What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-03-01 · 355 added, 300 removed, 1310 unchanged (33% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Income for the Year Ended December 31, 202 1 , 20 20 , and 201 9

Consolidated Statements of Comprehensive Income for the Year Ended December 31, 202 1 , 20 20 , and 201 9

Consolidated Statements of Shareholders' Equity for the Year Ended December 31, 202 1 , 20 20 , and 20 19

Consolidated Statements of Cash Flows for the Year Ended December 31, 202 1 , 20 20 , and 201 9

Consolidated Statements of Income for the Year s Ended December 31, 2022, 2021, and 2020

Consolidated Statements of Comprehensive Income for the Year s Ended December 31, 2022, 2021, and 2020

Consolidated Statements of Shareholders' Equity for the Year s Ended December 31, 2022, 2021, and 2020

Consolidated Statements of Cash Flows for the Year s Ended December 31, 2022, 2021, and 2020

Notes to Consolidated Financial Statements

6 unchanged sentences

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2022 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2023 expressed an adverse opinion thereon.

Basis for Opinion

13 unchanged sentences

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Manufacturer Franchise Rights Impairment Assessment

Description of the Matter At December 31, 2021, the Company's manufacturer franchise rights for car dealerships had an aggregate carrying value for franchises acquired of approximately $1,335.7 million, as disclosed in Note 10 of the consolidated financial statements.

Each manufacturer franchise right asset is assessed for impairment annually as of October 1st, or more often if events or circumstances indicated that impairment may have occurred.

If the fair value of the intangible asset is less than its carrying amount, an impairment loss is recognized in an amount equal to the difference.

We identified the assessment of the Company’s qualitative impairment tests over manufacturer franchise rights acquired prior to the fourth quarter of 2021 as a critical audit matter.

The tests included the evaluation of qualitative factors such as future revenue growth and profitability as well as comparable dealership sales, that required subjective auditor judgment.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s process over the manufacturer franchise rights annual impairment tests.

For example, this included testing controls over management’s review of significant assumptions, other inputs and the completeness and accuracy of the data used in the qualitative analysis over manufacturer franchise rights acquired prior to the fourth quarter of 2021.

To test the recoverability of the Company's manufacturer franchise rights as part of the impairment assessments, our audit procedures included, among others, understanding cost factors, financial performance, legal and regulatory factors, industry, market and macroeconomic conditions, and other relevant entity-specific events to determine whether a potential impairment indicator was present at one or multiple dealerships.

We also evaluated the Company’s assessment of the change to key assumptions most likely to affect the fair value of the manufacturer franchise rights since the previous quantitative analysis was performed.

Additionally, we evaluated dealership sales and profitability trends to identify potential indicators of impairment.

Valuation of Acquired Manufacturer Franchise Rights for Larry H.

Miller Dealerships

Description of the Matter At December 31, 2022, the Company's manufacturer franchise rights for car dealerships had an aggregate carrying value for franchises acquired of approximately $1,800 million, as disclosed on the Consolidated Balance Sheet.

Manufacturer franchise rights are an indefinite lived intangible asset and arise as a result of acquisitions of car dealerships accounted for under the acquisition method of accounting.

As disclosed in Note 3 to the consolidated financial statements, in 2022 the Company completed its valuation of approximately $1,310 million of acquired franchise rights resulting from the acquisition of Larry H.

Miller Dealerships (“LHM”).

Auditing the Company's estimate of fair value of the manufacturer franchise rights acquired in the LHM acquisition is complex due to the significant management judgments and estimates required.

The Company's model for estimating the fair value of these assets utilizes market participant assumptions related to the cash flows directly attributable to the franchise rights, including year-over-year and terminal revenue growth rates, weighted average cost of capital, future gross margins, and future selling, general, and administrative expenses, all of which are forward-looking and affected by expectations about economic, industry and company-specific factors.

The cash flows are derived on an individual dealership basis adding complexity to the auditor judgments required to test those assumptions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over the manufacturer franchise rights fair value estimates used in conjunction with its LHM acquisition.

This included testing controls over management’s review of the model, significant assumptions, other inputs and the completeness and accuracy of the data used in the measurements.

Procedures performed to test the fair value of the Company's manufacturer franchise rights as of the acquisition date included, among others, evaluating the Company's use of the discounted cash flows method, testing of the assumptions and inputs to the valuation model used to develop the projected financial information, involving our valuation specialists to assist in the testing of the weighted average cost of capital utilized and the appropriateness of the model used, and testing the completeness and accuracy of the underlying data.

We compared the assumptions to current industry, market and economic trends, as well as to the Company's historical results.

In addition, we assessed management’s ability to accurately forecast by comparing the first year forecasted cash flows to actual 2022 operating results.

We also performed a sensitivity analysis of certain assumptions to evaluate the potential change in the fair value of the manufacturer franchise rights resulting from changes in underlying assumptions.

/s/ Ernst & Young LLP

3 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Asbury Automotive Group, Inc.

To the Shareholders and Board of Directors of Asbury Automotive Group, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Asbury Automotive Group, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Asbury Automotive Group, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of 94 franchises (65 new dealership locations), seven used vehicle stores, eleven collision centers, a used wholesale business and an F&I product provider business acquired during 2021, which are included in the 2021 consolidated financial statements of the Company and constituted approximately $3.34 billion of consolidated assets as of December 31, 2021 and approximately $346.0 million of consolidated revenues for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the 94 franchises (65 new dealership locations), seven used vehicle stores, eleven collision centers, a used wholesale business and an F&I product provider business.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Asbury Automotive Group, Inc.

as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated March 1, 2022 expressed an unqualified opinion thereon.

In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, Asbury Automotive Group, Inc.

(the Company) has not maintained effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management’s assessment.

Management identified a material weakness as a result of deficiencies in information technology general controls (ITGCs) identified at the Larry H.

Miller Dealerships (LHM) and entities comprising the Finance and Insurance product provider, Total Care Auto, Powered by Landcar (TCA).

Specifically, the material weakness is due to control deficiencies in the design of the user access reviews for segregation of duties (SOD) configurations and appropriate administrative access for certain key applications at LHM and TCA.

The ineffective ITGCs limit the level of assurance over the completeness and accuracy of information used in certain automated and business process controls.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "consolidated financial statements").

This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the consolidated financial statements, and this report does not affect our report dated March 1, 2023 which expressed an unqualified opinion thereon.

Basis for Opinion

35 unchanged sentences

INTANGIBLE FRANCHISE RIGHTS 1,800.1 1,335.7

DEFERRED INCOME TAXES, net of current portion 69.1 —

DEFERRED INCOME TAXES — 69.1

OTHER LONG-TERM ASSETS 116.7 22.1

26 unchanged sentences

( 1,063.0 ) ( 1,044.2 )

Accumulated other comprehensive loss ( 0.7 ) ( 5.6 )

Accumulated other comprehensive income (loss) 74.4 ( 0.5 )

Total shareholders' equity 2,903.5 2,115.5

29 unchanged sentences

Gain on dealership divestitures, net ( 207.1 ) ( 8.0 ) ( 62.3 )

Total other expenses, net 94.1 32.7 81.1

Total other (income) expenses ( 46.5 ) 94.1 32.7

INCOME BEFORE INCOME TAXES 1,319.1 697.7 338.1

18 unchanged sentences

Change in fair value of cash flow swaps 103.3 6.3 ( 3.6 )

Unrealized gains on available-for-sale debt securities 0.2 — —

Income tax benefit (expense) associated with other comprehensive income items ( 1.6 ) 0.9 1.1

Unrealized (losses) gains on available-for-sale debt securities ( 4.0 ) 0.2 —

Income tax (expense) benefit associated with other comprehensive income items ( 24.3 ) ( 1.6 ) 0.9

Comprehensive income $ 1,072.2 $ 537.3 $ 251.7

15 unchanged sentences

Comprehensive income — — — 254.4 — — ( 2.7 ) 251.7

Cumulative effect of change in

accounting principle - ASU 2018-02

— — — 0.2 — — ( 0.2 ) —

Share-based compensation — — 12.6 — — 12.6

1 unchanged sentence

Repurchase of common stock associated with net share settlements of employee share-based awards — — — — 56,607 ( 5.1 ) — ( 5.1 )

Purchase of treasury shares — — — — 202,379 ( 15.3 ) — ( 15.3 )

Retirement of previously repurchased common stock ( 202,379 ) — ( 2.5 ) ( 12.8 ) ( 202,379 ) 15.3 — —

Balances, December 31, 2020 41,133,668 $ 0.4 $ 595.5 $ 1,348.9 21,848,314 $ ( 1,033.7 ) $ ( 5.6 ) $ 905.5

1 unchanged sentence

Net income — — — 532.4 — — — 532.4

Change in fair value of cash flow swaps, net of reclassification adjustment and $ 0.9 tax benefit

Unrealized gains on available-for-sale debt securities, net of $ 0 tax charge

— — — — — — 0.2 0.2

Change in fair value of cash flow swaps, net of reclassification adjustment and $ 1.6 tax expense

— — — — — — 4.7 4.7

Comprehensive income — — — 532.4 — — 4.9 537.3

Share-based compensation — — 16.2 — — — — 16.2

Proceeds from secondary offering of common stock, net 3,795,000 — 666.9 — — — — 666.9

Issuance of common stock, net of forfeitures, in connection with share-based payment arrangements 123,625 — — — — — — —

3 unchanged sentences

Net income — — — 997.3 — — — 997.3

Unrealized gains on available-for-sale debt securities, net of $ 0 tax charge

— — — — — — 0.2 0.2

Change in fair value of cash flow swaps, net of reclassification adjustment and $ 25.1 tax expense

— — — — — — 78.1 78.1

Unrealized loss on changes in fair value of debt securities, net of $ 0.8 tax benefit

— — — — — — ( 3.2 ) ( 3.2 )

Comprehensive income — — — 997.3 — — 74.9 1,072.2

Share-based compensation — — 20.6 — — — — 20.6

Proceeds from secondary offering of common stock, net 3,795,000 — 666.9 — — — — 666.9

Issuance of common stock, net of forfeitures, in connection with share-based payment arrangements 122,342 — — — — — — —

Share issues (repurchases) — — 1.4 — 1,635,030 ( 297.0 ) — ( 295.6 )

Repurchase of common stock associated with net share settlements of employee share-based awards — — — — 56,024 ( 9.2 ) — ( 9.2 )

Retirement of common stock ( 1,580,826 ) — ( 19.1 ) ( 268.3 ) ( 1,580,826 ) 287.4 — —

Balances, December 31, 2022 43,593,809 $ 0.4 $ 1,281.4 $ 2,610.1 22,024,479 $ ( 1,063.0 ) $ 74.4 $ 2,903.5

12 unchanged sentences

Franchise rights impairment — — 23.0

Unrealized gains on investments ( 1.0 ) — —

Unrealized loss (gain) on investments 14.1 ( 1.0 ) —

Loss on extinguishment of debt — — 20.6

Loaner vehicle amortization 14.7 20.9 21.8

Gain on divestitures ( 8.0 ) ( 62.3 ) ( 11.7 )

Gain on divestitures, net ( 207.1 ) ( 8.0 ) ( 62.3 )

Change in right-of-use asset 25.3 22.3 21.5

16 unchanged sentences

Acquisitions, net of cash acquired ( 5.0 ) ( 3,660.4 ) ( 954.1 )

Divestitures 21.3 177.9 39.1

Proceeds from dealership divestitures 701.2 21.3 177.9

Purchases of debt securities—available-for-sale ( 202.2 ) ( 1.1 ) —

3 unchanged sentences

Proceeds from the sale of assets — 21.5 4.2

Net cash used in investing activities ( 3,917.0 ) ( 820.8 ) ( 227.6 )

Net cash provided by (used in) investing activities 464.7 ( 3,917.0 ) ( 820.8 )

CASH FLOW FROM FINANCING ACTIVITIES:

12 unchanged sentences

Payment of debt issuance costs ( 0.4 ) ( 26.2 ) ( 4.7 )

Purchase of treasury stock ( 287.4 ) — —

Repurchases of common stock, including amounts associated with net share settlements of employee share-based awards ( 9.2 ) ( 10.4 ) ( 5.1 )

Net cash provided by (used in) financing activities 2,930.8 166.2 ( 127.0 )

Net cash (used in) provided by financing activities ( 1,104.3 ) 2,930.8 166.2

Net increase (decrease) in cash and cash equivalents 56.4 177.5 ( 2.1 )

9 unchanged sentences

Our store operations are conducted by our subsidiaries.

As of December 31, 2021, we owned and operated 205 new vehicle franchises, representing 31 brands of automobiles at 155 dealership locations, 35 collision centers, seven stand-alone used vehicle dealerships, one used vehicle wholesale business and one auto auction within fifteen states.

As of December 31, 2022, we owned and operated 186 new vehicle franchises, representing 31 brands of automobiles at 139 new vehicle dealership locations in 14 states.

We also operated 32 collision centers, seven stand-alone used vehicle stores, one used vehicle wholesale business, one auto auction and Total Care Auto, Powered by Landcar ("TCA"), a finance and insurance (F&I") product provider.

Our stores offer an extensive range of automotive products and services, including new and used vehicles;

parts and service, which includes repair and maintenance services, replacement parts and collision repair services (collectively referred to as "parts and services" or "P&S");

and finance and insurance products ("F&I"), including arranging vehicle financing through third parties and aftermarket products, such as extended service contracts, guaranteed asset protection ("GAP") debt cancellation and prepaid maintenance.

On December 17, 2021, the Company completed the acquisition of the Larry H.

Miller Dealerships ("LHM"), thereby acquiring 54 new vehicle dealerships, seven used car stores, 11 collision centers, a used vehicle wholesale business, the real property related thereto, and the entities comprising the F&I product provider, Total Care Auto, Powered by Landcar ("TCA") for a total purchase price of $ 3.48 billion (the "LHM Acquisition").

The real property was acquired in escrow, to be released, together with the related portion of the purchase price, subject to the satisfaction of certain title related conditions.

The purchase price was financed through a combination of cash, debt, including senior notes, real estate facilities, new and used vehicle floor plan facilities and the proceeds from the issuance of common stock.

TCA offers extended vehicle service contracts, prepaid maintenance contracts, vehicle theft assistance contracts, key replacement contracts, guaranteed asset protection contracts, paintless dent repair contracts, appearance protection contracts, tire and wheel, DrivePur, and lease wear and tear contracts.

In addition, TCA provides the required contractual liability insurance if needed.

The majority of these service contracts are sold through affiliated automobile dealerships.

As a result of acquiring the TCA as part of the LHM Acquisition, the Company now operates in two reportable segments, namely the Dealerships and TCA.

On August 24, 2020 the Company closed on the purchase of the Park Place Dealership group, acquiring substantially all of the assets of and leasing the real property related to, 12 franchises ( eight dealership locations), two collision centers and an auto auction for a purchase price of $ 889.9 million (the "Park Place Acquisition").

The purchase price was financed through a combination of cash, debt and seller financing.

Certain of the leased real property was subsequently acquired in May 2021 for $ 217.1 million.

See Note 3 "Acquisitions and Divestitures" for details of the LHM Acquisition and the Park Place Acquisition.

and F&I, including arranging vehicle financing through third parties and aftermarket products, such as extended service contracts, guaranteed asset protection ("GAP") debt cancellation and prepaid maintenance.

The finance and insurance products are provided by independent third parties and TCA.

The F&I products offered by TCA are sold through our dealerships.

The Company manages its operations in two reportable segments:

Dealerships and TCA.

Our operating results are generally subject to seasonal variations.

4 unchanged sentences

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), and reflect the consolidated accounts of Asbury Automotive Group, Inc.

and our wholly owned subsidiaries.

(the "Company") and our wholly owned subsidiaries.

All intercompany transactions have been eliminated in consolidation.

If necessary, reclassifications of amounts previously reported have been made to the accompanying consolidated financial statements in order to conform to current presentation.

Amounts presented have been calculated using non-rounded amounts for all periods presented and therefore certain amounts may not compute or tie to prior year financial statements due to rounding.

Use of Estimates

1 unchanged sentence

Actual results could differ materially from these estimates.

Estimates and assumptions are reviewed quarterly, and the effects of any revisions are

reflected in the consolidated financial statements in the period they are determined to be necessary.

Significant estimates made in the accompanying Consolidated Financial Statements include, but are not limited to, those relating to inventory valuation reserves, reserves for chargebacks against revenue recognized from the sale of finance and insurance products, reserves for self-insurance programs, certain assumptions related to intangible and long-lived assets, and reserves for certain legal or similar proceedings relating to our business operations.

Estimates and assumptions are reviewed quarterly, and the effects of any revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

Estimates made in the accompanying consolidated financial statements include, but are not limited to, those relating to inventory valuation reserves, reserves for chargebacks against revenue recognized from the sale of finance and insurance products, reserves for self-insurance programs, and certain assumptions related to goodwill and dealership franchise rights intangible assets.

Cash and Cash Equivalents

5 unchanged sentences

Short-term investments consist of debt securities that are callable or have a maturity date within the next 12 months and are classified as current assets.

Debt securities classified as short-term investments are designated as available-for-sale as management intends to hold these securities for indefinite periods of time or may sell the securities in response to changes in interest rates, prepayments, or other similar factors.

Debt securities classified as short-term investments are designated as available-for-sale as

management intends to hold these securities for indefinite periods of time or may sell the securities in response to changes in interest rates, prepayments, or other similar factors.

Available-for-sale debt securities are reported at fair market value with any unrealized gain or loss, net of applicable income tax, reported in other comprehensive income, as a separate component of shareholders’ equity.

3 unchanged sentences

Equity securities may consist of both preferred stock and common stock.

Other investments consist of hedge funds and partnerships.

Debt securities classified as non-current investments are designated as available-for-sale as management intends to hold these securities for indefinite periods of time or may sell the securities in response to changes in interest rates, prepayments, or other similar factors.

1 unchanged sentence

Premiums and discounts on debt securities included in non-current investments are amortized or accreted, as applicable, using the effective interest method over the period from the purchase date to the expected maturity or call date of the related security and are reported in net income.

Equity securities included in non-current investments are reported at fair market value with the change in value recognized in net income.

Other investments are measured at net asset value as a practical expedient with the net change in net asset value recognized in net income.

Equity securities included in non-current investments are reported at fair market value with the change in value, during the reporting period, recognized in net income.

We review the debt securities portfolio at the security level on a quarterly basis for potential credit losses, which takes into consideration numerous factors.

3 unchanged sentences

An unrealized loss on a debt security is generally considered to not be related to credit when the fair value of the security is below the carrying value of the security primarily due to changes in risk-free interest rates and when there has not been a significant deterioration in the financial condition of the issuer.

If the Company no longer has the intent or ability to hold a security in an unrealized loss position until recovery of the of the security’s cost basis, a loss is realized immediately in net income.

If the Company no longer has the intent or ability to hold a security in an unrealized loss position until recovery of the security’s cost basis, a loss is realized immediately in net income.

Contracts-In-Transit

12 unchanged sentences

Manufacturer advertising credits that are reimbursements of costs associated with specific advertising programs are recognized as a reduction of advertising expense in the period they are earned.

All other manufacturer advertising and floor plan interest credits are accounted for as purchase discounts, and are recorded as a reduction of inventory and recognized as a reduction to New vehicle cost of sales in the accompanying Consolidated Statements of Income in the period the related vehicle is sold.

All other manufacturer advertising and certain floor plan interest credits are accounted for as purchase discounts, and are recorded as a reduction of inventory and recognized as a reduction to new vehicle cost of sales in the accompanying consolidated statements of income in the period the related vehicle

Certain floor plan interest credits are reflected as a reduction in floor plan interest expense in the accompanying consolidated statements of income.

Property and Equipment

14 unchanged sentences

If the carrying amount of the underlying assets is less than their net recoverable value, then we calculate an impairment equal to the excess of the carrying amount over the fair market value, and the impairment loss would be charged to operations in the period identified.

During the year ended December 31, 2020, we recorded a $ 0.7 million impairment related to a vacant property.

We did no t record an impairment of our property and equipment in 2021 and 2019.

During the year ended December 31, 2020, we recorded a $ 0.7 million impairment charge related to a vacant property.

We did no t record an impairment charge related to our property and equipment in 2022 and 2021.

Acquisitions are accounted for under the acquisition method of accounting and the assets acquired and liabilities assumed are recorded at their fair value at the acquisition date.

The results of operations of acquired dealerships and other businesses are included in the accompanying Consolidated Statements of Income, commencing on the date of acquisition.

Results of acquired businesses, which are primarily dealerships, are included in our accompanying consolidated statements of income commencing on the date of acquisition.

Our acquisitions are accounted for such that the assets acquired and liabilities assumed are recognized at their acquisition date fair values, with any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired recorded as goodwill.

Goodwill is an asset representing operational synergies and future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

Upon the completion of purchase accounting, the fair value of our manufacturer franchise rights are determined as of the acquisition date, by discounting the projected cash flows specific to each franchise.

Included in this analysis are market participant assumptions related to the cash flows directly attributable to the franchise rights, including year-over-year and terminal growth rates, working capital requirements, weighted average cost of capital, future gross margins, and future selling, general, and administrative expenses.

Goodwill and Franchise Rights

1 unchanged sentence

We have determined that, based on how we integrate acquisitions into our business, how the components of our business share resources and interact with one another, and how we review the results of our operations, that we have several geographic market-based operating segments which consist of our dealerships.

our dealerships offer new and used vehicles, service, parts and third-party finance and insurance products), (iii) have similar customers, (iv) have similar distribution and marketing practices (all of our dealerships distribute products and services through dealership facilities that market to customers in similar ways), and (v) operate under similar regulatory environments.

We have determined that the dealerships in each of our operating segments are components that are aggregated into several geographic market-based reporting units for the purpose of testing goodwill for impairment, as they (i) have similar economic characteristics, (ii) offer similar products and services (all of our dealerships offer new and used vehicles, service, parts and third-party finance and insurance products), (iii) have similar customers, (iv) have similar distribution and marketing practices (all of our dealerships distribute products and services through dealership facilities that market to customers in similar ways), and (v) operate under similar regulatory environments.

Our dealership operating segments are aggregated into our single dealerships reportable segment.

Goodwill associated with TCA will be tested annually for impairment at the operating segment level which is the same as the reporting unit for this business.

In December 2021, we completed the LHM Acquisition which included 54 new vehicle dealerships, seven used car stores, 11 collision centers, a used vehicle wholesale business, the real property related thereto (Dealerships segment), and the entities comprising TCA.

We have determined that the operations of TCA comprise a separate operating and reportable segment to that of our dealerships operations and have therefore allocated goodwill of $ 1.64 billion associated with the LHM Acquisition to each of our reportable segments.

Approximately $ 710.3 million of goodwill was allocated to the TCA segment and $ 929.0 million was allocated to the Dealerships segment.

This allocation is preliminary and subject to change once the purchase price allocation is finalized.

Goodwill associated with TCA is tested for impairment at the operating segment level which is the same as the reporting unit for this business.

The fair value of our manufacturer franchise rights are determined as of the acquisition date, by discounting the projected cash flows specific to each franchise.

We have determined that manufacturer franchise rights have an indefinite life, as there are no economic, contractual or other factors that limit their useful lives, and they are expected to generate cash flows indefinitely due to the historically long lives of the manufacturers' brand names.

due to the historically long lives of the manufacturers' brand names.

Furthermore, to the extent that any agreements evidencing our manufacturer franchise rights would expire, we expect that we would be able to renew those agreements in the ordinary course of business.

2 unchanged sentences

We are subject to financial statement risk to the extent that goodwill becomes impaired due to decreases in the fair value of our automotive retail business or manufacturer franchise rights become impaired due to decreases in the fair value of our individual franchises.

Our identifiable intangible assets, other than goodwill, are our rights under franchise agreements with manufacturers, which are recorded at an individual franchise level, and the value of business acquired ("VOBA") which is recorded at the TCA operating unit level.

We recorded VOBA of $ 5.6 million in connection with the acquisition of TCA.

1 unchanged sentence

VOBA is based on actuarially determined projections, by each type of service contract, of future charges, premiums, claims, operating expenses, investment returns and other factors.

VOBA is reflected in Other long-term assets within the Consolidated Balance Sheets and is amortized over the period of the underlying contracts.

VOBA is reflected in other long-term assets within the consolidated balance sheets and is amortized over five years, which represents the period of the underlying contracts.

Debt Issuance Costs

15 unchanged sentences

We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers ("Topic 606").

Under that guidance, the transaction price is attributed to the underlying performance obligations in the contract and revenue is deferred and recognized as income as the Company satisfies the performance obligations in the contract and as the obligations under the contracts are performed.

Incremental costs of obtaining a contract are capitalized and amortized to the extent that the Company expects to recover those costs.

Incremental costs of obtaining a contract with a customer are capitalized and amortized to the extent that the Company expects to recover those costs.

The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below.

Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or performing a service to a customer.

Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or performing a service.

Sales and other taxes we collect, concurrent with revenue-producing activities, are excluded from revenue.

2 unchanged sentences

Payment is generally received at the time of sale or from a third-party financial institution within a short period of time following the sale of the vehicle.

Amounts due from third-party financial institutions are reflected in Contracts-in-transit or vehicle receivables within Accounts receivable, net on our Consolidated Balance Sheets.

Amounts due from third-party financial institutions are reflected in contracts-in-transit or vehicle receivables

within accounts receivable, net on our consolidated balance sheets.

Costs associated with incidental items that are immaterial in the context of the contract are accrued at the time of sale.

16 unchanged sentences

In addition, we record commissions received from our TCA segment related to the sale of TCA's various vehicle protection F&I products.

TCA offers extended vehicle service contracts, prepaid maintenance contracts, key replacement contracts, guaranteed asset protection contracts, paintless dent repair contracts, appearance protection contracts, tire and wheel, and lease wear and tear contracts.

In addition, TCA provides the required contractual liability insurance if needed.

The majority of these service contracts are sold through affiliated automobile dealerships.

Finance and insurance commission revenue is recognized at the point of sale since our performance obligation is to arrange financing or facilitating the sale of a third party's products or services to our customers.

4 unchanged sentences

We also participate in future profits pursuant to retrospective commission arrangements, which meet the definition of variable consideration, for certain insurance products associated with a third-party portfolio.

The Company estimates the

amount of variable consideration to be included in the transaction price based on historical payment trends and further constrains the variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur.

The Company estimates the amount of variable consideration to be included in the transaction price based on historical payment trends and further constrains the variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur.

In making these assessments the Company considers the likelihood and magnitude of a potential reversal of revenue and updates its assessment when uncertainties associated with the constraint are removed.

1 unchanged sentence

Each contract is considered to have a single performance obligation which extends over the life of the contract.

Revenue is recognized over the contract term in proportion to the amount of insurance protection provided.

Expenses are matched with earned premiums resulting in recognition of profits over the life of the contracts.

These expenses include the incremental costs incurred, primarily in the form of commissions, to obtain the contracts with customers.

These commissions are primarily paid to affiliated dealerships and are therefore eliminated upon consolidation.

Revenue is recognized ratably over the contract term based on earnings factors that align with the performance obligation.

We capitalize costs to obtain customer contracts, employee sales commissions, and amortize those costs over the life of the contract.

Amortization of costs to obtain customer contracts is included in selling, general and administrative expenses.

The portion of commissions that are paid to affiliated dealerships are eliminated upon consolidation.

Unearned premium reserves are established to cover the unexpired portion of premiums written.

15 unchanged sentences

The costs incurred by our new and used vehicle departments for work performed by our parts and service departments is included in either new vehicle cost of sales or used vehicle cost of sales on the accompanying consolidated statements of income, depending on the classification of the vehicle serviced.

We eliminate the internal profit on vehicles that remain in inventory.

We eliminate the internal profit on vehicles that remain in inventory at period end.

Intersegment Elimination

TCA's vehicle protection products are sold primarily through affiliated dealerships and the revenue from the related commissions are included in F&I revenue in the Dealerships segment revenue before consolidation.

TCA's vehicle protection products are sold through affiliated dealerships and the revenue from the related commissions are included in finance and insurance, net revenues in the Dealerships segment before consolidation.

The corresponding claims expense incurred and the amortization of deferred acquisition costs is recorded as a cost of sales in the TCA segment.

9 unchanged sentences

Periodically, the Company may retire repurchased shares of common stock previously held by the Company as treasury stock.

In accordance with our accounting policy, we allocate any excess share repurchase price over par value between additional paid-in capital, which is limited to amounts initially recorded

for the same issue, and retained earnings.

The Company did no t repurchase any shares under the Repurchase Program or retire any treasury shares during 2021 and 2020.

In accordance with our accounting policy, we allocate any excess share repurchase price over par value between additional paid-in capital, which is limited to amounts initially recorded for the same issue, and retained earnings.

During the year ended December 31, 2022, the Company repurchased 1,635,030 and retired 1,580,826 shares of our common stock under our share repurchase program.

The Company did no t repurchase any shares under the repurchase program or retire any treasury shares during 2021 or 2020.

On January 26, 2023, our Board of Directors approved an increase in the Company’s common share repurchase authorization to $ 200.0 million.

Earnings per Common Share

11 unchanged sentences

Assets and liabilities classified as held for sale include assets and liabilities associated with pending dealership disposals, real estate we are actively marketing to sell, and any related mortgage notes payable or other liabilities, if applicable.

Classification as held for sale begins on the date that we have met all of the criteria for classification as held for sale.

At the time of classifying assets as held for sale, we compare the carrying value of these assets to estimates of fair value to assess for impairment.

We compare the carrying value to estimates of fair value utilizing the assistance of third-party broker opinions of value and third-party desktop appraisals to assist in our fair value estimates related to real estate properties.

Classification as held for sale begins on the date that we have met all of the criteria for classification as held for sale.

Statements of Cash Flows

Borrowings and repayments of floor plan notes payable through our 2019 Senior Credit Facility ("Non-Trade"), and all floor plan notes payable relating to used vehicles (together referred to as "Floor Plan Notes Payable—Non-Trade"), are classified as financing activities on the accompanying Consolidated Statements of Cash Flows, with borrowings reflected separately from repayments.

The net change in floor plan notes payable to a lender affiliated with the manufacturer from which we purchase a particular new vehicle (collectively referred to as "Floor Plan Notes Payable—Trade") is classified as an operating activity on the accompanying Consolidated Statements of Cash Flows.

Borrowings of floor plan notes payable associated with inventory acquired in connection with all acquisitions and repayments made in connection with all divestitures are classified as a financing activity in the accompanying Consolidated Statement of Cash Flows.

Borrowings and repayments of floor plan notes payable through our senior secured credit agreement with Bank of America, as administrative agent, and the other agents and lenders party thereto (as amended, the "2019 Senior Credit Facility") and all floor plan notes payable relating to used vehicles (together referred to as "Floor Plan Notes Payable—Non-Trade"), are classified as financing activities in the accompanying consolidated statements of cash flows, with borrowings reflected separately from repayments.

The net change in floor plan notes payable to a lender affiliated with the manufacturer from which we purchase a particular new vehicle (collectively referred to as "Floor Plan Notes Payable—Trade") is classified as an operating activity in the accompanying consolidated statements of cash flows.

Cash flows related to floor plan notes payable included in operating activities differ from cash flows related to floor plan notes payable included in financing activities only to the extent that the former are payable to a lender affiliated with the manufacturer from which we purchased the related inventory, while the latter are payable to our 2019 Senior Credit Facility that includes lenders affiliated with the manufacturers and lenders not affiliated with the manufacturers from which we purchased the related inventory.

1 unchanged sentence

Loaner vehicles account for a significant portion of other current assets.

We acquire loaner vehicles either with available cash or through borrowings from either our manufacturer affiliated lenders or through our senior secured credit agreement with Bank of America, as administrative agent, and the other agents and lenders party thereto (as amended, the "2019 Senior Credit Facility").

Loaner vehicles are initially used by our service department for only a short period of time (typically 6 to 12 months) before we seek to sell them.

We acquire loaner vehicles either with available cash or through borrowings from either our manufacturer affiliated lenders or through our 2019 Senior Credit Facility.

Loaner vehicles are initially used by our service department for a short period of time (typically 6 to 12 months) before we seek to sell them.

Therefore, we classify the acquisition of loaner vehicles in other current assets and the borrowings and repayments of loaner vehicle notes payable in accounts payable and accrued liabilities in the accompanying consolidated statements of cash flows.

Loaner vehicles are depreciated over the service period to their estimated value.

At the end of the

loaner service period, loaner vehicles are transferred from Other current assets to used vehicle inventory.

At the end of the loaner service period, loaner vehicles are transferred from other current assets to used vehicle inventory.

These transfers are reflected as non-cash transfers between other current assets and inventory in the accompanying consolidated statements of cash flows.

28 unchanged sentences

(Toyota and Lexus)

Stellantis N.V.

( Chrysler, Dodge, Jeep, Ram and Fiat )

American Honda Motor Co., Inc.

(Honda and Acura)

Mercedes-Benz USA, LLC ( Mercedes-Benz and Sprinter )

Ford Motor Company (Ford and Lincoln)

Mercedes-Benz USA, LLC ( Mercedes-Benz and Sprinter )

Hyundai Motor North America ( Hyundai and Genesis )

General Motors Company ( Chevrolet, Buick and GMC)

Nissan North America, Inc.

(Nissan and Infiniti)

BMW of North America, LLC (BMW and MINI)

No other manufacturers individually accounted for more than 5 % of our total new vehicle revenue for the year ended December 31, 2022.

Segment Reporting

As of December 31, 2021, the Company had two reportable segments:

(1) Dealerships;

Prior to the acquisition of TCA as part of the LHM Acquisition, we had one reportable segment as the geographic dealership groups are aggregated into one reportable segment.

Segment information is discussed further in Note 20 "Segment Information".

Recent Accounting Pronouncements

Effective October 1, 2021, the Company adopted Financial Accounting Standard Board Accounting Standards Update 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires an acquiring entity to apply ASC Topic 606 to recognize and measure contract assets acquired and contract liabilities assumed in a business combination.

I n September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-04, Liabilities-Supplier Finance Programs.

This standard serves to improve transparency about supplier finance programs.

The ASU requires certain disclosures around key terms of outstanding supply chain finance programs and changes in obligations during a reporting period related to vendors participating in these programs.

The new disclosure requirements do not affect the recognition, measurement or financial statement presentation of any amounts due.

The guidance is effective for fiscal

years beginning after December 15, 2022, except for rollforward information, which is effective in the first quarter of 2024.

Early adoption is permitted.

We are evaluating the impact of this new guidance on our consolidated financial statements.

Effective October 1, 2021, the Company adopted ASU 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires an acquiring entity to apply ASC Topic 606 to recognize and measure contract assets acquired and contract liabilities assumed in a business combination.

The Company applied ASC Topic 606 in recording contract assets acquired and contract liabilities assumed in business combinations that occurred in the quarter ended December 31, 2021.

We assumed contract liabilities or deferred revenue of $ 667.6 million in connection with the LHM acquisition which closed in December 2021.

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848):

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04").

In January 2021, the FASB issued Accounting Standards Update No.

2021-01, Reference Rate Reform (Topic 848):

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

Scope , which clarified the scope and application of the original guidance.

3 unchanged sentences

LIBOR benchmarking is utilized in our debt (including mortgages), revolving credit facilities, floorplan facilities, and interest rate swaps.

We are in the process of amending our LIBOR-based debt arrangements and related hedging to revise their interest basis from LIBOR to a Secured Overnight Financing Rate ("SOFR").

The impact of these proposed amendments to our debt arrangements along with the adoption of the provisions from this standard is not anticipated to have a material impact on our Consolidated Financial Statements.

Effective January 1, 2020, the Company adopted Financial Accounting Standard Board Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments , which changed the way entities assess the impairment of its financial instruments based on its estimate of expected credit losses versus the current incurred loss model.

The adoption of this standard did not have a material impact on our Consolidated Financial Statements.

Effective January 1, 2019, the Company adopted the new lease accounting guidance in Accounting Standards Update (ASU) No.

2016-02, Leases (Topic 842) (“ASC 842”).

For additional information, please refer to Note 19 "Leases" within the accompanying Notes to Consolidated Financial Statements for additional information.

Effective January 1, 2019, the Company adopted ASU No.

2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02")." ASU 2018-02 allows entities to elect to reclassify the income tax effects resulting from the Tax Cuts and Jobs Act on items within accumulated other comprehensive income to retained earnings.

The Company elected to reclassify $ 0.2 million related to the change in deferred taxes associated with our cash flow hedges from accumulated other comprehensive income to retained earnings.

This reclassification was recognized as a cumulative effect adjustment in the Consolidated Statements of Shareholders' Equity.

On January 1, 2019, the Company adopted ASU No.

2017-12, "Derivatives and Hedging" (Topic 815):

Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12").

This update intended to simplify hedge accounting by better aligning how an entity's risk management activities and hedging relationships are presented in its financial statements and simplifies the application of hedge accounting guidance in certain situations.

This update expands and refines hedge accounting for both non-financial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements.

For cash flow hedges existing at the adoption date, this update required adoption on a modified retrospective basis with a cumulative-effect adjustment to retained earnings as of the effective date and the amendments to presentation guidance and disclosure requirements were required to be adopted prospectively.

The adoption of this update did not have a material impact on our Consolidated Financial Statements.

During the quarter ended June 30, 2022, we amended our LIBOR-based debt arrangements and related hedging financial instruments to revise their interest basis from LIBOR to a Secured Overnight Financing Rate ("SOFR").

See Note 14 "Debt" for further details.

The impact of these amendments to our debt arrangements and related interest rate swap derivative agreements, along with the adoption of the provisions from this standard, did not have a material impact on our consolidated financial statements.

REVENUE RECOGNITION

3 unchanged sentences

2022 2021 2020

(In millions)

New vehicle $ 7,365.6 $ 4,934.1 $ 3,767.4

10 unchanged sentences

Contract assets related to vehicle repair and maintenance services are transferred to receivables when a repair order is completed and invoiced to the customer.

Certain incremental sales commissions payable to obtain an F&I revenue contract with a customer have been capitalized and are amortized using the same pattern of recognition applicable to the associated F&I revenue contract.

Certain incremental sales commissions payable to obtain an F&I revenue contract with a customer have been capitalized and are

amortized using the same pattern of recognition applicable to the associated F&I revenue contract.

Vehicle Repair and Maintenance Services Finance and Insurance, net Deferred Sales Commissions Total

5 unchanged sentences

Transferred to receivables from contract assets recognized at the beginning of the period ( 12.3 ) ( 13.5 ) — ( 25.8 )

Amortization of costs incurred to obtain a contract with a customer — — ( 4.6 ) ( 4.6 )

Costs incurred to obtain a contract with a customer — — 40.3 40.3

Increases related to revenue recognized, inclusive of adjustments to constraint, during the period 14.7 14.7 — 29.4

Contract Assets, December 31, 2022 $ 14.7 $ 14.7 $ 37.2 $ 66.6

Contract Assets (current), December 31, 2022 $ 14.7 $ 14.7 $ 11.1 $ 40.5

The Company acquired $ 644.3 million in Deferred revenue as part of the LHM Acquisition in December 2021.

As of December 31, 2021, we had $ 647.8 million of Deferred revenue reflected in the Consolidated Balance Sheet.

Contract Assets (long-term), December 31, 2022 $ — $ — $ 26.1 $ 26.1

Contract Liabilities

The Company acquired $ 667.6 million in deferred revenue as part of the Larry H.

Miller and TCA acquisition in December 2021.

The consolidated balance sheet reflects $ 713.9 million and $ 647.8 million as of December 31, 2022 and 2021, respectively.

Approximately $ 209.6 million of deferred revenue at December 31, 2021 was recorded in finance and insurance, net revenue in the consolidated statement of income for the year ended December 31, 2022.

ACQUISITIONS AND DIVESTITURES

Results of acquired businesses, which are primarily dealerships, are included in our accompanying Consolidated Statements of Income commencing on the date of acquisition.

Included in this analysis are market participant assumptions related to the cash flows directly attributable to the franchise rights, including

year-over-year and terminal growth rates, working capital requirements, weighted average cost of capital, future gross margins, and future selling, general, and administrative expenses.

LHM Acquisition

On December 17, 2021, we completed the acquisition of the equity interests of, and the real property related to the businesses of the Larry H.

Miller Dealerships and the Total Care Auto, Powered by Landcar business.

Miller Dealerships and TCA (the "LHM acquisition").

The results of the LHM Dealerships and TCA business have been included in the consolidated financial statements since that date.

The acquisition diversifies Asbury's geographic mix, with entry into six Western states;

1 unchanged sentence

As a result of the LHM acquisition, we acquired 54 new vehicle dealerships, seven used car stores, 11 collision centers, a used vehicle wholesale business, the real property related thereto, and the entities comprising the TCA business for a total purchase price of approximately $ 3.48 billion.

The real property was acquired in escrow, to be released, together with the related portion of the preliminary purchase consideration, subject to the satisfaction of certain title related conditions.

The preliminary purchase price was paid in cash.

The sources of the preliminary purchase consideration are as follows:

The purchase price was paid in cash.

The sources of the purchase consideration are as follows:

(In millions)

2 unchanged sentences

Senior notes 1,378.5

Revolving credit facility 200.0

Real estate facility 513.0

2 unchanged sentences

Payable to sellers 6.0

Preliminary purchase price, net of cash acquired $ 3,193.9

Purchase price, net of cash acquired $ 3,193.9

Under the acquisition method of accounting, the tangible and intangible assets acquired and liabilities assumed are recorded at their estimated fair value based on information currently available.

The following table summarizes the amounts recorded based on preliminary estimates of fair value:

The following table summarizes the amounts recorded based on final estimates of fair value:

(In millions)

20 unchanged sentences

Net assets acquired $ 3,481.2

The preliminary acquisition accounting is based upon the Company’s estimates of fair value.

The estimated fair values of the assets acquired and liabilities assumed and the related preliminary acquisition accounting are based on management’s estimates and assumptions, as well as other information compiled by management, including the books and records of Larry H.

Our estimates and assumptions are subject to change during the measurement period, not to exceed one year from the acquisition date.

The areas of acquisition accounting that are not yet finalized primarily relate to the following significant items:

(i) finalizing the review and valuation of land, land improvements, buildings and non-real property and equipment (including the models, key assumptions, estimates and inputs used) and assignment of remaining useful lives associated with the depreciable assets, (ii) finalizing the review and valuation of manufacturer franchise rights (including key assumptions, inputs and estimates), (iii) finalizing the review of the actuarial inputs to the value of business added intangible asset for TCA, (iv) finalizing the valuation of certain in-place contracts or contractual relationships (including but not limited to leases), including determining the appropriate amortization period, (v) finalizing our review of certain assets acquired and liabilities assumed, (vi) finalizing the evaluation and valuation of certain legal matters and/or other loss contingencies, including those that we may not yet be aware of but meet the requirement to qualify as a pre-acquisition contingency, and (vii) finalizing our estimate of the impact of acquisition accounting on deferred income taxes or liabilities.

As the initial acquisition accounting is based on our preliminary assessments, actual values may differ (possibly materially) when final information becomes available that differs from our current estimates.

Additionally, the total consideration transferred is subject to certain post-close adjustments.

We believe that the information gathered to date provides a reasonable basis for estimating the preliminary fair values of assets acquired and liabilities assumed.

We will continue to evaluate these items until they are satisfactorily resolved and adjust our acquisition accounting accordingly, within the allowable measurement period.

The acquisition accounting is based upon the Company’s estimates of fair value.

The estimated fair values of the assets acquired and liabilities assumed and the related acquisition accounting are based on management’s estimates and assumptions, as well as other information compiled by management, including the books and records of LHM and TCA.

The effects of the measurement-period adjustments on our consolidated statement of income for the year ended December 31, 2022 were not material.

Approximately $ 1.31 billion of the purchase price was assigned to the indefinite lived franchise rights intangible assets related to the dealer agreements applicable to each new vehicle dealership.

In addition, goodwill of $ 1.21 billion was recognized and is primarily attributable to the anticipated synergies that Asbury expects to derive from the LHM acquisition as

well as the acquired assembled workforce of LHM and TCA.

Goodwill of $ 536.6 million was assigned to the TCA segment while $ 668.7 million was assigned to the Dealerships segment.

The Company recorded $ 4.9 million of acquisition related costs during the year ended December 31, 2021.

These costs are included in selling, general, and administrative in the consolidated statements of income.

The Company did not incur acquisition related costs during the year ended December 31, 2022.

The Company's consolidated statements of income included revenue and net income attributable to LHM from December 17, 2021 through December 31, 2021 of $ 256.4 million and $ 15.7 million, respectively.

The following represents the unaudited pro forma information as if LHM had been included in the consolidated results of the Company since January 1, 2020:

The following represents the unaudited pro forma information as if the LHM acquisition had been included in the consolidated results of the Company since January 1, 2020:

For the Year Ended December 31,

12 unchanged sentences

In September 2020, the Company redeemed the Seller Notes with proceeds from the offering of 4.50 % Notes due 2028 and 4.75 % Notes due 2030.

See Note 14 "Debt" for further details.

The sources of the purchase consideration are as follows:

4 unchanged sentences

Purchase price $ 889.9

Under the acquisition method of accounting, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on information currently available.

For the year ended December 31, 2021, we recorded a $ 1.5 million measurement period adjustment to Property and equipment and Goodwill, respectively.

The following table summarizes the allocation of the purchase price:

Under the acquisition method of accounting, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed.

The following table summarizes the final allocation of the purchase price:

(In millions)

26 unchanged sentences

Other Acquisitions and Divestitures

In addition to the LHM Acquisition during the year ended December 31, 2021, we acquired the assets of 11 franchises ( 10 dealership locations) in in the Denver, Colorado market and three franchises ( one dealership location) in the Indianapolis, Indiana market for a combined purchase price of $ 485.7 million.

In addition to the LHM acquisition during the year ended December 31, 2021, we acquired the assets of 11 franchises ( 10 dealership locations) in the Denver, Colorado market and three franchises ( one dealership location) in the Indianapolis, Indiana market for a combined purchase price of $ 485.7 million.

We funded these acquisitions with an aggregate of $ 455.1 million of cash and $ 9.6 million of floor plan borrowings for the purchase of the related new vehicle inventory.

In the aggregate, these acquisitions included purchase price holdbacks of $ 21.0 million for potential indemnity claims made by us with respect to the acquired franchises.

In addition to the acquisition amounts above, we released $ 1.0 million of purchase price holdbacks related to current and prior year acquisitions during the year ended December 31, 2021.

In addition to the Park Place Acquisition during the year ended December 31, 2020, we acquired the assets of three franchises ( one dealership location) in the Denver, Colorado market for a combined purchase price of $ 63.6 million.

this acquisition with an aggregate of $ 34.5 million of cash and $ 27.1 million of floor plan borrowings for the purchase of the related new vehicle inventory.

We funded this acquisition with an aggregate of $ 34.5 million of cash and $ 27.1 million of floor plan borrowings for the purchase of the related new vehicle inventory.

In the aggregate, this acquisition included purchase price holdbacks of $ 2.0 million for potential indemnity claims made by us with respect to the acquired franchises.

In addition to the acquisition amounts above, we released $ 2.5 million of purchase price holdbacks related to current and prior year acquisitions during the year ended December 31, 2020.

During the year ended December 31, 2019, we acquired the assets of nine franchises ( five dealership locations) and one collision center in the Indianapolis, Indiana market and one franchise ( one dealership location) in the Denver, Colorado market for a combined purchase price of $ 210.4 million.

We funded these acquisitions with an aggregate of $ 153.9 million of cash and $ 55.3 million of floor plan borrowings for the purchase of the related new vehicle inventory.

In the aggregate, these acquisitions included purchase price holdbacks of $ 1.2 million for potential indemnity claims made by us with respect to the acquired franchises.

In addition to the acquisition amounts above, we released $ 0.8 million of purchase price holdbacks related to a prior year acquisition.

Goodwill and manufacturer franchise rights associated with our Dealership segment acquisitions will be deductible for federal and state income tax purposes ratably over a 15 -year period.

Goodwill and manufacturer franchise rights associated with our Dealership segment acquisitions is deductible for federal and state income tax purposes ratably over a 15 -year period.

Below is the allocation of the purchase price for the acquisitions (other than the LHM acquisition and the Park Place acquisition) for the years ended December 31, 2021 and 2020.

For the 11 franchises ( 10 dealership locations) in the Denver, Colorado market and three franchises ( one dealership location) in the Indianapolis, Indiana market acquired in 2021, the preliminary acquisition accounting is based upon the Company’s estimates of fair value.

Additionally, the total consideration transferred is subject to certain post-close adjustments.

We believe that the information gathered to date provides a reasonable basis for estimating the preliminary fair values of assets acquired and liabilities assumed.

We will continue to evaluate these items until they are satisfactorily resolved and adjust our acquisition accounting accordingly, within the allowable measurement period.

For the Year Ended December 31,

8 unchanged sentences

Total purchase price $ 485.7 $ 63.6

During the year ended December 31, 2022, we sold one franchise ( one dealership location) in St.

Louis, Missouri, three franchises ( three dealership locations) and one collision center in Denver, Colorado, two franchises ( two dealership locations) in Spokane, Washington, one franchise ( one dealership location) in Albuquerque, New Mexico and 11 franchises ( nine dealership locations) and two collision centers in North Carolina.

The Company recorded a pre-tax gain totaling $ 207.1 million.

During the year ended December 31, 2021, we sold one franchise ( one dealership location) in the Charlottesville, Virginia market.

The Company recorded a pre-tax gain totaling $ 8.0 million, which is presented in our accompanying Consolidated Statements of Income as Gain on dealership divestitures, net.

During the year ended December 31, 2020, we sold two franchises ( two dealership locations) in the Atlanta, Georgia market, we sold six franchises ( five dealership locations) and one collision center in the Jackson, Mississippi market, and we sold one franchise ( one dealership location) in the Greenville, South Carolina market.

The Company recorded a pre-tax gain totaling $ 62.3 million, which is presented in our accompanying Consolidated Statements of Income as Gain on dealership divestitures, net.

During the year ended December 31, 2019, we sold one franchise ( one dealership location) and one collision center in the Houston, Texas market.

The Company divested $ 30.1 million of assets, which primarily consisted of inventory and property and equipment, resulting in a pre-tax gain of $ 11.7 million, which is presented in our accompanying Consolidated Statements of Income as Gain on divestitures.

The divested businesses would not be considered a significant subsidiary as defined in Rule 1-02(w) of Regulation S-X.

The Company recorded a pre-tax gain totaling $ 8.0 million.

During the year ended December 31, 2020, we sold two franchises ( two dealership locations) in the Atlanta, Georgia market, six franchises ( five dealership locations) and one collision center in the Jackson, Mississippi market, and one franchise ( one dealership location) in the Greenville, South Carolina market.

The Company recorded a pre-tax gain totaling $ 62.3 million.

ACCOUNTS RECEIVABLE

16 unchanged sentences

____________________________

(a) Amounts reflected for inventory as of December 31, 2021, excluded $ 24.1 million, of inventories classified as Assets held for sale.

(a) Inventories, net as of December 31, 2022 and December 31, 2021, excluded $ 3.4 million and $ 24.1 million classified as assets held for sale, respectively.

The lower of cost and net realizable value reserves reduced total inventory cost by $ 10.7 million and $ 7.7 million, respectively as of December 31, 2022 and December 31, 2021.

As of December 31, 2022 and December 31, 2021, certain automobile manufacturer incentives reduced new vehicle inventory cost by $ 2.7 million and $ 1.2 million, respectively, and reduced new vehicle cost of sales for the year ended December 31, 2022, 2021, and 2020 by $ 91.5 million, $ 60.4 million, and $ 47.0 million, respectively.

New vehicle inventories as of December 31, 2021 have decreased from December 31, 2020 as a result of manufacturer production challenges caused by the semiconductor chip shortage.

ASSETS HELD FOR SALE

18 unchanged sentences

Net assets held for sale $ 18.7 $ 354.3

As of December 31, 2022, assets held for sale consisted of one franchise ( one dealership location) in addition to one real estate property not currently used in our operations.

As of December 31, 2021, assets held for sale consisted of eight franchises ( eight dealership locations) in addition to one real estate property not currently used in our operations.

Assets and liabilities associated with these dealerships and properties totaled $ 375.1 million and $ 20.8 million, respectively.

As of December 31, 2020, assets held for sale consisted of three real estate properties not used in our operations.

Assets and liabilities associated with these properties totaled $ 28.3 million and $ 8.9 million, respectively.

During the year ended December 31, 2022, the Company sold 18 franchises ( 16 dealership locations) and three collision centers for a pre-tax gain totaling $ 207.1 million.

During the year ended December 31, 2021, the Company sold one franchise ( one dealership location) for a pre-tax gain totaling $ 8.0 million and two vacant properties with a net book value of $ 12.5 million.

During the year ended December 31, 2020, the Company sold nine franchises ( eight dealership locations) and one collision center for a pre-tax gain totaling $ 62.3 million and one vacant property with a net book value of $ 3.7 million.

During the year ended December 31, 2020, we recorded $ 0.7 million of impairment expense related to a real estate property we were actively marketing to sell, based on offers received from prospective buyers and third-party brokers' opinions of value.

We did no t record impairment expense associated with real estate properties that we were actively marketing to sell during the year ended December 31, 2021.

OTHER CURRENT ASSETS

5 unchanged sentences

Prepaid expenses 43.0 12.7

Notes receivable 12.9 6.3

Prepaid taxes 5.8 4.6

2 unchanged sentences

Other current assets $ 288.1 $ 203.7

The acquisition of TCA included an investment portfolio funded primarily by product premiums.

TCA has an investment portfolio funded primarily by product premiums.

The amortized cost, gross unrealized gains and losses and estimated fair values of debt securities available-for-sale, equity securities, and other investments measured at net asset value are as follows:

9 unchanged sentences

Common stock 48.7 — — — 48.7

Total investments $ 244.2 $ — $ 0.5 $ ( 4.4 ) $ 240.4

As of December 31, 2021

Amortized Cost Allowance For Credit Losses Gross Unrealized Gains Gross Unrealized Losses Fair Value

(In millions)

Short-term investments $ 11.0 $ — $ — $ — $ 11.0

U.S Treasury 7.5 — — ( 0.1 ) 7.4

Municipal 27.9 — 0.4 ( 0.1 ) 28.2

Corporate 9.5 — 0.1 ( 0.1 ) 9.5

Mortgage and other asset-backed securities 8.8 — 0.1 ( 0.1 ) 8.8

Total debt securities 64.7 — 0.6 ( 0.4 ) 64.9

Common stock 65.2 — — — 65.2

Other investments measured at net asset value 4.4 — — — 4.4

Total investments $ 134.3 $ — $ 0.6 $ ( 0.4 ) $ 134.5

As of December 31, 2021, the Company had $ 0.6 million of accrued interest receivable, which is included in Other current assets on the Consolidated Balance Sheet.

The Company does not consider accrued interest receivable in the carrying amount of financial assets held at amortized cost basis or in the allowance for credit losses calculation.

The Company recorded an unrealized loss of $ 0.4 million during the year ended December 31, 2022 and an unrealized gain of $ 18.3 million for the year ended December 31, 2021 related to equity securities held as of December 31, 2022 and December 31, 2021, respectively.

As of December 31, 2022 and December 31, 2021, the Company had $ 1.3 million and $ 0.6 million of accrued interest receivable, which was included in other current assets on the consolidated balance sheets.

The Company does not consider accrued interest receivable in the carrying amount of financial assets held at amortized cost basis or in the allowance for credit losses.

A summary of amortized costs and fair value of investments by time to maturity, is as follows:

9 unchanged sentences

Common stock 48.7 48.7

Other investments measured at net asset value 4.4 4.4

Total investment securities $ 244.2 $ 240.4

There were no gross gains and losses realized related to sales of available-for-sale debt securities carried at fair value from the acquisition date of December 17, 2021 to December 31, 2021

The following table summarizes the amount of unrealized losses, defined as the amount by which the amortized cost exceeds fair value, and the related fair value of investments with unrealized losses as of December 31, 2021.

There were no gross gains and losses realized related to the sales of available-for-sale debt securities carried at fair value from the acquisition date of December 17, 2021 to December 31, 2021.

During the year ended December 31, 2022, we recorded $ 0.1 million gross gains and $ 2.0 million gross losses related to the sales of available-for-sale debt securities.

The following tables summarize the amount of unrealized losses, defined as the amount by which the amortized cost exceeds fair value, and the related fair value of investments with unrealized losses.

The investments were segregated into two categories:

those that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position of 12 or more months.

The reference point for determining how long an investment was in an unrealized loss position was December 31, 2021.

All investments were acquired in the LHM acquisition on December 17, 2021, therefore there are no unrealized losses greater than 12 months at December 31, 2021.

The reference point for determining how long an investment was in

an unrealized loss position was December 31, 2022.

Investments held as of December 31, 2021 were acquired in the LHM acquisition on December 17, 2021, therefore there are no unrealized losses greater than 12 months at December 31, 2021.

As of December 31, 2022

7 unchanged sentences

Total debt securities $ 145.7 $ ( 2.0 ) $ 6.8 $ ( 0.5 ) $ 152.6 $ ( 2.5 )

As of December 31, 2021

Less than 12 Months Greater than 12 Months Total

Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

(In millions)

U.S Treasury 7.1 ( 0.1 ) — — 7.1 ( 0.1 )

Municipal 10.0 ( 0.1 ) — — 10.0 ( 0.1 )

Corporate 6.4 ( 0.1 ) — — 6.4 ( 0.1 )

Mortgage and other asset-backed securities 5.8 ( 0.1 ) — — 5.8 ( 0.1 )

Total debt securities $ 29.3 $ ( 0.4 ) $ — $ — $ 29.3 $ ( 0.4 )

On January 1, 2020, the Company adopted the amendments within ASU 2016-13, which replaced the legacy GAAP other-than-temporary impairment ("OTTI") model with a credit loss model.

3 unchanged sentences

Additionally, the Company has determined it has both the intent and ability to hold these investments until the market price recovers or until maturity and does not believe it will be required to sell the securities before maturity.

Accordingly, no credit losses were recognized on these securities during the year ended December 31, 2021 .

Accordingly, no credit losses were recognized on these securities during the years ended December 31, 2022 and 2021.

PROPERTY AND EQUIPMENT, NET

12 unchanged sentences

______________________________

(a) Amounts reflected for Property and equipment, net as of December 31, 2021 and 2020, excluded $ 110.8 million and $ 28.3 million, respectively classified as Assets held for sale.

(a) Property and equipment, net as of December 31, 2022 and 2021, excluded $ 24.0 million and $ 110.8 million, respectively classified as assets held for sale.

In addition, property and equipment, net as of December 31, 2022 and 2021 included finance leases of $ 8.1 million and $ 8.4 million, respectively.

During the years ended December 31, 2021, 2020, and 2019, we capitalized $ 0.8 million, $ 0.4 million, and $ 0.6 million, respectively, of interest in connection with various capital projects to upgrade or remodel our facilities.

Depreciation expense was $ 69.0 million, $ 41.9 million, and $ 38.5 million for the years ended December 31, 2022, 2021, and 2020, respectively.

4 unchanged sentences

Goodwill and intangible franchise rights are tested annually as of October 1 st , or more frequently in the event that facts and circumstances indicate a triggering event has occurred.

On December 17, 2021, the Company completed the LHM Acquisition, thereby acquiring 54 new vehicle dealerships, seven used car stores, 11 collision centers, a used vehicle wholesale business, the real property related thereto, and the entities comprising the TCA operations for a total purchase price of $ 3.48 billion.

We preliminarily recorded goodwill of $ 1.64 billion, franchise rights of $ 870.0 million and value of business acquired ("VOBA") of $ 5.6 million in connection with the LHM Acquisition.

We determined that the TCA operations are a separate operating and reportable segment from our dealership operations and have therefore allocated goodwill of $ 1.64 billion associated with the LHM Acquisition between our reportable segments.

In connection with the LHM acquisition, we recorded goodwill of $ 1.21 billion, franchise rights of $ 1.31 billion and VOBA of $ 5.6 million.

Approximately $ 536.6 million of goodwill was allocated to the TCA segment and $ 668.7 million was allocated to the Dealerships segment.

This allocation is preliminary and subject to change once the purchase price allocation is finalized.

Values may differ, possibly materially, when final information becomes available that differs from current estimates.

As a result of the LHM Acquisition, the Company now operates in two reportable segments namely, the Dealerships and TCA segments.

The changes in goodwill and intangible franchise rights for the years ended December 31, 2022 and 2021 are as follows:

Dealerships TCA Total

(In millions)

2 unchanged sentences

Divestitures ( 0.6 ) — ( 0.6 )

Reclassified from assets held for sale 5.3

Reclassified to assets held for sale ( 118.5 ) — ( 118.5 )

Balance as of December 31, 2021 (a) $ 1,561.4 $ 710.3 $ 2,271.7

Acquisitions 1,828.6

Reclassified from assets held for sale 118.5 — 118.5

Acquisitions - measurement-period adjustments ( 337.0 ) ( 173.7 ) ( 510.7 )

Divestitures ( 95.2 ) — ( 95.2 )

7 unchanged sentences

Acquisitions 1,020.5

Divestitures ( 11.3 )

Impairments ( 23.0 )

Balance as of December 31, 2020 $ 425.2

Acquisitions 1,020.5

Reclassified to assets held for sale ( 110.0 )

Balance as of December 31, 2021 $ 1,335.7

Reclassified from assets held for sale 110.0

Acquisitions - measurement-period adjustments 517.7

Divestitures ( 163.3 )

Balance as of December 31, 2022 $ 1,800.1

We elected to perform a qualitative assessment for our October 1, 2022 goodwill and franchise rights impairment testing and determined that it was more likely than not that the fair value of our reporting units exceeded their carrying value.

We did no t record an impairment charge for goodwill or franchise rights in the year ended December 31, 2021.

We did no t record an impairment charge for goodwill or franchise rights during the year ended December 31, 2022.

As a result of the adverse impact on our dealership operations caused by the COVID-19 pandemic in the first quarter of 2020, the Company considered the extent to which the COVID-19 impacts combined with other relevant circumstances (e.g., the results of the Company’s impairment test) could affect the significant inputs used to determine the fair value of the Company’s franchise rights and goodwill associated with the Company’s reporting units.

3 unchanged sentences

These assumptions include year-over-year and terminal growth rates, working capital requirements, weighted average cost of capital, future gross margins, and future selling, general, and administrative expenses.

The results of the quantitative impairment testing identified that the carrying values of certain of our franchise rights assets exceeded their fair value.

The results of the quantitative impairment testing identified that the carrying values of certain of our franchise rights intangible assets exceeded their fair value.

As a result, we recognized a $ 23.0 million pre-tax non-cash impairment charge during the three months ended March 31, 2020.

3 unchanged sentences

We consider floor plan notes payable to a party that is affiliated with the entity from which we purchase our new vehicle inventory as Floor Plan Notes Payable—Trade on our consolidated balance sheets.

Floor plan notes payable—trade, net

consisted of the following:

Floor plan notes payable—trade, net consisted of the following:

As of December 31,

3 unchanged sentences

Total floor plan notes payable—trade, net $ 51.0 $ 37.3

We have a floor plan facility with the Ford Motor Credit Company ("Ford Credit") to purchase new Ford and Lincoln vehicle inventory.

We have a floor plan facility with Ford Motor Credit Company ("Ford Credit") to purchase new Ford and Lincoln vehicle inventory.

Our floor plan facility with Ford Credit was amended in July 2020 and can be terminated by either the Company or Ford Credit with a 30-day notice period.

1 unchanged sentence

These transfers reduce the amount of outstanding new vehicle floor plan notes payable that would otherwise accrue interest, while retaining the ability to transfer amounts from the offset account into our operating cash accounts within one to two days.

As a result of using our floor plan offset account, we experienced a reduction in Floor plan interest expense on our Consolidated Statements of Income.

As a result of using our floor plan offset account, we experienced a reduction in floor plan interest expense in our consolidated statements of income.

The representations and covenants contained in the agreement governing our floor plan facility with Ford Credit are customary for financing transactions of this nature.

8 unchanged sentences

Floor plan notes payable—used non-trade — 294.0

Floor plan notes payable offset account ( 81.5 ) ( 78.6 )

Floor plan notes payable offset account (b) ( 613.6 ) ( 81.5 )

Total floor plan notes payable—non-trade, net $ — $ 527.2

__________________________

(a) Amounts reflected for Floor plan notes payable—new non-trade as of December 31, 2021, excluded $ 9.1 million classified as Liabilities associated with assets held for sale.

(a) Floor plan notes payable—new non-trade as of December 31, 2022 and 2021 excludes $ 2.8 million and $ 9.1 million, respectively, classified as liabilities associated with assets held for sale.

(b) In addition to the $ 613.6 million shown above, we held $ 164.0 million in the floor plan notes payable offset account of which $ 100.8 million was reflected within cash and cash equivalents and $ 63.2 million was shown as an offset to loaner vehicles notes payable which is included in accounts payable and accrued liabilities within the consolidated balance sheets.

2019 Senior Credit Facility

In connection with the LHM Acquisition, as of October 29, 2021 we entered into a Third Amendment (the "October 29, 2021 Amendment") to the Third Amended and Restated Credit Agreement dated September 25, 2019 with Bank of America, N.A.

In connection with the LHM acquisition, on October 29, 2021, we entered into a Third Amendment (the "October 29, 2021 Amendment") to the Third Amended and Restated Credit Agreement dated September 25, 2019 with Bank of America, N.A.

("Bank of America"), as administrative agent, and the other lenders party thereto (the "2019 Senior Credit Facility").

2 unchanged sentences

Subject to compliance with certain conditions, the 2019 Senior Credit Agreement provides that we have the ability, at our option and subject to the receipt of additional commitments from existing or new lenders, to increase the size of the facilities by up to $ 350.0 million in the aggregate without lender consent.

In addition, we have the ability to convert a portion of our availability under the Revolving Credit Facility to the New Vehicle Floor Plan Facility or the Used Vehicle Floor Plan Facility.

We have the ability to convert a portion of our availability under the Revolving Credit Facility to the New Vehicle Floor Plan Facility or the Used Vehicle Floor Plan Facility.

The maximum amount we are allowed to convert is determined based on our aggregate revolving commitment under the Revolving Credit Facility, less $ 50.0 million.

In addition, we are able to convert any amounts moved to the New Vehicle Floor Plan Facility or Used Vehicle Floor Plan Facility back to the Revolving Credit Facility.

On May 25, 2022, we and certain of our subsidiaries, as applicable, entered into an amendment to our 2019 Senior Credit Facility to revise the benchmark reference rate of LIBOR to SOFR applicable to interest payable under the New Vehicle Floor Plan Facility and the Used Vehicle Floor Plan Facility.

See Note 14 "Debt" for further details of the revisions to the applicable facility .

On May 27, 2022, $ 389.0 million of our availability under the Revolving Credit Facility was re-designated to the New Vehicle Floor Plan Facility to take advantage of lower commitment fee rates.

On September 30, 2022, the Company and certain of its subsidiaries entered into the fifth amendment to the 2019 Senior Credit Facility.

The amendment, among other things, increased the cap that the real estate component of the Revolving Borrowing Base can contribute to the Revolving Borrowing Base from 25 % to 40 % of the Aggregate Revolving Commitments, increased the amounts that any conversion of the Aggregate Revolving Commitments to Aggregate New Vehicle Floor Plan Commitments and/or Aggregate Used Vehicle Floor Plan Commitments (each way) can contribute to Aggregate Commitments from 20 % to 40 %, removed the $ 50 million limit on the portion of the Floorplan Offset Amount that may be subtracted from certain amounts outstanding under the floorplan facility and made certain changes to the criteria for Eligible Borrowing Base Real Property and the deliverables in connection with those properties (such capitalized terms, in each case, as defined in the amendment).

The amendment did not update or amend the maturity date, interest rates or total loan commitments under the 2019 Senior Credit Agreement.

In connection with the New Vehicle Floor Plan Facility, we continue to maintain an offset account with Bank of America that allows us to transfer cash as an offset to floor plan notes payable.

As a result of the use of our floor plan offset account, we experienced a reduction in Floor plan interest expense on our Consolidated Statements of Income.

Borrowings under the 2019 Senior Credit Facility bear interest, at our option, based on the London Interbank Offered Rate ("LIBOR") or the Base Rate, in each case plus an Applicable Rate.

The Base Rate is the highest of (i) the Federal Funds Rate plus 0.50 %, (ii) the Bank of America prime rate, and (iii) one month LIBOR plus 1.00 %.

Applicable Rate means with respect to the Revolving Credit Facility, a range from 1.00 % to 2.00 % for LIBOR loans and 0.15 % to 1.00 % for Base Rate loans, in each case based on the Company's consolidated total lease adjusted leverage ratio.

Borrowings under the New Vehicle Floorplan Facility bear interest, at our option, based on LIBOR plus 1.10 % or the Base Rate plus 0.10 %.

Borrowings under the Used Vehicle Floorplan Facility bear interest, at our option, based on LIBOR plus 1.40 % or the Base Rate plus 0.40 %.

As a result of the use of our floor plan offset account, we experienced a reduction in floor plan interest expense in our consolidated statements of income.

Borrowings under the 2019 Senior Credit Facility bear interest, at our option, based on Daily Simple SOFR, as defined within the agreement, or the Base Rate, in each case plus an Applicable Rate.

The Base Rate is the highest of (i) the Federal Funds Rate plus 0.50 %, (ii) the Bank of America prime rate, and (iii) SOFR plus 0.10 %, plus 1.00 %, and (iv) 1.00 %.

Applicable Rate means with respect to the Revolving Credit Facility, a range from 1.00 % to 2.00 % for Daily Simple SOFR loans and 0.15 % to 1.00 % for Base Rate loans, in each case based on the Company's consolidated total lease adjusted leverage ratio.

Borrowings under the New Vehicle Floorplan Facility bear interest, at our option, based on SOFR plus 0.10 %, plus 1.10 % or the Base Rate plus 0.10 %.

Borrowings under the Used Vehicle Floorplan Facility bear interest, at our option, based on SOFR plus 0.10 %, plus 1.40 % or the Base Rate plus 0.40 %.

In addition to the payment of interest on borrowings outstanding under the 2019 Senior Credit Facility, we are required to pay a quarterly commitment fee on total unused commitments thereunder.

16 unchanged sentences

Accrued insurance 39.2 31.5

Accrued finance and insurance chargebacks 31.5 23.3

Accrued interest 33.0 24.3

Accrued finance and insurance chargebacks 29.1 27.9

Customer deposits 23.5 23.2

Acquisition related liabilities 21.3 16.2

Unearned premium 13.6 13.0

5 unchanged sentences

____________________________

(a) Amounts reflected for Loaner vehicles notes payable as of December 31, 2021, excluded $ 4.6 million classified as Liabilities associated with assets held for sale.

(a) Loaner vehicles notes payable as of December 31, 2022 and 2021 excluded $ 0.8 million and $ 4.6 million classified as liabilities associated with assets held for sale, respectively.

The December 31, 2022 balance also reflects a $ 63.2 million floor plan offset.

Long-term debt consisted of the following:

2 unchanged sentences

4.50 % Senior Notes due 2028

$ 405.0 $ 405.0

4.625 % Senior Notes due 2029

1 unchanged sentence

5.00 % Senior Notes due 2032

Mortgage notes payable bearing interest at fixed rates (the weighted average interest rates were 4.6 % and 5.4 % for the year ended December 31, 2021 and 2020, respectively)

Mortgage notes payable bearing interest at fixed rates (the weighted average interest rates were 5.4 % and 4.6 % for the year ended December 31, 2022 and 2021, respectively) (a)

2021 Real Estate Facility 660.6 689.7

2021 BofA Real Estate Facility 173.3 180.7

2018 Bank of America Facility 78.8 84.2

2018 Wells Fargo Master Loan Facility (a) 81.9 86.9

2018 Bank of America Facility (b) 54.5 78.8

2018 Wells Fargo Master Loan Facility 76.9 81.9

2013 BofA Real Estate Facility 24.9 31.1

2015 Wells Fargo Master Loan Facility (b) 53.2 61.7

2015 Wells Fargo Master Loan Facility 42.3 53.2

2019 Syndicated Revolving Credit Facility — 169.0

8 unchanged sentences

____________________________

(a) Amounts reflected for the 2018 Wells Fargo Master Loan Facility as of December 31, 2020, exclude $ 5.1 million classified as Liabilities associated with assets held for sale.

(b) Amounts reflected for the 2015 Wells Fargo Master Loan Facility as of December 31, 2020, exclude $ 3.8 million classified as Liabilities associated with assets held for sale.

(a) Mortgage notes payable as of December 31, 2022 excludes $ 2.7 million classified as liabilities associated with assets held for sale.

(b) Amounts reflected for the 2018 Bank of America Facility as of December 31, 2022 exclude $ 4.1 million classified as

liabilities associated with assets held for sale.

The aggregate maturities of long-term debt as of December 31, 2022 are as follows (in millions):

39 unchanged sentences

We recorded a loss on extinguishment of the 6.0 % Notes of $ 19.1 million which comprised a redemption premium of $ 18.0 million and the net write-off of the unamortized premium and debt issuance costs of $ 1.1 million related to the 6.0 % Notes on the redemption date.

The Seller Notes comprised $ 150.0 million in aggregate principal amount of 4.00 % promissory note due August 2021 and $ 50.0 million in aggregate principal amount of a 4.00 % promissory note due February 2022 and were issued on August 24, 2020 in conjunction with the Park Place Acquisition.

In September 2020, the Company redeemed the Seller Notes with the proceeds of the September 2020 Offering.

Mortgage Financings

We have multiple mortgage agreements with finance companies affiliated with our vehicle manufacturers ("captive mortgages") and other lenders.

As of December 31, 2021 and 2020, we had total mortgage notes payable outstanding of $ 71.7 million and $ 79.2 million, respectively, which are collateralized by the associated real estate.

We have multiple mortgage agreements with finance companies affiliated with our vehicle manufacturers ("captive mortgages").

As of December 31, 2022 and 2021, we had total mortgage notes payable outstanding of $ 38.3 million and $ 71.8 million, respectively, that are collateralized by the associated real estate, which excludes amounts classified as liabilities associated with assets held for sale.

2021 Real Estate Facility

6 unchanged sentences

Borrowings under the 2021 Real Estate Facility are guaranteed by us, and are collateralized by first priority liens, subject to certain permitted exceptions, on all of the real property financed thereunder.

As of December 31, 2021, we had $ 689.7 million in term loans outstanding under the 2021 Real Estate Facility.

As of December 31, 2022 and 2021, we had $ 660.6 million and $ 689.7 million, respectively, in term loans outstanding under the 2021 Real Estate Facility.

2021 BofA Real Estate Facility

On May 25, 2022, we entered into the second amendment to the credit agreement to, among other things, revise the benchmark interest rate payable on term loans under our 2021 BofA Real Estate Facility.

Interest is payable, at our option, based on (1) SOFR plus 0.10 %, plus 1.65 % per annum or (2) the Base Rate plus 0.65 % per annum.

The Base Rate is the highest of (i) the Federal Funds rate plus 0.50 %, (ii) the Bank of America prime rate, (iii) SOFR plus 0.10 %, plus 1.00 %, and (iv) 1.00 %.

On May 20, 2021, the Company and certain of its subsidiaries borrowed $ 184.4 million under a real estate term loan credit agreement, dated as of May 10, 2021 (the "2021 BofA Real Estate Credit Agreement"), by and among the Company and certain of its subsidiaries, Bank of America, N.A., as administrative agent and the various financial institutions party thereto, as lenders, which provides for term loans in an aggregate amount equal to $ 184.4 million, subject to customary terms and conditions (the "2021 BofA Real Estate Facility").

10 unchanged sentences

Upon the occurrence of an event of default, we could be required by the 2021 BofA Real Estate Facility to immediately repay all amounts outstanding thereunder.

As of December 31, 2021, we had $ 180.7 million in term loans outstanding under the 2021 BofA Real Estate Facility.

As of December 31, 2022 and 2021, we had $ 173.3 million and $ 180.7 million, respectively, in term loans outstanding under the 2021 BofA Real Estate Facility.

2018 BofA Real Estate Facility

On May 25, 2022, we entered into the third amendment to the credit agreement to revise the benchmark interest rate payable on term loans under our 2018 BofA Real Estate Facility.

Interest is payable, at our option, based on SOFR plus 0.10 %, plus 1.50 % or the Base Rate plus 0.50 %.

The Base Rate is the highest of (i) the Federal Funds rate plus 0.50 %, (ii) the Bank of America prime rate, (iii) SOFR plus 0.10 %, plus 1.00 %, and (iv) 1.00 %.

On November 13, 2018, we entered into a real estate term loan credit agreement (as amended, restated or supplemented from time to time, the "2018 BofA Real Estate Credit Agreement") with Bank of America, as lender, providing for term loans in an aggregate amount not to exceed $ 128.1 million, subject to customary terms and conditions (the "2018 BofA Real Estate Facility").

4 unchanged sentences

Borrowings under the 2018 BofA Real Estate Facility are guaranteed by each of our operating dealership subsidiaries whose real estate is financed under the 2018 BofA Real Estate Facility, and are collateralized by first priority liens, subject to certain permitted exceptions, on all of the real property financed thereunder.

As of December 31, 2021 and 2020, we had $ 78.8 million and $ 84.2 million, respectively, in term loans outstanding under the 2018 BofA Real Estate Facility.

As of December 31, 2022 and 2021, we had $ 54.5 million and $ 78.8 million, respectively, in term loans outstanding under the 2018 BofA Real Estate Facility, which excludes amounts classified as liabilities associated with assets held for sale.

2018 Wells Fargo Master Loan Facility

On June 1, 2022, certain of our subsidiaries entered into the second amendment to the master loan agreement that revised interest payable from a LIBOR reference rate to SOFR plus 0.10 %, plus an applicable margin based on a pricing grid ranging from 1.50 % to 1.85 % per annum based on our consolidated total lease adjusted leverage ratio.

On November 16, 2018, certain of our subsidiaries entered into a master loan agreement (the "2018 Wells Fargo Master Loan Agreement" and, together with the 2013 BofA Real Estate Credit Agreement, the 2015 Wells Fargo Master Loan Agreement and the 2018 BofA Real Estate Agreement, the "Existing Real Estate Credit Agreements") with Wells Fargo Bank, National Association, as lender, which provides for term loans to certain of our subsidiaries that are borrowers under the Wells Fargo Master Loan Agreement in an aggregate amount not to exceed $ 100.0 million (the "Wells Fargo Master Loan Facility"), subject to customary terms and conditions (the "2018 Wells Fargo Master Loan Facility" and, together with the 2013 BofA Real Estate Facility, the 2015 Wells Fargo Master Loan Facility and the 2018 BofA Real Estate Facility, the "Existing Real Estate Facilities").

1 unchanged sentence

Term loans under the 2018 Wells Fargo Master Loan Facility bear interest based on LIBOR plus an applicable margin based on a pricing grid ranging from 1.50 % per annum to 1.85 % per annum based on our consolidated total lease adjusted leverage ratio.

We are required to make quarterly principal payments with respect to the initial amount of each loan in 108 equal monthly principal payments based on a hypothetical 19 year amortization schedule, with a balloon repayment of the outstanding principal amount of loans due on December 1, 2028.

We are required to make quarterly principal payments with respect to the initial amount of each loan in 108 equal monthly principal payments based on a hypothetical nineteen -year amortization schedule, with a balloon repayment of the outstanding principal amount of loans due on December 1, 2028.

Borrowings under the 2018 Wells Fargo Master Loan Facility can be voluntarily prepaid in whole or in part any time without premium or penalty.

Borrowings under the 2018 Wells Fargo Master Loan Facility are guaranteed by us pursuant to an unconditional guaranty, and all of the real property financed by any of our operating dealership subsidiaries under the 2018 Wells Fargo Master Loan Facility is collateralized by first priority liens, subject to certain permitted exceptions.

Borrowings under the 2018 Wells Fargo Master

Loan Facility are guaranteed by us pursuant to an unconditional guaranty, and all of the real property financed by any of our operating dealership subsidiaries under the 2018 Wells Fargo Master Loan Facility is collateralized by first priority liens, subject to certain permitted exceptions.

On June 26, 2020, the Company borrowed an additional $ 69.4 million under the 2018 Wells Fargo Master Loan Facility.

As of December 31, 2021 and 2020, we had $ 81.9 million and $ 86.9 million, respectively, outstanding borrowings under the 2018 Wells Fargo Master Loan Facility, which excludes amounts classified as Liabilities associated with assets held for sale.

As of December 31, 2022 and 2021, we had $ 76.9 million and $ 81.9 million, respectively, outstanding borrowings under the 2018 Wells Fargo Master Loan Facility.

2015 Wells Fargo Master Loan Facility

On February 3, 2015, certain of our subsidiaries entered into an amended and restated master loan agreement (as amended, restated or supplemented from time to time, the "2015 Wells Fargo Master Loan Agreement") with Wells Fargo Bank, National Association ("Wells Fargo"), as lender, which provides form term loans to certain of our subsidiaries that are borrowers under the 2015 Wells Fargo Master Loan Agreement in an aggregate amount not to exceed $ 100.0 million (the "2015 Wells Fargo Master Loan Facility").

1 unchanged sentence

Term loans under the 2015 Wells Fargo Master Loan Facility bear interest based on LIBOR plus 1.85 %.

Borrowings under the 2015 Wells Fargo Master Loan Facility can be voluntarily prepaid in whole or in part any time without premium or penalty.

Borrowings under the 2015 Wells Fargo Master Loan Facility are guaranteed by us pursuant to an unconditional guaranty, and all of the real property financed by any of our operating dealership subsidiaries under the 2015 Wells Fargo Master Loan Facility is collateralized by first priority liens, subject to certain permitted exceptions.

As of December 31, 2021 and 2020, we had $ 53.2 million and $ 61.7 million, respectively, outstanding under the 2015 Wells Fargo Master Loan Facility, which excludes amounts classified as Liabilities associated with assets held for sale.

As of December 31, 2022 and 2021, we had $ 42.3 million and $ 53.2 million, respectively, outstanding under the 2015 Wells Fargo Master Loan Facility.

2013 BofA Real Estate Facility

On May 25, 2022, we entered into the third amendment to the credit agreement to revise the benchmark interest rate payable on term loans under our 2013 BofA Real Estate Facility.

Interest is payable, at our option, based on SOFR plus 0.10 %, plus 1.50 % or the Base Rate plus 0.50 %.

The Base Rate is the highest of (i) the Federal Funds rate plus 0.50 %, (ii) the Bank of America prime rate, (iii) SOFR plus 0.10 %, plus 1.00 %, and (iv) 1.00 %.

Our right to make draws under the 2013 BofA Real Estate Facility terminated on December 26, 2013.

On September 26, 2013, we entered into a real estate term loan credit agreement (the "2013 BofA Real Estate Credit Agreement") with Bank of America, N.A.

11 unchanged sentences

Captive mortgages $ 38.3 $ 98.0 2023-2024 $ 70.9 $ 152.2 2022-2024

Other mortgage debt 0.8 42.8 2021-2022 1.8 43.2 2020-2022

Other mortgage debt (a) — — N/A 0.8 42.8 2022

2021 Real Estate Facility 660.6 864.6 2026 689.7 928.9 2026

2021 BofA Real Estate Facility 173.3 197.3 2031 180.7 199.4 2031

2018 BofA Real Estate Facility 78.8 105.0 2025 84.2 106.2 2025

2018 Wells Fargo Master Loan Facility (a) 81.9 105.3 2028 86.9 112.9 2028

2018 BofA Real Estate Facility (b) 54.5 78.7 2025 78.8 105.0 2025

2018 Wells Fargo Master Loan Facility 76.9 105.0 2028 81.9 105.3 2028

2013 BofA Real Estate Facility 24.9 61.7 2023 31.1 71.8 2023

2015 Wells Fargo Master Loan Facility (b) 53.2 95.3 2025 61.7 109.6 2025

2015 Wells Fargo Master Loan Facility 42.3 84.2 2025 53.2 95.3 2025

Total mortgage debt $ 1,070.8 $ 1,489.5 $ 1,187.1 $ 1,700.7

___________________________

(a) Amounts reflected for the 2018 Wells Fargo Master Loan Facility as of December 31, 2020 exclude $ 5.1 million classified as Liabilities associated with assets held for sale.

(b) Amounts reflected for the 2015 Wells Fargo Master Loan Facility as of December 31, 2020 exclude $ 3.8 million classified as Liabilities associated with assets held for sale.

(a) Amounts reflected for the mortgage notes payable as of December 31, 2022, exclude $ 2.7 million classified as liabilities associated with assets held for sale.

(b) Amounts reflected for the 2018 Bank of America Facility as of December 31, 2022, exclude $ 4.1 million classified as

liabilities associated with assets held for sale.

2019 Senior Credit Facility

On September 30, 2022, the Company and certain of its subsidiaries entered into the fifth amendment to the 2019 Senior Credit Facility.

The amendment, among other things, increased the cap that the real estate component of the Revolving Borrowing Base can contribute to the Revolving Borrowing Base from 25 % to 40 % of the Aggregate Revolving Commitments, increased the amounts that any conversion of the Aggregate Revolving Commitments to Aggregate New Vehicle Floorplan Commitments and/or Aggregate Used Vehicle Floorplan Commitments (each way) can contribute to Aggregate Commitments from 20 % to 40 %, removed the $ 50 million limit on the portion of the Floorplan Offset Amount that may be subtracted from certain amounts outstanding under the floorplan facility and made certain changes to the criteria for Eligible Borrowing Base Real Property and the deliverables in connection with those properties (such capitalized terms, in each case, as defined in the amendment).

The amendment did not update or amend the maturity date, interest rates or total loan commitments under the 2019 Senior Credit Facility.

On May 25, 2022, the Company and certain of its subsidiaries entered into the fourth amendment to the 2019 Senior Credit Facility.

The fourth amendment revised the benchmark reference rate from one-month LIBOR to SOFR.

Borrowings under the 2019 Senior Credit Facility bear interest, at our option, based on Daily Simple SOFR, as defined within the agreement, or the Base Rate, in each case, plus an Applicable Rate.

The Base Rate is the highest of (i) the Federal Funds Rate plus 0.50 %, (ii) the Bank of America prime rate, (iii) SOFR plus 0.10 %, plus 1.00 %, and (iv) 1.00 %.

Applicable Rate means with respect to the revolving credit facility under the 2019 Senior Credit Facility, a range from 1.00 % to 2.00 % for Daily Simple SOFR loans and 0.15 % to 1.00 % for Base Rate loans, in each case based on the Company's consolidated total lease adjusted leverage ratio.

Borrowings under the new vehicle floorplan facility under the 2019 Senior Credit Facility bear interest, at our option, based on SOFR plus 0.10 %, plus 1.10 % or the Base Rate plus 0.10 %.

Borrowings under the used vehicle floorplan facility under the 2019 Senior Credit Facility bear interest, at our option, based on SOFR plus 0.10 %, plus 1.40 % or the Base Rate plus 0.40 %.

Revolving Credit Facility

2 unchanged sentences

Availability under the Revolving Credit Facility is limited by borrowing base calculations and is reduced on a dollar-for-dollar basis by the aggregate face amount of any outstanding letters of credit.

As of December 31, 2021, we had $ 10.8 million in outstanding letters of credit, $ 169.0 million drawn on our Revolving Credit Facility and $ 270.2 million of borrowing availability as of December 31, 2021.

As of December 31, 2022, we had

$ 12.7 million in outstanding letters of credit, nothing drawn on our Revolving Credit Facility and $ 48.3 million of borrowing availability, with an additional $ 389.0 million available to convert from our new vehicle floorplan facility.

As of December 31, 2021, we had $ 10.8 million in outstanding letters of credit, $ 169.0 million drawn on our Revolving Credit Facility and $ 270.2 million of borrowing availability.

Proceeds from borrowings from time to time under the revolving credit facility may be used for among other things, acquisitions, working capital and capital expenditures.

12 unchanged sentences

• The Company may otherwise make restricted payments only up the cumulative capacity above.

Our restricted payment capacity balance as of December 31, 2021 was $ 958.6 million.

Our restricted payment capacity balance as of December 31, 2022 and 2021 was $ 1.11 billion and $ 958.6 million, respectively.

Representations and Covenants

5 unchanged sentences

We cannot give any assurance that we would be able to successfully take any of these actions on terms, or at times, that may be necessary or desirable.

The representations and covenants contained in the agreement governing the 2019 Senior Credit Facility are customary for financing transactions of this nature including, among others, a requirement to comply with a minimum consolidated fixed charge coverage ratio and maximum consolidated total lease adjusted leverage ratio, in each case as set out in the agreement

governing the 2019 Senior Credit Facility.

In addition, certain other covenants could restrict the Company's ability to incur additional debt, pay dividends or acquire or dispose of assets.

2 unchanged sentences

Upon the occurrence of an event of default, the Company could be required to immediately repay all amounts outstanding under the applicable facility.

The representations and covenants contained in the 2021 BofA Real Estate Facility are customary for financing transactions of this nature, including, among others, a requirement to comply with a minimum consolidated fixed charge coverage ratio and maximum consolidated total lease adjusted leverage ratio, in each case as set out in the 2021 BofA Real Estate Facility.

maximum consolidated total lease adjusted leverage ratio, in each case as set out in the 2021 BofA Real Estate Facility.

In addition, certain other covenants could restrict our ability to incur additional debt, pay dividends or acquire or dispose of assets.

41 unchanged sentences

Financial instruments consist primarily of cash and cash equivalents, investments, contracts-in-transit, accounts receivable, cash surrender value of corporate-owned life insurance policies, accounts payable, floor plan notes payable, subordinated long-term debt, mortgage notes payable, and interest rate swap instruments.

The carrying values of our financial instruments, with the exception of subordinated long-term debt and mortgage notes payable, approximate fair value due to (i) their short-term nature, (ii) recently completed market transactions, or (iii) existence of variable interest rates, which approximate market rates.

The carrying values of our financial instruments, with the exception of subordinated long-term debt and mortgage notes payable, approximate fair value primarily due to (i) their short-term nature, (ii) recently completed market transactions, or (iii) existence of variable interest rates, which approximate market rates.

The fair value of our subordinated long-term debt is based on reported market prices in an inactive market that reflects Level 2 inputs.

19 unchanged sentences

____________________________

(a) The balances as of December 31, 2020 exclude amounts classified as Liabilities associated with assets held for sale.

(a) Mortgage notes payable as of December 31, 2022, excludes $6.8 million classified as liabilities associated with assets held for sale.

Interest Rate Swap Agreements

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.

We currently have seven interest rate swap agreements.

In January 2022, we entered into two new interest rate swap agreements with a combined notional principal amount of $ 550.0 million.

These swaps are designed to provide a hedge against changes in variable rate cash flows regarding fluctuations in the SOFR rate.

All interest rate swap agreements with an inception date of 2021 and prior were amended on June 1, 2022 to provide a hedge against changes in variable rate cash flows regarding fluctuations in SOFR as compared to the previous benchmark rate of one-month LIBOR.

The revisions to the interest rate swap agreements did not impact our hedge accounting because we applied the accounting expedients outlined in ASU 2020-04 and ASU 2021-01 of ASC Topic 848, Reference Rate Reform .

The following table provides information on the attributes of each swap as of December 31, 2022 :

2 unchanged sentences

(In millions)

January 2022 $ 300.0 $ 288.8 $ 228.8 December 2026

January 2022 $ 250.0 $ 250.0 $ 250.0 December 2031

May 2021 $ 184.4 $ 173.3 $ 110.6 May 2031

6 unchanged sentences

Other than this input, all other inputs used in the valuation for these swaps are designated to be Level 2 fair values.

The fair value of our swaps for the years ended December 31, 2021 and 2020, reflect a net liability of $ 0.9 million and $ 7.2 million, respectively.

The fair value of our swaps for the years ended December 31, 2022 and 2021, reflect a net asset of $ 102.4 million and net liability of $ 0.9 million, respectively.

The following table provides information regarding the fair value of our interest rate swap agreements and the impact on the consolidated balance sheets:

1 unchanged sentence

(In millions)

Other current assets $ 29.6 $ —

Other current liabilities — ( 3.8 )

25 unchanged sentences

Total $ 60.9 $ 179.5 $ — $ 240.4

Total Investments, at fair value $ 240.4

As of December 31, 2021

Level 1 Level 2 Level 3 Total

(In millions)

Cash equivalents $ 6.0 $ — $ — $ 6.0

Short-term investments 2.9 8.1 — 11.0

U.S Treasury 7.4 — — 7.4

Municipal — 28.2 — 28.2

Corporate — 9.5 — 9.5

Mortgage and other asset backed securities — 8.8 — 8.8

Total debt securities 10.3 54.6 — 64.9

Common stock 65.2 — — 65.2

Total $ 75.5 $ 54.6 $ — $ 130.1

Investments measured at net asset value (a) 4.4

2 unchanged sentences

The NAV is based on the fair value of the underlying assets owned by the fund, minus its liabilities, divided by the number of units outstanding and is determined by the fund investment manager or custodian.

Other investment securities measured at net asset value as a practical expedient in the amount of $ 4.4 million are excluded from the fair value leveling disclosure above.

We do not have any significant restrictions on our ability to liquidate our

positions on these investments, nor do we believe it is probable a price less than NAV would be received in the event of a liquidation.

We review the fair value hierarchy classifications each reporting period.

1 unchanged sentence

Such reclassifications are reported as transfers in and out of Level 3, or between other levels, at the beginning fair value for the reporting period in which the changes occur.

Available-for-sale debt securities are recorded at fair value and any unrealized gains or losses are included in accumulated other comprehensive income and reclassified to finance and insurance, net revenue in the period or periods during which the debt securities are sold and the gains or losses are realized.

Information about the effect of our available-for-sale debt securities

in the accompanying consolidated statements of income and consolidated statements of comprehensive income, is as follows (in millions):

For the Year Ended December 31, Results Recognized in Accumulated Other Comprehensive Loss

(Effective Portion) Location of Results Reclassified from Accumulated Other Comprehensive Loss

Results Reclassified from Accumulated Other Comprehensive Loss

2022 $ ( 6.0 ) Revenue-Finance and Insurance, net $ ( 1.9 )

2021 $ — Revenue-Finance and Insurance, net $ —

2020 $ — Revenue-Finance and Insurance, net $ —

The components of income tax expense are as follows:

14 unchanged sentences

State income tax expense, net of federal benefit 42.7 3.2 21.0 3.0 10.1 3.0

Non-deductible/non-tax items 0.6 0.1 1.3 0.4 0.6 0.2

Non-deductible items 1.6 0.1 0.6 0.1 1.3 0.4

Other, net 0.5 0.1 ( 2.8 ) ( 0.4 ) 1.3 0.4

18 unchanged sentences

Total deferred income tax liabilities $ ( 227.8 ) $ ( 164.7 )

Net deferred income tax liabilities $ 69.1 $ ( 34.6 )

Net deferred income tax (liabilities)/ assets $ ( 100.7 ) $ 69.1

There were no valuation allowances recorded against the deferred tax assets as of December 31, 2022 or 2021.

As of December 31, 2022 and 2021, we had income taxes payable of $ 21.5 million and $ 47.0 million, respectively included in accounts payable and accrued liabilities.

As of December 31, 2020, there was $ 2.1 million of unrecognized tax benefit.

There was no unrecognized tax benefits as of December 31, 2021 or 2019.

As of December 31, 2022, we had a state net operating loss ("NOL") carryforward of $ 30.3 million and a deferred tax asset of $ 1.3 million to reflect the benefit.

This NOL will expire in 2042.

The statutes of limitation related to our consolidated Federal income tax returns are closed for all tax years up to and including 2018.

10 unchanged sentences

Interest rate swap — 2.6

Deferred payroll tax — 9.1

Sale and leaseback liability — 7.0

Other 0.5 7.1

2 unchanged sentences

During the years ended December 31, 2022, 2021, and 2020, we made interest payments, including amounts capitalized, totaling $ 147.2 million, $ 92.2 million, and $ 62.6 million, respectively.

Included in these interest payments are $ 8.7 million,

$ 19.4 million, and $ 38.6 million, of floor plan interest payments for the years ended December 31, 2021, 2020, and 2019, respectively.

Included in these interest payments are $ 8.4 million, $ 8.7 million, and $ 19.4 million, of floor plan interest payments for the years ended December 31, 2022, 2021, and 2020, respectively.

During the years ended December 31, 2022, 2021, and 2020 we made income tax payments, net of refunds received, totaling $ 198.4 million, $ 114.2 million, and $ 48.6 million, respectively.

During the years ended December 31, 2021, 2020, and 2019, we transferred $ 216.3 million, $ 163.5 million, and $ 141.0 million, respectively, of loaner vehicles from Other current assets to Inventory on our Consolidated Balance Sheets.

The following items are included in Other adjustments, net to reconcile net income to net cash provided by operating activities:

For the Year Ended December 31,

2021 2020 2019

(In millions)

Amortization of debt issuance costs $ 2.6 $ 1.8 $ 2.5

(Gain) Loss on disposal of fixed assets ( 2.3 ) 0.7 2.6

Other individually immaterial items ( 1.1 ) ( 1.2 ) ( 0.3 )

Other adjustments, net $ ( 0.8 ) $ 1.3 $ 4.8

During the years ended December 31, 2022, 2021, and 2020, we transferred $ 281.4 million, $ 216.3 million, and $ 163.5 million, respectively, of loaner vehicles from other current assets to inventory in our consolidated balance sheets.

We lease real estate and equipment primarily under operating lease agreements.

47 unchanged sentences

Changes to finance lease right-of-use asset resulting from lease reassessment event — ( 14.6 )

During the years ended December 31, 2021 and 2020, we obtained $ 69.2 million and $ 272.3 million, respectively, of right-of-use assets in exchange for new operating lease liabilities, primarily as a result of business combination acquisition transactions.

During the years ended December 31, 2022 and 2021, we obtained $ 6.2 million and $ 69.2 million, respectively, of right-of-use assets in exchange for new operating lease liabilities.

The activity during the year ended December 31, 2021 was primarily as a result of business combinations.

During the twelve months ended December 31, 2021, we reassessed and remeasured an existing real estate lease, which was previously accounted for as a finance lease due to the presence of a purchase price option which we concluded we are no longer reasonably certain to exercise.

20 unchanged sentences

(1) Dealerships and (2) TCA.

Prior to the acquisition of TCA in connection with the LHM Acquisition, we had one reportable segment whereby the geographic dealership groups were aggregated into one reportable segment.

On December 17, 2021, we completed the LHM Acquisition by which we acquired 54 new vehicle dealerships, seven used car stores, 11 collision centers, a used vehicle wholesale business, the real property related thereto, and the entities comprising TCA.

The dealerships acquired in the LHM Acquisition are located in Utah, Arizona, New Mexico, Colorado, Idaho, California and Washington.

Our dealership operations are organized by management into geographic market-based groups within the Dealerships segment.

2 unchanged sentences

The geographic dealership group operating segments have been aggregated into one reportable segment as their operations (i) have similar economic characteristics (our markets all have similar long-term average gross margins), (ii) offer similar products and services (all of our markets offer new and used vehicles, parts and service, and finance and insurance products), (iii) have similar customers, (iv) have similar distribution and marketing practices (all of our markets distribute products and services through dealership facilities that market to customers in similar ways), and (v) operate under similar regulatory environments.

Goodwill acquired in the LHM Acquisition of $ 929.0 million and $ 710.3 million was allocated to the Dealership and TCA segments, respectively, is consistent with how the Chief Operating Decision Maker reviews financial information and allocates resources.

Goodwill acquired in the LHM Acquisition of $ 668.7 million and $ 536.6 million was allocated to the Dealership and TCA segments, respectively.

The allocation was based on the net assets acquired in the Dealership and TCA segments.

This allocation is preliminary and subject to change once the purchase price allocation is finalized.

The majority of TCA’s revenue arises from sales through our affiliated dealerships.

Intercompany profits and losses are eliminated in consolidation.

Reportable segment financial information for the year ended December 31, 2021, are as follows:

Reportable segment financial information for the years ended December 31, 2022 and 2021 is as follows:

As of and for the year ended December 31, 2022

11 unchanged sentences

Total assets $ 7,170.8 $ 869.2 $ ( 18.6 ) $ 8,021.4

As of and for the year ended December 31, 2021

Dealerships TCA Eliminations Total Company

(In millions)

Revenue $ 9,836.7 $ 12.0 $ ( 11.0 ) $ 9,837.7

Gross profit 1,901.7 5.5 ( 5.0 ) 1,902.2

Depreciation and amortization 41.9 — — 41.9

Selling, general and administrative expense 1,076.9 0.3 ( 3.3 ) 1,073.9

Interest expense

Floor plan interest expense 8.2 — — 8.2

Other interest expense, net 93.9 — — 93.9

Total interest expense $ 102.1 $ — $ — $ 102.1

Capital expenditures 74.2 — — 74.2

Total assets $ 7,289.7 $ 762.6 $ ( 49.7 ) $ 8,002.6

COMMITMENTS AND CONTINGENCIES

17 unchanged sentences

The United States or the countries from which our products are imported may, from time to time, impose new quotas, duties, tariffs, or other restrictions;

presently prevailing quotas, duties, or tariffs, which may affect our operations, and our ability to purchase imported vehicles and/or parts at reasonable prices.

or adjust presently prevailing quotas, duties, or tariffs, which may affect our operations, and our ability to purchase imported vehicles and/or parts at reasonable prices.

Substantially all of our facilities are subject to federal, state and local provisions regarding the discharge of materials into the environment.

9 unchanged sentences

On April 18, 2012, our shareholders approved the 2012 Plan, which replaced our previous equity incentive plan.

The 2012 Plan expires on March 13, 2022 and provides for the grant of options, performance share units, restricted share units, and shares of restricted stock to our directors, officers, and employees in the total amount of 1.5 million shares.

The 2012 Plan expired on March 13, 2022 and provided for the grant of options, performance share units, restricted share units, and shares of restricted stock to our directors, officers, and employees in the total amount of 1.5 million shares.

On April 17, 2019, the stockholders of the Company approved the Asbury Automotive Group, Inc.

7 unchanged sentences

In addition, in connection with the vesting of equity-based awards, we repurchase a portion of the shares issued equal to the amount of employee income tax withholding.

We have recognized $ 16.2 million ($ 3.9 million tax benefit), $ 12.6 million ($ 3.2 million tax benefit), and $ 12.5 million ($ 3.1 million tax benefit) in share-based compensation expense for the years ended December 31, 2021, 2020, and 2019, respectively.

As of December 31, 2021, there was $ 14.4 million of total unrecognized share-based compensation expense related to non-vested share-based awards granted under the 2012 Plan, and the weighted average period over which it is expected to be recognized is 1.65 years.

We recognized $ 20.6 million ($ 5.0 million tax benefit), $ 16.2 million ($ 3.9 million tax benefit), and $ 12.6 million ($ 3.2 million tax benefit) in share-based compensation expense for the years ended December 31, 2022, 2021, and 2020, respectively.

As of December 31, 2022, there was $ 16.1 million of total unrecognized share-based compensation expense related to non-vested share-based awards granted under the 2012 Plan and 2019 Plan, and the weighted average period over which it is expected to be recognized is 1.6 years.

Further, we expect to recognize $ 2.1 million of this expense in 2023, $ 8.8 million in 2024, $ 5.2 million in 2025.

18 unchanged sentences

Total fair value of performance share units vested (in millions) $ 5.7 $ 5.7 $ 4.9

Restricted Share Units

R estricted Share Units

During the year ended December 31, 2022, the Compensation and Human Resources Committee of the Board of Directors approved the grant of 82,603 shares of restricted share units.

33 unchanged sentences

IRS rules limited total participant contributions during 2022 to $ 20,500 , or $ 27,000 if age 50 or more.

For non-highly compensated employees, after one year of employment we match 50 % of employees' contributions up to 4 % of their eligible compensation.

The Company's match was suspended during part of 2020 as a result of the economic uncertainty associated with the COVID-19 pandemic.

After one year of employment, we match 50 % of employees' contributions up to 6 % of their eligible compensation.

Employer contributions vest on a graded basis over 4 years after the date of hire.

The Company's match was suspended during part of 2020 as a result of the economic uncertainty associated with the COVID-19 pandemic.

The Company's expense related to employer matching contributions totaled $ 18.0 million, $ 5.3 million, and $ 2.5 million for the years ended December 31, 2022, 2021, and 2020, respectively.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data