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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-14733
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Lithia Motors, Inc.
(Exact name of registrant as specified in its charter)
Oregon 93-0572810
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
150 N. Bartlett StreetMedford,Oregon97501
(Address of principal executive offices)(Zip Code)
(541) 776-6401
Registrant’s telephone number, including area code
 
Securities registered pursuant to Section 12(b) of the Act: 
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock without par valueLADThe 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 No
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 No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerNon-accelerated filerAccelerated filerSmaller reporting companyEmerging growth company
 ☒ ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of April 26, 2024, there were 27,406,486 shares of the registrant’s common stock outstanding.



LITHIA MOTORS, INC.
FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
 
Item NumberItemPage
PART IFINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART IIOTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.
Item 2.
Item 5.Other Information
Item 6.
SIGNATURE


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CONSOLIDATED BALANCE SHEETS
(In millions; Unaudited)March 31, 2024December 31, 2023
Assets  
Current assets:  
Cash, restricted cash, and cash equivalents
$404.6 $941.4 
Accounts receivable, net of allowance for doubtful accounts of $3.3 and $7.1
1,249.3 1,123.1 
Inventories, net5,861.9 4,753.9 
Other current assets217.4 136.8 
Total current assets7,733.2 6,955.2 
Property and equipment, net of accumulated depreciation of $688.1 and $646.7
4,502.0 3,981.4 
Operating lease right-of-use assets753.2 478.8 
Finance receivables, net of allowance for estimated losses of $111.8 and $106.4
3,412.5 3,242.3 
Goodwill2,081.7 1,930.6 
Franchise value2,538.0 2,402.2 
Other non-current assets1,159.4 642.0 
Total assets$22,180.0 $19,632.5 
Liabilities and equity  
Current liabilities:  
Floor plan notes payable$2,533.3 $1,347.0 
Floor plan notes payable: non-trade2,428.7 2,288.5 
Current maturities of long-term debt97.2 75.7 
Current maturities of non-recourse notes payable27.6 33.9 
Trade payables327.6 288.0 
Accrued liabilities1,177.1 899.1 
Total current liabilities6,591.5 4,932.2 
Long-term debt, less current maturities5,662.4 5,483.7 
Non-recourse notes payable, less current maturities1,803.9 1,671.7 
Deferred revenue389.2 264.1 
Deferred income taxes378.9 349.3 
Non-current operating lease liabilities655.1 427.9 
Other long-term liabilities277.4 220.7 
Total liabilities15,758.4 13,349.6 
Redeemable non-controlling interest44.9 44.0 
Equity:  
Preferred stock - no par value; authorized 15.0 shares; none outstanding
  
Common stock - no par value; authorized 125.0 shares; issued and outstanding 27.5 and 27.4
1,117.8 1,100.6 
Additional paid-in capital67.8 79.9 
Accumulated other comprehensive income3.7 20.1 
Retained earnings5,162.1 5,013.3 
Total stockholders’ equity - Lithia Motors, Inc.6,351.4 6,213.9 
Non-controlling interest25.3 25.0 
Total equity6,376.7 6,238.9 
Total liabilities, redeemable non-controlling interest, and equity
$22,180.0 $19,632.5 

 See accompanying condensed notes to consolidated financial statements.
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FINANCIAL STATEMENTS
1


CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended March 31,
(In millions, except per share amounts; Unaudited)20242023
Revenues:  
New vehicle retail$4,014.1 $3,278.9 
Used vehicle retail2,800.8 2,227.5 
Used vehicle wholesale337.7 356.7 
Finance and insurance340.6 318.3 
Service, body and parts912.8 736.3 
Fleet and other155.8 56.1 
Total revenues8,561.8 6,973.8 
Cost of sales:  
New vehicle retail3,718.8 2,945.1 
Used vehicle retail2,618.1 2,061.8 
Used vehicle wholesale338.7 359.5 
Service, body and parts410.8 341.9 
Fleet and other140.2 54.0 
Total cost of sales7,226.6 5,762.3 
Gross profit1,335.2 1,211.5 
Financing operations loss(1.7)(20.8)
Selling, general and administrative934.3 764.4 
Depreciation and amortization57.8 47.3 
Operating income341.4 379.0 
Floor plan interest expense(60.7)(27.7)
Other interest expense, net(63.6)(39.0)
Other income, net3.5 2.0 
Income before income taxes220.6 314.3 
Income tax provision(55.6)(84.7)
Net income165.0 229.6 
Net income attributable to non-controlling interest(1.5)(0.7)
Net income attributable to redeemable non-controlling interest(0.9)(0.2)
Net income attributable to Lithia Motors, Inc.$162.6 $228.7 
Basic earnings per share attributable to Lithia Motors, Inc.$5.90 $8.32 
Shares used in basic per share calculations27.5 27.5 
Diluted earnings per share attributable to Lithia Motors, Inc.$5.89 $8.30 
Shares used in diluted per share calculations27.6 27.5 
Cash dividends paid per share$0.50 $0.42 
    
See accompanying condensed notes to consolidated financial statements.
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FINANCIAL STATEMENTS
2


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Three Months Ended March 31,
(In millions; Unaudited)20242023
Net income$165.0 $229.6 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment(16.2)13.1 
Unrealized loss on debt securities, net of tax benefit of $0.1 and $0.0
(0.2) 
Total other comprehensive (loss) income, net of tax(16.4)13.1 
Comprehensive income148.6 242.7 
Comprehensive income attributable to non-controlling interest(1.5)(0.7)
Comprehensive income attributable to redeemable non-controlling interest
(0.9)(0.2)
Comprehensive income attributable to Lithia Motors, Inc.$146.2 $241.8 

See accompanying condensed notes to consolidated financial statements.
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FINANCIAL STATEMENTS
3


CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NON-CONTROLLING INTEREST
Three Months Ended March 31,
(In millions; Unaudited)20242023
Total equity, beginning balances$6,238.9 $5,210.4 
Common stock, beginning balances1,100.6 1,082.1 
Stock-based compensation26.5 31.7 
Issuance of stock in connection with employee stock purchase plans5.7 6.1 
Repurchase of common stock(15.0)(14.4)
Common stock, ending balances1,117.8 1,105.5 
Additional paid-in capital, beginning balances79.9 76.8 
Stock-based compensation(12.1)(22.6)
Additional paid-in capital, ending balances67.8 54.2 
Accumulated other comprehensive income (loss), beginning balances20.1 (18.0)
Foreign currency translation adjustment(16.2)13.1 
Unrealized loss on debt securities, net of tax benefit of $0.1 and $0.0
(0.2) 
Accumulated other comprehensive income (loss), ending balances3.7 (4.9)
Retained earnings, beginning balances5,013.3 4,065.3 
Net income attributable to Lithia Motors, Inc.162.6 228.7 
Dividends paid(13.8)(11.5)
Retained earnings, ending balances5,162.1 4,282.5 
Non-controlling interest, beginning balances25.0 4.2 
Distribution of non-controlling interest(1.2)(1.3)
Net income attributable to non-controlling interest1.5 0.7 
Non-controlling interest, ending balances25.3 3.6 
Total equity, ending balances$6,376.7 $5,440.9 
Redeemable non-controlling interest, beginning balances$44.0 $40.7 
Net income attributable to redeemable non-controlling interest0.9 0.2 
Redeemable non-controlling interest, ending balances$44.9 $40.9 

See accompanying condensed notes to consolidated financial statements.
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FINANCIAL STATEMENTS
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CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months Ended March 31,
(In millions; Unaudited)20242023
Cash flows from operating activities:  
Net income$165.0 $229.6 
Adjustments to reconcile net income to net cash provided by (used in) operating activities: 
Depreciation and amortization75.9 49.6 
Stock-based compensation14.4 9.1 
(Gain) loss on disposal of other assets(0.5)0.1 
Loss (gain) on sales of stores
0.1 (7.2)
Unrealized investment (gain) loss(0.1)0.5 
Deferred income taxes14.8 14.5 
Amortization of operating lease right-of-use assets22.4 15.7 
(Increase) decrease (net of acquisitions and dispositions):
Accounts receivable, net(8.9)23.9 
Inventories(183.3)(56.9)
Finance receivables(173.8)(397.0)
Other assets(19.2)14.1 
Increase (decrease) (net of acquisitions and dispositions):
Floor plan notes payable327.7 38.9 
Trade payables0.2 (10.0)
Accrued liabilities57.5 31.7 
Other long-term liabilities and deferred revenue0.2 (5.6)
Net cash provided by (used in) operating activities292.4 (49.0)
Cash flows from investing activities: 
Capital expenditures(79.6)(38.9)
Proceeds from sales of assets3.7 0.8 
Cash paid for other investments(122.0)(11.1)
Cash paid for acquisitions, net of cash acquired(1,074.4)(387.4)
Proceeds from sales of stores6.4 22.7 
Net cash used in investing activities(1,265.9)(413.9)
Cash flows from financing activities: 
Borrowings on floor plan notes payable, net: non-trade156.1 187.6 
Borrowings on lines of credit3,658.8 3,462.9 
Repayments on lines of credit(3,606.9)(3,503.3)
Principal payments on long-term debt and finance lease liabilities, scheduled(9.0)(8.7)
Principal payments on long-term debt and finance lease liabilities, other (3.4)
Proceeds from issuance of long-term debt158.9 10.4 
Principal payments on non-recourse notes payable(203.5)(76.5)
Proceeds from issuance of non-recourse notes payable329.4 479.7 
Payment of debt issuance costs(2.6)(3.7)
Proceeds from issuance of common stock5.7 6.1 
Repurchase of common stock(15.0)(14.4)
Dividends paid(13.8)(11.5)
Payment of contingent consideration related to acquisitions(12.0)(14.0)
Other financing activity(1.1)(1.3)
Net cash provided by financing activities445.0 509.9 
Effect of exchange rate changes on cash, restricted cash, and cash equivalents
(3.0)6.2 
(Decrease) increase in cash, restricted cash, and cash equivalents
(531.5)53.2 
Cash, restricted cash, and cash equivalents at beginning of year
972.0 271.5 
Cash, restricted cash, and cash equivalents at end of period
$440.5 $324.7 

See accompanying condensed notes to consolidated financial statements.
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FINANCIAL STATEMENTS
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Three Months Ended March 31,
(In millions)20242023
Reconciliation of cash, restricted cash, and cash equivalents to the consolidated balance sheets
Cash and cash equivalents
$264.4 $184.9 
Restricted cash from collections on auto loans receivable and customer deposits140.2 114.5 
Cash, restricted cash, and cash equivalents
404.6 299.4 
Restricted cash on deposit in reserve accounts, included in other non-current assets35.9 25.3 
Total cash, restricted cash, and cash equivalents reported in the Consolidated Statements of Cash Flows
$440.5 $324.7 
Supplemental cash flow information:
Cash paid during the period for interest$165.8 $95.7 
Cash paid during the period for income taxes, net6.0 5.2 
Debt paid in connection with store disposals1.6 1.6 
Non-cash activities:
Debt assumed in connection with acquisitions$868.1 $365.4 
Right-of-use assets obtained in exchange for lease liabilities297.5 103.8 

See accompanying condensed notes to consolidated financial statements.
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FINANCIAL STATEMENTS
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1. INTERIM FINANCIAL STATEMENTS
 
Basis of Presentation
These condensed Consolidated Financial Statements contain unaudited information as of March 31, 2024, and for the three months ended March 31, 2024 and 2023. The unaudited interim financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain disclosures required by accounting principles generally accepted in the United States of America for annual financial statements are not included herein. In management’s opinion, these unaudited financial statements reflect all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the information when read in conjunction with our 2023 audited Consolidated Financial Statements and the related notes thereto. The financial information as of December 31, 2023, is derived from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2024. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

Reclassifications
Certain reclassifications of amounts previously reported have been made to the accompanying Consolidated Financial Statements to maintain consistency and comparability between periods presented. Within our financing operations income, we disaggregated our “lease income” out of our previously reported “interest, fee, and lease income”, to be its own separately presented line item.

NOTE 2. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following:
(in millions)March 31, 2024December 31, 2023
Contracts in transit$520.3 $559.7 
Trade receivables201.9 153.3 
Vehicle receivables252.7 191.4 
Manufacturer receivables262.7 216.5 
Other receivables, current15.0 9.3 
 1,252.6 1,130.2 
Less: Allowance for doubtful accounts(3.3)(7.1)
Total accounts receivable, net$1,249.3 $1,123.1 
The long-term portions of accounts receivable and allowance for doubtful accounts were included as a component of other non-current assets in the Consolidated Balance Sheets.

NOTE 3. INVENTORIES AND FLOOR PLAN NOTES PAYABLE

The components of inventories, net, consisted of the following:
(in millions)March 31, 2024December 31, 2023
New vehicles$3,447.5 $2,886.3 
Used vehicles2,142.8 1,637.5 
Parts and accessories271.6 230.1 
Total inventories$5,861.9 $4,753.9 

The new vehicle inventory cost is generally reduced by manufacturer holdbacks and incentives, while the related floor plan notes payable are reflective of the gross cost of the vehicle.
(in millions)March 31, 2024December 31, 2023
Floor plan notes payable$2,533.3 $1,347.0 
Floor plan notes payable: non-trade2,428.7 2,288.5 
Total floor plan debt$4,962.0 $3,635.5 

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NOTE 4. FINANCE RECEIVABLES

Interest income on finance receivables is recognized based on the contractual terms of each loan and is accrued until repayment, reaching non-accrual status, charge-off, or repossession. Direct costs associated with loan originations are capitalized and expensed as an offset to interest income when recognized on the loans.

The balances of finance receivables are made up of loans and leases secured by the related vehicles. More than 99% of the portfolio is aged less than 60 days past due with less than 1% on non-accrual status.


Finance Receivables, net
(in millions)March 31, 2024December 31, 2023
Asset-backed term funding$2,298.0 $2,146.5 
Warehouse facilities808.3 749.3 
Other managed receivables418.0 452.9 
Total finance receivables3,524.3 3,348.7 
Less: Allowance for finance receivable losses(111.8)(106.4)
Finance receivables, net$3,412.5 $3,242.3 

Finance Receivables by FICO Score
As of March 31, 2024
Year of Origination
($ in millions)20242023202220212020Total
<599
$16.8 $57.3 $34.0 $15.6 $2.1 $125.8 
600-699140.3 549.1 418.8 135.3 13.9 1,257.4 
700-774135.4 532.7 386.5 57.0 5.1 1,116.7 
775+141.7 445.8 240.4 13.1 2.3 843.3 
Total auto loan receivables$434.2 $1,584.9 $1,079.7 $221.0 $23.4 3,343.2 
Other finance receivables 1
181.1 
Total finance receivables$3,524.3 
As of December 31, 2023
Year of Origination
($ in millions)2023202220212020Total
<599
$62.2 $39.0 $17.6 $2.4 $121.2 
600-699586.6 463.6 152.7 16.1 1,219.0 
700-774568.1 422.5 63.9 5.9 1,060.4 
775+490.3 263.5 14.7 2.7 771.2 
Total auto loan receivables$1,707.2 $1,188.6 $248.9 $27.1 3,171.8 
Other finance receivables 1
176.9 
Total finance receivables$3,348.7 
1Includes legacy portfolio, loans that are originated with no FICO score available, and lease receivables.

In accordance with ASC Topic 326, the allowance for loan and lease losses is estimated based on our historical write-off experience, current conditions and forecasts, as well as the value of any underlying assets securing these loans. Consideration is given to recent delinquency trends and recovery rates. Account balances are charged against the allowance upon reaching 120 days past due status.

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Rollforward of Allowance for Loan and Lease Losses
Our allowance for loan and lease losses represents the net credit losses expected over the remaining contractual life of our managed receivables. The allowances for credit losses related to finance receivables consisted of the following changes during the period:
Three Months Ended March 31,
(in millions)20242023
Allowance at beginning of period$106.4 $69.3 
Charge-offs(34.1)(24.8)
Recoveries14.8 11.4 
Sold loans
(0.3) 
Provision expense25.0 26.3 
Allowance at end of period$111.8 $82.2 

Charge-off Activity by Year of Origination
Three Months Ended March 31,
(in millions)20242023
2024$ $ 
202313.4 0.1 
202215.1 14.2 
20214.9 8.9 
Other finance receivables 1
0.7 1.6 
Total charge-offs$34.1 $24.8 
1Includes legacy portfolio, loans that are originated with no FICO score available, and lease receivables.

NOTE 5. GOODWILL AND FRANCHISE VALUE

The changes in the carrying amounts of goodwill are as follows:
(in millions)Vehicle OperationsFinancing OperationsConsolidated
Balance as of December 31, 2022$1,443.5 $17.2 $1,460.7 
Additions through acquisitions 1
519.1  519.1 
Reductions through divestitures(51.1) (51.1)
Currency translation1.5 0.4 1.9 
Balance as of December 31, 20231,913.0 17.6 1,930.6 
Adjustments to purchase price allocations2
47.6  47.6 
Additions through acquisitions3
105.5  105.5 
Reductions through divestitures(0.2) (0.2)
Currency translation(1.8) (1.8)
Balance as of March 31, 2024$2,064.1 $17.6 $2,081.7 
1Our purchase price allocation for the 2022 acquisitions were finalized in 2023. As a result, we added $285.9 million of goodwill. Preliminary purchase price allocation for a portion of our 2023 acquisitions resulted in adding $233.2 million of goodwill. Our purchase price allocation for the remaining 2023 acquisitions are preliminary and goodwill is not yet allocated to our segments. These amounts are included in other non-current assets until we finalize our purchase accounting. See Note 12 – Acquisitions.
2Our purchase price allocation for a portion of the 2023 acquisitions recognized in 2023 was adjusted and finalized in 2024 upon the completion of our fair value adjustments for assumed contract liabilities, acquired loan portfolio, and contingent consideration, adding $47.6 million of goodwill.
3Our purchase price allocation for a portion of the 2023 acquisitions were finalized in 2024. As a result, we added $105.5 million of goodwill. Our purchase price allocation for the remaining 2023 and 2024 acquisitions are preliminary and goodwill is not yet allocated to our segments. These amounts are included in other non-current assets until we finalize our purchase accounting. See Note 12 – Acquisitions.
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NOTES TO FINANCIAL STATEMENTS
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The changes in the carrying amounts of franchise value are as follows:
(in millions)Franchise Value
Balance as of December 31, 2022$1,856.2 
Additions through acquisitions 1
556.5 
Reductions through divestitures(14.5)
Currency translation4.0 
Balance as of December 31, 20232,402.2 
Additions through acquisitions 2
140.8 
Reductions through divestitures(1.2)
Currency translation(3.8)
Balance as of March 31, 2024$2,538.0 
1Our purchase price allocation for the 2022 acquisitions were finalized in 2023. As a result, we added $363.1 million of franchise value. Preliminary purchase price allocation for a portion of our 2023 acquisitions resulted in adding $193.4 million of franchise value. Our purchase price allocation for the remaining 2023 acquisitions are preliminary and franchise value is not yet allocated to our reporting units. These amounts are included in other non-current assets until we finalize our purchase accounting. See Note 12 – Acquisitions.
2Our purchase price allocations for a portion of the 2023 acquisitions were finalized in 2024. As a result, we added $140.8 million of franchise value. Our purchase price allocation for the remaining 2023 and 2024 acquisitions are preliminary and franchise value is not yet allocated to our reporting units. These amounts are included in other non-current assets until we finalize our purchase accounting. See Note 12 – Acquisitions.

NOTE 6. NET INVESTMENT IN OPERATING LEASES

Net investment in operating leases consists primarily of lease contracts for vehicles with individuals and business entities. Assets subject to operating leases are depreciated using the straight-line method over the term of the lease to reduce the asset to its estimated residual value. Estimated residual values are based on assumptions for used vehicle prices at lease termination and the number of vehicles that are expected to be returned.

Net investment in operating leases was as follows:

(in millions)March 31, 2024December 31, 2023
Vehicles, at cost 1
$295.7 $102.7 
Accumulated depreciation 1
(16.3)(11.2)
Net investment in operating leases$279.4 $91.5 
1Vehicles, at cost and accumulated depreciation are recorded in other current assets on the Consolidated Balance Sheets.

NOTE 7. COMMITMENTS AND CONTINGENCIES

Contract Liabilities
We are the obligor on our lifetime oil and at home valet contracts. Revenue is allocated to these performance obligations and is recognized over time as services are provided to the customer. The amount of revenue recognized is calculated, net of cancellations, using an input method, which most closely depicts performance of the contracts. Our contract liability balances were $385.5 million and $317.0 million as of March 31, 2024, and December 31, 2023, respectively; and we recognized $15.8 million of revenue in the three months ended March 31, 2024 related to our contract liability balance at December 31, 2023. Our contract liability balance is included in accrued liabilities and deferred revenue.

Leases
We lease certain dealerships, office space, land and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. We have elected not to bifurcate lease and non-lease components related to leases of real property.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 23 years or more. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
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Certain of our lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Our finance lease liabilities are included in long-term debt, with the current portion included in current maturities of long-term debt. The related assets are included in property, plant and equipment, net of accumulated amortization.

We rent or sublease certain real estate to third parties.

Litigation
We are party to numerous legal proceedings arising in the normal course of our business. Although we do not anticipate that the resolution of legal proceedings arising in the normal course of business will have a material adverse effect on our business, results of operations, financial condition, or cash flows, we cannot predict this with certainty.

NOTE 8. DEBT

Credit Facilities
US Bank Syndicated Credit Facility
On February 23, 2024, we amended our existing syndicated credit facility (USB credit facility), comprised of 21 financial institutions, including eight manufacturer-affiliated finance companies, maturing February 23, 2029. The amendment increased the total financing commitment and the amount to which the commitment could be further expanded.

This USB credit facility provides for a total financing commitment of $6.0 billion, which may be further expanded, subject to lender approval and the satisfaction of other conditions, up to a total of $6.5 billion. The allocation of the financing commitment is for up to $2.9 billion in new vehicle inventory floorplan financing, up to $800 million in used vehicle inventory floorplan financing, up to $100 million in service loaner vehicle floorplan financing, and up to $2.2 billion in revolving financing for general corporate purposes, including acquisitions and working capital. We have the option to reallocate the commitments under this USB credit facility, provided that the aggregate revolving loan commitment may not be more than 40% of the amount of the aggregate commitment, and the aggregate service loaner vehicle floorplan commitment may not be more than the 3% of the amount of the aggregate commitment. All borrowings from, and repayments to, our lending group are presented in the Consolidated Statements of Cash Flows as financing activities.

Our obligations under our USB credit facility are secured by a substantial amount of our assets, including our inventory (including new and used vehicles, parts and accessories), equipment, accounts receivable (and other rights to payment) and our equity interests in certain of our subsidiaries. Under our USB credit facility, our obligations relating to new vehicle floor plan loans are secured only by collateral owned by Lithia and its dealerships borrowing under the new vehicle floor plan portion of the USB credit facility.

The interest rate on the USB credit facility varies based on the type of debt, with the rate of one-day SOFR plus a credit spread adjustment of 0.10% plus a margin of 1.10% for new vehicle floor plan financing, 1.40% for used vehicle floor plan financing, 1.20% for service loaner floor plan financing, and a variable interest rate on the revolving financing ranging from 1.00% to 2.00% depending on our leverage ratio. The annual interest rates associated with our floor plan commitments are as follows:
CommitmentAnnual Interest Rate at March 31, 2024
New vehicle floor plan6.54%
Used vehicle floor plan6.84%
Service loaner floor plan6.64%
Revolving line of credit6.44%

JPM Warehouse Facility
On February 23, 2024, we amended our securitization facility for our auto loan portfolio (JPM warehouse facility) with JPMorgan Chase Bank, as administrative agent and account bank, providing initial commitments for borrowings of up to $1.0 billion. The JPM warehouse facility matures on July 18, 2025. The interest rate on the JPM
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warehouse facility varies based on the Daily Simple SOFR rate plus 1.15% to 1.95%. As of March 31, 2024, we had $389.0 million drawn on the JPM warehouse facility.

Mizuho Warehouse Facility
On February 16, 2024, we amended our securitization facility for our auto loan portfolio (Mizuho warehouse facility), with Mizuho Bank Ltd. as administrative agent and account bank, providing initial commitments for borrowings of up to $750 million. The Mizuho warehouse facility matures on July 20, 2026. The interest rate on the Mizuho warehouse facility varies based on the Daily Simple SOFR rate plus 1.20%. As of March 31, 2024, we had $247.0 million drawn on the Mizuho warehouse facility.

Bank of Nova Scotia Syndicated Credit Facility
On March 18, 2024, we amended our syndicated credit agreement with The Bank of Nova Scotia as agent (BNS credit facility), comprised of six financing institutions, including two manufacturer-affiliated finance companies, to extend the maturity date.

The BNS credit facility provides for a total financing commitment of approximately $1.1 billion CAD, including a working capital revolving credit facility of up to $100 million CAD, a wholesale flooring facility for new vehicles up to $500 million CAD, used vehicle flooring facility of up to $100 million CAD, wholesale leasing facility of up to $400 million CAD, and daily rental vehicle facility up to $25 million CAD.

The interest rate on the Bank of Nova Scotia syndicated credit facility varies based on the type of debt, with the daily compound rate of the Canadian Overnight Repo Rate Average (CORRA) plus a margin of 1.00-1.30%. The annual interest rates associated with our floor plan commitments are as follows:

CommitmentAnnual Interest Rate at March 31, 2024
Wholesale flooring facility6.05%
Used vehicle flooring facility6.30%
Daily rental facility6.25%
Wholesale leasing facility6.35%
Working capital revolving facility6.30%

All Canadian facilities other than the wholesale flooring facility, which is a demand facility, mature on March 18, 2027. The credit agreement includes various financial and other covenants typical of such agreements.

Non-Recourse Notes Payable
In 2024, we issued $329.4 million in non-recourse notes payable related to asset-backed term funding transactions. Below is a summary of outstanding non-recourse notes payable issued:
($ in millions)Balance as of March 31, 2024Initial Principal AmountIssuance DateInterest Rate RangeFinal Distribution Date
LAD Auto Receivables Trust 2021-1 Class A-D82.6 $344.4 11/24/21
1.30% to 3.99%
Various dates through Nov 2029
LAD Auto Receivables Trust 2022-1 Class A-C131.6 298.1 08/17/22
5.21% to 6.85%
Various dates through Apr 2030
LAD Auto Receivables Trust 2023-1 Class A-D279.0 479.7 02/14/23
5.48% to 7.30%
Various dates through Jun 2030
LAD Auto Receivables Trust 2023-2 Class A-D362.5 556.7 05/24/23
5.42% to 6.30%
Various dates through Feb 2031
LAD Auto Receivables Trust 2023-3 Class A-D316.9 415.4 08/23/23
5.95% to 6.92%
Various dates through Dec 2030
LAD Auto Receivables Trust 2023-4 Class A-D352.4 421.2 11/15/23
6.10% to 7.37%
Various dates through Apr 2031
LAD Auto Receivables Trust 2024-1 Class A-D306.5 329.4 02/14/24
5.17% to 6.15%
Various dates through Jun 2031
Total non-recourse notes payable$1,831.5 $2,844.9 

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NOTE 9. RETIREMENT PLANS AND POSTRETIREMENT BENEFITS

Company-Sponsored Defined Benefit Pension Plan
In January 2024, we acquired Pendragon PLC’s Fleet Management and UK Motor Divisions in the United Kingdom, which included the assumption of its company-sponsored defined benefit plan applicable to a portion of the salaried present and past employees, closed to future accrual. At the time of acquisition, these balances increased our defined benefit obligations $465.7 million and increased our fair value of plan assets $466.4 million.

Net Periodic (Benefit) Cost
Interest cost represents the increase in the projected benefit obligation, which is a discounted amount, due to the passage of time. The expected return on plan assets reflects the computed amount of current-year earnings from the investment of plan assets using an estimated long-term rate of return.
($ in millions)March 31, 2024
Interest cost$5.6 
Expected return on plan assets(6.2)
Net periodic benefit
$(0.6)

During the three months ended March 31, 2024, funding of pension plans was $12.7 million. For the remainder of 2024, we estimate approximately $3.3 million of cash contributions.

NOTE 10. EQUITY

Repurchases of Common Stock
Repurchases of our common stock occurred under a repurchase authorization granted by our Board of Directors and related to shares withheld as part of the vesting of restricted stock units (RSUs). Share repurchases under our authorization were as follows:
 Repurchases Occurring in 2024Cumulative Repurchases as of March 31, 2024
 SharesAverage PriceSharesAverage Price
Share Repurchase Authorization $ 7,047,510 $174.96 

As of March 31, 2024, we had $467.0 million available for repurchases pursuant to our share repurchase authorization from our Board of Directors in 2022 and prior years.

In addition, during 2024, we repurchased 45,516 shares at an average price of $329.21 per share, for a total of $15.0 million, related to tax withholding associated with the vesting of RSUs. The repurchase of shares related to tax withholding associated with stock awards does not reduce the number of shares available for repurchase as approved by our Board of Directors.

NOTE 11. FAIR VALUE MEASUREMENTS

Factors used in determining the fair value of our financial assets and liabilities are summarized into three broad categories:

Level 1 - quoted prices in active markets for identical securities;
Level 2 - other significant observable inputs, including quoted prices for similar securities, interest rates, prepayment spreads, credit risk; and
Level 3 - significant unobservable inputs, including our own assumptions in determining fair value.

We determined the carrying value of cash equivalents, accounts receivable, trade payables, accrued liabilities, finance receivables, and short-term borrowings approximate their fair values because of the nature of their terms and current market rates of these instruments. We believe the carrying value of our variable rate debt approximates fair value.

Beginning in January of 2024, our captive insurance subsidiary began investing the cash in excess of current needs in marketable securities, recorded as part of Other current assets in the Consolidated Balance Sheets. For the
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three-month period ended March 31, 2024, the net unrealized investment losses, net of tax, of $0.2 million were recorded in Other comprehensive income (loss) and the net realized investment gains of $0.1 million were recorded in Other income, net. Amortized cost for these marketable securities was $50.1 million as of March 31, 2024.

We have fixed rate debt primarily consisting of amounts outstanding under our senior notes, non-recourse notes payable, and real estate mortgages. We calculated the estimated fair value of the senior notes using quoted prices for the identical liability (Level 1). The fair value of non-recourse notes payable are measured using observable Level 2 market expectations at each measurement date. The calculated estimated fair values of the fixed rate real estate mortgages and finance lease liabilities use a discounted cash flow methodology with estimated current interest rates based on a similar risk profile and duration (Level 2). The fixed cash flows are discounted and summed to compute the fair value of the debt.

We have derivative instruments consisting of an offsetting set of interest rate caps. The fair value of derivative assets and liabilities are measured using observable Level 2 market expectations at each measurement date and is recorded as other current assets, current liabilities and other long-term liabilities in the Consolidated Balance Sheets.

Nonfinancial assets such as goodwill, franchise value, or other long-lived assets are measured and recorded at fair value during a business combination or when there is an indicator of impairment. We evaluate our goodwill and franchise value using a qualitative assessment process. If the qualitative factors determine that it is more likely than not that the carrying value exceeds the fair value, we would further evaluate for potential impairment using a quantitative assessment. The quantitative assessment estimates fair values using unobservable (Level 3) inputs by discounting expected future cash flows of the store for franchise value, or reporting unit for goodwill. The forecasted cash flows contain inherent uncertainties, including significant estimates and assumptions related to growth rates, margins, working capital requirements, and cost of capital, for which we utilize certain market participant-based assumptions we believe to be reasonable. We estimate the value of other long-lived assets that are recorded at fair value on a non-recurring basis on a market valuation approach. We use prices and other relevant information generated primarily by recent market transactions involving similar or comparable assets, as well as our historical experience in divestitures, acquisitions and real estate transactions. Additionally, we may use a cost valuation approach to value long-lived assets when a market valuation approach is unavailable. Under this approach, we determine the cost to replace the service capacity of an asset, adjusted for physical and economic obsolescence. When available, we use valuation inputs from independent valuation experts, such as real estate appraisers and brokers, to corroborate our estimates of fair value. Real estate appraisers’ and brokers’ valuations are typically developed using one or more valuation techniques including market, income and replacement cost approaches. Because these valuations contain unobservable inputs, we classified the measurement of fair value of long-lived assets as Level 3.

There were no changes to our valuation techniques during the three-month period ended March 31, 2024.

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Below are our assets and liabilities that are measured at fair value:
As of March 31, 2024As of December 31, 2023
($ in millions)Carrying ValueLevel 1Level 2Level 3Carrying ValueLevel 1Level 2Level 3
Recorded at fair value
Marketable securities
Equity securities$2.0 $2.0 $ $ $ $ $ $ 
U.S. Treasury$19.8 $19.8 $ $ $ $ $ $ 
Corporate debt28.1  28.1      
Total debt securities$47.9 $19.8 $28.1 $ $ $ $ $ 
Derivatives
Derivative assets$11.0 $ $11.0 $ $12.3 $ $12.3 $ 
Derivative liabilities11.0  11.0  12.3  12.3  
Recorded at historical value
Fixed rate debt 1
4.625% Senior notes due 2027
$400.0 $383.0 $ $ $400.0 $380.0 $ $ 
4.375% Senior notes due 2031
550.0 490.9   550.0 492.3   
3.875% Senior notes due 2029
800.0 720.0   800.0 716.0   
Non-recourse notes payable1,831.5  1,828.3  1,705.6  1,705.1  
Real estate mortgages and other debt723.4  744.6  603.5  644.5  
1Excluding unamortized debt issuance costs

NOTE 12. ACQUISITIONS

In the first three months of 2024, we completed the following acquisitions:

In January 2024, Pendragon PLC’s Fleet Management and UK Motor Divisions in the United Kingdom.
In February 2024, Carousel Motor Group in Minnesota and Wisconsin.

Revenue and operating income contributed by the 2024 acquisitions subsequent to the date of acquisition were as follows (in millions):
Three Months Ended March 31,2024
Revenue$985.4 
Operating income13.6 

In the first three months of 2023, we completed the following acquisitions:

In February 2023, Thornhill Acura in Canada.
In March 2023, Jardine Motors Group UK Limited in the United Kingdom.

All acquisitions were accounted for as business combinations under the acquisition method of accounting. The results of operations of the acquired stores are included in our Consolidated Financial Statements from the date of acquisition.
 
The following tables summarize the consideration paid for the 2024 acquisitions and the preliminary purchase price allocations for identified assets acquired and liabilities assumed as of the acquisition date:
(in millions) Consideration
Cash paid, net of cash acquired$1,074.4 
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(in millions)Assets Acquired and Liabilities Assumed
Trade receivables, net$119.0 
Inventories972.1 
Property and equipment499.6 
Operating lease right-of-use assets289.7 
Net investment in operating leases
181.5 
Deferred taxes, net20.5 
Other assets494.1 
Trade payables(39.6)
Floor plan notes payable(868.1)
Operating lease liability
(283.9)
Other liabilities and deferred revenue
(310.5)
Total net assets acquired and liabilities assumed$1,074.4 

The purchase price allocations for the acquisitions from the third quarter of 2023 through the first quarter of 2024 are preliminary, and we have not obtained and evaluated all of the detailed information necessary to finalize the opening balance sheet amounts in all respects. We recorded the purchase price allocations based upon information that is currently available and recorded unallocated items as a component of other non-current assets in the Consolidated Balance Sheets.

We expect all of the goodwill related to North American acquisitions completed in 2023 and 2024 to be deductible for US federal income tax purposes. Due to local country laws, we do not expect goodwill related to UK acquisitions completed in 2023 and 2024 to be deductible for UK income tax purposes.

In the three-month period ended March 31, 2024, we recorded $7.7 million in acquisition-related expenses as a component of selling, general and administrative expense. Comparatively, we recorded $1.3 million of acquisition-related expenses in the same period of 2023.
 
The following unaudited pro forma summary presents consolidated information as if all acquisitions in the three-month periods ended March 31, 2024 and 2023 had occurred on January 1, 2023:
Three Months Ended March 31,
(in millions, except per share amounts)20242023
Revenue$9,024.4 $8,197.2 
Net income attributable to Lithia Motors, Inc.170.8 245.7 
Basic earnings per share attributable to Lithia Motors, Inc.6.20 8.94 
Diluted earnings per share attributable to Lithia Motors, Inc.6.19 8.92 
 
These amounts have been calculated by applying our accounting policies and estimates. The results of the acquired stores have been adjusted to reflect the following: depreciation on a straight-line basis over the expected lives for property and equipment, accounting for inventory on a specific identification method, and recognition of interest expense for real estate financing related to stores where we purchased the facility. No nonrecurring proforma adjustments directly attributable to the acquisitions are included in the reported proforma revenues and earnings.

NOTE 13. EARNINGS PER SHARE

We calculate basic earnings per share (EPS) by dividing net income attributable to Lithia Motors, Inc. by the weighted average number of common shares outstanding for the period, including vested RSU awards. Diluted EPS is calculated by dividing net income attributable to Lithia Motors, Inc. by the weighted average number of shares outstanding, adjusted for the dilutive effect of unvested RSU awards and employee stock purchases.

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The following is a reconciliation of net income attributable to Lithia Motors, Inc. and weighted average shares used for our basic EPS and diluted EPS:
Three Months Ended March 31,Three Months Ended March 31,
(in millions, except per share amounts)20242023
Net income attributable to Lithia Motors, Inc. and applicable to common stockholders$162.6 $228.7 
Weighted average common shares outstanding – basic27.5 27.5 
Effect of employee stock purchases and restricted stock units on weighted average common shares outstanding0.1  
Weighted average common shares outstanding – diluted 27.6 27.5 
Basic earnings per share attributable to Lithia Motors, Inc.$5.90 $8.32 
Diluted earnings per share attributable to Lithia Motors, Inc.$5.89 $8.30 

The effect of antidilutive securities on common stock was evaluated for the three-month periods ended March 31, 2024 and 2023 and was determined to be immaterial.

NOTE 14. SEGMENTS

We operate in two reportable segments: Vehicle Operations and Financing Operations. Our Vehicle Operations consists of all aspects of our auto merchandising and service operations, excluding financing provided by our Financing Operations. Our Financing Operations segment provides financing to customers buying and leasing retail vehicles from our Vehicle Operations, as well as leasing vehicles from our fleet management services provider.

All other remaining unallocated corporate overhead expenses and internal charges are reported under “Corporate and Other”. Asset information by segment is not utilized for purposes of assessing performance or allocating resources and, as a result, such information has not been presented.

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Certain financial information on a segment basis is as follows:
 Three Months Ended
March 31,
(in millions)20242023
Vehicle operations revenue$8,561.8 $6,973.8 
Vehicle operations gross profit1,335.2 1,211.5 
Floor plan interest expense(60.7)(27.7)
Vehicle operations selling, general and administrative(990.1)(822.6)
Vehicle operations income284.4 361.2 
Financing operations interest margin:
Interest and fee income77.3 49.3 
Interest expense(47.8)(37.5)
Total interest margin29.5 11.8 
Lease income22.4 4.6 
Depreciation and amortization(18.0)(2.3)
Lease income, net
4.4 2.3 
Selling, general and administrative(10.6)(8.6)
Provision expense(25.0)(26.3)
Financing operations loss(1.7)(20.8)
Total segment income for reportable segments282.7 340.4 
Corporate and other55.8 58.2 
Depreciation and amortization(57.8)(47.3)
Other interest expense(63.6)(39.0)
Other income, net3.5 2.0 
Income before income taxes$220.6 $314.3 

NOTE 15. RECENT ACCOUNTING PRONOUNCEMENTS

In November 2023, the Financial Accounting Standards Board (FASB) issued an accounting standards update (ASU) 2023-07 related to improvements to reportable segment disclosures. The amendments in this update require additional disclosure of significant expenses related to our reportable segments, additional segment disclosures on an interim basis, and qualitative disclosures regarding the decision making process for segment resources. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We have adopted this pronouncement and plan to make the necessary updates to our segment disclosures for the year ending December 31, 2024, and, aside from these disclosure changes, we do not expect the amendments to have a material effect on our financial statements.

In December 2023, the FASB issued ASU 2023-09 related to improvements to income tax disclosures. The amendments in this update require enhanced jurisdictional and other disaggregated disclosures for the effective tax rate reconciliation and income taxes paid. The amendments in this update are effective for fiscal years beginning after December 15, 2024. We plan to adopt this pronouncement and make the necessary updates to our disclosures for the year ending December 31, 2025, and, aside from these disclosure changes, we do not expect the amendments to have a material effect on our financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Forward-Looking Statements and Risk Factors
Certain statements under the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” and elsewhere in this Form 10-Q constitute forward-looking statements within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Generally, you can identify forward-looking statements by terms such as “project,” “outlook,” “target,” “may,” “will,” “would,” “should,” “seek,” “expect,” “plan,” “intend,” “forecast,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “likely,” “goal,” “strategy,” “future,” “maintain,” and “continue” or the negative of these terms or other comparable terms. Examples of forward-looking statements in this Form 10-Q include, among others, statements we make regarding:

Future market conditions, including anticipated car and other sales levels and the supply of inventory
Our business strategy and plans, including our achieving our long-term EPS target
The growth, expansion, make-up and success of our network, including our finding accretive acquisitions and acquiring additional stores
Annualized revenues from acquired stores
The growth and performance of our Driveway e-commerce home solution and Driveway Finance Corporation (DFC), their synergies and other impacts on our business and our ability to meet Driveway and DFC-related targets
The impact of sustainable vehicles and other market and regulatory changes on our business
Our capital allocations and uses and levels of capital expenditures in the future
Expected operating results, such as improved store performance, continued improvement of selling, general and administrative expenses (SG&A) as a percentage of gross profit and any projections
Our anticipated financial condition and liquidity, including from our cash and the future availability of our credit facilities, unfinanced real estate and other financing sources
Our continuing to purchase shares under our share repurchase program
Our compliance with financial and restrictive covenants in our credit facilities and other debt agreements
Our programs and initiatives for employee recruitment, training, and retention
Our strategies and targets for customer retention, growth, market position, operations, financial results and risk management
 
The forward-looking statements contained in this Form 10-Q involve known and unknown risks, uncertainties and situations that may cause our actual results to materially differ from the results expressed or implied by these statements. Certain important factors that could cause actual results to differ from our expectations are discussed in the Risk Factors section of our 2023 Annual Report on Form 10-K, as supplemented and amended from time to time in Quarterly Reports on Form 10-Q and our other filings with the Securities and Exchange Commission (SEC).
 
By their nature, forward-looking statements involve risks and uncertainties because they relate to events that depend on circumstances that may or may not occur in the future. You should not place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. We assume no obligation to update or revise any forward-looking statement.

Overview
Lithia and Driveway (LAD) is one of the largest global automotive retailers providing an array of products and services throughout the vehicle ownership lifecycle. Simple, convenient and transparent experiences are offered through our comprehensive network of physical locations, e-commerce platforms, captive finance solutions and other synergistic adjacencies. We have delivered consistent profitable growth in a massive and unconsolidated industry. Our highly diversified and competitively differentiated design provides us the flexibility and scale to pursue our vision to modernize personal transportation solutions wherever, whenever and however consumers desire. As of March 31, 2024, we operated 482 locations representing 51 brands in three countries.

We offer a wide array of products and services fulfilling the entire vehicle ownership lifecycle including new and used vehicles, financing and insurance products and automotive repair and maintenance. We strive for diversification in our products, services, brands and geographic locations to reduce dependence on any one manufacturer, reduce susceptibility to changing consumer preferences, manage market risk and maintain profitability. Our diversification, along with our operating structure, provides a resilient and nimble business model.
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We seek to provide customers with a seamless, blended online and physical retail experience, broad selection and access to specialized expertise and knowledge. Our comprehensive network enables us to provide convenient touch points for customers and provides services throughout the vehicle life cycle. We seek to increase market share and optimize profitability by focusing on the consumer experience and applying proprietary performance measurement systems fueled by data science. Our Driveway and GreenCars brands complement our in-store experiences in the United States and provide convenient, simple and transparent platforms that serve as our e-commerce home solutions and allow us to deliver differentiated, proprietary digital experiences. Enhancing our business with Driveway Finance Corporation (DFC), our captive auto finance division, allows us to provide financing solutions for customers and diversify our business model with an adjacent product.

Our long-term strategy to create value for our customers, employees and shareholders includes the following elements:

Driving operational excellence, innovation and diversification
LAD builds magnetic brand loyalty in our 482 stores and with Driveway, our e-commerce home delivery experience, and GreenCars, our electric vehicle learning resource and marketplace. Operational excellence is achieved by focusing the business on convenient and transparent consumer experiences supported by proprietary data science to improve market share, consumer loyalty, and profitability. By promoting an entrepreneurial model with our in-store experiences, we build strong businesses responsive to each of our local markets. Utilizing performance-based action plans, we develop high-performing teams and foster manufacturer relationships.

In response to evolving consumer preferences, we invest in modernization that supports and expands our core business. These digital strategies combine our experienced, knowledgeable workforce with our owned inventory and physical network of stores, enabling us to be agile and adapt to consumer preferences and market specific conditions. Additionally, we systematically explore transformative adjacencies, which are identified to be synergistic and complementary to our existing business such as DFC, our captive auto loan portfolio.

Our investments in modernization are well under way and are taking hold with our teams as they provide digital shopping experiences including finance, contactless test drives and home delivery or curbside pickup for vehicle purchases. Our people and these solutions power our national brands, overlaying our physical footprint in a way that we believe attracts a larger population of digital consumers seeking transparent, empowered, flexible and simple buying and servicing experiences.

Our performance-based culture is geared toward an incentive-based compensation structure for a majority of our personnel. We develop pay plans that are measured based upon various factors such as customer satisfaction, profitability and individual performance metrics. These plans serve to reward team members for creating customer loyalty, achieving store potential, developing high-performing talent, meeting and exceeding manufacturer requirements and living our core values.

We have centralized many administrative functions to drive efficiencies and streamline store-level operations. The reduction of administrative functions at our stores allows our local managers to focus on customer-facing opportunities to increase revenues and gross profit. Our operations are supported by regional and corporate management, as well as dedicated training and personnel development programs which allow us to share best practices across our network and develop management talent.

Growth through acquisition and network optimization
Our acquisition growth strategy has been successful both financially and culturally. Our disciplined approach focuses on acquiring new vehicle franchises, which operate in markets ranging from mid-sized regional markets to metropolitan markets. Acquisition of these businesses increases our proximity to consumers throughout North America and the United Kingdom. While we target annual after tax return of more than 15% for our acquisitions, we have averaged over a 25% return by the third year of ownership due to a disciplined approach focusing on accretive, cash flow positive targets at reasonable valuations. In addition to being financially accretive, acquisitions aim to drive network growth that improves our ability to serve customers through vast selection, greater density and access to customers and ability to leverage national branding and advertising.

As we focus on expanding our physical network of stores, one of the criteria we evaluate is a valuation multiple between 3x to 6x of investment in intangibles to estimated annualized adjusted EBITDA, with various factors
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including location, ability to expand our network and talent considered in determining value. We also target an investment in intangibles as a percentage of annualized revenues in the range of 15% to 30%.

We regularly optimize and balance our network through strategic divestitures to ensure continued high performance. We believe our disciplined approach provides us with attractive acquisition opportunities and expanded coast-to-coast coverage.

Thoughtful capital allocation
We manage our liquidity and available cash to support our long-term plan focused on growth through acquisitions and investments in our existing business, technology and adjacencies that expand and diversify our business model. In the current market of elevated acquisition pricing, we have adjusted our free cash flow deployment strategy. Under current conditions, including recent trends in our stock price, we may consider repurchases as a more attractive use of funds than acquisitions. Our current free cash flow deployment strategy has shifted to an allocation of 50 to 60% investment in acquisitions, 25% investment in capital expenditures, innovation, and diversification and 15 to 25% in shareholder return in the form of dividends and share repurchases. During the first three months of 2024, we utilized $79.6 million for capital expenditures investing in our existing business and paid $13.8 million in dividends. As of March 31, 2024, we had available liquidity of approximately $1.3 billion, which was comprised of $264.4 million in unrestricted cash, $49.9 million in marketable securities, and $1.0 billion availability on our credit facilities. In addition, our unfinanced real estate could provide additional liquidity of approximately $0.3 billion.

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Financial Performance
2627 29
We experienced growth of revenue in 2024 compared to 2023, primarily driven by increases in volume related to acquisitions, complemented by organic growth in new vehicle retail sales and service, body and parts sales. Gross profit on new and used vehicle retail sales declined compared to 2023 due to continued normalization of margins. Net income decline was primarily driven by this margin normalization, increased interest expense, and increased SG&A as a percentage of gross profit.
362363
549755814299549755814300
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Vehicle Operations
Key performance metrics for revenue and gross profit were as follows:

Three Months Ended March 31,
($ in millions, except per unit values)20242023Change
Revenues
New vehicle retail$4,014.1 $3,278.9 22.4  %
Used vehicle retail2,800.8 2,227.5 25.7 
Finance and insurance340.6 318.3 7.0 
Service, body and parts912.8 736.3 24.0 
Total revenues8,561.8 6,973.8 22.8 
Gross profit
New vehicle retail$295.3 $333.8 (11.5) %
Used vehicle retail182.7 165.7 10.3 
Finance and insurance340.6 318.3 7.0 
Service, body and parts502.0 394.4 27.3 
Total gross profit1,335.2 1,211.5 10.2 
Gross profit margins
New vehicle retail7.4 %10.2 %(280) bps
Used vehicle retail6.5 7.4 (90)
Finance and insurance100.0 100.0 — 
Service, body and parts55.0 53.6 140 
Total gross profit margin15.6 17.4 (180)
Retail units sold
New vehicles85,683 67,796 26.4  %
Used vehicles102,436 78,142 31.1 
Average selling price per retail unit
New vehicles$46,848 $48,364 (3.1) %
Used vehicles27,342 28,506 (4.1)
Average gross profit per retail unit
New vehicles$3,447 $4,924 (30.0)%
Used vehicles1,783 2,120 (15.9)
Finance and insurance1,811 2,181 (17.0)
Total vehicle 1
4,346 5,585 (22.2)
1Includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail.

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Same Store Operating Data
We believe that same store comparisons are an important indicator of our financial performance. Same store measures demonstrate our ability to grow revenues in our existing locations. As a result, same store measures have been integrated into the discussion below.
 
Same store measures reflect results for stores that were operating in each comparison period and only include the months when operations occurred in both periods. For example, a store acquired in February 2023 would be included in same store operating data beginning in March 2024, after its first complete comparable month of operation. The first quarter operating results for the same store comparisons would include results for that store in only the month of March for both comparable periods.
Three Months Ended March 31,
($ in millions, except per unit values)20242023Change
Revenues
New vehicle retail$3,261.0 $3,188.7 2.3  %
Used vehicle retail2,039.6 2,148.0 (5.0)
Finance and insurance297.7 312.7 (4.8)
Service, body and parts740.2 717.5 3.2 
Total revenues6,639.8 6,771.1 (1.9)
Gross profit
New vehicle retail$235.7 $323.5 (27.1) %
Used vehicle retail152.6 160.6 (5.0)
Finance and insurance297.7 312.7 (4.8)
Service, body and parts409.7 384.4 6.6 
Total gross profit1,094.8 1,180.3