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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to
Commission file number: 001-31262  
ASBURY AUTOMOTIVE GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 01-0609375
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer
Identification No.)
2905 Premiere Parkway NW, Suite 300  
Duluth, Georgia
 30097
(Address of principal executive offices)   (Zip Code)
(770) 418-8200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Trading
Title of each class Symbol(s) Name of each exchange on which registered
Common stock, $0.01 par value per share ABG New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer ☒    Accelerated Filer ☐
Non-Accelerated Filer ☐ Smaller Reporting Company ☐
Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: The number of shares of common stock outstanding as of April 25, 2023 was 21,534,085.

ASBURY AUTOMOTIVE GROUP, INC.

TABLE OF CONTENTS

    Page
PART I—Financial Information
4
5
6
7
8
9
PART II—Other Information







PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements

ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value and share data)
(Unaudited)
  March 31, 2023 December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 296.8  $ 235.3 
Short-term investments 5.5  5.4 
Contracts-in-transit, net 156.3  220.8 
Accounts receivable, net 166.6  171.9 
Inventories, net 1,081.4  959.2 
Assets held for sale 44.9  29.1 
Other current assets 298.8  288.1 
Total current assets 2,050.2  1,909.8 
INVESTMENTS 280.8  235.0 
PROPERTY AND EQUIPMENT, net 1,930.5  1,941.0 
OPERATING LEASE RIGHT-OF-USE ASSETS 239.7  235.4 
GOODWILL 1,783.4  1,783.4 
INTANGIBLE FRANCHISE RIGHTS 1,800.1  1,800.1 
OTHER LONG-TERM ASSETS 98.1  116.7 
Total assets $ 8,182.8  $ 8,021.4 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Floor plan notes payable—trade, net $ 45.6  $ 51.0 
Floor plan notes payable—non-trade, net —  — 
Current maturities of long-term debt 83.1  84.5 
Current maturities of operating leases 22.6  23.6 
Accounts payable and accrued liabilities 672.2  645.0 
Deferred revenue—current 221.8  218.9 
Liabilities associated with assets held for sale 23.1  10.5 
Total current liabilities 1,068.3  1,033.4 
LONG-TERM DEBT 3,194.8  3,216.8 
LONG-TERM LEASE LIABILITY 224.2  218.4 
DEFERRED REVENUE 491.9  495.0 
DEFERRED INCOME TAXES 99.3  100.7 
OTHER LONG-TERM LIABILITIES 55.1  53.5 
COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; 10,000,000 shares authorized; none issued
or outstanding
 —  — 
Common stock, $.01 par value; 90,000,000 shares authorized; 43,549,857 and 43,593,809 shares issued, including shares held in treasury, respectively
 0.4  0.4 
Additional paid-in capital 1,288.0  1,281.4 
Retained earnings 2,763.3  2,610.1 
Treasury stock, at cost; 22,015,888 and 22,024,479 shares, respectively
 (1,064.3) (1,063.0)
Accumulated other comprehensive gain 61.8  74.4 
Total shareholders' equity 3,049.2  2,903.5 
Total liabilities and shareholders' equity $ 8,182.8  $ 8,021.4 


See accompanying Notes to Condensed Consolidated Financial Statements
4
ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
  For the Three Months Ended March 31,
  2023 2022
REVENUE:
New vehicle $ 1,767.7  $ 1,855.6 
Used vehicle 1,126.5  1,350.9 
Parts and service 515.6  501.9 
Finance and insurance, net 172.5  203.4 
TOTAL REVENUE 3,582.3  3,911.8 
COST OF SALES:
New vehicle 1,588.8  1,631.6 
Used vehicle 1,049.5  1,251.6 
Parts and service 233.5  225.4 
Finance and insurance 14.3  11.2 
TOTAL COST OF SALES 2,886.1  3,119.8 
GROSS PROFIT 696.2  792.0 
OPERATING EXPENSES:
Selling, general, and administrative 403.0  455.5 
Depreciation and amortization 16.7  18.4 
Other operating income, net —  (2.7)
INCOME FROM OPERATIONS 276.5  320.8 
OTHER EXPENSES:
Floor plan interest expense 0.6  2.6 
Other interest expense, net 37.3  37.6 
Gain on dealership divestitures, net —  (33.1)
Total other expenses, net 38.0  7.1 
INCOME BEFORE INCOME TAXES 238.5  313.7 
Income tax expense 57.1  76.0 
NET INCOME $ 181.4  $ 237.7 
EARNINGS PER SHARE:
Basic—
Net income $ 8.42  $ 10.43 
Diluted—
Net income $ 8.37  $ 10.38 
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 21.6 22.8
Performance share units 0.1 0.1
Diluted 21.7 22.9







 See accompanying Notes to Condensed Consolidated Financial Statements
5
ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
  For the Three Months Ended March 31,
  2023   2022
Net income $ 181.4  $ 237.7 
Other comprehensive income:
Change in fair value of cash flow swaps (19.4) 42.2 
Income tax benefit (expense) associated with cash flow swaps 4.7  (10.4)
Gains (losses) on available-for-sale debt securities 2.5  (2.2)
Income tax (expense) benefit associated with available-for-sale debt securities (0.5) 0.2 
Comprehensive income $ 168.7    $ 267.5 








































See accompanying Notes to Condensed Consolidated Financial Statements
6
ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in millions)
(Unaudited)

  Common Stock Additional
Paid-in
Capital		 Retained
Earnings		 Treasury Stock Accumulated
Other
Comprehensive
Income (Loss)		 Total
  Shares Amount Shares Amount
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 
Comprehensive Income:
Net income —  —  —  181.4  —  —  —  181.4 
Change in fair value of cash flow swaps, net of reclassification adjustment and $4.7 million tax benefit
 —  —  —  —  —  —  (14.6) (14.6)
Unrealized gain on changes in fair value of debt securities, net of reclassification adjustment and $0.5 million tax expense
 —  —  —  —  —  —  2.0  2.0 
Comprehensive income —  —  —  181.4  —  —  (12.6) 168.7 
Share-based compensation —  —  8.6  —  —  —  —  8.6 
Issuance of common stock, net of forfeitures, in connection with share-based payment arrangements 120,575  —  —  —  —  —  — 
Share repurchases —  —  —  —  110,323  (20.7) —  (20.7)
Repurchase of common stock associated with net share settlement of employee share-based awards —  —  —  —  45,613  (10.9) —  (10.9)
Retirement of common stock (164,527) —  (2.0) (28.2) (164,527) 30.2  —  — 
Balances, March 31, 2023 43,549,857  $ 0.4  $ 1,288.0  $ 2,763.3  22,015,888  $ (1,064.3) $ 61.8  $ 3,049.2 

  Common Stock Additional
Paid-in
Capital		 Retained
Earnings		 Treasury Stock Accumulated
Other
Comprehensive
Income (Loss)		 Total
  Shares Amount Shares Amount
Balances, December 31, 2021 45,052,293  $ 0.4  $ 1,278.6  $ 1,881.3  21,914,251  $ (1,044.1) $ (0.7) $ 2,115.5 
Comprehensive Income:
Net income —  —  —  237.7  —  —  —  237.7 
Change in fair value of cash flow swaps, net of reclassification adjustment and $10.4 million tax expense
 —  —  —  —  —  —  31.8  31.8 
Unrealized loss on changes in fair value of debt securities, net of reclassification adjustment and $0.2 million tax benefit
 —  —  —  —  —  —  (2.0) (2.0)
Comprehensive income —  —  —  237.7  —  —  29.8  267.5 
Share-based compensation —  —  7.0  —  —  —  —  7.0 
Issuance of common stock, net of forfeitures, in connection with share-based payment arrangements 115,435  —  —  —  —  —  —  — 
Share repurchases —  —  1.4  —  1,069,203  (200.0) —  (198.6)
Repurchase of common stock associated with net share settlements of employee share-based awards —  —  —  —  53,810  (8.9) —  (8.9)
Retirement of common stock (1,069,203) —  (12.9) (187.1) (1,069,203) 200.0  $ —  $ — 
Balances, March 31, 2022 44,098,525  $ 0.4  $ 1,274.1  $ 1,931.9  21,968,061  $ (1,053.0) $ 29.1  $ 2,182.5 


See accompanying Notes to Condensed Consolidated Financial Statements
7
ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
  For the Three Months Ended March 31,
  2023 2022
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 181.4  $ 237.7 
Adjustments to reconcile net income to net cash provided by operating activities—
Depreciation and amortization 16.7  18.4 
Share-based compensation 8.6  7.0 
Deferred income taxes 2.8  (0.4)
Unrealized (gains) losses on investments (3.1) 3.3 
Loaner vehicle amortization 6.7  3.2 
Gain on divestitures, net —  (33.1)
Change in right-of-use assets 6.3  7.3 
Other adjustments, net 0.8  0.4 
Changes in operating assets and liabilities, net of acquisitions and divestitures—
Contracts-in-transit 64.5  (1.8)
Accounts receivable 5.2  35.7 
Inventories (33.3) 70.3 
Other current assets (109.5) (82.5)
Floor plan notes payable—trade, net (5.4) (22.0)
Deferred revenue (0.2) 15.5 
Accounts payable and accrued liabilities 33.8  163.0 
Operating lease liabilities (5.9) (7.0)
Other long-term assets and liabilities, net 2.3  (6.0)
Net cash provided by operating activities 171.7  409.0 
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures—excluding real estate (15.2) (20.8)
Divestitures —  252.2 
Purchases of debt securities—available-for-sale (44.1) (12.3)
Purchases of equity securities —  (3.3)
Proceeds from the sale of debt securities—available-for-sale 3.5  12.2 
Proceeds from the sale of equity securities 0.6  3.3 
Net cash (used in) provided by investing activities (55.2) 231.3 
CASH FLOW FROM FINANCING ACTIVITIES:
Floor plan borrowings—non-trade 1,799.6  1,873.7 
Floor plan repayments—non-trade (1,798.2) (2,004.1)
Floor plan repayments—divestitures —  (19.9)
Repayments of borrowings (15.3) (7.7)
Proceeds from revolving credit facility —  320.0 
Repayments of revolving credit facility —  (489.0)
Proceeds from issuance of common stock —  1.4 
Payment of debt issuance costs —  (0.4)
Purchases of treasury stock (30.2) (200.0)
Repurchases of common stock, including amounts associated with net share settlements of
employee share-based awards		 (10.9) (8.9)
Net cash used in financing activities (55.0) (534.9)
Net increase in cash and cash equivalents 61.5  105.4 
CASH AND CASH EQUIVALENTS, beginning of period 235.3  178.9 
CASH AND CASH EQUIVALENTS, end of period $ 296.8  $ 284.3 


See Note 11 "Supplemental Cash Flow Information" for further details
See accompanying Notes to Condensed Consolidated Financial Statements
8
ASBURY AUTOMOTIVE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Asbury Automotive Group, Inc., a Delaware corporation organized in 2002, is one of the largest automotive retailers in the United States. Our store operations are conducted by our subsidiaries.
As of March 31, 2023, we owned and operated 184 new vehicle franchises (139 dealership locations), representing 31 brands of automobiles, and 32 collision centers in 14 states. For the three months ended March 31, 2023, our new vehicle revenue brand mix consisted of 34% luxury, 38% imports and 28% domestic brands. Our stores offer an extensive range of automotive products and services, including new and used vehicles; parts and service, which includes repair and maintenance services, replacement parts and collision repair services (collectively referred to as "parts and services" or "P&S"); and finance and insurance ("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 Company reflects its operations in two reportable segments: Dealerships and TCA.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), and reflect the consolidated accounts of Asbury Automotive Group, Inc. (the "Company") and our wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation. If necessary, reclassifications of amounts previously reported have been made to the accompanying condensed consolidated financial statements in order to conform to current presentation.
In the opinion of management, all adjustments, consisting only of normal, recurring adjustments, considered necessary for a fair statement of the condensed consolidated financial statements as of March 31, 2023, and for the three months ended March 31, 2023 and 2022, have been included, unless otherwise indicated. Amounts presented in the condensed consolidated financial statements 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.
The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for any other interim period, or any full year period. Our condensed consolidated financial statements should be read together with our audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2022.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the periods presented. Actual results could differ materially from these estimates. Estimates and assumptions are reviewed quarterly and the effects of any revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Estimates made in the accompanying condensed consolidated financial statements include, but are not limited to, those relating to inventory valuation reserves, reserves for chargebacks against revenue recognized from the sale of finance and insurance products, reserves for self-insurance programs, and certain assumptions related to goodwill and dealership franchise rights intangible assets.
Share Repurchases
Share repurchases may be made from time-to-time in open market transactions or through privately negotiated transactions under the authorization approved by the Board of Directors. Periodically, the Company may retire repurchased shares of common stock previously held by the Company as treasury stock. In accordance with our accounting policy, we allocate any excess share repurchase price over par value between additional paid-in capital, which is limited to amounts initially recorded for the same issue, and retained earnings. During the three months ended March 31, 2023 and 2022, the Company repurchased 110,323 and 1,069,203 shares and retired 164,527 and 1,069,203 shares, of our common stock under our share repurchase program, respectively. The cash paid for share repurchases was $20.7 million and $200.0 million for the three months ended March 31, 2023 and 2022, respectively. From April 1, 2023 through April 27, 2023, the Company repurchased 149,765 shares for $28.7 million pursuant to a 10b5-1 agreement.

9
Earnings per Share
Basic earnings per share is computed by dividing net income by the weighted-average common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average common shares and common share equivalents outstanding during the period. The Company excluded 4,005 and 2,123 restricted share units and 476 and 533 performance share units issued under the Asbury Automotive Group, Inc. 2019 Equity and Incentive Compensation Plan from its computation of diluted earnings per share for the three months ended March 31, 2023 and 2022, respectively, because they were anti-dilutive. For all periods presented, there were no adjustments to the numerator necessary to compute diluted earnings per share.
Recent Accounting Pronouncements
In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-04, Liabilities-Supplier Finance Programs. This standard serves to improve transparency about supplier finance programs. The ASU requires certain disclosures around key terms of outstanding supply chain finance programs and changes in obligations during a reporting period related to vendors participating in these programs. The new disclosure requirements do not affect the recognition, measurement or financial statement presentation of any amounts due. The guidance is effective for fiscal years beginning after December 15, 2022, except for rollforward information, which is effective in the first quarter of 2024. Early adoption is permitted. The adoption of this new guidance on January 1, 2023 did not have a material impact on our condensed consolidated financial statements. Refer to Note 8, "Floor Plan Notes Payable."
2. REVENUE RECOGNITION
Disaggregation of Revenue
Revenue from contracts with customers for the three months ended March 31, 2023 and 2022 consists of the following:
For the Three Months Ended March 31,
2023 2022
(In millions)
Revenue:
   New vehicle $ 1,767.7  $ 1,855.6 
   Used vehicle retail 1,021.6  1,217.0 
   Used vehicle wholesale 104.9  134.0 
New and used vehicle 2,894.2  3,206.5 
  Sale of vehicle parts and accessories 126.0  130.2 
  Vehicle repair and maintenance services 389.6  371.7 
Parts and service 515.6  501.9 
Finance and insurance, net 172.5  203.4 
Total revenue $ 3,582.3  $ 3,911.8 









10
Contract Assets
Changes in contract assets during the period are reflected in the table below. Contract assets related to vehicle repair and maintenance services are transferred to receivables when a repair order is completed and invoiced to the customer. Certain incremental sales commissions payable to obtain an F&I revenue contract with a customer have been capitalized and are amortized using the same pattern of recognition applicable to the associated F&I revenue contract.
Vehicle Repair and Maintenance Services Finance and Insurance, net Deferred Sales Commissions Total
(In millions)
Balance as of January 1, 2023 $ 14.7  $ 14.7  $ 37.2  $ 66.6 
Transferred to receivables from contract assets recognized at the beginning of the period (14.7) (3.0) —  (17.7)
Amortization of costs to obtain a contract with a customer —  —  (2.0) (2.0)
Costs incurred to obtain a contract with a customer —  —  8.6  8.6 
Increases related to revenue recognized, inclusive of adjustments to constraint, during the period 16.3  2.8  —  19.1 
Balance as of March 31, 2023 $ 16.3  $ 14.5  $ 43.8  $ 74.6 
Contract Assets (current), March 31, 2023 16.3  14.5  12.9  43.7 
Contract Assets (long-term), March 31, 2023 —  —  30.9  30.9 
Deferred Revenue
The condensed consolidated balance sheets reflect $713.7 million and $713.9 million of deferred revenue as of March 31, 2023 and December 31, 2022, respectively. Approximately $62.4 million of deferred revenue at December 31, 2022 was recorded in finance and insurance, net revenue in the condensed consolidated statements of income during the three months ended March 31, 2023.
3. DIVESTITURES
During the three months ended March 31, 2022, we sold one franchise (one dealership location) in St. Louis, Missouri, and three franchises (three dealership locations) in the Denver, Colorado market. The Company recorded a pre-tax gain totaling $33.1 million, for the three months ended March 31, 2022, which is presented in our accompanying condensed consolidated statements of income as gain on dealership divestitures, net. There were no divestitures during the three months ended March 31, 2023.

4. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following: 
  As of
  March 31, 2023 December 31, 2022
  (In millions)
Vehicle receivables $ 48.1  $ 50.4 
Manufacturer receivables 42.1  43.3 
Other receivables 78.6  80.5 
     Total accounts receivable 168.9  174.1 
Less—Allowance for credit losses (2.3) (2.2)
     Accounts receivable, net $ 166.6  $ 171.9 
11
5. INVENTORIES
Inventories consisted of the following:
As of
  March 31, 2023 December 31, 2022
  (In millions)
New vehicles $ 643.0  $ 527.7 
Used vehicles 308.5  304.4 
Parts and accessories 129.9  127.2 
Total inventories, net (a) $ 1,081.4  $ 959.2 
____________________________
(a) Inventories, net as of March 31, 2023 and December 31, 2022, excluded $5.0 million and $3.4 million classified as assets held for sale, respectively.
The lower of cost and net realizable value reserves reduced total inventories by $9.5 million and $10.7 million as of March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023 and December 31, 2022, certain automobile manufacturer incentives reduced new vehicle inventory cost by $4.0 million and $2.7 million, respectively, and reduced new vehicle cost of sales for the three months ended March 31, 2023 and 2022 by $22.3 million and $25.5 million, respectively.
6. ASSETS AND LIABILITIES 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.
A summary of assets held for sale and liabilities associated with assets held for sale is as follows:
As of
March 31, 2023 December 31, 2022
(In millions)
Assets:
Inventory $ 5.0  $ 3.4 
Loaners, net 0.9  0.9 
Property and equipment, net 36.0  24.0 
Operating lease right-of-use assets 2.1  — 
Goodwill 0.9  0.9 
Total assets held for sale 44.9  29.1 
Liabilities:
Floor plan notes payable—non-trade 4.2  2.8 
Loaners notes payable 1.0  0.8 
Current maturities of long-term debt 1.0  0.6 
Current maturities of operating leases 0.5  — 
Long-term debt 14.8  6.2 
Operating lease liabilities 1.6  — 
Total liabilities associated with assets held for sale 23.1  10.5 
Net assets held for sale $ 21.8  $ 18.7 
As of March 31, 2023, assets held for sale consisted of one franchise (one dealership location), real estate associated with five used vehicle stores, one collision center, and 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.
12
7. INVESTMENTS
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, equity securities, and other investments measured at net asset value are as follows:
As of March 31, 2023
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
(In millions)
Short-term investments $ 5.5  $ —  $ —  $ 5.5 
U.S. Treasury 11.9  0.1  (0.1) 11.9 
Municipal 28.3  0.2  (0.2) 28.3 
Corporate 93.8  0.6  (1.4) 93.0 
Mortgage and other asset-backed securities 96.5  0.6  (1.1) 96.0 
Total debt securities 236.0  1.5  (2.8) 234.6 
Common stock 51.7  —  —  51.7 
Total investments $ 287.7  $ 1.5  $ (2.8) $ 286.3 

As of December 31, 2022
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
(In millions)
Short-term investments $ 5.4  $ —  $ —  $ 5.4 
U.S. Treasury 11.8  —  (0.2) 11.6 
Municipal 22.8  —  (0.4) 22.4 
Corporate 81.8  0.2  (2.3) 79.7 
Mortgage and other asset-backed securities 73.8  0.3  (1.4) 72.7 
Total debt securities 195.5  0.5  (4.4) 191.7 
Common stock 48.7  —  —  48.7 
Total investments $ 244.2  $ 0.5  $ (4.4) $ 240.4 
The Company had an unrealized gain of $2.6 million and an unrealized loss of $0.4 million related to equity securities held as of March 31, 2023 and December 31, 2022, respectively.
As of March 31, 2023 and December 31, 2022, the Company had $1.5 million and $1.3 million of accrued interest receivable, which is included in other current assets on the condensed 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.
13
A summary of amortized costs and fair value of investments by time to maturity, is as follows:
  As of March 31, 2023
  Amortized Cost Fair Value
  (In millions)
Due in 1 year or less $ 5.5  $ 5.5 
Due in 1-5 years 87.7  87.0 
Due in 6-10 years 44.0  43.9 
Due after 10 years 2.3  2.3 
Total by maturity 139.5  138.7 
Mortgage and other asset-backed securities 96.5  96.0 
Common stock 51.7  51.7 
Total investment securities $ 287.7  $ 286.3 
There were no gross losses and $0.1 million gross gains realized related to the sale of available-for-sale debt securities carried at fair value for the three months ended March 31, 2023. There were no gross gains or losses realized related to the sale of equity securities carried at fair value for the three months ended March 31, 2023.
The following tables summarize the amount of unrealized losses, defined as the amount by which the amortized cost exceeds fair value, and the related fair value of investments with unrealized losses. The investments were segregated into two categories: those that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months. The reference point for determining how long an investment was in an unrealized loss position was March 31, 2023.
As of March 31, 2023
Less than 12 Months Greater than 12 Months Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
(In millions)
Short-term investments $ 4.0  $ —  $ —  $ —  $ 4.0  $ — 
U.S. Treasury 7.4  (0.1) 0.1  —  7.5  (0.1)
Municipal 14.8  (0.1) 0.9  —  15.7  (0.2)
Corporate 52.4  (0.8) 9.5  (0.6) 61.9  (1.4)
Mortgage and other asset-backed securities 55.3  (0.9) 3.5  (0.3) 58.8  (1.1)
Total debt securities $ 133.9  $ (1.9) $ 13.9  $ (0.9) $ 147.8  $ (2.8)
As of December 31, 2022
Less than 12 Months Greater than 12 Months Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
(In millions)
U.S. Treasury $ 9.2  $ (0.2) $ —  $ —  $ 9.2  $ (0.2)
Municipal 19.0  (0.4) —  —  19.0  (0.4)
Corporate 66.2  (0.1) 5.2  (0.3) 71.4  (0.4)
Mortgage and other asset-backed securities 51.4  (1.3) 1.5  (0.2) 52.9  (1.5)
Total debt securities $ 145.7  $ (2.0) $ 6.8  $ (0.5) $ 152.6  $ (2.5)
The Company reviews the investment securities portfolio at the security level on a quarterly basis for potential credit losses, which takes into consideration numerous factors including changes in credit ratings. The decline in fair value identified in the tables above are a result of widening market spreads and not a result of credit quality. Additionally, the Company has
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determined it has both the intent and ability to hold these investments until the market price recovers or until maturity and does not believe it will be required to sell the securities before maturity. Accordingly, no credit losses were recognized on these securities during the three months ended March 31, 2023.
8. FLOOR PLAN NOTES PAYABLE
Floor plan notes payable consisted of the following:
As of
  March 31, 2023 December 31, 2022
  (In millions)
Floor plan notes payable—trade $ 59.9  $ 65.1 
Floor plan notes payable offset account (14.3) (14.2)
Floor plan notes payable—trade, net $ 45.6  $ 51.0 
Floor plan notes payable—new non-trade (a) $ 680.0  $ 613.6 
Floor plan notes payable offset account (b) (680.0) (613.6)
Floor plan notes payable—non-trade, net $ —  $ — 
____________________________

(a) Floor plan notes payable—new non-trade as of March 31, 2023 and December 31, 2022, excluded $4.2 million and $2.8 million classified as liabilities associated with assets held for sale, respectively.
(b) In addition to the $680.0 million and $613.6 million shown above as of March 31, 2023 and December 31, 2022, respectively, we held $158.1 million and $164.0 million, in the floor plan notes payable offset account as of March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023, $77.2 million of the $158.1 million was reflected within cash and cash equivalents and the remaining $80.9 million was shown as an offset to loaner vehicles notes payable. As of December 31, 2022, $100.8 million of the $164.0 million was reflected within cash and cash equivalents and the remaining $63.2 million was shown as an offset to loaner vehicles notes payable. Loaner vehicle notes payable is included in accounts payable and accrued liabilities within the condensed consolidated balance sheets.
We have floor plan offset accounts that allow us to offset our floor plan notes payable balances outstanding with transfers of cash to reduce the amount of outstanding 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 the same day.
We have the ability to convert a portion of our availability under the Revolving Credit Facility to the New Vehicle Floor Plan Facility or the Used Vehicle Floor Plan Facility. The maximum amount we are allowed to convert is determined based on our aggregate revolving commitment under the Revolving Credit Facility, less $50.0 million. In addition, we are able to convert any amounts moved to the New Vehicle Floor Plan Facility or Used Vehicle Floor Plan Facility back to the Revolving Credit Facility.
On May 27, 2022, $389.0 million of our availability under the Revolving Credit Facility was re-designated to the New Vehicle Floor Plan Facility to take advantage of lower commitment fee rates. On 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 Ford Motor Credit Company (“Ford Credit”), Bank of America and certain original equipment manufacturers (“OEMs”). Generally, the loaner vehicle programs with the OEMs provide for a short-term lease of the loaner vehicle pursuant to which we make monthly payments. During the term of the lease, the title and ownership of the loaner vehicles are retained by the OEM. We are obligated to purchase the loaner vehicle upon expiration of the lease. Under certain programs, we have the option to purchase the loaner vehicle prior to the expiration of the lease term. Loaner vehicles notes payable related to Ford Credit as of March 31, 2023 and December 31, 2022 were $13.7 million and $13.4 million, respectively. Loaner vehicles notes payable related to Bank of America as of March 31, 2023 and December 31, 2022 were $0.0 million and $10.8 million, net of offsets of $80.9 million and $63.2 million, respectively. Loaner vehicles notes payable related to OEMs as of March 31, 2023 and December 31, 2022 were $75.1 million and $70.4 million, respectively.
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9. DEBT
Long-term debt consisted of the following:
  As of
March 31, 2023 December 31, 2022
(In millions)
4.50% Senior Notes due 2028
 $ 405.0  $ 405.0 
4.625% Senior Notes due 2029
 800.0  800.0 
4.75% Senior Notes due 2030
 445.0  445.0 
5.00% Senior Notes due 2032
 600.0  600.0 
Mortgage notes payable bearing interest at fixed rates (a) 37.7  38.3 
2021 Real Estate Facility (b) 642.9  660.6 
2021 BofA Real Estate Facility 171.5  173.3 
2018 Bank of America Facility (c) 53.5  54.5 
2018 Wells Fargo Master Loan Facility 75.7  76.9 
2013 BofA Real Estate Facility 24.3  24.9 
2015 Wells Fargo Master Loan Facility 41.1  42.3 
Finance lease liability 8.4  8.4 
Total debt outstanding 3,304.9  3,329.2 
Add—unamortized premium on 4.50% Senior Notes due 2028
 0.8  0.8 
Add—unamortized premium on 4.75% Senior Notes due 2030
 1.5  1.6 
Less—debt issuance costs (29.3) (30.4)
Long-term debt, including current portion 3,277.9  3,301.2 
Less—current portion, net of current portion of debt issuance costs (83.1) (84.5)
Long-term debt $ 3,194.8  $ 3,216.8 
____________________________
(a) Mortgage notes payable excluded $2.7 million that were classified as liabilities associated with assets held for sale as of both March 31, 2023 and December 31, 2022.
(b) Amounts reflected for the 2021 Real Estate Facility as of March 31, 2023 exclude $9.2 million classified as liabilities associated with assets held for sale.
(c) Amounts reflected for the 2018 Bank of America Facility as of March 31, 2023 and December 31, 2022, exclude $4.0 million and $4.1 million classified as liabilities associated with assets held for sale.
10. FINANCIAL INSTRUMENTS AND FAIR VALUE
In determining fair value, we use various valuation approaches, including market and income approaches. Accounting standards establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the presumptions market participants would use in pricing the asset or liability, developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:
Level 1-Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access.
Level 2-Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Assets and liabilities utilizing Level 2 inputs include interest rate swap instruments, exchange-traded debt securities that are not actively traded or do not have a high trading volume, mortgage notes payable and certain real estate properties on a non-recurring basis.
Level 3-Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Asset and liability measurements utilizing Level 3 inputs include those used in estimating the fair value of certain non-financial assets and
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non-financial liabilities in purchase acquisitions and those used in the assessment of impairment for goodwill and manufacturer franchise rights.
The availability of observable inputs can vary and is affected by a wide variety of factors. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment required to determine fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.
Fair value is a market-based exit price measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, our assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. We use inputs that are current as of the measurement date, including during periods of significant market fluctuations.
Financial instruments consist primarily of cash and cash equivalents, contracts-in-transit, accounts receivable, cash surrender value of corporate-owned life insurance policies, accounts payable, floor plan notes payable, subordinated long-term debt, mortgage notes payable and interest rate swap instruments. The carrying values of our financial instruments, with the exception of subordinated long-term debt and certain mortgage notes payable, approximate fair value due to (i) their short-term nature, (ii) recently completed market transactions or (iii) existence of variable interest rates, which approximate market rates. The fair value of our subordinated long-term debt is based on reported market prices in an inactive market that reflect Level 2 inputs. 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 subordinated long-term debt and our mortgage notes payable is as follows: 
  As of
  March 31, 2023 December 31, 2022
  (In millions)
Carrying Value:
4.50% Senior Notes due 2028
 $ 402.3  $ 409.5 
4.625% Senior Notes due 2029
 789.4  789.1 
4.75% Senior Notes due 2030
 441.8  441.7 
5.00% Senior Notes due 2032
 591.7  591.5 
Mortgage notes payable (a) 1,044.2  1,061.1 
Total carrying value $ 3,269.5  $ 3,292.9 
Fair Value:
4.50% Senior Notes due 2028
 $ 367.5  $ 354.4 
4.625% Senior Notes due 2029
 708.0  672.0 
4.75% Senior Notes due 2030
 393.8  372.7 
5.00% Senior Notes due 2032
 523.5  492.0 
Mortgage notes payable (a) 1,045.2  1,069.8 
Total fair value $ 3,038.0  $ 2,960.9 
____________________________
(a) Mortgage notes payable as of March 31, 2023 and December 31, 2022, exclude $15.8 million and $6.8 million classified as liabilities associated with assets held for sale, respectively.
Interest Rate Swap Agreements
We currently have seven interest rate swap agreements. In January 2022, we entered into two new interest rate swap agreements with a combined notional principal amount of $550.0 million. These swaps are designed to provide a hedge against changes in variable rate cash flows regarding fluctuations in the SOFR rate. All interest rate swap agreements with an inception date of 2021 and prior were amended on June 1, 2022 to provide a hedge against changes in variable rate cash flows regarding fluctuations in SOFR as compared to the previous benchmark rate of one-month LIBOR. The revisions to the interest rate swap
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agreements did not impact our hedge accounting because we applied the accounting expedients outlined in ASU 2020-04 and ASU 2021-01 of ASC Topic 848, Reference Rate Reform. The following table provides information on the attributes of each swap as of March 31, 2023:
Inception Date Notional Principal at Inception
Notional Value as of March 31, 2023
 Notional Principal at Maturity Maturity Date
(In millions)
January 2022 $ 300.0  $ 285.0  $ 228.8  December 2026
January 2022 $ 250.0  $ 250.0  $ 250.0  December 2031
May 2021 $ 184.4  $ 171.5  $ 110.6  May 2031
July 2020 $ 93.5  $ 80.1  $ 50.6  December 2028
July 2020 $ 85.5  $ 72.1  $ 57.3  November 2025
June 2015 $ 100.0  $ 62.7  $ 53.1  February 2025
November 2013 $ 75.0  $ 40.5  $ 38.7  September 2023
The fair value of cash flow swaps is calculated as the present value of expected future cash flows, determined on the basis of forward interest rates and present value factors. Fair value estimates reflect a credit adjustment to the discount rate applied to all expected cash flows under the swaps. Other than this input, all other inputs used in the valuation of these swaps are designated to be Level 2 inputs. The fair value of our swaps was an $83.0 million and a $102.4 million net asset as of March 31, 2023 and December 31, 2022, respectively.
The following table provides information regarding the fair value of our interest rate swap agreements and the impact on the condensed consolidated balance sheets:
As of
March 31, 2023 December 31, 2022
(In millions)
Other current assets $ 27.9  $ 29.6 
Other long-term assets 55.1  72.8 
Total fair value $ 83.0  $ 102.4 
Our interest rate swaps qualify for cash flow hedge accounting treatment. These interest rate swaps are marked to market at each reporting date and any unrealized gains or losses are included in accumulated other comprehensive income and reclassified to interest expense in the same period or periods during which the hedged transactions affect earnings. Information about the effect of our interest rate swap agreements in the accompanying condensed consolidated statements of income and condensed consolidated statements of comprehensive income, is as follows (in millions):
For the Three Months Ended March 31, Results Recognized in Accumulated Other Comprehensive Income/(Loss)
Location of Amount Reclassified from Accumulated Other Comprehensive Income/(Loss) to Earnings
 Amount Reclassified from Accumulated Other Comprehensive Income/(Loss)
to Earnings
2023 $ (27.0) Other interest expense, net $ (7.7)
2022 $ 45.4  Other interest expense, net $ 3.1 
 On the basis of yield curve conditions as of March 31, 2023 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 $27.9 million.

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Investments
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:
As of March 31, 2023
  Level 1 Level 2 Level 3 Total
  (In millions)
Cash equivalents $ 2.5  $ —  $ —  $ 2.5 
Short-term investments 1.5  4.0  —  5.5 
U.S. Treasury 11.9  —  —  11.9 
Municipal —  28.3  —  28.3 
Corporate —  93.0  —  93.0 
Mortgage and other asset-backed securities —  96.0  —  96.0 
Total debt securities 13.4  221.3  —  234.6 
Common stock 51.7  —  —  51.7 
Total $ 65.1  $ 221.3  $ —  $ 286.3 

As of December 31, 2022
  Level 1 Level 2 Level 3 Total
  (In millions)
Cash equivalents $ 6.6  $ —  $ —  $ 6.6 
Short-term investments 0.6  4.8  —  5.4 
U.S. Treasury 11.6 —  —  11.6 
Municipal —  22.4  —  22.4 
Corporate —  79.7  —  79.7 
Mortgage and other asset-backed securities —  72.6  —  72.6 
Total debt securities 12.2  179.5  —  191.7 
Common stock 48.7 —  —  48.7 
Total $ 60.9  $ 179.5  $ —  $ 240.4 
We review the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain investments. Such reclassifications are reported as transfers in and out of Level 3, or between other levels, at the beginning fair value for the reporting period in which the changes occur.
Available-for-sale debt securities are recorded at fair value and any unrealized gains or losses are included in accumulated other comprehensive income and reclassified to finance and insurance, net revenue in the period or periods during which the debt securities are sold and the gains or losses are realized. Information about the effect of our available-for-sale debt securities in the accompanying condensed consolidated statements of income and condensed consolidated statements of comprehensive income, is as follows (in millions):
For the Three Months Ended March 31, Results Recognized in Accumulated Other Comprehensive Income/(Loss)
Location of Amount Reclassified from Accumulated Other Comprehensive Income/(Loss) to Earnings
 Amount Reclassified from Accumulated Other Comprehensive Income/(Loss)
to Earnings
2023 $ 2.6  Revenue-Finance and Insurance, net $ 0.1 
2022 $ (2.5) Revenue-Finance and Insurance, net $ (0.3)
11. SUPPLEMENTAL CASH FLOW INFORMATION
During the three months ended March 31, 2023 and 2022, we made interest payments, including amounts capitalized, totaling $28.4 million and $31.6 million, respectively. Included in these interest payments is net interest received of $0.2 million during the three months ended March 31, 2023 due to cash held in our floor plan offset accounts, and $2.6 million of floor plan interest payments during the three months ended March 31, 2022.
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During the three months ended March 31, 2023 and 2022, we transferred $90.4 million and $57.5 million, respectively, of loaner vehicles from other current assets to inventories on our condensed consolidated balance sheets.

12. SEGMENT INFORMATION
As of March 31, 2023, the Company had two reportable segments: (1) Dealerships and (2) TCA. Our dealership operations are organized by management into geographic market-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.
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. The corresponding claims expense incurred and the amortization of deferred acquisition costs is recorded as a cost of sales in the TCA segment. 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.
Reportable segment financial information for the three months ended March 31, 2023 and 2022, are as follows:
Three Months Ended March 31, 2023
Dealerships TCA Eliminations Total Company
(In millions)
Revenue $ 3,556.3  $ 70.7  $ (44.7) $ 3,582.3 
Gross profit $ 679.6  $ 21.1  $ (4.5) $ 696.2 

Three Months Ended March 31, 2022
Dealerships TCA Eliminations Total Company
(In millions)
Revenue $ 3,894.2  $ 57.3  $ (39.7) $ 3,911.8 
Gross profit $ 781.4  $ 12.4  $ (1.9) $ 792.0 


Total assets by segment as of March 31, 2023 and as of December 31, 2022 are as follows:

As of March 31, 2023
Dealerships TCA Eliminations Total Company
(In millions)
Total assets $ 7,348.7  $ 840.5  $ (6.4) $ 8,182.8 

As of December 31, 2022
Dealerships TCA Eliminations Total Company
(In millions)
Total assets $ 7,170.8  $ 869.2  $ (18.6) $ 8,021.4 
13. COMMITMENTS AND CONTINGENCIES
Our dealerships are party to dealer and framework agreements with applicable vehicle manufacturers. In accordance with these agreements, each dealership has certain rights and is subject to restrictions typical in the industry. The ability of these
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manufacturers to influence the operations of the dealerships or the loss of any of these agreements could have a materially negative impact on our operating results.
In some instances, manufacturers may have the right, and may direct us, to implement costly capital improvements to dealerships as a condition to entering into, renewing, or extending franchise agreements with them. Manufacturers also typically require that their franchises meet specific standards of appearance. These factors, either alone or in combination, could cause us to use our financial resources on capital projects for which we might not have planned or otherwise determined to undertake.
From time-to-time, we and our dealerships are or may become involved in various claims relating to, and arising out of, our business and our operations. These claims may involve, but not be limited to, financial and other audits by vehicle manufacturers or lenders and certain federal, state, and local government authorities, which have historically related primarily to (i) incentive and warranty payments received from vehicle manufacturers, or allegations of violations of manufacturer agreements or policies, (ii) compliance with lender rules and covenants, and (iii) payments made to government authorities relating to federal, state, and local taxes, as well as compliance with other government regulations. 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. Based on our review of the various types of claims currently known to us, there is no indication of material reasonably possible losses in excess of amounts accrued in the aggregate. We currently do not anticipate that any known claim will materially adversely affect our financial condition, liquidity, or results of operations. However, the outcome of any matter cannot be predicted with certainty, and an unfavorable resolution of one or more matters presently known or arising in the future could have a material adverse effect on our financial condition, liquidity, or results of operations.
A significant portion of our business involves the sale of vehicles, parts, or vehicles composed of parts that are manufactured outside the United States. As a result, our operations are subject to customary risks of importing merchandise, including fluctuations in the relative values of currencies, import duties, exchange controls, trade restrictions, work stoppages, and general political and socio-economic conditions in foreign countries. The United States or the countries from which our products are imported may, from time-to-time, impose new quotas, duties, tariffs, or other restrictions, or adjust presently prevailing quotas, duties, or tariffs, which may affect our operations, and our ability to purchase imported vehicles and/or parts at reasonable prices.
Substantially all of our facilities are subject to federal, state and local provisions regarding the discharge of materials into the environment. 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. 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.
We had $12.5 million of letters of credit outstanding as of March 31, 2023, which are required by certain of our insurance providers. In addition, as of March 31, 2023, we maintained a $17.4 million surety bond line in the ordinary course of our business. Our letters of credit and surety bond line are considered to be off balance sheet arrangements.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Information
Certain of the discussions and information included or incorporated by reference in this report may constitute "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are statements that are not historical in nature and may include statements relating to our goals, plans and projections regarding industry and general economic trends, our expected financial position, results of operations or market position and our business strategy. Such statements can generally be identified by words such as "may," "target," "could," "would," "will," "should," "believe," "expect," "anticipate," "plan," "intend," "foresee," and other similar words or phrases. Forward-looking statements may also relate to our expectations and assumptions with respect to, among other things:

•the seasonally adjusted annual rate of new vehicle sales in the United States;
•general economic conditions and its expected impact on our revenue and expenses;
•our expected parts and service revenue due to, among other things, improvements in vehicle technology;
•our ability to limit our exposure to regional economic downturns due to our geographic diversity and brand mix;
•manufacturers' continued use of incentive programs to drive demand for their product offerings;
•our capital allocation strategy, including as it relates to acquisitions and divestitures, stock repurchases, dividends and capital expenditures;
•our revenue growth strategy;

•the growth of the brands that comprise our portfolio over the long-term;
•disruptions in the production and supply of vehicles and parts from our vehicle and parts manufacturers and other suppliers due to any ongoing impact of supply issues, including the global semiconductor chip shortage, which can disrupt our operations; and
•our estimated future capital expenditures, which can be impacted by increasing prices and labor shortages and acquisitions and divestitures.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual future results, performance or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Such factors include, but are not limited to:
•the ability to acquire and successfully integrate acquired businesses into our existing operations and realize expected benefits and synergies from such acquisitions;
•the effects of increased expenses or unanticipated liabilities incurred as a result of, or due to activities related to our acquisitions or divestitures;
•changes in general economic and business conditions, including the current inflationary environment, the current rising interest rate environment, changes in employment levels, consumer confidence levels, consumer demand and preferences, the availability and cost of credit, fuel prices and levels of discretionary personal income;
•our ability to generate sufficient cash flows, maintain our liquidity and obtain any necessary additional funds for working capital, capital expenditures, acquisitions, stock repurchases, debt maturity payments and other corporate purposes, if necessary or desirable;
•significant disruptions in the production and delivery of vehicles and parts for any reason, including supply shortages (including semiconductor chips), the ongoing conflict in Russia and Ukraine, including any government sanctions imposed in connection therewith, natural disasters, severe weather, civil unrest, product recalls, work stoppages or other occurrences that are outside of our control;
•our ability to execute our automotive retailing and service business strategy while operating under restrictions and best practices imposed or encouraged by governmental and other regulatory authorities;
•our ability to successfully attract and retain skilled employees;
•our ability to successfully operate, including our ability to maintain, and obtain future necessary regulatory approvals, for Total Care Auto, Powered by Landcar ("TCA"), our finance and insurance ("F&I") product provider;
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•adverse conditions affecting the vehicle manufacturers whose brands we sell, and their ability to design, manufacture, deliver and market their vehicles successfully;
•changes in the mix and total number of vehicles we are able to sell;
•our outstanding indebtedness and our continued ability to comply with applicable covenants in our various financing and lease agreements, or to obtain waivers of these covenants as necessary;
•high levels of competition in our industry, which may create pricing and margin pressures on our products and services;
•our relationships with manufacturers of the vehicles we sell and our ability to renew, and enter into new framework and dealer agreements with vehicle manufacturers whose brands we sell, on terms acceptable to us;
•the availability of manufacturer incentive programs and our ability to earn these incentives;
•failure of our, or those of our third-party service providers, management information systems;
•any data security breaches occurring, including with regard to personally identifiable information ("PII");
•changes in laws and regulations governing the operation of automobile franchises, including trade restrictions, consumer protections, accounting standards, taxation requirements and environmental laws;
•changes in, or the imposition of, new tariffs or trade restrictions on imported vehicles or parts;
•adverse results from litigation or other similar proceedings involving us;
•our ability to consummate planned mergers, acquisitions and dispositions;
•any disruptions in the financial markets, which may impact our ability to access capital;
•our relationships with, and the financial stability of, our lenders and lessors;
•our ability to execute our initiatives and other strategies; and
•our ability to leverage scale and cost structure to improve operating efficiencies across our dealership portfolio.
Many of these factors are beyond our ability to control or predict, and their ultimate impact could be material. Moreover, the factors set forth under "Item 1A. Risk Factors" and other cautionary statements made in this report should be read and considered as forward-looking statements subject to such uncertainties. Forward-looking statements speak only as of the date of this report. We expressly disclaim any obligation to update any forward-looking statement contained herein.

OVERVIEW
We are one of the largest automotive retailers in the United States. As of March 31, 2023, through our Dealerships segment, we owned and operated 184 new vehicle franchises (139 dealership locations), representing 31 brands of automobiles, and 32 collision centers within 14 states. Our stores offer an extensive range of automotive products and services, including new and used vehicles; parts and service, which includes repair and maintenance services, replacement parts and collision repair services; and finance and insurance products. The finance and insurance products are provided by both independent third parties and TCA. The F&I products offered by TCA are sold through affiliated dealerships. For the three months ended March 31, 2023, our new vehicle revenue brand mix consisted of 34% luxury, 38% imports and 28% domestic brands. The Company manages its operations in two reportable segments: Dealerships and TCA.
Our Dealerships segment revenues are derived primarily from: (i) the sale of new vehicles; (ii) the sale of used vehicles to individual retail customers ("used retail") and to other dealers at auction ("wholesale") (the terms "used retail" and "wholesale" collectively referred to as "used"); (iii) repair and maintenance services, including collision repair, the sale of automotive replacement parts, and the reconditioning of used vehicles (collectively referred to as "parts and service"); and (iv) the arrangement of third-party vehicle financing and the sale of a number of vehicle protection products. F&I products are offered by dealerships to customers in connection with the purchase of vehicles through either TCA or independent third parties. We evaluate the results of our new and used vehicle sales based on unit volumes and gross profit per vehicle sold, our parts and service operations based on aggregate gross profit, and our F&I business based on F&I gross profit per vehicle sold. 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.
Our TCA segment revenues, reflected in F&I revenue, net, are derived from the sale of various vehicle protection products including vehicle service contracts, GAP, prepaid maintenance contracts, and appearance protection contracts. These products are sold through company-owned dealerships. TCA's F&I revenues also include investment gains or losses and income earned associated with the performance of TCA's investment portfolio.
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Our TCA segment gross profit margin can vary due to incurred claims expense and the performance of our investment portfolio. Certain F&I products may result in higher gross profit margins to TCA. Therefore, the product mix of F&I products sold by TCA can affect the gross profits earned. In addition, interest rate volatility, based on economic and market conditions outside the control of the Company, may increase or reduce TCA segment gross profit margins as well as the fair market values of certain securities within our investment portfolio. Fair market values typically fluctuate inversely to the fluctuations in interest rates.
Selling, general, and administrative ("SG&A") expenses consist primarily of fixed and incentive-based compensation, advertising, rent, insurance, utilities, and other customary operating expenses. A significant portion of our cost structure is variable (such as sales commissions) or controllable (such as advertising), which we believe allows us to adapt to changes in the retail environment over the long-term. We evaluate commissions paid to salespeople as a percentage of retail vehicle gross profit, advertising expense on a per vehicle retailed basis, and all other SG&A expenses in the aggregate as a percentage of total gross profit.
Our continued organic growth is dependent upon the execution of our balanced automotive retailing and service business strategy, the continued strength of our brand mix and the production and allocation of desirable vehicles from the automobile manufacturers whose brands we sell. Our vehicle sales have historically fluctuated with product availability as well as local and national economic conditions, including consumer confidence, availability of consumer credit, fuel prices and employment levels.
In addition, our ability to sell certain new and used vehicles can be negatively impacted by a number of factors, some of which are outside of our control. While new vehicle inventories continue to rise, manufacturers remain hampered by the lack of availability of parts and key components from suppliers, such as semiconductor chips, which has impacted new vehicle inventory levels and availability of certain parts, keeping new vehicle inventories at historical lows. We cannot predict with any certainty how long the automotive retail industry will continue to be subject to these production slowdowns or when normalized production will resume at these manufacturers.
We are strategically operating within the changing environment and we continue to prioritize profitability. Over the last couple of years, pre-owned vehicle inventory has been depleted due to fleet levels and lack of leasing. Overall, with this limited availability of pre-owned inventory and unbalanced new inventory by brand, we are focused on maximizing our gross profit streams.
Clicklane
As part of our omni-channel strategy, we implemented Clicklane, the automotive retail industry’s first, end-to-end, 100% online vehicle retail tool, which offers our customers a convenient, seamless and transparent approach to purchase and sell vehicles completely online. Our Clicklane platform provides our customers with the ability to (i) select a new or used vehicle, (ii) arrange for and obtain financing from a variety of lenders, (iii) obtain an offer on their trade-in vehicle, (iv) obtain an exact pay-off amount on any existing loan on a trade-in vehicle, (v) select and purchase F&I products designed for the customer’s vehicle and then (vi) complete the vehicle purchase and financing by signing the transaction documents and scheduling in-store pickup or home delivery, with each step performed entirely online. We have implemented Clicklane across all of our stores.
Financial Highlights
Highlights related to our financial condition and results of operations include the following:
•Consolidated revenue for the three months ended March 31, 2023 was $3.6 billion, compared to $3.9 billion for the prior year.
•Consolidated gross profit for the three months ended March 31, 2023 was $696.2 million, compared to $792.0 million for the prior year.
•The decrease in consolidated revenue and gross profit is primarily due to the effects of dealership divestitures. During 2022, we completed sixteen divestitures that contributed $683 million in revenue for the year ended December 31, 2022. Four of the divestitures closed in the first quarter, three in the second quarter, and nine in the fourth quarter of 2022.
•Our capital allocation priorities were supported by the repurchase of 0.1 million shares for $21 million during the three months ended March 31, 2023.
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CONSOLIDATED RESULTS OF OPERATIONS
Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022
  For the Three Months Ended March 31, Increase
(Decrease)		 %
Change
  2023 2022
  (Dollars in millions, except per share data)
REVENUE:
New vehicle $ 1,767.7  $ 1,855.6  $ (87.9) (5) %
Used vehicle 1,126.5  1,350.9  (224.4) (17) %
Parts and service 515.6  501.9  13.7  3  %
Finance and insurance, net 172.5  203.4  (30.9) (15) %
TOTAL REVENUE 3,582.3  3,911.8  (329.5) (8) %
GROSS PROFIT:
New vehicle 178.9  224.0  (45.1) (20) %
Used vehicle 77.0  99.3  (22.3) (22) %
Parts and service 282.1  276.4  5.7  2  %
Finance and insurance, net 158.2  192.3  (34.1) (18) %
TOTAL GROSS PROFIT 696.2  792.0  (95.8) (12) %
OPERATING EXPENSES:
Selling, general, and administrative 403.0  455.5  (52.5) (12) %
Depreciation and amortization 16.7  18.4  (1.7) (9) %
Other operating income, net —  (2.7) 2.7  NM
INCOME FROM OPERATIONS 276.5  320.8  (44.3) (14) %
OTHER EXPENSES:
Floor plan interest expense 0.6  2.6  (2.0) (75) %
Other interest expense, net 37.3  37.6  (0.2) (1) %
Gain on dealership divestitures, net —  (33.1) 33.1  NM
Total other expenses, net 38.0  7.1  30.9  NM
INCOME BEFORE INCOME TAXES 238.5  313.7  (75.2) (24) %
Income tax expense 57.1  76.0  (18.9) (25) %
NET INCOME $ 181.4  $ 237.7  $ (56.3) (24) %
Net income per share—Diluted $ 8.37  $ 10.38  $ (2.01) (19) %
______________________________
NM—Not Meaningful
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  For the Three Months Ended March 31,
  2023 2022
REVENUE MIX PERCENTAGES:
New vehicle 49.3  % 47.4  %
Used vehicle retail 28.5  % 31.1  %
Used vehicle wholesale 2.9  % 3.4  %
Parts and service 14.4  % 12.8  %
Finance and insurance, net 4.8  % 5.2  %
Total revenue 100.0  % 100.0  %
GROSS PROFIT MIX PERCENTAGES:
New vehicle 25.7  % 28.3  %
Used vehicle retail 10.1  % 12.1  %
Used vehicle wholesale 0.9  % 0.4  %
Parts and service 40.5  % 34.9  %
Finance and insurance, net 22.7  % 24.3  %
Total gross profit 100.0  % 100.0  %
GROSS PROFIT MARGIN 19.4  % 20.2  %
SG&A EXPENSE AS A PERCENTAGE OF GROSS PROFIT 57.9  % 57.5  %
Total revenue for the three months ended March 31, 2023 decreased by $329.5 million (8%) compared to the three months ended March 31, 2022, due to a $87.9 million (5%) decrease in new vehicle revenue, a $224.4 million (17%) decrease in used vehicle revenue, a $30.9 million (15%) decrease in F&I, net revenue, offset by a $13.7 million (3%) increase in parts and service revenue. The $95.8 million (12%) decrease in gross profit during the three months ended March 31, 2023 was driven by a $45.1 million (20%) decrease in new vehicle gross profit, a $34.1 million (18%) decrease in F&I, net gross profit and a $22.3 million (22%) decrease in used vehicle gross profit, offset by a $5.7 million (2%) increase in parts and service gross profit.
Income from operations during the three months ended March 31, 2023 decreased by $44.3 million (14%), compared to the three months ended March 31, 2022, primarily due to the $95.8 million (12%) decrease in gross profit and a $2.7 million decrease in other operating income, net, partially offset by a $52.5 million (12%) decrease in SG&A expense, and a $1.7 million (9%) decrease in depreciation and amortization expense.
Total other expenses, net increased by $30.9 million, primarily as a result of a $33.1 million gain on dealership divestitures, net recorded during the three months ended March 31, 2022 whereas the current year period did not reflect any divestitures. This increase in other expenses, net was partially offset by a $2.0 million (75%) decrease in floor plan interest expense, and a $0.2 million (1%) decrease in other interest expense, net during the three months ended March 31, 2023 when compared to the prior year period. Income before income taxes decreased $75.2 million to $238.5 million for the three months ended March 31, 2023. Overall, net income decreased by $56.3 million (24%) during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.










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New Vehicle—
  For the Three Months Ended March 31, Increase
(Decrease)		 %
Change
  2023 2022
  (Dollars in millions, except for per vehicle data)
As Reported:
Revenue:
Luxury $ 607.4  $ 543.3  $ 64.1  12  %
Import 666.9  765.9  (99.0) (13) %
Domestic 493.4  546.4  (53.0) (10) %
Total new vehicle revenue $ 1,767.7  $ 1,855.6  $ (87.9) (5) %
Gross profit:
Luxury $ 72.4  $ 70.8  $ 1.5  2  %
Import 64.0  95.4  (31.4) (33) %
Domestic 42.5  57.7  (15.2) (26) %
Total new vehicle gross profit $ 178.9  $ 224.0  $ (45.1) (20) %
New vehicle units:
Luxury 8,429  8,257  172  2  %
Import 17,389  20,678  (3,289) (16) %
Domestic 8,688  10,239  (1,551) (15) %
Total new vehicle units 34,506  39,174  (4,668) (12) %
Same Store:
Revenue:
Luxury $ 607.4  $ 513.0  $ 94.3  18  %
Import 666.9  668.4  (1.5) —  %
Domestic 493.4  527.9  (34.6) (7) %
Total new vehicle revenue $ 1,767.7  $ 1,709.4  $ 58.3  3  %
Gross profit:
Luxury $ 72.4  $ 67.6  $ 4.8  7  %
Import 64.0  84.0  (20.0) (24) %
Domestic 42.5  55.9  (13.4) (24) %
Total new vehicle gross profit $ 178.9  $ 207.5  $ (28.6) (14) %
New vehicle units:
Luxury 8,429  7,741  688  9  %
Import 17,389  18,169  (780) (4) %
Domestic 8,688  9,868  (1,180) (12) %
Total new vehicle units 34,506  35,778  (1,272) (4) %
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New Vehicle Metrics—
  For the Three Months Ended March 31, Increase (Decrease) %
Change
  2023 2022
As Reported:
Revenue per new vehicle sold $ 51,228  $ 47,367  $ 3,861  8  %
Gross profit per new vehicle sold $ 5,184  $ 5,717  $ (533) (9) %
New vehicle gross margin 10.1  % 12.1  % (2.0) %
Luxury: