Asbury Automotive Group, Inc. (ABG) 2024年年度報告「NYSE」.pdf

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1、Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2024 orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EX

2、CHANGE ACT OF 1934For the transition period from to Commission file number:001-31262 ASBURY AUTOMOTIVE GROUP,INC.(Exact name of Registrant as specified in its charter)Delaware01-0609375(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)2905 Premiere Park

3、way,NW,Suite 300Duluth,Georgia30097(Address of principal executive offices)(Zip Code)(770)418-8200(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:TradingTitle of each classSymbol(s)Name of each exchange on which registeredCommon stock,$0.01

4、 par value per shareABGNew York Stock Exchange Securities registered pursuant to Section 12(g)of the Act:None.aIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file

5、 reports pursuant to Section 13 or Section 15(d)of the Act.Yes No Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during thepreceding 12 months(or for such shorter period that the registrant was r

6、equired to file such reports),and(2)has been subject to such filing requirements for the past90 days.Yes No Table of ContentsIndicate by check mark whether the registrant has submitted electronically and posted on its website,if any,every Interactive Data File required to be submitted and postedpurs

7、uant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit andpost such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated

8、 filer,a smaller reporting company,or an emerging growthcompany.See the definitions of large accelerated filer,accelerated filer,smaller reporting company,and emerging growth company in Rule 12b-2 of the Exchange Act.Large Accelerated Filer Accelerated FilerNon-Accelerated FilerSmaller Reporting Com

9、panyEmerging Growth CompanyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whe

10、ther the registrant has filed a report on and attestation to its managements assessment ofthe effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its audit report

11、.If securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in the filing reflect thecorrection of an error to previously issued financial statements.Indicate by check mark whether any of those error corrections

12、 are restatements that required a recovery analysis of incentive-based compensation received by any of theregistrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).Indicate by check mark whether registrant is a shell company(as defined in Rule 12b-2 of the Exchange

13、Act).Yes No Based on the closing price of the registrants common stock as of June 30,2024,the aggregate market value of the common stock held by non-affiliates of the registrantwas$4.52 billion(based upon the assumption,solely for purposes of this computation,that all of the officers and directors o

14、f the registrant were affiliates of the registrant).Indicate the number of shares outstanding of each of the registrants classes of common stock,as of the latest practicable date:The number of shares of common stockoutstanding as of February 24,2025 was 19,645,447.DOCUMENTS INCORPORATED BY REFERENCE

15、List hereunder the following documents if incorporated by reference and the Part of the Form 10-K into which the document is incorporated:Portions of the registrants definitive Proxy Statement for the 2025 Annual Meeting of Stockholders,to be filed within 120 days after the end of the registrants fi

16、scal year,are incorporated by reference into Part III,Items 10 through 14 of this Annual Report on Form 10-K.Table of ContentsASBURY AUTOMOTIVE GROUP,INC.ANNUAL REPORT ON FORM 10-KFOR THE YEAR ENDEDDECEMBER 31,2024 PagePART IItem 1.Business6Item 1A.Risk Factors18Item 1B.Unresolved Staff Comments31It

17、em 1C.Cybersecurity31Item 2.Properties33Item 3.Legal Proceedings33Item 4.Mine Safety Disclosures34PART IIItem 5.Market for Registrants Common Equity,Related Stockholder Matters,and Issuer Purchases of Equity Securities35Item 6.Reserved37Item 7.Managements Discussion and Analysis of Financial Conditi

18、on and Results of Operations37Item 7A.Quantitative and Qualitative Disclosures About Market Risk66Item 8.Financial Statements and Supplementary Data68Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure120Item 9A.Controls and Procedures120Item 9B.Other Informat

19、ion121Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections121PART IIIItem 10.Directors,Executive Officers,and Corporate Governance122Item 11.Executive Compensation122Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters122Item 1

20、3.Certain Relationships and Related Transactions,and Director Independence122Item 14.Principal Accountant Fees and Services122PART IVItem 15.Exhibits and Financial Statement Schedules123Item 16.Form 10-K Summary127SIGNATURES128Table of ContentsPART I.Forward-Looking InformationCertain of the discuss

21、ions and information included or incorporated by reference in this report may constitute forward-looking statements within themeaning of the federal securities laws.Forward-looking statements are statements that are not historical in nature and may include statements relating to ourgoals,plans and p

22、rojections regarding industry and general economic trends,our expected financial position,results of operations or market position and ourbusiness strategy.Such statements can generally be identified by words such as may,target,could,would,will,should,believe,expect,anticipate,plan,intend,foresee,an

23、d other similar words or phrases.Forward-looking statements may also relate to our expectations and assumptionswith 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 expen

24、ses;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 o

25、fferings;our capital allocation strategy,including as it relates to acquisitions and divestitures,stock repurchases 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 pa

26、rts from our vehicle and parts manufacturers and other suppliers,which can disrupt ouroperations;andour estimated future capital expenditures,which can be impacted by increasing prices and labor shortages and acquisitions and divestitures.Forward-looking statements involve known and unknown risks,un

27、certainties and other factors that may cause our actual future results,performance orachievements to be materially different from any future results,performance,or achievements expressed or implied by the forward-looking statements.Suchfactors include,but are not limited to:the ability to acquire an

28、d successfully integrate acquired businesses into our existing operations and realize expected benefits and synergies fromsuch acquisitions;the effects of increased expenses or unanticipated liabilities incurred as a result of,or due to activities related to our acquisitions or divestitures;changes

29、in general economic and business conditions,including the current inflationary environment,the current interest rate environment,changesin U.S.trade policy,including the imposition of tariffs,changes in employment levels,consumer confidence levels,consumer demand andpreferences,the availability and

30、cost of credit,fuel prices and levels of discretionary personal income;our ability to generate sufficient cash flows,maintain our liquidity and obtain any necessary additional funds for working capital,capitalexpenditures,acquisitions,stock repurchases,debt maturity payments and other corporate purp

31、oses,if necessary or desirable;significant disruptions in the production and delivery of vehicles and parts for any reason,including supply shortages,the ongoing conflict in Russiaand Ukraine,including any government sanctions imposed in connection therewith,natural disasters,severe weather,civil un

32、rest,product recalls,work stoppages or other occurrences that are outside of our control;our ability to successfully attract and retain skilled employees;our ability to successfully operate,including our ability to maintain,and obtain future necessary regulatory approvals,for Total Care Auto,Powered

33、by Landcar(TCA),our finance and insurance(F&I)product provider;adverse conditions affecting the vehicle manufacturers whose brands we sell,and their ability to design,manufacture,deliver and market theirvehicles successfully;changes in the mix and total number of vehicles we are able to sell;4Table

34、of Contentsour outstanding indebtedness and our continued ability to comply with applicable covenants in our various financing and lease agreements,or toobtain waivers of these covenants as necessary;high levels of competition in our industry,which may create pricing and margin pressures on our prod

35、ucts and services;our relationships with manufacturers of the vehicles we sell and our ability to renew,and enter into new framework and dealer agreements withvehicle manufacturers whose brands we sell,on terms acceptable to us;the availability of manufacturer incentive programs and our ability to e

36、arn these incentives;failure of our,or those of our third-party service providers,management information systems and our ability to successfully transition between keyinformation systems,including dealer management systems;any data security breaches occurring,including with regard to personally iden

37、tifiable information(PII);changes in laws and regulations governing the operation of automobile franchises,including trade restrictions,consumer protections,accountingstandards,taxation requirements and environmental laws;changes in,or the imposition of,new tariffs or trade restrictions on imported

38、vehicles or parts;adverse results from litigation,regulatory investigations or other similar proceedings involving us,including costs,expenses,settlements andjudgments related thereto;our ability to consummate planned or pending mergers,acquisitions and dispositions;any disruptions in the financial

39、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 scale and cost structure to improve operating efficiencies across our dealership po

40、rtfolio;andour ability to remediate material weakness and the ongoing effectiveness of internal control over financial reporting.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 Item1A.Risk Factors and

41、 Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations below and other cautionarystatements made in this report should be read and considered as forward-looking statements subject to such uncertainties.We urge you to carefully considerthose factors.Forward-looki

42、ng statements speak only as of the date of this report.We expressly disclaim any obligation to update any forward-looking statementcontained herein.Additional InformationOur annual reports on Form 10-K,quarterly reports on Form 10-Q,current reports on Form 8-K,and any amendments to such reports file

43、d pursuant toSection 13(a)or 15(d)of the Securities Exchange Act of 1934,are made available free of charge on our website at http:/ as soon aspractical after such reports are filed with the U.S.Securities and Exchange Commission(the Commission).In addition,the proxy statement that will bedelivered t

44、o our stockholders in connection with our 2025 Annual Meeting of Stockholders,when filed,will also be available on our website,and at the URLstated in such proxy statement.We also make available on our website copies of our certificate of incorporation,bylaws,and other materials that outline ourcorp

45、orate governance policies and practices,including:the respective charters of our audit committee,governance and nominating committee,compensation and human resources committee,and capitalallocation and risk management committee;our criteria for independence of the members of our Board of Directors,a

46、udit committee,and compensation and human resources committee;our Corporate Governance Guidelines;and our Code of Business Conduct and Ethics for Directors,Officers,and Employees.We intend to provide any information required by Item 5.05 of Form 8-K(relating to amendments or waivers of our Code of B

47、usiness Conduct and Ethicsfor Directors,Officers,and Employees)by disclosure on our website.You may also obtain a printed copy of the foregoing materials by sending a written request to:Investor Relations Department,Asbury AutomotiveGroup,Inc.,2905 Premiere Parkway,NW,Suite 300,Duluth,Georgia 30097.

48、In addition,the5Table of ContentsCommission makes available on its website,free of charge,reports,proxy and information statements,and other information regarding issuers,such as us,that file electronically with the Commission.The Commissions website is http:/www.sec.gov.Unless otherwise specified,i

49、nformation contained on ourwebsite,available by hyperlink from our website or on the Commissions website,is not incorporated into this report or other documents we file with,orfurnish to,the Commission.Except as the context otherwise requires,we,our,us,Asbury,and the Company refer to Asbury Automoti

50、ve Group,Inc.and its subsidiaries.Item 1.BUSINESSAsbury Automotive Group,Inc.,a Delaware corporation organized in 2002,is a Fortune 500 company and one of the largest franchised automotiveretailers in the United States.Our mission and vision is to put the guest experience first and follow our North

51、Star to be the most guest-centric automotiveretailer in the industry.We follow three key principles to guide us:(1)have a fun,supportive and inclusive culture where team members thrive personallywhile building meaningful bonds with one another;(2)be great brand ambassadors and exceptional stewards o

52、f capital for our partners who fuel our mission;and(3)be caring professionals who strive to delight our guests and foster love for the brand.Our strong organizational culture and purposeful mission allowus to continuously deliver best-in-class experiences to our guests.As of December 31,2024,we owne

53、d and operated 198 new vehicle franchises,representing31 brands of automobiles at 152 dealership locations,37 collision centers,and Total Care Auto,Powered by Landcar(TCA or TCA Business),ourfinance and insurance(F&I)product provider,within 14 states.Our store operations are conducted by our subsidi

54、aries and the Company operates in tworeportable segments,the Dealerships and TCA segments.We offer an extensive range of automotive products and services fulfilling the entire vehicle ownership lifecycle including new and used vehicles,partsand service,which includes vehicle repair and maintenance s

55、ervices,replacement parts and collision repair services(collectively referred to as parts andservices or P&S),and F&I products,including arranging vehicle financing through third parties and aftermarket products,such as extended servicecontracts,guaranteed asset protection(GAP)debt cancellation and

56、prepaid maintenance.We strive for a diversified mix of products,services,brands andgeographic locations which allows us to reduce our reliance on any one manufacturer,minimize the impact from changes in customer preference and maintainprofitability across fluctuations in new vehicle sales.Our divers

57、e revenue base,along with our commitment to operational excellence across our dealershipportfolio,provides a resilient business model and strong profit margins.Our omni-channel platform is designed to engage with customers where and when they want to interact and to increase our market share through

58、 digitalinnovation.We are focused on providing a high level of customer service and have designed our dealerships services to meet the increasingly sophisticatedneeds of customers throughout the vehicle ownership lifecycle.Our digital capabilities further enhance our physical dealership network and

59、drive additionalrevenue.Our ability to provide a low friction experience across our omni-channel platform drives customer satisfaction and repeat business across ourdealership portfolio.AcquisitionsOn February 14,2025,the Company,through one of its subsidiaries,entered into a Purchase and Sale Agree

60、ment(the Transaction Agreement)withvarious entities that comprise the Herb Chambers automotive group(the Herb Chambers Dealerships).Pursuant to the Transaction Agreement,theCompany is expected to acquire substantially all of the assets,including all real property and businesses,of the Herb Chambers

61、Dealerships(collectively,theBusinesses)for an aggregate purchase price of approximately$1.34 billion,which includes$750 million for goodwill and approximately$590 million forthe real estate and leasehold improvements.In addition,the Company will acquire new vehicles,used vehicles,service loaner vehi

62、cles,fixed assets,parts andsupplies for a purchase price to be determined at the closing(the Closing)of the transactions set forth in the Transaction Agreement and will reimburse theHerb Chambers Dealerships for certain dealership construction and development costs incurred prior to the Closing.The

63、Businesses include 33 dealerships,52 franchises and three collision centers.Herb Chambers will retain ownership of the Mercedes-Benz of Boston dealership in Somerville,Massachusetts(theMB Boston Dealership).The Transaction Agreement includes certain restrictions and obligations regarding the sale of

64、 the MB Boston Dealership,includinga put right obligating the Company to purchase the MB Boston Dealership during the five-year period following the Closing,absent certain circumstances.The Closing is subject to various customary closing conditions,including(i)receipt of approval of the transactions

65、 by certain automotive manufacturers,(ii)receipt of certain governmental clearances,including the expiration or termination of the waiting period under the Hart-Scott-Rodino AntitrustImprovements Act of 1976,as amended,(iii)the continued accuracy of the representations and warranties of the parties,

66、(iv)the assignment of certain leasesand key contracts and(v)the absence of a material adverse effect.The Transaction Agreement also contains certain termination rights.The Herb ChambersDealerships may,in some circumstances of termination,be required to pay us a termination fee of$100 million,and in

67、other circumstances of termination,beentitled to receive certain earnest money.The Closing is anticipated to occur in the second quarter of 2025.6Table of ContentsSome but not all of the factors that could cause actual results or events to differ materially from those anticipated are set forth at It

68、em 1A.Risk Factors inthis Form 10-K.There were no acquisitions during the years ended December 31,2024 and 2022.On December 11,2023,the Company completed the acquisition of the business of the Jim Koons(Koons)Automotive Companies,(collectively,theKoons acquisition),thereby acquiring 20 new vehicle d

69、ealerships,six collision centers and the real property related thereto for an aggregate purchase priceof approximately$1.50 billion,which includes$256.1 million of new vehicle floor plan financing and$100.9 million of assets held for sale related to KoonsLexus of Wilmington.The acquisition was funde

70、d with borrowings under Asburys existing credit facility and cash on hand.The Koons acquisitiondiversified Asburys geographic mix,with expansion in the greater Washington-Baltimore region of the United States.DivestituresDuring the year ended December 31,2024,we sold 1 Lexus franchise(1 dealership l

71、ocation)in Wilmington,Delaware due to OEM requirements inconnection with the Koons acquisition,1 Nissan franchise(1 dealership location)in Denver,Colorado,1 Nissan franchise(1 dealership location)in Atlanta,Georgia,1 Chevrolet franchise(1 dealership location)in Atlanta,Georgia and 1 Honda franchise(

72、1 dealership location)in Spokane,Washington.TheCompany recorded a pre-tax gain totaling$8.6 million,which is presented in our accompanying consolidated statements of income as a gain on dealershipdivestitures,net.During the year ended December 31,2023,we sold 1 franchise(1 dealership location)in Aus

73、tin,Texas.The Company recorded a pre-tax gain totaling$13.5 million.During the year ended December 31,2022,we sold one franchise(one dealership location)in St.Louis,Missouri,three franchises(three dealershiplocations)and one collision center in Denver,Colorado,two franchises(two dealership locations

74、)in Spokane,Washington,one franchise(one dealershiplocation)in Albuquerque,New Mexico and 11 franchises(nine dealership locations)and two collision centers in North Carolina.The Company recorded apre-tax gain totaling$207.1 million.Four Key Components of Our BusinessThe following chart presents the

75、contribution to total revenue and gross profit by each line of business for the year ended December 31,2024:7Table of ContentsOur new vehicle franchise retail network within our Dealerships segment is made up of dealerships located in 14 states operating primarily under 16locally branded dealership

76、groups.The following chart provides a detailed breakdown of our states,brand names,and franchises as of December 31,2024:Dealership Group Brand NameStateFranchiseCoggin Automotive GroupFloridaAcura,BMW,Buick,Chevrolet,Ford(a),GMC,Honda(d),Hyundai,Mercedes-Benz,Nissan(a),ToyotaCourtesy AutogroupFlori

77、daChrysler,Dodge Ram,Honda,Hyundai,Infiniti,Jeep,Kia,Mercedes-Benz,Nissan,Sprinter,ToyotaCrown Automotive CompanySouth CarolinaNissanVirginiaAcura,BMW(a),MINIDavid McDavid Auto GroupTexasFord,Honda(a),LincolnGreenville Automotive GroupSouth CarolinaLand Rover,Porsche,Toyota,VolvoHare,Bill Estes&Kahl

78、o AutomotiveGroupsIndianaChevrolet(b),Chrysler(a),Dodge Ram(a),Ford,GMC,Honda,Isuzu,Jeep(a),ToyotaJim Koons Automotive CompaniesMarylandChevrolet(a),Ford,GMC,Kia,Mercedes-Benz,Sprinter,Toyota(b),VolvoVirginiaBuick,Chevrolet,Chrysler,Dodge Ram,Ford(b),GMC(a),Hyundai,Jeep,Kia,Toyota(a)Larry H.Miller D

79、ealershipsArizonaChrysler(b),Dodge Ram(c),Fiat,Ford,Genesis,Hyundai,Jeep(b),Nissan,Toyota,Volkswagen(a)CaliforniaToyota(a)ColoradoChrysler(a),Dodge Ram(b),Fiat,Ford,Jeep(a),Nissan,VolkswagenIdahoChrysler,Dodge Ram,Honda,Jeep,SubaruNew MexicoChevrolet,Chrysler(a),Dodge Ram,Hyundai(a),Jeep(a),ToyotaUt

80、ahChevrolet(a),Chrysler(c),Dodge Ram(c),Ford(b),Honda,Jeep(c),Lexus(a),Lincoln,Mercedes-Benz,Toyota,SprinterMike Shaw,Stevinson&ArapahoeAutomotive GroupsColoradoSubaru(a),Chevrolet,Chrysler,Dodge Ram,Hyundai(a),Jaguar,Jeep,Lexus(a),Porsche,Toyota(a)Nalley Automotive GroupGeorgiaAcura,Audi,Bentley,BM

81、W,Honda,Hyundai,Infiniti(a),Kia,Lexus(a),Toyota(b),VolkswagenPark Place AutomotiveTexasAcura,Lexus(a),Land Rover,Mercedes-Benz(b),Porsche,Volvo,Sprinter(b)Plaza Motor CompanyMissouriAudi,BMW,Infiniti,Land Rover,Mercedes-Benz(a),Sprinter(a)_(a)This dealership group has two of these franchises.(b)This

82、 dealership group has three of these franchises.(c)This dealership group has four of these franchises.(d)This dealership group has five of these franchises.8Table of ContentsOperationsNew Vehicle SalesThe following table reflects the number of franchises we owned as of December 31,2024 and the perce

83、ntage of new vehicle revenues represented byclass and franchise for the year ended December 31,2024:Class/FranchiseNumber ofFranchises Owned%of NewVehicle RevenuesLuxuryMercedes-Benz9 8 Lexus8 10 BMW5 3 Acura4 1 Infiniti4 1 Land Rover3 2 Porsche3 2 Volvo3 1 Audi2 1 Lincoln2 1 Genesis1 Bentley1 Jagua

84、r1 Total Luxury46 30 ImportToyota19 19 Honda12 9 Hyundai9 5 Sprinter8 1 Nissan6 2 Kia4 2 Volkswagen4 1 Subaru3 2 Fiat2 MINI1 Isuzu1 Total Import69 41 DomesticChrysler,Dodge,Jeep,Ram52 9 Chevrolet,Buick,GMC18 8 Ford13 13 Total Domestic83 29 Total Franchises198 100*Franchise accounted for less than 1%

85、of new vehicle revenues for the year ended December 31,2024.Our new vehicle revenues include new vehicle sales and lease transactions arranged by our dealerships with third-party financial institutions.We believethat leasing provides a number of benefits to our other business lines,including the his

86、torical customer loyalty to the leasing dealership for repairs andmaintenance services and the fact that lessors typically give the leasing dealership the first option to purchase the off-lease vehicle.9Table of ContentsUsed Vehicle SalesWe sell used vehicles at all our franchised dealership locatio

87、ns.Used vehicle sales include the sale of used vehicles to individual retail customers(usedretail)and the sale of used vehicles to other dealers or licensed wholesalers(wholesale)(the terms used retail and wholesale collectively referred to asused).Gross profit from the sale of used vehicles depends

88、 primarily on our dealerships ability to obtain a high quality supply of used vehicles and our use oftechnology to manage our inventory.Our new vehicle operations typically provide our used vehicle operations with a large supply of trade-ins and off-leasevehicles,which we believe are good sources of

89、 high quality used vehicles.We also purchase a portion of our used vehicle inventory at open auctions andauctions restricted to new vehicle dealers.Additionally,our used vehicle sales benefit from our ability to sell certified pre-owned vehicles from our franchiseddealerships.Parts and ServiceWe pro

90、vide vehicle repair and maintenance services,sell replacement parts,and recondition used vehicles at all of our dealerships.In addition,weprovide collision repair services at our 37 free-standing collision repair centers that we operate either on the premises of,or in close proximity to,ourdealershi

91、ps.Historically,parts and service revenues have been more stable than those from vehicle sales.Industry-wide,parts and service revenues haveconsistently increased over time primarily due to the increased cost of maintaining vehicles,the added technical complexity of vehicles,and the increasingnumber

92、 of vehicles on the road.The automotive parts and service industry tends to be highly fragmented,with franchised dealerships and independent repair shops competing for thisbusiness.We believe,however,that the increased use of advanced technology in vehicles is making it difficult for independent rep

93、air shops to competeeffectively with franchised dealerships as they may not be able to make the investments necessary to perform major or technical repairs.In an effort tomaintain the necessary knowledge to service vehicles and further develop our technician staff,we focus on our internal and manufa

94、cturer specific training anddevelopment programs for new and existing technicians.We believe our parts and service business is also well-positioned to benefit from the service workpotentially generated through the sale of extended service contracts to customers who purchase new and used vehicles fro

95、m us,as historically these customerstend to have their vehicles serviced at the location where they purchased the extended service contract.In addition,our franchised dealerships benefit frommanufacturer policies requiring that warranty and recall related repairs be performed at a franchised dealers

96、hip.We believe our collision repair centersprovide us with an attractive opportunity to grow our business due to the high margins provided by collision repair services and the fact that we are able tosource original equipment manufacturer parts from our franchised dealerships.Finance and InsuranceWe

97、 offer a wide variety of automotive F&I products to our customers.Through the acquisition of TCA in December 2021,we offer extended vehicleservice contracts,prepaid maintenance contracts,key replacement contracts,guaranteed asset protection contracts,paintless dent repair contracts,appearanceprotect

98、ion contracts,tire and wheel,and lease wear and tear contracts.These F&I products are sold to our customers via our network of dealerships.In addition to the TCA F&I products,we offer our customers a variety of vehicle protection products through independent third parties in connection withthe purch

99、ase of vehicles.These products are underwritten and administered by these third parties.Under our arrangements with the providers of theseproducts,we primarily sell the products on a straight commission basis.We are subject to chargebacks for service and other contracts as a result of earlyterminati

100、on,default,or prepayment of the contract.In addition,we participate in future profits associated with the performance of the third-party heldunderlying portfolio for certain products pursuant to retrospective commission arrangements.We also arrange third-party financing for the sale or lease of vehi

101、cles to our customers in exchange for compensation paid to us by the third-partyfinancial institution.We do not directly finance our customers vehicle purchases or leases,therefore our exposure to losses in connection with those third-party financing arrangements is limited generally to the compensa

102、tion we receive.The compensation we receive is subject to chargeback,or repayment,to thethird-party finance company if a customer defaults or prepays the retail installment contract typically during some limited time period at the beginning of thecontract term.We have negotiated agreements with cert

103、ain lenders pursuant to which we receive additional compensation upon reaching a certain volume ofbusiness.F&I revenue in our Dealerships segment represents the commissions earned from both TCA and independent third parties related to a broad range of F&Iproducts.This F&I revenue is presented net of

104、 third-party chargebacks.F&I revenue in our TCA segment represents the premium revenue earned from customers for F&I products primarily sold in connection with thepurchase of vehicles at our dealerships.The premium revenue is recognized over the life of the F&I10Table of Contentsproduct contract as

105、services are provided.We capitalize costs,such as employee sales commissions,to obtain customer contracts,and amortize those costsover the life of the contract.Amortization of costs to obtain customer contracts is included in selling,general and administrative expenses in the consolidatedstatements

106、of income.The portion of commissions that are paid to affiliated dealerships are eliminated upon consolidation.The Dealerships segment alsoprovides vehicle repair and maintenance services to TCA customers in connection with claims related to TCAs products.Upon consolidation,the associatedservice rev

107、enue recorded by the Dealerships segment is eliminated against the service costs incurred by the Dealerships segment.All claims paid related tothe contracts are recognized in F&I cost of sales in the TCA segment.In addition,F&I revenue includes investment income and other gains and losses related to

108、 the performance of our investment portfolio.Business StrategyWe seek to be the most guest-centric automotive retailer and to create long-term value for our stockholders by striving to drive operational excellence anddeploy capital to its highest risk adjusted returns.To achieve these objectives,we

109、employ the strategies described below.Provide an exceptional customer experience in our stores.We are guided by our mission and vision to be the most guest-centric automotive retailer in the industry and use that framework as our North Star.Wehave designed our dealerships services to meet the needs

110、of an increasingly sophisticated and demanding automotive consumer.We endeavor to establishrelationships that we believe will result in both repeat business and additional business through customer referrals.Furthermore,we provide our dealershipmanagers with appropriate incentives to employ efficien

111、t selling approaches,engage in extensive follow-up to develop long-term relationships withcustomers,and extensively train our sales staff to meet customer needs.Accelerate same store growth and guest experience through technology investment.As part of our long-term growth strategy,we invest in techn

112、ologies or partner with leading software platform vendors to develop applications that(i)serve our guests with omni-channel buying options offering enhanced speed,and transparency and(ii)drive a more efficient guest experience at a lower costto serve.Grow F&I product penetration and expand TCAs serv

113、ice offerings across the full dealership portfolio.We continue to be positioned to leverage the acquisition of LHM to improve profitability via the ownership of TCA,a highly scalable provider of a full-suite of F&I products.TCAs key offerings include vehicle service contracts,prepaid maintenance,pro

114、tection plans,key and remote replacement,leasedvehicle protection and tire and wheel protection.Over the long-term,we expect that the profitability of our TCA products will be higher than the profitabilityassociated with selling F&I products offered by third-parties.We are continuing to integrate TC

115、As service offerings across our full dealership portfolio toincrease our F&I product penetration and profitability.We expect to complete the rollout of TCAs service offerings to all of our dealerships in 2025 byoffering TCA products in our Florida market during the first quarter of 2025,and the Koon

116、s platform in the second quarter of 2025;however,no assurancecan be given that the rollout will be completed with the timeframe contemplated.Attract,retain and invest in top talent to drive growth and optimize operations.We believe the core of our business success lies in our talent pool,so we are f

117、ocused on attracting,hiring and retaining the best people.We also invest inresources to train and develop our employees.Our executive management team has extensive experience in the auto retail sector and is able to leverageexperience from all positions throughout the Company.In addition,we believe

118、that local management of dealership operations enables our retail network toprovide market specific responses to sales,customer service and inventory requirements.The general manager of each of our dealerships is responsible forthe operations,personnel and financial performance of that dealership as

119、 well as other day-to-day operations.Leverage scale and cost structure to improve operating efficiencies.We are positioned to leverage our significant scale so that we are able to achieve competitive operating margins by centralizing and streamlining variousback-office functions.We are able to impro

120、ve financial controls and lower servicing costs by maintaining key store-level accounting and administrativeactivities in our shared service centers,and we leverage our scale to reduce costs related to purchasing certain equipment,supplies,and services throughnational vendor relationships.Similarly,

121、we are able to leverage our scale to implement these best practices when integrating newly acquired dealershipsallowing us to continue to improve our operating efficiencies.11Table of ContentsDeploy capital to highest returns and continue to invest in the business.Our capital allocation decisions ar

122、e made within the context of maintaining sufficient liquidity and a prudent capital structure.We target a 2.5x to 3.5xtransaction adjusted net leverage ratio,which is calculated as set forth in our credit facility,in a normal business environment.The Companys transactionadjusted net leverage ratio w

123、as 2.85x at December 31,2024,compared to 2.54x at December 31,2023.We believe our cash position and borrowing capacity,combined with our current and expected future cash generation capability,provides us with financial flexibility to,among other things,reinvest in ourbusiness,acquire dealerships and

124、 repurchase our stock,when prudent.We continually evaluate our existing dealership network and seek to make strategic investments that will increase the capacity of our dealerships andimprove the customer experience.In addition,we continue to execute on our strategy of selectively acquiring our leas

125、ed properties where financing ratesmake it attractive to be an owner and provide us a further means to finance our business.Evaluate opportunities to refine the dealership portfolio.We continually evaluate the financial and operating results of our dealerships,as well as each dealerships geographica

126、l location and,based on variousfinancial and strategic rationales,may make decisions to dispose of dealerships to refine our dealership and real estate portfolio.We also evaluate dealershipacquisition opportunities based on market position and geography,brand representation and availability,key pers

127、onnel and other factors.Our approach todispositions and acquisitions is highly disciplined with a focus on long-term strategic value to stockholders.Deliver on our mission to grow and transform our business with revenue of$30 billion or more by 2030.We continually evaluate additional opportunities t

128、o drive revenue growth while maintaining our disciplined approach to capital allocation.In February2024,the Company announced an update to our strategic outlook targeting revenue of$30 billion or more by 2030.We intend to execute on this strategic planby focusing on a variety of growth efforts inclu

129、ding,balanced capital allocation,driving same-store revenue growth and acquiring revenue through strategictransactions.Aligning with our strategic outlook,the Company,on February 14,2025,through one of its subsidiaries,entered into a Transaction Agreementwith the Herb Chambers Dealerships that will

130、result in the Company acquiring substantially all of the assets,including all real property and businesses of theHerb Chambers Dealerships,which comprise 33 dealerships,52 franchises and three collision centers,which is expected to positively contribute to theCompanys overall revenue objectives.Comp

131、etitionThe automotive retail and service industry is highly competitive with respect to price,service,location,and selection.For new vehicle sales,ourdealerships compete with other franchised dealerships,primarily in their regions.Our new vehicle store competitors also have franchise agreements with

132、 thevarious vehicle manufacturers,and as such,generally obtain new vehicle inventory from vehicle manufacturers on the same terms as us.The franchiseagreements grant the franchised dealership a non-exclusive right to sell the manufacturers(or distributors)brand of vehicles and offer related parts an

133、dservice within a specified market area.State automotive franchise laws restrict competitors from relocating their stores or establishing new stores of aparticular vehicle brand within a specified area that is served by our dealership of the same vehicle brand.Recently,certain electric vehicle manuf

134、acturershave been permitted to circumvent the state automotive franchise laws of several states in the United States thereby permitting them to sell their new vehiclesdirectly to consumers.We rely on our advertising and merchandising,sales expertise,service reputation,strong local branding,and locat

135、ion of our dealershipsto assist in the sale of new vehicles.Our used vehicle operations compete with other franchised dealerships,non-franchised automotive dealerships,regional and national vehicle rentalcompanies,and internet-based vehicle brokers for the supply and resale of used vehicles.We compe

136、te with other franchised dealerships to perform warranty and recall-related repairs.We compete with other franchised dealerships andindependent service centers for collision and non-warranty repair and maintenance services.We compete with other automobile dealers,service stores,andauto parts retaile

137、rs in our parts operations.We believe that we have a competitive advantage in parts and service sales due to our ability to use factory-approved replacement parts,our skilled manufacturer trained and certified technicians,our competitive prices,our familiarity with manufacturer brands andmodels,and

138、the quality of our customer service.We compete with a broad range of financial institutions in arranging financing for our customers vehicle purchases.In addition,many financialinstitutions are now offering F&I products through the internet,which has increased competition and may reduce our profits

139、on certain of these items.Webelieve the principal competitive factors in providing financing are convenience,interest rates,and flexibility in contract length.12Table of ContentsSeasonalityThe automobile industry has historically been subject to seasonal variations.Demand for new vehicles is general

140、ly highest during the second and thirdquarters of each year and,accordingly,we expect our revenues and operating results to generally be higher during these periods.In addition,we typicallyexperience higher sales of luxury vehicles,which have higher average selling prices and gross profit per vehicl

141、e retailed,in the fourth quarter.Revenues andoperating results may be impacted significantly from quarter to quarter by changing economic conditions,vehicle manufacturer incentive programs,oradverse weather events,or other occurrences that are outside of our control.Dealer and Framework AgreementsEa

142、ch of our dealerships operate pursuant to a dealer agreement between the dealership and the manufacturer(or in some cases the distributor)of eachbrand of new vehicles sold and/or serviced at the dealership.The dealer agreements grant the franchised dealership a non-exclusive right to sell themanufac

143、turers(or distributors)brand of vehicles and offer related parts and service within a specified market area.Each dealer agreement also grants ourdealerships the right to use the manufacturers trademarks and service marks in connection with the dealerships operations and they also impose numerousoper

144、ational requirements related to,among other things,the following:inventories of new vehicles and manufacturer replacement parts;maintenance of minimum net working capital requirements,and in some cases,minimum net worth requirements;achievement of certain sales and customer satisfaction targets;adve

145、rtising and marketing practices;facilities and signs;products offered to customers;dealership management;personnel training;information systems;geographic market,including but not limited to requirements to meet sales and service targets within an assigned market area,geographic limitationson where

146、the dealership may locate or advertise,and restrictions on the export of vehicles;and dealership monthly and annual financial reporting.Our dealer agreements are for various terms,ranging from one year to indefinite.We expect that we will be able to renew expiring agreements in theordinary course of

147、 business.However,typical dealer agreements give the manufacturer the right to terminate or the option of non-renewal of the dealeragreement under certain circumstances,subject to applicable state automotive dealership franchise laws,including:insolvency or bankruptcy of the dealership;failure to ad

148、equately operate the dealership or to maintain required capitalization levels;impairment of the reputation or financial condition of the dealership;change of ownership or management of the dealership without manufacturer consent;certain extraordinary corporate transactions such as a merger or sale o

149、f all or substantially all of our assets without manufacturer consent;failure to complete facility upgrades required by the manufacturer or agreed to by the dealer;failure to maintain any license,permits or authorization required to conduct the dealerships business;conviction of a dealer/manager or

150、owner for certain crimes;ormaterial breach of other provisions of a dealer agreement.Notwithstanding the terms of any dealer agreement,the states in which we operate have automotive dealership franchise laws which provide that it isunlawful for a manufacturer to terminate or not renew a franchise un

151、less good cause exists.13Table of ContentsIn addition to requirements under dealer agreements,we are subject to provisions contained in supplemental agreements,framework agreements,dealeraddenda and manufacturers policies,collectively referred to as framework agreements.Framework agreements impose r

152、equirements on us in addition tothose described above.Such agreements also define other standards and limitations,including:company-wide performance criteria;capitalization requirements;limitations on changes in our ownership or management;limitations on the number of a particular manufacturers fran

153、chises owned by us;restrictions or prohibitions on our ability to pledge the stock of certain of our subsidiaries;andconditions for consent to proposed acquisitions,including sales and customer satisfaction criteria,as well as limitations on the total local,regional,and national market share percent

154、age that would be represented by a particular manufacturers franchises owned by us after giving effect to aproposed acquisition.Some dealer agreements and framework agreements grant the manufacturer the right to terminate or not renew our dealer and framework agreements,orto compel us to divest our

155、dealerships,for a number of reasons,including default under the agreement,any unapproved change of control(specific changesvary from manufacturer to manufacturer,but which include material changes in the composition of our Board of Directors during a specified time period,theacquisition of 5%or more

156、 of our voting stock by another vehicle manufacturer or distributor,the acquisition of 20%or more of our voting stock by thirdparties,and the acquisition of an ownership interest sufficient to direct or influence management and policies),or certain other unapproved events(includingcertain extraordin

157、ary corporate transactions such as a merger or sale of all or substantially all of our assets).Triggers of the clauses are often based uponactions by our stockholders and are generally outside of our control.Some of our dealer agreements and framework agreements also give the manufacturer aright of

158、first refusal if we propose to sell any dealership representing the manufacturers brands to a third-party.These agreements may also attempt to limitthe protections available under applicable state laws and require us to resolve disputes through binding arbitration.For additional information,please r

159、efer tothe risk factor captioned We are dependent upon our relationships with the manufacturers of vehicles that we sell and are subject to restrictions imposed by,and significant influence from,these vehicle manufacturers.Any of these restrictions or any changes or deterioration of these relationsh

160、ips could have amaterial adverse effect on our business,financial condition,results of operations,and cash flows.Our framework agreements with certain manufacturers contain provisions that,among other things,attempt to limit the protections available to dealersunder these laws.If these laws are repe

161、aled in the states in which we operate,manufacturers may be able to terminate our franchises without providing uswith advance notice,an opportunity to cure or a showing of good cause.Without the protection of these laws,it may also be more difficult for us to renew ourdealer agreements upon expirati

162、on.Changes in laws that provide manufacturers the ability to terminate our dealer agreements could materially adversely affect our business,financialcondition and results of operations.Furthermore,if a manufacturer seeks protection from creditors in bankruptcy,courts have held that the federal bankr

163、uptcylaws may supersede these laws,resulting in either the termination,non-renewal or rejection of franchises by such manufacturers,which,in turn,couldmaterially adversely affect our business,financial condition,and results of operations.For additional information,please refer to the risk factor cap

164、tioned Ifstate laws that protect automotive retailers are repealed,weakened,or superseded by our framework agreements with manufacturers,our dealerships will bemore susceptible to termination,non-renewal or renegotiation of their dealer agreements which could have a material adverse effect on our bu

165、siness,resultsof operations,financial condition,and cash flows.RegulationsWe operate in a highly regulated industry.In every state in which we operate,we must obtain one or more licenses issued by state regulatory authorities inorder to operate our business.In addition,we are subject to numerous com

166、plex federal,state,and local laws regulating the conduct of our business,includingthose relating to our sales,operations,finance and insurance,marketing,and employment practices.These laws and regulations include state franchise lawsand regulations,product standards and recalls,consumer protection l

167、aws,privacy and data security laws,anti-money laundering laws,and other extensivelaws and regulations applicable to new and used motor vehicle dealers.These laws also include federal and state wage and hour,anti-discrimination,andother laws governing employment practices.Industry RegulationsThe Fede

168、ral Trade Commission(FTC)has regulatory authority over automotive dealers and has implemented enforcement initiatives relating to themarketing practices of automotive dealers.Our operations are also subject to the National14Table of ContentsTraffic and Motor Vehicle Safety Act,Federal Motor Vehicle

169、Safety Standards and other product standards promulgated by the United States Department ofTransportation,and the rules and regulations of various state motor vehicle regulatory agencies.Our financing activities with customers are subject to federal truth-in-lending,consumer leasing,and equal credit

170、 opportunity laws and regulations,aswell as state and local motor vehicle finance laws,leasing laws,installment finance laws,usury laws,and other installment state and leasing laws andregulations.Some U.S.states regulate fees and charges that may be collected as a result of vehicle sales and service

171、.Claims arising out of actual or allegedviolations of law may be asserted against us or our stores by individuals or governmental entities and may expose us to significant damages,fines or otherpenalties,including revocation or suspension of our license to conduct store operations.Our financing acti

172、vities,as well as our sale of finance and insuranceproducts,may also be impacted indirectly by laws and regulations that govern automotive finance companies and other financial institutions,includingregulations adopted by the Consumer Financial Protection Bureau(the CFPB).Our TCA business involves t

173、he offer and sale of extended vehicle service contracts,debt protection products,vehicle protection plans and othermiscellaneous vehicle protection products,which are subject to a wide range of federal,state and local laws and regulations.The Departments of Insurance ofU.S.states have regulatory aut

174、hority over our TCA business.Our TCA business is subject to state licensing and registration requirements,and financialresponsibility and security requirements.For additional information,please refer to the risk factors captioned:Our dealership operations and facilities aresubject to extensive gover

175、nmental laws and regulations.If we are found to be in purported violation of or subject to liabilities under any of these laws orregulations,or if new laws or regulations are enacted that adversely affect our operations,our business,results of operations,financial condition,cash flows,reputation and

176、 prospects could suffer and Our TCA business is subject to a wide range of federal,state and local laws and regulations,some of which wemay not have previously been subject.If we are found to be in purported violation of or subject to liabilities under any of these laws or regulations,or if newlaws

177、or regulations are enacted that adversely affect our TCA business,our business,results of operations,financial condition,cash flows,reputation andprospects could suffer.Environmental,Health and Safety Laws and RegulationsWe are subject to a wide range of environmental laws and regulations,including

178、those governing discharges into water,air emissions,storage ofpetroleum substances and chemicals,handling and disposal of solid and hazardous wastes,remediation of various types of contamination,and otherwiserelating to health,safety and protection of the environment.For example,and without creating

179、 an exhaustive list:as with automobile dealerships generally,and service and parts and collision repair center operations in particular,our business involves the generation,use,handling,and disposal of hazardous ortoxic substances and wastes and the use of above ground and underground storage tanks(

180、ASTs and USTs).Operations involving the management of wastesand the use of ASTs and USTs are subject to requirements of the Resource Conservation and Recovery Act,analogous state statutes,and their implementingregulations.Pursuant to these laws,federal and state environmental agencies have establish

181、ed approved methods for handling,storing,treating,transporting,and disposing of regulated substances and wastes with which we must comply.We also are subject to laws and regulations governing responses to anyreleases of contamination at or from our facilities or at facilities that receive our hazard

182、ous wastes for treatment or disposal.The ComprehensiveEnvironmental Response,Compensation and Liability Act(CERCLA)and similar state statutes,can impose strict and joint and several liability for cleanupcosts on those that are considered to have contributed to the release of a hazardous substance.We

183、 also are subject to the Clean Water Act,analogous statestatutes,and their implementing regulations which,among other things,prohibit discharges of pollutants into regulated waters without permits,requirecontainment of potential discharges of oil or hazardous substances,and require preparation of sp

184、ill contingency plans.We have incurred,and will continue to incur,costs and capital expenditures to comply with these laws and regulations.We believe that our operationscurrently are being conducted in substantial compliance with all applicable regulations.From time to time,we may experience inciden

185、ts and encounterconditions that are not in compliance with regulations.We may occasionally receive notices from governmental agencies regarding potential violations ofthese laws or regulations.In such cases,we will work with the agencies to address any issues and to implement appropriate corrective

186、action when necessary.However,none of our dealerships has been subject to any material liabilities in the past,nor do we know of any fact or condition that would result in anymaterial liabilities being incurred in the future.Human CapitalMission and VisionAt Asbury,our North Star and our mission is

187、to be the most guest-centric automotive retailer.Our success depends on our employees and theircommitment to delivering a consistent and exceptional guest experience.Our employees work at locations in Colorado,Florida,Georgia,Indiana,Missouri,South Carolina,Texas,California,Arizona,New Mexico,Idaho,

188、Utah,Virginia and Maryland.We believe that our employees help to set us apart from ourcompetitors,and,therefore,we understand15Table of Contentsthey are our greatest asset.As a result,a critical part of our business strategy is investing in,supporting and developing our employees so that they are tr

189、ainedand incentivized to provide best-in-class service to our guests.As of December 31,2024,we employed approximately 15,000 full-time and part-time employees,none of whom were covered by collective bargainingagreements.We believe we have good relations with our employees.Inclusive and Welcoming Cul

190、tureWe strive to create a welcoming and inclusive workplace throughout our dealerships and offices for our team members who represent a wide range ofbackgrounds and experiences.We feel that building this culture enables us to attract,retain and develop the careers of our highly talented team members

191、.Weintend to continue to learn and develop-working towards building a workplace where every Asbury team member feels included and welcomed.Community OutreachThrough our Asbury Cares program,we support selected community partner organizations across the nation to help reduce disparities in our commun

192、itieswhere we live and serve.Since 2021,we have awarded all of our full-time employees with an additional 40 hours of paid time off per year that can be used tovolunteer with our local community partners.We have seen significant year-over-year growth in employee participation in our community engage

193、mentevents.A significant portion of our Asbury Cares Community program revolves around education and making sure that young people in underservedcommunities have access to a quality education.We formed a partnership with HBCU Change,an app-based organization that lets users round up theirspending an

194、d donate to historically black colleges and universities(HBCU).We learned that many HBCUs historically lag in funding and resourcescompared to other public or private universities and many have closed their doors in recent years.Many of our Asbury team members are proud HBCUalumni and these institut

195、ions provide a unique community of support and understanding for not only African American students,but students of all races andbackgrounds.In partnership with HBCU Change,we launched a campaign to help raise funds for HBCUs across the country and in the local communities where weoperate.The point-

196、of-sale credit card machines in our locations show a prompt asking our guests if they would like to round up their change or donate$1,$3,$5,or a custom amount to HBCUs in their communities.At the end of each quarter,the funds raised are donated to HBCUs across the country.Throughdonations from our g

197、uests and company match,we have contributed more than$1.5 million to HBCUs since the start of our partnership with HBCU Changein May 2021.Recruitment and Talent DevelopmentWhen recruiting for open positions,we search for the most talented people who each have varying backgrounds,perspectives,and exp

198、eriences.We alsopartner with local colleges and trade schools to develop apprenticeship and internship programs.This allows us to help provide valuable training to entry-level candidates while also growing our pipeline.Our goal is to promote employees from within to career growth opportunities whene

199、ver possible.We invest resources to train and develop our employeesto reach their career goals.In 2022,we launched a training curriculum for all store positions.In addition,we offer our employees access to an online careerpath tool,which helps them plan their desired career path and see the required

200、 performance goals and milestones to be considered for a promotion.Our fixedoperations organization encourages technicians to obtain and maintain certification status with our vehicle manufacturers,and in most cases,our dealershippays for the training.Our employees also attend vehicle manufacturer-s

201、ponsored and industry training events.We pride ourselves on rewarding and developing talented and tenured employees.Compensation and BenefitsWe offer competitive compensation and benefits to attract and retain the best people,including the following benefits for our full-time employees:Health,dental

202、,and vision benefits with multiple plan choices;Discounted healthcare premiums for biometric screening and completion of health survey;andEmployee assistance program.16Table of ContentsSaving and retirementHoliday match;and401(k)match.Paid time offUp to 4 weeks paid time off;Paid pregnancy leave;and

203、Paid parental leave.Disability and accident insuranceShort-term disability and long-term disability insurance;Accident insurance,hospital indemnity,employee critical illness insurance;Employer paid life insurance;andSupplemental life insurance.Scholarships for educationAnnual scholarship program.Bro

204、ad employee equity ownershipWe also lead the industry by offering equity awards to frontline employees because we want them to be owners of our Company and committed toour long-term success.Self-Insurance ProgramsDue to the inherent risk in the automotive retail industry,our operations expose us to

205、a variety of liabilities.These risks generally require significant levelsof insurance covering liabilities such as claims from employees,customers,or other third parties,for personal injury and property-related losses occurring inthe course of our operations.We may be subject to fines and civil and

206、criminal penalties in connection with alleged violations of federal and state laws orregulatory environments.Further,the automobile retail industry is subject to substantial risk of real and personal property loss,due to the significantconcentration of property values located at the various dealersh

207、ip locations.Under our self-insurance programs,including property and casualty,workers compensation,and medical,the Company retains various levels ofaggregate loss limits and per-claim deductibles.In addition,the Company maintains separate insurance policies to address potential cyber and directors

208、andofficers exposures.We are self-insured for certain employee medical claims and maintain stop-loss insurance for individual claims.Provisions for retained losses and deductibles are made by charges to expense based upon periodic evaluations of the estimated ultimate liabilities onreported and unre

209、ported claims.The insurance companies that underwrite our insurance require we secure certain of our obligations for deductiblereimbursements with collateral.Our collateral requirements are set by the insurance companies and,to date,have been satisfied by posting surety bonds,letters of credit,and/o

210、r cash deposits.Our collateral requirements may change from time-to-time based on,among other things,our claims experience.17Table of ContentsItem 1A.Risk FactorsIn addition to the other information contained,referred to or incorporated by reference into this report,you should consider carefully the

211、 following factorswhen evaluating our business and before making an investment decision.Our business,operations,ability to implement our strategy,reputation,results ofoperations,financial condition,cash flows,and prospects may be materially adversely affected by the risks described below.In addition

212、,other risks oruncertainties not presently known to us or that we currently do not deem material could arise,any of which could also materially adversely affect us.Risks Related to Our BusinessOperating RisksDisruptions in the production and delivery of new vehicles and parts from manufacturers due

213、to the lack of availability of parts and key components fromsuppliers could have a material adverse effect on our business,results of operations,financial condition and cash flows.Historically,we have generated a significant portion of our revenue through new vehicle sales,and new vehicle sales also

214、 tend to lead to sales of higher-margin products and services,such as F&I products and vehicle-related parts and service.In addition,new vehicle buyers often trade in an owned vehicle,orturn in a leased vehicle,to us at the time of purchase,and these traded vehicles have historically been an importa

215、nt source for our used vehicle inventory.Werely exclusively on the various vehicle manufacturers for our new vehicle inventory and maintenance and replacement parts inventory.In turn,our vehiclemanufacturers rely on certain third-party suppliers to manufacture and deliver certain parts and key compo

216、nents for their vehicles.As a result,ourprofitability is dependent to a great extent on various aspects of vehicle manufacturers operations and timely delivery of new vehicles and parts.Property loss or other uninsured liabilities could have a material adverse impact on our results of operations.We

217、are subject to substantial risk of property loss due to the significant concentration of property at dealership locations,including vehicles and parts.Wehave historically experienced business interruptions from time to time at several of our dealerships,due to actual or threatened adverse weather co

218、nditions ornatural disasters,such as hurricanes,earthquakes,tornadoes,floods,hail storms,fires or other extraordinary events.Concentration of property at dealershiplocations also makes the automotive retail business particularly vulnerable to theft,fraud and misappropriation of assets.Illegal or une

219、thical conduct byemployees,customers,vendors,and unaffiliated third parties can result in loss of assets,disrupt operations,impact brand reputation,jeopardize manufacturerand other relationships,result in the imposition of fines or penalties,and subject us to governmental investigations or lawsuits.

220、While we maintain insuranceto protect against a number of losses,this insurance coverage often contains significant deductibles.In addition,we self-insure a portion of our potentialliabilities,meaning we do not carry insurance from a third-party for such liabilities,and are wholly responsible for an

221、y related losses including for certainpotential liabilities that some states prohibit the maintenance of insurance to protect against.In certain instances,our insurance may not fully cover a lossdepending on the applicable deductible or the magnitude and nature of the claim.Additionally,changes in t

222、he cost or availability of insurance in the futurecould substantially increase our costs to maintain our current level of coverage or could cause us to reduce our insurance coverage and increase our self-insured risks.To the extent we incur significant additional costs for insurance,suffer losses th

223、at are not covered by in-force insurance or suffer losses forwhich we are self-insured,our financial condition,results of operations and cash flows could be materially adversely impacted.If we are unable to acquire and successfully integrate additional businesses into our existing operations,and rea

224、lize expected benefits and synergies fromsuch acquisitions,our revenue and earnings growth may be adversely affected.We believe that the automotive retailing industry is a mature industry whose sales are significantly impacted by the prevailing economic climate,bothnationally and in local markets.Ac

225、cordingly,we believe that our future growth depends in part on our ability to manage expansion,control costs in ouroperations and acquire and effectively integrate acquired dealerships into our organization.For example,with the consummation of the Koons acquisition in2023 and the pending Herb Chambe

226、rs acquisition,we have experienced,and expect to continue to experience,significantly more sales,and have more assetsand employees than we did previously.However,there can be no assurance that there will be sufficient revenue from such acquisitions to offset increasedexpenses and costs arising out o

227、f such acquisitions.When seeking to acquire other dealerships,we often compete with several other national,regional and local dealership groups,and other strategic andfinancial buyers,some of which may have greater financial resources than us.Competition for attractive acquisition targets may result

228、 in fewer acquisitionopportunities for us and we may have to forgo acquisition opportunities to the extent we cannot negotiate such acquisitions on acceptable terms.Theintegration processes require us to expend significant capital and significantly expand the scope of our operations and financial sy

229、stems.Integration alsorequires18Table of Contentssupport or other actions by third parties such as vendors,suppliers,and licensing agencies,and the untimely or inadequate responses from such third partiescan delay or otherwise negatively impact integration processes.We also face additional risks com

230、monly encountered with growth through acquisitions.These risks include,but are not limited to:(i)failing to obtainmanufacturers consents to acquisitions of additional franchises;(ii)manufacturers requirements to divest certain franchises when acquiring additionalfranchises;(iii)incurring significant

231、 transaction-related costs for completed,failed and pending acquisitions;(iv)incurring significantly higher capitalexpenditures and operating expenses;(v)the inability to obtain the necessary financing in order to complete acquisitions;(vi)failing to successfully integratethe operations and personne

232、l of the acquired dealerships and impairing relationships with employees;(vii)impairing relationships with employees of theacquired dealerships;(viii)incorrectly valuing entities to be acquired or incurring undisclosed liabilities at acquired dealerships;(ix)disrupting our ongoingbusiness and divert

233、ing our management resources to newly acquired dealerships;(x)failing to achieve expected performance levels and financial results on asame store basis after integration;(xi)impairing relationships with manufacturers and customers as a result of changes in management;(xii)delays ordifficulties relat

234、ed to our ability to obtain future necessary regulatory approvals for TCA in jurisdictions applicable to acquired dealerships;(xiii)difficultiesin entering geographic markets in which we have no or limited direct prior experience;(xiv)failing to realize expected benefits and synergies from thetransa

235、ction;and(xv)failing to implement or improve controls,policies and information systems and related security measures in the acquired businesses.We may not adequately anticipate all the demands that our growth will impose on our personnel,procedures and structures,including our financial andreporting

236、 control systems,information technology systems,data processing systems,and management structure.Moreover,our failure to retain qualifiedmanagement personnel at any acquired dealership may increase the risks associated with integrating the acquired dealership.If we cannot adequatelyanticipate and re

237、spond to these demands,we may fail to realize acquisition synergies and our resources will be focused on incorporating new operations intoour structure rather than on areas that may be more profitable.We are a holding company and as a result are dependent on our operating subsidiaries to generate su

238、fficient cash and distribute cash to us to service ourindebtedness and fund our ongoing operations.Our ability to make payments on our indebtedness and fund our ongoing operations depends on our operating subsidiaries ability to generate cash in thefuture and distribute that cash to us.It is possibl

239、e that our subsidiaries may not generate cash from operations in an amount sufficient to enable us to serviceour indebtedness.In addition,many of our subsidiaries are required to comply with the provisions of franchise agreements,dealer agreements,otheragreements with manufacturers,mortgages,and cre

240、dit facility providers.Many of these agreements contain minimum working capital or net worthrequirements,and are subject to change at least annually.Although the requirements contained in these agreements did not restrict our subsidiaries fromdistributing cash to us as of December 31,2024,unexpected

241、 changes to our financial metrics or to the terms of our franchise agreements,dealer agreements,or other agreements with manufacturers could require us to alter the manner in which we distribute or use cash.If our operating subsidiaries are unable togenerate and distribute sufficient cash to us to s

242、ervice our indebtedness and fund our ongoing operations,our financial condition may be materially adverselyaffected.Our inability to execute a substantial portion of our business strategy,including our mission to grow and transform our business,could have an adverseeffect on our business,results of

243、operations,financial condition and cash flows.Our inability to execute a substantial portion of our business strategy,could adversely affect our business,results of operations,financial condition andcash flows.We seek to execute on our strategic plan using a variety of growth efforts,which includes

244、driving same-store revenue growth and acquiringadditional revenue through strategic acquisitions.Many of the factors that impact our ability to execute our strategic vision,such as the advancement ofcertain technologies,general economic conditions and legal and regulatory obstacles are beyond our co

245、ntrol.Consumers are increasingly shopping for new and used vehicles,automotive repair and maintenance service and other automotive products and servicesonline and through mobile applications,including through third-party online and mobile sales platforms,with which we compete,that are designed togen

246、erate consumer sales that are sold to automotive dealers.We have invested and will continue to invest in our omni-channel and other online applications infurtherance of our strategic vision.We face increased competition for market share from other automotive retailers and other sales platforms that

247、have alsoinvested in digital channels.There can be no assurance that our initiatives and investments in digital channels will be successful or result in improvedfinancial performance.We may not adequately anticipate all the demands that our growth will impose on our personnel,procedures and structur

248、es,including our financial andreporting control systems,information technology systems,data processing systems,and management structure.Furthermore,we may decide to alter ordiscontinue aspects of our strategic plan and may adopt alternative or additional strategies in response to business or competi

249、tive factors or other factors orevents beyond our control.19Table of ContentsWe cannot give assurance that we will be able to execute a substantial portion of our strategic plan which could have a material adverse effect on ourbusiness,financial condition,results of operations,and cash flows.Goodwil

250、l and manufacturer franchise rights comprise a significant portion of our total assets.We must test our goodwill and manufacturer franchiserights for impairment at least annually,which could result in a material,non-cash write-down of goodwill or manufacturer franchise rights and couldhave a materia

251、l adverse effect on our results of operations and stockholders equity.Our principal intangible assets are goodwill and our rights under our franchise agreements with vehicle manufacturers.Goodwill and indefinite-livedintangible assets,including manufacturer franchise rights,are subject to impairment

252、 assessments at least annually(or more frequently when events or changesin circumstances indicate that an impairment may have occurred),by applying a qualitative or quantitative assessment.A decrease in our marketcapitalization or profitability increases the risk of goodwill impairment.The fair valu

253、e of our manufacturer franchise rights is determined by discounting asubset of the projected cash flows at a dealership that we attribute to the value of the franchise.Changes to the business mix or declining cash flows in adealership increase the risk of impairment.During the year ended December 31

254、,2024,we recognized asset impairment charges of$149.5 million associatedwith manufacturer franchise rights recorded at certain dealerships and goodwill associated with certain asset disposal groups.We cannot accurately predict theamount and timing of any additional impairment charges at this time;ho

255、wever,any such impairment charge could have an adverse effect on our results ofoperations and stockholders equity.See Note 10 Goodwill and Intangible Franchise Rights of the notes to the consolidated financial statements for moreinformation.The loss of key personnel and limited management and person

256、nel resources could adversely affect our business.Our success depends,to a significant degree,upon the continued contributions of our management team,and service and sales personnel.In addition,manufacturer dealer or framework agreements may require the prior approval of the applicable manufacturer

257、before any change is made in dealership generalmanagers or other management positions.The loss of the services of one or more of these key employees may materially impair the profitability of ouroperations,or may result in a violation of an applicable dealer or framework agreement.In addition,the ma

258、rket for qualified employees in the industry and inthe states in which we operate,specifically for general managers and sales and service personnel,is highly competitive and may subject us to increased laborcosts during periods of low unemployment.The loss of the services of such employees or the in

259、ability to attract additional qualified employees may adverselyaffect the ability of our dealerships to conduct their operations in accordance with the standards set by us or the manufacturers.If we are unable to retain ourkey personnel,we may be unable to successfully execute our business plans,whi

260、ch may have a material adverse effect on our business.The Herb Chambers Dealerships acquisition may not occur at all or may not occur in the expected time frame,which may negatively affect the tradingprice of our common stock and our future business and financial results.No assurance can be provided

261、 that the Herb Chambers Dealerships acquisition will be completed in the manner and on the time frame currentlyanticipated,or at all.Completion of the Herb Chambers Dealerships acquisition is subject to the satisfaction or waiver of a number of conditions beyond ourcontrol that may prevent,delay or

262、otherwise materially adversely affect its completion.If the Herb Chambers Dealerships acquisition is not completed,ifthere are significant delays in completing the Herb Chambers Dealerships acquisition or if the Herb Chambers Dealerships acquisition involves an unexpectedamount of remedies required

263、by regulatory authorities,it could negatively affect the trading price of our common stock and our future business and financialresults.The following are some but not all of the factors that could cause the Herb Chambers Dealerships acquisition to be delayed or not successfully becompleted:(i)the oc

264、currence of any event,change or other circumstances that could give rise to the termination of the Transaction Agreement;(ii)the riskthat the necessary manufacturer approvals may not be obtained;(iii)the risk that the necessary regulatory approvals may not be obtained or may be obtainedsubject to co

265、nditions that are not anticipated;(iv)the inability to obtain the necessary financing in order to complete the acquisition;(v)the risk that theproposed acquisition will not be consummated in a timely manner;and(vi)the risk that any of the closing conditions to the proposed acquisition may not besati

266、sfied or may not be satisfied in a timely manner.We may not realize the strategic benefits and cost synergies that are anticipated from the planned Herb Chambers Dealerships acquisition.Our future growth depends in part on our ability to acquire and effectively integrate acquired dealerships into ou

267、r organization,such as the pending HerbChambers Dealerships acquisition.The benefits that are expected to result from the Herb Chambers Dealerships acquisition will depend,in part,on our abilityto consummate the Herb Chambers Dealerships acquisition within the anticipated time period,or at all,and t

268、o integrate and realize the anticipated costsynergies from the Herb Chambers Dealerships acquisition.There is a significant degree of difficulty and management distraction inherent in the process ofintegrating an acquisition.Some members of our management may be required to devote considerable time

269、to this integration process,which will decrease thetime they will have to manage the Company,service existing customers,attract new customers20Table of Contentsand develop new businesses or strategies.If management is not able to effectively manage the integration process,or if any significant busin

270、ess activities areinterrupted as a result of the integration process,our business,financial condition and results of operations could suffer.We also cannot guarantee that thebenefits and cost synergies that we currently expect to realize as a result of the Herb Chambers Dealerships acquisition will

271、be achieved within our anticipatedtime frames or at all.Additionally,we may incur substantial expenses in connection with the integration of the Herb Chambers Dealerships,which mayexceed expectations and offset certain anticipated benefits.The following are some but not all of the factors that could

272、 cause actual results or events to differ materially from those anticipated in connection with theHerb Chambers Dealerships acquisition:(i)risks related to disruption of management time from ongoing business operations due to the proposed acquisition;(ii)the failure to realize the benefits expected

273、from the proposed acquisition;(iii)the failure to promptly and effectively integrate the operations,includinginformation technology systems and security,and personnel,including applicable pay plans;(iv)the effect of the announcement of the proposed Transactionon the ability of the Company to retain

274、and hire key personnel,and maintain relationships with suppliers;and(v)our ability to execute our business strategyand accelerate same store growth after integration.Risks Related to Macroeconomic and Market ConditionsThe automotive retail industry is sensitive to unfavorable changes in general econ

275、omic conditions and various other factors that could affect demand forour products and services,which could have a material adverse effect on our business,our ability to implement our strategy and our results of operations.Our future performance will be impacted by general economic conditions includ

276、ing among other things:changes in employment levels;consumerdemand,preferences and confidence levels;the availability and cost of credit;fuel prices;levels of discretionary personal income;inflation;interest rates;andchanges in U.S.trade policy,including the imposition of tariffs and resulting conse

277、quences.Recently,inflation has increased throughout the U.S.economy.Inflation can adversely affect us by increasing the costs of labor,fuel and other costs as well as by reducing demand for automobiles.Sales of certain vehicles,particularly trucks and sport utility vehicles that historically have pr

278、ovided us with higher gross profit per vehicle retailed,may be sensitive to fuel prices.Inaddition,rapid changes in fuel prices can cause shifts in consumer preferences which are difficult to accommodate given the long lead-time of inventoryacquisition.Inflation is also often accompanied by higher i

279、nterest rates,which could reduce the fair value of our outstanding debt obligations.Changes ininterest rates can also significantly impact new and used vehicle sales and vehicle affordability due to the direct relationship between interest rates andmonthly loan payments,a critical factor for many ve

280、hicle buyers,and the impact interest rates have on customers borrowing capacity and disposable income.In an inflationary environment,depending on automotive industry and other economic conditions,we may be unable to raise prices to keep up with the rate ofinflation,which would reduce our profit marg

281、ins.We have experienced,and continue to experience,increases in the prices of labor,fuel and other costs ofproviding service.Continued inflationary pressures could impact our profitability.We also are subject to economic,competitive,and other conditions prevailing in the various markets in which we

282、operate,even if those conditions are notprominent nationally.Retail vehicle sales are cyclical and historically have experienced periodic downturns characterized by oversupply and weak demand,which could resultin a need for us to lower the prices at which we sell vehicles,which would reduce our reve

283、nue per vehicle sold and our margins.Additionally,a shift inconsumer vehicle preferences driven by pricing,fuel costs or other factors may have a material adverse effect on our revenues,margins and results ofoperations.Changes in general economic conditions may make it difficult for us to execute ou

284、r business strategy.In such an event,we may be required to enter intocertain transactions in order to generate additional cash,which may include,but not be limited to,selling certain of our dealerships or other assets orincreasing borrowings under our existing,or any future,credit facilities.There c

285、an be no assurance that,if necessary,we would be able to enter into any suchtransactions in a timely manner or on reasonable terms,if at all.Furthermore,in the event we were required to sell dealership assets,the sale of any materialportion of such assets could have a material adverse effect on our

286、revenue and profitability.Adverse conditions affecting one or more of the vehicle manufacturers with which we hold franchises or their inability to deliver a desirable mix ofvehicles that our consumers demand could have a material adverse effect on our business,results of operations,financial condit

287、ion and cash flows.Historically,we have generated most of our revenue through new vehicle sales,and new vehicle sales also tend to lead to sales of higher-margin productsand services,such as finance and insurance products and vehicle-related parts and service.As a result,our profitability is depende

288、nt to a great extent onvarious aspects of vehicle manufacturers operations,many of which are outside of our control.Our ability to sell new vehicles is dependent onmanufacturers ability to design and produce,and willingness to allocate and deliver to our dealerships,a desirable mix of popular new ve

289、hicles thatconsumers demand.For21Table of Contentsexample,improvements in electric,battery-powered and hybrid gas/electric vehicles have increased consumer demand for such vehicles.If consumer demandincreases for certain types of vehicles,including electric,battery-powered and hybrid gas/electric,an

290、d our manufacturers are not able to adapt and producesuch vehicles that meet consumer demands,our new and used vehicle sales volumes,parts and service revenue and our results of operations may be adverselyaffected.Further,if manufacturers shift significant resources away from traditional production

291、models to invest in clean vehicles and new technologies,wemay experience an inadequate supply of historically popular vehicles and other adverse effects on our new and used vehicle sales volume,parts and servicerevenue and our results of operations until such time as consumer preferences for clean v

292、ehicles and other new technologies become widespread.In addition,popular vehicles may often be difficult to obtain from manufacturers for a number of reasons,including the fact that manufacturers generally allocate theirvehicles to dealerships based on sales history and capital expenditures associat

293、ed with such dealerships.Further,if a manufacturer fails to produce desirablevehicles or develops a reputation for producing undesirable vehicles or produces vehicles that do not comply with applicable laws or government regulations,and we own dealerships which sell that manufacturers vehicles,our r

294、evenues from those dealerships could be adversely affected as consumers shift theirvehicle purchases away from that brand.Although we seek to limit our dependence on any one vehicle manufacturer,there can be no assurance that the brand mix allocated and delivered to ourdealerships by the manufacture

295、rs will be appropriate or sufficiently diverse to protect us from a significant decline in the desirability of vehicles manufacturedby a particular manufacturer or disruptions in a manufacturers ability to produce vehicles.For the year ended December 31,2024,manufacturers representing5%or more of ou

296、r revenues from new vehicle sales were as follows:Manufacturer(Vehicle Brands):%of TotalNew Vehicle RevenuesToyota Motor Sales,U.S.A.,Inc.(Toyota and Lexus)30%Ford Motor Company(Ford and Lincoln)13%American Honda Motor Co.,Inc.(Honda and Acura)10%Stellantis N.V.(Chrysler,Dodge,Jeep,Ram and Fiat)9%Me

297、rcedes-Benz USA,LLC(Mercedes-Benz and Sprinter)8%General Motors Company(Chevrolet,Buick and GMC)8%Hyundai Motor North America(Hyundai and Genesis)5%Similar to automotive retailers,vehicle manufacturers may be affected by the long-term U.S.and international economic climate.In addition,we remainvulne

298、rable to other matters that may impact the manufacturers of the vehicles we sell,many of which are outside of our control,including:(i)changes in theirrespective financial condition;(ii)changes in their respective marketing efforts;(iii)changes in their respective reputation;(iv)manufacturer and oth

299、erproduct defects,including recalls;(v)changes in their respective management;(vi)disruptions in the production and delivery of vehicles and parts due tonatural disasters,pandemics,wars,conflicts or other reasons;(vii)issues with respect to labor relations;and(viii)consolidation among manufacturers.

300、Ourbusiness is highly dependent on consumer demand and brand preferences for our manufacturers products.Manufacturer recall campaigns are a commonoccurrence that have accelerated in frequency and scope.Manufacturer recall campaigns could(i)adversely affect our new and used vehicle sales or customerr

301、esidual trade-in valuations,(ii)cause us to temporarily remove vehicles from our inventory,(iii)force us to incur increased costs,and(iv)expose us tolitigation and adverse publicity related to the sale of recalled vehicles,which could have a material adverse effect on our business,results of operati

302、ons,financial condition and cash flows.Vehicle manufacturers that produce vehicles outside of the U.S.are subject to additional risks including changes in quotas,tariffs or duties,fluctuations in foreign currency exchange rates,regulations governing imports and the costs related thereto,and foreign

303、governmentalregulations.Adverse conditions that materially affect a vehicle manufacturer and its ability to profitably design,market,produce or distribute desirable new vehiclescould in turn materially adversely affect our ability to(i)sell vehicles produced by that manufacturer,(ii)obtain or financ

304、e our new vehicle inventories,(iii)access or benefit from manufacturer financial assistance programs,(iv)collect in full or on a timely basis any amounts due therefrom,and/or(v)obtain othergoods and services provided by the impacted manufacturer.In addition,we depend on manufacturers ability to desi

305、gn,produce,and supply parts to us andany failure to do so could have a material adverse effect on our parts and services business.Our business,results of operations,financial condition,and cashflows could be materially adversely affected as a result of any event that has an adverse effect on any veh

306、icle manufacturer.In addition,if a vehicle manufacturers financial condition worsens and it seeks protection from creditors in bankruptcy or similar proceedings,orotherwise under the laws of its jurisdiction of organization,(i)the manufacturer could seek to terminate or reject all or certain of our

307、franchises,(ii)if themanufacturer is successful in terminating all or certain of our franchises,we may not receive adequate compensation for those franchises,(iii)our cost toobtain financing for our new vehicle inventory22Table of Contentsmay increase or no longer be available from such manufacturer

308、s captive finance subsidiary,(iv)consumer demand for such manufacturers products could bematerially adversely affected,especially if costs related to improving such manufacturers financial condition are factored into the price of its products,(v)there may be a significant disruption in the availabil

309、ity of consumer credit to purchase or lease that manufacturers vehicles or negative changes in the termsof such financing,which may negatively impact our sales,or(vi)there may be a reduction in the value of receivables and inventory associated with thatmanufacturer,among other things.The occurrence

310、of any one or more of these events could have a material adverse effect on our business,results ofoperations,financial condition,and cash flows.Furthermore,the automotive manufacturing supply chain spans the globe.As such,supply chain disruptions resulting from natural disasters,adverseweather,pande

311、mics,tariffs,labor stoppages,wars,conflicts and other events may affect the flow of vehicle and parts inventories to us or our manufacturingpartners.If we experience disruptions in the supply of vehicle and parts inventories,such disruptions could have a material adverse effect on our business,resul

312、ts of operations,financial condition,and cash flows.Substantial competition in automobile sales and services may have a material adverse effect on our results of operations.The automotive retail and service industry is highly competitive with respect to price,service,location,and selection.Our compe

313、tition includes:(i)franchised automobile dealerships in our markets that sell the same or similar new and used vehicles;(ii)privately negotiated sales of used vehicles;(iii)otherused vehicle retailers,including regional and national vehicle rental companies;(iv)companies with a primarily internet-ba

314、sed business model,such asCarvana,and used vehicle brokers that sell used vehicles to consumers;(v)service center and parts supply chain stores;and(vi)independent service andrepair shops.We do not have any cost advantage over other retailers in purchasing new vehicles from manufacturers.We typically

315、 rely on our advertising,merchandising,sales expertise,service reputation,strong local branding and dealership location to sell new vehicles.Because our dealer agreements onlygrant us a non-exclusive right to sell a manufacturers product within a specified market area,our revenues,gross profit and o

316、verall profitability may bematerially adversely affected if competing dealerships expand their market share.Further,our vehicle manufacturers may decide to award additionalfranchises in our markets in ways that negatively impact our sales.The internet has become a significant part of the advertising

317、 and sales process in our industry.Customers are using the internet to shop and compareprices for new and used vehicles,automotive repair and maintenance services,finance and insurance products and other automotive products.If we are unableto effectively use the internet to attract customers to our

318、own online channels,and mobile applications,and,in turn,to our stores,our business,financialcondition,results of operations and cash flows could be materially adversely affected.Additionally,the growing use of social media by consumers increasesthe speed and extent that information and opinions can

319、be shared,and negative posts or comments on social media about us or any of our stores could damageour reputation and brand names,which could have a material adverse effect on our business,financial condition,results of operations and cash flows.Additionally,we rely on the protection of state franch

320、ise laws in the states in which we operate and if those laws are repealed or weakened,ourframework,franchise and related agreements may become more susceptible to termination,nonrenewal or renegotiation.These laws have historicallyrestricted the ability of automobile manufacturers to directly enter

321、the retail market and sell vehicles directly to consumers.However,many states haverecently passed or introduced legislation to permit direct to consumer sales of electric vehicles by certain companies,such as Tesla and Rivian,without therequirements of establishing a dealer network.If the state fran

322、chise laws are repealed,weakened or amended to permit vehicle manufacturers to sell vehicles(whether electric or not)directly to consumers,they may be able to have a competitive advantage over the traditional dealers,which could have a materialadverse effect on our sales in those states,which in tur

323、n,could have a material adverse effect on our business,financial condition,results of operations andcash flows.We are dependent upon our relationships with the manufacturers of vehicles that we sell and are subject to restrictions imposed by,and significantinfluence from,these vehicle manufacturers.

324、Any of these restrictions or any changes or deterioration of these relationships could have a materialadverse effect on our business,financial condition,results of operations and cash flows.We are dependent on our relationships with the manufacturers of the vehicles we sell,which have the ability to

325、 exercise a great deal of control andinfluence over our day-to-day operations,as a result of the terms of our dealer,framework and related agreements.We may obtain new vehicles frommanufacturers,service vehicles,sell new vehicles and display vehicle manufacturers trademarks only to the extent permit

326、ted under these agreements.Theterms of these agreements may conflict with our interests and objectives and may impose limitations on key aspects of our operations,including acquisitionstrategy and capital spending.23Table of ContentsFor example,manufacturers can set performance standards with respec

327、t to sales volume,sales effectiveness and customer satisfaction,and require us toobtain manufacturer consent before we can acquire dealerships selling a manufacturers automobiles.From time to time,we may be precluded underagreements with certain manufacturers from acquiring additional franchises,or

328、subject to other adverse actions,to the extent we are not meeting certainperformance criteria at our existing stores(with respect to matters such as sales volume,customer satisfaction and sales effectiveness)until our performanceimproves in accordance with the agreements,subject to applicable state

329、franchise laws.In addition,many vehicle manufacturers place limits on the totalnumber of franchises that any group of affiliated dealerships may own and certain manufacturers place limits on the number of franchises or share of totalbrand vehicle sales that may be maintained by an affiliated dealers

330、hip group on a national,regional or local basis,as well as limits on store ownership incontiguous markets.If we reach any of these limits,we may be prevented from making further acquisitions,or we may be required to dispose of certaindealerships,which could adversely affect our future growth.We cann

331、ot provide assurance that manufacturers will approve future acquisitions timely,if at all,which could significantly impair the execution of our acquisition strategy.In addition,certain manufacturers use a dealerships manufacturer-determined customer satisfaction index(CSI)score as a factor governing

332、participation in incentive programs.To the extent we do not meet minimum score requirements,our future payments may be materially reduced or we may beprecluded from receiving certain incentives,which could materially adversely affect our business,financial condition,results of operations and cash fl

333、ows.Manufacturers also typically establish facilities and minimum capital requirements for dealerships on a case-by-case basis.In certain circumstances,including as a condition to obtaining consent to a proposed acquisition and qualifying for certain financial incentives,a manufacturer may require us toremodel,upgrade or move our facilities,and capitalize the subject dealership at levels we would