What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-03-01 · 240 added, 234 removed, 639 unchanged (43% of the section changed)

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As of December 31, 2023, through our Dealerships segment, we owned and operated 208 new vehicle franchises (158 dealership locations), representing 31 brands of automobiles, within 16 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"), our F&I product provider.

We also operated 37 collision centers, and Total Care Auto, Powered by Landcar ("TCA"), our F&I product provider.

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

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(i) the sale of new vehicles;

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

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

(iii) repair and maintenance services, including collision repair, the sale of automotive replacement parts, and the reconditioning of used vehicles (collectively referred to as "parts and service");

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As a result, when used vehicle, parts and service, and F&I revenue increase as a percentage of total revenue, we expect our overall gross profit margin to increase.

However, recently, new vehicle gross profit margins have been above historical levels and higher than used vehicle gross margins as a result of inventory disruptions caused primarily by a shortage of semiconductor chips required in the vehicle assembly process.

However, recently, new vehicle gross profit margins have been above historical levels and higher than used vehicle gross margins as a result of inventory disruptions from supply chain issues.

Our TCA segment revenues, reflected in F&I revenue, net, are derived from the sale of various vehicle protection products including vehicle service contracts, GAP, prepaid maintenance contracts, and appearance protection contracts.

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In addition, our ability to sell certain new and used vehicles can be negatively impacted by a number of factors, some of which are outside of our control.

Manufacturers continue to be hampered by the lack of availability of parts and key components from suppliers, such as semiconductor chips, which has impacted new vehicle inventory levels and availability of certain parts.

Manufacturers continue to be hampered by the lack of availability of parts and key components from suppliers which has impacted new vehicle inventory levels and availability of certain parts.

We cannot predict with any certainty how long the automotive retail industry will continue to be subject to these production slowdowns or when normalized production will resume at these manufacturers.

Jim Koons Acquisition

On December 11, 2023, the Company completed the acquisition of substantially all of the assets, including all real property and businesses of the Jim Koons Dealerships ("Koons") pursuant to a Purchase and Sale Agreement with various entities that comprise the Jim Koons automotive dealerships group (the "Koons acquisition") 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 comprised 20 new vehicle dealerships and six collision centers.

Miller Acquisition

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

Miller ("LHM") Dealerships and TCA (collectively, the "LHM acquisition"), thereby acquiring 54 new vehicle dealerships, seven used cars 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 $3.48 billion.

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 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.

Financial Highlights

Highlights related to our financial condition and results of operations include the following:

• Consolidated revenue for the year ended December 31, 2022 increased to $15.43 billion, compared to $9.84 billion for the prior year.

• Consolidated gross profit for the year ended December 31, 2022 increased to $3.10 billion, compared to $1.90 billion for the prior year.

• The increase in consolidated revenue and gross profit is primarily due to the inclusion of a full year of results related to our acquisitions that were completed in December 2021.

• During the year ended December 31, 2022, we completed the divestitures of sixteen dealerships and received $701.2 million in cash proceeds.

• Consolidated revenue for the year ended December 31, 2023 decreased to $14.80 billion, compared to $15.43 billion for the prior year.

• Consolidated gross profit for the year ended December 31, 2023 decreased to $2.76 billion, compared to $3.10 billion for the prior year.

• The decrease in consolidated revenue and gross profit is primarily due to lower used vehicle and F&I revenue.

Additionally, lower gross profit was driven by lower gross profit per vehicle sold for both new and used vehicles as margins continue to shift downward from the historic highs in recent years.

• The effects of dealership divestitures also impacted consolidated revenue and gross profit.

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

During 2022, we completed sixteen divestitures that contributed $683 million in revenue for the year ended December 31, 2022.

Four of the divestitures closed in the first quarter, three in the second quarter, and nine in the fourth quarter of 2022.

• Our capital allocation priorities were supported by share repurchases of approximately 1,316,167 million shares for $258.1 million during the year ended December 31, 2023.

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

• On October 20, 2023, we entered into a fourth amended and restated credit agreement with Bank of America, as administrative agent, and the other lenders party thereto (the "2023 Senior Credit Facility').

The 2023 Senior Credit Facility increased our borrowing capacity from $2.55 billion to $2.80 billion and extended the maturity date to October 20, 2028.

CONSOLIDATED RESULTS OF OPERATIONS

The Company's full year results for 2022 include the results of the dealerships acquired in the fourth quarter of 2021.

Accordingly, the significant increases in revenue, gross profit and income from operations for 2022 compared to 2021 are largely a result of these acquisitions.

We assess the organic growth of our revenue and gross profit on a same store basis.

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Additionally, amounts related to divested dealerships are excluded from each comparative period.

During 2022, the Company completed sixteen divestitures that contributed $683 million in revenue for the year.

Four of the divestitures closed in the first quarter, three in the second quarter, and nine in the fourth quarter of 2022.

The Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

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Depreciation and amortization 67.7 69.0 (1.3) (2) %

Asset impairments 117.2 — 117.2 NM

Other operating income, net — (4.4) 4.4 (100) %

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Gain on dealership divestitures, net (13.5) (207.1) 193.6 NM

Total other (income) expenses, net (46.5) 94.1 (140.6) NM

Total other expenses (income), net 152.2 (46.5) 198.8 NM

INCOME BEFORE INCOME TAXES 801.3 1,319.1 (517.8) (39) %

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SG&A EXPENSES AS A PERCENTAGE OF GROSS PROFIT 58.7 % 56.9 %

Total revenue during 2022 increased by $5.60 billion (57%) compared to 2021, due to a $2.43 billion (49%) increase in new vehicle revenue, a $1.88 billion (57%) increase in used vehicle revenue, a $891.4 million (75%) increase in parts and service revenue and a $391.9 million (97%) increase in F&I revenue.

The $1.20 billion (63%) increase in gross profit during 2022 was the result of a $353.5 million (72%) increase in new vehicle gross profit, a $64.9 million (22%) increase in used vehicle gross profit, a $430.8 million (60%) increase in parts and service gross profit and a $349.2 million (87%) increase in F&I gross profit.

Our total gross profit margin increased 75 basis points from 19.3% in 2021 to 20.1% in 2022.

Income from operations during 2022 increased by $480.8 million (61%) compared to 2021, primarily due to a $1.20 billion (63%) increase in gross profit, partially offset by a 689.4 (64%) increase in selling, general, and administrative expenses and a $27.1 million (65%) increase in depreciation and amortization expenses.

Total other (income) expenses, net decreased by $140.6 million (149%) from expense of $94.1 million in 2021 to $46.5 million of income in 2022, primarily due to a $199.1 million increase in gain on dealership divestitures, partially offset by a $58.3 million increase in other interest expense, net, and a $0.2 million increase in floor plan interest expense.

As a result, income before income taxes increased by $621.4 million (89%) to $1.32 billion in 2022.

The $156.5 million (95%) increase in income tax expense was primarily attributable to the 89% increase in income before taxes and a 70 basis point increase in the 2022 effective tax rate.

Overall, net income increased by $464.9 million (87%) from $532.4 million in 2021 to $997.3 million in 2022.

DEALERSHIP SEGMENT

Total revenue during 2023 decreased by $631.2 million (4%) compared to 2022, due to a $782.8 million (15%) decrease in used vehicle revenue, a $120.8 million (15%) decrease in F&I revenue, offset by a $265.1 million (4%) increase in new vehicle revenue and a $7.3 million increase in parts and service revenue.

The $344.8 million (11%) decrease in gross profit during 2023 was the result of a $141.0 million (17%) decrease in new vehicle gross profit, an $89.2 million (25%) decrease in used vehicle gross profit, a $2.1 million decrease in parts and service gross profit and a $112.5 million (15%) decrease in F&I gross profit.

Our total gross profit margin decreased 147 basis points from 20.1% in 2022 to 18.6% in 2023.

Income from operations during 2023 decreased by $319.1 million (25%) compared to 2022, primarily due to a $344.8 million (11%) decrease in gross profit and a $117.2 million increase in asset impairments, partially offset by a $146.0 million (8%) decrease in selling, general, and administrative expenses.

Total other expenses (income), net increased by $198.8 million from income of $46.5 million in 2022 to $152.2 million of expenses in 2023, primarily due to a $193.6 million decrease in gain on dealership divestitures, a $3.9 million (3%) increase in other interest expense, net and a $1.3 million (15%) increase in floor plan interest expense.

As a result, income before income taxes decreased by $517.8 million (39%) to $801.3 million in 2023.

The $123.0 million (38%) decrease in income tax expense was primarily attributable to the 39% decrease in income before taxes, partially offset by a 41 basis point increase in the 2023 effective tax rate.

Overall, net income decreased by $394.8 million (40%) from $997.3 million in 2022 to $602.5 million in 2023.

For the Year Ended December 31, Increase

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New vehicle gross margin 7.8 % 10.0 % (2.2) %

New vehicle revenue increased by $2.43 billion (49%), as a result of a 38% increase in new vehicle unit sales and a 9% increase in revenue per new vehicle sold.

Same store new vehicle revenue decreased by $407.8 million (9%) as a result of a 18% decrease in new vehicle units sold offset by a 10% increase in revenue per new vehicle sold.

New vehicle gross profit increased by $353.5 million (72%) as a result of a 25% increase in gross profit per new vehicle sold and a 38% increase in unit volumes.

Same store new vehicle gross profit increased by $31.2 million (7%) in 2022, as a result of a 30% increase in gross profit per new vehicle sold partially offset by a 18% decrease in unit volumes.

Same store new vehicle gross margin increased 179 basis points to 11.7% in 2022, primarily as a result of supply challenges for much of 2022 caused by a global semi-conductor shortage which led to manufacturer production challenges.

We finished 2022 with a 26 day supply of new vehicle inventory which is below our targeted days supply primarily as a result of these manufacturer production challenges.

During 2023, new vehicle revenue increased by $265.1 million (4%) when compared to 2022, as a result of a 5% increase in revenue per new vehicle sold partially offset by a 1% decrease in new vehicle unit sales.

Same store new vehicle revenue increased by $500.6 million (7%) as a result of a 4% increase in revenue per new vehicle sold and a 3% increase in new vehicle units sold.

New vehicle gross profit decreased by $141.0 million (17)% in 2023 when compared to 2022, as a result of a 16% decrease in gross profit per new vehicle sold and a 1% decrease in unit volumes.

Same store new vehicle gross profit decreased by $114.0 million (14%) in 2023, as a result of a 16% decrease in gross profit per new vehicle sold partially offset by a 3% increase in unit volumes.

Same store new vehicle gross margin decreased 228 basis points to 9.2% in 2023.

The decrease in our new vehicle gross profit margin was primarily attributable to the easing of new vehicle inventory constraints which softened the historically high new vehicle margins seen in recent years.

The seasonally adjusted annual rate ("SAAR") for new vehicle sales in the U.S.

during the year ended December 31, 2023 was approximately 15.4 million which increased as compared to approximately 13.7 million during the year ended December 31, 2022.

The increase in new vehicle sales revenue on a same store basis for the year ended December 31, 2023 over the same period in the prior year is primarily attributable to an increase of $2,118 of revenue per new vehicle sold and an increase of 3,845 in new vehicle units sold.

The increase in SAAR period over period reflects higher inventory supply, including fleet, coupled with continued consumer demand for new vehicles.

However, we continue to be negatively impacted by the significant variation in new vehicle days supply among brands and models.

We ended the year with approximately 43

days of supply of new vehicle inventory which reflects an increase from 26 days of supply as of December 31, 2022 but remains well below historical levels.

Used Vehicle—

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Used vehicle retail gross margin 6.2 % 7.2 % (1.0) %

Used vehicle revenue increased by $1.88 billion (57%), due to a $1.77 billion (58%) increase in used retail revenue and a $108.6 million (42%) increase in used vehicle wholesale revenue.

Same store used vehicle revenue increased by $148.7 million (5%) due to an $226.9 million (8%) increase in used vehicle retail revenue, partially offset by a $78.1 million (34%) decrease in used vehicle wholesale revenue.

In 2022, total Company and same store used vehicle retail gross profit margins both decreased 139 and 224 basis points to 7.2% and 6.4%, respectively.

We attribute the decreases in used vehicle retail gross profit margin to a softening in the used

vehicle market, which was at record highs in 2021 as a result of new vehicle inventory shortages caused by semiconductor supply chain issues and COVID-19 disruptions.

Used vehicle revenue decreased by $782.8 million (15%), due to an $811.3 million (17%) decrease in used vehicle retail revenue, partially offset by a $28.5 million (8%) increase in used vehicle wholesale revenue.

Same store used vehicle revenue decreased by $513.7 million (11%) due to a $554.6 million (12%) decrease in used vehicle retail revenue, partially offset by a $40.8 million (12%) increase in used vehicle wholesale revenue.

Used vehicle revenues and unit volume have continued to

contract during 2023, along with margins on both an all store and same store basis.

Used vehicle revenue and unit volumes have been negatively impacted by the affordability headwinds and lack of inventory availability, especially in vehicles with lower mileage.

In 2023, total Company and same store used vehicle retail gross profit margins decreased 100 and 102 basis points, respectively, to both 6.2%.

We attribute the decreases in used vehicle retail gross profit margin to a softening in the used vehicle market, which was at record highs in 2021 and, to a lesser extent 2022, as a result of new vehicle inventory shortages initially caused by COVID-19 disruptions followed by supply chain issues.

We believe that our used vehicle inventory continues to be well-aligned with current consumer demand, with approximately 32 days of supply as of December 31, 2023.

This level of days of supply is in line with our historic targeted range of 30 to 35 days.

Parts and Service—

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Total parts and service gross profit $ 1,150.6 $ 1,152.6 $ (2.1) — %

Total parts and service gross margin 55.3% 55.6% (0.3) %

Parts and service revenue $ 2,063.2 $ 1,960.5 $ 102.6 5 %

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Total parts and service gross profit $ 1,140.7 $ 1,087.8 $ 52.9 5 %

Total parts and service gross margin 55.3% 55.5% (0.2) %

* Reconditioning and preparation represents the gross profit earned by our parts and service departments for internal work performed and is included as a reduction of Parts and service cost of sales within the accompanying consolidated statements of income upon the sale of the vehicle.

The $923.3 million (78%) increase in parts and service revenue was due to a $568.1 million (70%) increase in customer pay revenue, a $270.2 million (143%) increase in wholesale parts revenue, and a $85.0 million (47%) increase in warranty revenue.

The $7.3 million increase in parts and service revenue was due to a $6.3 million increase in customer pay revenue and a $10.2 million (4%) increase in warranty revenue, partially offset by a $9.2 million (2%) decrease in wholesale parts revenue.

Same store parts and service revenue increased $102.6 (5%) from $1.96 billion in 2022 to $2.06 billion in 2023.

The increase in same store parts and service revenue was due to a $108.7 million (15%) increase in customer pay revenue and a $26.8 million (17%) increase in wholesale parts revenue, partially offset by a $9.1 million (6%) decrease in warranty revenue.

Parts and service gross profit, excluding reconditioning and preparation, increased by $380.2 million (67%) to $946.7 and same store gross profit, excluding reconditioning and preparation, increased by $57.5 million (11%) to $565.7 million.

The $57.5 million increase in same store gross profit, excluding reconditioning and preparation, is primarily due to a $60.1 million (15%) increase in customer pay gross profit, and a 3.2 million (11%) increase in wholesale parts gross profit, partially offset by a $5.7 million (7%) decrease in warranty gross profit.

The increase in same store parts and service revenue was due to a $72.1 million (6%) increase in customer pay revenue, a $19.8 million (8%) increase in warranty revenue and a $10.7 million (2%) increase in wholesale parts revenue.

Parts and service gross profit, excluding reconditioning and preparation, increased by $5.1 million (1%) to $936.6 million and same store gross profit, excluding reconditioning and preparation, increased by $47.6 million (5%) to $928.1 million.

The $47.6 million increase in same store gross profit, excluding reconditioning and preparation, is primarily due to a $33.8 million (5%) increase in customer pay gross profit, an $11.3 million (8%) increase in warranty gross profit, and a $2.5 million (3%) increase in wholesale parts gross profit.

As a result of the shortage of new vehicle inventory, many customers have elected to keep their current vehicles longer which has generated additional customer pay and wholesale parts gross profit for the parts and service departments.

We continue to focus on increasing our customer pay parts and service revenue over the long-term by improving the customer experience, providing competitive benefits to our technicians, capitalizing on our dealership training programs and upgrading equipment.

Finance and Insurance, net—

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(Dollars in millions, except for per vehicle data)

Finance and insurance, net $ 670.9 $ 402.7 $ 268.2 67 %

Finance and insurance, net revenue $ 676.2 $ 797.0 $ (120.8) (15) %

Finance and insurance, net gross profit $ 638.2 $ 750.7 $ (112.5) (15) %

Finance and insurance, net per vehicle sold $ 2,304 $ 2,480 $ (177) (7) %

Finance and insurance, net $ 403.0 $ 362.7 $ 40.4 11 %

Finance and insurance, net revenue $ 667.3 $ 761.7 $ (94.4) (12) %

Finance and insurance, net gross profit $ 629.4 $ 715.5 $ (86.1) (12) %

Finance and insurance, net per vehicle sold $ 2,308 $ 2,527 $ (219) (9) %

F&I revenue, net increased by $268.2 million (67%) in 2022 when compared to 2021 primarily as a result of a 41% increase in new and used retail unit sales and an 18% increase in F&I per vehicle retailed.

On a same store basis F&I revenue, net increased by $40.4 million (11%) in 2022 when compared to 2021 primarily as a result of a 24% increase in F&I per vehicle retailed, partially offset by a 11% decrease in new and used retail unit sales.

During 2022 we continued to benefit from a favorable consumer lending environment, which allowed more of our customers to take advantage of a broader array of F&I products and our continued focus on improving the F&I results at our lower-performing stores through our F&I training programs.

For the Year Ended December 31,

As Reported Dealership Inter-company Eliminations TCA After Dealership Eliminations As Reported Dealership Inter-company Eliminations TCA After Dealership Eliminations

F&I revenue, net decreased by $120.8 million (15%) in 2023 when compared to 2022 primarily as a result of an 8% decrease in new and used retail unit sales and a 7% decrease in F&I per vehicle retailed.

On a same store basis F&I revenue, net decreased by $94.4 million (12%) in 2023 when compared to 2022 primarily as a result of a 4% decrease in new and used retail unit sales and a 9% decrease in F&I per vehicle retailed.

The financial results of the TCA segment, after dealership eliminations, are as follows:

For the Year Ended December 31, Increase

(Dollars in millions)

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Premium revenues are supplemented with investment gains or losses and income earned associated with the performance of TCA's investment portfolio.

During the year ended December 31, 2022, TCA generated $245.8 million of revenue, consisting primarily of earned premium partially offset by a loss of $8.0 million in the investment portfolio.

Direct expenses paid for the acquisition of contracts on which revenue has been received but not yet earned have been deferred and are amortized over the related contract period.

During the year ended December 31, 2022, TCA recorded $191.9 million of cost of sales consisting primarily of claims expense.

During the year ended December 31, 2023, TCA generated $138.3 million of revenue, consisting primarily of earned premium and $15.7 million from the investment portfolio.

Direct expenses incurred for the acquisition of F&I contracts on which revenue has not yet been recognized have been deferred and are amortized over the related contract period.

During the year ended December 31, 2023, TCA recorded $37.9 million of cost of sales consisting primarily of claims expense, after the elimination of claims paid to affiliated dealerships.

Commissions expense paid by TCA to our affiliated dealerships and reflected as F&I revenue in our Dealerships segment is eliminated in the TCA segment upon consolidation.

As we continue to integrate TCA, we expect a rollout of TCA products to our remaining stores by the end of 2024.

With the ownership of TCA, while the overall profitability of the transaction is higher, the timing of revenue and cost recognition is deferred and amortized over the life of the contract.

We expect that this rollout will result in lower F&I revenue and gross profit over the next two to three years.

With the ownership of TCA, while the combined profitability of the transaction is higher, the timing of revenue and cost recognition is deferred and amortized over the life of the contract.

We expect that this rollout will result in lower F&I revenue and gross profit over the next two to three years due to the change in how these contracts are earned.

S elling, General, and Administrative Expense—

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Personnel costs $ 1,081.7 39.3 % $ 1,247.4 40.2 % $ (165.7) (1.0) %

Sales compensation 289.8 9.3 % 190.8 10.0 % 99.0 (0.7) %

Share-based compensation 20.6 0.7 % 16.2 0.9 % 4.4 (0.2) %

Outside services 192.2 6.2 % 110.6 5.8 % 81.6 0.4 %

Rent and related expenses 119.0 4.3 % 121.7 3.9 % (2.7) 0.4 %

Advertising 47.5 1.7 % 50.1 1.6 % (2.6) 0.1 %

Rent 44.8 1.4 % 37.6 2.0 % 7.2 (0.5) %

Utilities 31.3 1.0 % 18.8 1.0 % 12.5 — %

Insurance 25.2 0.8 % 22.5 1.2 % 2.7 (0.4) %

Other 369.2 13.4 % 344.2 11.1 % 25.0 2.3 %

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Personnel costs $ 1,068.5 39.2 % $ 1,181.8 40.2 % $ (113.3) (0.9) %

Sales compensation 170.5 9.6 % 172.8 10.1 % (2.3) (0.5) %

Share-based compensation 20.6 1.2 % 16.2 0.9 % 4.4 0.2 %

Outside services 113.2 6.4 % 101.6 5.9 % 11.6 0.4 %

Rent and related expenses 117.9 4.3 % 116.3 4.0 % 1.6 0.4 %

Advertising 45.6 1.7 % 43.8 1.5 % 1.8 0.2 %

Rent 33.7 1.9 % 37.5 2.2 % (3.8) (0.3) %

Utilities 18.6 1.0 % 17.0 1.0 % 1.6 0.1 %

Insurance 10.6 0.6 % 18.7 1.1 % (8.1) (0.5) %

Other 361.6 13.3 % 329.0 11.2 % 32.6 2.1 %

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SG&A expense as a percentage of gross profit increased 182 basis points from 56.9% in 2022 to 58.7% in 2023.

Same store SG&A expense as a percentage of gross profit decreased 35 basis points from 57.2% in 2021 to 56.9% in 2022.

The decrease in SG&A as a percentage of gross profit is primarily the result of higher gross profits earned across our Dealership segment, as well as maintaining expense discipline, particularly in personnel costs, with enhanced productivity of our team members.

With respect to the TCA F&I products sold at our dealerships, sales compensation expense is reduced for commission costs that are capitalized and recognized over the life of the contract.

Depreciation and Amortization Expense —

The $27.1 million (65%) increase in depreciation and amortization expense during 2022 compared to 2021, was primarily the result of depreciation associated with dealership acquisitions during 2021 and additional assets placed into service during 2022.

Same store SG&A expense as a percentage of gross profit increased 173 basis points from 56.8% in 2022 to 58.5% in 2023.

The increase in SG&A as a percentage of gross profit is primarily the result of lower gross profits for 2023 when compared to 2022.

SG&A expense for the year ended December 31, 2023 includes $4.3 million of expense related to hail damage, a $3.6 million gain from the sale of real estate and $4.1 million of professional fees related to the Koons acquisition.

SG&A expense for the year ended December 31, 2022 includes $2.7 million of professional fees related to acquisition due diligence.

Asset Impairments —

During the year ended December 31, 2023, we recognized asset impairment charges of $117.2 million as compared to no impairment charges during the year ended December 31, 2022.

The asset impairment charges resulted from our annual franchise rights impairment tests and the classification of certain asset disposal groups as held for sale which resulted in additional franchise rights and goodwill impairment charges.

Floor Plan Interest Expense —

Floor plan interest expense increased by $0.2 million (2%) to $8.4 million during 2022 compared to $8.2 million during 2021.

Floor plan interest expense increased by $1.3 million (15%) to $9.6 million during 2023 compared to $8.4 million during 2022 due to less cash held in the floor plan offset account in December 2023 as a result of funding the Koons acquisition.

Other Interest Expense —

Other interest expense increased $3.9 million (3%) from $152.2 million in 2022 to $156.1 million in 2023.

The increase is due to having a full year of interest expense in 2022 in connection with acquisition-related financing that we entered into during the fourth quarter of 2021.

The increase is primarily due to higher loaner payable interest expense driven by higher loaner vehicle balances, as well as interest expense on our revolving credit agreement in December 2023.

Gain on Dealership Divestitures —

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 net 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.

Income Tax Expense —

The $156.5 million (95%) increase in income tax expense was the result of a $621.4 million (89%) increase in income before income taxes.

The $123.0 million (38%) decrease in income tax expense was primarily the result of a $517.8 million (39%) decrease in income before income taxes.

Our effective tax rate increased 41 basis points from 24.4% in 2022 to 24.8% in 2023.

The increase in our effective tax rate was primarily due to the apportionment of income to states with higher tax rates we began doing business in as a result of the acquisitions made during the fourth quarter of 2021.

We are forecasting our 2023 effective tax rate to be approximately 24.5%.

The increase in our effective tax rate was primarily due to lower income before taxes and our acquisition and divestiture activity.

Stores acquired are located in relatively high tax rate states while the stores divested are located in relatively low or no tax rate states.

Refer to Note 16 "Income Taxes" for additional information regarding income taxes.

CONSOLIDATED RESULTS OF OPERATIONS

The Company's full year results for 2022 include the results of the dealerships acquired in the fourth quarter of 2021.

Accordingly, the significant increases in revenue, gross profit and income from operations for 2022 compared to 2021 are largely a result of these acquisitions.

The Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

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Depreciation and amortization 69.0 41.9 27.1 65 %

Franchise rights impairment — 23.0 (23.0) (100) %

Other operating (income) expenses, net (5.4) 9.2 (14.6) (159) %

Other operating income, net (4.4) (5.4) 1.0 (19) %

INCOME FROM OPERATIONS 1,272.6 791.8 480.8 61 %

OTHER EXPENSES (INCOME):

OTHER (INCOME) EXPENSES:

Floor plan interest expense 8.4 8.2 0.2 2 %

Other interest expense, net 152.2 93.9 58.3 62 %

Loss on extinguishment of long-term debt, net — 20.6 (20.6) (100)

Gain on dealership divestitures, net (8.0) (62.3) 54.3 (87)

Total other expenses, net 94.1 32.7 61.4 188 %

Gain on dealership divestitures, net (207.1) (8.0) (199.1) NM

Total other (income) expenses, net (46.5) 94.1 (140.6) NM

INCOME BEFORE INCOME TAXES 1,319.1 697.7 621.4 89 %

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Net income per common share—Diluted $ 44.61 $ 26.49 $ 18.12 68 %

______________________________

NM — Not Meaningful

For the Year Ended December 31,

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SG&A EXPENSES AS A PERCENTAGE OF GROSS PROFIT 56.9 % 56.5 %

Total revenue during 2021 increased by $2.71 billion (38%) compared to 2020, due to a $1.17 billion (31%) increase in new vehicle revenue, $1.15 billion (53%) increase in used vehicle revenue, a $293.1 million (33%) increase in parts and service revenue and a $100.0 million (33%) increase in F&I revenue.

The $678.7 million (55%) increase in gross profit during 2021 was the result of a $272.0 million (124%) increase in new vehicle gross profit, a $131.7 million (84%) increase in used vehicle gross profit, a $178.7 million (33%) increase in parts and service gross profit and a $96.4 million (32%) increase in F&I gross profit.

Our total gross profit margin increased 75 basis points from 19.3% in 2021 to 20.1% in 2022.

Income from operations during 2021 increased by $420.9 million (114%) compared to 2020, primarily due to a $678.7 million (55%) increase in gross profit, a $23.0 million decrease in franchise rights impairment, a $14.6 million decrease in other operating expenses, net partially offset by a $292.0 million (37%) increase in selling, general, and administrative expenses and a $3.4 million (9%) increase in depreciation and amortization expenses.

Total other expenses, net increased by $61.4 million (188%) in 2021, primarily due to a $54.3 million decrease in gain on dealership divestitures, a $37.2 million increase in other interest expense, net, partially offset by a $9.5 million decrease in floor plan interest expense and a $20.6 million decrease in loss on extinguishment of debt.

As a result, income before income taxes increased by $359.6 million (106%) to $697.7 million in 2021.

The $81.6 million (97%) increase in income tax expense was primarily attributable to the 106% increase in income before taxes, partially offset by a 110 basis point decrease in the 2021 effective tax rate.

Income from operations during 2022 increased by $480.8 million (61%) compared to 2021, primarily due to a $1.20 billion (63%) increase in gross profit, partially offset by a $689.4 million (64%) increase in selling, general, and administrative expenses and a $27.1 million (65%) increase in depreciation and amortization expenses.

As a result, income before income taxes increased by $621.4 million (89%) to $1.32 billion in 2022.

The $156.5 million (95%) increase in income tax expense was primarily attributable to the 89% increase in income before taxes and a 70 basis point increase in the 2022 effective tax rate.

Overall, net income increased by $464.9 million (87%) from $532.4 million in 2021 to $997.3 million in 2022.

DEALERSHIP SEGMENT

DEALERSHIPS SEGMENT

For the Year Ended December 31, Increase

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New vehicle revenue increased by $2.43 billion (49%), as a result of a 38% increase in new vehicle unit sales and a 9% increase in revenue per new vehicle sold.

Same store new vehicle revenue increased by $496.3 million (13%) as a result of a 4% increase in new vehicle units sold and a 9% increase in revenue per new vehicle sold.

Same store new vehicle gross profit in 2021 increased by $190.6 million (89%), as a result of an 82% increase in gross profit per new vehicle sold and a 4% increase in unit volumes.

Same store new vehicle gross margin increased 390 basis points to 9.7% in 2021, primarily as a result of a supply shortage for much of 2021 caused by manufacturer production challenges caused by the semi-conductor shortage and the COVID-19 pandemic.

We finished 2021 with an eight day supply of new vehicle inventory which is below our targeted day supply primarily as a result of these manufacturer production challenges.

Same store new vehicle revenue decreased by $407.8 million (9%) as a result of a 18% decrease in new vehicle units sold offset by a 10% increase in revenue per new vehicle sold.

New vehicle gross profit increased by $353.5 million (72%) , as a result of a 25% increase in gross profit per new vehicle sold and a 38% increase in unit volumes.

Same store new vehicle gross profit increased by $31.2 million (7%) in 2022, as a result of a 30% increase in gross profit per new vehicle sold partially offset by a 18% decrease in unit volumes.

We finished 2022 with a 26 days of supply of new vehicle inventory which is below our targeted days supply primarily as a result of these manufacturer production challenges.

Used Vehicle—

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Used vehicle revenue increased by $1.88 billion (57%), due to a $1.77 billion (58%) increase in used retail revenue and a $108.6 million (42%) increase in used vehicle wholesale revenue.

Same store used vehicle revenue increased by $689.7 million (33%) due to an $749.8 million (40%) increase in used vehicle retail revenue, partially offset by a $60.1 million (26%) decrease in used vehicle wholesale revenue.

In 2021, total Company and same store used vehicle retail gross profit margins both increased 110 and 100 basis points, respectively, to 8.6%.

We primarily attribute the increases in used vehicle retail gross profit margin to increased demand for used vehicles as a result of new vehicle inventory shortages caused by semiconductor supply chain and COVID-19 disruptions.

Same store used vehicle revenue increased by $148.7 million (5%) due to a $226.9 million (8%) increase in used vehicle retail revenue, partially offset by a $78.1 million (34%) decrease in used vehicle wholesale revenue.

In 2022, total Company and same store used vehicle retail gross profit margins both decreased 139 and 224 basis points to 7.2% and 6.4%, respectively.

We attribute the decreases in used vehicle retail gross profit margin to a softening in the used

vehicle market, which was at record highs in 2021 as a result of new vehicle inventory shortages caused by semiconductor supply chain issues and COVID-19 disruptions.

We believe that our used vehicle inventory continues to be well-aligned with current consumer demand, with approximately 27 days of supply as of December 31, 2022.

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Total parts and service gross profit $ 1,167.8 $ 720.1 $ 447.7 62 %

Total parts and service gross margin 55.4% 60.8% (5.4) %

Parts and service revenue $ 1,181.8 $ 1,055.5 $ 126.3 12 %

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Total parts and service gross profit $ 707.3 $ 645.7 $ 61.6 10 %

Total parts and service gross margin 59.8% 61.2% (1.3) %

The $923.3 million (78%) increase in parts and service revenue was due to a $568.1 million (70%) increase in customer pay revenue, a $270.2 million (143%) increase in wholesale parts revenue and a $85.0 million (47%) increase in warranty revenue.

Same store parts and service revenue increased $126.7 million (15%) from $867.8 million in 2020 to $994.5 million in 2021.

Same store parts and service revenue increased $126.3 million (12%) from $1.06 billion in 2021 to $1.18 billion in 2022.

Parts and service gross profit, excluding reconditioning and preparation, increased by $380.2 million (67%) to $946.7 million and same store gross profit, excluding reconditioning and preparation, increased by $57.5 million (11%) to $565.7 million.

The $55.1 million increase in same store gross profit, excluding reconditioning and preparation, is primarily due to a $59.8 million (20%) increase in customer pay gross profit, a $7.1 million (33%) increase in wholesale parts gross profit, partially offset by an $11.8 million (13%) decrease in warranty gross profit.

The parts and service business was negatively impacted by the COVID-19 pandemic in 2020 but has since recovered to pre-pandemic levels.

In addition, the shortage of new vehicle inventory has increased demand for used vehicles which in turn has generated additional reconditioning and preparation gross profit for the parts and service departments.

The $57.5 million increase in same store gross profit, excluding reconditioning and preparation, is primarily due to a $60.1 million (15%) increase in customer pay gross profit and a $3.2 million (11%) increase in wholesale parts gross profit, partially offset by a $5.7 million (7%) decrease in warranty gross profit.

Finance and Insurance, net—

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On a same store basis F&I revenue, net increased by $64.9 million (22%) in 2021 when compared to 2020 primarily as a result of a 11% decrease in new and used retail unit sales and a 9% increase in F&I per vehicle retailed.

The financial results of the TCA segment, after dealership eliminations, are as follows:

For the Year Ended December 31, Increase

(Dollars in millions)

Finance and insurance, revenue $ 12.0 $ — $ 12.0 N/A

Finance and insurance, cost of sales $ 6.4 $ — $ 6.4 N/A

Finance and insurance, gross profit $ 5.5 $ — $ 5.5 N/A

During the 15-day period the Company owned TCA in December 2021, TCA generated $12.0 million of revenue, consisting of both earned premium and investment income.

During the 15-day period the Company owned TCA in December 2021, TCA recorded $6.4 million of cost of sales consisting primarily of claims expense.

Finance and insurance, revenue $ 126.0 $ 2.3 $ 123.7 NM

Finance and insurance, cost of sales $ 46.3 $ 3.6 $ 42.7 NM

Finance and insurance, gross profit $ 79.8 $ (1.3) $ 81.0 NM

TCA offers a variety of F&I products, such as extended vehicle service contracts, prepaid maintenance contracts, GAP, appearance protection contracts and lease wear-and-tear contracts.

TCA's products are sold through our automobile dealerships.

Revenue generated by TCA is earned over the period of the related product contract.

The method for recognizing revenue is assigned based on contract type and expected claim patterns.

Premium revenues are supplemented with investment gains or losses and income earned associated with the performance of TCA's investment portfolio.

During the year ended December 31, 2022, TCA generated $126.0 million of revenue, consisting primarily of earned premium partially offset by a loss of $8.0 million in the investment portfolio.

Direct expenses incurred for the acquisition of F&I contracts on which revenue has not yet been recognized have been deferred and are amortized over the related contract period.

During the year ended December 31, 2022, TCA recorded $46.3 million of cost of sales consisting primarily of claims expense, after the elimination of claims paid to affiliated dealerships.

Commissions expense paid by TCA to our affiliated dealerships and reflected as F&I revenue in our Dealerships segment is eliminated in the TCA segment upon consolidation.

S elling, General, and Administrative Expense—

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Personnel costs $ 1,247.4 40.2 % $ 747.5 39.3 % $ 499.9 0.9 %

Sales compensation 190.8 10.0 % 121.4 9.9 % 69.3 0.1 %

Share-based compensation 16.2 0.9 % 12.6 1.0 % 3.6 (0.2) %

Outside services 110.6 5.8 % 82.9 6.8 % 27.7 (1.0) %

Rent and related expenses 121.7 3.9 % 96.1 5.0 % 25.6 (1.1) %

Advertising 50.1 1.6 % 30.7 1.6 % 19.4 — %

Rent 37.6 2.0 % 32.2 2.6 % 5.5 (0.7) %

Utilities 18.8 1.0 % 15.8 1.3 % 3.0 (0.3) %

Insurance 22.5 1.2 % 16.7 1.4 % 5.8 (0.2) %

Other 344.2 11.1 % 199.7 10.5 % 144.5 0.6 %

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Personnel costs $ 717.3 40.5 % $ 693.3 40.5 % $ 24.0 (0.1) %

Sales compensation 167.5 10.3 % 118.5 9.9 % 49.0 0.4 %

Share-based compensation 16.2 1.0 % 12.6 1.1 % 3.6 (0.1) %

Outside services 97.1 6.0 % 80.3 6.7 % 16.8 (0.7) %

Rent and related expenses 52.3 3.0 % 54.6 3.2 % (2.3) (0.2) %

Advertising 20.6 1.2 % 25.0 1.5 % (4.4) (0.3) %

Rent 37.5 2.3 % 32.0 2.7 % 5.5 (0.4) %

Utilities 16.0 1.0 % 15.3 1.3 % 0.7 (0.3) %

Insurance 18.2 1.1 % 15.7 1.3 % 2.5 (0.2) %

Other 218.1 12.3 % 205.7 12.0 % 12.4 0.3 %

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Gross profit $ 1,773.0 $ 1,710.1

SG&A expense as a percentage of gross profit decreased 750 basis points from 63.9% in 2020 to 56.5% in 2021.

SG&A expense as a percentage of gross profit increased 41 basis points from 56.5% in 2021 to 56.9% in 2022.

Same store SG&A expense as a percentage of gross profit decreased 35 basis points from 57.2% in 2021 to 56.9% in 2022.

The decrease in SG&A as a percentage of gross profit is primarily the result of higher gross profits earned across our Dealerships segments, as well as maintaining expense discipline, particularly in personnel costs, with enhanced productivity of our team members.

The decrease in SG&A as a percentage of gross profit is primarily the result of higher gross profits earned across our Dealerships segment, as well as maintaining expense discipline, particularly in personnel costs, with enhanced productivity of our team members.

Depreciation and Amortization Expense —

The $3.4 million (9%) increase in depreciation and amortization expense during 2021 compared to 2020, was primarily the result of depreciation associated with dealership acquisitions during 2021, additional assets placed into service during 2021, and depreciation expense associated with the purchase of previously leased properties.

Franchise Rights Impairment —

We assessed our manufacturer franchise rights for impairment by comparing the present value of cash flows attributable to each franchise right to its carrying value.

As a result of our impairment testing performed, we recognized no impairment charges during the year ended December 31, 2021 and a $23.0 million pre-tax non-cash charge related to eleven dealerships during the year ended December 31, 2020.

Other Operating Expenses (Income), net —

Other operating (income) expenses, net includes gains and losses from the sale of property and equipment, income derived from lease arrangements, and other non-core operating items.

During the twelve months ended December 31, 2021, the Company recorded other operating income, net of $5.4 million, which included a $3.5 million gain related to legal settlements and a $1.9 million gain on divestitures of certain real estate.

During the twelve months ended December 31, 2020, the Company recorded other operating expense, net of $9.2 million, which included $12.9 million related to the Park Place acquisition, $0.7 million real estate related impairment partially offset by a $2.1 million gain related to legal settlements and a $0.3 million gain related to the sale of vacant real estate.

Floor Plan Interest Expense —

Floor plan interest expenses decreased by $9.5 million (54%) to $8.2 million during 2021 compared to $17.7 million during 2020, as a result of lower new vehicle inventory levels during 2021 caused by production issues related to the semiconductor shortage and COVID-19.

Floor plan interest expense increased by $0.2 million (2%) to $8.4 million during 2022 compared to $8.2 million during 2021.

Other Interest Expense —

Other interest expense increased $58.3 million (62%) from $93.9 million in 2021 to $152.2 million in 2022.

In 2021, we incurred approximately $27.5 million in bridge commitment fees related to our acquisition of LHM and TCA.

During 2021, we also incurred additional interest expense related to our $800.0 million 2029 Notes (as defined below) and $600.0 million 2032 Notes (as defined below) issued in November 2021, the proceeds of which were also used to finance recent acquisitions.

In addition, we incurred interest expense in connection with the 2021 BofA Real Estate Facility, the proceeds of which was used to finance the acquisition of previously leased Park Place Dealership premises.

The increase is due to having a full year of interest expense in 2022 in connection with acquisition-related financing that we entered into during the fourth quarter of 2021.

Gain on Dealership Divestitures —

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 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 net 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.

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.

Income Tax Expense —

The $156.5 million (95%) increase in income tax expense was the result of a $621.4 million (89%) increase in income before income taxes.

Our effective tax rate decreased 110 basis points from 24.8% in 2020 to 23.7% in 2021.

The decrease in our effective tax rate was primarily due to decreases in state rates in jurisdictions in which the Company has significant activity.

Our effective tax rate increased 70 basis points from 23.7% in 2021 to 24.4% in 2022.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2022, we had total available liquidity of $1.54 billion, which consisted of cash and cash equivalents of $181.6 million (excluding $53.7 million held by TCA), available funds in our floor plan offset accounts of $691.0 million of which $627.8 million is offset against new vehicle floor plan notes payable and $63.2 million is netted against loaner vehicle notes payable, $437.3 million of availability under our revolving credit facility (of which $389.0 million is under our new vehicle floorplan facility that is able to be converted to a revolving credit facility), and $230.6 million of availability under our used vehicle revolving floor plan facility.

As of December 31, 2023, we had total available liquidity of $459.8 million, which consisted of cash and cash equivalents of $32.5 million (excluding $13.2 million held by TCA), available funds in our floor plan offset accounts of $95.2 million million and $332.1 million of availability under our revolving credit facility.

The borrowing capacities under our revolving credit facility and our used vehicle revolving floor plan facility are limited by borrowing base calculations and, from time to time, may be further limited by our required compliance with certain financial covenants.

As of December 31, 2022, these financial covenants did not further limit our availability under our other credit facilities.

For more information on our financial covenants, see "Covenants and Defaults" and "Share Repurchases and Dividend Restrictions" below.

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capital expenditures;

and any operating requirements for at least the next twelve months.

and any operating requirements for at least the next twelve months and the foreseeable future.

Material Indebtedness

We currently are party to the following material credit facilities and agreements and have the following material indebtedness outstanding.

For a more detailed description of the material terms of these agreements and facilities, and this indebtedness, see Note 14 "Debt" footnote included in the notes to consolidated financial statements.

• 2019 Senior Credit Facility —On September 25, 2019, the Company and certain of its subsidiaries entered into the 2019 third amended and restated credit agreement with Bank of America, as administrative agent, and the other lenders party thereto (the "2019 Senior Credit Facility").

For a more detailed description of the material terms of these agreements and facilities, and this indebtedness, see Note 14 "Debt" included in the notes to consolidated financial statements.

• 2023 Senior Credit Facility —On October 20, 2023, the Company and certain of its subsidiaries entered into a fourth amended and restated credit agreement with Bank of America, N.A.

("Bank of America"), as administrative agent, and the other lenders party thereto (the "2023 Senior Credit Facility").

The 2023 Senior Credit Facility amended and restated the Company’s pre-existing third amended and restated credit agreement, dated as of September 25, 2019, among the Company, certain of its subsidiaries, Bank of America, as administrative agent, and the other lenders party thereto.

As amended, the 2023 Senior Credit Agreement provides for the following:

Revolving Credit Facility — A $500.0 million Revolving Credit Facility for, among other things, acquisitions, working capital and capital expenditures, including a $50.0 million sub-limit for letters of credit.

As of December 31, 2022, we converted $389.0 million of availability from the Revolving Credit facility to the New Vehicle Floor Plan Facility (as defined below), resulting in $61.0 million of borrowing capacity.

As of December 31, 2023, we converted $389.0 million of availability from the New Vehicle Floor Plan Facility (as defined below) back to the Revolving Credit facility resulting in $346.1 million in borrowing capacity.

In addition, as of December 31, 2023, we had $14.0 million in outstanding letters of credit, resulting in $332.1 million of borrowing availability.

We began the year with $169.0 million drawn on our revolving credit facility.

During the year ended December 31, 2022, we had additional borrowings of $330.0 million and $499.0 million in repayments, resulting in no outstanding borrowing as of December 31, 2022.

We began the year with no amounts drawn on our revolving credit facility.

During the year ended December 31, 2023, we had borrowings of $329.0 million and $329.0 million in repayments, resulting in no outstanding borrowings as of December 31, 2023.

New Vehicle Floor Plan Facility — A $1.93 billion New Vehicle Floor Plan Facility which allows us to transfer cash as an offset to floor plan notes payable.

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

As of December 31, 2022, we had $679.6 million outstanding under the New Vehicle Floor Plan Facility, which includes $2.8 million classified as liabilities associated with assets held for sale and $63.2 million classified in loaner vehicles notes payable which is included in accounts payable and accrued liabilities in our consolidated balance sheets.

As of December 31, 2022, we held $777.6 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 in the consolidated balance sheets.

As of December 31, 2023, we had $1.46 billion outstanding under the New Vehicle Floor Plan Facility, which includes $127.2 million classified in loaner vehicles notes payable which is included in accounts payable and accrued liabilities in our consolidated balance sheets.

As of December 31, 2023, we held $44.7 million in the floor plan notes payable offset account.

Used Vehicle Floor Plan Facility — A $375.0 million Used Vehicle Floor Plan Facility to finance the acquisition of used vehicle inventory and for working capital and capital expenditures, as well as to refinance used vehicles.

We began the year with $294.0 million drawn on our Used Vehicle Floor Plan Facility.

As of December 31, 2022, we had additional borrowings of $200.0 million and $494.0 million in repayments resulting in no outstanding borrowings as of December 31, 2022.

Our borrowing capacity under the Used

Vehicle Floor Plan Facility was $230.6 million based on our borrowing base calculation as of December 31, 2022.

We began the year with no amounts drawn on our Used Vehicle Floor Plan Facility.

During the year ended December 31, 2023, we had additional borrowings of $547.1 million and $240.0 million in

repayments resulting in $307.1 million outstanding borrowings as of December 31, 2023.

We did not have any borrowing capacity under the Used Vehicle Floor Plan Facility based on our borrowing base calculation as of December 31, 2023.

Subject to compliance with certain conditions, the 2023 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 $750.0 million in the aggregate without lender consent.

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We re-designated this amount to take advantage of the lower commitment fee rates on the New Vehicle Floor Plan Facility when compared to the Revolving 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 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.

On May 25, 2022, the Company and certain of its subsidiaries entered into the fourth amendment to the 2019 Senior Credit Facility with Bank of America, as administrative agent, and the other lenders party thereto, to replace the benchmark reference rate of LIBOR to Secured Overnight Financing Rate ("SOFR").

See Note 14 "Debt" for further details.

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.

In addition to the payment of interest on borrowings outstanding under the 2023 Senior Credit Facility, we are required to pay a quarterly commitment fee on total unused commitments thereunder.

The fee for unused commitments under the Revolving Credit Facility is between 0.15% and 0.40% per year, based on the Company's total lease adjusted leverage ratio, and the fee for unused commitments under the New Vehicle Facility Floor Plan and the Used Vehicle Floor Plan Facility is 0.15% per year.

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The 2029 Senior Notes and the 2032 Senior Notes are not required to be registered under the Securities Act of 1933.

• 2028 and 2030 Senior Notes —On February 19, 2020, the Company completed its offering of senior unsecured notes, consisting of $525.0 million aggregate principal amount of the Existing 2028 Notes and $600.0 million aggregate

principal amount of the Existing 2030 Notes.

The 2028 Notes and 2030 Notes mature on March 1, 2028 and March 1, 2030, respectively.

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The $3.5 million premium paid by the initial purchasers of the Additional Notes was recorded as a component of long-term debt on our consolidated balance sheets and is being amortized as a reduction of interest expense over the remaining term of the Notes.

The proceeds of the September 2020 Offering were used to redeem the Seller Notes issued in connection with the acquisition of Park Place.

The proceeds of the September 2020 Offering were used to redeem certain seller notes issued in connection with the acquisition of Park Place.

The 2028 Notes and the 2030 Notes are guaranteed, jointly and severally, on a senior unsecured basis, by each of our existing and future restricted subsidiaries, other than the TCA Non-Guarantor Subsidiaries.

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The Company completed the registration of the 2028 Notes and 2030 Notes in October 2020.

• 6.0% Senior Subordinated Notes due 2024 — In connection with the issuance of the Existing 2028 Notes and Existing 2030 Notes, on March 4, 2020, we redeemed all of our 6.0% Notes at 103% of par, plus accrued and unpaid interest up to, but excluding, the date of redemption.

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

As of December 31, 2022 we had total mortgage notes payable outstanding of $41.0 million which includes $2.7 million classified as liabilities associated with assets held for sale that are collateralized by the associated real estate.

As of December 31, 2023 we had total mortgage notes payable outstanding of $31.9 million which are collateralized by the associated real estate.

• 2021 Real Estate Facility —On December 17, 2021, we entered into a real estate term loan credit agreement with Bank of America, N.A., as administrative agent and the other lenders party thereto, which provided for term loans in an aggregate amount equal to $689.7 million (the "2021 Real Estate Facility").

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See Note 14 "Debt" for further details.

• 2018 Bank of America Facility —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").

• 2018 BofA Real Estate Facility —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").

Our right to make draws under the 2018 BofA Real Estate Facility terminated on November 13, 2019.

All of the real property financed by an operating dealership subsidiary of the Company under the 2018 BofA Real Estate Facility is collateralized by first priority liens, subject to certain permitted exceptions.

As of December 31, 2022, we had $58.6 million, which includes $4.1 million classified as liabilities associated with assets held for sale, of outstanding borrowings under the 2018 Bank of America Facility.

As of December 31, 2023, we had $50.3 million, of outstanding borrowings under the 2018 BofA Real Estate Facility.

There is no further borrowing availability under the 2018 BofA Real Estate Facility.

On May 25, 2022, certain of our

subsidiaries entered into an amendment to the 2018 BofA Real Estate Credit Agreement to replace the benchmark reference rate of LIBOR to SOFR, effective June 1, 2022.

On May 25, 2022, certain of our subsidiaries entered into an amendment to the 2018 BofA Real Estate Credit Agreement to replace the benchmark reference rate of LIBOR to SOFR, effective June 1, 2022.

See Note 14 "Debt" for further details.

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There is no further borrowing availability under the 2018 Wells Fargo Master Loan Facility.

On and with effect from June 1, 2022, certain of our subsidiaries entered into an amendment to our 2018 Wells Fargo Master Loan Agreement to replace the benchmark reference rate of LIBOR to SOFR.

On and with effect from

June 1, 2022, certain of our subsidiaries entered into an amendment to our 2018 Wells Fargo Master Loan Agreement to replace the benchmark reference rate of LIBOR to SOFR.

See Note 14 "Debt" for further details.

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• 2013 BofA Real Estate Facility —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., as lender, providing for term loans in an aggregate amount not to exceed $75.0 million, subject to customary terms and conditions (the "2013 BofA Real Estate Facility").

As of December 31, 2022, we had $24.9 million of outstanding borrowings under the 2013 BofA Real Estate Facility.

There is no further borrowing availability under the 2013 Real Estate Facility.

On May 25, 2022, certain of our subsidiaries entered into an amendment to our 2013 BofA Real Estate Credit Agreement to replace the benchmark reference rate of LIBOR to SOFR, effective June 1, 2022.

See Note 14 "Debt" for further details.

In June 2023, the Company prepaid the aggregate principal amounts remaining under the 2013 BofA Real Estate Facility for an aggregate amount of approximately $23.9 million with cash on hand.

Covenants and Defaults

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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 2021 Real Estate Facility, 2021 BofA Real Estate Facility, 2018 BofA Real Estate Credit Agreement, 2018 Wells Fargo Master Loan Agreement, 2015 Wells Fargo Master Loan Agreement, 2013 BofA Real Estate Credit Agreement, and the related documents are customary for financing transactions of this nature, including, among others, requirements to comply with a minimum consolidated fixed charge coverage ratio and maximum consolidated total lease adjusted leverage ratio, in each case, as applicable.

The representations and covenants contained in the 2021 Real Estate Facility, 2021 BofA Real Estate Credit Agreement, 2018 BofA Real Estate Credit Agreement, 2018 Wells Fargo Master Loan Agreement, 2015 Wells Fargo Master Loan Agreement, and the related documents are customary for financing transactions of this nature, including, among others, requirements to comply with a minimum consolidated fixed charge coverage ratio and maximum consolidated total lease adjusted leverage ratio, in each case, as applicable.

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

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

The agreement governing the 2019 Senior Credit Facility also

provides for events of default that are customary for financing transactions of this nature, including cross-defaults to other material indebtedness.

The agreement governing the 2023 Senior Credit Facility also provides for events of default that are customary for financing transactions of this nature, including cross-defaults to other material indebtedness.

In certain instances, an event of default under either the Revolving Credit Facility or the Used Vehicle Floor Plan Facility could be, or result in, an event of default under the New Vehicle Floor Plan Facility, and vice versa.

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Restricted payments generally include items such as dividends, share repurchases, unscheduled repayments of subordinated debt, or purchases of certain investments.

Subject to our continued compliance with a consolidated fixed charge coverage ratio and a maximum consolidated total lease adjusted leverage ratio, in each case as set out in the Indentures, restricted payments capacity additions (or subtractions if negative) equal to a base level plus the cumulative amount of (i) 50% of our net income (as defined in the 2019 Senior Credit Facility) plus (ii) 100% of any cash proceeds we receive from the sale of equity interests minus (iii) the dollar amount of share purchases made and dividends paid during the defined measurement periods, subject to certain exceptions.

Subject to our continued compliance with a consolidated fixed charge coverage ratio and a maximum consolidated total lease adjusted leverage ratio, in each case as set out in the Indentures, restricted payments capacity additions (or subtractions if negative) equal to a base level plus the cumulative amount of (i) 50% of our net income (as defined in the 2023 Senior Credit Facility) plus (ii) 100% of any cash proceeds we receive from the sale of equity interests minus (iii) the dollar amount of share purchases made and dividends

paid during the defined measurement periods, subject to certain exceptions.

In the event that our Consolidated Total Leverage Ratio does (or would) exceed 3.0 to 1.0, the 2023 Senior Credit Facility and the Indentures would then also allow for restricted payments under mutually exclusive parameters, subject to certain exclusions.

Under the 2028 Senior Notes and 2030 Senior Notes, our most restrictive indentures, these parameters are:

• The Company may repurchase its own shares in an aggregate amount not to exceed $20.0 million in any fiscal year.

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

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

The Company may otherwise make restricted payments only up to the aforementioned cumulative capacity.

Our restricted payment capacity balance as of December 31, 2023 and 2022 was $1.18 billion and $1.11 billion, respectively.

Share Repurchases and Dividend Restrictions

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Any repurchases will be subject to applicable limitations in our debt or other financing agreements that may be in existence from time to time.

On January 26, 2023, the Board of Directors increased the Company’s share repurchase authorization under our Repurchase Program by $108.0 million to $200.0 million.

On May 26, 2023, our Board of Directors announced that it authorized a new $250.0 million share repurchase authorization (the "New Share Repurchase Authorization"), which replaced our previous share repurchase authorization for the repurchase of our common stock in open market transactions or privately negotiated transactions or in other manners as permitted by federal securities laws and other legal and contractual requirements.

The extent that the Company repurchases its shares, the number of shares and the timing of any repurchases will depend on general market conditions, legal requirements and other corporate considerations.

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The IRA, among other things, implements a 1% excise tax on share repurchases, which takes effect in tax years beginning after December 31, 2022.

We do not believe the IRA will have a material effect on our reported results, cash flows or financial position.

We expect to reflect the excise tax within equity as part of the repurchase price of common stock.

In 2023, we recorded a total of $2.5 million excise tax on our share repurchases.

Contractual Obligations

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Classification of Cash Flows Associated with Floor Plan Notes Payable

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.

Borrowings and repayments of floor plan notes payable through our 2023 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.

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As a result, we believe that it is important to understand the relationship between the cash flows of all of our floor plan notes payable and new vehicle inventory in order to understand our working capital and operating cash flow and to be able to compare our operating cash flow to that of our competitors (i.e., if our competitors have a different mix of trade and non-trade floor plan financing as compared to us).

In addition, we include all floor plan borrowings and repayments in our internal operating cash flow forecasts.

In addition, we include all floor plan borrowings and repayments in our internal

operating cash flow forecasts.

As a result, we use the non-GAAP measure "Adjusted cash flow provided by operating activities" (defined below) to compare our results to forecasts.

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In order to compensate for these potential limitations we also review the related GAAP measures.

Adjusted cash flow provided by operating activities for the year ended December 31, 2020 differs from previously disclosed non-GAAP operating cash flow measures presented in Management's Discussion and Analysis due to methodology changes made during the year ended December 31, 2021 stemming from material acquisitions during the 2021 fiscal year.

We believe that the additional adjustments related to cash flows associated with our used vehicle borrowing base, floorplan offset accounts and the impact of acquisitions and divestitures eliminates cash flow volatility and provides an adjusted operating cash flow metric that best reflects our results of operations and our management of inventory and related financing activities.

Adjustments related to cash flows associated with our used vehicle borrowing base, floorplan offset accounts and the impact of acquisitions and divestitures eliminates cash flow volatility and provides an adjusted operating cash flow metric that best reflects our results of operations and our management of inventory and related financing activities.

We have provided below a reconciliation of cash flow provided by operating activities, as if all changes in floor plan notes payable, except for (i) borrowings associated with acquisitions and repayments associated with divestitures and (ii) borrowings and repayments associated with the purchase of used vehicle inventory and (iii) changes in the floorplan offset accounts were classified as an operating activity for both floorplan notes payable - non-trade and floor plan notes payable - trade.

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Operating Activities—

Net cash provided by operating activities totaled $696.0 million, $1.16 billion, and $652.5 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Adjusted cash flow provided by operating activities totaled $987.0 million,

$632.1 million, and $442.6 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Net cash provided by operating activities totaled $313.0 million, $696.0 million, and $1.16 billion for the years ended December 31, 2023, 2022, and 2021, respectively.

Adjusted cash flow provided by operating activities totaled $705.4 million, $987.0 million, and $632.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Adjusted cash flow provided by operating activities includes net income, adjustments to reconcile net income to net cash provided by operating activities, changes in working capital, changes in used vehicle borrowing base, changes in floor plan notes payable - non-trade and trade, excluding the impact of offsets, and excluding operating cash flows associated with acquisitions and divestitures related to loaner vehicles and new vehicle inventories financed through floor plan notes payable - trade.

The $354.9 million increase in adjusted cash flow provided by operating activities for the year ended December 31, 2022 compared to the year ended December 31, 2021, was primarily the result of the following:

• increase in $431.9 million in net income and non-cash adjustments to net income;

The $281.6 million decrease in adjusted cash flow provided by operating activities for the year ended December 31, 2023 compared to the year ended December 31, 2022, was primarily the result of the following:

• decrease in $192.4 million in net income and non-cash adjustments to net income;

• $144.1 million decrease related to sale volume and the timing of collection of accounts receivable and contracts-in-transit during 2023 compared to 2022;

• $210.9 million decrease related to the change in other current assets, net;

• $2.6 million decrease in other long term assets and liabilities, net;

• $1.3 million decrease related to the change in operating lease liabilities.

The decrease in our adjusted cash flow provided by operating activities, was partially offset by:

• $155.2 million related to an increase in inventory, net of floor plan notes payable, including both trade and non-trade, excluding offset and including used vehicle borrowing base changes adjusted for acquisitions and divestitures;

• $114.4 million increase related to the change in accounts payable and accrued liabilities;

The $354.9 million increase in our adjusted cash flow provided by operating activities for the year ended December 31, 2022 compared to the year ended December 31, 2021, was primarily the result of the following:

• increase of $431.9 million in net income and non-cash adjustments to net income;

• $126.7 million related to an increase in inventory, net of floor plan notes payable, including both trade and non-trade, excluding offset and including used vehicle borrowing base changes adjusted for acquisitions and divestitures;

• $16.2 million increase in other long term assets and liabilities, net.

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• $4.8 million related to the change in operating lease liabilities.

The $189.5 million increase in our adjusted cash flow provided by operating activities for the year ended December 31, 2021 compared to the year ended December 31, 2020, was primarily the result of the following:

• increase in $314.2 million net income and non-cash adjustments to net income primarily related to less gain on dealership divestitures in 2021 when compared to 2020, partially offset by no franchise rights impairment in 2021;

• $69.7 million related to sales volume and the timing of collection of accounts receivable and contracts-in-transit.

The increase in our adjusted cash flow provided by operating activities, was partially offset by:

• $67.3 million related to a decrease in inventory, net of floor plan notes payable, including both trade and non-trade, excluding offset and including used vehicle borrowing base changes adjusted for acquisitions and divestitures;

• $26.8 million related to the change in other long-term assets and liabilities;

• $43.8 million related to the change in other current assets, net;

• $56.8 million related to a decrease in accounts payable and accrued liabilities.

Investing Activities—

Net cash provided by investing activities totaled $464.7 million for the year ended December 31, 2022 compared to net cash used in investing activities of $3.92 billion and $820.8 million for the years ended December 31, 2021 and 2020, respectively.

Net cash used in investing activities totaled $1.68 billion and $3.92 billion for the year ended December 31, 2023 and 2021, respectively, compared to net cash provided by investing activities of $464.7 million for the year ended December 31, 2022.

Cash flows from investing activities relate primarily to capital expenditures, acquisitions, divestitures, and the sale of property and equipment.

Capital expenditures, excluding the purchase of real estate, were $142.3 million, $94.6 million, and $74.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Purchases of real estate totaled $13.3 million, $7.8 million, and $2.3 million for the years ended December 31, 2022, 2021, and 2020, respectively.

There were no purchases related to real estate for the year ended December 31, 2023.

Purchases of real estate totaled $13.3 million and $7.8 million for the years ended December 31, 2022, and 2021, respectively.

In addition, we purchased previously leased facilities for $217.1 million during the year ended December 31, 2021.

We expect that capital expenditures during 2024 will total approximately $250.0 million to upgrade or replace our existing facilities, construct new facilities, expand our service capacity, and invest in technology and equipment.

In addition, as part of our capital allocation strategy, we continually evaluate opportunities to purchase properties currently under lease and acquire

properties in connection with future dealership relocations.

In addition, as part of our capital allocation strategy, we continually evaluate opportunities to purchase properties currently under lease and acquire properties in connection with future dealership relocations.

No assurances can be provided that we will have or be able to access capital at times or on terms in amounts deemed necessary to execute this strategy.

On December 11, 2023, we completed the acquisition of the Jim Koons Dealerships for a total 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 sources of the purchase price included borrowings under Asbury’s existing credit facility and cash on hand.

On December 17, 2021, we completed the acquisition of LHM and TCA for a total purchase price of approximately $3.48 billion.

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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 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.

During the year ended December 31, 2020, we 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 comprising the Park Place Dealership group for a purchase price of $889.9 million.

We funded this acquisition with $527.4 million of cash, $200.0 million of Seller Notes, $127.5 million of floor plan borrowings for the purchase of the related new vehicle inventory and $35.0 million of floor plan borrowings for the purchase of the related used vehicle inventory.

In addition, we acquired the assets of three franchises (one dealership location) in the Denver, Colorado market for a purchase price of $63.6 million.

This acquisition was funded 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.

These acquisitions 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 a prior year acquisition.

During the year ended December 31, 2023, the Company sold one franchise (one dealership location) in Austin, Texas for proceeds of $30.7 million.

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 for proceeds of $701.2 million.

During the year ended December 31, 2021, we divested one franchise (one dealership location) in the Charlottesville, Virginia market for proceeds of $21.3 million.

During the year ended December 31, 2020, we divested 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 for proceeds of $177.9 million.

Proceeds from the sale of assets, unrelated to a dealership divestiture, were $0.0 million, $21.5 million, and $4.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

During the years ended December 31, 2022 and 2021, we purchased $202.2 million and $1.1 million of debt securities and $41.4 million and $0.4 million of equity securities, respectively.

During the years ended December 31, 2022 and 2021, we also received proceeds of $69.7 million and $0.8 million from the sale of debt securities and $50.3 million and $0.4 million, from the sale of equity securities, respectively.

We did not hold debt or equity securities during the year ended December 31, 2020.

During the year ended December 31, 2021, we divested one franchise (one dealership location) in the Charlottesville, Virginia for proceeds of $21.3 million.

Proceeds from the sale of assets, unrelated to a dealership divestiture, were $16.3 million and $21.5 million for the years ended December 31, 2023 and 2021, respectively.

W did not have any proceeds from the sale of assets, unrelated to a dealership divestitures in 2022.

During the years ended December 31, 2023, 2022, and 2021, we purchased $195.2 million, $202.2 million and $1.1 million of debt securities and $41.4 million and $1.1 million of equity securities in December 31, 2022 and 2021, respectively.

We did not purchase any equity securities in 2023.

During the years ended December 31, 2023, 2022, and 2021, we also received proceeds of $60.3 million, $69.7 million, and $0.8 million from the sale of debt securities and $51.8 million, $50.3 million and $0.4 million, from the sale of equity securities, respectively.

Financing Activities—

Net cash used in financing activities totaled $1.10 billion for the year ended December 31, 2022.

Net cash provided by financing activities totaled $2.93 billion and $166.2 million for the years ended December 31, 2021 and 2020, respectively.

Net cash provided by financing activities totaled $1.18 billion and $2.93 billion for the years ended December 31, 2023 and 2021, respectively.

Net cash used in financing activities totaled $1.10 billion year ended December 31, 2022.

During the years ended December 31, 2023, 2022, and 2021, we had non-trade floor plan borrowings of $8.39 billion, $7.41 billion, and $5.04 billion, respectively.

Included in our non-trade floor plan borrowings, were borrowings of $307.1 million and $294.0 million for the years ended December 31, 2023 and 2021, respectively, related to our used vehicle floor plan facility.

During the year ended December 31, 2022 and 2021, we borrowed $330.0 million and $439.0 million and repaid $499.0 million and $270.0 million, respectively, on our revolving line of credit.

We did not have any activity under our revolving line of credit in 2020.

We did not have any floor plan borrowing related to our used vehicle floor plan facility as of December 31,2022.

During the year ended December 31, 2023, 2022 and 2021, we borrowed $329.0 million, $330.0 million, and $439.0 million, and repaid $329.0 million, $499.0 million and $270.0 million, respectively, on our revolving line of credit.

In addition, during the years ended December 31, 2023 and 2021, we had non-trade floor plan borrowings of $256.1 million and $214.5 million respectively, related to acquisitions.

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During the years ended December 31, 2023, 2022, and 2021, we made non-trade floor plan repayments of $7.06 billion, $7.89 billion, and $5.36 billion, respectively.

Included in our non-trade floor plan repayments were repayments of $220.0 million for the years ended December 31, 2020, related to our used vehicle floor plan facility.

We had no repayments for the years ended December 31, 2022 and 2021.

In addition, during the years ended December 31, 2022, 2021 and 2020, we had floor plan repayments associated with dealership divestitures of $48.4 million, $0.8 million, and $60.4 million, respectively.

During the years ended December 31, 2021, and 2020, we received proceeds from borrowings totaling $2.27 billion and $1.88 billion, respectively.

We did not have any proceeds from borrowings in 2022.

Repayments of borrowings totaled $106.2 million, $41.5 million, and $1.62 billion, for the years ended December 31, 2022, 2021, and 2020, respectively.

In addition, during the years ended December 31, 2022 and 2021, we had floor plan repayments associated with dealership divestitures of $48.4 million and $0.8 million, respectively.

During 2023, we did not have any floor plan repayments associated with dealership divestitures.

During the year ended December 31, 2021, we received proceeds from borrowings totaling $2.27 billion.

We did not have any proceeds from borrowings in 2023 and 2022.

Repayments of borrowings totaled $126.0 million, $106.2 million and $41.5 million, for the years ended December 31, 2023, 2022, and 2021, respectively.

During the years ended December 31, 2022, and 2021, we received net proceeds from the issuance of common stock totaling $1.4 million and $666.9 million, respectively.

We did not have any net proceeds from the issuance of common stock in 2023.

During the year ended December 31, 2022, we repurchased 1,635,030 shares of our common stock under our Repurchase Program for a total of $297.0 million and 56,024 shares of our common stock for $9.2 million from employees in connection with a net share settlement feature of employee equity-based awards.

We did not have any share repurchases in 2021 or 2020.

During the year ended December 31, 2023 and 2022, we repurchased 1,316,167 and 1,635,030 shares of our common stock under our Repurchase Program for a total of $258.1 million and $297.0 million and 48,262 and 56,024 shares of our common stock for $11.4 million and $9.2 million from employees in connection with a net share settlement feature of employee equity-based awards, respectively.

We did not have any share repurchases in 2021.

Off Balance Sheet Arrangements

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Goodwill represents the excess cost of an acquired business over the fair market value of its identifiable assets and liabilities.

We have determined, 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.

We have determined, 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.

We have determined 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 franchised dealerships offer new and used vehicles, parts and service, and arrange for third-party vehicle financing and the sale of 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.

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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.

As a result of the effects of the COVID-19 pandemic, we performed quantitative impairment tests as of March 31, 2020, and identified eleven dealerships with franchise rights carrying values that exceeded their fair values, and as a result, recorded non-cash impairment charges of $23.0 million.

No franchise right impairments were identified in 2022 or 2021.

We do not amortize goodwill and other intangible assets that are deemed to have indefinite lives.

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If we elect to bypass the qualitative assessment or if we determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, a quantitative test would be required.

We believe that the fair value of each of our reporting units is substantially in excess of its carrying amount.

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.

As a result of our annual franchise rights impairment tests as of October 1, 2023, we identified several dealerships with franchise rights carrying values that exceeded their fair values due to the underperformance of certain stores, limited primarily to two brands, and an increase in discount rates.

As a result, we recorded non-cash impairment charges totaling $73.1 million during the year ended December 31, 2023 reflected in asset impairments within our consolidated statements of income.

For certain stores, the fair value of the franchise rights equals the carrying amount.

In connection with a change in reporting units in our Dealerships segment, we performed quantitative impairment tests of goodwill for the affected reporting units as of October 1, 2023, both before and after the change in reporting units.

The results of our quantitative goodwill impairment tests related to certain reporting units indicated that the fair value of these reporting units exceeded their carrying values.

For all reporting units, for which a qualitative or quantitative impairment test was performed as of October 1, 2023, the fair values exceeded their carrying amounts.

We believe that the fair value of our reporting units is substantially in excess of its carrying amount, except for the Arizona and Utah reporting units, which exceeded their carrying amounts by less than 5% as of October 1, 2023.

The goodwill balance for the Arizona and Utah reporting units as of December 31, 2023 was $204.4 million and $197.8 million, respectively.

In December 2023, certain dealerships met the held for sale criteria and the assets and liabilities associated with these dealerships were reclassified as assets held for sale and liabilities associated with assets held for sale in our consolidated balance sheets.

As a result, we evaluated the disposal groups to ensure their recording at the lower of their carrying value or fair value less costs to sell.

The quantitative impairment tests of each disposal group included a comparison of the estimated fair value to the carrying value of the disposal group less costs to sell.

The Company determined the estimated fair value of each disposal group based on the estimated sales proceeds less cost to sell.

As a result of this analysis, we recorded asset impairment charges of $44.1 million.

These asset impairment charges are reflected in asset impairments in our consolidated statements of income.

Since the resulting impairment charges and the decision to dispose of these dealerships represented a triggering event for goodwill, we performed quantitative impairment tests of goodwill for the affected reporting units in December 2023.

The results of our quantitative goodwill impairment tests for the affected reporting units indicated that the fair value of these reporting units exceeded their carrying values.

In total, we recognized asset impairments of $117.2 million during the year ended December 31, 2023.

No franchise rights or goodwill impairments were identified in 2022 or 2021.

We continue to monitor developments related to macroeconomic conditions and the performance of our stores and reporting units.

It is reasonably possible that future developments could have a negative effect on the estimates and assumptions utilized in our impairment assessments and could result in material impairment charges in future periods.

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 7. Management’s Discussion and Analysis