2) the Company’s Chief Financial Officer; and (3) the Company’s President. We have determined that our operating segments also represent our reportable segments.

Reportable segment revenues, segment income (loss), floor plan interest expense, depreciation and amortization, capital expenditures and assets are as follows:


	Year Ended December 31,
	2018		2017		2016
	(In thousands)
Revenues:
Franchised Dealerships Segment	$	9,251,453	$	9,612,899	$	9,590,752
EchoPark Segment	700,177		254,309		141,027
Total revenues	$	9,951,630	$	9,867,208	$	9,731,779

	Year Ended December 31,
	2018		2017		2016
	(In thousands)
Segment income (loss) (1):
Franchised Dealerships Segment (2)	$	181,730	$	197,121	$	218,769
EchoPark Segment (3)	(52,465)		(21,951)		(13,576)
Total segment income (loss)	129,265		175,170		205,193
Interest expense, other, net	(54,059)		(52,524)		(50,106)
Other income (expense), net	106		(14,522)		125
Income (loss) from continuing operations before taxes	$	75,312	$	108,124	$	155,212

(1) Segment income (loss) for each segment is defined as operating income (loss) less interest expense, floor plan.

(2) For the year ended December 31, 2018, the above amount includes approximately $38.9 million of net gain on the disposal of franchised dealerships, offset partially by approximately $27.9 million of impairment expense, approximately $4.0 million of storm-related physical damage costs, approximately $1.7 million of legal costs, approximately $1.6 million of executive transition costs and approximately $1.4 million of lease exit charges. For the year ended December 31, 2017, the above amount includes approximately $14.6 million of net loss on the extinguishment of debt, approximately $8.9 million of storm-related physical damage and legal costs, approximately $7.5 million of impairment expense, approximately $0.7 million of double-carry interest and approximately $0.3 million of lease exit charges, offset partially by approximately $10.0 million of net gain on the disposal of franchised dealerships. For the year ended December 31, 2016, the above amount includes approximately $11.7 million of storm-related physical damage and legal costs, approximately $7.9 million of impairment expense and approximately $0.2 million of lease exit charges.

(3) For the year ended December 31, 2018, the above amount includes approximately $32.5 million of long-term compensation-related charges and approximately $1.6 million of impairment expense. For the year ended December 31, 2017, the above amount includes approximately $1.9 million of impairment expense, approximately $1.3 million of long-term compensation-related charges, approximately $0.6 million of lease exit charges and approximately $0.2 million of storm-related physical damage and legal costs.


	Year Ended December 31,
	2018		2017		2016
	(In thousands)
Floor plan interest expense:
Franchised Dealerships Segment	$	46,126	$	35,030	$	26,631
EchoPark Segment	2,272		1,365		1,085
Total floor plan interest expense	$	48,398	$	36,395	$	27,716


	Year Ended December 31,
	2018		2017		2016
	(In thousands)
Depreciation and amortization:
Franchised Dealerships Segment	$	85,849	$	83,741	$	73,591
EchoPark Segment	7,774		5,203		3,855
Total depreciation and amortization	$	93,623	$	88,944	$	77,446


	Year Ended December 31,
	2018		2017		2016
	(In thousands)
Capital expenditures:
Franchised Dealerships Segment	$	116,854	$	195,220	$	166,405
EchoPark Segment	46,765		39,025		39,827
Total capital expenditures	$	163,619	$	234,245	$	206,232


	December 31,
	2018		2017
	(In thousands)
Assets:
Franchised Dealerships Segment	$	1,861,144	$	1,930,336
EchoPark Segment	245,648		200,289
Corporate and other:
Cash and Cash Equivalents	5,854		6,352
Goodwill, Net	509,592		525,780
Other Intangible Assets, Net	69,705		74,589
Other Corporate and Other Assets	1,104,864		1,081,172
Total assets	$	3,796,807	$	3,818,518