Company Quick10K Filing
Quick10K
Asbury Automotive Group
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$93.34 19 $1,811
10-Q 2019-09-30 Quarter: 2019-09-30
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-10-10 Officers, Exhibits
8-K 2019-09-25 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-07-26 Earnings, Exhibits
8-K 2019-07-24 Officers
8-K 2019-04-23 Earnings, Exhibits
8-K 2019-04-17 Shareholder Vote, Other Events, Exhibits
8-K 2019-02-06 Earnings, Exhibits
8-K 2018-11-19 Enter Agreement, Off-BS Arrangement
8-K 2018-11-01 Officers, Exhibits
8-K 2018-10-23 Earnings, Exhibits
8-K 2018-08-01 Officers
8-K 2018-07-24 Earnings, Exhibits
8-K 2018-05-02 Other Events
8-K 2018-04-24 Earnings, Exhibits
8-K 2018-04-18 Shareholder Vote
8-K 2018-02-06 Earnings, Exhibits
8-K 2018-01-05 Officers
KMX Carmax 13,759
CASY Caseys General Stores 6,312
KAR Kar Auction Services 3,511
LAD Lithia Motors 3,037
MNRO Monro 2,552
GPI Group 1 Automotive 1,387
SAH Sonic Automotive 1,175
CMSS CM Seven Star Acquisition 608
TA TravelCenters of America 561
LAZY Lazydays Holdings 43
ABG 2019-09-30
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 4. Mine Safety Disclosures
Item 6. Exhibits
EX-4.1 ex41eighthsupplementalinde.htm
EX-10.7 excompensationplan.htm
EX-31.1 ex311section302ceocertific.htm
EX-31.2 ex312section302cfocertific.htm
EX-32.1 ex321section906ceocertific.htm
EX-32.2 ex322section906cfocertific.htm

Asbury Automotive Group Earnings 2019-09-30

ABG 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
       
For the transition period from              to
Commission file number: 001-31262  
 
ASBURY AUTOMOTIVE GROUP, INC.
(Exact name of Registrant as specified in its charter)  
 
 
 
Delaware
 
01-0609375
 
 
(State or other jurisdiction of
incorporation or organization)

 
(I.R.S. Employer
Identification No.)
 
 
 
 
 
 
 
 
 
2905 Premiere Parkway NW
,
Suite 300
 

 
 
Duluth
,
Georgia
 
30097
 
 
(Address of principal executive offices)
 
(Zip Code)
 
(770) 418-8200
(Registrant's telephone number, including area code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
 
Trading
 
 
Title of each class
 
Symbol(s)
 
Name of each exchange on which registered
Common stock, $0.01 par value per share
 
ABG
 
New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer
  
Accelerated Filer
 
 
 
 
 
Non-Accelerated Filer
 
Smaller Reporting Company
 
 
 
 
 
 
 
 
Emerging Growth Company


Table of Contents

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: The number of shares of common stock outstanding as of October 29, 2019 was 19,302,729.
 


Table of Contents

ASBURY AUTOMOTIVE GROUP, INC.

TABLE OF CONTENTS

 
 
Page
PART I—Financial Information
 
 
 
 
 
 
 
 
 
 
 
PART II—Other Information
 
 
 
 
 
 
 









Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value and share data)
(Unaudited)
 
September 30, 2019
 
December 31, 2018
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
1.8

 
$
8.3

Contracts-in-transit
148.6

 
198.3

Accounts receivable, net
112.5

 
130.3

Inventories
1,030.1

 
1,067.6

Assets held for sale
26.1

 
26.3

Other current assets
128.9

 
122.2

Total current assets
1,448.0

 
1,553.0

PROPERTY AND EQUIPMENT, net
943.4

 
886.1

OPERATING LEASE RIGHT-OF-USE ASSETS
77.1

 

GOODWILL
272.1

 
181.2

INTANGIBLE FRANCHISE RIGHTS
65.8

 
65.8

OTHER LONG-TERM ASSETS
10.1

 
9.3

Total assets
$
2,816.5

 
$
2,695.4

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Floor plan notes payable—trade, net
$
122.1

 
$
114.0

Floor plan notes payable—non-trade, net
738.9

 
852.1

Current maturities of long-term debt
38.1

 
38.8

Current maturities of operating leases
21.0

 

Accounts payable and accrued liabilities
315.0

 
298.4

Total current liabilities
1,235.1

 
1,303.3

LONG-TERM DEBT
867.8

 
866.5

OPERATING LEASE LIABILITIES
60.3

 

DEFERRED INCOME TAXES
20.4

 
21.7

OTHER LONG-TERM LIABILITIES
32.9

 
30.7

COMMITMENTS AND CONTINGENCIES (Note 12)

 

SHAREHOLDERS' EQUITY:
 
 
 
Preferred stock, $.01 par value; 10,000,000 shares authorized; none issued or outstanding

 

Common stock, $.01 par value; 90,000,000 shares authorized; 41,096,408 and 41,065,069 shares issued, including shares held in treasury, respectively
0.4

 
0.4

Additional paid-in capital
580.8

 
572.9

Retained earnings
1,050.9

 
922.7

Treasury stock, at cost; 21,791,707 and 21,719,339 shares, respectively
(1,028.6
)
 
(1,023.4
)
Accumulated other comprehensive (loss) income
(3.5
)
 
0.6

Total shareholders' equity
600.0

 
473.2

Total liabilities and shareholders' equity
$
2,816.5

 
$
2,695.4




See accompanying Notes to Condensed Consolidated Financial Statements

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Table of Contents

ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
REVENUE:
 
 
 
 
 
 
 
New vehicle
$
986.9

 
$
980.5

 
$
2,823.9

 
$
2,766.3

Used vehicle
546.9

 
497.5

 
1,590.4

 
1,499.0

Parts and service
227.6

 
206.1

 
669.7

 
609.9

Finance and insurance, net
80.6

 
73.3

 
232.3

 
215.0

TOTAL REVENUE
1,842.0

 
1,757.4

 
5,316.3

 
5,090.2

COST OF SALES:
 
 
 
 
 
 
 
New vehicle
948.3

 
938.4

 
2,709.1

 
2,645.0

Used vehicle
514.5

 
464.7

 
1,487.6

 
1,398.6

Parts and service
86.1

 
76.3

 
252.3

 
225.4

TOTAL COST OF SALES
1,548.9

 
1,479.4

 
4,449.0

 
4,269.0

GROSS PROFIT
293.1

 
278.0

 
867.3

 
821.2

OPERATING EXPENSES:
 
 
 
 
 
 
 
Selling, general, and administrative
202.0

 
188.8

 
593.7

 
563.6

Depreciation and amortization
9.1

 
8.5

 
26.7

 
25.2

Other operating (income) expense, net
(0.2
)
 
(0.1
)
 
1.0

 
(1.2
)
INCOME FROM OPERATIONS
82.2

 
80.8

 
245.9

 
233.6

OTHER EXPENSES (INCOME):
 
 
 
 
 
 
 
Floor plan interest expense
9.0

 
8.4

 
29.7

 
23.0

Other interest expense, net
13.7

 
13.2

 
41.2

 
39.4

Swap interest expense

 
0.1

 

 
0.5

Gain on divestiture

 

 
(11.7
)
 

Total other expenses, net
22.7

 
21.7

 
59.2

 
62.9

INCOME BEFORE INCOME TAXES
59.5

 
59.1

 
186.7

 
170.7

Income tax expense
14.5

 
14.8

 
45.9

 
43.1

NET INCOME
$
45.0

 
$
44.3

 
$
140.8

 
$
127.6

EARNINGS PER SHARE:
 
 
 
 
 
 
 
Basic—
 
 
 
 
 
 
 
Net income
$
2.36

 
$
2.22

 
$
7.37

 
$
6.29

Diluted—
 
 
 
 
 
 
 
Net income
$
2.33

 
$
2.18

 
$
7.30

 
$
6.22

WEIGHTED AVERAGE SHARES OUTSTANDING:
 
 
 
 
 
 
 
Basic
19.1

 
20.0

 
19.1

 
20.3

Restricted stock
0.1

 
0.1

 
0.1

 
0.1

Performance share units
0.1

 
0.2

 
0.1

 
0.1

Diluted
19.3

 
20.3

 
19.3

 
20.5









 See accompanying Notes to Condensed Consolidated Financial Statements

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Table of Contents

ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
45.0

 
$
44.3

 
$
140.8

 
$
127.6

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Change in fair value of cash flow swaps
(1.0
)
 
0.9

 
(5.3
)
 
4.9

Income tax expense (benefit) associated with cash flow swaps
0.3

 
(0.2
)
 
1.4

 
(1.3
)
Comprehensive income
$
44.3

 
$
45.0

 
$
136.9

 
$
131.2












































See accompanying Notes to Condensed Consolidated Financial Statements

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Table of Contents

ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in millions)
(Unaudited)
 
Common Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Treasury Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
 
Shares
 
Amount
 
 
 
Shares
 
Amount
 
 
Balances, December 31, 2018
41,065,069

 
$
0.4

 
$
572.9

 
$
922.7

 
21,719,339

 
$
(1,023.4
)
 
$
0.6

 
$
473.2

Net income

 

 

 
40.9

 

 

 

 
40.9

Other comprehensive loss

 









 
(1.3
)
 
(1.3
)
Cumulative effect of change in accounting principle - ASU 2018-02


 

 

 
0.2

 

 

 
(0.2
)
 

Share-based compensation

 

 
3.9

 

 

 

 

 
3.9

Issuance of common stock, net of forfeitures in connection with share-based payment arrangements
238,078

 

 

 

 

 

 

 

Repurchase of common stock associated with net share settlement of employee share-based awards

 

 

 

 
66,912

 
(4.7
)
 

 
(4.7
)
Share repurchases

 

 

 

 
108,978

 
(7.4
)
 

 
(7.4
)
Retirement of previously repurchased common stock
(108,978
)
 

 
(1.3
)
 
(6.1
)
 
(108,978
)
 
7.4

 

 

Balances, March 31, 2019
41,194,169

 
$
0.4

 
$
575.5

 
$
957.7

 
21,786,251

 
$
(1,028.1
)
 
$
(0.9
)
 
$
504.6

Net income

 

 

 
54.9

 

 

 

 
54.9

Other comprehensive loss

 

 

 

 

 

 
(1.9
)
 
(1.9
)
Share-based compensation

 

 
2.9

 

 

 

 

 
2.9

Issuance of common stock, net of forfeitures in connection with share-based payment arrangements
(3,656
)
 

 

 

 

 

 

 

Repurchase of common stock associated with net share settlement of employee share-based awards

 

 

 

 
3,328

 
(0.3
)
 

 
(0.3
)
Share repurchases

 

 

 

 
50,436

 
(3.9
)
 

 
(3.9
)
Retirement of previously repurchased common stock
(50,436
)
 

 
(0.6
)
 
(3.3
)
 
(50,436
)
 
3.9

 

 

Balances, June 30, 2019
41,140,077

 
$
0.4

 
$
577.8

 
$
1,009.3

 
21,789,579

 
$
(1,028.4
)
 
$
(2.8
)
 
$
556.3

Net income

 

 

 
45.0

 

 

 

 
45.0

Other comprehensive loss

 

 

 

 

 

 
(0.7
)
 
(0.7
)
Share-based compensation

 

 
3.6

 

 

 

 

 
3.6

Issuance of common stock, net of forfeitures in connection with share-based payment arrangements
(704
)
 

 

 

 
 
 
 
 

 

Repurchase of common stock associated with net share settlement of employee share-based awards

 

 

 

 
2,128

 
(0.2
)
 

 
(0.2
)
Share repurchases

 

 

 

 
42,965

 
(4.0
)
 

 
(4.0
)
Retirement of previously repurchased common stock
(42,965
)
 

 
(0.6
)
 
(3.4
)
 
(42,965
)
 
4.0

 

 

Balances, September 30, 2019
41,096,408

 
$
0.4

 
$
580.8

 
$
1,050.9

 
21,791,707

 
$
(1,028.6
)
 
$
(3.5
)
 
$
600.0




7

Table of Contents

 
Common Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Treasury Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
 
Shares
 
Amount
 
 
 
Shares
 
Amount
 
 
Balances, December 31, 2017
40,969,987

 
$
0.4

 
$
563.5

 
$
750.3

 
20,156,962

 
$
(919.1
)
 
$
(0.9
)
 
$
394.2

Net income

 

 

 
40.1

 

 

 

 
40.1

Other comprehensive income

 

 

 

 

 

 
2.1

 
2.1

Cumulative effect of change in accounting principle - ASU 2014-09

 

 

 
9.2

 

 

 

 
9.2

Share-based compensation

 

 
3.2

 

 

 

 

 
3.2

Issuance of common stock, net of forfeitures in connection with share-based payment arrangements
181,720

 

 

 

 

 

 

 

Repurchase of common stock associated with net share settlements of employee share-based awards

 

 

 

 
65,412

 
(4.4
)
 

 
(4.4
)
Share repurchases

 

 

 

 
296,822

 
(20.0
)
 

 
(20.0
)
Balances, March 31, 2018
41,151,707

 
$
0.4

 
$
566.7

 
$
799.6

 
20,519,196

 
$
(943.5
)
 
$
1.2

 
$
424.4

Net income

 
 
 

 
43.2

 

 

 

 
43.2

Other comprehensive income

 

 

 

 

 

 
0.8

 
0.8

Share-based compensation

 

 
2.5

 
 
 
 
 

 

 
2.5

Issuance of common stock, net of forfeitures in connection with share-based payment arrangements
12,877

 

 

 

 

 

 

 

Repurchase of common stock associated with net share settlements of employee share-based awards

 

 

 

 
3,519

 
(0.2
)
 

 
(0.2
)
Share repurchases

 

 

 

 
287,468

 
(20.2
)
 

 
(20.2
)
Balances, June 30, 2018
41,164,584

 
$
0.4

 
$
569.2

 
$
842.8

 
20,810,183

 
$
(963.9
)
 
$
2.0

 
$
450.5

Net income

 
 
 

 
44.3

 

 

 

 
44.3

Other comprehensive income

 

 

 

 

 

 
0.7

 
0.7

Share-based compensation

 

 
2.5

 
 
 
 
 

 

 
2.5

Issuance of common stock, net of forfeitures in connection with share-based payment arrangements
(5,265
)
 

 

 

 

 

 

 

Repurchase of common stock associated with net share settlements of employee share-based awards

 

 

 

 
2,087

 
(0.1
)
 

 
(0.1
)
Share repurchases

 

 

 

 
239,769

 
(16.9
)
 

 
(16.9
)
Balances, September 30, 2018
41,159,319

 
$
0.4

 
$
571.7

 
$
887.1

 
21,052,039

 
$
(980.9
)
 
$
2.7

 
$
481.0
















See accompanying Notes to Condensed Consolidated Financial Statements

8

Table of Contents

ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
For the Nine Months Ended September 30,
 
2019
 
2018
CASH FLOW FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
140.8

 
$
127.6

Adjustments to reconcile net income to net cash provided by operating activities—
 
 
 
Depreciation and amortization
26.7

 
25.2

Share-based compensation
10.4

 
8.2

Deferred income taxes

 
0.6

Loaner vehicle amortization
17.6

 
16.7

Gain on divestiture
(11.7
)
 

Change in right-of-use asset
14.3

 

Other adjustments, net
4.0

 
1.9

Changes in operating assets and liabilities, net of acquisitions and divestitures—
 
 
 
Contracts-in-transit
49.7

 
55.3

Accounts receivable
17.6

 
14.8

Inventories
201.0

 
26.4

Other current assets
(131.1
)
 
(144.5
)
Floor plan notes payable—trade, net
8.1

 
(2.0
)
Accounts payable and other current liabilities
11.8

 
(25.6
)
Operating lease liabilities
(14.5
)
 

Other long-term assets and liabilities, net
3.0

 
1.8

Net cash provided by operating activities
347.7

 
106.4

CASH FLOW FROM INVESTING ACTIVITIES:
 
 
 
Capital expenditures—excluding real estate
(28.7
)
 
(21.5
)
Capital expenditures—real estate
(9.2
)
 
(17.6
)
Purchases of previously leased real estate
(4.9
)
 
(4.4
)
Acquisitions
(210.0
)
 
(91.3
)
Divestiture
39.1

 

Proceeds from the sale of assets
7.5

 
2.0

Net cash used in investing activities
(206.2
)
 
(132.8
)
CASH FLOW FROM FINANCING ACTIVITIES:
 
 
 
Floor plan borrowings—non-trade
3,118.7

 
3,309.7

Floor plan borrowings—acquisitions
55.3

 
22.7

Floor plan repayments—non-trade
(3,273.1
)
 
(3,231.4
)
Floor plan repayments—divestiture
(14.1
)
 

Repayments of borrowings
(12.0
)
 
(10.7
)
Payment of debt issuance costs
(2.3
)
 

Repurchases of common stock, including shares associated with net share settlement of employee share-based awards
(20.5
)
 
(61.8
)
Net cash (used in) provided by financing activities
(148.0
)
 
28.5

Net (decrease) increase in cash and cash equivalents
(6.5
)
 
2.1

CASH AND CASH EQUIVALENTS, beginning of period
8.3

 
4.7

CASH AND CASH EQUIVALENTS, end of period
$
1.8

 
$
6.8




See Note 11 "Supplemental Cash Flow Information" for further details
See accompanying Notes to Condensed Consolidated Financial Statements

9

Table of Contents

ASBURY AUTOMOTIVE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
We are one of the largest automotive retailers in the United States. As of September 30, 2019, we owned and operated 107 new vehicle franchises (88 dealership locations) representing 31 brands of automobiles and 25 collision repair centers in 18 metropolitan markets within ten states. Our stores offer an extensive range of automotive products and services, including new and used vehicles; parts and service, which includes repair and maintenance services, replacement parts and collision repair services; and finance and insurance products. For the nine months ended September 30, 2019, our new vehicle revenue brand mix consisted of 46% imports, 33% luxury, and 21% domestic brands.
Our retail network is made up of dealerships operating primarily under the following locally-branded dealership groups:
 
Coggin dealerships operating primarily in Jacksonville, Fort Pierce and Orlando, Florida;
Courtesy dealerships operating in Tampa, Florida;
Crown dealerships operating in North Carolina, South Carolina and Virginia;
Greenville Automotive dealerships operating in Greenville, South Carolina;
Gray-Daniels dealerships operating in the Jackson, Mississippi area;
Hare and Estes dealerships operating in the Indianapolis, Indiana area;
McDavid dealerships operating in metropolitan Austin and Dallas, Texas;
Nalley dealerships operating in metropolitan Atlanta, Georgia;
Plaza dealerships operating in metropolitan St. Louis, Missouri; and
Mike Shaw dealership in the Denver, Colorado area.

Our operating results are generally subject to changes in the economic environment as well as seasonal variations. Historically, we have generated more revenue and operating income in the second, third, and fourth quarters than in the first quarter of the calendar year. Generally, the seasonal variations in our operations are caused by factors related to weather conditions, changes in manufacturer incentive programs, model changeovers, and consumer buying patterns, among other things.
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), and reflect the consolidated accounts of Asbury Automotive Group, Inc. (the "Company") and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.
In the opinion of management, all adjustments, consisting only of normal, recurring adjustments, considered necessary for a fair presentation of the Condensed Consolidated Financial Statements as of September 30, 2019, and for the three and nine months ended September 30, 2019 and 2018, have been included, unless otherwise indicated. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for any other interim period, or any full year period. Our Condensed Consolidated Financial Statements should be read together with our audited Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2018.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the periods presented. Actual results could differ materially from these estimates. Estimates and assumptions are reviewed quarterly and the effects of any revisions are reflected in the Consolidated Financial Statements in the period they are determined to be necessary. Significant estimates made in the accompanying Condensed Consolidated Financial Statements include, but are not limited to, those relating to inventory valuation reserves, variable consideration and constraint considerations related to retro-commission arrangements, reserves for chargebacks against revenue recognized from the sale of finance and insurance products, reserves for insurance programs,

10

Table of Contents

certain assumptions related to intangible and long-lived assets, and reserves for certain legal or similar proceedings relating to our business operations.
Contracts-In-Transit
Contracts-in-transit represent receivables from third-party finance companies for the portion of new and used vehicle purchase price financed by customers through sources arranged by us.
Revenue Recognition
Please refer to Note 2 "Revenue Recognition" within the accompanying Condensed Consolidated Financial Statements.
Internal Profit
Revenues and expenses associated with internal work performed by our parts and service departments on new and used vehicle inventory are eliminated in consolidation. The gross profit earned by our parts and service departments for internal work performed is included as a reduction of Parts and Service Cost of Sales on the accompanying Consolidated Statements of Income upon the sale of the vehicle. The costs incurred by our new and used vehicle departments for work performed by our parts and service departments is included in either New Vehicle Cost of Sales or Used Vehicle Cost of Sales on the accompanying Consolidated Statements of Income, depending on the classification of the vehicle serviced. We eliminate the internal profit on vehicles that remain in inventory.
Income Taxes
We use the liability method to account for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis using currently enacted tax rates.
Share Repurchases

Share repurchases may be made from time-to-time in open market transactions or through privately negotiated transactions under the authorization approved by the Board of Directors. Periodically, the Company may retire repurchased shares of common stock previously held by the Company as treasury stock. In accordance with our accounting policy, we allocate any excess share repurchase price over par value between additional paid-in capital, which is limited to amounts initially recorded for the same issue, and retained earnings.
Earnings per Share
Basic earnings per share is computed by dividing net income by the weighted-average common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average common shares and common share equivalents outstanding during the period. For all periods presented, there were no adjustments to the numerator necessary to compute diluted earnings per share.
Assets Held for Sale and Liabilities Associated with Assets Held for Sale
Certain amounts have been classified as Assets Held for Sale in the accompanying Condensed Consolidated Balance Sheets. Assets and liabilities classified as held for sale include assets and liabilities associated with pending dealership disposals, real estate we are actively marketing to sell, and any related mortgage notes payable or other liabilities, if applicable. Classification as held for sale begins on the date that we have met all of the criteria for classification as held for sale.
At the time of classifying assets as held for sale, we compare the carrying value of these assets to estimates of fair value to assess for impairment. We compare the carrying value to estimates of fair value utilizing the assistance of third-party broker opinions of value and third-party desktop appraisals to assist in our fair value estimates related to real estate properties.
Statements of Cash Flows
Borrowings and repayments of floor plan notes payable to a lender unaffiliated with the manufacturer from which we purchase a particular new vehicle ("Non-Trade") and all floor plan notes payable relating to pre-owned vehicles (together referred to as "Floor Plan Notes Payable—Non-Trade") are classified as financing activities on the accompanying Condensed Consolidated Statements of Cash Flows, with borrowings reflected separately from repayments. The net change in floor plan notes payable to a lender affiliated with the manufacturer from which we purchase a particular new vehicle (collectively referred to as "Floor Plan Notes Payable—Trade") is classified as an operating activity on the accompanying Condensed Consolidated Statements of Cash Flows. Borrowings of floor plan notes payable associated with inventory acquired in

11

Table of Contents

connection with all acquisitions and repayments made in connection with all divestitures are classified as financing activities in the accompanying Condensed Consolidated Statement of Cash Flows. Cash flows related to floor plan notes payable included in operating activities differ from cash flows related to floor plan notes payable included in financing activities only to the extent that the former are payable to a lender affiliated with the manufacturer from which we purchased the related inventory, while the latter are payable to a lender not affiliated with the manufacturer from which we purchased the related inventory.
Loaner vehicles account for a significant portion of Other Current Assets. We acquire loaner vehicles either with available cash or through borrowing from either our manufacturer affiliated lenders or through our senior secured credit agreement with Bank of America, as administrative agent, and the other agents and lenders party thereto (as amended, the "2019 Senior Credit Facility"). Loaner vehicles are initially used by our service department for a short period of time (typically six to twelve months) before we seek to sell them. Therefore, we classify the acquisition of loaner vehicles in Other Current Assets and the borrowings and repayments of loaner vehicle notes payable in Accounts Payable and Accrued Liabilities in the accompanying Condensed Consolidated Statements of Cash Flows. Loaner vehicles are depreciated over the service period to their estimated value. At the end of the loaner service period, loaner vehicles are transferred from Other Current Assets to used vehicle inventory. These transfers are reflected as non-cash transfers between Other Current Assets and Inventories in the accompanying Condensed Consolidated Statements of Cash Flows.
Recent Accounting Pronouncements
Effective January 1, 2019, the Company adopted the new lease accounting guidance in Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) (“ASC 842”). For additional information, please refer to Note 9 "Leases" within the accompanying Condensed Consolidated Financial Statements for additional information.
On January 1, 2019, the Company adopted ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02")." ASU 2018-02 allows entities to elect to reclassify the income tax effects resulting from the Tax Cuts and Jobs Act on items within accumulated other comprehensive income to retained earnings. During the first quarter of 2019, the Company elected to reclassify $0.2 million related to the change in deferred taxes associated with our cash flow hedges from accumulated other comprehensive income to retained earnings. This reclassification was recognized as a cumulative effect adjustment in the Condensed Consolidated Statements of Shareholders' Equity during the first quarter of 2019.
On January 1, 2019, the Company adopted ASU No. 2017-12, "Derivatives and Hedging" (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"). This update is intended to simplify hedge accounting by better aligning how an entity’s risk management activities and hedging relationships are presented in its financial statements and simplifies the application of hedge accounting guidance in certain situations. This update expands and refines hedge accounting for both non-financial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. For cash flow hedges existing at the adoption date, this update requires adoption on a modified retrospective basis with a cumulative-effect adjustment to retained earnings as of the effective date and the amendments to presentation guidance and disclosure requirements are required to be adopted prospectively. The adoption of this update did not have a material impact on our Condensed Consolidated Financial Statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments- Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), which requires an entity to assess impairment of its financial instruments based on its estimate of expected credit losses versus the current incurred loss model. The provisions of ASU 2016-13 are effective for fiscal years beginning after December 15, 2019. Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We are currently evaluating the impact that the adoption of the provisions of the ASU will have on our Condensed Consolidated Financial Statements, but do not expect the impact of the adoption of this ASU to be material.

12

Table of Contents

2. REVENUE RECOGNITION
The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or performing a service to a customer. Sales and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.
Disaggregation of Revenue
The following table summarizes revenue from contracts with customers for the three and nine months ended September 30, 2019 and 2018:
 
For the Three Months Ended September 30,
 
2019
 
2018
 
(In millions)
Revenue:
 
 
 
   New vehicle
$
986.9

 
$
980.5

   Used vehicle retail
505.0

 
448.7

   Used vehicle wholesale
41.9

 
48.8

New and used vehicle
1,533.8

 
1,478.0

  Sale of vehicle parts and accessories
36.7

 
34.3

  Vehicle repair and maintenance services
190.9

 
171.8

Parts and services
227.6

 
206.1

Finance and insurance, net
80.6

 
73.3

Total revenue
1,842.0

 
$
1,757.4

 
For the Nine Months Ended September 30,
 
2019
 
2018
 
(In millions)
Revenue:
 
 
 
   New vehicle
$
2,823.9

 
$
2,766.3

   Used vehicle retail
1,449.8

 
1,355.4

   Used vehicle wholesale
140.6

 
143.6

New and used vehicle
4,414.3

 
4,265.3

  Sale of vehicle parts and accessories
109.7

 
102.4

  Vehicle repair and maintenance services
560.0

 
507.5

Parts and services
669.7

 
609.9

Finance and insurance, net
232.3

 
215.0

Total revenue
$
5,316.3

 
$
5,090.2


New vehicle and used vehicle retail
Revenue from the sale of new and used vehicles (which excludes sales and other taxes) is recognized when the terms of the customer contract are satisfied which generally occurs with the signing of the sales contract and transfer of control of the vehicle to the customer. Costs associated with incidental items that are immaterial in the context of the contract are accrued at the time of sale.
Used vehicle wholesale
Proceeds from the sale of these vehicles are recognized in used vehicle revenue upon transfer of control to end-users at auction.


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Sale of vehicle parts and accessories
The Company recognizes revenue upon transfer of control to the customer which occurs at a point in time. When the Company performs shipping and handling activities after the transfer of control to the customer (e.g., when control transfers prior to delivery), they are considered as fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized.
Vehicle repair and maintenance services
The Company provides vehicle repair and maintenance services to its customers pursuant to the terms and conditions included within the customer contract ("repair order"). Satisfaction of this performance obligation creates an asset with no alternative use for which an enforceable right to payment for performance to date exists within our contractual agreements. As such, the Company recognizes revenue over time as the Company satisfies its performance obligation. Additionally, the Company has determined that parts and labor are not individually distinct in the context of a repair order and therefore are treated as a single performance obligation.
Finance and Insurance, net
We receive commissions from third-party lending and insurance institutions for arranging customer financing and from the sale of vehicle service contracts, guaranteed auto protection (known as "GAP") insurance, and other insurance, to end-users. Finance and insurance commission revenue is recognized at the point of sale since our performance obligation is to arrange financing or facilitating the sale of a third party’s products or services to our customers.
The Company’s commission arrangements with third-party lenders and insurance administrators consists of fixed ("upfront") and variable consideration. Variable consideration includes commission charge backs ("chargebacks") in the event a contract is prepaid, defaulted upon, or terminated by the end-user. The Company reserves for future chargebacks based on historical chargeback experience and the termination provisions of the applicable contract and these reserves are established in the same period that the related revenue is recognized.
We also participate in future profits pursuant to retrospective commission arrangements, which meet the definition of variable consideration, for certain insurance products associated with a third-party portfolio. The Company estimates the amount of variable consideration to be included in the transaction price based on historical payment trends and further constrains the variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur. In making these assessments the Company considers the likelihood and magnitude of a potential reversal of revenue and updates its assessment when uncertainties associated with the constraint are removed.















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Contract Asset
The Company records a contract asset related to its right to payment for vehicle repair and maintenance services and variable F&I, net for goods and services already transferred to the customer. Contract assets related to vehicle repair and maintenance services are transferred to receivables when a repair order is completed and invoiced to the customer. Changes in contract assets during the period are reflected in the table below:
 
Vehicle Repair and Maintenance Services
 
Finance and Insurance, net
 
Total
 
(In millions)
Contract Assets (Current), January 1, 2019
$
4.1

 
$
10.6

 
$
14.7

Transferred to receivables from contract assets recognized at the beginning of the period
(4.1
)
 
(3.3
)
 
(7.4
)
Increases related to revenue recognized, inclusive of adjustments to constraint, during the period
4.4

 
3.3

 
7.7

Contract Assets (Current), March 31, 2019
$
4.4

 
$
10.6

 
$
15.0

Transferred to receivables from contract assets recognized at the beginning of the period
(4.4
)
 
(3.2
)
 
(7.6
)
Increases related to revenue recognized, inclusive of adjustments to constraint, during the period
4.8

 
4.6

 
9.4

Contract Assets (Current), June 30, 2019
4.8

 
12.0

 
16.8

Transferred to receivables from contract assets recognized at the beginning of the period
(4.8
)
 
(2.6
)
 
(7.4
)
Increases related to revenue recognized, inclusive of adjustments to constraint, during the period
4.9

 
2.1

 
7.0

Contract Assets (Current), September 30, 2019
$
4.9

 
$
11.5

 
$
16.4


3. ACQUISITIONS AND DIVESTITURES
Results of acquired dealerships are included in our accompanying Condensed Consolidated Statements of Income commencing on the date of acquisition. Our acquisitions are accounted for such that the assets acquired and liabilities assumed are recognized at their acquisition date fair values, with any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired recorded as goodwill. Goodwill is an asset representing operational synergies and future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. The fair value of our manufacturer franchise rights are determined as of the acquisition date, by discounting the projected cash flows specific to each franchise. Included in this analysis are market participant assumptions, at a dealership level, regarding the cash flows directly attributable to the franchise rights, revenue growth rates, future gross margins and future selling, general, and administrative expenses. Using an estimated weighted average cost of capital, estimated residual values at the end of the forecast period and estimated future capital expenditure requirements, the Company calculates the fair value of the franchise rights.
During the nine months ended September 30, 2019, we acquired the assets of nine franchises (five dealership locations) and one collision center in the Indianapolis, Indiana market and one franchise (one dealership location) in the Denver, Colorado market for a combined purchase price of $210.4 million. We funded these acquisitions with an aggregate of $153.9 million of cash and $55.3 million of floor plan borrowings for the purchase of the related new vehicle inventory. In the aggregate, these acquisitions included purchase price holdbacks of $1.2 million for potential indemnity claims made by us with respect to the acquired franchises. In addition to the acquisition amounts above, we released $0.8 million of purchase price holdbacks related to a prior year acquisition.
Below is the preliminary allocation of purchase price for the acquisitions completed during the nine months ended September 30, 2019. We have not finalized our valuation for manufacturer franchise rights, real estate, property and equipment, or our assessment with respect to certain assumed leases.

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The goodwill and manufacturer franchise rights associated with our acquisitions will be deductible for federal and state income tax purposes ratably over a 15 year period.
 
As of
 
September 30, 2019
 
(In millions)
Inventory
$
70.9