Company Quick10K Filing
Quick10K
Asbury Automotive Group
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$80.26 19 $1,560
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 2019-07-26 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
BTI British American Tobacco 86,910
PAYC Paycom 12,160
CHSP Chesapeake Lodging Trust 1,860
GBDC Golub Capital BDC 1,090
DFP Delphi Financial Group 454
LMRK Landmark Infrastructure Partners 389
ACRX Acelrx Pharmaceuticals 250
BNED Barnes & Noble Education 186
ISCO International Stem Cell 0
BCTCV Boston Capital Tax Credit Fund V 0
ABG 2019-06-30
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-10.1 ex101-firstamendmentto.htm
EX-10.2 ex102-secondamendmentt.htm
EX-31.1 ex311section302ceocert.htm
EX-31.2 ex312section302cfocert.htm
EX-32.1 ex321section906ceocert.htm
EX-32.2 ex322section906cfocert.htm

Asbury Automotive Group Earnings 2019-06-30

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 June 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 July 30, 2019 was 19,348,289.
 


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)
 
June 30, 2019
 
December 31, 2018
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
9.6

 
$
8.3

Contracts-in-transit
153.9

 
198.3

Accounts receivable, net
117.3

 
130.3

Inventories
1,100.8

 
1,067.6

Assets held for sale
19.5

 
26.3

Other current assets
128.4

 
122.2

Total current assets
1,529.5

 
1,553.0

PROPERTY AND EQUIPMENT, net
918.9

 
886.1

OPERATING LEASE RIGHT-OF-USE ASSETS
78.9

 

GOODWILL
213.2

 
181.2

INTANGIBLE FRANCHISE RIGHTS
65.8

 
65.8

OTHER LONG-TERM ASSETS
7.7

 
9.3

Total assets
$
2,814.0

 
$
2,695.4

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Floor plan notes payable—trade, net
$
123.8

 
$
114.0

Floor plan notes payable—non-trade, net
794.9

 
852.1

Current maturities of long-term debt
38.4

 
38.8

Current maturities of operating leases
20.5

 

Accounts payable and accrued liabilities
295.0

 
298.4

Total current liabilities
1,272.6

 
1,303.3

LONG-TERM DEBT
871.2

 
866.5

OPERATING LEASE LIABILITIES
62.6

 

DEFERRED INCOME TAXES
20.7

 
21.7

OTHER LONG-TERM LIABILITIES
30.6

 
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; 41,140,077 and 41,065,069 shares issued, including shares held in treasury, respectively
0.4

 
0.4

Additional paid-in capital
577.8

 
572.9

Retained earnings
1,009.3

 
922.7

Treasury stock, at cost; 21,789,579 and 21,719,339 shares, respectively
(1,028.4
)
 
(1,023.4
)
Accumulated other comprehensive (loss) income
(2.8
)
 
0.6

Total shareholders' equity
556.3

 
473.2

Total liabilities and shareholders' equity
$
2,814.0

 
$
2,695.4




See accompanying Notes to Condensed Consolidated Financial Statements

4

Table of Contents

ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
REVENUE:
 
 
 
 
 
 
 
New vehicle
$
965.2

 
$
928.7

 
$
1,837.0

 
$
1,785.8

Used vehicle
533.6

 
516.9

 
1,043.5

 
1,001.5

Parts and service
224.5

 
204.5

 
442.1

 
403.8

Finance and insurance, net
80.2

 
73.5

 
151.7

 
141.7

TOTAL REVENUE
1,803.5

 
1,723.6

 
3,474.3

 
3,332.8

COST OF SALES:
 
 
 
 
 
 
 
New vehicle
926.9

 
888.1

 
1,760.8

 
1,706.6

Used vehicle
497.7

 
482.8

 
973.1

 
933.9

Parts and service
83.9

 
74.9

 
166.2

 
149.1

TOTAL COST OF SALES
1,508.5

 
1,445.8

 
2,900.1

 
2,789.6

GROSS PROFIT
295.0

 
277.8

 
574.2

 
543.2

OPERATING EXPENSES:
 
 
 
 
 
 
 
Selling, general, and administrative
200.7

 
190.6

 
391.7

 
374.8

Depreciation and amortization
9.0

 
8.5

 
17.6

 
16.7

Other operating expense (income), net
(0.6
)
 
(0.9
)
 
1.2

 
(1.1
)
INCOME FROM OPERATIONS
85.9

 
79.6

 
163.7

 
152.8

OTHER EXPENSES (INCOME):
 
 
 
 
 
 
 
Floor plan interest expense
10.5

 
8.0

 
20.7

 
14.6

Other interest expense, net
13.6

 
13.2

 
27.5

 
26.2

Swap interest expense

 
0.2

 

 
0.4

Gain on divestiture
(11.7
)
 

 
(11.7
)
 

Total other expenses, net
12.4

 
21.4

 
36.5

 
41.2

INCOME BEFORE INCOME TAXES
73.5

 
58.2

 
127.2

 
111.6

Income tax expense
18.6

 
15.0

 
31.4

 
28.3

NET INCOME
$
54.9

 
$
43.2

 
$
95.8

 
$
83.3

EARNINGS PER SHARE:
 
 
 
 
 
 
 
Basic—
 
 
 
 
 
 
 
Net income
$
2.87

 
$
2.13

 
$
4.99

 
$
4.08

Diluted—
 
 
 
 
 
 
 
Net income
$
2.84

 
$
2.11

 
$
4.96

 
$
4.02

WEIGHTED AVERAGE SHARES OUTSTANDING:
 
 
 
 
 
 
 
Basic
19.1

 
20.3

 
19.2

 
20.4

Restricted stock
0.1

 
0.1

 
0.0

 
0.1

Performance share units
0.1

 
0.1

 
0.1

 
0.2

Diluted
19.3

 
20.5

 
19.3

 
20.7









 See accompanying Notes to Condensed Consolidated Financial Statements

5

Table of Contents

ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
54.9

 
$
43.2

 
$
95.8

 
$
83.3

Other comprehensive income:
 
 
 
 
 
 
 
Change in fair value of cash flow swaps
(2.5
)
 
1.2

 
(4.3
)
 
4.0

Income tax expense (benefit) associated with cash flow swaps
0.6

 
(0.4
)
 
1.1

 
(1.1
)
Comprehensive income
$
53.0

 
$
44.0

 
$
92.6

 
$
86.2












































See accompanying Notes to Condensed Consolidated Financial Statements

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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

Comprehensive Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 
$

 
$

 
$
40.9

 

 
$

 
$

 
$
40.9

Change in fair value of cash flow swaps, net of reclassification adjustment and $0.5 tax expense

 
$

 
$

 
$

 

 
$

 
$
(1.3
)
 
$
(1.3
)
Comprehensive income

 
$

 
$

 
$
40.9

 

 
$

 
$
(1.3
)
 
$
39.6

Cumulative effect adjustment of 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

Comprehensive Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 
$

 
$

 
$
54.9

 

 
$

 
$

 
$
54.9

Change in fair value of cash flow swaps, net of reclassification adjustment and $0.6 tax expense

 
$

 
$

 
$

 

 
$

 
$
(1.9
)
 
$
(1.9
)
Comprehensive income

 
$

 
$

 
$
54.9

 

 
$

 
$
(1.9
)
 
$
53.0

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




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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

Comprehensive Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 
$

 
$

 
$
40.1

 

 
$

 
$

 
$
40.1

Change in fair value of cash flow swaps, net of reclassification adjustment and $0.7 tax benefit

 
$

 
$

 
$

 

 
$

 
$
2.1

 
$
2.1

Comprehensive income

 
$

 
$

 
$
40.1

 

 
$

 
$
2.1

 
$
42.2

Cumulative effect adjustment of 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

Comprehensive Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 
 
 
$

 
$
43.2

 

 
$

 
$

 
$
43.2

Change in fair value of cash flow swaps, net of reclassification adjustment and $0.4 tax benefit

 
$

 
$

 
$

 

 
$

 
$
0.8

 
$
0.8

Comprehensive income

 
$

 
$

 
$
43.2

 

 
$

 
$
0.8

 
$
44.0

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























See accompanying Notes to Condensed Consolidated Financial Statements

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ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
For the Six Months Ended June 30,
 
2019
 
2018
CASH FLOW FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
95.8

 
$
83.3

Adjustments to reconcile net income to net cash provided by operating activities—
 
 
 
Depreciation and amortization
17.6

 
16.7

Share-based compensation
6.8

 
5.7

Loaner vehicle amortization
11.8

 
11.2

Gain on divestiture
(11.7
)
 

Change in right-of-use asset
9.3

 

Other adjustments, net
2.9

 
1.6

Changes in operating assets and liabilities, net of acquisitions and divestitures—
 
 
 
Contracts-in-transit
44.4

 
48.1

Accounts receivable
12.9

 
16.8

Inventories
82.4

 
(25.8
)
Other current assets
(90.5
)
 
(96.8
)
Floor plan notes payable—trade, net
(4.7
)
 
0.8

Accounts payable and other current liabilities
(8.2
)
 
(32.8
)
Operating lease liabilities
(9.5
)
 

Other long-term assets and liabilities, net
1.2

 
0.3

Net cash provided by operating activities
160.5

 
29.1

CASH FLOW FROM INVESTING ACTIVITIES:
 
 
 
Capital expenditures—excluding real estate
(15.5
)
 
(12.2
)
Capital expenditures—real estate

 
(17.6
)
Purchases of previously leased real estate
(4.9
)
 

Acquisitions
(118.5
)
 
(91.3
)
Divestiture
39.1

 

Proceeds from the sale of assets
7.5

 
2.0

Net cash used in investing activities
(92.3
)
 
(119.1
)
CASH FLOW FROM FINANCING ACTIVITIES:
 
 
 
Floor plan borrowings—non-trade
2,044.9

 
2,240.5

Floor plan borrowings—acquisitions
47.7

 
22.7

Floor plan repayments—non-trade
(2,121.2
)
 
(2,123.5
)
Floor plan repayments—divestiture
(14.1
)
 

Repayments of borrowings
(7.9
)
 
(7.1
)
Repurchases of common stock, including shares associated with net share settlement of employee share-based awards
(16.3
)
 
(44.8
)
Net cash (used in) provided by financing activities
(66.9
)
 
87.8

Net increase (decrease) in cash and cash equivalents
1.3

 
(2.2
)
CASH AND CASH EQUIVALENTS, beginning of period
8.3

 
4.7

CASH AND CASH EQUIVALENTS, end of period
$
9.6

 
$
2.5





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

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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 June 30, 2019, we owned and operated 105 new vehicle franchises (86 dealership locations) representing 30 brands of automobiles and 24 collision repair centers in 17 metropolitan markets within nine states. Our stores offer an extensive range of automotive products and services, including new and used vehicles; parts and service, which includes repair and maintenance services, replacement parts and collision repair services; and finance and insurance products. As of June 30, 2019, our new vehicle revenue brand mix consisted of 45% imports, 33% luxury, and 22% 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;
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, Dallas and Houston, Texas;
Nalley dealerships operating in metropolitan Atlanta, Georgia; and
Plaza dealerships operating in metropolitan St. Louis, Missouri.

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. 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 June 30, 2019, and for the three and six months ended June 30, 2019 and 2018, have been included, unless otherwise indicated. The results of operations for the three and six months ended June 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, certain assumptions related to intangible and long-lived assets, and reserves for certain legal or similar proceedings relating to our business operations.


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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
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 maintain a reserve to eliminate the internal profit on vehicles that have not been sold.
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 not currently used in our operations that 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 connection with all acquisitions and repayments made in connection with all divestitures are classified as financing activities in

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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 "2016 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”). 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 plan to adopt ASU 2016-13 in 2020 and are currently evaluating the expected impact from adopting this update on our Consolidated Financial Statements.

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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 six months ended June 30, 2019 and 2018:
 
For the Three Months Ended June 30,
 
2019
 
2018
 
(In millions)
Revenue:
 
 
 
   New vehicle
$
965.2

 
$
928.7

   Used vehicle retail
486.6

 
470.9

   Used vehicle wholesale
47.0

 
46.0

New and used vehicle
1,498.8

 
1,445.6

  Sale of vehicle parts and accessories
36.1

 
34.3

  Vehicle repair and maintenance services
188.4

 
170.2

Parts and services
224.5

 
204.5

Finance and insurance, net
80.2

 
73.5

Total revenue
1,803.5

 
$
1,723.6

 
For the Six Months Ended June 30,
 
2019
 
2018
 
(In millions)
Revenue:
 
 
 
   New vehicle
$
1,837.0

 
$
1,785.8

   Used vehicle retail
944.8

 
906.7

   Used vehicle wholesale
98.7

 
94.8

New and used vehicle
2,880.5

 
2,787.3

  Sale of vehicle parts and accessories
73.0

 
68.1

  Vehicle repair and maintenance services
369.1

 
335.7

Parts and services
442.1

 
403.8

Finance and insurance, net
151.7

 
141.7

Total revenue
$
3,474.3

 
$
3,332.8


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.
Contract Assets
Changes in contract assets during the period are reflected in the table below. Contract assets related to vehicle repair and maintenance services are transferred to receivables when a repair order is completed and invoiced to the customer.
 
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



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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 six months ended June 30, 2019, we acquired the assets of eight franchises (four dealership locations) in the Indianapolis, Indiana market for a purchase price of $121.0 million. We funded these acquisitions with $70.8 million of cash, $47.7 million of floor plan borrowings for the purchase of the related new vehicle inventory, and purchase price holdbacks of $2.5 million for potential indemnity claims made by us with respect to the acquired franchises.
Below is the preliminary allocation of purchase price for the acquisitions completed during the six months ended June 30, 2019. We have not finalized our valuation for manufacturer franchise rights, which will be reclassified from goodwill once completed. The goodwill and manufacturer rights associated with our acquisitions will be deductible for federal and state income tax purposes ratably over a 15 year period.
 
As of
 
June 30, 2019
 
(In millions)
Inventory
$
58.1

Real estate
29.8

Property and equipment
1.8

Goodwill
32.1

Liabilities assumed
(0.8
)
Total purchase price
$
121.0


During the six months ended June 30, 2018, we acquired the assets of one franchise (one dealership location) in the Indianapolis, Indiana market and two franchises (two dealership locations) in the Atlanta, Georgia market for a combined purchase price of $93.2 million. We funded these acquisitions with $68.6 million of cash, $22.7 million of floor plan borrowings for the purchase of the related new vehicle inventory, and purchase price holdbacks of $1.9 million for potential indemnity claims made by us with respect to the acquired franchise.
During the six months ended June 30, 2019, we sold one franchise (one dealership location) and one collision center in the Houston, Texas market. The Company divested $30.1 million of assets, which primarily consisted of inventory and property and equipment, resulting in a pre-tax gain of $11.7 million, which is presented in our accompanying Condensed Consolidated Statements of Income as Gain on Divestiture. The divested businesses would not be considered significant subsidiaries as defined in Rule 1-02(w) of Regulation S-X.

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4. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following: 
 
As of
 
June 30, 2019
 
December 31, 2018
 
(In millions)
Vehicle receivables
$
45.3

 
$
45.7

Manufacturer receivables
40.5

 
51.2

Other receivables
32.9

 
34.7

     Total accounts receivable
118.7

 
131.6

Less—Allowance for doubtful accounts
(1.4
)
 
(1.3
)
     Accounts receivable, net
$
117.3

 
$
130.3


5. INVENTORIES
Inventories consisted of the following:
 
As of
 
June 30, 2019
 
December 31, 2018
 
(In millions)
New vehicles
$
895.1

 
$
867.2

Used vehicles
162.2

 
158.9

Parts and accessories
43.5

 
41.5

Total inventories
$
1,100.8

 
$
1,067.6


The lower of cost and net realizable value reserves reduced total inventories by $5.6 million and $6.1 million as of June 30, 2019 and December 31, 2018, respectively. As of June 30, 2019 and December 31, 2018, certain automobile manufacturer incentives reduced new vehicle inventory cost by $11.2 million and $10.1 million, respectively, and reduced new vehicle cost of sales for the six months ended June 30, 2019 and 2018 by $21.8 million and $19.7 million, respectively.
6. ASSETS AND LIABILITIES HELD FOR SALE
Assets classified as held for sale consists of real estate not currently used in our operations that we are actively marketing to sell totaling $19.5 million and $26.3 million as of June 30, 2019 and December 31, 2018, respectively. There were no liabilities associated with these properties as of June 30, 2019 or December 31, 2018.
During the six months ended June 30, 2019, we sold one vacant property with a net book value of $6.8 million.


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7. FLOOR PLAN NOTES PAYABLE
Floor plan notes payable consisted of the following:
 
As of
 
June 30, 2019
 
December 31, 2018
 
(In millions)
Floor plan notes payable—trade
$
137.0

 
$
125.3

Floor plan notes payable offset account
(13.2
)
 
(11.3
)
Floor plan notes payable—trade, net
$
123.8

 
$
114.0

 
 
 
 
Floor plan notes payable—new non-trade
$
869.1

 
$
843.0

Floor plan notes payable—used non-trade

 
30.0

Floor plan notes payable offset account
(74.2
)
 
(20.9
)
Floor plan notes payable—non-trade, net
$
794.9

 
$
852.1


We have established a floor plan notes payable offset account with Ford Motor Credit Company that allows us to transfer cash to the account as an offset of our outstanding Floor Plan Notes Payable—Trade. Additionally, we have a similar floor plan offset account with Bank of America that allows us to offset our outstanding Floor Plan Notes Payable—Non-Trade. These accounts allow us to transfer cash to reduce the amount of outstanding floor plan notes payable that would otherwise accrue interest, while retaining the ability to transfer amounts from the floor plan offset accounts into our operating cash accounts within one to two days. As of June 30, 2019 and December 31, 2018, we had $87.4 million and $32.2 million, respectively, in these floor plan offset accounts.
8. LONG-TERM DEBT
Long-term debt consisted of the following:
 
As of
June 30, 2019
 
December 31, 2018
(In millions)
6.0% Senior Subordinated Notes due 2024
$
600.0

 
$
600.0

Mortgage notes payable bearing interest at fixed rates
128.9

 
132.2

 2018 Bank of America Facility
25.0

 
25.7

 2018 Wells Fargo Master Loan Facility
25.0

 
25.0

Prior real estate credit agreement
36.8

 
40.8

Restated master loan agreement
80.7