What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-26 compared with 2024-02-29 · 312 added, 318 removed, 1332 unchanged (32% of the section changed)

9 unchanged sentences

Report of Independent Registered Public Accounting Firm

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

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

Opinion on the Financial Statements

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 29, 2024 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 26, 2025 expressed an adverse opinion thereon.

Basis for Opinion

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

Manufacturer Franchise Rights Quantitative Impairment Assessment

Description of the Matter At December 31, 2023, the Company’s manufacturer franchise rights had an aggregate carrying value for franchises acquired of approximately $2,095.8 million, as disclosed in Note 10 of the consolidated financial statements.

Manufacturer franchise rights are assessed for impairment annually as of October 1st, or more often if events or circumstances indicate that impairment may have occurred.

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

We identified the assessment of the Company’s quantitative impairment tests over manufacturer franchise rights acquired prior to the fourth quarter of 2023 as a critical audit matter.

In connection with its annual quantitative impairment assessment during the year ended December 31, 2023, the Company recorded impairment charges of $73.1 million related to manufacturer franchise rights.

Auditing the Company's fair value estimates used in its annual impairment assessment is complex due to the significant management judgments and estimates required.

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

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

Goodwill and Manufacturer Franchise Rights Interim Quantitative Impairment Assessment

Description of the Matter At December 31, 2024, the Company’s goodwill and manufacturer franchise rights had an aggregate carrying value of approximately $2,044.7 million and $1,911.7 million, respectively, as disclosed in Note 10 of the consolidated financial statements.

Manufacturer franchise rights and goodwill are assessed for impairment annually as of October 1st, or more often if events or circumstances indicate that impairment may have occurred.

If the fair value of a franchise right or a goodwill reporting unit is less than its carrying amount, an impairment loss is recognized in an amount equal to the difference.

We identified as a critical audit matter the assessment of the Company’s projected cash flows utilized in the interim quantitative impairment tests over certain manufacturer franchise rights and the goodwill of the Arizona and Utah reporting units.

In connection with its interim quantitative impairment assessment performed during the second quarter 2024, the Company recorded impairment charges of $134.1 million related to manufacturer franchise rights, as disclosed in Note 10 of the consolidated financial statements, and there was no impairment charge recorded related to goodwill as the carrying values of the Arizona and Utah reporting units did not exceed their fair value.

Auditing the Company's fair value estimates used in its impairment assessment was complex due to the estimation uncertainty required to determine the fair value of the franchise rights and the fair value of the reporting units subject to the interim quantitative impairment assessment.

The Company's model for estimating the fair value of these assets was sensitive to changes in significant market participant assumptions related to the cash flows directly attributable to the franchise rights and goodwill reporting units, including the revenue growth rates, which are forward-looking and affected by expectations about economic, industry and company-specific factors.

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

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

Procedures performed to test the fair value of the Company's manufacturer franchise rights as part of the quantitative impairment assessment included, among others, testing of the significant assumptions described above and testing the completeness and accuracy of the underlying data.

We involved our valuation specialists to assist in the testing of the weighted average cost of capital and to assess the appropriateness of the model used.

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

In addition, we assessed the accuracy of the Company’s historical projections by comparing them to actual operating results and evaluated the Company’s intent and ability to carry out a particular course of action by evaluating the Company’s past history of carrying out its stated intentions.

We also performed sensitivity analyses on the significant assumptions to evaluate the potential change in the fair value of the manufacturer franchise rights resulting from changes in underlying assumptions.

Procedures performed to test the fair value of the Company's goodwill and manufacturer franchise rights as part of the interim quantitative impairment assessments included, among others, evaluating the Company's use of the discounted cash flows method, testing of the revenue growth assumption used in the valuation model used to develop the projected financial information, involving our valuation specialists to assist in the testing of the appropriateness of the model used, and testing the completeness and accuracy of the underlying data.

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

In addition, we assessed the accuracy of the Company’s projections by comparing them to actual operating results and evaluated the Company’s intent and ability to carry out a particular course of action by evaluating the Company’s past history of carrying out its stated intentions.

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

/s/ Ernst & Young LLP

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Report of Independent Registered Public Accounting Firm

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

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

Opinion on Internal Control Over Financial Reporting

We have audited Asbury Automotive Group, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Asbury Automotive Group, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include an evaluation of the internal controls of the Jim Koons Dealerships, which are included in the 2023 consolidated financial statements of the Company from the date of acquisition and represented approximately $1.65 billion of consolidated total assets as of December 31, 2023, and approximately $168.2 million of consolidated revenues for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the Jim Koons Dealerships.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”) and our report dated February 29, 2024 expressed an unqualified opinion thereon.

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

(the Company) has not maintained effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.

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

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

Management identified a material weakness in internal control over financial reporting in Jim Koons Automotive Companies business (“Koons”).

The design of information technology general controls for an information technology (“IT”) application that is used across all significant processes within the Koons business was not effective, specifically pertaining to insufficient control activities at a third-party system administrator.

As a result, automated and business process controls that are dependent on the completeness and accuracy of information derived from the affected IT system were also ineffective because they could have been adversely impacted.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes.

This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and this report does not affect our report dated February 26, 2025, which expressed an unqualified opinion thereon.

Basis for Opinion

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Change in fair value of cash flow swaps ( 3.2 ) ( 22.6 ) 103.3

Unrealized gains (losses) on available-for-sale debt securities 5.2 ( 4.0 ) 0.2

Unrealized (losses) gains on available-for-sale debt securities ( 2.5 ) 5.2 ( 4.0 )

Income tax benefit (expense) associated with other comprehensive income items 1.4 4.0 ( 24.3 )

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Net income — — — 997.3 — — — 997.3

Unrealized gains on changes in fair value of debt securities, net of $ 0 tax expense

— — — — — — 0.2 0.2

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

— — — — — — 78.1 78.1

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

— — — — — — ( 3.2 ) ( 3.2 )

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

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

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

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

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

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

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

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

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Net income — — — 602.5 — — — 602.5

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

Change in fair value of cash flow swaps, net of reclassification adjustment and $ 5.1 million tax benefit

— — — — — — ( 17.5 ) ( 17.5 )

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

Unrealized gain on changes in fair value of debt securities, net of $ 1.1 million tax expense

— — — — — — 4.1 4.1

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— — — — — — ( 2.3 ) ( 2.3 )

Unrealized gain on changes in fair value of debt securities, net of $ 1.1 million tax expense

Unrealized gain on changes in fair value of debt securities, net of $ 0.6 million tax benefit

— — — — — — ( 1.9 ) ( 1.9 )

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Purchases of previously leased real estate ( 11.9 ) — —

Acquisitions, net of cash acquired ( 1,500.0 ) ( 5.0 ) ( 3,660.4 )

Acquisitions ( 4.7 ) ( 1,500.0 ) ( 5.0 )

Proceeds from dealership divestitures 196.3 30.7 701.2

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Floor plan repayments—divestitures ( 34.1 ) — ( 48.4 )

Proceeds from borrowings — — 2,274.0

Repayments of borrowings ( 71.4 ) ( 126.0 ) ( 106.2 )

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Proceeds from issuance of common stock — — 1.4

Payment of debt issuance costs — ( 1.2 ) ( 0.4 )

For the Year Ended December 31,

2024 2023 2022

Payment of debt issuance costs ( 1.2 ) ( 0.4 ) ( 26.2 )

Purchase of treasury stock ( 183.0 ) ( 267.7 ) ( 287.4 )

Repurchases of common stock, including amounts associated with net share settlements of employee share-based awards ( 10.2 ) ( 11.4 ) ( 9.2 )

Net cash provided by (used in) financing activities 1,175.8 ( 1,104.3 ) 2,930.8

Net (decrease) increase in cash and cash equivalents ( 189.6 ) 56.4 177.5

Net cash (used in) provided by financing activities ( 510.3 ) 1,175.8 ( 1,104.3 )

Net increase (decrease) in cash and cash equivalents 23.7 ( 189.6 ) 56.4

CASH AND CASH EQUIVALENTS, beginning of period 45.7 235.3 178.9

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

The finance and insurance products are provided by independent third parties and Total Care Auto, Powered by Landcar ("TCA").

The finance and insurance products are provided by Total Care Auto, Powered by Landcar ("TCA") and independent third parties.

The Company manages its operations in two reportable segments:

Dealerships and TCA.

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.

See Note 3 "Acquisitions and Divestitures" for details of the Koons acquisition.

Our operating results are generally subject to seasonal variations.

Demand for new vehicles is generally highest during the second, third, and fourth quarters of each year and, accordingly, we expect our revenues to generally be higher during these periods.

Demand for new vehicles is generally highest during the second and third quarters of each year and, accordingly, we expect our revenues to generally be higher during these periods.

In addition, we typically experience higher sales of luxury vehicles in the fourth quarter, which have higher average selling prices and gross profit per vehicle retailed.

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

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

Amounts presented have been calculated using non-rounded amounts for all periods presented and therefore certain amounts may not compute due to rounding.

Use of Estimates

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

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

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

shareholders’ equity.

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

Investments consist of available-for-sale debt securities, equity securities, and other investments.

Investments consist of available-for-sale debt securities and other investments.

These securities are classified as non-current investments as they are not intended to fund current operations or have stated call dates or maturity dates beyond the next 12 months.

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

We sold all equity securities during the year ended December 31, 2023.

The Company only holds debt securities as of December 31, 2024 and 2023.

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

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

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

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

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

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

Property and Equipment

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Depreciation is included in depreciation and amortization on the accompanying consolidated statements of income.

Leasehold improvements are capitalized and amortized over the lesser of the remaining lease term or the useful life of the related asset.

improvements are capitalized and amortized over the lesser of the remaining lease term or the useful life of the related asset.

The ranges of estimated useful lives are as follows (in years):

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

During the year ended December 31, 2023, we recorded a $ 1.1 million impairment charge included in selling, general and administrative expenses related to construction in progress.

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

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

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

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

We have determined that the dealerships in each of our operating segments are components that are aggregated into several geographic market-based reporting units for the purpose of testing goodwill for impairment, as they (i) have similar economic characteristics, (ii) offer similar products and services (all of our dealerships offer new and used vehicles, service, parts and third-party finance and insurance products), (iii) have similar

customers, (iv) have similar distribution and marketing practices (all of our dealerships distribute products and services through dealership facilities that market to customers in similar ways), and (v) operate under similar regulatory environments.

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

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

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

Our dealership operating segments are aggregated into our Dealerships reportable segment.

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

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We review goodwill and manufacturer franchise rights for impairment annually as of October 1 st , or more often if events or circumstances indicate that impairment may have occurred.

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.

We are subject to financial statement risk to the extent

that goodwill becomes impaired due to decreases in the fair value of our automotive retail business or manufacturer franchise rights become impaired due to decreases in the fair value of our individual franchises.

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

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

We recorded VOBA of $ 5.6 million in connection with the acquisition of TCA in 2021.

VOBA reflects the estimated fair value of the expected future profits in unearned premium for in-force service contracts acquired in the LHM acquisition.

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

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

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

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

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We earn and recognize premium revenue related to the TCA segment over the period of the related service contract.

Accordingly, we record deferred revenue as we ratably recognize revenue over the service contract period.

Accordingly, we record deferred revenue and ratably recognize revenue over the service contract period.

Unpaid Losses and Loss Adjustment Expense Reserve

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

Intersegment Elimination

Intersegment Eliminations

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

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

During the year ended December 31, 2023 and 2022, the Company repurchased 1,316,167 and 1,635,030 and retired 1,370,371 and 1,580,826 shares of our common stock under our share repurchase program, respectively.

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

On May 25, 2023, our Board of

Directors approved a new authorization to repurchase up to $ 250.0 million of the Company's common stock (the "New Share Repurchase Authorization"), which replaces our previous share repurchase authorization.

During the years ended December 31, 2024, 2023 and 2022, the Company repurchased 830,297 , 1,316,167 and 1,635,030 shares and retired 830,297 , 1,370,371 and 1,580,826 shares of our common stock under our share repurchase program, respectively.

On May 15, 2024, the Company announced that its Board of Directors approved an increase of $ 256.2 million in the Company's common share repurchase authorization to $ 400.0 million (the "New Share Repurchase Authorization").

As of December 31, 2024, the Company had $ 275.9 million remaining on its share repurchase authorization.

The share repurchase authorization does not require the Company to repurchase any specific number of shares, and may be modified, suspended or terminated at any time without further notice.

Earnings per Common Share

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Certain amounts have been classified as assets held for sale as of December 31, 2024 and 2023 in the accompanying consolidated balance sheets.

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

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

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

At the end of the loaner service period,

loaner vehicles are transferred from other current assets to used vehicle inventory.

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

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

Business and Credit Concentration Risk

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As of December 31, 2024, we had total debt of $ 3.16 billion, which excludes floor plan notes payable, debt issuance costs, and the debt premium on the 4.5 % Senior Notes (the " 4.5 % Notes") and 4.75 % Senior Notes (the " 4.75 % Notes") due 2028 and 2030, respectively.

In addition, we and our subsidiaries have the ability to obtain additional debt from time to time to finance acquisitions, real property purchases, capital expenditures, share repurchases or for other purposes, although such borrowings are subject to the restrictions contained in the fourth amended and restated senior secured credit agreement with Bank of America, N.A.

In addition, we and our subsidiaries have the ability to

obtain additional debt from time to time to finance acquisitions, real property purchases, capital expenditures, share repurchases or for other purposes, although such borrowings are subject to the restrictions contained in the fourth amended and restated senior secured 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 indentures governing our 4.5 % Notes, 4.625 % Notes, 4.75 % Notes and 5.0 % Notes (the "Indentures"), and our other debt instruments.

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(Toyota and Lexus)

Stellantis N.V.

( Chrysler, Dodge, Jeep, Ram and Fiat )

Ford Motor Company (Ford and Lincoln)

American Honda Motor Co., Inc.

(Honda and Acura)

Ford Motor Company (Ford and Lincoln)

Stellantis N.V.

( Chrysler, Dodge, Jeep, Ram and Fiat )

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

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Recent Accounting Pronouncements

The Financial Accounting Standards Board ("FASB") issued final guidance in ASU 2023-09, Improvements to Income Tax Disclosures , in December 2023 which primarily expands the disclosures related to the effective tax rate reconciliation and income taxes paid.

The Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, Disaggregation – Income Statement Expenses , in November 2024, which requires additional disclosure of the nature of expenses included in the income statement.

The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses.

The guidance is effective for annual periods beginning after December 15, 2026 and should be applied prospectively with the option of retrospective application.

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

I n November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting:

In December 2023, the FASB issued final guidance in ASU 2023-09, Improvements to Income Tax Disclosures , which primarily expands the disclosures related to the effective tax rate reconciliation and income taxes paid.

The guidance is effective for annual periods beginning after December 15, 2024 and should be applied prospectively with the option of retrospective

We do not expect the adoption of this accounting standard to have a significant impact on our consolidated financial statements, but it will require certain additional disclosures.

I n November 2023, the FASB issued ASU 2023-07, Segment Reporting:

Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which enhances the disclosures primarily around segment expenses.

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The guidance should be applied retrospectively and is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024.

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

I n September 2022, the FASB issued ASU 2022-04, Liabilities-Supplier Finance Programs.

This standard serves to improve transparency about supplier finance programs.

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

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

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

Early adoption is permitted.

The adoption of this new guidance on January 1, 2023 did not have a material impact on our condensed consolidated financial statements.

See Notes11 "Floor Plan Notes Payable-Trade" and Note 12 "Floor Plan Notes Payable-Non-Trade."

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

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

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

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

The guidance in these standards apply to contract accounting, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met, and provides optional expedients and exceptions for a limited time to ease the potential burden in accounting for reference rate reform.

The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform.

ASU 2020-04 is effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022.

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

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

See Note 14 "Debt" for further details.

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

We adopted this new guidance for the year ended December 31, 2024.

See Note 20, "Segment Information".

REVENUE RECOGNITION

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Contract Assets (long-term), December 31, 2024 $ — $ — $ 65.9 $ 65.9

Contract Liabilities

Deferred Revenue

The consolidated balance sheet reflects $ 766.0 million and $ 736.7 million in deferred revenue as of December 31, 2024 and 2023, respectively.

Approximately $ 227.9 million of deferred revenue at December 31, 2022 was recorded in finance and insurance, net revenue in the consolidated statement of income for the year ended December 31, 2023.

Approximately $ 239.3 million and $ 227.9 million of deferred revenue at December 31, 2023 and 2022, was recorded in finance and insurance, net revenue in the consolidated statements of income for the years ended December 31, 2024 and 2023, respectively.

ACQUISITIONS AND DIVESTITURES

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As a result of the Koons acquisition, we acquired 20 new vehicle dealerships, six collision centers and the real property related thereto, for a total purchase price of approximately $ 1.50 billion, which includes $ 256.1 million of new vehicle floor plan financing and $ 100.9 million of assets held for sale related to Koons Lexus of Wilmington.

The preliminary purchase price was paid in cash.

The sources of the preliminary purchase consideration are as follows:

The purchase price was paid in cash.

The sources of the purchase consideration are as follows:

(In millions)

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Used vehicle floor plan facility 307.1

Preliminary purchase price $ 1,500.0

Purchase price $ 1,504.5

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

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

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

Summary of Assets Acquired and Liabilities Assumed

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Net assets acquired $ 1,504.5

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

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

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

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

(i) finalizing the review and valuation of inventory, land, land improvements, buildings and non-real property and equipment (including the models, key assumptions, estimates and inputs used) and assignment of remaining useful lives associated with

the depreciable assets, and (ii) finalizing the review and valuation of manufacturer franchise rights (including key assumptions, inputs and estimates).

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

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

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

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

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

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

Measurement period adjustments recorded during the year ended December 31, 2024 and their related effects on our consolidated statements of income were not material.

Furthermore, we recorded a $ 26.7 million measurement period adjustment to reflect the fair value of franchise rights acquired, with a corresponding increase to goodwill, within our consolidated balance sheet during the year ended December 31, 2024.

Approximately $ 401.0 million of the purchase price was assigned to the indefinite lived franchise rights intangible assets related to the dealer agreements applicable to each new vehicle dealership.

In addition, goodwill of $ 231.7 million was recognized and is primarily attributable to the anticipated synergies that Asbury expects to derive from the Koons acquisition as well as the acquired assembled workforce of the Koons dealerships.

In addition, goodwill of $ 272.4 million was recognized and is attributable to the anticipated synergies that Asbury expects to derive from the Koons acquisition as well as the acquired assembled workforce of the Koons dealerships.

The Company recorded $ 4.1 million of acquisition related costs during the year ended December 31, 2023.

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

The Company's consolidated statements of income included revenue and net income attributable to the Jim Koons Dealerships from December 11, 2023 through December 31, 2023 of $ 168.2 million and $ 7.0 million, respectively.

The Company did not incur acquisition related costs during the year ended December 31, 2024.

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

The Company's consolidated statements of income for the year ended December 31, 2024 included revenue and net income attributable to the Jim Koons Dealerships of $ 2,805.5 million and $ 86.9 million, respectively.

The following represents the unaudited pro forma information as if the Koons acquisition had been included in the consolidated results of the Company since January 1, 2022:

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Pro forma net income $ 660.8 $ 1,092.9

The above pro forma financial information adjusts the revenue and net income related to the Koons acquisition primarily for (1) depreciation and interest expense assuming that the fair value adjustments and indebtedness incurred in connection with the Koons acquisition had occurred on January 1, 2022 and (2) the exclusion of Koons Lexus of Wilmington, which is classified as assets held for sale as of December 31, 2023.

assets held for sale as of December 31, 2023.

The pro forma net income for the year ended December 31, 2023 includes $ 117.2 million of asset impairments recorded by the Company during the fourth quarter of 2023.

LHM Acquisition

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

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

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

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

Arizona, Utah, New Mexico, Idaho, California and Washington, and added to the Company’s growing Colorado presence.

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

The purchase price was paid in cash.

The sources of the purchase consideration are as follows:

(In millions)

Cash, net of cash acquired $ 195.0

Common stock offering 666.9

Senior notes 1,378.5

Revolving credit facility 200.0

Real estate facility 513.0

New vehicle floor plan facility 183.5

Used vehicle floor plan facility 51.0

Payable to sellers 6.0

Purchase price, net of cash acquired $ 3,193.9

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

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

Summary of Assets Acquired and Liabilities Assumed

(In millions)

Cash and cash equivalents $ 287.4

Investments 133.5

Contracts-in-transit, net 99.5

Accounts receivable, net 110.0

Inventories, net 282.1

Other current assets 25.0

Total current assets 937.5

Property and equipment, net 805.6

Goodwill 1,205.3

Intangible franchise rights 1,309.7

Operating lease right-of-use assets 34.1

Deferred income taxes 139.7

Other long-term assets 5.6

Total assets acquired $ 4,437.6

Accounts payable and accrued liabilities $ 229.5

Operating lease liabilities 34.1

Deferred revenue 667.6

Other long-term liabilities 25.2

Total liabilities assumed 956.4

Net assets acquired $ 3,481.2

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

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

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

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

well as the acquired assembled workforce of LHM and TCA.

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

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

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

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

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

For the Year Ended December 31,

(In millions)

Pro forma revenue $ 15,431.5 $ 12,927.3

Pro forma net income $ 777.3 $ 359.9

This pro forma information incorporates the Company's accounting policies and adjusts the results of the LHM acquisition for depreciation, rent expense, and interest expense assuming that the fair value adjustments and indebtedness incurred in connection with the LHM acquisition had occurred on January 1, 2020.

They have also been adjusted to reflect the $ 4.9 million of acquisition related costs incurred during 2021 as having occurred on January 1, 2020.

Other Acquisitions and Divestitures

During the year ended December 31, 2022, we did not complete any dealership acquisitions.

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

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

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

On May 20, 2021, we exercised the purchase option for certain Park Place real estate leases whose original operating lease right-of-use assets and liabilities totaled $ 99.5 million.

We acquired these properties for $ 217.1 million which was partly financed through the 2021 BofA Real Estate Facility.

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

Below is the allocation of the purchase price for the acquisitions (other than the LHM acquisition) for the year ended December 31, 2021.

As of December 31,

(In millions)

Inventory $ 37.5

Real estate 99.9

Property and equipment 4.2

Goodwill 110.5

Manufacturer franchise rights 228.2

Loaner vehicles 8.9

Other ( 3.5 )

Total purchase price $ 485.7

On February 14, 2025, the Company, through one of its subsidiaries, entered into a Transaction Agreement with various entities that comprise the Herb Chambers Dealerships.

See Note 23 "Subsequent Event” for more information.

There were no other acquisitions during the years ended December 31, 2024, 2023 and 2022.

During the year ended December 31, 2024, we sold one Lexus franchise ( one dealership location) in Wilmington, Delaware due to OEM requirements in connection with the Koons acquisition, one Nissan franchise ( one dealership location) in Denver, Colorado, one Nissan franchise ( one dealership location) in Atlanta, Georgia, one Chevrolet franchise ( one dealership location) in Atlanta, Georgia and one Honda franchise ( one dealership location) in Spokane, Washington.

The Company recorded a pre-tax gain totaling $ 8.6 million, which is presented in our accompanying consolidated statements of income as a gain on dealership divestitures, net.

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

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

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

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

ACCOUNTS RECEIVABLE

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(a) Inventories, net as of December 31, 2024 and December 31, 2023, excluded $ 58.7 million and $ 84.5 million classified as assets held for sale, respectively.

The lower of cost and net realizable value reserves reduced total inventory cost by $ 8.8 million and $ 10.7 million, respectively as of December 31, 2023 and December 31, 2022.

As of December 31, 2023 and December 31, 2022, certain automobile manufacturer incentives reduced new vehicle inventory cost by $ 8.3 million and $ 2.7 million, respectively, and reduced new vehicle cost of sales for the year ended December 31, 2023, 2022, and 2021 by $ 94.1 million, $ 91.5 million, and $ 60.4 million, respectively.

The lower of cost and net realizable value reserves reduced total inventory cost by $ 9.7 million and $ 8.8 million, respectively as of December 31, 2024 and 2023.

As of December 31, 2024 and 2023, certain automobile manufacturer incentives reduced new vehicle inventory cost by $ 13.8 million and $ 8.3 million, respectively, and reduced new vehicle cost of sales for the years ended December 31, 2024, 2023 and 2022 by $ 113.4 million, $ 94.1 million and $ 91.5 million, respectively.

ASSETS HELD FOR SALE

Assets and liabilities classified as held for sale include (i) assets and liabilities associated with pending dealership disposals,(ii) real estate not currently used in our operations that we are actively marketing to sell and (iii) the related mortgage notes payable, if applicable.

Assets and liabilities classified as held for sale include assets and liabilities associated with pending dealership disposals, and real estate not currently used in our operations that we are actively marketing to sell.

A summary of assets held for sale and liabilities associated with assets held for sale is as follows:

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Total assets held for sale 174.4 342.2

Floor plan notes payable—non-trade — 2.8

Loaners/ Notes payable — 0.8

Current maturities of long-term debt — 0.6

Current maturities of operating leases 0.2 0.2

Long-term debt — 6.2

Operating lease liabilities 1.7 1.9

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Net assets held for sale $ 172.4 $ 340.1

As of December 31, 2023, assets held for sale consisted of 11 franchise ( 11 dealership locations) in addition to one real estate property not currently used in our operations.

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

As of December 31, 2024, assets held for sale consisted of seven franchises ( six dealership locations) in a ddit ion to one real estate property not currently used in our operations.

As of December 31, 2023, assets held for sale consisted of 11 franchises ( 11 dealership locations) in addition to one real estate property not currently used in our operations.

During the year ended December 31, 2024, the Company sold five franchises ( five dealership locations) for a pre-tax gain totaling $ 8.6 million.

During the year ended December 31, 2023, the Company sold one franchise ( one dealership location) for a pre-tax gain totaling $ 13.5 million.

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

OTHER CURRENT ASSETS

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Other current assets $ 351.7 $ 388.9

TCA has an investment portfolio funded primarily by product premiums.

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

Our investment portfolio is primarily funded by product premiums from the sale of our TCA F&I products.

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

As of December 31, 2024

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Mortgage and other asset-backed securities 170.1 0.6 ( 1.7 ) 169.1

Total debt securities 331.6 3.5 ( 2.2 ) 332.9

Total investments $ 349.8 $ 1.6 $ ( 2.7 ) $ 348.6

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Mortgage and other asset-backed securities 150.1 1.6 ( 0.9 ) 150.9

Total debt securities 195.5 0.5 ( 4.4 ) 191.7

Common stock 48.7 — — 48.7

Total investments $ 331.6 $ 3.5 $ ( 2.2 ) $ 332.9

There were no equity securities held as of December 31, 2023.

As of December 31, 2023 and 2022, the Company had $ 2.5 million and $ 1.3 million of accrued interest receivable, which was included in other current assets on the consolidated balance sheets.

As of December 31, 2024 and 2023, the Company had $ 2.8 million and $ 2.5 million of accrued interest receivable, respectively, which is included in other current assets on the consolidated balance sheets.

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

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During the year ended December 31, 2024, we recorded $ 1.2 million gross gains and $ 0.6 million gross losses realized related to the sales of available-for-sale debt securities carried at fair value.

During the year ended December 31, 2023, we recorded $ 0.5 million gross gains and $ 1.5 million gross losses realized related to the sales of available-for-sale debt securities carried at fair value.

During the year ended December 31, 2023, we recorded $ 3.7 million gross gains and $ 0.9 million gross losses realized related to the sales of equity securities carried at fair value.

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During the year ended December 31, 2022, we recorded $ 10.1 million gross gains and $ 3.6 million gross losses realized related to the sales of equity securities carried at fair value.

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

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

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(In millions)

Short-term investments $ — $ — $ 6.0 $ ( 0.1 ) $ 6.0 $ ( 0.1 )

U.S Treasury 3.4 ( 0.1 ) 5.0 ( 0.1 ) 8.5 ( 0.1 )

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Reclassified from assets held for sale 0.9 — 0.9

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

Acquisitions 240.8 — 240.8

Divestitures ( 0.9 ) — ( 0.9 )

Impairments ( 14.9 ) — ( 14.9 )

Reclassified to assets held for sale ( 0.3 ) — ( 0.3 )

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Balance as of December 31, 2022 $ 1,800.1

Acquisitions - measurement-period adjustments 429.0

Impairments ( 102.3 )

Reclassified to assets held for sale ( 31.0 )

Balance as of December 31, 2023 $ 2,095.8

Reclassified from assets held for sale 71.9

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Divestitures ( 74.6 )

Balance as of December 31, 2022 $ 1,800.1

Acquisitions 429.0

Impairments ( 148.2 )

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Balance as of December 31, 2024 $ 1,911.7

Based on the underperformance of certain stores, limited primarily to two brands, along with an increase in discount rates, we performed quantitative impairment tests of franchise rights for certain stores in our Dealerships segment as of October 1, 2023.

The quantitative impairment tests for franchise rights included a comparison of the estimated fair value to the carrying value of each franchise right asset.

Our quantitative impairment tests for franchise rights include a comparison of the estimated fair value to the carrying value of each franchise right asset.

The Company estimates fair value by using a discounted cash flow model (income approach) based on market participant assumptions related to the cash flows directly attributable to the franchise.

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

Based on the underperformance of certain stores, we performed quantitative impairment tests in the second quarter of 2024 and as of our annual impairment testing date, October 1, 2024.

The results of the quantitative impairment testing identified that the carrying values of certain of our franchise rights intangible assets exceeded their fair value by $ 134.1 million and $ 14.1 million and the related impairment charges were recorded during the three months ended June 30, 2024 and December 31, 2024, respectively.

In total, we recognized a $ 148.2 million pre-tax non-cash impairment charge related to our franchise rights intangible assets during the year ended December 31, 2024.

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

As a result, we recognized a $ 73.1 million pre-tax non-cash impairment charge related to our franchise rights intangible assets during the year ended December 31, 2023.

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

Additionally, 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.

We also performed qualitative impairment assessments on the remaining franchise rights as of October 1, 2024 and 2023, respectively.

The results of our qualitative impairment assessments on the remaining franchise rights indicated that the fair values of the franchise rights related to those dealerships more likely than not exceeded their carrying values.

Additionally, in connection with changes in reporting units in our Dealerships segment, we performed qualitative and quantitative impairment tests of goodwill for the affected reporting units as of October 1, 2024 and 2023, both before and after the change in reporting units.

Lastly, we performed an interim quantitative impairment test of goodwill for two reporting units in the second quarter of 2024.

The quantitative impairment tests of goodwill included a comparison of the estimated fair value to the carrying value of the reporting unit.

The Company estimates fair value by using a discounted cash flow model (income approach) based on market participant assumptions.

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

We also performed qualitative assessments on the remaining franchise rights and goodwill reporting units as of October 1, 2023.

The results of our qualitative assessment on the remaining franchise rights indicated that the fair values of the franchise rights related to those dealerships more likely than not exceeded their carrying values.

The results of our qualitative assessments of goodwill impairment related to the remaining reporting units indicated that the fair values of the reporting units more likely than not exceeded their carrying values.

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

The results of our quantitative goodwill impairment tests during the second quarter of 2024 and as of October 1, 2024 and 2023 related to certain reporting units indicated that the fair value of these reporting units exceeded their carrying values.

We performed qualitative impairment assessments on the remaining reporting units as of October 1, 2024 and 2023, respectively.

The results of our qualitative impairment assessments of goodwill related to the remaining reporting units indicated that the fair values of the reporting units more likely than not exceeded their carrying values.

We also recorded a goodwill impairment charge of $ 1.3 million during the year ended December 31, 2024 related to one dealership that met the assets held for sale criteria in June 2024.

The quantitative impairment test of the disposal group included a comparison of the estimated fair value to the carrying value of the disposal group less cost to sell.

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.

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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.

As a result of this analysis, we recorded asset impairment charges of $ 44.1 million in 2023.

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

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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.

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

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

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

In total, we recognized asset impairments of $ 149.5 million and $ 117.2 million during the years ended December 31, 2024 and 2023, respectively.

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

FLOOR PLAN NOTES PAYABLE—TRADE

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

As a result of using our floor plan offset account, we experienced a reduction in floor plan interest expense in our consolidated statements of income.The representations and covenants contained in the agreement governing our floor plan facility with Ford Credit are customary for financing transactions of this nature.

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

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

Further, the agreement governing our floor plan facility with Ford Credit also provides for events of default that are customary for financing transactions of this nature, including cross-defaults to other material indebtedness.

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(In millions)

Floor plan notes payable—new non-trade (a) $ 1,328.1 $ 613.6

Floor plan notes payable—new non-trade $ 1,359.8 $ 1,328.1

Floor plan notes payable—used non-trade 100.7 307.1

Floor plan notes payable offset account (b) ( 44.7 ) ( 613.6 )

Floor plan notes payable offset account ( 115.7 ) ( 44.7 )

Total floor plan notes payable—non-trade, net $ 1,344.8 $ 1,590.6

__________________________

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

(b) In addition to the $ 613.6 million shown above as of December 31, 2022, we held $ 164.0 million in the floor plan notes payable offset account of which $ 100.8 million was reflected within cash and cash equivalents and $ 63.2 million was shown as an offset to loaner vehicles notes payable which is included in accounts payable and accrued liabilities within the consolidated balance sheets.

2023 Senior Credit Facility

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Proceeds from borrowings under the 2023 Senior Credit Facility will be used, among other things, (i) to finance the purchase of new and used vehicles by the Company and certain of its subsidiaries, (ii) for working capital needs of the Company and certain of its subsidiaries, and (iii) for other general corporate purposes of the Company and certain of its subsidiaries.

Subject to compliance with certain conditions, the 2023 Senior Credit Facility 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.

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

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Borrowings outstanding under the 2023 Senior Credit Facility bear interest, at the option of the Company, based on Daily Simple SOFR (as defined in the 2023 Senior Credit Facility) or the Base Rate, in each case plus an Applicable Rate.

Rate is the highest of (i) the Federal Funds Rate (as defined in the 2023 Senior Credit Agreement) plus 0.50 %, (ii) the Bank of America prime rate, and (iii) Daily Simple SOFR plus 1.00 % and (iv) 1.00 %.

The Base Rate is the highest of (i) the Federal Funds Rate (as defined in the 2023 Senior Credit Agreement) plus 0.50 %, (ii) the Bank of America prime rate, and (iii) Daily Simple SOFR plus 1.00 % and (iv) 1.00 %.

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

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See the "Representations and Covenants" section below under our "Long-Term Debt" footnote for a description of the representations, covenants and events of default contained in the 2023 Senior Credit Facility.

2019 Senior Credit Facility

On October 29, 2021, we entered into a third amendment to the third amended and restated credit agreement dated September 25, 2019 with Bank of America, as administrative agent, and the other lenders party thereto (the "2019 Senior Credit Facility").

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

The amendment, among other things, increased the cap that the real estate component of the Revolving Borrowing Base can contribute to the Revolving Borrowing Base from 25 % to 40 % of the Aggregate Revolving Commitments, increased the amounts that any conversion of the Aggregate Revolving Commitments to Aggregate New Vehicle 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, we and certain of our subsidiaries, as applicable, entered into an amendment to our 2019 Senior Credit Facility to revise the benchmark reference rate of LIBOR to SOFR applicable to interest payable under the New Vehicle Floor Plan Facility and the Used Vehicle Floor Plan Facility.

On June 3, 2022, $ 389.0 million of our availability under the Revolving Credit Facility was re-designated to the New Vehicle Floor Plan Facility to take advantage of lower commitment fee rates.

On March 31, 2023, we designated this $ 389.0 million back to the Revolving Credit Facility.

In addition to our new and used vehicle floor plan facilities, we have loaner vehicle floor plan facilities with Bank of America and certain original equipment manufacturers ("OEMs").

Loaner vehicles notes payable related to Bank of America was $ 127.2 million as of December 31, 2023 and $ 10.8 million, net of offsets of $ 63.2 million as of December 31, 2022.

Loaner vehicles notes payable related to Bank of America was $ 56.7 million as of December 31, 2024 and $ 127.2 million as of December 31, 2023.

Loaner vehicles notes payable related to OEMs as of December 31, 2024 and 2023 were $ 161.5 million and $ 111.9 million, respectively.

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(In millions)

Loaner vehicles notes payable $ 218.1 $ 239.1

Accounts payable 169.1 155.6

Loaner vehicles notes payable (a) 239.1 94.5

Taxes payable 82.1 74.9

Accrued compensation 56.8 89.0

Accrued compensation and benefits 80.5 62.7

Accrued interest 45.5 46.6

Customer deposits 30.2 23.5

Accrued insurance 30.4 28.4

Customer deposits 25.2 30.2

Accrued finance and insurance chargebacks 23.2 24.7

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Accounts payable and accrued liabilities $ 761.4 $ 748.1

____________________________

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

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

Long-term debt consisted of the following:

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5.00 % Senior Notes due 2032

Mortgage notes payable bearing interest at fixed rates (the weighted average interest rates were 5.9 % and 5.4 % for the year ended December 31, 2023 and 2022, respectively) (a)

Mortgage notes payable bearing interest at fixed rates 29.6 31.9

2021 Real Estate Facility 579.9 614.4

2021 BofA Real Estate Facility 158.6 165.9

2018 Bank of America Facility (b) 50.3 54.5

2018 Bank of America Facility 37.9 50.3

2018 Wells Fargo Master Loan Facility 62.2 72.0

2013 BofA Real Estate Facility — 24.9

2015 Wells Fargo Master Loan Facility 32.0 37.2

2023 Syndicated Revolving Credit Facility — —

Finance lease liability 8.4 8.4

6 unchanged sentences

Long-term debt $ 3,023.9 $ 3,121.2

____________________________

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

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

liabilities associated with assets held for sale.

The aggregate maturities of long-term debt as of December 31, 2024 are as follows (in millions):

6 unchanged sentences

The 2029 Notes will mature on November 15, 2029.

We may redeem some or all of the 2029 Notes at any time on and after November 15, 2024 at redemption prices specified in the 2029 Notes Indenture.

Prior to November 15, 2024, we may also redeem up to 40 % of the aggregate principal amount of the 2029 Notes using the proceeds from certain equity offerings at a redemption price of 104.625 % of their principal amount plus accrued and unpaid interest, if any, to, but not including the redemption date.

In addition, we may redeem some or all of the 2029 Notes at any time prior to November 15, 2024 at a price equal to 100 % of the principal amount thereof plus a make-whole premium set forth in the 2029 Notes Indenture, and accrued and unpaid interest, if any.

If we sell certain of our assets or experience specific kinds of changes of control, we must offer to repurchase the 2029 Notes.

26 unchanged sentences

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

During the year ended December 31, 2024, we modified the captive mortgages to extend the payment term and maturity of the captive mortgages to August 2034.

In addition, the interest rate was amended to 5.8 % over the revised term.

As of December 31, 2024, and 2023, we had total mortgage notes payable outstanding of $ 29.6 million and $ 31.9 million, respectively, that are collateralized by the associated real estate, which excludes amounts classified as liabilities associated with assets held for sale.

The total mortgage notes payable is due to be repaid in 2024.

2021 Real Estate Facility

15 unchanged sentences

We are required to make 39 consecutive quarterly principal payments of 1.00 % of the initial amount of each loan, with a balloon repayment of the outstanding principal amount of loans due on the maturity date.

The 2021 BofA Real Estate Facility

matures ten years from the initial funding date.

The 2021 BofA Real Estate Facility matures ten years from the initial funding date.

Borrowings under the 2021 BofA Real Estate Facility are guaranteed by us and each of our operating dealership subsidiaries that leased the real estate now financed under the 2021 BofA Real Estate Facility, and are collateralized by first priority liens, subject to certain permitted exceptions, on all of the real property financed thereunder.

26 unchanged sentences

We are required to make quarterly principal payments with respect to the initial amount of each loan in 108 equal monthly principal payments based on a hypothetical nineteen-year amortization schedule, with a balloon repayment of the outstanding principal amount of loans due on February 1, 2025.

On February 21, 2025, the agreement was modified and the maturity date was extended to June 1, 2025.

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

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

Borrowings under the 2015 Wells Fargo Master Loan Facility are guaranteed by us pursuant to an unconditional guaranty, and all of the real property financed by any of our operating

dealership subsidiaries under the 2015 Wells Fargo Master Loan Facility is collateralized by first priority liens, subject to certain permitted exceptions.

As of December 31, 2024 and 2023, we had $ 32.0 million and $ 37.2 million, respectively, outstanding under the 2015 Wells Fargo Master Loan Facility.

12 unchanged sentences

Mortgage Agreement Aggregate Principal Outstanding Carrying Value of Collateralized Related Real Estate Maturity Dates Aggregate Principal Outstanding Carrying Value of Collateralized Related Real Estate Maturity Dates

Captive mortgages (a) $ 31.9 $ 86.3 2024 $ 38.3 $ 98.0 2023-2024

Captive mortgages $ 29.6 $ 84.9 2034 $ 31.9 $ 86.3 2024

2021 Real Estate Facility 579.9 845.9 2026 614.4 852.4 2026

2021 BofA Real Estate Facility 158.6 195.0 2031 165.9 198.4 2031

2018 BofA Real Estate Facility (b) 50.3 72.7 2025 54.5 78.7 2025

2018 BofA Real Estate Facility 37.9 59.4 2025 50.3 72.7 2025

2018 Wells Fargo Master Loan Facility 62.2 94.4 2028 72.0 103.6 2028

2013 BofA Real Estate Facility — — N/A 24.9 61.7 2023

2015 Wells Fargo Master Loan Facility 32.0 93.4 2025 37.2 83.1 2025

Total mortgage debt $ 900.2 $ 1,362.8 $ 971.7 $ 1,396.5

___________________________

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

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

liabilities associated with assets held for sale.

Revolving Credit Facility

2 unchanged sentences

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

As of December 31, 2023, we had $ 14.0 million in outstanding letters of credit, nothing drawn on our Revolving Credit Facility and $ 332.1 million of borrowing availability As of December 31, 2022, we had $ 12.7 million in outstanding letters of credit, nothing drawn on our Revolving Credit Facility and $ 48.3 million of borrowing availability, with an additional $ 389.0 million available to convert from our new vehicle floorplan facility.

As of December 31, 2024, we had $ 14.0 million in outstanding letters of credit, nothing drawn on our Revolving Credit Facility and $ 486.0 million of borrowing availability.

As of December 31, 2023, we had $ 14.0 million in outstanding letters of credit, nothing drawn on our Revolving Credit Facility and $ 332.1 million of borrowing availability, with an additional $ 389.0 million available to convert from our new vehicle floorplan facility.

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

Stock Repurchase and Dividend Restrictions

The 2023 Senior Credit Facility and the Indentures currently allow for restricted payments without limit so long as our Consolidated Total Leverage Ratio (as defined in the 2023 Senior Credit Facility and the Indentures) is no greater than 3.0 to 1.0 after giving effect to such proposed restricted payments.

1.0 after giving effect to such proposed restricted payments.

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

33 unchanged sentences

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

2015 Wells Fargo Master Loan Agreement also provides for events of default that are customary for financing transactions of this nature, including cross-defaults to other material indebtedness.

The 2015 Wells Fargo Master Loan Agreement also provides for events of default that are customary for financing transactions of this nature, including cross-defaults to other material indebtedness.

Upon the occurrence of an event of default, we could be required by the 2015 Wells Fargo Master Loan Facility to immediately repay all amounts outstanding thereunder.

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

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

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

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

A summary of the carrying values and fair values of our Notes is as follows:

We estimate the fair value of our mortgage notes payable using a present value technique based on current market interest rates for similar types of financial instruments that reflect Level 2 inputs.

A summary of the carrying values and fair values of our Notes and our mortgage notes payable is as follows:

As of December 31,

6 unchanged sentences

5.00 % Senior Notes due 2032

Mortgage notes payable 29.6 31.9

Total carrying value $ 2,260.6 $ 2,259.7

4 unchanged sentences

5.00 % Senior Notes due 2032

Mortgage notes payable 29.3 31.9

Total fair value $ 2,115.8 $ 2,117.0

1 unchanged sentence

We currently have six interest rate swap agreements.

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

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

2 unchanged sentences

The following table provides information on the attributes of each swap as of December 31, 2024:

Inception Date Notional Value at Inception Notional Value as of December 31, 2023

Notional Value at Maturity Maturity Date

Inception Date Notional Principal at Inception Notional Value as of December 31, 2024

Notional Principal at Maturity Maturity Date

(In millions)

24 unchanged sentences

2022 $ 100.8 Other interest expense, net $ ( 2.4 )

On the basis of yield curve conditions as of December 31, 2023 and including assumptions about future changes in fair value, we expect the amount to be reclassified out of accumulated other comprehensive loss into earnings within the next 12 months will be gains of $ 27.5 million.

On the basis of yield curve conditions as of December 31, 2024 and including assumptions about future changes in fair value, we expect the amount to be reclassified out of accumulated other comprehensive income into earnings within the next 12 months will be gains of $ 20.3 million.

The table below presents the Company’s investment securities that are measured at fair value on a recurring basis aggregated by the level in the fair value hierarchy within which those measurements fall:

8 unchanged sentences

Mortgage and other asset backed securities — 169.1 — 169.1

Total debt securities 15.5 317.4 — 332.9

Total $ 6.1 $ 342.5 $ — $ 348.6

Total Investments, at fair value $ 332.9

As of December 31, 2023

3 unchanged sentences

Short-term investments 2.0 4.2 — 6.2

U.S Treasury 11.6 — — 11.6

Treasury 13.5 — — 13.5

Municipal — 30.1 — 30.1

1 unchanged sentence

Mortgage and other asset-backed securities — 150.9 — 150.9

Total debt securities 12.2 179.5 — 191.7

Common stock 48.7 — — 48.7

Total $ 15.5 $ 317.4 $ — $ 332.9

Total Investments, at fair value $ 240.4

We review the fair value hierarchy classifications each reporting period.

49 unchanged sentences

There were no valuation allowances recorded against the deferred tax assets as of December 31, 2024 or 2023.

As of December 31, 2023, we had an income tax receivable of $ 11.5 million, included in Other current assets.

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

As of December 31, 2023, we had a state net operating loss ("NOL") carryforward of $ 63.8 million and a deferred tax asset of $ 2.2 million to reflect the benefit.

This NOL will expire in 2042.

As of December 31, 2024, we had an income tax receivable of $ 3.4 million, included in Other current assets and an income tax payable of $ 5.7 million included in accounts payable and other accrued liabilities.

As of December 31, 2023, we had income tax receivable of $ 11.5 million, included in Other current assets.

The statutes of limitation related to our consolidated Federal income tax returns are closed for all tax years up to and including 2020.

16 unchanged sentences

During the years ended December 31, 2024, 2023, and 2022, we transferred $ 489.7 million, $ 431.2 million, and $ 281.4 million, respectively, of loaner vehicles from other current assets to inventory in our consolidated balance sheets.

The aforementioned amounts are included in changes in inventories in the operating activities section of the accompanying consolidated statement of cash flows.

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

45 unchanged sentences

During the years ended December 31, 2024 and 2023, we obtained $ 12.0 million and $ 35.0 million, respectively, of right-of-use assets in exchange for new operating lease liabilities.

The activity during the year ended December 31, 2023 was primarily as a result of business combinations.

The activity during the year ended December 31, 2023 was primarily as a result of a business combination.

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities as of December 31, 2024, including leases related to liabilities associated with assets held for sale .

16 unchanged sentences

Certain of our lease agreements include financial covenants and incorporate by reference the financial covenants set forth in the 2023 Senior Credit Facility.

A breach of any of these covenants could immediately give rise to certain landlord remedies under our various lease agreements, the most severe of which include the following:

A breach of any of these covenants could immediately give rise to certain landlord remedies

under our various lease agreements, the most severe of which include the following:

(i) termination of the applicable lease and/or other leases with the same or an affiliated landlord under a cross-default provision, (ii) eviction from the premises;

3 unchanged sentences

(1) Dealerships and (2) TCA.

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

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

The operations of our F&I product provider is reflected within our TCA segment.

Our Chief Operating Decision Maker is our Chief Executive Officer who manages the business, regularly reviews financial information and allocates resources at the geographic market level for our dealerships and at the TCA segment level for our F&I product provider's operations.

The geographic dealership group operating segments have been aggregated into one reportable segment as their operations (i) have similar economic characteristics (our markets all have similar long-term average gross margins), (ii) offer similar products and services (all of our markets offer new and used vehicles, parts and service, and finance and insurance products), (iii) have similar customers, (iv)

have similar distribution and marketing practices (all of our markets distribute products and services through dealership facilities that market to customers in similar ways), and (v) operate under similar regulatory environments.

Our Chief Operating Decision Maker (CODM) is our Chief Executive Officer who manages the business, regularly reviews financial information and allocates resources at the geographic region level for our dealerships and at the TCA segment level for our F&I product provider's operations.

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

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

1 unchanged sentence

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

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

The preliminary amount of goodwill acquired in the Koons acquisition of $ 231.7 million was allocated to the Dealerships segment.

The gross profit earned by our parts and service departments for work performed for TCA customers is reflected as a reduction of parts and service cost of sales in the accompanying consolidated statements of income.

The costs incurred by TCA for work performed by our parts and service departments are included in finance and insurance cost of sales in the accompanying consolidated statements of income.

The CODM evaluates the performance of each reportable segment primarily through segment operating income.

Segment operating income is derived from GAAP operating income, adjusted to exclude the effects of asset impairments and to include floor plan interest expense.

Asset impairments are excluded as they are non-recurring in nature and typically do not arise from the ordinary course of operations.

By removing these charges, segment operating income better represents the underlying operational performance of the segments.

Floor plan interest expense is included in segment operating income because floor plan financing is a required component of the business model dictated by manufacturers.

As such, it is an inherent and unavoidable cost of operations.

Including floor plan interest expense ensures that the measurement of segment profitability reflects the operational realities and obligations associated with inventory financing, providing a clearer representation of the Dealerships segment’s performance.

This approach ensures a consistent and meaningful evaluation of each segment's operational performance by normalizing results for items that may not directly reflect ongoing segment profitability.

By utilizing segment operating income in this manner, the CODM can make informed decisions regarding resource allocation, evaluate the relative performance of individual segments, and monitor the effectiveness of strategic initiatives.

All floor plan interest expense and asset impairments are exclusively within the dealerships segment for the periods presented.

Therefore, there are no reconciling items between segment operating income and income from operations for the TCA segment.

Goodwill acquired in the Koons acquisition, which closed in December 2023, of $ 272.4 million was allocated to the Dealerships segment.

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

Intercompany profits and losses are eliminated in consolidation.

The significant expense categories and amounts are consistent with the segment-level information that is regularly provided to the CODM.

Certain intersegment expenses are included within the amounts shown.

Rent and related expenses include rent expense, utilities, property and casualty insurance, real estate tax and personal property tax.

Other segment items for the TCA segment relate to selling, general and administrative expenses.

Reportable segment financial information for the years ended December 31, 2024, 2023 and 2022 is as follows:

As of and for the year ended December 31, 2024

Dealerships TCA Eliminations Total Company

Dealerships TCA Total

(In millions)

Revenue $ 14,699.0 $ 285.2 $ ( 181.5 ) $ 14,802.7

Gross profit 2,671.1 77.1 7.6 2,755.8

Revenue from external customers $ 16,885.0 $ 303.6 $ 17,188.6

Intersegment revenue 222.5 — 222.5

$ 17,107.5 $ 303.6 $ 17,411.1

Reconciliation of revenue

Elimination of intersegment revenue ( 222.5 )

Total consolidated revenue $ 17,188.6

Cost of sales

New vehicle 8,209.3 —

Used vehicle 4,972.7 —

Parts and service 1,043.0 —

Finance and insurance — 223.4

Selling, general and administrative expenses

Personnel costs 1,256.2 —

Rent and related expenses 142.3 —

Advertising 61.8 —

Other selling, general and administrative expense 441.0 —

Other segment items — 7.0

Depreciation and amortization 74.6 0.4

Selling, general and administrative expense 1,638.5 7.4 ( 28.5 ) 1,617.4

Interest expense

Floor plan interest expense 89.9 —

Segment operating income $ 816.7 $ 72.8 $ 889.5

Reconciliation of segment operating income

Intersegment eliminations

Total intersegment revenue eliminations ( 222.5 )

Total intersegment cost of sales eliminations 208.5

Deferral of SG&A expense (related to capitalized contracts offset by amortization) 19.7

Total intersegment eliminations 5.8

Asset impairments ( 149.5 )

Other interest expense, net ( 179.1 )

Total interest expense $ 165.7 $ — $ — $ 165.7

Gain on dealership divestitures, net 8.6

Income before income taxes $ 575.3

As of and for the year ended December 31, 2024

Dealerships TCA Total Reportable Segments Eliminations Total

(In millions)

Capital expenditures $ 308.2 $ — $ 308.2 $ — $ 308.2

Other interest expense $ 179.1 $ — $ 179.1 $ — $ 179.1

Amortization of deferred acquisition costs $ — $ 170.2 $ 170.2 $ ( 170.2 ) $ —

Total assets $ 9,227.6 $ 1,049.4 $ 10,277.0 $ 60.1 $ 10,337.0

As of and for the year ended December 31, 2023

Dealerships TCA Eliminations Total Company

Dealerships TCA Total

(In millions)

Revenue $ 15,341.1 $ 245.8 $ ( 153.0 ) $ 15,433.8

Gross profit 3,036.0 53.8 10.8 3,100.6

Revenue from external customers $ 14,517.5 $ 285.2 $ 14,802.7

Intersegment revenue 181.5 — 181.5

$ 14,699.0 $ 285.2 $ 14,984.2

Reconciliation of revenue

Elimination of intersegment revenue ( 181.5 )

Total consolidated revenue $ 14,802.7

Cost of sales

New vehicle 6,927.8 —

Used vehicle 4,150.2 —

Parts and service 949.9 —

Finance and insurance — 208.1

Selling, general and administrative expenses

Personnel costs 1,106.5 —

Rent and related expenses 118.7 —

Advertising 47.3 —

Other selling, general and administrative expense 366.0 —

Other segment items — 7.4

Depreciation and amortization 67.1 0.7

Selling, general and administrative expense 1,786.3 7.0 ( 30.0 ) 1,763.4

Interest expense

Floor plan interest expense 9.6 —

Segment operating income $ 955.9 $ 69.0 $ 1,025.0

Reconciliation of segment operating income

Intersegment eliminations

Total intersegment revenue eliminations ( 181.5 )

Total intersegment cost of sales eliminations 189.1

Deferral of SG&A expense (related to capitalized contracts offset by amortization) 28.5

Total intersegment eliminations 36.1

Asset impairments ( 117.2 )

Other interest expense, net ( 156.1 )

Total interest expense $ 160.6 $ — $ — $ 160.6

Gain on dealership divestitures, net 13.5

Income before income taxes $ 801.3

As of and for the year ended December 31, 2023

Dealerships TCA Total Reportable Segments Eliminations Total

(In millions)

Capital expenditures $ 142.3 $ — $ 142.3 $ — $ 142.3

Other interest expense $ 156.1 $ — $ 156.1 $ — $ 156.1

Amortization of deferred acquisition costs $ — $ 161.9 $ 161.9 $ ( 155.9 ) $ 6.0

Total assets $ 9,199.4 $ 913.9 $ 10,113.3 $ 46.1 $ 10,159.4

As of and for the year ended December 31, 2022

Dealerships TCA Total

(In millions)

Revenue from external customers $ 15,188.1 $ 245.8 $ 15,433.8

Intersegment revenue 153.0 — 153.0

$ 15,341.1 $ 245.8 $ 15,586.9

Reconciliation of revenue

Elimination of intersegment revenue ( 153.0 )

Total consolidated revenue $ 15,433.8

Cost of sales

New vehicle 6,521.6 —

Used vehicle 4,843.8 —

Parts and service 939.7 —

Finance and insurance — 191.9

Personnel costs 1,273.6 —

Rent and related expenses 121.4 —

Advertising 50.0 —

Other selling, general and administrative expense 341.3 —

Other segment items — 7.0

Depreciation and amortization 68.2 0.8

Floor plan interest expense 8.4 —

Segment operating income $ 1,173.1 $ 46.0 $ 1,219.0

Reconciliation of segment operating income

Intersegment eliminations

Total intersegment revenue eliminations ( 153.0 )

Total intersegment cost of sales eliminations 163.8

Deferral of SG&A expense (related to capitalized contracts offset by amortization) 30.0

Total intersegment eliminations 40.8

Other operating income 4.4

Other interest expense, net ( 152.2 )

Gain on dealership divestitures, net 207.1

Income before income taxes $ 1,319.1

As of and for the year ended December 31, 2022

Dealerships TCA Total Reportable Segments Eliminations Total

(In millions)

Capital expenditures $ 107.9 $ — $ 107.9 $ — $ 107.9

Other interest expense $ 152.2 $ — $ 152.2 $ — $ 152.2

Amortization of deferred acquisition costs $ — $ 165.7 $ 165.7 $ ( 147.5 ) $ 18.2

Total assets $ 7,170.8 $ 869.2 $ 8,040.0 $ ( 18.6 ) $ 8,021.4

COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

On February 8, 2024, the FTC staff counsel sent to us a proposed consent order and draft complaint, alleging that the Company and three of our dealerships had violated Section 5 of the Federal Trade Commission Act ("FTC Act") and certain provisions of the Equal Credit Opportunity Act ("ECOA") in connection with the sale of add-on products (e.g., vehicle service contracts, maintenance plans, etc.), and advising that it would recommend the filing of an enforcement action if the Company did not settle the FTC’s claims.

The Company disputes the FTC’s allegations that it violated the FTC Act and the ECOA, and is currently involved in discussions with the FTC staff regarding the matter.

There can be no assurance that negotiations between us and the FTC for a favorable settlement will be successful, or that we will succeed in any litigation as a result of the investigation.

At this time, we are unable to reasonably predict the possible outcome of this matter, or provide a reasonably possible range of loss, if any, as a result of the investigation.

If the FTC files a suit against us based on these allegations, whether meritorious or not, it may adversely affect our ability to attract customers, result in the loss of existing customers, harm our reputation and cause us to incur defense costs and other expenses.

On August 16, 2024, after discussions with the FTC stalled, the FTC initiated an administrative proceeding by filing an enforcement action against the Company.

On October 4, 2024, the Company filed suit against the FTC in the United States District Court for the Northern District of Texas, seeking to enjoin the FTC’s administrative proceeding on the ground that the administrative proceeding was unconstitutional.

While the Company disputes the FTC’s allegations that it violated the FTC Act and the ECOA, we are unable to reasonably predict the possible outcome of this matter at this time, or provide a reasonably possible range of loss, if any.

There can be no assurance that the Company will succeed in either the FTC’s administrative proceeding against the Company or in the Company’s lawsuit against the FTC, and the FTC’s allegations, whether meritorious or not, may adversely affect our ability to attract customers, result in the loss of existing customers, harm our reputation and cause us to incur defense costs and other expenses.

Our dealerships are party to dealer and framework agreements with applicable vehicle manufacturers.

7 unchanged sentences

Claims may also arise through litigation, government proceedings, and other dispute resolution processes.

Such claims, including class actions, could relate to, but may not be limited to, the practice of charging administrative fees and other fees and commissions, employment-related matters, truth-in-lending and other dealer assisted financing obligations, contractual disputes, actions brought by

governmental authorities, and other matters.

We evaluate pending and threatened claims and establish loss contingency reserves based upon outcomes we currently believe to be probable and reasonably estimable.

9 unchanged sentences

Compliance with these provisions has not had, nor do we expect such compliance to have, any material effect upon our capital expenditures, net earnings, financial condition, liquidity or competitive position.

We believe that our current practices and procedures for the control and disposition of such materials comply with applicable federal, state, and local requirements.

We believe that our current practices and procedures for the control and disposition of such materials comply with applicable federal, state and local

requirements.

No assurances can be provided, however, that future laws or regulations, or changes in existing laws or regulations, would not require us to expend significant resources in order to comply therewith.

21 unchanged sentences

During the year ended December 31, 2024, the Compensation and Human Resources Committee of the Board of Directors approved the grant of up to 86,662 performance share units, which represents 150 % of the target award.

Performance share

units provide an opportunity for the employee-recipient to receive a number of shares of our common stock based on our performance during a specified year period following the grant as measured against objective performance goals as determined by the Compensation and Human Resources Committee of our Board of Directors.

Performance share units provide an opportunity for the employee-recipient to receive a number of shares of our common stock based on our performance during a specified year period following the grant as measured against objective performance goals as determined by the Compensation and Human Resources Committee of our Board of Directors.

The actual number of units earned may range from 0 % to 150 % of the target number of units depending upon achievement of the performance goals.

34 unchanged sentences

The Company's most recent grant of restricted stock awards occurred in 2019 and has since been replaced with restricted share units.

As of December 31, 2024 all restricted stock awards have vested.

The following table summarizes information about restricted stock awards for 2024:

3 unchanged sentences

Vested ( 2,169 ) 69.18

Forfeited — —

Non-vested at December 31, 2024 — $ —

11 unchanged sentences

The Company's expense related to employer matching contributions totaled $ 18.4 million , $ 16.0 million and, $ 18.0 million for the years ended December 31, 2024, 2023 and 2022, respectively.

SUBSEQUENT EVENT

On February 14, 2025, the Company, through one of its subsidiaries, entered into a Purchase and Sale Agreement (the "Transaction Agreement") with various entities that comprise the Herb Chambers automotive group (the "Herb Chambers Dealerships").

Pursuant to the Transaction Agreement, the Company is expected to acquire substantially all of the assets, including all real property and businesses of the Herb Chambers Dealerships (collectively, the "Businesses") for an aggregate purchase price of approximately $ 1.34 billion, which includes $ 750 million for goodwill and approximately $ 590 million for the real estate and leasehold improvements.

In addition, the Company will acquire new vehicles, used vehicles, service loaner vehicles, fixed assets, parts and supplies for a purchase price to be determined at the closing (the "Closing") of the transactions set forth in the Transaction Agreement and will reimburse the Herb Chambers Dealerships for certain dealership construction and development costs incurred prior to the Closing.

The Businesses includes 33 dealerships, 52 franchises and three collision centers.

Herb Chambers will retain ownership of the Mercedes-Benz of Boston dealership in Somerville, Massachusetts (the "MB Boston Dealership").

The Transaction Agreement includes certain restrictions and obligations regarding the sale of the MB Boston Dealership, including a put right obligating the Company to purchase the MB Boston Dealership during the five-year period following the Closing, absent certain circumstances.

The Company's acquisition of the Businesses is anticipated to close in the second quarter of 2025 and is subject to various customary closing conditions, including approval from the applicable automotive manufacturers.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data