Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
We are exposed to risk from changes in interest rates on a significant portion of our outstanding indebtedness. Based on $1.40 billion of non-hedged total variable interest rate debt, which includes our floor plan notes payable, amounts drawn on our used vehicle floor plan, revolver and certain mortgage liabilities, outstanding as of December 31, 2021, a 100 basis point change in interest rates would result in a change of $14.0 million in annual interest expense.
We periodically receive floor plan assistance from certain automobile manufacturers, which is accounted for as a reduction in our new vehicle inventory cost. Floor plan assistance reduced our cost of sales for the years ended December 31, 2021, 2020, and 2019, by $57.5 million, $44.0 million, and $42.2 million, respectively. We cannot provide assurance as to the future amount of floor plan assistance and these amounts may be negatively impacted due to future changes in interest rates.
As part of our strategy to mitigate our exposure to fluctuations in interest rates, we have various interest rate swap agreements. All of our interest rate swaps qualify for cash flow hedge accounting treatment and do not contain any ineffectiveness.
As of December 31, 2021 we had five interest rate swap agreements. In May 2021, we entered into a new interest rate swap agreement with a notional principal amount of $184.4 million which will reduce to $110.6 million at maturity. This swap, along with our existing swaps, was designed to provide a hedge against changes in variable rate cash flows regarding fluctuations in the one month LIBOR rate, through each swap's maturity date as noted in the table below. The following table provides information on the attributes of each swap as of December 31, 2021:
67
Table of Contents
Inception Date Notional Value at Inception Notional Value as of December 31, 2021
Notional Value at Maturity Maturity Date
(In millions) (In millions) (In millions)
May 2021 $ 184.4 $ 180.7 $ 110.6 May 2031
July 2020 $ 93.5 $ 86.6 $ 50.6 December 2028
July 2020 $ 85.5 $ 78.8 $ 57.3 November 2025
June 2015 $ 100.0 $ 69.3 $ 53.1 February 2025
November 2013 $ 75.0 $ 45.2 $ 38.7 September 2023
For additional information about the effect of our derivative instruments, please refer to Note 15 "Financial Instruments and Fair Value" within the accompanying Consolidated Financial Statements.
68
Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.