What changed in this filing

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Item 1. Business

2024-02-29 compared with 2023-03-01 · 50 added, 61 removed, 288 unchanged (28% of the section changed)

Asbury Automotive Group, Inc., a Delaware corporation organized in 2002, is a Fortune 500 company and one of the largest franchised automotive retailers in the United States with 139 new vehicle dealerships across 14 states.

Asbury Automotive Group, Inc., a Delaware corporation organized in 2002, is a Fortune 500 company and one of the largest franchised automotive retailers in the United States.

Our mission and vision is to put the guest experience first and follow our "North Star" to be the most guest-centric automotive retailer in the industry.

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Our strong organizational culture and purposeful mission allow us to continuously deliver best-in-class experiences to our guests.

As of December 31, 2022, we owned and operated 186 new vehicle franchises, representing 31 brands of automobiles at 139 dealership locations, 32 collision centers, seven stand-alone used vehicle dealerships, one used vehicle wholesale business, one auto auction, and Total Care Auto, Powered by Landcar ("TCA" or "TCA Business"), our finance and insurance ("F&I") product provider, within 14 states.

As of December 31, 2023, we owned and operated 208 new vehicle franchises, representing 31 brands of automobiles at 158 dealership locations, 37 collision centers, and Total Care Auto, Powered by Landcar ("TCA" or "TCA Business"), our finance and insurance ("F&I") product provider, within 16 states.

Our store operations are conducted by our subsidiaries.

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Our ability to provide a low friction experience across our omni-channel platform drives customer satisfaction and repeat business across our dealership portfolio.

In December 2020, we introduced Clicklane, the automotive retail industry’s first, end-to-end, 100% online vehicle retail tool.

This differentiated platform offers our customers an easy, seamless and transparent approach to completing the purchase or sale of vehicles completely online inclusive of all documentation, loan origination and everything in between.

We believe the Clicklane tool will further enhance our physical dealership network and creates a competitive advantage as the vehicle buying process evolves in a digital environment.

On December 11, 2023, the Company completed the acquisition of the business of the Jim Koons ("Koons") Automotive Companies, (collectively, the "Koons acquisition"), thereby acquiring 20 new vehicle dealerships, six collision centers and the real property related thereto for an aggregate purchase price of approximately $1.50 billion, which includes $256.1 million of new vehicle floor plan financing and $103.8 million of assets held for sale related to Koons Lexus of Wilmington.

The acquisition was funded with borrowings under Asbury’s existing credit facility and cash on hand.

The Koons acquisition diversifies Asbury's geographic mix, with expansion in the greater Washington-Baltimore region of the United States.

There were no acquisitions during the year ended December 31, 2022.

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

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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.

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

As a result of the transaction, the Company operates in two reportable segments, the Dealerships and TCA segments.

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.

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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.

On August 24, 2020, the Company, through two of its subsidiaries, acquired substantially all of the assets of, and leased the real property related to, 12 new vehicle dealership franchises (eight dealership locations), two collision centers and an auto auction (collectively, the "Park Place acquisition").

The Park Place acquisition was financed through a combination of cash, floor plan facilities and seller financing.

The seller financing comprised $150.0 million in aggregate principal amount of a 4.00% promissory note due August 2021 and $50.0 million in aggregate principal amount of a 4.00% promissory note due

February 2022 (collectively, the "Seller Notes").

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.

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.

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.

There were no acquisitions during the year ended December 31, 2022.

During the year ended December 31, 2023, we sold one franchise (one dealership location) in Austin, Texas.

The Company recorded a pre-tax gain totaling $13.5 million.

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

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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.

Four Key Components of Our Business

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Virginia Acura, BMW(a), MINI

David McDavid Auto Group Texas Acura, Ford, Honda(a), Lincoln

Greenville Automotive Group South Carolina Jaguar, Land Rover, Porsche, Toyota, Volvo

David McDavid Auto Group Texas Ford, Honda(a), Lincoln

Greenville Automotive Group South Carolina Land Rover, Porsche, Toyota, Volvo

Hare, Bill Estes & Kahlo Automotive Groups Indiana Buick, Chevrolet(b), Chrysler(a), Dodge(a), Ford, GMC, Honda, Isuzu, Jeep(a), Toyota

Jim Koons Automotive Companies Maryland Buick, Chevrolet(a), Ford, GMC, Kia, Mercedes-Benz, Sprinter, Toyota(b), Volvo

Virginia Buick(a), Chevrolet, Chrysler, Dodge, Ford(b), GMC(a), Hyundai, Jeep, Kia, Toyota(a)

Delaware Lexus

Miller Dealerships Arizona Chrysler(b), Dodge(c), Fiat, Ford, Genesis, Hyundai, Jeep(b), Nissan, Toyota, Volkswagen(a)

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Idaho Chrysler, Dodge, Honda, Jeep, Subaru

New Mexico Chevrolet, Chrysler(a), Dodge, Genesis, Hyundai(a), Jeep(a), Toyota

Utah Chevrolet(a), Chrysler(c), Dodge(c), Ford(b), Honda, Jeep(c), Lexus(a), Lincoln(a), Mercedes-Benz, Toyota, Sprinter

New Mexico Chevrolet, Chrysler(a), Dodge, Hyundai(a), Jeep(a), Toyota

Utah Chevrolet(a), Chrysler(c), Dodge(c), Ford(b), Honda, Jeep(c), Lexus(a), Lincoln, Mercedes-Benz, Toyota, Sprinter

Washington Honda

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Nalley Automotive Group Georgia Acura, Audi, Bentley, BMW, Chevrolet, Honda, Hyundai, Infiniti(a), Kia, Lexus(a), Nissan, Toyota(b), Volkswagen

Park Place Automotive Texas Acura, Jaguar, Lexus(a), Land Rover, Mercedes-Benz(b), Porsche, Volvo, Sprinter(b)

Plaza Motor Company Missouri Audi, BMW, Infiniti, Jaguar, Land Rover, Mercedes-Benz(a), Sprinter(a)

Park Place Automotive Texas Acura, Lexus(a), Land Rover, Mercedes-Benz(b), Porsche, Volvo, Sprinter(b)

Plaza Motor Company Missouri Audi, BMW, Infiniti, Land Rover, Mercedes-Benz(a), Sprinter(a)

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Used Vehicle Sales

We sell used vehicles at all our franchised dealership locations, seven stand-alone used vehicle dealerships, one used vehicle wholesale business and one auto auction.

Used vehicle sales include the sale of used vehicles to individual retail

customers ("used retail") and the sale of used vehicles to other dealers at auction ("wholesale") (the terms "used retail" and "wholesale" collectively referred to as "used").

We sell used vehicles at all our franchised dealership locations.

Used vehicle sales include the sale of used vehicles to individual retail customers ("used retail") and the sale of used vehicles to other dealers at auction ("wholesale") (the terms "used retail" and "wholesale" collectively referred to as "used").

Gross profit from the sale of used vehicles depends primarily on our dealerships' ability to obtain a high quality supply of used vehicles and our use of technology to manage our inventory.

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F&I revenue in our TCA segment represents the premium revenue earned from customers for F&I products primarily sold in connection with the purchase of vehicles at our dealerships.

The premium revenue is recognized over the life of the F&I product contract as services are provided.

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 in the consolidated statements of income.

The premium revenue is recognized over the life of the F&I

product contract as services are provided.

We capitalize costs, such as employee sales commissions, to obtain customer contracts, 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 in the consolidated statements of income.

The portion of commissions that are paid to affiliated dealerships are eliminated in the TCA segment upon consolidation.

Claims paid related to the contracts are recognized in F&I cost of sales.

The Dealerships segment also provides vehicle repair and maintenance services to TCA customers in connection with claims related to TCA's products.

Upon consolidation, the associated service revenue and costs recorded by the Dealerships segment are eliminated against claims expense recorded by the TCA segment.

Third-party claims paid related to the contracts are recognized in F&I cost of sales.

In addition, F&I revenue includes investment income and other gains and losses related to the performance of our investment portfolio.

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Furthermore, we provide our dealership managers with appropriate incentives to employ efficient selling approaches, engage in extensive follow-up to develop long-term relationships with customers, and extensively train our sales staff to meet customer needs.

Further develop digital and omni-channel capabilities and drive Clicklane penetration across our coast-to-coast footprint .

As part of our omni-channel strategy, we implemented Clicklane, the automotive retail industry’s first, end-to-end, 100% online vehicle retail tool, which offers our customers a convenient, seamless and transparent approach to purchase and sell vehicles completely online.

Our Clicklane platform provides our customers with the ability to (i) select a new or used vehicle, (ii) arrange for and obtain financing from a variety of lenders, (iii) obtain an offer on their trade-in vehicle, (iv) obtain an exact pay-off amount on any existing loan on a trade-in vehicle, (v) select and purchase F&I products designed for the customer’s vehicle and then (vi) complete the vehicle purchase and financing by signing the transaction documents and scheduling in-store pickup or home delivery, with each step performed entirely online.

We have implemented Clicklane across all of our stores.

The 2021 acquisitions have extended our footprint across seven western U.S.

states including Arizona, California, Idaho, New Mexico, Colorado, Utah, and Washington.

Although we developed our Clicklane platform together with a third-party vendor, certain technology elements of the platform were developed solely by us and are subject to trade secret protection.

In addition, our other omni-channel tools offer our customers the ability to arrange vehicle service appointments, receive service updates, and pay for maintenance and repair services online.

We continue to invest in and develop omni-channel initiatives designed to deliver an exceptional customer experience.

Accelerate same store growth and guest experience through technology investment .

As part of our long-term growth strategy, we invest in technologies or partner with leading software platform vendors to develop applications that (i) serve our guests with omni-channel buying options offering enhanced speed, and transparency, (ii) drive a more efficient guest experience at a lower cost to serve and (iii) offer tailored recommendations to value add products and services.

Grow F&I product penetration and expand TCA's service offerings across the full dealership portfolio.

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We are able to improve financial controls and lower servicing costs by maintaining key store-level accounting and administrative activities in our shared service centers, and we leverage our scale to reduce costs related to purchasing certain equipment, supplies, and services through national vendor relationships.

we are able to leverage our scale to implement these best practices when integrating newly acquired dealerships allowing us to continue to improve our operating efficiencies.

Similarly, we are able to leverage our scale to implement these best practices when integrating newly acquired dealerships allowing us to continue to improve our operating efficiencies.

Deploy capital to highest returns and continue to invest in the business.

Our capital allocation decisions are made within the context of maintaining sufficient liquidity and a prudent capital structure.

We target a 2.5x to 3.5x adjusted net leverage ratio in a normal business environment.

We target a 2.5x to 3.5x adjusted net leverage ratio, which is calculated as set forth in our credit facility, in a normal

business environment.

The Company’s adjusted net leverage ratio was 2.5x at December 31, 2023, compared to 1.7x at December 31, 2022.

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Our approach to dispositions and acquisitions is highly disciplined with a focus on long-term strategic value to stockholders.

Execute our five-year strategic plan to target an increase in our annual revenue to $32 billion by 2025.

Deliver on our mission to grow and transform our business with revenue of $30 billion or more by 2030.

We continually evaluate additional opportunities to drive revenue growth while maintaining our disciplined approach to capital allocation.

In December 2020, we announced our five-year strategic plan, targeting an increase in our revenue to $20 billion by 2025.

In April 2022, the Company announced an update to this plan by increasing the annual revenue target to $32 billion by 2025.

We intend to execute on this strategic plan by focusing on a variety of growth efforts including, driving same-store revenue growth, acquiring additional revenue through strategic acquisitions and adding incremental revenue through our Clicklane platform.

In February 2024, the Company announced an update to our strategic outlook targeting revenue of $30 billion or more by 2030.

We intend to execute on this strategic plan by focusing on a variety of growth efforts including, balanced capital allocation, driving same-store revenue growth and acquiring revenue through strategic transactions.

The automotive retail and service industry is highly competitive with respect to price, service, location, and selection.

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The Federal Trade Commission ("FTC") has regulatory authority over automotive dealers and has implemented enforcement initiatives relating to the marketing practices of automotive dealers.

Our operations are also subject to the National

Traffic and Motor Vehicle Safety Act, Federal Motor Vehicle Safety Standards and other product standards promulgated by the United States Department of Transportation, and the rules and regulations of various state motor vehicle regulatory agencies.

Our operations are also subject to the National Traffic and Motor Vehicle Safety Act, Federal Motor Vehicle Safety Standards and other product standards promulgated by the United States Department of Transportation, and the rules and regulations of various state motor vehicle regulatory agencies.

Our financing activities with customers are subject to federal truth-in-lending, consumer leasing, and equal credit opportunity laws and regulations, as well as state and local motor vehicle finance laws, leasing laws, installment finance laws, usury laws, and other installment state and leasing laws and regulations.

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Claims arising out of actual or alleged violations of law may be asserted against us or our stores by individuals or governmental entities and may expose us to significant damages, fines or other penalties, including revocation or suspension of our license to conduct store operations.

Our financing activities, as well as our sale of finance and insurance products, may also be impacted indirectly by laws and regulations that govern automotive finance companies and other financial institutions, including regulations adopted by the Consumer Financial Protection Bureau (the "CFPB").

Our financing activities, as well as our sale of finance and insurance products, may also be impacted indirectly by laws and regulations that govern automotive finance

companies and other financial institutions, including regulations adopted by the Consumer Financial Protection Bureau (the "CFPB").

Our TCA business involves the offer and sale of extended vehicle service contracts, debt protection products, vehicle protection plans and other miscellaneous vehicle protection products, which are subject to a wide range of federal, state and local laws and regulations.

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"Our operations are subject to extensive governmental laws and regulations.

If we are found to be in purported violation of or subject to liabilities under any of these laws or regulations, or if new laws or regulations are enacted that adversely affect our operations, our business, our reputation, financial condition, results of operations, and prospects could suffer" and "Our TCA Business is subject to a wide range of federal, state and local laws and regulations, some of which we may have not have been previously been subject.

If we are found to be in purported violation of or subject to liabilities under any of these laws or regulations, or if new laws or regulations are enacted that adversely affect our operations, our business, our reputation, financial condition, results of operations, and prospects could suffer" and "Our TCA business is subject to a wide range of federal, state and local laws and regulations, some of which we may not have previously been subject.

If we are found to be in purported violation of or subject to liabilities under any of these laws or regulations, or if new laws or regulations are enacted that adversely affect our TCA business, our business, results of operations, financial condition, cash flows, reputation and prospects could suffer."

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In such cases, we will work with the agencies to address any issues and to implement appropriate corrective action when necessary.

However, none of our dealerships have been subject to any material liabilities in the past, nor do we know of any fact or condition that would result in any material liabilities being incurred in the future.

However, none of our dealerships has been subject to any material liabilities in the past, nor do we know of any fact or condition that would result in any material liabilities being incurred in the future.

Human Capital

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Our success depends on our employees and their commitment to delivering a consistent and exceptional guest experience.

Our employees work at locations in Colorado, Florida, Georgia, Indiana, Missouri, South Carolina, Texas, California, Arizona, New Mexico, Idaho, Utah, Washington and Virginia.

We believe that our employees help to set us apart from our competitors, and, therefore, we

understand they are our greatest asset.

Our employees work at locations in Colorado, Florida, Georgia, Indiana, Missouri, South Carolina, Texas, California, Arizona, New Mexico, Idaho, Utah, Washington, Virginia, Maryland and Delaware.

We believe that our employees help to set us apart from our competitors, and, therefore, we understand they are our greatest asset.

As a result, a critical part of our business strategy is investing in, supporting and developing our employees so that they are trained and incentivized to provide best-in-class service to our guests.

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We strive to recruit new employees based on their diversity of thought, background and experience as well as diversity of personal characteristics to best reflect our guests and communities we serve.

With the help and guidance of an outside consulting firm, we developed a diversity, equity and inclusion ("DE&I") initiative and launched a company-wide effort in November 2020 to identify our strengths and areas of opportunity related to our DE&I initiative.

In May 2022, we hired a Vice President, Chief Diversity Equity and Inclusion Officer to help develop and guide our DEI strategy and practices.

The goal of our DE&I initiative is to create more welcoming and inclusive workplaces throughout our dealerships and offices to enable us to attract, retain and develop the careers of diverse, highly talented team members.

The goal of our diversity, equity and inclusion ("DE&I") efforts is to create more welcoming and inclusive workplaces throughout our dealerships and offices to enable us to attract, retain and develop the careers of diverse, highly talented team members.

We intend to continue to learn and develop - working towards building a workplace where every Asbury team member feels included and welcomed.

Our Chief Diversity Equity and Inclusion Officer and her team lead the strategic focus and execution of our DE&I strategy in partnership with our operations leadership and support teams throughout the company.

Community Outreach

Through our Asbury Cares program, we support selected community partner organizations to focus on reducing social inequality.

In 2021, to ensure widespread support for our outreach program, we awarded all of our employees with an additional 40 hours of paid time off per year that can only be used to volunteer with our local community partners.

Since 2021, we have awarded all of our employees with an additional 40 hours of paid time off per year that can only be used to volunteer with our local community partners.

We have seen significant year-over-year growth in employee participation in our community engagement events.

A significant portion of our Asbury Cares Community Initiative revolves around education and making sure that young people in underserved communities have access to a quality education.

We formed a partnership with HBCU Change, an app-based organization that lets users round up their spending and donate to historical black colleges and universities ("HBCU").

We formed a partnership with HBCU Change, an app-based organization that lets users round up their spending and donate to historically black colleges and universities ("HBCU").

We learned that many HBCUs historically lag in funding and resources compared to other public or private universities and many have closed their doors in recent years.

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At the end of each quarter, the funds raised are donated to the HBCUs across the country.

Through donations from our guests and company match, we have contributed more than $1 million to HBCUs since the start of our partnership with HBCU Change in May 2021.

Recruitment and Talent Development

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We offer competitive compensation and benefits to attract and retain the best people, including the following benefits for our full-time employees:

• Health, dental, and vision benefits;

• Choice of multiple health, dental and vision plans;

• Discount for biometric screening and completion of health survey;

• Health, dental, and vision benefits with multiple plan choices;

• Discounted healthcare premiums for biometric screening and completion of health survey;

• Employee assistance program.

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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 1. Business