Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This MD&A should be read in conjunction with the accompanying audited consolidated financial statements and notes. Forward-looking statements in this MD&A are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to the "Forward-Looking Statements" and Part I, Item 1A. Risk Factors for a discussion of these risks and uncertainties. An analysis of our consolidated results of operations for 2024 and 2023 and year-to-year comparisons between 2024 and 2023 can be found in MD&A in Part II, Item 7 of the Company’s Form 10-K for the year ended December 31, 2024.
OVERVIEW
We are one of the largest automotive retailers in the United States. As of December 31, 2025, through our Dealerships segment, we owned and operated 223 new vehicle franchises (171 dealership locations), representing 36 brands of automobiles, within 15 states. We also operated 39 collision centers, and Total Care Auto, Powered by Asbury ("TCA"), our F&I product provider. Our stores offer an extensive range of automotive products and services, including new and used vehicles; parts and service, which include repair and maintenance services, replacement parts, and collision repair service; and finance and insurance products. The finance and insurance products are provided by both TCA and independent third parties. The F&I products offered by TCA are sold through affiliated dealerships. For the year ended December 31, 2025, our new vehicle revenue brand mix consisted of 40% imports, 32% luxury, and 28% domestic brands. The Company manages its operations in two reportable segments: Dealerships and TCA.
Our Dealerships segment revenues are derived primarily from: (i) the sale of new vehicles; (ii) the sale of used vehicles to individual retail customers ("used retail") and to other dealers at auction ("wholesale") (the terms "used retail" and "wholesale" are collectively referred to as "used"); (iii) repair and maintenance services, collision repair, the sale of automotive replacement parts, and the reconditioning of used vehicles (collectively referred to as "parts and service"); and (iv) the arrangement of third-party vehicle financing and the sale of a number of vehicle protection products. F&I products are offered by dealerships to customers in connection with the purchase of vehicles through either TCA or independent third parties. We evaluate the results of our new and used vehicle sales based on unit volumes and gross profit per vehicle sold, our parts and service operations based on aggregate gross profit, and our F&I business based on F&I gross profit per vehicle sold. Amounts presented have been calculated using non-rounded amounts for all periods presented and therefore certain amounts may not compute due to rounding.
Our Dealerships segment gross profit margin varies with our revenue mix. Historically, the sales of new vehicles generally results in a lower gross profit margin than used vehicle sales, sales of parts and service, and sales of F&I products. As a result, when used vehicle, parts and service, and F&I revenue increase as a percentage of total revenue, we expect our overall gross profit margin to increase. However, during and after the COVID-pandemic, new vehicle gross profit margins have been above historical levels and higher than used vehicle gross margins as a result of inventory disruptions from supply chain issues.
Our TCA segment revenues, reflected in F&I revenue, net, are derived from the sale of various vehicle protection products including vehicle service contracts, GAP, prepaid maintenance contracts, and appearance protection contracts. These products are sold through company-owned dealerships. TCA's F&I revenues also include investment gains or losses and income earned associated with the performance of TCA's investment portfolio.
Our TCA segment gross profit margin can vary due to incurred claims expense and the performance of our investment portfolio. Certain F&I products may result in higher gross profit margins to TCA. Therefore, the product mix of F&I products sold by TCA can affect the gross profits earned. In addition, interest rate volatility based on economic and market conditions outside the control of the Company, may increase or reduce TCA segment gross profit margins as well as the fair market values of certain securities within our investment portfolio. Fair market values typically fluctuate inversely to the fluctuations in interest rates.
Selling, general and administrative ("SG&A") expenses consist primarily of fixed and incentive-based compensation, advertising, rent, insurance, utilities, and other customary operating expenses. A significant portion of our cost structure is variable (such as sales commissions) or controllable (such as advertising), which we believe allows us to adapt to changes in the retail environment over the long-term. We evaluate commissions paid to salespeople as a percentage of retail vehicle gross profit, advertising expense on a per vehicle retailed ("PVR") basis, and all other SG&A expenses in the aggregate as a percentage of total gross profit. Commissions expense paid by TCA to our affiliated dealerships and reflected as F&I revenue in our Dealerships segment is eliminated in the consolidated financial statements.
Our continued organic growth is dependent upon the execution of our balanced automotive retailing and service business strategy, the continued strength of our brand mix, and the production and allocation of desirable vehicles from the automobile
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manufacturers whose brands we sell. Our vehicle sales have historically fluctuated with product availability as well as local and national economic conditions, including consumer confidence, availability of consumer credit, fuel prices, and employment levels.
In addition, our ability to sell certain new and used vehicles can be negatively impacted by a number of factors, some of which are outside of our control. Certain manufacturers continue to be hampered by the lack of availability of parts and key components from suppliers which has impacted new vehicle inventory levels and availability of certain parts. We cannot predict with any certainty how long the automotive retail industry will continue to be subject to these production slowdowns or when normalized production will resume at these manufacturers.
Recent Events
Herb Chambers acquisition
On July 21, 2025, the Company completed the Herb Chambers acquisition, thereby acquiring substantially all of the assets including the real property related thereto, for a total purchase price of approximately $1.76 billion. The acquisition was financed by borrowings under our new vehicle floor plan and used vehicle floor plan facilities, revolving credit facility and borrowings under a real estate facility. The Herb Chambers acquisition comprised 33 dealerships and three collision centers.
Macroeconomic and geopolitical considerations
The demand and availability for and pricing of our products and services may be adversely impacted by economic conditions and financial developments, including increasing interest rates, rising inflation, high energy prices, a potential recessionary environment and other factors. The automotive retail industry is influenced by general economic conditions, particularly consumer confidence and consumer spending, interest rates, fuel prices, exchange rates, technology and business model changes, supply conditions, consumer transportation preferences, credit availability, and the unemployment rate. Consumer spending can be materially and adversely impacted by periods of economic uncertainty or by consumer concern regarding manufacturer viability. In addition, local economic, competitive and other conditions affect the performance of our dealerships. Our results of operations depend substantially on general economic conditions and consumer spending in those regions where we maintain operations.
Tariffs and trade risks
A significant portion of our business involves the sale of vehicles, parts, or vehicles composed of, or maintenance and repair services including, parts that are manufactured outside the U.S. Changes or increases in tariffs, trade restrictions, fluctuations in foreign currency exchange rates, the negotiation of new trade agreements, non-tariff trade barriers, local content requirements, uncertainty surrounding global trade policies, and the imposition of new or retaliatory tariffs against certain countries or covering certain products, including vehicles and parts, may affect our competitive position and impair our ability to sell and service vehicles and parts, and have a material adverse effect on our results of operations.
In late January 2025, the U.S. government commenced a broad review of U.S. trade relations, following which it began issuing numerous executive orders and other public policy statements imposing or threatening to impose tariffs on certain countries, materials, and industries, including the automotive industry. Such tariffs include a 25% tariff on imports of automobiles and certain automobile parts, with different rates for some countries as a result of respective trade deals. In response, certain impacted countries have imposed or threatened various corresponding retaliatory tariffs and other actions. If maintained, these and other newly announced tariffs and actions and the potential escalation of trade disputes are expected to affect the automotive industry generally, including manufacturers, distributors and retailers of vehicles, parts and supplies. The extent of the tariffs and the resulting impact on general economic conditions and on our business are uncertain and depend on various factors, such as negotiations between the U.S. and affected countries, the duration of such tariffs, the responses of other countries or regions to such tariffs, the actual increases in the costs of vehicles, products and raw materials, and exemptions or exclusions that may be granted. Should tariffs increase and be sustained, our inventory acquisition and carrying costs, and the production costs for many of our manufacturer, distributor and supplier partners, may be increased, which costs may be passed on to us and consumers through higher prices for many new vehicles and certain parts we sell. These increased prices may affect our new vehicle sales and related finance and insurance sales and may impact demand for such vehicles and parts, and could materially and affect the results of our operations.
See “Item 1A. Risk Factors” in Part I of this report for additional information about risks and uncertainties facing our Company.
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Financial Highlights
Highlights related to our financial condition and results of operations include the following:
• Consolidated revenue for the year ended December 31, 2025 increased to $18.00 billion, compared to $17.19 billion for the prior year.
• Consolidated gross profit for the year ended December 31, 2025 increased to $3.07 billion, compared to $2.95 billion for the prior year.
• The increase in consolidated revenue and consolidated gross profit was primarily due to the effects of the Herb Chambers acquisition and growth in parts and services gross profit. This increase was offset by lower gross profit per vehicle sold for new vehicles as margins continue to shift downward from the historic highs in recent years.
• The effects of dealership divestitures also impacted consolidated revenue and gross profit. During the year ended December 31, 2025, we divested 24 franchises (15 dealership locations). These divested dealerships contributed approximately $436.3 million of revenue during the year ended December 31, 2025.
• Our capital allocation priorities were supported by share repurchases of approximately 432,752 shares for $99.9 million during the year ended December 31, 2025.
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CONSOLIDATED RESULTS OF OPERATIONS
We assess the organic growth of our revenue and gross profit on a same store basis. We believe that our assessment on a same store basis represents an important indicator of comparative financial performance and provides relevant information to assess our performance. As such, for the following discussion, same store amounts consist of information from dealerships for identical months in each comparative period, commencing with the first full month we owned the dealership. Additionally, amounts related to divested dealerships are excluded from each comparative period for same store reporting.
The Company's full year results for 2025 include the results of the Herb Chambers dealerships acquired in July 2025. Accordingly, the increases in revenue, gross profit and income from operations for 2025 compared to 2024 are largely a result of this acquisition.
The Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
For the Year Ended December 31,
Increase
(Decrease)
Change
(Dollars in millions, except per share data)
REVENUE:
New vehicle
Used vehicle
Parts and service
Finance and insurance, net
TOTAL REVENUE
GROSS PROFIT:
New vehicle
Used vehicle
Parts and service
Finance and insurance, net
TOTAL GROSS PROFIT
OPERATING EXPENSES:
Selling, general and administrative
Depreciation and amortization
Asset impairments
INCOME FROM OPERATIONS
OTHER (INCOME) EXPENSES:
Floor plan interest expense
Other interest expense, net
Gain on dealership divestitures, net
Total other expenses, net
INCOME BEFORE INCOME TAXES
Income tax expense
NET INCOME
Net income per common share—Diluted
NM — Not Meaningful
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For the Year Ended December 31,
REVENUE MIX PERCENTAGES:
New vehicles
Used retail vehicles
Used vehicle wholesale
Parts and service
Finance and insurance, net
Total revenue
GROSS PROFIT MIX PERCENTAGES:
New vehicles
Used retail vehicles
Used vehicle wholesale
Parts and service
Finance and insurance, net
Total gross profit
GROSS PROFIT MARGIN
SG&A EXPENSES AS A PERCENTAGE OF GROSS PROFIT
Total revenue during 2025 increased by $810.4 million (5%) compared to 2024, due to a $646.5 million (7%) increase in new vehicle revenue, a $152.1 million (6%) increase in parts and service revenue, a $7.2 million increase in used vehicle revenue and a $4.6 million (1%) increase in F&I revenue.
The $123.0 million (4%) increase in gross profit during 2025 was the result of a $121.3 million (9%) increase in parts and service gross profit, a $13.6 million (6%) increase in used vehicle gross profit and a $6.5 million (1%) increase in F&I gross profit, partially offset by an $18.4 million (3%) decrease in new vehicle gross profit. Our total gross profit margin decreased 9 basis points from 17.2% in 2024 to 17.1% in 2025.
Income from operations during 2025 increased by $25.0 million (3%) compared to 2024, primarily due to a $123.0 million (4%) increase in gross profit and an $8.5 million (6%) decrease in asset impairments, partially offset by a $99.0 million (5%) increase in selling, general and administrative expenses and an $8.5 million (6%) increase in depreciation and amortization expense.
Total other expenses, net decreased by $61.9 million (24%) from expenses of $260.3 million in 2024 to $198.4 million of expenses in 2025, primarily due to a $71.6 million (828%) increase in gain on dealership divestitures, net, partially offset by an $8.3 million (5%) increase in other interest expense, net and a $1.3 million (1%) increase in floor plan interest expense. As a result, income before income taxes increased by $86.9 million (15%) to $662.2 million in 2025. The $25.3 million (17%) increase in income tax expense was primarily attributable to the 15% increase in income before taxes, and a 50 basis point increase in the 2025 effective tax rate. Overall, net income increased by $61.6 million (14%) from $430.3 million in 2024 to $492.0 million in 2025.
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New Vehicle—
For the Year Ended December 31,
Increase
(Decrease)
Change
(Dollars in millions, except for per vehicle data)
As Reported:
Revenue:
Luxury
Import
Domestic
Total new vehicle revenue
Gross profit:
Luxury
Import
Domestic
Total new vehicle gross profit
New vehicle units:
Luxury
Import
Domestic
Total new vehicle units
Same Store:
Revenue:
Luxury
Import
Domestic
Total new vehicle revenue
Gross profit:
Luxury
Import
Domestic
Total new vehicle gross profit
New vehicle units:
Luxury
Import
Domestic
Total new vehicle units
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New Vehicle Metrics—
For the Year Ended December 31,
Increase
(Decrease)
Change
As Reported:
Revenue per new vehicle sold
Gross profit per new vehicle sold
New vehicle gross margin
Luxury:
Gross profit per new vehicle sold
New vehicle gross margin
Import:
Gross profit per new vehicle sold
New vehicle gross margin
Domestic:
Gross profit per new vehicle sold
New vehicle gross margin
Same Store:
Revenue per new vehicle sold
Gross profit per new vehicle sold
New vehicle gross margin
Luxury:
Gross profit per new vehicle sold
New vehicle gross margin
Import:
Gross profit per new vehicle sold
New vehicle gross margin
Domestic:
Gross profit per new vehicle sold
New vehicle gross margin
During 2025, new vehicle revenue increased by $646.5 million (7%) when compared to 2024, as a result of a 5% increase in new vehicle unit sales, combined with a 3% increase in revenue per new vehicle sold which increased to $52,406 for the year ended December 31, 2025, from $51,090 for the year ended December 31, 2024. Same store new vehicle revenue increased by $316.0 million (4%) mainly driven by an increase in the number of units sold which increased by 4,392 (3%) for the year ended December 31, 2025 as compared to the same period in the prior year. In addition, same store revenue per new vehicle sold increased from $51,285 for the year ended December 31, 2024 to $51,830 for the year ended December 31, 2025.
New vehicle gross profit decreased by $18.4 million (3%) for the year ended December 31, 2025 when compared to the same period in the prior year, as a result of a 7% decrease in gross profit per new vehicle sold which decreased from $3,697 for the year ended December 31, 2024 to $3,432 for the year ended December 31, 2025, partially offset by a 5% increase in unit volumes sold. Same store new vehicle gross profit decreased by $49.0 million (8%) in 2025 as a result of an 11% decrease in gross profit per new vehicle sold. Same store new vehicle gross margin decreased 83 basis points from 7.3% for the year ended December 31, 2024 to 6.4% for the year ended December 31, 2025. The decrease in our new vehicle gross profit margin was primarily attributable to the softening of the historically high new vehicle margins seen in recent years.
The seasonally adjusted annual rate ("SAAR") for new vehicle sales in the U.S. during the year ended December 31, 2025 was approximately 16.2 million which increased as compared to approximately 15.8 million during the year ended December 31, 2024. The increase in SAAR period over period reflects higher inventory supply, including fleet, coupled with increased consumer demand due to concerns with respect to rising vehicle prices in light of, among other things, tariffs. In
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addition, we saw increased demand for new electric vehicles before the expiration of federal tax credits in September 2025. We ended the year with approximately 52 days of supply of new vehicle inventory which reflects an increase from 49 days of supply as of December 31, 2024, but remains well below historical levels.
Used Vehicle—
For the Year Ended December 31,
Increase
(Decrease)
Change
(Dollars in millions, except for per vehicle data)
As Reported:
Revenue:
Used vehicle retail revenue
Used vehicle wholesale revenue
Used vehicle revenue
Gross profit:
Used vehicle retail gross profit
Used vehicle wholesale gross profit
Used vehicle gross profit
Used vehicle retail units:
Used vehicle retail units
Same Store:
Revenue:
Used vehicle retail revenue
Used vehicle wholesale revenue
Used vehicle revenue
Gross profit:
Used vehicle retail gross profit
Used vehicle wholesale gross profit
Used vehicle gross profit
Used vehicle retail units:
Used vehicle retail units
Used Vehicle Metrics—
For the Year Ended December 31,
Increase
(Decrease)
Change
As Reported:
Revenue per used vehicle retailed
Gross profit per used vehicle retailed
Used vehicle retail gross margin
Same Store:
Revenue per used vehicle retailed
Gross profit per used vehicle retailed
Used vehicle retail gross margin
Used vehicle revenue increased by $7.2 million, due to a $63.5 million (10%) increase in used vehicle wholesale revenue, partially offset by a $56.3 million (1%) decrease in used vehicle retail revenue. Same store used vehicle revenue decreased by $185.0 million (4%) due to a $210.9 million (5%) decrease in used vehicle retail revenue, partially offset by a $25.9 million
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(4%) increase in used vehicle wholesale revenue. Used vehicle revenues and unit volume have continued to contract during 2025, on both an all store and same store basis. Used vehicle revenue and unit volumes continue to be negatively impacted by the affordability headwinds and lack of inventory availability, especially in vehicles with lower mileage.
Offsetting volume declines, we reported higher used vehicle retail gross profit margins for the year ended December 31, 2025 as compared to the same period in the prior year. Total Company and same store used vehicle retail gross profit margins increased 30 and 22 basis points, respectively, to 5.3% for the year ended December 31, 2025 as compared to the same period in the prior year. We attribute the increases in used vehicle retail gross profit margins to improved sourcing and disciplined execution focused on profitability over units sold.
We believe that our used vehicle inventory continues to be well-aligned with current consumer demand, with approximately 38 days of supply as of December 31, 2025.
Parts and Service—
For the Year Ended December 31,
Increase
(Decrease)
Change
(Dollars in millions)
As Reported:
Parts and service revenue
Parts and service gross profit:
Customer pay
Warranty
Collision
Wholesale parts
Parts and service gross profit, excluding reconditioning and preparation
Parts and service gross margin, excluding reconditioning and preparation
Reconditioning and preparation *
Total parts and service gross profit
Total parts and service gross margin
Same Store:
Parts and service revenue
Parts and service gross profit:
Customer pay
Warranty
Collision
Wholesale parts
Parts and service gross profit, excluding reconditioning and preparation
Parts and service gross margin, excluding reconditioning and preparation
Reconditioning and preparation *
Total parts and service gross profit
Total parts and service gross margin
* Reconditioning and preparation represents the gross profit earned by our parts and service departments for internal work performed and is included as a reduction of Parts and service cost of sales within the accompanying consolidated statements of income upon the sale of the vehicle.
The $152.1 million (6%) increase in parts and service revenue was due to a $95.8 million (8%) increase in customer pay revenue, a $66.4 million (19%) increase in warranty revenue, partially offset by a $4.9 million (1%) decrease in wholesale parts revenue and a $5.1 million (2%) decrease in collision revenue. Same store parts and service revenue increased $73.7 million
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(3%) from $2,212.70 million in 2024 to $2,286.4 million in 2025. The increase in same store parts and service revenue was due to a $52.0 million (4%) increase in customer pay revenue and a $38.2 million (12%) increase in warranty revenue, partially offset by a $13.8 million (5%) decrease in collision revenue and a $2.7 million (1%) decrease in wholesale parts revenue.
Parts and service gross profit, excluding reconditioning and preparation, increased by $107.9 million (10%) to $1,211.9 million and same store gross profit, excluding reconditioning and preparation, increased by $57.2 million (5%) to $1,100.1 million. The $57.2 million increase in same store gross profit, excluding reconditioning and preparation, is primarily due to a $41.0 million (6%) increase in customer pay gross profit and a $21.7 million (12%) increase in warranty gross profit, partially offset by a $5.8 million (5%) decrease in collision gross profit. Wholesale parts gross profit held steady on a same store basis for the year ended year ended December 31, 2025 as compared to the same period in the prior year. As a result of the shortage of new vehicle inventory in recent years, coupled with inflationary headwinds, many customers have elected to keep their current vehicles longer which has generated additional customer pay gross profit for the service departments. In addition, the increasing complexity of vehicles due to advanced systems is increasing the frequency of recalls resulting in an increase in warranty gross profit. We continue to focus on increasing our customer pay parts and service revenue over the long-term by improving the customer experience, providing competitive benefits to our technicians, capitalizing on our dealership training programs and upgrading equipment.
Finance and Insurance, net—
For the Year Ended December 31,
Increase
(Decrease)
Change
(Dollars in millions, except for per vehicle data)
As Reported:
Finance and insurance, net revenue
Finance and insurance, net gross profit
Finance and insurance, net per vehicle sold
Same Store:
Finance and insurance, net revenue
Finance and insurance, net gross profit
Finance and insurance, net per vehicle sold
F&I revenue, net increased by $4.6 million (1%) in 2025 when compared to 2024 primarily as a result of a $17 (1%) increase in F&I per vehicle retailed which was partially offset by a decline in new and used retail unit sales.
On a same store basis, F&I revenue, net decreased by $17.6 million (2%) in 2025 when compared to 2024 primarily as a result of a 2% decrease in new and used retail unit sales and a $14 (1%) decrease in F&I per vehicle retailed.
The financial results of the TCA segment, after dealership eliminations, are as follows:
For the Year Ended December 31,
Increase
(Decrease)
Change
(Dollars in millions)
Finance and insurance, revenue
Finance and insurance, cost of sales
Finance and insurance, gross profit
TCA offers a variety of F&I products, such as extended vehicle service contracts, prepaid maintenance contracts, GAP, appearance protection contracts and lease wear-and-tear contracts. TCA's products are sold through our automobile dealerships.
Revenue generated by TCA is earned over the period of the related product contract. The method for recognizing revenue is assigned based on contract type and expected claim patterns. Premium revenues are supplemented with investment gains or losses and income earned associated with the performance of TCA's investment portfolio. During the years ended December 31,
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2025 and 2024, TCA generated $91.1 million and $120.6 million, respectively, of revenue, consisting primarily of earned premium and $20.7 million and $17.8 million, respectively, from the investment portfolio.
Direct expenses incurred for the acquisition of F&I contracts on which revenue has not yet been recognized have been deferred and are amortized over the related contract period. During the years ended December 31, 2025 and 2024, TCA recorded $52.5 million and $54.4 million, respectively, of cost of sales consisting primarily of claims expense paid to affiliated dealerships. Commissions expense paid by TCA to our affiliated dealerships and reflected as F&I revenue in our Dealerships segment is eliminated upon consolidation.
We completed the rollout of TCA's service offerings in our Florida market and the Koons platform during the year ended December 31, 2025. We expect to complete the rollout to all of our dealerships in 2026 by offering TCA products on our Herb Chambers platform; however, no assurance can be given that the rollout will be completed with the timeframe contemplated.
S elling, General and Administrative Expense—
For the Year Ended December 31,
Increase
(Decrease)
% of Gross
Profit Increase (Decrease)
% of Gross
Profit
% of Gross
Profit
(Dollars in millions)
As Reported:
Personnel costs
Rent and related expenses
Advertising
Other
Selling, general and administrative expense
Gross profit
Same Store:
Personnel costs
Rent and related expenses
Advertising
Other
Selling, general and administrative expense
Gross profit
SG&A expense as a percentage of gross profit increased 66 basis points from 64.0% in 2024 to 64.7% in 2025. Same store SG&A expense as a percentage of gross profit increased 16 basis points from 63.5% in 2024 to 63.7% in 2025. The increase in SG&A as a percentage of gross profit is primarily the result of higher cost in personnel and other categories in SG&A expense partially offset by higher gross profits for 2025 as compared to 2024. SG&A expense as reported for the year ended December 31, 2025 increased by $99.0 million (0.7%) as compared to the year ended December 31, 2024 primarily due to the acquisition of the Herb Chambers stores in July 2025 and an increase in professional and legal fees including those related to the Herb Chambers acquisition ($15.4 million) and the Tekion implementation project ($8.6 million) which was partially offset by an insurance recovery of $15.0 million. On a same store basis, the increase in SG&A expense for the year ended December 31, 2025 as compared to the year ended December 31, 2024 is due to an increase in professional and legal fees offset by the insurance recovery of $15.0 million and the decrease in personnel costs of $5.5 million.
Asset Impairments —
During the year ended December 31, 2025, we recognized asset impairment charges of $141.0 million as compared to $149.5 million of impairment charges during the year ended December 31, 2024. The asset impairment charges resulted from our annual franchise rights impairment tests and the classification of certain asset disposal groups as held for sale which resulted in additional franchise rights impairment charges.
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Floor Plan Interest Expense —
Floor plan interest expense increased by $1.3 million to $91.2 million during 2025 compared to $89.9 million during 2024 due to floor plan interest expense related to the Herb Chambers stores acquired in July 2025 and an increase in unused credit facility fees of $2.5 million. These increases were offset by a reduction in interest rates year over year.
Other Interest Expense —
Other interest expense increased $8.3 million (5%) from $179.1 million in 2024 to $187.5 million in 2025. The increase is primarily due to higher loaner payable interest expense driven by higher loaner vehicle balances, as well as interest expense on our revolving credit agreement during the year ended December 31, 2025.
Gain on Dealership Divestitures, Net —
During the year ended December 31, 2025, we sold 24 franchises (15 dealership locations) for an aggregate purchase price of approximately $566.5 million. The Company recorded a pre-tax gain totaling $80.2 million, which is presented in our accompanying consolidated statements of income as a gain on dealership divestitures, net.
During the year ended December 31, 2024, we sold five franchises (5 dealership locations) for an aggregate purchase price of approximately $196.3 million. The Company recorded a pre-tax gain totaling $8.6 million, which is presented in our accompanying consolidated statements of income as a gain on dealership divestitures, net.
During the year ended December 31, 2023, we sold one franchise (one dealership location) for proceeds of $30.7 million. The Company recorded a pre-tax gain totaling $13.5 million.
Income Tax Expense —
The $25.3 million (17%) increase in income tax expense was primarily the result of a $86.9 million (15%) increase in income before income taxes. Our effective tax rate increased 50 basis points from 25.2% in 2024 to 25.7% in 2025. The increase in our effective tax rate was primarily due to our acquisition and divestiture activity. Stores acquired are located in relatively high tax rate states while the stores divested are located in relatively low or no tax rate states.
Refer to Note 16 "Income Taxes" for additional information regarding income taxes.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2025, we had total available liquidity of $927.1 million, which consisted of cash and cash equivalents of $28.2 million (excluding $12.2 million held by TCA), available funds in our floor plan offset accounts of $151.6 million and $747.3 million of availability under our revolving credit facility. The borrowing capacities under our revolving credit facility and our used vehicle revolving floor plan facility are limited by borrowing base calculations and, from time to time, may be further limited by our required compliance with certain financial covenants. For more information on our financial covenants, see "Covenants and Defaults" and "Share Repurchases and Dividend Restrictions" below.
We continually evaluate our liquidity and capital resources based upon (i) our cash and cash equivalents on hand, (ii) the funds that we expect to generate through future operations, (iii) current and expected borrowing availability under our 2023 Senior Credit Facility (discussed further below), (iv) amounts in our new vehicle floor plan notes payable offset accounts, and (v) the potential impact of our capital allocation strategy and any contemplated or pending future transactions, including, but not limited to, financings, acquisitions, dispositions, equity and/or debt repurchases, dividends, or other capital expenditures. We believe we will have sufficient liquidity to meet our debt service and working capital requirements; commitments and contingencies; debt repayment, maturity and repurchase obligations; acquisitions; capital expenditures; and any operating requirements for at least the next twelve months and the foreseeable future.
Material Indebtedness
We currently are party to the following material credit facilities and agreements and have the following material indebtedness outstanding. For a more detailed description of the material terms of these agreements and facilities, and this indebtedness, see Note 14 "Debt" included in the notes to consolidated financial statements.
• 2023 Senior Credit Facility —On October 20, 2023, the Company and certain of its subsidiaries entered into a fourth amended and restated credit agreement with Bank of America, N.A. ("Bank of America"), as administrative agent, and the other lenders party thereto (the "2023 Senior Credit Facility"). The 2023 Senior Credit Facility amended and
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restated the Company’s pre-existing third amended and restated credit agreement, dated as of September 25, 2019, among the Company, certain of its subsidiaries, Bank of America, as administrative agent, and the other lenders party thereto.
On April 9, 2025, the Company obtained an amendment to the 2023 Senior Credit Facility by and among the Company, as a borrower, certain of its subsidiaries, as vehicle borrowers, Bank of America, as administrative agent, and the other lenders party thereto. The Amendment, among other things, provided for the following, subject to satisfaction of certain other customary conditions in each case:
Revolving Credit Facility — An increase of the aggregate commitments from $500.0 million to $925.0 million under the Revolving Credit Facility for, among other things, acquisitions, working capital and capital expenditures, including a $50.0 million sub-limit for letters of credit. As of December 31, 2025, we had $25.2 million in outstanding letters of credit, resulting in $747.3 million of borrowing availability. We began the year with no amounts drawn on our revolving credit facility. During the year ended December 31, 2025, we had borrowings of $2.15 billion and $2.03 billion in repayments, resulting in $120.0 million of outstanding borrowings as of December 31, 2025.
New Vehicle Floor Plan Facility — An increase of the aggregate commitments from $1.93 billion to $2.25 billion under the New Vehicle Floor Plan Facility which allows us to transfer cash as an offset to floor plan notes payable. These transfers reduce the amount of outstanding new vehicle floor plan notes payable that would otherwise accrue interest, while retaining the ability to transfer amounts from the offset account into our operating cash accounts within one to two days. As a result of the use of this floor plan offset account, we experienced a reduction in floor plan interest expense on our consolidated statements of income. As of December 31, 2025, we had $1.57 billion outstanding under the New Vehicle Floor Plan Facility, which includes $65.0 million classified in loaner vehicles notes payable which is included in accounts payable and accrued liabilities in our consolidated balance sheets. As of December 31, 2025, we held $150.7 million in the floor plan notes payable offset account.
Used Vehicle Floor Plan Facility — A $375.0 million Used Vehicle Floor Plan Facility to finance the acquisition of used vehicle inventory and for working capital and capital expenditures, as well as to refinance used vehicles. We began the year with $100.7 million amounts drawn on our Used Vehicle Floor Plan Facility. During the year ended December 31, 2025, we had additional borrowings of $650.0 million and $425.7 million in repayments resulting in $325.0 million outstanding borrowings as of December 31, 2025. We had fully utilized our borrowing capacity under the Used Vehicle Floor Plan Facility based on our borrowing base calculation as of December 31, 2025.
At our option, we have the ability to re-designate a portion of our availability under the Revolving Credit Facility to the New Vehicle Floor Plan Facility or the Used Vehicle Floor Plan Facility. The maximum amount we are allowed to re-designate is determined based on aggregate commitments under the Revolving Credit Facility, less $50.0 million. In addition, we are able to re-designate any amounts moved to the New Vehicle Floor Plan Facility or the Used Vehicle Floor Plan Facility back to the Revolving Credit Facility.
In addition to the payment of interest on borrowings outstanding under the 2023 Senior Credit Facility, we are required to pay a quarterly commitment fee on total unused commitments thereunder. The fee for unused commitments under the Revolving Credit Facility is between 0.15% and 0.40% per year, based on the Company's total lease adjusted leverage ratio, and the fee for unused commitments under the New Vehicle Facility Floor Plan and the Used Vehicle Floor Plan Facility is 0.15% per year.
• Manufacturer affiliated new vehicle floor plan and other financing facilities —We have a floor plan facility with the Ford Motor Credit Company ("Ford Credit") to purchase new Ford and Lincoln vehicle inventory. Our floor plan facility with Ford Credit was amended in July 2020 and can be terminated by either the Company or Ford Credit with a 30-day notice period. We have also established a floor plan offset account with Ford Credit, which operates in a similar manner to our floor plan offset account with Bank of America. As of December 31, 2025, we had $343.1 million, which is net of $1.0 million in our floor plan offset account, outstanding under our floor plan facility. Neither our floor plan facility with Ford Credit nor our facilities for loaner vehicles have stated borrowing limitations.
• 2029 and 2032 Senior Notes— On November 19, 2021, the Company completed its offering of $800.0 million aggregate principal amount of 4.625% senior notes due 2029 (the "2029 Senior Notes") and $600.0 million aggregate principal amount of 5.000% senior notes due 2032 (the "2032 Senior Notes"). The 2029 Senior Notes and 2032 Senior Notes mature on November 15, 2029 and February 15, 2032, respectively. Interest is payable semiannually, on
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November 15 and May 15 of each year. The 2029 Senior Notes and the 2032 Senior Notes were offered, together with additional borrowings and cash on hand, to (i) fund the LHM Acquisition and (ii) pay related fees and expenses.
The 2029 Notes and 2032 Notes have been fully and unconditionally guaranteed, on a joint and several basis, by substantially all of our subsidiaries other than the TCA Non-Guarantor Subsidiaries. In addition, the notes are subject to customary covenants, events of default and optional redemption revisions. The 2029 Senior Notes and the 2032 Senior Notes are not required to be registered under the Securities Act of 1933.
• 2028 and 2030 Senior Notes —On February 19, 2020, the Company completed its offering of senior unsecured notes, consisting of $525.0 million aggregate principal amount of the Existing 2028 Notes and $600.0 million aggregate principal amount of the Existing 2030 Notes. The 2028 Notes and 2030 Notes mature on March 1, 2028 and March 1, 2030, respectively. Interest is payable semiannually, on March 1 and September 1 of each year. The 2028 Notes and the 2030 Notes were offered, together with additional borrowings and cash on hand, to (i) fund the acquisition of substantially all of the assets of Park Place, (ii) redeem all of our outstanding $600.0 million aggregate principal amount of 6.0% Senior Subordinated Notes due 2024 (the "6.0% Notes") and (iii) pay fees and expenses.
On March 24, 2020, the Company redeemed $245.0 million aggregate principal million of the 2028 Notes and $280.0 million aggregate principal amount of the 2030 Notes pursuant to a special mandatory redemption.
In September 2020, the Company completed an add-on issuance of $250.0 million aggregate principal amount of additional senior notes consisting of $125.0 million aggregate principal amount of additional 2028 Notes at a price of 101.00% of par, plus accrued interest from September 1, 2020, and $125.0 million aggregate principal amount of additional 2030 Notes (together with the additional 2028 Notes, the "Additional Notes") at a price of 101.75% of par, plus accrued interest from September 1, 2020 (the "September 2020 Offering"). After deducting the initial purchasers' discounts of $2.8 million, we received net proceeds of approximately $250.6 million from the September 2020 Offering. The $3.5 million premium paid by the initial purchasers of the Additional Notes was recorded as a component of long-term debt on our consolidated balance sheets and is being amortized as a reduction of interest expense over the remaining term of the Notes. The proceeds of the September 2020 Offering were used to redeem certain seller notes issued in connection with the acquisition of Park Place.
The 2028 Notes and the 2030 Notes are guaranteed, jointly and severally, on a senior unsecured basis, by each of our existing and future restricted subsidiaries, other than the TCA Non-Guarantor Subsidiaries. In addition, the Notes are subject to customary covenants, events of default and optional redemption revisions. The 2028 Notes and the 2030 Notes were required to be registered under the Securities Act of 1933 within 270 days of the closing date for the offering of each respective series. The Company completed the registration of the 2028 Notes and 2030 Notes in October 2020.
• Mortgage Financings —We have multiple mortgage agreements with finance companies affiliated with our vehicle manufacturers ("captive mortgages"). As of December 31, 2025 we had total mortgage notes payable outstanding of $27.2 million which are collateralized by the associated real estate.
• 2025 Wells Fargo Real Estate Facility —On July 21, 2025, certain subsidiaries of the Company borrowed $546.5 million (the “2025 Real Estate Facility”) under a real estate term loan credit agreement, dated as of July 21, 2025 (the “Real Estate Credit Agreement”) by and among the Company, certain of the Company’s subsidiaries that own or lease the real estate financed thereunder, as borrowers, Wells Fargo Bank, National Association, as administrative agent, and the various financial institutions parties thereto, as lenders. The Real Estate Facility matures ten years from the initial funding date. The Company used the proceeds from these borrowings, together with other available funds, to finance the Herb Chambers acquisition. As of December 31, 2025, we had $537.4 million of outstanding borrowings under the 2025 Real Estate Facility.
• 2021 Real Estate Facility —On December 17, 2021, we entered into a real estate term loan credit agreement with Bank of America, N.A., as administrative agent and the other lenders party thereto, which provided for term loans in an aggregate amount equal to $689.7 million (the "2021 Real Estate Facility"). As of December 31, 2025, we had $442.1 million of outstanding borrowings under the 2021 Real Estate Facility. There is no further borrowing availability under the 2021 Real Estate Facility.
• 2021 BofA Real Estate Facility —On May 10, 2021, we entered into a real estate term loan credit agreement (the "2021 BofA Real Estate Credit Agreement"), by and among the Company and certain of its subsidiaries, Bank of America, N.A., as administrative agent and the various financial institutions party thereto, as lenders, which provided for term loans in an aggregate amount equal to $184.4 million, subject to customary terms and conditions (the "2021 BofA Real Estate Facility"). As of December 31, 2025, we had $151.2 million of outstanding borrowings under the
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2021 BofA Real Estate Facility. There is no further borrowing availability under the 2021 BofA Real Estate Credit Agreement. On May 25, 2022, certain of our subsidiaries entered into amendments to our 2021 BofA Real Estate Facility to replace the benchmark reference rate of LIBOR to SOFR, effective June 1, 2022. See Note 14 "Debt" for further details.
• 2018 BofA Real Estate Facility —On November 13, 2018, we entered into a real estate term loan credit agreement (as amended, restated or supplemented from time to time, the "2018 BofA Real Estate Credit Agreement") with Bank of America, as lender, providing for term loans in an aggregate amount not to exceed $128.1 million, subject to customary terms and conditions (the "2018 BofA Real Estate Facility"). In November 2025, we paid off the aggregate principal amounts remaining under the 2018 BofA Real Estate Facility for an aggregate amount of approximately $34.2 million.
• 2018 Wells Fargo Master Loan Facility — On November 16, 2018, certain of our subsidiaries entered into a master loan agreement (the "2018 Wells Fargo Master Loan Agreement") with Wells Fargo as lender, which provides for term loans to certain of our subsidiaries that are borrowers under the 2018 Wells Fargo Master Loan Agreement in an aggregate amount not to exceed $100.0 million (the "2018 Wells Fargo Master Loan Facility"). Our right to make draws under the 2018 Wells Fargo Master Loan Facility terminated on June 30, 2020. On November 16, 2018 and June 26, 2020, we borrowed an aggregate amount of $25.0 million and $69.4 million, respectively, under the 2018 Wells Fargo Master Loan Facility, the proceeds of which were used for general corporate purposes. As of December 31, 2025, we had $57.2 million outstanding borrowings under the 2018 Wells Fargo Master Loan Facility. There is no further borrowing availability under the 2018 Wells Fargo Master Loan Facility. On and with effect from June 1, 2022, certain of our subsidiaries entered into an amendment to our 2018 Wells Fargo Master Loan Agreement to replace the benchmark reference rate of LIBOR to SOFR. See Note 14 "Debt" for further details.
• 2015 Wells Fargo Master Loan Facility —On February 3, 2015, certain of our subsidiaries entered into an amended and restated master loan agreement (the "2015 Wells Fargo Master Loan Agreement") with Wells Fargo Bank, National Association ("Wells Fargo"), as lender, which provides for term loans to certain of our subsidiaries that are borrowers under the 2015 Wells Fargo Master Loan Agreement in an aggregate amount not to exceed $100.0 million (the "2015 Wells Fargo Master Loan Facility"). The outstanding balance under this agreement in the amount of $31.6 million was paid off in May 2025.
• 2013 BofA Real Estate Facility —On September 26, 2013, we entered into a real estate term loan credit agreement (the "2013 BofA Real Estate Credit Agreement") with Bank of America, N.A., as lender, providing for term loans in an aggregate amount not to exceed $75.0 million, subject to customary terms and conditions (the "2013 BofA Real Estate Facility"). In June 2023, the Company prepaid the aggregate principal amounts remaining under the 2013 BofA Real Estate Facility for an aggregate amount of approximately $23.9 million with cash on hand.
Covenants and Defaults
We are subject to a number of customary covenants in our various debt and lease agreements, including those described below. We were in compliance with all of our covenants as of December 31, 2025. Failure to comply with any of our debt covenants would constitute a default under the relevant debt agreements, which would entitle the lenders under such agreements to terminate our ability to borrow under the relevant agreements and accelerate our obligations to repay outstanding borrowings, if any, unless compliance with the covenants were waived. In many cases, defaults under one of our agreements could trigger cross-default provisions in our other agreements. If we are unable to remain in compliance with our financial or other covenants, we would be required to seek waivers or modifications of our covenants from our lenders, or we would need to raise debt and/or equity financing or sell assets to generate proceeds sufficient to repay such debt. We cannot give any assurance that we would be able to successfully take any of these actions on terms, or at times, that may be necessary or .
The representations and covenants contained in the 2021 Real Estate Facility, 2021 BofA Real Estate Credit Agreement, 2018 BofA Real Estate Credit Agreement, 2018 Wells Fargo Master Loan Agreement, the 2025 Real Estate Facility, and the related documents are customary for financing transactions of this nature, including, among others, requirements to comply with a minimum consolidated fixed charge coverage ratio and maximum consolidated total lease adjusted leverage ratio, in each case, as applicable. In addition, certain other covenants could restrict our ability to incur additional debt, pay dividends or acquire or dispose of assets. Each of these agreements provides for events of default that are customary for financing transactions of this nature, including cross-defaults to other material indebtedness. Upon the occurrence of an event of default, we could be required by the applicable agreement to immediately repay all amounts outstanding thereunder.
The representations and covenants contained in the agreement governing the 2023 Senior Credit Facility are customary for financing transactions of this nature including, among others, a requirement to comply with a minimum consolidated fixed charge coverage ratio and maximum consolidated total lease adjusted leverage ratio, in each case as set out in the agreement
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governing the 2023 Senior Credit Facility. In addition, certain other covenants could restrict the Company's ability to incur additional debt, pay dividends or acquire or dispose of assets. The agreement governing the 2023 Senior Credit Facility also provides for events of default that are customary for financing transactions of this nature, including cross-defaults to other material indebtedness. In certain instances, an event of default under either the Revolving Credit Facility or the Used Vehicle Floor Plan Facility could be, or result in, an event of default under the New Vehicle Floor Plan Facility, and vice versa. Upon the occurrence of an event of default, the Company could be required to immediately repay all amounts outstanding under the applicable facility.
The 2023 Senior Credit Facility and the Indentures currently allow for restricted payments without limit so long as our Consolidated Total Leverage Ratio (as defined in the 2023 Senior Credit Facility and the Indentures) is no greater than 3.0 to 1.0 after giving effect to such proposed restricted payments. Restricted payments generally include items such as dividends, share repurchases, unscheduled repayments of subordinated debt, or purchases of certain investments. Subject to our continued compliance with a consolidated fixed charge coverage ratio and a maximum consolidated total lease adjusted leverage ratio, in each case as set out in the Indentures, restricted payments capacity additions (or subtractions if negative) equal to a base level plus the cumulative amount of (i) 50% of our net income (as defined in the 2023 Senior Credit Facility) plus (ii) 100% of any cash proceeds we receive from the sale of equity interests minus (iii) the dollar amount of share purchases made and dividends paid during the defined measurement periods, subject to certain exceptions. In the event that our Consolidated Total Leverage Ratio does (or would) exceed 3.0 to 1.0, the 2023 Senior Credit Facility and the Indentures would then also allow for restricted payments under mutually exclusive parameters, subject to certain exclusions. The Company may otherwise make restricted payments only up to the aforementioned cumulative capacity. Our restricted payment capacity balance as of December 31, 2025 and 2024 was $1.34 billion and $1.22 billion, respectively.
Share Repurchases and Dividend Restrictions
Our ability to repurchase shares or pay dividends on our common stock is subject to our compliance with the covenants and restrictions described in "Covenants and Defaults" above.
On May 15, 2024, the Company announced that its Board of Directors approved an increase of $256.2 million in the Company's common share repurchase authorization to $400.0 million (the "New Share Repurchase Authorization"), for the repurchase of our common stock in open market transactions or privately negotiated transactions or in other manners as permitted by federal securities laws and other legal and contractual requirements. The extent that the Company repurchases its shares, the number of shares and the timing of any repurchases will depend on general market conditions, legal requirements and other corporate considerations. The repurchase program may be modified, suspended or terminated at any time without prior notice.
During the year ended December 31, 2025, we repurchased 432,752 shares of our common stock under our repurchase program for a total of $99.9 million and an additional 44,212 shares of our common stock for $13.7 million from employees in connection with a net share settlement feature of employee equity-based awards.
As of December 31, 2025, we had remaining authorization to repurchase up to an additional $175.9 million of our common stock. Any repurchases will be subject to applicable limitations in our debt or other financing agreements that may be in existence from time to time.
Contractual Obligations
As of December 31, 2025, we had significant contractual obligations related to our floor plan notes payable disclosed in Notes 11 and 12, operating lease liabilities disclosed in Note 19 and long-term debt arrangements discussed in Note 14. Disclosures related to our commitments and contingencies are outlined in Note 21. All note references are to the notes to our consolidated financial statements included elsewhere herein.
Cash Flows
Classification of Cash Flows Associated with Floor Plan Notes Payable
Borrowings and repayments of floor plan notes payable through our 2023 Senior Credit Facility ("Non-Trade"), and all floor plan notes payable relating to used vehicles (together referred to as "Floor Plan Notes Payable—Non-Trade"), are classified as financing activities on the accompanying 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 consolidated statements of cash flows. Borrowings of non-trade floor plan notes payable associated with inventory acquired in connection with all acquisitions and repayments made in connection with all divestitures are classified as a financing activity in the accompanying consolidated statements of cash flows. Cash flows related
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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 our 2023 Senior Credit Facility that includes lenders affiliated with the manufacturers and lenders not affiliated with the manufacturers from which we purchased the related inventory. The majority of our floor plan notes are payable to our 2023 Senior Credit Facility, with the exception of floor plan notes payable relating to the financing of new Ford and Lincoln vehicles and certain loaner vehicle programs.
Floor plan borrowings are required by all vehicle manufacturers for the purchase of new vehicles, and all floor plan lenders require amounts borrowed for the purchase of a vehicle to be repaid within a short time period after the related vehicle is sold. As a result, we believe that it is important to understand the relationship between the cash flows of all of our floor plan notes payable and new vehicle inventory in order to understand our working capital and operating cash flow and to be able to compare our operating cash flow to that of our competitors (i.e., if our competitors have a different mix of trade and non-trade floor plan financing as compared to us). In addition, we include all floor plan borrowings and repayments in our internal operating cash flow forecasts. As a result, we use the non-GAAP measure "Adjusted cash flow provided by operating activities" (defined below) to compare our results to forecasts. We believe that splitting the cash flows of floor plan notes payable between operating activities and financing activities, while all new vehicle inventory activity is included in operating activities, results in significantly different operating cash flow than if all the cash flows of floor plan notes payable were classified together in operating activities.
Adjusted cash flow provided by operating activities includes borrowings and repayments of floor plan notes payable non-trade and used floor plan notes payable borrowing base changes. Adjusted cash flow provided by operating activities may not be comparable to similarly titled measures of other companies and should not be considered in isolation, or as a substitute for analysis of our operating results in accordance with GAAP. In order to compensate for these potential limitations, we also review the related GAAP measures. We believe that the adjustments related to cash flows associated with our used vehicle borrowing base, floor plan offset accounts and the impact of acquisitions and divestitures eliminates cash flow volatility and provides an adjusted operating cash flow metric that best reflects our results of operations and our management of inventory and related financing activities.
We have provided below a reconciliation of cash flow provided by operating activities, as if all changes in floor plan notes payable, except for (i) borrowings associated with acquisitions and repayments associated with divestitures and (ii) borrowings and repayments associated with the purchase of used vehicle inventory and (iii) changes in the floor plan offset accounts were classified as an operating activity for both floor plan notes payable - non-trade and floor plan notes payable - trade.
For the Year Ended December 31,
(In millions)
Reconciliation of cash provided by operating activities to cash provided by operating activities, as adjusted
Cash provided by operating activities, as reported
Change in Floor Plan Notes Payable Non-Trade, net
Change in Floor Plan Notes Payable Non-Trade associated with floor plan offset, used vehicle borrowing base changes adjusted for acquisition and divestitures
Change in Floor Plan Notes Payable Trade associated with floor plan offset and acquisitions and divestitures, net
Adjusted cash flow provided by operating activities
Operating Activities—
Net cash provided by operating activities totaled $775.2 million, $671.2 million, and $313.0 million for the years ended December 31, 2025, 2024, and 2023, respectively. Adjusted cash flow provided by operating activities totaled $651.4 million, $688.4 million, and $705.3 million for the years ended December 31, 2025, 2024, and 2023, respectively. Adjusted cash flow provided by operating activities includes net income, adjustments to reconcile net income to net cash provided by operating activities, changes in working capital, changes in used vehicle borrowing base, changes in floor plan notes payable - non-trade and trade, excluding the impact of offsets, and excluding operating cash flows associated with acquisitions and divestitures related to loaner vehicles and new vehicle inventories financed through floor plan notes payable - trade.
The $37.0 million decrease in adjusted cash flow provided by operating activities for the year ended December 31, 2025 compared to the year ended December 31, 2024, was primarily the result of the following:
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• decrease of $56.7 million related to the change in accounts payable and accrued liabilities;
• decrease of $51.7 million in other current assets, net; and
• decrease of $24.4 million in net income and non-cash adjustments to net income.
The decrease in our adjusted cash flow provided by operating activities was partially offset by:
• $59.4 million increase related to sale volume and the timing of collection of accounts receivable and contracts-in-transit during 2025 compared to 2024;
• $31.3 million increase related to other long-term assets and liabilities, net; and
• increase of $8.2 million in inventory, net of floor plan notes payable, including both trade and non-trade, excluding offset and including used vehicle borrowing base changes adjusted for acquisitions and divestitures.
The $16.9 million decrease in our adjusted cash flow provided by operating activities for the year ended December 31, 2024 compared to the year ended December 31, 2023, was primarily the result of the following:
• decrease of $86.6 million in net income and non-cash adjustments to net income;
• $100.9 million decrease related to the change in accounts payable and accrued liabilities; and
• $24.8 million related to a decrease in inventory, net of floor plan notes payable, including both trade and non-trade, excluding offset and including used vehicle borrowing base changes adjusted for acquisitions and divestitures.
The decrease in our adjusted cash flow provided by operating activities was partially offset by:
• $118.1 million decrease related to the change in other current assets, net;
• $69.4 million decrease related to sale volume and the timing of collection of accounts receivable and contracts-in-transit during 2024 compared to 2023; and
• $8.2 million decrease in other long-term assets and liabilities, net.
Investing Activities—
Net cash used in investing activities totaled $1.46 billion, $137.2 million, and $1.68 billion for the years ended December 31, 2025, 2024, and 2023 respectively. Cash flows from investing activities relate primarily to capital expenditures, acquisitions, divestitures, and the sale of property and equipment.
Capital expenditures, excluding the purchase of real estate, were $186.0 million, $162.6 million, and $142.3 million for the years ended December 31, 2025, 2024 and 2023, respectively. There were no purchases related to real estate for the year ended December 31, 2023. Purchases of real estate totaled $19.3 million and $145.6 million for the years ended December 31, 2025, and 2024, respectively. In addition, we purchased previously leased facilities for $11.9 million during the year ended December 31, 2024.
We expect that capital expenditures during 2026 will total approximately $250.0 million to upgrade or replace our existing facilities, construct new facilities, expand our service capacity, and invest in technology and equipment. In addition, as part of our capital allocation strategy, we continually evaluate opportunities to purchase properties currently under lease and acquire properties in connection with future dealership relocations. No assurances can be provided that we will have or be able to access capital at times or on terms in amounts deemed necessary to execute this strategy.
On July 21, 2025, we completed the acquisition of the Herb Chambers dealerships for a total purchase price of approximately $1.76 billion, which includes $292.0 million of new vehicle floor plan financing, $623.3 million of borrowings under a revolving credit facility, and $546.5 million of borrowings under a real estate facility.
On December 11, 2023, we completed the acquisition of the Jim Koons Dealerships for a total purchase price of approximately $1.50 billion, which includes $256.1 million of new vehicle floor plan financing and $100.9 million of assets
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held for sale related to Koons Lexus of Wilmington. The sources of the purchase price included borrowings under Asbury’s existing credit facility and cash on hand.
During the year ended December 31, 2025, we sold 24 franchises (15 dealership locations) for an aggregate purchase price of approximately $566.5 million. The Company recorded a pre-tax gain totaling $80.2 million, which is presented in our accompanying consolidated statements of income as a gain on dealership divestitures, net.
During the year ended December 31, 2024, we sold five franchises (5 dealership locations) for an aggregate purchase price of approximately $196.3 million. The Company recorded a pre-tax gain totaling $8.6 million, which is presented in our accompanying consolidated statements of income as a gain on dealership divestitures, net.
During the year ended December 31, 2023, we sold one franchise (one dealership location) for proceeds of $30.7 million. The Company recorded a pre-tax gain totaling $13.5 million.
Proceeds from the sale of assets, unrelated to a dealership divestiture, was $6.5 million and $16.3 million for the years ended December 31, 2024 and 2023, respectively. We did not have proceeds from the sale of assets, unrelated to a dealership divestiture, for the year ended December 31, 2025.
During the years ended December 31, 2025, 2024, and 2023, we purchased $189.4 million, $165.0 million and $195.2 million of debt securities. We did not purchase any equity securities in 2025, 2024 or 2023.
During the years ended December 31, 2025, 2024, and 2023, we also received proceeds of $132.8 million, $149.8 million, and $60.3 million from the sale of debt securities respectively and $51.8 million from the sale of equity securities in 2023. We did not have any proceeds from the sale of equity securities in 2025 or 2024.
Financing Activities—
Net cash provided by financing activities totaled $653.1 million and $1.18 billion for the years ended December 31, 2025 and 2023, respectively. Net cash used in financing activities totaled $510.3 million for the year ended December 31, 2024.
During the years ended December 31, 2025, 2024, and 2023, we had non-trade floor plan borrowings of $10.38 billion, $9.45 billion, and $8.39 billion, respectively. Included in our non-trade floor plan borrowings, were borrowings of $325.0 million, $100.7 million, and $307.1 million for the years ended December 31, 2025, 2024, and 2023, respectively, related to our used vehicle floor plan facility.
During the years ended December 31, 2025, 2024 and 2023, we borrowed $2.15 billion, $1.21 billion, and $329.0 million, and repaid $2.03 billion, $1.21 billion and $329.0 million, respectively, on our revolving line of credit.
In addition, during the years ended December 31, 2025 and 2023 we had non-trade floor plan borrowings of $262.7 million and $256.1 million, respectively, related to acquisitions. The majority of our floor plan notes are payable to parties unaffiliated with the entities from which we purchase our new vehicle inventory, with the exception of floor plan notes payable relating to the financing of new Ford and Lincoln vehicles. We did not have any dealership acquisitions in 2024.
During the years ended December 31, 2025, 2024, and 2023, we made non-trade floor plan repayments of $10.21 billion, $9.66 billion, and $7.06 billion, respectively. In addition, during the years ended December 31, 2025 and 2024, we had floor plan repayments associated with dealership divestitures of $90.7 million and $34.1 million, respectively. During 2023, we did not have any floor plan repayments associated with dealership divestitures.
Proceeds from borrowings totaled $546.5 million for the year ended December 31, 2025. We did not have proceeds from borrowings for the years ended December 31, 2024 and 2023, respectively.
Repayments of borrowings totaled $234.1 million, $71.4 million and $126.0 million, for the years ended December 31, 2025, 2024, and 2023, respectively.
During the years ended December 31, 2025, 2024, and 2023 we repurchased 432,752, 830,297, and 1,316,167 shares of our common stock under our Repurchase Program for a total of $99.9 million, $183.0 million and $258.1 million and 44,212, 46,941 and 48,262 shares of our common stock for $12.8 million, $10.2 million and $11.4 million from employees in connection with a net share settlement feature of employee equity-based awards, respectively.
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Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements during any of the periods presented other than those disclosed in Note 21 "Commitments and Contingencies" of the Company's consolidated financial statements.
Guarantor Financial Information
As of December 31, 2025, the Company had outstanding $405.0 million of 4.500% Senior Notes due 2028 and $445.0 million of 4.750% Senior Notes due 2030. As explained in Note 14 of the Company's consolidated financial statements as of and for the year ended December 31, 2025, the Senior Notes have been fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by each existing and future restricted subsidiary of the Company (the "Guarantor Subsidiaries"), which are listed in Exhibit 21, with the exception of Landcar Administration Company, Landcar Agency, Inc. and Landcar Casualty Company and their respective subsidiaries (collectively, the "TCA Non-Guarantor Subsidiaries").
The following tables present summarized financial information for the Company and the Guarantor Subsidiaries on a combined basis after elimination of (i) intercompany transactions and balances among Asbury and the Guarantor Subsidiaries and (ii) assets, liabilities, and equity in earnings from and investments in any non-guarantor subsidiaries.
Summarized Balance Sheet Data of Asbury and Guarantor Subsidiaries
As of December 31,
(In millions)
Current assets
Current assets - affiliates
Non-current assets
Current liabilities
Current liabilities - affiliates
Non-current liabilities
Summarized Statement of Operations Data for Asbury and Guarantor Subsidiaries
For the Year Ended December 31,
(In millions)
Net sales
Gross profit
Income from operations
Net income
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities, as of the date of the financial statements, and reported amounts of revenues and expenses during the periods presented. On an ongoing basis, management evaluates their estimates and assumptions and the effects of any such revisions are reflected in the financial statements, in the period in which they are determined to be necessary. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our consolidated financial statements. Set forth below are the policies and estimates that we have identified as critical to our business operations and understanding our results of operations, based on the high degree of judgment or complexity in their application.
Goodwill and Manufacturer Franchise Rights
Goodwill represents the excess cost of an acquired business over the fair market value of its identifiable assets and liabilities. We have determined, based on how we integrate acquisitions into our business, how the components of our business
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share resources and interact with one another, and how we review the results of our operations, that we have several geographic region-based operating segments. We have determined the dealerships in each of our operating segments are components that are aggregated into geographic region-based operating segments which are also our reporting units for the purpose of testing goodwill for impairment, as they (i) have similar economic characteristics, (ii) offer similar products and services (all of our franchised dealerships offer new and used vehicles, parts and service, and arrange for third-party vehicle financing and the sale of insurance products), (iii) have similar customers, (iv) have similar distribution and marketing practices (all of our dealerships distribute products and services through dealership facilities that market to customers in similar ways) and (v) operate under similar regulatory environments. Our TCA segment also represents a reporting unit for the purpose of testing goodwill for impairment.
Our only other significant identifiable intangible assets are our rights under franchise agreements with manufacturers, which are recorded at an individual franchise level. The fair value of our manufacturer franchise rights are determined at the acquisition date, by discounting the projected cash flows specific to each franchise. We have determined that manufacturer franchise rights have an indefinite life as there are no economic, contractual or other factors that limit their useful lives, and they are expected to generate cash flows indefinitely due to the historically long lives of the manufacturers' brand names. Furthermore, to the extent that any agreements evidencing our manufacturer franchise rights would expire, we expect that we would be able to renew those agreements in the ordinary course of business.
We do not amortize goodwill and other intangible assets that are deemed to have indefinite lives. We review goodwill and manufacturer franchise rights for impairment annually as of October 1 st , or more often if events or circumstances indicate that any impairment may have occurred. We have the option of performing a qualitative assessment of impairment to determine whether any further quantitative assessment for impairment is necessary. The option of whether or not to perform a qualitative assessment is made annually and may vary by reporting unit. Factors we consider in the qualitative assessment include general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our reporting units, events or changes affecting the composition or carrying amount of the net assets of our reporting units, sustained decrease in our share price, and other relevant entity-specific events. If we elect to bypass the qualitative assessment or if we determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, a quantitative test would be required.
As a result of our annual franchise rights impairment tests as of October 1, 2025, we identified several dealerships with franchise rights carrying values that exceeded their fair values due to the underperformance of certain stores. As a result, we recognized a $115.0 million pre-tax non-cash impairment charge related to our franchise rights intangible assets during the year ended December 31, 2025.
In connection with our annual goodwill impairment tests, we performed qualitative impairment tests of goodwill as of October 1, 2025. For all reporting units, for which a qualitative impairment test was performed as of October 1, 2025, the fair values exceeded their carrying amounts. We believe that the fair value of our reporting units is substantially in excess of its carrying amount.
We also recorded a franchise rights impairment charge of $26.0 million during the year ended December 31, 2025 related to dealerships that met the assets held for sale criteria during 2025. The quantitative impairment test of the disposal group included a comparison of the estimated fair value, less costs to sell, to the carrying value of the disposal group. This asset impairment charge is reflected in asset impairments in our consolidated statements of income.
In total, we recognized asset impairments of $141.0 million, $149.5 million and $117.2 million during the years ended December 31, 2025, 2024, and 2023, respectively.
We continue to monitor developments related to macroeconomic conditions and the performance of our stores and reporting units. It is reasonably possible that future developments could have a negative effect on the estimates and assumptions utilized in our impairment assessments and could result in material impairment charges in future periods.
