ASBURY AUTOMOTIVE GROUP INC. Management’s Discussion and Analysis of Financial Position and Operating Results (Form 10-Q)

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 the
global semiconductor shortage, which can disrupt our operations;
•disruptions in our operations, the operations of our vehicle and parts
manufacturers and other suppliers, vendors and business partners, and the global
economy in general due to the global COVID-19 pandemic, including due to any new
strains of the virus and the efficacy and rate of vaccinations; and
•our estimated future capital expenditures, which can be impacted by increasing
prices and labor shortages.

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 degree to which disruptions in our operations, the operations of our
vehicle and parts manufacturers and other suppliers, vendors and business
partners, and the global economy in general due to any ongoing effects of the
COVID-19 pandemic may adversely impact our business, results of operations,
financial condition and cash flows;

• the effects of increased expenses or unforeseen liabilities incurred as a result of or as a result of activities related to our acquisitions or disposals;

•changes in general economic and business conditions, including changes in
employment levels, consumer confidence levels, consumer demand and preferences,
the availability and cost of credit, fuel prices, levels of discretionary
personal income and interest rates;
•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 the COVID-19 pandemic, supply shortages (including
semiconductor chips), 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;
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•our ability successfully to attract and retain skilled employees;
•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;
•our ability to leverage gains from our dealership portfolio; and
•our ability to successfully integrate businesses we may acquire, or that any
business we acquire may not perform as we expected at the time we acquired it.
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.

PREVIEW

We are one of the largest automotive retailers in the United States. As of
September 30, 2021, we owned and operated 112 new vehicle franchises (91
dealership locations), representing 31 brands of automobile, 25 collision
centers, and one auto auction in 15 metropolitan markets within nine 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. For the nine months ended September 30, 2021, our new
vehicle revenue brand mix consisted of 45% luxury, 40% imports and 15% domestic
brands.
Our retail network is made up of dealerships operating primarily under the
following locally-branded dealership groups:

•Coggin dealerships operating primarily in Jacksonville, Fort Pierce and
Orlando, Florida;
•Courtesy dealerships operating in Tampa, Florida;
•Crown dealerships operating in North Carolina, South Carolina and Virginia;
•Greenville Automotive dealerships operating in Greenville, South Carolina;
•Hare and Estes dealerships operating in the Indianapolis, Indiana area;
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•McDavid dealerships operating in metropolitan Austin and Dallas-Fort Worth,
Texas;
•Mike Shaw dealerships in the Denver, Colorado area;
•Nalley dealerships operating in metropolitan Atlanta, Georgia;
•Park Place dealerships operating in the Dallas-Fort Worth, Texas area; and
•Plaza dealerships operating in metropolitan St. Louis, Missouri.
Our 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 (defined below and collectively
referred to as "F&I"). 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.
Our gross profit margin varies with our revenue mix. Sales of new vehicles have
historically resulted in a lower gross profit margin than used vehicle sales,
sales of parts and service, and sales of F&I products. As a result, when used
vehicle, parts and service, and F&I revenue increase as a percentage of total
revenue, we expect our overall gross profit margin to increase.
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 ("PVR") basis, and all other SG&A expense 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. Our vehicle sales may also be
impacted by manufacturer imposed stop-sales or open safety recalls.
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. Significant
shortages of semiconductor chips and other component parts and supplies have
forced many automotive manufacturers and their suppliers to suspend or curtail
production. Furthermore, as a result of the COVID-19 global pandemic, certain
vehicle manufacturers and their suppliers slowed or temporarily halted
production for the safety of their workers. The impact of these factors has
negatively impacted our new vehicle inventory levels. We cannot predict with any
certainty how long the automotive retail industry will continue to be subject to
these shortages or when normalized production will resume at these
manufacturers.
We also cannot predict the duration or scope, and future effects, of the impacts
from the COVID-19 global pandemic, which may adversely impact our financial
condition, liquidity and cash flow. Vaccine efficacy to new strains of the
virus, the public's willingness to get vaccinated, and government imposed
vaccine mandates on the workforce all remain challenges, which could lengthen
the duration of the impacts of the pandemic. We continue to monitor and respond
as necessary to the Company's operational needs and financial flexibility during
the ongoing outbreak of the COVID-19 global pandemic and the resulting economic
uncertainty. Our top priority continues to be the safety and protection of our
customers, team members and their families. We have modified certain business
practices to conform to government restrictions and are taking precautionary
measures as directed by government and regulatory authorities.
We continue to believe that any future negative trends in new vehicle sales
caused by lack of inventory availability would be partially mitigated by (i)
increased demand and higher margins on pre-owned vehicles, (ii) the expected
relative stability of our parts and service operations over the long-term, (iii)
the variable nature of significant components of our cost structure, and (iv)
our diversified brand and geographic mix.
The seasonally adjusted annual rate ("SAAR") of new vehicle sales in the U.S.
during the three months ended September 30, 2021 was 13.4 million compared to
15.5 million during the three months ended September 30, 2020. On a same-store
basis, all of our revenue streams increased from the prior year quarter and we
experienced a significant increase in both new and used vehicle gross profit
during the three months ended September 30, 2021 when compared to the prior year
period. New vehicle supply disruptions as a result of the semiconductor chip
shortage and the COVID-19 global pandemic have reduced the availability of new
vehicle inventory, which has driven up demand for used vehicles. Our parts and
service business has returned to pre-pandemic levels of activity and
profitability.
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We had total available liquidity of $776.6 million as of September 30, 2021,
which consisted of cash and cash equivalents of $330.6 million, $46.8 million of
funds in our floor plan offset accounts, $190.0 million availability under our
new vehicle floor plan facility that is able to be converted to our revolving
credit facility, $49.2 million of availability under our revolving credit
facility, and $160.0 million of availability under our used vehicle revolving
floor plan facility. For further discussion of our liquidity, please refer to
"Liquidity and Capital Resources" below. We believe we will have sufficient
liquidity to meet our debt service and working capital requirements; commitments
and contingencies; debt repayment, maturity and repurchase obligations;
acquisitions; capital expenditures; and any operating requirements for at least
the next twelve months.
Equity Purchase Agreement, Real Estate Purchase Agreement and Insurance Purchase
Agreement
On September 28, 2021, Asbury Automotive Group, LLC ("Purchaser"), a Delaware
limited liability company and a wholly-owned subsidiary of Asbury Automotive
Group, Inc., a Delaware corporation (the "Company"), entered into (i) a Purchase
Agreement (the "Equity Purchase Agreement") with certain members of the Larry H.
Miller Dealership family of entities; (ii) a Real Estate Purchase and Sale
Agreement (the "Real Estate Purchase Agreement") with Miller Family Real Estate,
L.L.C. and (iii) a Purchase Agreement (the "Insurance Purchase Agreement" and
together with the Equity Purchase Agreement and the Real Estate Purchase
Agreement, the "Transaction Agreements") with certain equity owners of the Total
Care Auto, Powered by Landcar ("TCA") insurance business affiliated with the
Larry H. Miller Dealership family of entities. Pursuant to the Transaction
Agreements, Purchaser will acquire the equity interests of, and the real
property related to (collectively, the "Transactions"), the businesses of the
Larry H. Miller Dealerships and TCA (collectively, the "Businesses"), each
described in the Equity Purchase Agreement, the Real Estate Purchase Agreement
and the Insurance Purchase Agreement, for an aggregate purchase price of
approximately $3.2 billion,which includes approximately $740.0 million of real
estate and leasehold improvements.
The Transaction Agreements contain customary representations and warranties made
by each of the parties. The parties have also agreed to various covenants in the
Transaction Agreements, including covenants by the sellers, the various seller
affiliates and the principal to conduct the material operations of the
Businesses in the ordinary course of business consistent with past practice and
to cooperate with the Company's efforts to secure permanent financing prior to
closing of the Transactions. Purchaser and Sellers have agreed to indemnify one
another against certain damages (subject to certain exceptions and limitations).
The closing of the Transactions is subject to various customary closing
conditions, including (i) receipt of approval of the Transactions by certain
automotive manufacturers, (ii) receipt of certain governmental clearances,
including the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and certain
required approvals related to the insurance business, (iii) the continued
accuracy of the representations and warranties of the parties (subject to
specified materiality standards) and (iv) the absence of a material adverse
effect with respect to the Businesses. The Transaction Agreements are not
subject to any financing condition.
The closing of the Transactions is expected to be consummated during the fourth
quarter of 2021, subject to receipt of regulatory and other approvals and
customary closing conditions.
Other acquisitions under contract
As of September 30, 2021, the Company was under contract to acquire ten
dealerships with combined annual revenues of approximately $900 million. These
acquisitions are expected to close during the fourth quarter of 2021 and are
subject to customary closing conditions.
Park Place Acquisition
On July 6, 2020, the Company, through two of its subsidiaries, entered into an
Asset Purchase Agreement with certain members of the Park Place Dealership
group, to acquire substantially all of the assets of, and lease the real
property related to, 12 new vehicle dealership franchises (eight dealership
locations), two collision centers and an auto auction (collectively, the "Park
Place acquisition"). The Park Place acquisition was completed on August 24, 2020
and financed through a combination of cash, floor plan facilities and seller
financing. The seller financing comprised $150.0 million in aggregate principal
amount of a 4.00% promissory note due August 2021 and $50.0 million in aggregate
principal amount of 4.00% promissory note due February 2022 (collectively, the
"Seller Notes"). In September 2020, the Company redeemed the Seller Notes with
proceeds from the offering of 4.50% Notes due 2028 and 4.75% Notes due 2030.




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RESULTS OF OPERATIONS
Three Months Ended September 30, 2021 Compared to the Three Months Ended
September 30, 2020
                                                             For the Three Months Ended
                                                                   September 30,                    Increase                %
                                                               2021               2020             (Decrease)            Change
                                                                        (Dollars in millions, except per share data)
REVENUE:
New vehicle                                               $   1,129.5          $  957.9          $     171.6                  18  %
Used vehicle                                                    879.0             569.5                309.5                  54  %
Parts and service                                               297.1             237.2                 59.9                  25  %
Finance and insurance, net                                      100.4              80.8                 19.6                  24  %
TOTAL REVENUE                                                 2,406.0           1,845.4                560.6                  30  %
GROSS PROFIT:
New vehicle                                                     126.0              60.6                 65.4                 108  %
Used vehicle                                                     72.2              49.2                 23.0                  47  %
Parts and service                                               181.4             145.3                 36.1                  25  %
Finance and insurance, net                                      100.4              80.8                 19.6                  24  %
TOTAL GROSS PROFIT                                              480.0             335.9                144.1                  43  %
OPERATING EXPENSES:
Selling, general, and administrative                            268.7             206.5                 62.2                  30  %
Depreciation and amortization                                    10.7               9.8                  0.9                   9  %
Other operating (income) expense, net                            (0.4)              0.5                 (0.9)               (180) %
INCOME FROM OPERATIONS                                          201.0             119.1                 81.9                  69  %
OTHER EXPENSES (INCOME):
Floor plan interest expense                                       1.5               3.0                 (1.5)                (50) %
Other interest expense, net                                      14.8              12.9                  1.9                  15  %

Gain on dealership divestitures, net                             (8.0)            (24.7)                16.7                 (68) %
Total other expenses (income), net                                8.3              (8.8)                17.1                (194) %
INCOME BEFORE INCOME TAXES                                      192.7             127.9                 64.8                  51  %
Income tax expense                                               45.7              31.7                 14.0                  44  %

NET INCOME                                                $     147.0          $   96.2          $      50.8                  53  %

Net income per common share-Diluted                       $      7.54          $   4.96          $      2.58                  52  %



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Contents

For the three months ended September 30,

                                                                                2021                    2020
REVENUE MIX PERCENTAGES:
New vehicle                                                                         46.9  %                51.9  %
Used vehicle retail                                                                 34.3  %                27.4  %
Used vehicle wholesale                                                               2.3  %                 3.4  %
Parts and service                                                                   12.3  %                12.9  %
Finance and insurance, net                                                           4.2  %                 4.4  %
Total revenue                                                                      100.0  %               100.0  %
GROSS PROFIT MIX PERCENTAGES:
New vehicle                                                                         26.3  %                18.0  %
Used vehicle retail                                                                 14.3  %                12.8  %
Used vehicle wholesale                                                               0.7  %                 1.8  %
Parts and service                                                                   37.8  %                43.3  %
Finance and insurance, net                                                          20.9  %                24.1  %
Total gross profit                                                                 100.0  %               100.0  %
GROSS PROFIT MARGIN                                                                 20.0                   18.2
SG&A EXPENSE AS A PERCENTAGE OF GROSS PROFIT                                        56.0  %                61.5  %


Total revenue during the third quarter of 2021 increased by $560.6 million (30%)
compared to the third quarter of 2020, due to a $171.6 million (18%) increase in
new vehicle revenue, a $309.5 million (54%) increase in used vehicle revenue, a
$59.9 million (25%) increase in parts and service revenue and a $19.6 million
(24%) increase in F&I, net revenue. During the three months ended September 30,
2021, gross profit increased by $144.1 million (43%) driven by an $65.4 million
(108%) increase in new vehicle gross profit, a $23.0 million (47%) increase in
used vehicle gross profit, an $36.1 million (25%) increase in parts and service
gross profit and a $19.6 million (24%) increase in F&I gross profit.
Income from operations during the third quarter of 2021 increased by $81.9
million (69%) compared to the third quarter of 2020, primarily due to the $144.1
million (43%) increase in gross profit, partially offset by a $62.2 million
(30%) increase in SG&A expense, a $0.9 million (9%) increase in depreciation and
amortization expenses partially offset by a $0.9 million (180%) increase in
other operating (income) expense, net. Total other expenses, net increased by
$17.1 million (194%), primarily due to a $16.7 million (68%) decrease on the
gain on dealership divestitures, $1.9 million (15%) increase in other interest
expense, net partially offset by a $1.5 million (50%) decrease in floor plan
interest expense during the third quarter of 2021. As a result, income before
income taxes increased $64.8 million (51%). Overall, net income increased by
$50.8 million (53%) during the third quarter of 2021 as compared to the third
quarter of 2020.

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New Vehicle-
                                                       For the Three Months Ended
                                                              September 30,                   Increase                 %
                                                          2021               2020            (Decrease)             Change
                                                                (Dollars in millions, except for per vehicle data)
As Reported:
Revenue:
Luxury                                               $     508.1          $ 345.9          $      162.2                  47  %
Import                                                     459.0            414.0                  45.0                  11  %
Domestic                                                   162.4            198.0                 (35.6)                (18) %
Total new vehicle revenue                            $   1,129.5          $ 957.9          $      171.6                  18  %
Gross profit:
Luxury                                               $      60.2          $  28.4          $       31.8                 112  %
Import                                                      50.1             19.3                  30.8                 160  %
Domestic                                                    15.7             12.9                   2.8                  22  %
Total new vehicle gross profit                       $     126.0          $  60.6          $       65.4                 108  %
New vehicle units:
Luxury                                                     7,972            6,157                 1,815                  29  %
Import                                                    13,491           13,818                  (327)                 (2) %
Domestic                                                   3,300            4,580                (1,280)                (28) %
Total new vehicle units                                   24,763           24,555                   208                   1  %

Same Store:
Revenue:
Luxury                                               $     371.3          $ 334.5          $       36.8                  11  %
Import                                                     452.1            413.9                  38.2                   9  %
Domestic                                                   162.4            192.6                 (30.2)                (16) %
Total new vehicle revenue                            $     985.8          $ 941.0          $       44.8                   5  %
Gross profit:
Luxury                                               $      43.3          $  27.3          $       16.0                  59  %
Import                                                      49.4             19.4                  30.0                 155  %
Domestic                                                    15.7             12.4                   3.3                  27  %
Total new vehicle gross profit                       $     108.4          $  59.1          $       49.3                  83  %
New vehicle units
Luxury                                                     5,918            5,951                   (33)                 (1) %
Import                                                    13,329           13,818                  (489)                 (4) %
Domestic                                                   3,300            4,464                (1,164)                (26) %
Total new vehicle units                                   22,547           24,233                (1,686)                 (7) %



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New Vehicle Metrics-
                                                        For the Three Months Ended
                                                               September 30,                    Increase                %
                                                          2021                2020             (Decrease)            Change
As Reported:
Revenue per new vehicle sold                         $   45,612            $ 39,010          $     6,602                  17  %
Gross profit per new vehicle sold                    $    5,088            $  2,468          $     2,620                 106  %
New vehicle gross margin                                   11.2    %            6.3  %               4.9  %

Luxury:

Gross profit per new vehicle sold                    $    7,551            $  4,613          $     2,938                  64  %
New vehicle gross margin                                   11.8    %            8.2  %               3.6  %

Import:

Gross profit per new vehicle sold                    $    3,714            $  1,397          $     2,317                 166  %
New vehicle gross margin                                   10.9    %            4.7  %               6.2  %

National:

Gross profit per new vehicle sold                    $    4,758            $  2,817          $     1,941                  69  %
New vehicle gross margin                                    9.7    %            6.5  %               3.2  %

Same Store:
Revenue per new vehicle sold                         $   43,722            $ 38,831          $     4,891                  13  %
Gross profit per new vehicle sold                    $    4,808            $  2,439          $     2,369                  97  %
New vehicle gross margin                                   11.0    %            6.3  %               4.7  %

Luxury:

Gross profit per new vehicle sold                    $    7,317            $  4,587          $     2,730                  60  %
New vehicle gross margin                                   11.7    %            8.2  %               3.5  %

Import:

Gross profit per new vehicle sold                    $    3,706            $  1,404          $     2,302                 164  %
New vehicle gross margin                                   10.9    %            4.7  %               6.2  %

National:

Gross profit per new vehicle sold                    $    4,758            $  2,778          $     1,980                  71  %
New vehicle gross margin                                    9.7    %            6.4  %               3.3  %


New vehicle revenue increased by $171.6 million (18%) due to a $162.2 million
(47%) increase in luxury brands revenue, a $45.0 million (11%) increase in
import brands revenue partially offset by a $35.6 million (18%) decrease in
domestic brands revenue. Luxury brand revenue benefited from the acquisition of
the Park Place Dealership group which occurred during the third quarter of 2020.
The 18% increase in new vehicle revenue is the result of a 1% increase in new
vehicle units sold and a 17% increase in revenue per new vehicle sold. Same
store new vehicle revenue increased by $44.8 million (5%) due to a $36.8 million
(11%) increase in luxury brands revenue, a $38.2 million (9%) increase in import
brands revenue partially offset by a $30.2 million (16%) decrease in domestic
brands revenue.
New vehicle gross profit increased by $65.4 million (108%) for the three months
ended September 30, 2021 and same store new vehicle gross profit increased $49.3
million (83%) over the same period. Same store new vehicle gross profit margin
for the three months ended September 30, 2021 increased 470 basis points to
11.0%. The increase in our same store gross profit margin was primarily
attributable to our efforts to focus on optimizing margin as new inventory
levels declined as a result of manufacturer production disruptions.
We ended the quarter with approximately 12 days of supply of new vehicle
inventory, well below our target range of 70-75 days. Our new vehicle inventory
levels have been negatively impacted by production disruptions at the
manufacturers caused primarily by the semiconductor chip shortage.

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Used Vehicle-
                                                          For the Three Months Ended September 30,                Increase                 %
                                                                    2021                         2020            (Decrease)             Change
                                                                          (Dollars in millions, except for per vehicle data)
As Reported:
Revenue:
Used vehicle retail revenue                          $       823.7                            $ 507.4          $      316.3                  62  %
Used vehicle wholesale revenue                                55.3                               62.1                  (6.8)                (11) %
Used vehicle revenue                                 $       879.0                            $ 569.5          $      309.5                  54  %
Gross profit:
Used vehicle retail gross profit                     $        68.7                            $  43.3          $       25.4                  59  %
Used vehicle wholesale gross profit                            3.5                                5.9                  (2.4)                (41) %
Used vehicle gross profit                            $        72.2                            $  49.2          $       23.0                  47  %
Used vehicle retail units:
Used vehicle retail units                                   27,761                             20,464                 7,297                  36  %

Same Store:
Revenue:
Used vehicle retail revenue                          $       728.2                            $ 496.1          $      232.1                  47  %
Used vehicle wholesale revenue                                38.4                               61.4                 (23.0)                (37) %
Used vehicle revenue                                 $       766.6                            $ 557.5          $      209.1                  38  %
Gross profit:
Used vehicle retail gross profit                     $        61.1                            $  42.2          $       18.9                  45  %
Used vehicle wholesale gross profit                            2.6                                5.9                  (3.3)                (56) %
Used vehicle gross profit                            $        63.7                            $  48.1          $       15.6                  32  %
Used vehicle retail units:
Used vehicle retail units                                   25,442                             20,050                 5,392                  27  %



Used Vehicle Metrics-
                                                       For the Three Months Ended
                                                              September 30,                    Increase                %
                                                         2021                2020             (Decrease)             Change
As Reported:
Revenue per used vehicle retailed                   $   29,671            $ 24,795          $     4,876                   20  %
Gross profit per used vehicle retailed              $    2,475            $  2,116          $       359                   17  %
Used vehicle retail gross margin                           8.3    %            8.5  %              (0.2) %

Same Store:
Revenue per used vehicle retailed                   $   28,622            $ 24,743          $     3,879                   16  %
Gross profit per used vehicle retailed              $    2,402            $  2,105          $       297                   14  %
Used vehicle retail gross margin                           8.4    %            8.5  %              (0.1) %



Used vehicle revenue increased by $309.5 million (54%) due to a $316.3 million
(62%) increase in used vehicle retail revenue partially offset by a $6.8 million
(11%) decrease in used vehicle wholesale revenue. Same store used vehicle
revenue increased by $209.1 million (38%) due to a $232.1 million (47%) increase
in used vehicle retail revenue, partially offset a $23.0 million (37%) decrease
in used vehicle wholesale revenue. Total used vehicle retail unit sales
increased by 36% while same store retail used vehicle unit sales increased by
27% during the three months ended September 30, 2021 as compared to the three
months ended September 30, 2020. Used vehicle revenues and unit sales benefited
from the decline in new vehicle inventory availability during the third quarter
of 2021.

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For the three months ended September 30, 2021, total Company and same store used
vehicle retail gross profit margins decreased by 20 basis points and 10 basis
points, respectively, as compared to the prior year quarter. The Company's
wholesale revenue and gross profit declined as a result of our efforts to retail
more used units due to the new vehicle supply shortage.

Our 28 days of supply of used vehicle inventory as of September 30, 2021, is
slightly below our historic targeted range of 30 to 35 days.
Parts and Service-
                                                                For the Three Months Ended
                                                                       September 30,                  Increase               %
                                                                   2021               2020           (Decrease)            Change
                                                                                      (Dollars in millions)
As Reported:
Parts and service revenue                                     $   297.1            $ 237.2          $     59.9                 25  %
Parts and service gross profit:
Customer pay                                                      109.3               84.0                25.3                 30  %
Warranty                                                           23.7               25.7                (2.0)                (8) %
Wholesale parts                                                     8.7                5.8                 2.9                 50  %

Gross margin for parts and services, excluding reconditioning and preparation

                                                   $   141.7            $ 115.5          $     26.2                 23  %

Parts and service gross margin, excluding reconditioning and preparation

                                                        47.7    %          48.7  %             (1.0) %
Reconditioning and preparation *                              $    39.7            $  29.8          $      9.9                 33  %
Total parts and service gross profit                          $   181.4            $ 145.3          $     36.1                 25  %

Same Store:
Parts and service revenue                                     $   256.0            $ 232.5          $     23.5                 10  %
Parts and service gross profit:
Customer pay                                                       92.5               82.3                10.2                 12  %
Warranty                                                           19.7               25.0                (5.3)               (21) %
Wholesale parts                                                     7.7                5.7                 2.0                 35  %

Gross margin for parts and services, excluding reconditioning and preparation

                                                   $   119.9            $ 113.0          $      6.9                  6  %

Parts and service gross margin, excluding reconditioning and preparation

                                                        46.8    %          48.6  %             (1.8) %
Reconditioning and preparation *                              $    36.0            $  29.2          $      6.8                 23  %
Total parts and service gross profit                          $   155.9            $ 142.2          $     13.7                 10  %


* Reconditioning and preparation represents the gross profit earned by our parts
and service departments for internal work performed and is included as a
reduction of Parts and Service Cost of Sales in the accompanying Condensed
Consolidated Statements of Income upon the sale of the vehicle.
The $59.9 million (25%) increase in parts and service revenue was due to an
$47.7 million (30%) increase in customer pay revenue, a $14.9 million (47%)
increase in wholesale parts revenue partially offset by a $2.7 million (6%)
decrease in warranty revenue. Same store parts and service revenue increased by
$23.5 million (10%) to $256.0 million during the three months ended
September 30, 2021 from $232.5 million during the three months ended
September 30, 2020. The increase in same store parts and service revenue was due
to a $20.7 million (13%) increase in customer pay revenue, a $11.1 million (35%)
increase in wholesale parts revenue partially offset by a $8.3 million (18%)
increase in warranty revenue.
During the three months ended September 30, 2021, parts and service gross
profit, excluding reconditioning and preparation, increased by $26.2 million
(23%) to $141.7 million and same store parts and service gross profit, excluding
reconditioning and preparation, increased by $6.9 million (6%) to $119.9
million. We attribute much of this increase to consumer driving habits returning
to pre-pandemic levels. We continue to focus on increasing our customer pay
parts and service revenue over the long-term by upgrading equipment, improving
the customer experience, providing competitive benefits to our technicians and
capitalizing on our dealership training programs.


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Finance and Insurance, net-
                                                       For the Three Months Ended
                                                              September 30,                  Increase                %
                                                          2021              2020            (Decrease)            Change
                                                                (Dollars in millions, except for per vehicle data)
As Reported:
Finance and insurance, net                            $   100.4          $  80.8          $      19.6                  24  %
Finance and insurance, net per vehicle sold           $   1,912          $ 1,795          $       117                   7  %

Same Store:
Finance and insurance, net                            $    93.8          $  79.7          $      14.1                  18  %
Finance and insurance, net per vehicle sold           $   1,955          $ 1,800          $       155                   9  %


F&I, net revenue increased by $19.6 million (24%) during the third quarter of
2021 as compared to the third quarter of 2020 and same store F&I, net revenue
increased by $14.1 million (18%) over the same period. We attribute the increase
in all stores' F&I, net revenue to a 17% increase in total retail units sold and
a 7% improvement in F&I PVR.
Selling, General, and Administrative Expense-

                                                             For the Three Months Ended September 30,                                                  % of Gross
                                                                 % of Gross                               % of Gross              Increase           Profit Increase
                                               2021                Profit                2020               Profit               (Decrease)            (Decrease)
                                                                                             (Dollars in millions)
As Reported:
Personnel costs                            $   133.9                    27.9  %       $ 106.5                    31.7  %       $      27.4                    (3.8) %
Sales compensation                              48.6                    10.1  %          32.4                     9.6  %              16.2                     0.5  %
Share-based compensation                         3.8                     0.8  %           2.6                     0.8  %               1.2                       -  %
Outside services                                30.9                     6.4  %          21.9                     6.5  %               9.0                    (0.1) %
Advertising                                      7.4                     1.5  %           6.3                     1.9  %               1.1                    (0.4) %
Rent                                             8.3                     1.7  %           8.1                     2.4  %               0.2                    (0.7) %
Utilities                                        5.0                     1.0  %           4.2                     1.3  %               0.8                    (0.3) %
Insurance                                        3.3                     0.7  %           3.3                     1.0  %                 -                    (0.3) %
Other                                           27.5                     5.9  %          21.2                     6.3  %               6.3                    (0.4) %
Selling, general, and administrative
expense                                    $   268.7                    56.0  %       $ 206.5                    61.5  %       $      62.2                    (5.5) %
Gross profit                               $   480.0                                  $ 335.9

Same Store:
Personnel costs                            $   118.5                    28.1  %       $ 104.7                    31.8  %       $      13.8                    (3.7) %
Sales compensation                              44.0                    10.4  %          31.9                     9.7  %              12.1                     0.7  %
Share-based compensation                         3.8                     0.9  %           2.7                     0.8  %               1.1                     0.1  %
Outside services                                27.6                     6.5  %          21.4                     6.5  %               6.2                       -  %
Advertising                                      6.9                     1.6  %           6.0                     1.8  %               0.9                    (0.2) %
Rent                                             8.2                     1.9  %           8.0                     2.4  %               0.2                    (0.5) %
Utilities                                        4.4                     1.0  %           4.1                     1.2  %               0.3                    (0.2) %
Insurance                                        2.4                     0.6  %           3.1                     0.9  %              (0.7)                   (0.3) %
Other                                           23.8                     5.8  %          20.7                     6.5  %               3.1                    (0.7) %
Selling, general, and administrative
expense                                    $   239.6                    56.8  %       $ 202.6                    61.6  %       $      37.0                    (4.8) %
Gross profit                               $   421.8                                  $ 329.1


SG&A expense as a percentage of gross profit decreased 550 basis points from
61.5% for the third quarter of 2020 to 56.0% for the third quarter of 2021. Same
store SG&A expense as a percentage of gross profit decreased 480 basis points,
from 61.6% for the third quarter of 2020 to 56.8% over the same period in 2021.
The decrease in SG&A expense as a percentage of gross
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profit is primarily the result of higher gross profits on new and used vehicle
sales. On a same store basis our personnel costs decreased by 370 basis points
as a percentage of gross profit in the third quarter of 2021 as compared to the
same quarter in the prior year. The Company has also focused on retaining the
efficiencies and productivity gained during the COVID-19 downturn and has been
judicious with adding headcount. Sales compensation as a percentage of gross
profit increased on both a total and same store basis for the three months ended
September 30, 2021 as compared to the three months ended September 30, 2020, due
to increased commission expense as a result of our profitability. During the
three months ended September 30, 2021 and 2020 the Company incurred $3.5 million
and $1.3 million, respectively, in professional fees related to acquisitions.
Other Operating (Income) Expense, net -
Other operating expense (income), net includes gains and losses from the sale of
property and equipment, and other operating items not considered core to our
business. During the three months ended September 30, 2020, we recorded an
impairment charge of $0.7 million related to property and equipment reflected in
Assets held for sale included in the Condensed Consolidated Balance Sheet as of
September 30, 2020.
Floor Plan Interest Expense -
Floor plan interest expense decreased by $1.5 million (50%) to $1.5
million during the three months ended September 30, 2021 as compared to $3.0
million for the three months ended September 30, 2020, primarily due to lower
average new vehicle inventory levels.
Other Interest Expense, net -
The $1.9 million (15%) increase in other interest expense, net is primarily the
result of higher average outstanding debt during the three months ended
September 30, 2021 due to the $250.0 million September 2020 offering of the
Senior Notes and the 2021 Bank of America Real Estate Facility as compared to
the same period in the prior year.
Gain on Dealership Divestitures, net-
During the three months ended September 30, 2021, we sold one franchise (one
dealership location) in the Charlottesville, Virginia market and recorded a
pre-tax gain of $8.0 million.
During the three months ended September 30, 2020 we sold one franchise (one
dealership location) in the Greenville, South Carolina market and recorded a
pre-tax gain of $24.7 million.
Income Tax Expense -
The $14.0 million (44%) increase in income tax expense was primarily the result
of a $64.8 million (51%) increase in income before income taxes. Our effective
tax rate for the three months ended September 30, 2021 was 23.7% compared to
24.8% in the prior comparative period. We expect our effective tax rate for 2021
to be around 25%.

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RESULTS OF OPERATIONS
Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September
30, 2020
                                                              For the Nine Months Ended
                                                                    September 30,                   Increase                %
                                                               2021                2020            (Decrease)            Change
                                                                        (Dollars in millions, except per share data)
REVENUE:
New vehicle                                               $   3,649.6          $ 2,541.8          $  1,107.8                  44  %
Used vehicle                                                  2,386.1            1,510.2               875.9                  58  %
Parts and service                                               851.5              628.0               223.5                  36  %
Finance and insurance, net                                      295.7              217.8                77.9                  36  %
TOTAL REVENUE                                                 7,182.9            4,897.8             2,285.1                  47  %
GROSS PROFIT:
New vehicle                                                     325.6              135.6               190.0                 140  %
Used vehicle                                                    211.5              117.0                94.5                  81  %
Parts and service                                               527.1              380.7               146.4                  38  %
Finance and insurance, net                                      295.7              217.8                77.9                  36  %
TOTAL GROSS PROFIT                                            1,359.9              851.1               508.8                  60  %
OPERATING EXPENSES:
Selling, general, and administrative                            778.2              553.4               224.8                  41  %
Depreciation and amortization                                    30.6               29.0                 1.6                   6  %
Franchise rights impairment                                         -               23.0               (23.0)               (100) %
Other operating (income) expense, net                            (4.6)               9.4               (14.0)               (149) %
INCOME FROM OPERATIONS                                          555.7              236.3               319.4                 135  %
OTHER EXPENSES:
Floor plan interest expense                                       6.5               14.1                (7.6)                (54) %
Other interest expense, net                                      43.2               41.7                 1.5                   4  %

Loss on extinguishment of long-term debt                            -               20.6               (20.6)               (100) %
Gain on dealership divestitures, net                             (8.0)             (58.4)               50.4                  86  %
Total other expenses, net                                        41.7               18.0                23.7                 132  %
INCOME BEFORE INCOME TAXES                                      514.0              218.3               295.7                 135  %
Income tax expense                                              122.1               53.0                69.1                 130  %

NET INCOME                                                $     391.9          $   165.3          $    226.6                 137  %

Net income per share-Diluted                              $     20.10          $    8.56          $    11.54                 135  %


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Contents

For the nine months ending in September

                                                                                             30,
                                                                                  2021                  2020
REVENUE MIX PERCENTAGES:
New vehicle                                                                          50.8  %               51.9  %
Used vehicle retail                                                                  30.5  %               28.0  %
Used vehicle wholesale                                                                2.7  %                2.9  %
Parts and service                                                                    11.9  %               12.8  %
Finance and insurance, net                                                            4.1  %                4.4  %
Total revenue                                                                       100.0  %              100.0  %
GROSS PROFIT MIX PERCENTAGES:
New vehicle                                                                          23.9  %               15.9  %
Used vehicle retail                                                                  14.0  %               12.5  %
Used vehicle wholesale                                                                1.6  %                1.3  %
Parts and service                                                                    38.8  %               44.7  %
Finance and insurance, net                                                           21.7  %               25.6  %
Total gross profit                                                                  100.0  %              100.0  %
GROSS PROFIT MARGIN                                                                  18.9  %               17.4  %
SG&A EXPENSE AS A PERCENTAGE OF GROSS PROFIT                                         57.2  %               65.0  %


Total revenue for the nine months ended September 30, 2021 increased by $2.29
billion (47%) compared to the nine months ended September 30, 2020, due to a
$1.11 billion (44%) increase in new vehicle revenue, a $875.9 million (58%)
increase in used vehicle revenue, a $223.5 million (36%) increase in parts and
service revenue and a $77.9 million (36%) increase in F&I, net revenue. The
$508.8 million (60%) increase in gross profit during the nine months ended
September 30, 2021 was driven by a $190.0 million (140%) increase in new vehicle
gross profit, a $146.4 million (38%) increase in parts and service gross profit,
a $94.5 million (81%) increase in used vehicle gross profit and a $77.9 million
(36%) increase in F&I, net gross profit.
Income from operations during the nine months ended September 30, 2021 increased
by $319.4 million (135%), compared to the nine months ended September 30, 2020,
due to the $508.8 million (60%) increase in gross profit, a $23.0 million
franchise right impairment charge recorded in 2020, a $14.0 million (149%)
decrease in other operating expense, net, partially offset by a $224.8 million
(41%) increase in SG&A expense and a $1.6 million (6%) increase in depreciation
and amortization expense.
Total other expenses, net increased by $23.7 million (132%), primarily as a
result of a $50.4 million decrease in the gain on dealership divestitures, net
during the first nine months of 2021 when compared to the first nine months of
2020 and a $1.5 million (4%) increase in other interest expense, net partially
offset by a $7.6 million (54%) decrease in floor plan interest expense and no
loss on extinguishment of debt. Income before income taxes increased $295.7
million to $514.0 million for the nine months ended September 30, 2021. Overall,
net income increased by $226.6 million (137%) during the nine months ended
September 30, 2021 as compared to the nine months ended September 30, 2020.










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New Vehicle-
                                                         For the Nine Months Ended
                                                               September 30,                   Increase                %
                                                          2021                2020            (Decrease)            Change
                                                                (Dollars in millions, except for per vehicle data)
As Reported:
Revenue:
Luxury                                               $   1,634.3          $   865.9          $    768.4                  89  %
Import                                                   1,454.5            1,114.1               340.4                  31  %
Domestic                                                   560.8              561.8                (1.0)                  -  %
Total new vehicle revenue                            $   3,649.6          $ 2,541.8          $  1,107.8                  44  %
Gross profit:
Luxury                                               $     166.8          $    62.1          $    104.7                 169  %
Import                                                     112.2               42.5                69.7                 164  %
Domestic                                                    46.6               31.0                15.6                  50  %
Total new vehicle gross profit                       $     325.6          $   135.6          $    190.0                 140  %
New vehicle units:
Luxury                                                    26,568             15,508              11,060                  71  %
Import                                                    45,125             37,886               7,239                  19  %
Domestic                                                  12,054             13,198              (1,144)                 (9) %
Total new vehicle units                                   83,747             66,592              17,155                  26  %

Same Store:
Revenue:
Luxury                                               $   1,064.8          $   829.8          $    235.0                  28  %
Import                                                   1,443.6            1,098.3               345.3                  31  %
Domestic                                                   556.0              532.7                23.3                   4  %
Total new vehicle revenue                            $   3,064.4          $ 2,460.8          $    603.6                  25  %
Gross profit:
Luxury                                               $     103.2          $    59.3          $     43.9                  74  %
Import                                                     111.4               42.3                69.1                 163  %
Domestic                                                    46.3               29.3                17.0                  58  %
Total new vehicle gross profit                       $     260.9          $   130.9          $    130.0                  99  %
New vehicle units:
Luxury                                                    17,795             14,851               2,944                  20  %
Import                                                    44,885             37,383               7,502                  20  %
Domestic                                                  11,953             12,558                (605)                 (5) %
Total new vehicle units                                   74,633             64,792               9,841                  15  %


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New Vehicle Metrics-
                                                         For the Nine Months Ended
                                                               September 30,                    Increase                %
                                                          2021                2020             (Decrease)            Change
As Reported:
Revenue per new vehicle sold                         $   43,579            $ 38,170          $     5,409                  14  %
Gross profit per new vehicle sold                    $    3,888            $  2,036          $     1,852                  91  %
New vehicle gross margin                                    8.9    %            5.3  %               3.6  %

Luxury:

Gross profit per new vehicle sold                    $    6,278            $  4,004          $     2,274                  57  %
New vehicle gross margin                                   10.2    %            7.2  %               3.0  %

Import:

Gross profit per new vehicle sold                    $    2,486            $  1,122          $     1,364                 122  %
New vehicle gross margin                                    7.7    %            3.8  %               3.9  %

National:

Gross profit per new vehicle sold                    $    3,866            $  2,349          $     1,517                  65  %
New vehicle gross margin                                    8.3    %            5.5  %               2.8  %

Same Store:
Revenue per new vehicle sold                         $   41,060            $ 37,980          $     3,080                   8  %
Gross profit per new vehicle sold                    $    3,496            $  2,020          $     1,476                  73  %
New vehicle gross margin                                    8.5    %            5.3  %               3.2  %

Luxury:

Gross profit per new vehicle sold                    $    5,799            $  3,993          $     1,806                  45  %
New vehicle gross margin                                    9.7    %            7.1  %               2.6  %

Import:

Gross profit per new vehicle sold                    $    2,482            $  1,132          $     1,350                 119  %
New vehicle gross margin                                    7.7    %            3.9  %               3.8  %

National:

Gross profit per new vehicle sold                    $    3,874            $  2,333          $     1,541                  66  %
New vehicle gross margin                                    8.3    %            5.5  %               2.8  %


For the nine months ended September 30, 2021, new vehicle revenue increased by
$1.11 billion (44%) as a result of a 26% increase in new vehicle units sold and
a 14% increase in revenue per new vehicle sold. For the nine months ended
September 30, 2021, same store new vehicle revenue increased by $603.6 million
(25%) as the result of a 15% increase in new vehicle units sold and a 8%
increase in revenue per unit sold.
For the nine months ended September 30, 2021, new vehicle gross profit and same
store new vehicle gross profit increased by $190.0 million (140%) and $130.0
million (99%), respectively. Same store new vehicle gross margin for the nine
months ended September 30, 2021 improved 320 basis points to 8.5%.
The seasonally adjusted annual rate ("SAAR") of new vehicle sales in the U.S.
during the nine months ended September 30, 2021 was 15.8 million compared to
14.0 million during the nine months ended September 30, 2020, a 13% increase.
The Company experienced continued strength in new vehicle sales for the nine
months ended September 30, 2021, building on the new vehicle sales recovery in
the latter part of 2020. The increase in new vehicle sales revenue for the nine
months ended September 30, 2021 over the same period in the prior year is also
attributable to the acquisition of the Park Place Dealership Group in August
2020 and a significant decline in new vehicle sales during April 2020 as a
result of the COVID-19 pandemic. On a same store basis, we experienced an
increase in gross profit margin across all three of our new vehicle categories
which we largely attribute to the scarcity of new vehicle inventory as a result
of manufacturer production challenges arising from the semiconductor chip
shortage.
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Used Vehicle-
                                                           For the Nine Months Ended September 30,                Increase                 %
                                                                   2021                         2020             (Decrease)             Change
                                                                          (Dollars in millions, except for per vehicle data)
As Reported:
Revenue:
Used vehicle retail revenue                          $       2,190.6                        $ 1,366.0          $      824.6                  60  %
Used vehicle wholesale revenue                                 195.5                            144.2                  51.3                  36  %
Used vehicle revenue                                 $       2,386.1                        $ 1,510.2          $      875.9                  58  %
Gross profit:
Used vehicle retail gross profit                     $         189.7                        $   106.1          $       83.6                  79  %
Used vehicle wholesale gross profit                             21.8                             10.9                  10.9                 100  %
Used vehicle gross profit                            $         211.5                        $   117.0          $       94.5                  81  %
Used vehicle retail units:
Used vehicle retail units                                     78,136                           59,151                18,985                  32  %

Same Store:
Revenue:
Used vehicle retail revenue                          $       1,837.1                        $ 1,311.7          $      525.4                  40  %
Used vehicle wholesale revenue                                 127.9                            140.4                 (12.5)                 (9) %
Used vehicle revenue                                 $       1,965.0                        $ 1,452.1          $      512.9                  35  %
Gross profit:
Used vehicle retail gross profit                     $         162.1                        $   102.7          $       59.4                  58  %
Used vehicle wholesale gross profit                             15.3                             11.0                   4.3                  39  %
Used vehicle gross profit                            $         177.4                        $   113.7          $       63.7                  56  %
Used vehicle retail units:
Used vehicle retail units                                     69,250                           56,884                12,366                  22  %



























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Used Vehicle Metrics-
                                                         For the Nine Months Ended
                                                               September 30,                    Increase                %
                                                          2021                2020             (Decrease)             Change
As Reported:
Revenue per used vehicle retailed                    $   28,036            $ 23,093          $     4,943                   21  %
Gross profit per used vehicle retailed               $    2,428            $  1,794          $       634                   35  %
Used vehicle retail gross margin                            8.7    %            7.8  %               0.9  %

Same Store:
Revenue per used vehicle retailed                    $   26,529            $ 23,059          $     3,470                   15  %
Gross profit per used vehicle retailed               $    2,341            $  1,805          $       536                   30  %
Used vehicle retail gross margin                            8.8    %            7.8  %               1.0  %


Used vehicle revenue increased by $875.9 million (58%) due to a $824.6 million
(60%) increase in used vehicle retail revenue, and a $51.3 million (36%)
increase in used vehicle wholesale revenue. Same store used vehicle revenue
increased by $512.9 million (35%) due to a $525.4 million (40%) increase in used
vehicle retail revenue partially offset by a $12.5 million (9%) decrease in used
vehicle wholesale revenues.
For the nine months ended September 30, 2021, gross profit margins increased by
90 basis points to 8.7%. Due to the new vehicle inventory shortages that have
arisen due to manufacturer challenges, we continue to see an increased demand
for used vehicles. Used vehicle gross profit increased for the nine months ended
September 30, 2021 by $94.5 million (81%) on an all store basis and $63.7
million (56%) on a same store basis as compared to the nine months ended
September 30, 2020.



















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Parts and Service-
                                                                 For the Nine Months Ended
                                                                       September 30,                  Increase               %
                                                                   2021               2020           (Decrease)            Change
                                                                                      (Dollars in millions)
As Reported:
Parts and service revenue                                     $   851.5            $ 628.0          $    223.5                 36  %
Parts and service gross profit:
Customer pay                                                      313.2              216.1                97.1                 45  %
Warranty                                                           74.8               65.7                 9.1                 14  %
Wholesale parts                                                    23.7               15.6                 8.1                 52  %

Gross margin for parts and services, excluding reconditioning and preparation

                                                   $   411.7            $ 297.4          $    114.3                 38  %

Parts and service gross margin, excluding reconditioning and preparation

                                                        48.3    %          47.4  %              0.9  %
Reconditioning and preparation *                              $   115.4            $  83.3          $     32.1                 39  %
Total parts and service gross profit                          $   527.1            $ 380.7          $    146.4                 38  %

Same Store:
Parts and service revenue                                     $   700.0            $ 607.9          $     92.1                 15  %
Parts and service gross profit:
Customer pay                                                      252.5              209.4                43.1                 21  %
Warranty                                                           57.9               63.3                (5.4)                (9) %
Wholesale parts                                                    20.1               15.1                 5.0                 33  %

Gross margin for parts and services, excluding reconditioning and preparation

                                                   $   330.5            $ 287.8          $     42.7                 15  %

Parts and service gross margin, excluding reconditioning and preparation

                                                        47.2    %          47.3  %             (0.1) %
Reconditioning and preparation *                              $   100.8            $  80.5          $     20.3                 25  %
Total parts and service gross profit                          $   431.3            $ 368.3          $     63.0                 17  %


* Reconditioning and preparation represents the gross profit earned by our parts
and service departments for internal work performed is included as a reduction
of Parts and Service Cost of Sales in the accompanying Condensed Consolidated
Statements of Income upon the sale of the vehicle.
The $223.5 million (36%) increase in parts and service revenue was primarily due
to a $168.1 million (40%) increase in customer pay revenue, a $40.8 million
(47%) increase in wholesale parts revenue and a $14.6 million (12%) increase in
warranty revenue. Same store parts and service revenue increased by $92.1
million (15%) from $607.9 million for the nine months ended September 30, 2020
to $700.0 million for the nine months ended September 30, 2021. The increase in
same store parts and service revenue was due to a $72.9 million (18%) increase
in customer pay revenue, a $28.8 million (34%) increase in wholesale parts
revenue partially offset by a $9.6 million (8%) decrease in warranty revenue.
Parts and service gross profit, excluding reconditioning and preparation,
increased by $114.3 million (38%) to $411.7 million, and same store gross
profit, excluding reconditioning and preparation, increased by $42.7 million
(15%) to $330.5 million. The parts and service business was negatively impacted
by "shelter in place" orders issued in response to the COVID-19 pandemic in 2020
but has since returned to pre-pandemic levels.







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Finance and Insurance, net-
                                                        For the Nine Months Ended
                                                              September 30,                  Increase                %
                                                          2021              2020            (Decrease)            Change
                                                                (Dollars in millions, except for per vehicle data)
As Reported:
Finance and insurance, net                            $   295.7          $ 217.8          $      77.9                  36  %
Finance and insurance, net per vehicle sold           $   1,827          $ 1,732          $        95                   5  %

Same Store:
Finance and insurance, net                            $   271.6          $ 212.2          $      59.4                  28  %
Finance and insurance, net per vehicle sold           $   1,888          $ 1,744          $       144                   8  %


F&I revenue, net increased $77.9 million (36%) during the nine months ended
September 30, 2021 when compared to the nine months ended September 30, 2020,
and same store F&I revenue, net increased by $59.4 million (28%) over the same
period. F&I revenue, net increased as a result of the increase in new and used
retail unit sales for the nine months ended September 30, 2021 as compared to
the nine months ended September 30, 2020. For the nine months ended
September 30, 2021, the Company was able to improve the F&I PVR by $95 per unit
(5%) over the comparable prior year period.

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Selling, General, and Administrative Expense-

                                                               For the Nine Months Ended September 30,                                                   % of Gross
                                                                   % of Gross                               % of Gross              Increase           Profit Increase
                                                2021                 Profit                2020               Profit               (Decrease)            (Decrease)
                                                                                              (Dollars in millions)
As Reported:
Personnel costs                            $     383.5                    28.2  %       $ 273.3                    32.1  %       $     110.2                    (3.9) %
Sales compensation                               137.6                    10.1  %          84.6                     9.9  %              53.0                     0.2  %
Share-based compensation                          12.2                     0.9  %           9.2                     1.1  %               3.0                    (0.2) %
Outside services                                  81.1                     6.0  %          60.3                     7.1  %              20.8                    (1.1) %
Advertising                                       24.0                     1.8  %          17.9                     2.1  %               6.1                    (0.3) %
Rent                                              28.7                     2.1  %          20.8                     2.4  %               7.9                    (0.3) %
Utilities                                         13.8                     1.0  %          11.6                     1.4  %               2.2                    (0.4) %
Insurance                                         16.8                     1.2  %          12.0                     1.4  %               4.8                    (0.2) %
Other                                             80.5                     5.9  %          63.7                     7.5  %              16.8                    (1.6) %
Selling, general, and administrative
expense                                    $     778.2                    57.2  %       $ 553.4                    65.0  %       $     224.8                    (7.8) %
Gross profit                               $   1,359.9                                  $ 851.1

Same Store:
Personnel costs                            $     323.9                    28.4  %       $ 265.1                    32.1  %       $      58.8                    (3.7) %
Sales compensation                               120.2                    10.5  %          81.8                     9.9  %              38.4                     0.6  %
Share-based compensation                          12.2                     1.1  %           9.3                     1.1  %               2.9                       -  %
Outside services                                  68.5                     6.0  %          58.1                     7.0  %              10.4                    (1.0) %
Advertising                                       20.9                     1.8  %          16.7                     2.0  %               4.2                    (0.2) %
Rent                                              28.2                     2.5  %          20.6                     2.5  %               7.6                       -  %
Utilities                                         11.5                     1.0  %          11.1                     1.3  %               0.4                    (0.3) %
Insurance                                         13.2                     1.2  %          11.1                     1.3  %               2.1                    (0.1) %
Other                                      $      66.1                     5.7  %       $  62.1                     7.7  %               4.0                    (2.0) %
Selling, general, and administrative
expense                                    $     664.7                    58.2  %       $ 535.9                    64.9  %       $     128.8                    (6.7) %
Gross profit                               $   1,141.2                                  $ 825.1


SG&A expense as a percentage of gross profit decreased 780 basis points from
65.0% for the nine months ended September 30, 2020 to 57.2% for the nine months
ended September 30, 2021, while same store SG&A expense as a percentage of gross
profit decreased 670 basis points to 58.2% over the same period. The decrease in
SG&A as a percentage of gross profit during the nine months ended September 30,
2021, is primarily the result of higher sales volume and gross profits earned on
new and used vehicle sales. On an as-reported basis, Personnel costs and Sales
compensation increased by $110.2 million and $53.0 million, respectively, for
the nine months ended September 30, 2021 as compared to the nine months ended
September 30, 2020, primarily due to the inclusion of the Park Place acquisition
in year-to-date 2021 results. We also attribute the increase to higher sales
commissions related to the increase in gross profit earned during the nine
months ended September 30, 2021.
Franchise Rights Impairment-
During the nine months ended September 30, 2020, we recorded a franchise rights
impairment charge of $23.0 million. As a result of the COVID-19 pandemic, we
performed a quantitative impairment analysis of certain franchise rights assets
and determined that their carrying values exceeded their fair value by $23.0
million as of March 31, 2020. We did not perform impairment testing related to
franchise rights for the nine months ended September 30, 2021 as no triggering
events had occurred.
Other Operating Expense, net-
Other operating expense, net includes gains and losses from the sale of property
and equipment, and other operating items not considered core to our business.
During the nine months ended September 30, 2021, the Company recorded other
operating income, net of $4.6 million, primarily related to a $3.5 million gain
arising from legal settlements and a $1.9 million gain on divestitures of
certain real estate, partially offset by $1.3 million of real estate related
charges. Included in the $9.4 million of other operating expense, net for the
nine months ended September 30, 2020, was an $11.6 million charge related to
certain
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financing transactions related to, as well as the initial termination of, the
Park Place acquisition, partially offset by a $2.1 million gain related to legal
settlements and a $0.3 million gain related to the sale of vacant real estate.
Floor Plan Interest Expense-
Floor plan interest expense decreased by $7.6 million (54%) to $6.5 million
during the nine months ended September 30, 2021 compared to $14.1 million during
the nine months ended September 30, 2020 primarily as a result of lower new
vehicle inventory levels.
Loss on Extinguishment of Debt-
On March 4, 2020, the Company redeemed its $600 million 6% Notes scheduled to
mature in 2024 at 103% of par, plus accrued and unpaid interest. We recorded a
loss on extinguishment of the 6% Notes of $19.1 million which comprised a
redemption premium of $18.0 million and the write-off of the unamortized premium
and debt issuance costs totaling $1.1 million, net.
As a result of the termination of the Asset Purchase Agreement (the "2019 Asset
Purchase Agreement"), dated as of December 11, 2019, among the Company, Park
Place and the other parties thereto, the Company delivered a notice of special
mandatory redemption to holders of its $525.0 million aggregate principal amount
of Senior Notes due 2028 (the "Existing 2028 Notes") and $600.0 million
aggregate principal amount of Senior Notes due 2030 (the "Existing 2030 Notes")
pursuant to which it would redeem on a pro rata basis (1) $245.0 million of the
Existing 2028 Notes and (2) $280.0 million of the Existing 2030 Notes, in each
case, at 100% of the respective principal amount plus accrued and unpaid
interest to, but excluding the special mandatory redemption date. On March 30,
2020, the Company completed the redemption and recorded a write-off of
unamortized debt issuance costs of $1.5 million.
Gain on Dealership Divestitures, net-
During the nine months ended September 30, 2021, we sold one franchise (one
dealership location) in the Charlottesville, Virginia market and recorded a
pre-tax gain of $8.0 million.
During the nine months ended September 30, 2020, we sold one franchise (one
dealership location) in the Atlanta, Georgia market, six franchises (five
dealership locations) and one collision center in the Jackson, Mississippi
market, and one franchise (one dealership location) in the Greenville, South
Carolina market. The Company recorded a net pre-tax gain totaling $58.4 million.
Income Tax Expense-
The $69.1 million increase in income tax expense was primarily the result of a
$295.7 million increase in income before income taxes. Our effective tax rate
for the nine months ended September 30, 2021 was 23.8% compared to 24.3% in the
prior year period.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2021, we had total available liquidity of $776.6 million,
which consisted of $330.6 million of cash and cash equivalents, $46.8 million of
available funds in our floor plan offset accounts, $190.0 million availability
under our new vehicle floor plan facility that is able to be converted to our
revolving credit facility, $49.2 million of availability under our revolving
credit facility, and $160.0 million of availability under our used vehicle
revolving floor plan facility. The borrowing capacities under our revolving
credit facility and our used vehicle revolving floor plan facility are limited
by borrowing base calculations and, from time to time, may be further limited by
our required compliance with customary operating and other restrictive
covenants. As of September 30, 2021, these covenants did not further limit our
availability under our credit facilities. For more information on our covenants,
see "Covenants" and "Share Repurchases and Dividend Restrictions" below.
On September 28, 2021, the Company entered into the Transaction Agreements to
acquire the Larry H. Miller family of dealerships including the associated real
estate and Total Care Auto, Powered by Landcar. In connection with entering into
the Transaction Agreements, the Company entered into a commitment letter, dated
September 28, 2021 (the "Commitment Letter"), with Bank of America, N.A., BofA
Securities, Inc. and JPMorgan Chase Bank N.A. (collectively, the "Commitment
Parties"), pursuant to which, among other things, the Commitment Parties have
committed to provide debt financing for the Transactions, consisting of (i) a
$2.35 billion bridge loan (the "HY Bridge Facility"); and (ii) a $900.0 million
364-day bridge loan (the "364-Bridge Facility"), on the terms and subject to the
conditions set forth in the Commitment Letter. Each of the HY Bridge Facility
and 364-Day Bridge Facility is subject to reduction as set forth in the
Commitment Letter upon the completion of certain debt and equity financings, as
applicable, and upon other specified events. The obligation of the Commitment
Parties to provide this
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debt financing is subject to a number of customary conditions, including,
without limitation, execution and delivery of certain definitive documentation.
We continually evaluate our liquidity and capital resources based upon (i) our
cash and cash equivalents on hand, (ii) the funds that we expect to generate
through future operations, (iii) current and expected borrowing availability,
(iv) amounts in our new vehicle floor plan notes payable offset accounts, and
(v) the potential impact of our capital allocation strategy and any contemplated
or pending future transactions, including, but not limited to, financings,
acquisitions, dispositions, equity and/or debt repurchases, dividends, or other
capital expenditures. We believe we will have sufficient liquidity to meet our
debt service and working capital requirements; commitments and contingencies;
debt repayment, maturity and repurchase obligations; acquisitions; capital
expenditures; and any operating requirements for at least the next twelve
months.
Material Indebtedness
We currently are party to the following material credit facilities and
agreements, and have the following material indebtedness outstanding. For a more
detailed description of the material terms of these agreements and facilities,
and this indebtedness, please refer to Note 13 "Debt" in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2020.
•2019 Senior Credit Facility-On September 25, 2019, the Company and certain of
its subsidiaries entered into the third amended and restated credit agreement
with Bank of America, as administrative agent, and the other lenders party
thereto (the "2019 Senior Credit Facility"). The 2019 Senior Credit Agreement
provides for the following:
Revolving Credit Facility-A $250.0 million Revolving Credit Facility for, among
other things, acquisitions, working capital and capital expenditures, including
a $50.0 million sub-limit for letters of credit. As described below, as of
September 30, 2021, we converted $190.0 million of aggregate commitments from
the Revolving Credit Facility to our New Vehicle Floor Plan Facility, resulting
in $60.0 million of borrowing capacity. In addition, we had $10.8 million in
outstanding letters of credit as of September 30, 2021, resulting in $49.2
million of borrowing availability as of September 30, 2021.
New Vehicle Floor Plan Facility-A $1.04 billion New Vehicle Floor Plan Facility
which allows us to transfer cash as an offset to floor plan notes payable. These
transfers reduce the amount of outstanding new vehicle floor plan notes payable
that would otherwise accrue interest, while retaining the ability to transfer
amounts from the offset account into our operating cash accounts. As a result of
the use of our floor plan offset account and the reduction in LIBOR rates, we
experienced a reduction in Floor Plan Interest Expense on our Condensed
Consolidated Statements of Income. As of September 30, 2021, we had $116.1
million outstanding under the New Vehicle Floor Plan Facility, which is net of
$45.2 million in our floor plan offset account.
Used Vehicle Floor Plan Facility-A $160.0 million Used Vehicle Floor Plan
Facility to finance the acquisition of used vehicle inventory and for, among
other things, working capital and capital expenditures, as well as to refinance
used vehicles. We began the year with nothing drawn on our used vehicle floor
plan facility and there was no activity during the nine months ended September
30, 2021. Our borrowing capacity under the Used Vehicle Floor Plan Facility was
$160.0 million based on our borrowing base calculation as of September 30, 2021.
Subject to compliance with certain conditions, the 2019 Senior Credit Agreement
provides that we have the ability, at our option and subject to the receipt of
additional commitments from existing or new lenders, to increase the size of the
facilities by up to $350.0 million in the aggregate without lender consent.
At our option, we have the ability to re-designate 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
re-designate is determined based on aggregate commitments under the Revolving
Credit Facility, less $50.0 million. In addition, we are able to re-designate
any amounts moved to the New Vehicle Floor Plan Facility or the Used Vehicle
Floor Plan Facility back to the Revolving Credit Facility. On April 6, 2021,
$190.0 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.
Borrowings under the 2019 Senior Credit Facility bear interest, at our option,
based on LIBOR or the Base Rate, in each case, plus an Applicable Rate. The Base
Rate is the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the Bank of
America prime rate, and (iii) one month LIBOR plus 1.00%. Applicable Rate means
with respect to the Revolving Credit Facility, a range from 1.00% to 2.00% for
LIBOR loans and 0.15% to 1.00% for Base Rate loans, in each case based on the
Company's consolidated total lease adjusted leverage ratio. Borrowings under the
New Vehicle Floorplan Facility bear interest, at our option, based on LIBOR plus
1.10% or the Base Rate plus 0.10%. Borrowings
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under the Used Vehicle Floorplan Facility bear interest, at our option, based on
LIBOR plus 1.40% or the Base Rate plus 0.40%.
In addition to the payment of interest on borrowings outstanding under the 2019
Senior Credit Facility, we are required to pay a quarterly commitment fee on
total unused commitments thereunder. The fee for unused commitments under the
Revolving Credit Facility is between 0.15% and 0.40% per year, based on the
Company's total lease adjusted leverage ratio, and the fee for unused
commitments under the New Vehicle Facility Floor Plan and the Used Vehicle
Facility Floor Plan Facility is 0.15% per year.
•Manufacturer affiliated new vehicle floor plan and other financing
facilities-We have a floor plan facility with the Ford Motor Credit Company
("Ford Credit") to purchase new Ford and Lincoln vehicle inventory. Our floor
plan facility with Ford Credit was amended in July 2020 and can be terminated by
either the Company or Ford Credit with a 30-day notice period. We have also
established a floor plan offset account with Ford Credit, which operates in a
similar manner to our floor plan offset account with Bank of America. As of
September 30, 2021, we had $22.1 million, which is net of $1.6 million in our
floor plan offset account, outstanding under our floor plan facility.
Additionally, we had $129.8 million, outstanding under our 2019 Senior Credit
Facility and facilities with certain manufacturers for the financing of loaner
vehicles, which are presented within Accounts payable and accrued liabilities in
our Condensed Consolidated Balance Sheets. Neither our floor plan facility with
Ford Credit nor our facilities for loaner vehicles have stated borrowing
limitations.
•The New Senior Notes-On February 19, 2020, the Company completed its offering
of senior unsecured notes, consisting of $525.0 million aggregate principal
amount of the Existing 2028 Notes and $600.0 million aggregate principal amount
of the Existing 2030 Notes. The Existing 2028 Notes and Existing 2030 Notes
mature on March 1, 2028 and March 1, 2030, respectively.
On March 24, 2020, the Company delivered notice to the sellers terminating the
2019 Asset Purchase Agreement and the Real Estate Purchase Agreement. As a
result, the Company redeemed $245.0 million aggregate principal million of the
Existing 2028 Notes and $280.0 million aggregate principal amount of the
Existing 2030 Notes pursuant to the Special Mandatory Redemption.
In September 2020, the Company completed an add-on issuance of $250.0 million
aggregate principal amount of additional senior notes consisting of $125.0
million aggregate principal amount of additional Existing 2028 Notes at a price
of 101.0% of par, plus accrued interest from September 1, 2020, and $125.0
million aggregate principal amount of additional Existing 2030 Notes (together
with the additional 2028 Notes, the "Additional Notes") at a price of 101.75% of
par, plus accrued interest from September 1, 2020.
•Mortgage notes-As of September 30, 2021, we had $73.1 million of mortgage note
obligations. These obligations are collateralized by the associated real estate
at our dealership locations.
•2013 BofA Real Estate Facility-On September 26, 2013, we entered into a real
estate term loan credit agreement (the "2013 BofA Real Estate Credit Agreement")
with Bank of America, N.A. ("Bank of America"), as lender, providing for term
loans in an aggregate amount not to exceed $75.0 million, subject to customary
terms and conditions (the "2013 BofA Real Estate Facility"). As of September 30,
2021, we had $31.7 million of outstanding borrowings under the 2013 BofA Real
Estate Facility. There is no further borrowing availability under this
agreement.

•2015 Wells Fargo Master Loan Facility-On February 3, 2015, certain of our
subsidiaries entered into an amended and restated master loan agreement (the
"2015 Wells Fargo Master Loan Agreement") with Wells Fargo Bank, National
Association ("Wells Fargo"), as lender, which provides for term loans to certain
of our subsidiaries that are borrowers under the 2015 Wells Fargo Master Loan
Agreement in an aggregate amount not to exceed $100.0 million (the "2015 Wells
Fargo Master Loan Facility"). Borrowings under the 2015 Wells Fargo Master Loan
Facility are guaranteed by us and are collateralized by the real property
financed under the 2015 Wells Fargo Master Loan Facility. As of September 30,
2021, the outstanding balance under this agreement was $54.5 million. There is
no further borrowing availability under this agreement.

•2018 Bank of America Facility-On November 13, 2018, we entered into a real
estate term loan credit agreement (as amended, restated or supplemented from
time to time, the "2018 BofA Real Estate Credit Agreement") with Bank of
America, as lender, providing for term loans in an aggregate amount not to
exceed $128.1 million, subject to customary terms and conditions (the "2018 BofA
Real Estate Facility"). Our right to make draws under the 2018 BofA Real Estate
Facility terminated on November 13, 2019. All of the real property financed by
an operating dealership subsidiary of the Company under the 2018 BofA Real
Estate Facility is collateralized by first priority liens, subject to
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certain permitted exceptions. As of September 30, 2021, we had $80.1 million of
outstanding borrowings under the 2018 Bank of America Facility.
•2018 Wells Fargo Master Loan Facility-On November 16, 2018, certain of our
subsidiaries entered into a master loan agreement (the "2018 Wells Fargo Master
Loan Agreement") with Wells Fargo as lender, which provides for term loans to
certain of our subsidiaries that are borrowers under the 2018 Wells Fargo Master
Loan Agreement in an aggregate amount not to exceed $100.0 million (the "2018
Wells Fargo Master Loan Facility"). As of September 30, 2021, we had $83.1
million, outstanding borrowings under the 2018 Wells Fargo Master Loan Facility.
There is no further borrowing availability under this agreement.
•2021 BofA Real Estate Facility-On May 20, 2021, the Company and certain of its
subsidiaries borrowed $184.4 million under a real estate term loan credit
agreement, dated as of May 10, 2021 (the "2021 BofA Real Estate Credit
Agreement"), by the Company and certain of its subsidiaries, Bank of America,
N.A., as administrative agent and the various financial institutions party
thereto, as lenders, which provides for term loans in an aggregate amount equal
to $184.4 million, subject to customary terms and conditions (the "2021 BofA
Real Estate Facility"). The Company used the proceeds from these borrowings to
finance the exercise of its option to purchase certain of the leased real
property related to the Park Place dealerships. The Company completed the
purchase of the leased real property on May 20, 2021. As of September 30, 2021,
we had $182.5 million of outstanding borrowings under the 2021 BofA Real
Estate Facility. There is no further borrowing availability under this
agreement.
Term loans under our 2021 BofA Real Estate Facility bear interest, at our
option, based on (1) LIBOR plus 1.65% per annum or (2) the Base Rate (as
described below) plus 0.65% per annum. The Base Rate is the highest of (i) the
Federal Funds rate plus 0.50%, (ii) the Bank of America prime rate, and (iii)
one month LIBOR plus 1.0%. We will be required to make 39 consecutive quarterly
principal payments of 1.00% of the initial amount of each loan, with a balloon
repayment of the outstanding principal amount of loans due on the maturity date.
The 2021 BofA Real Estate Facility matures ten years from the initial funding
date. Borrowings under the 2021 BofA Real Estate Facility are guaranteed by us
and each of our operating dealership subsidiaries that leased the real estate
now financed under the 2021 BofA Real Estate Facility, and are collateralized by
first priority liens, subject to certain permitted exceptions, on all of the
real property financed thereunder.
The representations and covenants in the 2021 BofA Real Estate Credit Agreement
are customary for financing transactions of this nature, including, among
others, a requirement to comply with a minimum consolidated current ratio,
minimum consolidated fixed charge coverage ratio and maximum consolidated total
lease adjusted leverage ratio, in each case as set out in the 2021 BofA Real
Estate Credit Agreement. In addition, certain other covenants could restrict our
ability to incur additional debt, pay dividends or acquire or dispose of assets.
The 2021 BofA Real Estate Credit Agreement also provides for events of default
that are customary for financing transactions of this nature, including
cross-defaults to other material indebtedness. Upon the occurrence of an event
of default, we could be required by the 2021 BofA Real Estate Credit Agreement
to immediately repay all amounts outstanding thereunder.
Covenants
We are subject to a number of customary operating and other restrictive
covenants in our various debt and lease agreements. We were in compliance with
all of our covenants as of September 30, 2021.
Share Repurchases and Dividend Restrictions
Our ability to repurchase shares or pay dividends on our common stock is subject
to our compliance with the covenants and restrictions in our various debt and
lease agreements.
Our 2019 Senior Credit Facility and our Indentures permit us to make an
unlimited amount of restricted payments, such as share repurchases or dividends,
so long as our Consolidated Total Leverage Ratio, as defined in those
agreements, does not exceed 3.0 to 1.0 on a pro forma basis after giving effect
to any proposed payments. As of September 30, 2021, our Consolidated Total
Leverage Ratio did not exceed 3.0 to 1.0.
On January 27, 2021, the Board of Directors increased the Company's share
repurchase authorization under our current share repurchase program (the
"Repurchase Program") by $33.7 million to $100 million, for the repurchase of
our common stock in open market transactions or privately negotiated
transactions from time to time. The extent to which the Company repurchases its
shares, the number of shares and the timing of any repurchases will depend on
general market conditions, legal requirements and other corporate
considerations. The repurchase program may be modified, suspended or terminated
at any time without prior notice.
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During the nine months ended September 30, 2021, we did not repurchase any
shares of our common stock under the Repurchase Program and had remaining
authorization to repurchase $100.0 million in shares of our common stock under
the Repurchase Program.
During the three and nine months ended September 30, 2021, we repurchased 96 and
65,123 shares, of our common stock for $0.1 million and $10.3 million,
respectively, from employees in connection with a net share settlement feature
of employee equity-based awards.
Cash Flows
Classification of Cash Flows Associated with Floor Plan Notes Payable
Borrowings and repayments of floor plan notes payable to a lender unaffiliated
with the manufacturer from which we purchase a particular new vehicle
("Non-Trade"), and all floor plan notes payable relating to used vehicles
(together referred to as "Floor Plan Notes Payable-Non-Trade"), are classified
as financing activities in the accompanying Condensed Consolidated Statements of
Cash Flows, with borrowings reflected separately from repayments. The net change
in floor plan notes payable to a lender affiliated with the manufacturer from
which we purchase a particular new vehicle (collectively referred to as "Floor
Plan Notes Payable-Trade") is classified as an operating activity in the
accompanying Condensed Consolidated Statements of Cash Flows. Borrowings of
floor plan notes payable associated with inventory acquired in connection with
all acquisitions and repayments made in connection with all divestitures are
classified as a financing activity in the accompanying Condensed Consolidated
Statements of Cash Flows. Cash flows related to floor plan notes payable
included in operating activities differ from cash flows related to floor plan
notes payable included in financing activities only to the extent that the
former are payable to a lender affiliated with the manufacturer from which we
purchased the related inventory, while the latter are payable to a lender not
affiliated with the manufacturer from which we purchased the related inventory.
The majority of our floor plan notes are payable to parties unaffiliated with
the entities from which we purchase our new vehicle inventory, with the
exception of floor plan notes payable relating to the financing of new Ford and
Lincoln vehicles.
Floor plan borrowings are required by all vehicle manufacturers for the purchase
of new vehicles, and all floor plan lenders require amounts borrowed for the
purchase of a vehicle to be repaid within a short time period after the related
vehicle is sold. As a result, we believe that it is important to understand the
relationship between the cash flows of all of our floor plan notes payable and
new vehicle inventory in order to understand our working capital and operating
cash flow and to be able to compare our operating cash flow to that of our
competitors (i.e., if our competitors have a different mix of trade and
non-trade floor plan financing as compared to us). In addition, we include all
floor plan borrowings and repayments in our internal operating cash flow
forecasts. As a result, we use the non-GAAP measure "cash provided by operating
activities, as adjusted" (defined below) to compare our results to forecasts. We
believe that splitting the cash flows of floor plan notes payable between
operating activities and financing activities, while all new vehicle inventory
activity is included in operating activities, results in significantly different
operating cash flow than if all the cash flows of floor plan notes payable were
classified together in operating activities.
Cash provided by operating activities, as adjusted, includes borrowings and
repayments of floor plan notes payable to lenders not affiliated with the
manufacturer from which we purchase the related new vehicles. Cash provided by
operating activities, as adjusted, has material limitations, and therefore, may
not be comparable to similarly titled measures of other companies and should not
be considered in isolation, or as a substitute for analysis of our operating
results in accordance with GAAP. In order to compensate for these potential
limitations we also review the related GAAP measures.
We have provided below a reconciliation of cash flow from operating activities,
as if all changes in floor plan notes payable, except for (i) borrowings
associated with acquisitions and repayments associated with divestitures and
(ii) borrowings and repayments associated with the purchase of used vehicle
inventory, were classified as an operating activity.
                                                                               For the Nine Months Ended
                                                                                     September 30,
                                                                                 2021              2020
                                                                                     (In millions)
Reconciliation of Cash provided by operating activities to Cash provided by
operating activities, as adjusted
Cash provided by operating activities, as reported                           $   958.6          $  625.2
New vehicle floor plan repayments -non-trade, net                               (520.7)           (207.4)

Cash provided by operating activities, as adjusted                           $   437.9          $  417.8



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Operating Activities-
Net cash provided by operating activities totaled $958.6 million and $625.2
million, for the nine months ended September 30, 2021 and 2020, respectively.
Net cash provided by operating activities, as adjusted, totaled $437.9 million
and $417.8 million for the nine months ended September 30, 2021 and 2020,
respectively.
The $20.1 million increase in our net cash provided by operating activities, as
adjusted, for the nine months ended September 30, 2021 compared to the nine
months ended September 30, 2020 was primarily the result of a $226.6 million
increase in net income and increase of $24.0 million related to the lower
balances of accounts receivable and contracts-in-transit around the period end,
offset by a $87.6 million decrease related to the change in inventory, net of
floor plan, a $66.5 million decrease in other current assets, a decrease in
accounts payable and other current liabilities of $76.8 million and an increase
in non-cash reconciling adjustments to net income of $15.0 million.
Investing Activities-
Net cash used in investing activities totaled $248.6 million for the nine months
ended September 30, 2021 compared to cash used in investing activities of $818.1
million, for the nine months ended September 30, 2020. Capital expenditures,
excluding the purchase of real estate, were $49.4 million and $27.5 million for
the nine months ended September 30, 2021 and 2020, respectively. We expect that
capital expenditures for 2021 will total approximately $50.9 million to upgrade
or replace our existing facilities, construct new facilities, expand our service
capacity, and invest in technology and equipment.
During the nine months ended September 30, 2021, we acquired the assets of one
franchise (one dealership location) in the Denver, Colorado market for a
purchase price of $15.9 million. We funded this acquisition with an aggregate of
$15.6 million of cash and $0.3 million of floor plan borrowings for the purchase
of the related new vehicle inventory. During the nine months ended September 30,
2021, we released $1.0 million of purchase price holdbacks related to a prior
year acquisition.
During the nine months ended September 30, 2020, we acquired substantially all
of the assets of, and leased the real property related to 12 new vehicle
dealership franchises (8 dealership locations), two collision centers and an
auto auction comprising the Park Place Dealership group for a purchase price of
$889.9 million. We funded this acquisition with $527.4 million of cash, $200.0
million of Seller Notes, $127.5 million of floor plan borrowings for the
purchase of the related new vehicle inventory and $35.0 million of floor plan
borrowings for the purchase of the related used vehicle inventory. We also
acquired the assets of three franchises (one dealership location) in the Denver,
Colorado market for a purchase price of $63.6 million. We funded this
acquisition with an aggregate of $34.5 million of cash and $27.1 million of
floor plan borrowings for the purchase of the related new vehicle inventory. In
the aggregate, this acquisition included purchase price holdbacks of $2.0
million for potential indemnity claims made by us with respect to the acquired
franchises. In addition to the acquisition amounts above, we released $2.5
million of purchase price holdbacks related to a prior year acquisition.
During the nine months ended September 30, 2021, we sold one franchise (one
dealership location) in the Charlottesville, Virginia market for a purchase
price of $21.3 million. In addition, during the nine months ended September 30,
2021, we received cash proceeds of $21.5 million from the sale of real estate
properties.
During the nine months ended September 30, 2020, we sold one franchise (one
dealership location) in the Atlanta, Georgia market, six franchises (five
dealership locations) and one collision center in the Jackson, Mississippi
market, and one franchise (one dealership location) in the Greenville, South
Carolina market for an aggregate purchase price of $161.6 million. In addition,
during the nine months ended September 30, 2020, we received cash proceeds of
$4.2 million from the sale of vacant properties.
During the nine months ended September 30, 2021 and 2020, purchases of real
estate, including previously leased real estate, totaled $7.8 million and $2.3
million, respectively.
As part of our capital allocation strategy, we continually evaluate
opportunities to purchase properties currently under lease and acquire
properties in connection with future dealership relocations. No assurances can
be provided that we will have or be able to access capital at times or on terms
in amounts deemed necessary to execute this strategy.
Financing Activities-
Net cash used in financing activities totaled $380.8 million for the nine months
ended September 30, 2021. Net cash provided by financing activities totaled
$193.5 million for the nine months ended September 30, 2020.
During the nine months ended September 30, 2021 and 2020, we had non-trade floor
plan borrowings, excluding floor plan borrowings associated with acquisitions,
of $3.40 billion and $2.84 billion, respectively, and non-trade floor plan
repayments, excluding floor plan repayments associated with a divestiture, of
$3.93 billion and $3.00 billion, respectively.
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During the nine months ended September 30, 2021 and 2020 we had floor plan
borrowings of  $0.3 million and $131.6 million, respectively, related to
acquisitions.
During the nine months ended September 30, 2021 and 2021, we had non-trade floor
plan repayments associated with divestitures of $0.8 million and $55.3 million,
respectively.
Repayments of borrowings totaled $33.7 million and $1.60 billion for the nine
months ended September 30, 2021 and 2020, respectively. In addition, payments of
debt issuance costs totaled $3.1 million for the nine months ended September 30,
2020.
During the nine months ended September 30, 2020, we had proceeds of $7.3 million
related to a sale and leaseback of real estate in Plano, Texas.
During the nine months ended September 30, 2021, we did not repurchase any
shares of our common stock under our Repurchase Program but repurchased 65,123
shares of our common stock for $10.3 million from employees in connection with a
net share settlement feature of employee equity-based awards.
Off Balance Sheet Arrangements
We had no off balance sheet arrangements during any of the periods presented
other than those disclosed in Note 12 "Commitments and Contingencies" within the
accompanying Condensed Consolidated Financial Statements.
Critical Accounting Policies and Estimates
For a description of our critical accounting policies and estimates, see our
Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Our
critical accounting policies and estimates have not changed materially during
the nine months ended September 30, 2021.
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