Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with Part I, including the matters set forth in Item 1A. Risk Factors, and our Consolidated Financial Statements and notes thereto included elsewhere in this Form 10-K. Refer to Item 1. Business — General for an overview of our operations. Additionally, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the fiscal year 2022 compared to fiscal year 2021.
Overview
Our operating results reflect the combined performance of each of our interrelated business activities. Historically, various facets of our business have been directly or indirectly impacted by a variety of supply/demand factors, including vehicle inventories, consumer confidence, consumer transportation preferences, discretionary spending levels, availability and affordability of consumer credit, new vehicle introductions and innovations, manufacturer incentives, the COVID-19 pandemic, weather patterns, fuel prices, inflation and interest rates. For example, during periods of sustained economic downturn or significant supply/demand imbalances, new vehicle sales may be negatively impacted as consumers tend to shift their purchases to used vehicles. Some consumers may delay their purchasing decisions altogether, electing instead to continue to maintain and repair their existing vehicles. In such cases, however, we believe the new vehicle sales impact on our overall business is mitigated by our ability to offer other products and services, such as used vehicles and parts, as well as maintenance, repair and collision services. In addition, our ability to expediently adjust our cost structure in response to changes in new vehicle sales volumes also tempers any negative impact of such sales volume changes.
Recent Events
On October 7, 2023, Hamas, an internationally designated terrorist organization and ruling party of the Gaza strip in Palestine, launched an attack on Israel. On October 8, 2023, Israel declared war on Hamas with the armed conflict ongoing as of the date of this filing. In tandem with such conflict, the Houthi movement, which controls parts of Yemen, has targeted and launched numerous attacks on Israeli, American and international commercial marine vessels in the Red Sea as the ships approach the Suez Canal, resulting in many shipping companies re-routing to avoid the region altogether and worsening existing supply chain issues, including delays in supplier deliveries, extended lead times and increased cost of freight and materials, including certain parts required for EU vehicle production. It is not known at this time what impact, if any, this war and regional instability will have on the global economy, our operations or the operations of our suppliers.
On September 15, 2023, the United Auto Workers (“UAW”) announced a labor strike at certain facilities of Ford Motor Company, General Motors Company and Stellantis N.V. (collectively the “Big 3” domestic automakers). The strike ended at different dates for each of the Big 3 however all ended prior to December 31, 2023. The strike was limited in its scope and we did not experience a significant impact on our domestic vehicle and parts inventory.
Our manufacturers’ production continued at historically reduced levels in the Current Year, despite recent production improvements over that same period for some of those manufacturers. Prior to the UAW labor strike, production and related inventory constraints were primarily a result of sustained global semiconductor and other parts shortages, as well as armed conflicts impacting the global supply chain, including the ongoing conflict in Ukraine. Increased deliveries from all manufacturers in the Current Year drove a higher volume of new units sold and lack of new vehicle availability in prior years also helped maintain elevated new vehicle retail sales prices and margins relative to pre-COVID-19 pandemic levels. EV inventory has been building over the Current Year for certain brands, outpacing the buildup of non-EV inventory, as EV sales volume has lagged OEM deliveries in recent quarters. While EV sales continued to increase in 2023, the growth trend has not continued at the pace experienced in the two years prior. Challenges with EV technologies continue to make headlines within the U.S. media market, raising concerns around consumer demand and interest in the products. Our new vehicle days’ supply of inventory was approximately 37 days at December 31, 2023, as compared to 24 and 12, at December 31, 2022 and 2021, respectively. In the Current Year, we noted increases of new vehicle days’ supply of inventory for most manufacturers. As new vehicle days’ supply of inventory normalizes, we expect further pressure on sales prices and margins.
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On April 12, 2023, the EPA proposed regulations establishing more stringent air emissions limits for light and medium-duty vehicles, which include passenger cars, vans, pickups, sedans and SUVs for model years 2027 through 2032. The EPA proposes higher emissions stringency each year, beginning with model year 2027. These proposed standards include new battery durability requirements and changes to certain existing air emissions credit programs. These regulations could increase or accelerate the adoption of certain emissions reducing technologies, and further market penetration for hybrid, plug-in and battery-EVs. For example, should the proposed regulations be enacted, the EPA projects that at least 60% of new light-duty passenger vehicles sold in the U.S. would be battery-electric by 2030. The EPA also estimates that the regulations, if finalized, would increase costs for auto manufacturers and reduce consumer repair costs for covered vehicles. The EPA projects the regulations to become final in 2024. The regulations, as proposed in their current form, may have a significant impact on the future mix of vehicles provided by our manufacturers. Although the future impact of these regulations on our operations cannot be predicted with certainty, we will continue to monitor and evaluate any proposed or issued regulations.
The global economy continues to experience inflation. In response to higher than historical average inflationary pressures and challenging macroeconomic conditions, the U.S. Federal Reserve, along with other central banks, including in the U.K., increased interest rates throughout 2022 and maintained rates at elevated levels throughout 2023. As a consequence, the cost of financing vehicles for our consumers has increased and created affordability challenges in addition to higher vehicle prices over the past three years. Continued inflation reducing the disposable income of our customers, volatility in new vehicle availability and higher interest rates increasing the monthly cost of financing vehicles, contributed to used vehicle prices declining in the latter part of 2022 and during the Current Year.
Recent Accounting Pronouncements
Refer to Note 1. Basis of Presentation, Consolidation and Summary of Accounting Policies within our Notes to Consolidated Financial Statements.
Critical Accounting Policies and Accounting Estimates
The preparation of our financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date and the amounts of revenues and expenses recognized during the reporting period. Below are the accounting policies and estimates that have been determined to be critical to our business operations and the understanding of our results of operations.
Goodwill and Intangible Franchise Rights
We are organized into two geographic regions, the U.S. region and the U.K. region; each region represents a reporting unit for the purpose of assessing goodwill for impairment. In addition to goodwill, we have identifiable intangibles in the form of rights under our franchise agreements with manufacturers, which are recorded at an individual dealership level.
We evaluate goodwill and intangible franchise rights for impairment annually as of October 31, or more frequently if events or circumstances indicate possible impairment has occurred. We have the option of performing a qualitative assessment of impairment to determine whether any further quantitative assessment for impairment is necessary. The option of whether or not to perform a qualitative assessment is made annually and may vary by reporting unit. If we elect to bypass the qualitative assessment or if we determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, a quantitative test would be required.
In 2023, we elected to perform a quantitative test. Based on the quantitative goodwill test performed for the U.S. and U.K. reporting units in the fourth quarter of 2023, no impairments of goodwill were recorded during the Current Year. No goodwill impairments were recorded on any reporting units during the year ended December 31, 2022 (the “Prior Year”). T he quantitative goodwill impairment test is dependent on management estimates and assumptions used to determine the fair value of our reporting units. Refer to Note 12. Intangible Franchise Rights and Goodwill within our Notes to Consolidated Financial Statements for further discussion of goodwill, including management’s use of estimates and assumptions.
During the Current Year, $25.1 million of impairment was recorded for intangible franchise rights. In the Prior Year, impairment charges of $1.3 million were recorded for intangible franchise rights. As our intangible franchise rights are tested for impairment at the dealership level, any impairments are specific to the performance and outlook of the respective dealership.
Refer to Note 12. Intangible Franchise Rights and Goodwill within our Notes to Consolidated Financial Statements for further discussion of our intangibles, including fair value assumptions.
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Results of Operations
The “same store” amounts presented below include the results of dealerships and corporate headquarters for the identical months in each comparative period, commencing with the first full month in which we owned the dealership. Amounts related to divestitures are excluded from each comparative period, ending with the last full month in which we owned the dealership. Same store results provide a measurement of our ability to grow revenues and profitability of our existing stores and also provide a metric for peer group comparisons. For these reasons, same store results allow management to manage and monitor the performance of the business and is also useful to investors.
We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our underlying business and results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our current period reported results for entities reporting in currencies other than USD using comparative period exchange rates rather than the actual exchange rates in effect during the respective periods. The constant currency performance measures should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with U.S. GAAP. Additionally, we caution investors not to place undue reliance on non-GAAP measures, but also to consider them with the most directly comparable U.S. GAAP measures. Our management also uses constant currency and adjusted cash flows from operating, investing and financing activities in conjunction with U.S. GAAP financial measures to assess our business, including communication with our Board of Directors, investors and industry analysts concerning financial performance. We disclose these non-GAAP measures and the related reconciliations because we believe investors use these metrics in evaluating longer-term period-over-period performance. These metrics also allow investors to better understand and evaluate the information used by management to assess operating performance.
Certain amounts in the financial statements may not compute due to rounding. All computations have been calculated using unrounded amounts for all periods presented.
Retail new vehicle units sold for 2023 include new vehicle agency units sold under agency arrangements with certain manufacturers in the U.K. The agency units and related revenues are excluded from the calculation of the average sales price per unit sold for new vehicles due to their net presentation within revenues as only the sales commission is reported in revenues for dealerships operating under an agency arrangement. The agency units and related net revenues are included in the calculation of gross profit per unit sold.
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The following tables summarize our operating results on a reported basis and on a same store basis for the Current Year, as compared to the Prior Year.
Reported Operating Data — Consolidated
(In millions, except unit data)
For the Years Ended December 31,
2023 2022 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change
Revenues:
New vehicle retail sales $ 8,774.6 $ 7,452.5 $ 1,322.0 17.7 % $ 13.9 17.6 %
Used vehicle retail sales 5,693.5 5,673.3 20.2 0.4 % 3.7 0.3 %
Used vehicle wholesale sales 441.4 364.6 76.9 21.1 % 0.1 21.1 %
Total used 6,135.0 6,037.9 97.1 1.6 % 3.8 1.5 %
Parts and service sales 2,222.3 2,009.5 212.7 10.6 % 2.5 10.5 %
F&I, net 741.9 722.2 19.7 2.7 % 0.4 2.7 %
Total revenues $ 17,873.7 $ 16,222.1 $ 1,651.6 10.2 % $ 20.4 10.1 %
Gross profit:
New vehicle retail sales $ 767.0 $ 825.6 $ (58.6) (7.1) % $ 1.5 (7.3) %
Used vehicle retail sales 300.9 313.8 (12.8) (4.1) % 0.1 (4.1) %
Used vehicle wholesale sales (3.8) — (3.8) NM — NM
Total used 297.2 313.8 (16.6) (5.3) % — (5.3) %
Parts and service sales 1,214.2 1,103.7 110.5 10.0 % 1.3 9.9 %
F&I, net 741.9 722.2 19.7 2.7 % 0.4 2.7 %
Total gross profit $ 3,020.3 $ 2,965.2 $ 55.1 1.9 % $ 3.1 1.8 %
Gross margin:
New vehicle retail sales 8.7 % 11.1 % (2.3) %
Used vehicle retail sales 5.3 % 5.5 % (0.2) %
Used vehicle wholesale sales (0.9) % — % (0.9) %
Total used 4.8 % 5.2 % (0.4) %
Parts and service sales 54.6 % 54.9 % (0.3) %
Total gross margin 16.9 % 18.3 % (1.4) %
Units sold:
Retail new vehicles sold 175,566 154,714 20,852 13.5 %
Retail used vehicles sold 187,656 184,700 2,956 1.6 %
Wholesale used vehicles sold 43,763 37,072 6,691 18.0 %
Total used 231,419 221,772 9,647 4.3 %
Average sales price per unit sold:
New vehicle retail $ 50,325 $ 48,170 $ 2,156 4.5 % $ 426 3.6 %
Used vehicle retail $ 30,340 $ 30,716 $ (376) (1.2) % $ 20 (1.3) %
Gross profit per unit sold:
New vehicle retail sales $ 4,369 $ 5,336 $ (967) (18.1) % $ 9 (18.3) %
Used vehicle retail sales $ 1,604 $ 1,699 $ (95) (5.6) % $ — (5.6) %
Used vehicle wholesale sales $ (86) $ — $ (86) NM $ (1) NM
Total used $ 1,284 $ 1,415 $ (131) (9.2) % $ — (9.2) %
F&I PRU $ 2,043 $ 2,128 $ (85) (4.0) % $ 1 (4.1) %
Other:
SG&A expenses $ 1,926.8 $ 1,783.3 $ 143.4 8.0 % $ 2.7 7.9 %
SG&A as % gross profit 63.8 % 60.1 % 3.7 %
Floorplan expense:
Floorplan interest expense $ 64.1 $ 27.3 $ 36.8 134.9 % $ 0.1 134.5 %
Less: floorplan assistance (1)
71.2 56.0 15.2 27.2 % — 27.2 %
Net floorplan expense $ (7.1) $ (28.7) $ 21.6 $ 0.1
(1) Floorplan assistance is included within Gross profit — New vehicle retail sales above and Cost of sales — New vehicle retail sales in our Consolidated Statements of Operations.
NM - not meaningful
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Same Store Operating Data — Consolidated
(In millions, except unit data)
For the Years Ended December 31,
2023 2022 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change
Revenues:
New vehicle retail sales $ 8,191.2 $ 7,277.5 $ 913.7 12.6 % $ 13.7 12.4 %
Used vehicle retail sales 5,378.4 5,553.7 (175.3) (3.2) % 3.7 (3.2) %
Used vehicle wholesale sales 411.9 355.5 56.5 15.9 % 0.1 15.9 %
Total used 5,790.3 5,909.1 (118.8) (2.0) % 3.8 (2.1) %
Parts and service sales 2,128.9 1,952.6 176.3 9.0 % 2.4 8.9 %
F&I, net 700.4 705.4 (5.1) (0.7) % 0.4 (0.8) %
Total revenues $ 16,810.8 $ 15,844.6 $ 966.2 6.1 % $ 20.1 6.0 %
Gross profit:
New vehicle retail sales $ 714.3 $ 806.1 $ (91.7) (11.4) % $ 1.5 (11.6) %
Used vehicle retail sales 285.4 307.6 (22.2) (7.2) % 0.1 (7.2) %
Used vehicle wholesale sales (3.7) 0.2 (4.0) NM — NM
Total used 281.7 307.8 (26.2) (8.5) % — (8.5) %
Parts and service sales 1,159.8 1,072.4 87.4 8.1 % 1.2 8.0 %
F&I, net 700.4 705.4 (5.1) (0.7) % 0.4 (0.8) %
Total gross profit $ 2,856.2 $ 2,891.7 $ (35.5) (1.2) % $ 3.0 (1.3) %
Gross margin:
New vehicle retail sales 8.7 % 11.1 % (2.4) %
Used vehicle retail sales 5.3 % 5.5 % (0.2) %
Used vehicle wholesale sales (0.9) % 0.1 % (1.0) %
Total used 4.9 % 5.2 % (0.3) %
Parts and service sales 54.5 % 54.9 % (0.4) %
Total gross margin 17.0 % 18.3 % (1.3) %
Units sold:
Retail new vehicles sold 165,659 150,652 15,007 10.0 %
Retail used vehicles sold 178,782 180,164 (1,382) (0.8) %
Wholesale used vehicles sold 41,458 35,934 5,524 15.4 %
Total used 220,240 216,098 4,142 1.9 %
Average sales price per unit sold:
New vehicle retail $ 49,810 $ 48,307 $ 1,503 3.1 % $ 446 2.2 %
Used vehicle retail $ 30,083 $ 30,826 $ (742) (2.4) % $ 21 (2.5) %
Gross profit per unit sold:
New vehicle retail sales $ 4,312 $ 5,350 $ (1,038) (19.4) % $ 9 (19.6) %
Used vehicle retail sales $ 1,596 $ 1,707 $ (111) (6.5) % $ — (6.5) %
Used vehicle wholesale sales $ (89) $ 7 $ (96) NM $ (1) NM
Total used $ 1,279 $ 1,424 $ (146) (10.2) % $ — (10.2) %
F&I PRU $ 2,033 $ 2,132 $ (99) (4.6) % $ 1 (4.7) %
Other:
SG&A expenses $ 1,845.4 $ 1,771.1 $ 74.3 4.2 % $ 2.5 4.1 %
SG&A as % gross profit 64.6 % 61.2 % 3.4 %
NM - not meaningful
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Reported Operating Data — U.S.
(In millions, except unit data)
For the Years Ended December 31,
2023 2022 Increase/(Decrease) % Change
Revenues:
New vehicle retail sales $ 7,433.6 $ 6,238.5 $ 1,195.0 19.2 %
Used vehicle retail sales 4,458.7 4,531.5 (72.8) (1.6) %
Used vehicle wholesale sales 314.4 238.8 75.6 31.7 %
Total used 4,773.1 4,770.2 2.8 0.1 %
Parts and service sales 1,933.3 1,761.4 171.9 9.8 %
F&I, net 674.3 656.9 17.3 2.6 %
Total revenues $ 14,814.2 $ 13,427.1 $ 1,387.1 10.3 %
Gross profit:
New vehicle retail sales $ 646.1 $ 713.5 $ (67.4) (9.4) %
Used vehicle retail sales 240.8 250.3 (9.5) (3.8) %
Used vehicle wholesale sales 2.6 2.6 — (1.9) %
Total used 243.3 252.9 (9.6) (3.8) %
Parts and service sales 1,046.4 959.0 87.5 9.1 %
F&I, net 674.3 656.9 17.3 2.6 %
Total gross profit $ 2,610.1 $ 2,582.3 $ 27.8 1.1 %
Gross margin:
New vehicle retail sales 8.7 % 11.4 % (2.7) %
Used vehicle retail sales 5.4 % 5.5 % (0.1) %
Used vehicle wholesale sales 0.8 % 1.1 % (0.3) %
Total used 5.1 % 5.3 % (0.2) %
Parts and service sales 54.1 % 54.4 % (0.3) %
Total gross margin 17.6 % 19.2 % (1.6) %
Units sold:
Retail new vehicles sold 142,809 124,934 17,875 14.3 %
Retail used vehicles sold 145,617 145,632 (15) — %
Wholesale used vehicles sold 31,456 25,076 6,380 25.4 %
Total used 177,073 170,708 6,365 3.7 %
Average sales price per unit sold:
New vehicle retail $ 52,052 $ 49,934 $ 2,118 4.2 %
Used vehicle retail $ 30,619 $ 31,116 $ (497) (1.6) %
Gross profit per unit sold:
New vehicle retail sales $ 4,524 $ 5,711 $ (1,187) (20.8) %
Used vehicle retail sales $ 1,653 $ 1,719 $ (65) (3.8) %
Used vehicle wholesale sales $ 81 $ 104 $ (23) (21.8) %
Total used $ 1,374 $ 1,481 $ (107) (7.3) %
F&I PRU $ 2,338 $ 2,428 $ (90) (3.7) %
Other:
SG&A expenses $ 1,622.9 $ 1,516.9 $ 106.0 7.0 %
SG&A as % gross profit 62.2 % 58.7 % 3.4 %
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Same Store Operating Data — U.S.
(In millions, except unit data)
For the Years Ended December 31,
2023 2022 Increase/(Decrease) % Change
Revenues:
New vehicle retail sales $ 6,869.4 $ 6,065.6 $ 803.8 13.3 %
Used vehicle retail sales 4,167.2 4,416.8 (249.5) (5.6) %
Used vehicle wholesale sales 287.0 230.1 56.8 24.7 %
Total used 4,454.2 4,646.9 (192.7) (4.1) %
Parts and service sales 1,858.5 1,715.4 143.1 8.3 %
F&I, net 633.8 640.5 (6.7) (1.0) %
Total revenues $ 13,815.9 $ 13,068.4 $ 747.5 5.7 %
Gross profit:
New vehicle retail sales $ 595.5 $ 694.2 $ (98.7) (14.2) %
Used vehicle retail sales 227.0 244.5 (17.5) (7.1) %
Used vehicle wholesale sales 2.7 2.8 (0.2) (5.6) %
Total used 229.7 247.3 (17.6) (7.1) %
Parts and service sales 1,000.4 932.9 67.5 7.2 %
F&I, net 633.8 640.5 (6.7) (1.0) %
Total gross profit $ 2,459.4 $ 2,514.9 $ (55.5) (2.2) %
Gross margin:
New vehicle retail sales 8.7 % 11.4 % (2.8) %
Used vehicle retail sales 5.4 % 5.5 % (0.1) %
Used vehicle wholesale sales 0.9 % 1.2 % (0.3) %
Total used 5.2 % 5.3 % (0.2) %
Parts and service sales 53.8 % 54.4 % (0.6) %
Total gross margin 17.8 % 19.2 % (1.4) %
Units sold:
Retail new vehicles sold 133,330 120,958 12,372 10.2 %
Retail used vehicles sold 137,605 141,355 (3,750) (2.7) %
Wholesale used vehicles sold 29,312 24,023 5,289 22.0 %
Total used 166,917 165,378 1,539 0.9 %
Average sales price per unit sold:
New vehicle retail $ 51,522 $ 50,146 $ 1,375 2.7 %
Used vehicle retail $ 30,284 $ 31,246 $ (962) (3.1) %
Gross profit per unit sold:
New vehicle retail sales $ 4,466 $ 5,739 $ (1,273) (22.2) %
Used vehicle retail sales $ 1,650 $ 1,729 $ (80) (4.6) %
Used vehicle wholesale sales $ 91 $ 118 $ (27) (22.6) %
Total used $ 1,376 $ 1,495 $ (119) (8.0) %
F&I PRU $ 2,339 $ 2,442 $ (102) (4.2) %
Other:
SG&A expenses $ 1,548.8 $ 1,507.6 $ 41.2 2.7 %
SG&A as % gross profit 63.0 % 59.9 % 3.0 %
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U.S. Region — Year Ended December 31, 2023 compared to 2022
The following discussion of our U.S. operating results is on an as reported and same store basis. The difference between as reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings.
Revenues
Total revenues in the U.S. during the Current Year increased $1,387.1 million, or 10.3%, as compared to the Prior Year, driven by higher same store revenues and the acquisition of stores.
Total same store revenues in the U.S. during the Current Year increased $747.5 million, or 5.7%, as compared to the Prior Year. This increase was driven by higher revenues from new vehicle retail, parts and service and used vehicle wholesale, partially offset by lower used vehicle retail and F&I, net.
New and used vehicle retail revenues benefited from the sale of approximately 45,000 units from our online digital platform, AcceleRide®, during the Current Year, a 47.7% increase as compared to the Prior Year.
New vehicle retail same store revenues outperformed the Prior Year, driven by strong new vehicle retail pricing coupled with more units sold. The shortage of new vehicle inventory, compared to pre-COVID-19 pandemic levels, despite recent manufacturers’ production improvements, drove strong pricing. While new vehicle inventory levels remain depressed compared to pre-COVID-19 pandemic levels, manufacturer vehicle deliveries were higher in the Current Year and as a result, our inventory levels were higher than the Prior Year, providing for the increase in units sold. We ended the Current Year with a U.S. new vehicle inventory supply of 36 days, 15 days higher than the Prior Year , but below pre-COVID-19 pandemic levels .
Used vehicle retail same store revenues underperformed the Prior Year, driven by lower pricing , coupl ed with fewer units sold , due to the ongoing new vehicle supply shortage impacting the supply of used vehicles, as well as impacts from inflation reducing the disposable income of our customers and higher interest rates increasing the monthly cost of financing vehicles. Used vehicle wholesale same store revenues increased primarily due to more wholesale units sold coupled with higher wholesale pricing.
Parts and service same store revenues outperformed the Prior Year, driven by increases across all parts and service business lines, reflecting increased business activity and increased same store technician headcount through our technician recruiting and retention efforts, providing greater capacity to meet increased demand. In addition to technician recruitment efforts, we have invested in improving the operations of our U.S. customer contact center, online scheduling, one-to-one marketing initiatives and by using artificial intelligence. Customer pay saw the largest increase of the parts and service business lines.
F&I, net same store revenues underperformed the Prior Year, primarily driven by lower used vehicle finance penetration as a result of customers seeking alternative providers of financing in this higher interest rate environment and tighter lending requirements requiring larger down payments. In addition, used VSC penetration has also declined as a result of vehicle affordability challenges for consumers with higher interest rates. New vehicle finance and VSC penetration increased in the Current Year, partially offsetting the used vehicle impact.
Gross Profit
Total gross profit in the U.S. during the Current Year increased $27.8 million, or 1.1%, as compared to the Prior Year, driven by the acquisition of stores.
Total same store gross profit in the U.S. during the Current Year decreased $55.5 million, or 2.2%, as compared to the Prior Year, primarily driven by downward pressures on new vehicle margins and lower F&I PRU.
New vehicle retail same store gross profit underperformed the Prior Year, driven by a decrease in new vehicle retail same store gross profit per unit sold, partially offset by an increase in same store new vehicle retail units sold. The decrease in new vehicle retail same store gross profit per unit is due to modestly higher production and inventory levels of new vehicles as described above.
Used vehicle retail same store gross profit underperformed the Prior Year, driven by a decrease in used vehicle retail same store gross profit per unit sold, coupled with lower same store used vehicle retail units sold. These decreases were driven by the ongoing new vehicle supply shortage impacting the supply of used vehicles, as well as impacts from inflation reducing the disposable income of our customers and rising interest rates increasing the monthly cost of financing vehicles.
Our used vehicle wholesale same store gross profit underperformed the Prior Year, driven by a decrease in used vehicle wholesale same store gross profit per unit sold, partially offset by an increase in same store wholesale used vehicle units sold. The decrease in used vehicle wholesale same store gross profit per unit sold was driven by higher wholesale vehicle acquisition costs.
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Parts and service same store gross profit outperformed the Prior Year, as described above for same store revenues.
F&I, net same store gross profit, underperformed the Prior Year, as described above for F&I, net same store revenues.
Total same store gross margin decreased 144 basis points, primarily driven by the reasons described above for same store gross profit per unit sold for new vehicle retail, used vehicle retail, used vehicle wholesale and F&I, net. In addition, same store parts and service gross margin declined slightly, largely due to increased labor costs.
SG&A Expenses
SG&A as a percentage of gross profit increased 344 basis points and 303 basis points on an as reported and same store basis, respectively, compared to the Prior Year.
Total SG&A expenses in the U.S. during the Current Year increased $106.0 million, or 7.0%, as compared to the Prior Year, primarily driven by the acquisition of stores and higher same store SG&A expenses. Total same store SG&A expenses in the U.S. during the Current Year increased $41.2 million or 2.7% as compared to the Prior Year, primarily driven by increased activity related to outside services and professional fees, loaner car and related expenses, insurance and taxes, advertising expenses, and rent and facilities expenses, including related taxes, insurance and utilities. In addition, higher than historical average inflation has contributed to the increase in these same store SG&A expense categories. These increases were partially offset by lower employee-related costs.
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Reported Operating Data — U.K.
(In millions, except unit data)
For the Years Ended December 31,
2023 2022 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change
Revenues:
New vehicle retail sales $ 1,341.0 $ 1,214.0 $ 127.0 10.5 % $ 13.9 9.3 %
Used vehicle retail sales 1,234.8 1,141.8 93.0 8.1 % 3.7 7.8 %
Used vehicle wholesale sales 127.1 125.8 1.3 1.0 % 0.1 0.9 %
Total used 1,361.9 1,267.6 94.3 7.4 % 3.8 7.1 %
Parts and service sales 289.0 248.2 40.8 16.4 % 2.5 15.4 %
F&I, net 67.6 65.2 2.4 3.7 % 0.4 3.1 %
Total revenues $ 3,059.5 $ 2,795.1 $ 264.4 9.5 % $ 20.4 8.7 %
Gross profit:
New vehicle retail sales $ 120.8 $ 112.0 $ 8.8 7.9 % $ 1.5 6.5 %
Used vehicle retail sales 60.2 63.5 (3.3) (5.1) % 0.1 (5.2) %
Used vehicle wholesale sales (6.3) (2.6) (3.7) (142.5) % — (141.2) %
Total used 53.9 60.9 (7.0) (11.5) % — (11.5) %
Parts and service sales 167.8 144.7 23.1 15.9 % 1.3 15.1 %
F&I, net 67.6 65.2 2.4 3.7 % 0.4 3.1 %
Total gross profit $ 410.1 $ 382.9 $ 27.3 7.1 % $ 3.1 6.3 %
Gross margin:
New vehicle retail sales 9.0 % 9.2 % (0.2) %
Used vehicle retail sales 4.9 % 5.6 % (0.7) %
Used vehicle wholesale sales (5.0) % (2.1) % (2.9) %
Total used 4.0 % 4.8 % (0.8) %
Parts and service sales 58.1 % 58.3 % (0.2) %
Total gross margin 13.4 % 13.7 % (0.3) %
Units sold:
Retail new vehicles sold 32,757 29,780 2,977 10.0 %
Retail used vehicles sold 42,039 39,068 2,971 7.6 %
Wholesale used vehicles sold 12,307 11,996 311 2.6 %
Total used 54,346 51,064 3,282 6.4 %
Average sales price per unit sold:
New vehicle retail $ 42,488 $ 40,766 $ 1,722 4.2 % $ 439 3.1 %
Used vehicle retail $ 29,373 $ 29,227 $ 147 0.5 % $ 88 0.2 %
Gross profit per unit sold:
New vehicle retail sales $ 3,689 $ 3,762 $ (73) (1.9) % $ 47 (3.2) %
Used vehicle retail sales $ 1,432 $ 1,624 $ (193) (11.9) % $ 1 (11.9) %
Used vehicle wholesale sales $ (514) $ (217) $ (297) (136.4) % $ (3) (135.1) %
Total used $ 991 $ 1,192 $ (201) (16.8) % $ — (16.9) %
F&I PRU $ 904 $ 948 $ (44) (4.6) % $ 5 (5.1) %
Other:
SG&A expenses $ 303.9 $ 266.5 $ 37.4 14.0 % $ 2.7 13.0 %
SG&A as % gross profit 74.1 % 69.6 % 4.5 %
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Same Store Operating Data — U.K.
(In millions, except unit data)
For the Years Ended December 31,
2023 2022 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change
Revenues:
New vehicle retail sales $ 1,321.9 $ 1,211.9 $ 109.9 9.1 % $ 13.7 7.9 %
Used vehicle retail sales 1,211.2 1,136.9 74.3 6.5 % 3.7 6.2 %
Used vehicle wholesale sales 125.0 125.3 (0.4) (0.3) % 0.1 (0.3) %
Total used 1,336.1 1,262.2 73.9 5.9 % 3.8 5.6 %
Parts and service sales 270.4 237.2 33.2 14.0 % 2.4 13.0 %
F&I, net 66.5 64.9 1.6 2.5 % 0.4 1.9 %
Total revenues $ 2,995.0 $ 2,776.3 $ 218.7 7.9 % $ 20.1 7.2 %
Gross profit:
New vehicle retail sales $ 118.9 $ 111.9 $ 7.0 6.2 % $ 1.5 4.9 %
Used vehicle retail sales 58.4 63.1 (4.7) (7.5) % 0.1 (7.6) %
Used vehicle wholesale sales (6.4) (2.6) (3.8) (147.2) % — (145.7) %
Total used 52.0 60.5 (8.5) (14.1) % — (14.1) %
Parts and service sales 159.4 139.5 19.9 14.3 % 1.2 13.4 %
F&I, net 66.5 64.9 1.6 2.5 % 0.4 1.9 %
Total gross profit $ 396.8 $ 376.8 $ 20.0 5.3 % $ 3.0 4.5 %
Gross margin:
New vehicle retail sales 9.0 % 9.2 % (0.2) %
Used vehicle retail sales 4.8 % 5.6 % (0.7) %
Used vehicle wholesale sales (5.1) % (2.1) % (3.0) %
Total used 3.9 % 4.8 % (0.9) %
Parts and service sales 59.0 % 58.8 % 0.1 %
Total gross margin 13.2 % 13.6 % (0.3) %
Units sold:
Retail new vehicles sold 32,329 29,694 2,635 8.9 %
Retail used vehicles sold 41,177 38,809 2,368 6.1 %
Wholesale used vehicles sold 12,146 11,911 235 2.0 %
Total used 53,323 50,720 2,603 5.1 %
Average sales price per unit sold:
New vehicle retail $ 42,458 $ 40,814 $ 1,644 4.0 % $ 440 3.0 %
Used vehicle retail $ 29,413 $ 29,294 $ 119 0.4 % $ 90 0.1 %
Gross profit per unit sold:
New vehicle retail sales $ 3,676 $ 3,767 $ (91) (2.4) % $ 47 (3.6) %
Used vehicle retail sales $ 1,418 $ 1,626 $ (209) (12.8) % $ 1 (12.9) %
Used vehicle wholesale sales $ (525) $ (216) $ (308) (142.4) % $ (3) (140.9) %
Total used $ 975 $ 1,194 $ (218) (18.3) % $ — (18.3) %
F&I PRU $ 905 $ 948 $ (42) (4.5) % $ 5 (5.0) %
Other:
SG&A expenses $ 296.6 $ 263.6 $ 33.0 12.5 % $ 2.5 11.6 %
SG&A as % gross profit 74.7 % 69.9 % 4.8 %
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U.K. Region — Year Ended December 31, 2023 compared to 2022
The following discussion of our U.K. operating results is on an as reported and same store basis. The difference between the as reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings. Retail new vehicle units sold for 2023 include new vehicle agency units. The agency units and related revenues are excluded from the calculation of the average sales price per unit sold for new vehicles due to their net presentation within revenues. The agency units and related net revenues are included in the calculation of gross profit per unit sold. The GBP to USD foreign currency exchange rate has fluctuated from £1 to $1.21 a t December 31, 2022, to £1 to $1.27 at December 31, 2023, or an increase in the value of the GBP of 5.2%.
Revenues
Total revenues in the U.K. during the Current Year increased $264.4 million, or 9.5%, as compared to the Prior Year, driven by higher same store results and the acquisition of stores.
Total same store revenues in the U.K. during the Current Year increased $218.7 million, or 7.9%, as compared to the Prior Year. On a constant currency basis, total same store revenues increased 7.2%, driven by outperformances across all of our business lines except used vehicle wholesale sales.
New vehicle retail same store revenues, on a constant currency basis, outperformed the Prior Year, driven by more units sold, coupled with higher new vehicle retail pricing. The shortage of new vehicle inventory, compared to pre-COVID-19 pandemic levels, despite recent manufacturers’ production improvements, drove strong pricing. Vehicle demand was and continues to be pent-up from past years due to the withdrawal of the U.K. from the EU (“Brexit”) and the COVID-19 pandemic. In addition, despite the increase in same store new vehicle units sold, we experienced vehicle delivery shortages at various times throughout the Current Year from certain OEMs, limiting our revenue potential. We ended the Current Year with a U.K. new vehicle inventory suppl y of 48 days, twelve d ays higher than the Prior Year , but below pre-COVID-19 pandemic levels .
Used vehicle retail same store revenues, on a constant currency basis, outperformed the Prior Year, primarily driven by more units sold, coupled with higher used vehicle retail pricing.
Parts and service same store revenues, on a constant currency basis, outperformed the Prior Year, driven by i ncreases in all business lines, reflecting increased business activity. W e have invested in improvements to our U.K. customer contact center, streamlining operations to make scheduling appointments easier for customers, resulting in an increase in parts and service activity driving an increase in revenues as compared to the Prior Year.
F&I, net same store revenues, on a constant currency basis, outperformed the Prior Year, driven by an increase in retail units sold, partially offset by decreases in income per contract for retail finance fees and service contracts.
Gross Profit
Total gross profit in the U.K. during the Current Year increased $27.3 million, or 7.1%, as compared to the Prior Year, driven by higher same store results and the acquisition of stores .
Total same store gross profit in the U.K. during the Current Year increased $20.0 million, or 5.3%, as compared to the Prior Year. On a constant currency basis, total same store gross profit increased 4.5% driven by improvements in new vehicle retail, parts and service and F&I, net gross profit, partially offset by a decline in total used vehicle gross profit.
New vehicle retail same store gross profit, on a constant currency basis, outperformed the Prior Year, due to an increase in new vehicle retail units sold, partially offset by a decrease in new vehicle retail gross profit per unit sold as a result of the increase in vehicle inventory supply as described above generating downward pressure on new vehicle margins.
Used vehicle retail same store gross profit, on a constant currency basis, underperformed the Prior Year, driven by a decrease in used vehicle retail same store gross profit per unit sold, partially offset by an increase in used vehicle retail units sold. This decrease in gross profit per unit sold was driven by increases in used vehicle acquisition costs, outpacing the increase in used vehicle retail average sales price per unit sold as a result of continued inflationary pressures.
Parts and service same store gross profit, on a constant currency basis, outperformed the Prior Year, driven by increases in parts and service same store revenues, as discussed above, while maintaining gross margin relatively flat compared to the prior year.
F&I, net same store gross profit, on a constant currency basis, outperformed the Prior Year, driven by increases in F&I, net same store revenues, as described above.
Total same store gross margin in the U.K. decreased 32 basis points, primarily driven by lower same store total used gross margin caused by inflationary impacts on our used vehicle customers and higher used vehicle acquisition prices.
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SG&A Expenses
SG&A as a percentage of gross profit increased by 450 and 480 basis points on an as reported and same store basis, respectively, compared to the Prior Year.
Total SG&A expenses in the U.K. during the Current Year increased $37.4 million, or 14.0%, as compared to the Prior Year, primarily driven by increases in same store SG&A and the full year impact of prior period acquisitions. Total same store SG&A expenses in the U.K. during the Current Year increased $33.0 million, or 12.5%, as compared to the Prior Year. On a constant currency basis, total same store SG&A expenses increased 11.6%. These increases were primarily driven by increased employee-related expenses and facilities-related expenses as a result of higher activity and continued inflationary pressures, coupled with increased demonstration and loaner car expenses compared to the Prior Year. The vehicle delivery shortages from certain manufacturers, as discussed above, resulted in higher than anticipated SG&A as a percentage of gross profit given our staffing levels assumed the delivery and sale of these vehicles in the Current Year.
Consolidated Selected Comparisons — Year Ended December 31, 2023 compared to 2022
The following table (in millions) and discussion of our results of operations is on a consolidated basis, unless otherwise noted.
For the Years Ended December 31,
2023 2022 Increase/ (Decrease) % Change
Depreciation and amortization expense $ 92.0 $ 88.4 $ 3.7 4.1 %
Asset impairments $ 32.9 $ 2.1 $ 30.7 NM
Floorplan interest expense $ 64.1 $ 27.3 $ 36.8 134.9 %
Other interest expense, net $ 99.8 $ 77.5 $ 22.3 28.7 %
Provision for income taxes $ 198.2 $ 231.1 $ (32.9) (14.2) %
NM - not meaningful
Depreciation and Amortization Expense
Depreciation and amortization expense for the Current Year increased compared to the Prior Year, primarily driven by acquired property and equipment in our U.S. region, as we continue to strategically add dealership related real estate and facilities to our investment portfolio and make improvements to our existing facilities intended to enhance the profitability of our dealerships and improve the overall customer experience.
Impairment of Assets
No goodwill impairments were recorded during the Current Year and the Prior Year. During the Current Year and Prior Year we recorded impairment of franchise rights of $25.1 million and $1.3 million for franchise agreements in the U.S. region, respectively.
We review long-lived assets including property and equipment and ROU assets for impairment at the lowest level of identifiable cash flows whenever there is evidence that the carrying value of these assets may not be recoverable (i.e., triggering events). During the Current Year and Prior Year, we recorded total property and equipment and ROU asset impairment charges of $6.8 million and $0.8 million in the U.S. region, respectively.
See Note 12. Intangible Franchise Rights and Goodwill, Note 10. Property and Equipment, Net and Note 11. Leases within our Notes to Consolidated Financial Statements for further discussion of our assessment for impairments.
Floorplan Interest Expense
Our floorplan interest expense fluctuates with changes in our outstanding borrowings and associated interest rates, which are based on SOFR, the U.S. prime rate or other benchmark rates. Outstanding borrowings largely fluctuate based on our levels of new and used vehicle inventory. To mitigate the impact of interest rate fluctuations, we employ an interest rate hedging strategy, whereby we swap variable interest rate exposure on a portion of our borrowings for a fixed interest rate.
For the Current Year, floorplan interest expense increased $36.8 million, or 134.9%, as compared to the Prior Year, driven primarily by an increase in inventories due to improvements in manufacturer production as well as acquisitions, partially offset by realized gains on our interest rate swap portfolio due to increases in corresponding interest rates.
Refer to Note 7 . Financial Instruments and Fair Value Measurements within our Notes to Consolidated Financial Statements for additional discussion of interest rate swaps.
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Other Interest Expense, Net
Other interest expense, net consists of interest charges primarily on our $750.0 million 4.00% Senior Notes due August 2028 (“4.00% Senior Notes”), real estate related debt and other debt, partially offset by interest income.
For the Current Year, other interest expense, net, increased $22.3 million, or 28.7%, as compared to the Prior Year. The increase in other interest expense, net during the Current Year was primarily attributable to the additional borrowings used to acquire property in our U.S. region. The increase in the Current Year was partially offset by the gain on the de-designation of a mortgage interest rate swap of $4.0 million. Refer to Note 14. Debt within our Notes to Consolidated Financial Statements for additional discussion of our debt. Refer to Note 7 . Financial Instruments and Fair Value Measurements within our Notes to the Consolidated Financial Statements for additional discussion of the de-designation of the mortgage interest rate swap.
Provision for Income Taxes
Provision for income taxes from continuing operations during the Current Year decreased $32.9 million, or 14.2%, as compared to the Prior Year. During the Current Year and Prior Year, we recorded a tax provision from continuing operations of $198.2 million and $231.1 million, respectively. The year-over-year tax expense decrease was primarily due to lower pre-tax book income.
The 2023 effective tax rate of 24.8% was higher than the 2022 effective tax rate of 23.5%. The tax rate increase was primarily due to taxable gains from asset dispositions and the higher U.K. statutory tax rate in the Current Year compared to the Prior Year.
We believe that it is more-likely-than-not that our deferred tax assets, net of valuation allowances provided, will be realized, based primarily on assumptions of our future taxable income, considering future reversals of existing taxable temporary differences.
For further discussion, please see Note 15. Income Taxes within our Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
Our liquidity and capital resources are primarily derived from cash on hand, cash temporarily invested as a pay down of our U.S. Floorplan Line and FMCC Facility levels (see Note 13. Floorplan Notes Payable in our Notes to the Consolidated Financial Statements for additional information), cash from operations, borrowings under our credit facilities, working capital, dealership and real estate acquisition financing and proceeds from debt and equity offerings. We anticipate we will generate sufficient cash flows from operations, coupled with cash on hand and available borrowing capacity under our credit facilities, to fund our working capital requirements, service our debt and meet any other recurring operating expenditures.
Available Liquidity Resources
We had the following sources of liquidity available (in millions):
December 31, 2023
Cash and cash equivalents $ 57.2
Floorplan offset accounts 275.2
Available capacity under Acquisition Line 462.8
Total liquidity $ 795.2
Cash Flows
We arrange our new and used vehicle inventory floorplan financing through lenders affiliated with our vehicle manufacturers and our Revolving Credit Facility. In accordance with U.S. GAAP, we report floorplan financed with lenders affiliated with our vehicle manufacturers (excluding the cash flows from or to manufacturer-affiliated lenders participating in our syndicated lending group) within Cash Flows from Operating Activities in the Consolidated Statements of Cash Flows. We report floorplan financed with the Revolving Credit Facility (including the cash flows from or to manufacturer-affiliated lenders participating in the facility) and other credit facilities in the U.K. unaffiliated with our manufacturer partners, within Cash Flows from Financing Activities in the Consolidated Statements of Cash Flows. Refer to Note 13. Floorplan Notes Payable within our Notes to the Consolidated Financial Statements for additional discussion of our Revolving Credit Facility.
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However, we believe that all floorplan financing of inventory purchases in the normal course of business should correspond with the related inventory activity and be classified as an operating activity. As a result, we use the non-GAAP measure “Adjusted net cash provided by/used in operating activities” and “Adjusted net cash provided by/used in financing activities” to further evaluate our cash flows. We believe that this classification eliminates excess volatility in our operating cash flows prepared in accordance with U.S. GAAP. In addition, floorplan financing associated with dealership acquisitions and dispositions are classified as investing activities on an adjusted basis to eliminate excess volatility in our operating cash flows prepared in accordance with U.S. GAAP.
The following table reconciles cash flows on a U.S. GAAP basis to the corresponding adjusted amounts (in millions):
Years Ended December 31,
2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities: $ 190.2 $ 585.9
Change in Floorplan notes payable — credit facility and other, excluding floorplan offset and net acquisitions and dispositions 504.6 319.7
Change in Floorplan notes payable — manufacturer affiliates associated with net acquisitions and dispositions and floorplan offset activity 25.2 10.1
Adjusted net cash provided by operating activities $ 720.0 $ 915.7
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in investing activities: $ (366.1) $ (484.6)
Change in cash paid for acquisitions, associated with Floorplan notes payable 66.3 25.3
Change in proceeds from disposition of franchises, property and equipment, associated with Floorplan notes payable (48.8) (3.9)
Adjusted net cash used in investing activities $ (348.6) $ (463.2)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided by (used in) financing activities: $ 185.2 $ (67.3)
Change in Floorplan notes payable, excluding floorplan offset (547.3) (351.2)
Adjusted net cash used in financing activities $ (362.1) $ (418.6)
Sources and Uses of Liquidity from Operating Activities — Year Ended December 31, 2023 compared to 2022
For the Current Year, net cash provided by operating activities decreased by $395.8 million as compared to the Prior Year. On an adjusted basis for the same period, adjusted net cash provided by operating activities decreased by $195.8 million. The decrease on an adjusted basis was primarily driven by a $285.6 million increase in inventory levels, a $149.9 million decrease in net income, a $32.7 million increase in contracts-in-transit and vehicle receivables and a $27.3 million decrease in accounts payable and accrued expenses, partially offset by a $319.1 million increase in Floorplan notes payable — manufacturer affiliates.
Sources and Uses of Liquidity from Investing Activities — Year Ended December 31, 2023 compared to 2022
For the Current Year, net cash used in investing activities decreased by $118.5 million, as compared to the Prior Year. On an adjusted basis for the same period, adjusted net cash used in investing activities decreased by $114.7 million, driven by a $203.6 million decrease in acquisition activity, offset by a $59.4 million decrease in sales proceeds due to the sale of the Brazil Disposal Group in the Prior Year, which did not reoccur in the Current Year and a $30.0 million increase in purchases of property and equipment.
Capital Expenditures
Our capital expenditures include costs to extend the useful lives of current dealership facilities, as well as to start or expand operations. In general, expenditures relating to the construction or expansion of dealership facilities are driven by dealership acquisition activity, new franchises being granted to us by a manufacturer, significant growth in sales at an existing facility, relocation opportunities or manufacturer imaging programs. We critically evaluate all planned future capital spending, working closely with our manufacturer partners to maximize the return on our investments.
For the Current Year, $185.4 million was used to purchase property and equipment.
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Sources and Uses of Liquidity from Financing Activities — Year Ended December 31, 2023 compared to 2022
For the Current Year, net cash provided by financing activities increased by $252.5 million, as compared to the Prior Year. On an adjusted basis for the same period, adjusted net cash used in financing activities decreased by $56.4 million. The decrease in net cash used in financing activities on an adjusted basis was primarily driven by a decrease of $348.5 million in cash paid for share repurchases from $521.2 million in the Prior Year to $172.8 million in the Current Year, an increase in acquisition line net borrowings of $44.8 million and a decrease in debt issuance costs paid of $4.3 million, offset by net repayments in credit facilities of $239.9 million and net repayments of other debt of $102.5 million.
Credit Facilities, Debt Instruments and Other Financing Arrangements
Our various credit facilities, debt instruments and other financing arrangements are used to finance the purchase of inventory and real estate, acquisitions and working capital for general corporate purposes.
The following table summarizes the commitment of our credit facilities as of December 31, 2023 (in millions):
As of December 31, 2023
Total
Commitment Outstanding Available
U.S. Floorplan Line (1)
$ 1,200.0 $ 1,121.6 $ 78.4
Acquisition Line (2)
800.0 337.2 462.8
Total Revolving Credit Facility 2,000.0 1,458.7 541.3
FMCC facility (3)
300.0 118.1 181.9
GM Financial Facility (4)
84.5 37.9 46.6
Total U.S. credit facilities (5)
$ 2,384.5 $ 1,614.8 $ 769.7
(1) The available balance at December 31, 2023, includes $236.7 million of immediately available funds. The remaining available balance can be used for vehicle inventory financing.
(2) The outstanding balance of $337.2 million is related to outstanding letters of credit of $12.2 million and $325.0 million in borrowings. The borrowings outstanding under the Acquisition Line included $325.0 million USD borrowings. The available borrowings may be limited from time to time, based on certain debt covenants.
(3) The available balance as of December 31, 2023, includes $38.5 million of immediately available funds. The remaining available balance can be used for Ford new vehicle inventory financing.
(4) The remaining available balance as of December 31, 2023, can be used for General Motors new and rental vehicle inventory financing.
(5) The outstanding balance excludes $287.8 million of borrowings with manufacturer-affiliates and third-party financial institutions for foreign and rental vehicle financing not associated with any of our U.S. credit facilities.
We have other credit facilities in the U.S. and the U.K. with third-party financial institutions, most of which are affiliated with the automobile manufacturers that provide financing for portions of our new, used and rental vehicle inventories. In addition, we have outstanding debt instruments, including our 4.00% Senior Notes, as well as real estate related and other debt instruments. Refer to Note 14. Debt in our Notes to Consolidated Financial Statements for further information.
Covenants
Our Revolving Credit Facility, indentures governing our 4.00% Senior Notes and certain mortgage term loans contain customary financial and operating covenants that place restrictions on us, including our ability to incur additional indebtedness, create liens or to sell or otherwise dispose of assets and to merge or consolidate with other entities. Certain of our mortgage agreements contain cross-default provisions that, in the event of a default of certain mortgage agreements and of our Revolving Credit Facility, could trigger an uncured default.
As of December 31, 2023, we were in compliance with the requirements of the financial covenants under our debt agreements. We are required to maintain the ratios detailed in the following table:
As of December 31, 2023
Required Actual
Total adjusted leverage ratio < 5.75 2.06
Fixed charge coverage ratio > 1.20 4.63
Based on our position as of December 31, 2023, and our outlook as discussed within Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations to this Form 10-K, we believe we have sufficient liquidity and do not anticipate any material liquidity constraints or issues with our ability to remain in compliance with our debt covenants.
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Refer to Note 13. Floorplan Notes Payable and Note 14. Debt in our Notes to Consolidated Financial Statements for further discussion of our credit facilities, debt instruments and other financing arrangements existing as of December 31, 2023.
Stock Repurchases and Dividends
From time to time, our Board of Directors authorizes the repurchase of shares of our common stock up to a certain monetary limit. On August 2, 2023, our Board of Directors increased the share repurchase authorization to $250.0 million. During the Current Year, 729,582 shares were repurchased at an average price of $236.78 per share, for a total of $172.8 million. As of December 31, 2023, we had $143.3 million available under our current stock repurchase authorization.
During the Current Year, our Board of Directors approved quarterly cash dividends per share on all shares of our common stock totaling $1.80 per share, which resulted in $24.6 million paid to common shareholders and $0.6 million to unvested RSA holders.
Future share repurchases and the payment of any future dividends are subject to the business judgment of our Board of Directors, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements, covenant compliance, changes in laws and regulations, current and predicted economic environment and other factors considered relevant.
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