10q10k10q10k.net

What changed in LITHIA MOTORS INC's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of LITHIA MOTORS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+246 added−231 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in LITHIA MOTORS INC's 2023 10-K

246 paragraphs added · 231 removed · 186 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

33 edited+21 added−15 removed37 unchanged
Biggest changeBusiness Overview Lithia Motors, Inc. is the premier automotive retailer in North America, offering a wide selection of vehicles across global carmakers and providing a full suite of financing, leasing, repair, and maintenance options. Purchasing and owning a vehicle is easy and hassle-free with convenient solutions offered through our comprehensive network of locations, e-commerce platforms, and captive finance division.
Biggest changeBusiness Overview Lithia Motors, Inc. is one of the largest global automotive retailers providing an array of products and services throughout the vehicle ownership lifecycle. Convenient and hassle-free 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.
In addition, we generally experience higher volume of luxury vehicles, which have higher average selling prices and 6 gross profit per vehicle, during the fourth quarter. The timing of our acquisition activity, which varies, and ability to integrate stores into our existing cost structure has moderated this seasonality.
In addition, we generally experience higher volume of luxury vehicles, which have higher average selling prices and gross profit per vehicle, during the fourth quarter. The timing of our acquisition activity, which varies, and ability to integrate stores into our existing cost structure has moderated this seasonality.
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. 2 Growth through acquisition and network optimization Our acquisition growth strategy has been successful both financially and culturally.
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.
We may 5 become aware of minor contamination at certain of our facilities, and we conduct investigations and remediation at properties as needed. In certain cases, the current or prior property owner may conduct the investigation and/or remediation or we have been indemnified by either the current or prior property owner for such contamination.
We may become aware of minor contamination at certain of our facilities, and we conduct investigations and remediation at properties as needed. In certain cases, the current or prior property owner may conduct the investigation and/or remediation or we have been indemnified by either the current or prior property owner for such contamination.
Under certain laws, a manufacturer may not terminate or fail to renew a franchise without good cause or prevent any reasonable changes in the capital structure or financing of a store.
Under certain laws, a manufacturer may not 4 terminate or fail to renew a franchise without good cause or prevent any reasonable changes in the capital structure or financing of a store.
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 296 stores and with Driveway, our e-commerce home delivery experience, and GreenCars, our electric vehicle learning resource and marketplace.
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 344 stores and with Driveway, our e-commerce home delivery experience, and GreenCars, our electric vehicle learning resource and marketplace.
Examples of forward-looking statements in this Form 10-K include, among others, statements 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 2025 Plan and related targets • The growth, expansion 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 • 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 for customer retention, growth, market position, financial results and risk management Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control.
Examples of forward-looking statements in this Form 10-K include, among others, statements 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 2025 Plan and related targets • 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 Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control.
Item 1. Business Forward-Looking Statements Certain statements in this Annual Report, including in the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” constitute forward-looking statements within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995.
Forward-Looking Statements Certain statements in this Annual Report, including in the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” constitute forward-looking statements within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995.
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.
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.
Our comprehensive network enables us to provide convenient touch points for customers and provide 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 comprehensive network enables us to provide convenient touch points for customers and provide 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 to drive high performance.
These 300+ online channels provide customers with simple, transparent ways to manage their vehicle ownership including: search new and used inventories, view current pricing, apply incentives and offers, calculate payments for purchase or lease, apply for financing, buy online, sell their vehicle, schedule service appointments, schedule vehicle pick-up and delivery, and provide us feedback about their experience.
These online channels provide customers with simple, transparent ways to manage their vehicle ownership including search new-and-used inventories, view current pricing, apply incentives and offers, calculate payments for purchase or lease, apply for financing, buy online, sell their vehicle, offering the consumer to schedule service appointments both in store or at home, schedule vehicle pick-up and delivery, and provide us feedback about their experience.
Our free cash flow deployment strategy targets an allocation of 65% investment in acquisitions, 25% investment in capital expenditures, innovation, and diversification and 10% in shareholder return in the form of dividends and share repurchases. During 2022, we utilized $303.1 million for capital expenditures investing in our existing business and paid $45.2 million in dividends.
Our free cash flow deployment strategy targets an allocation of 65% investment in acquisitions, 25% investment in capital expenditures, innovation, and diversification and 10% in shareholder return in the form of dividends and share repurchases. During 2023, we utilized $230.2 million for capital expenditures investing in our existing business and paid $52.8 million in dividends.
Currently, there are more than 16,500 new vehicle franchise dealers in the United States, many of which are independent stores managed by individuals, families or small retail groups. We compete primarily with other automotive retailers, both publicly- and privately-held and other used-only automotive retailers such as CarMax, Carvana, Shift and Vroom.
Currently, there are more than 16,500 new vehicle franchise dealers in the United States, 4,500 in the UK, and 3,400 in Canada. Many of these franchised dealers are independent stores managed by individuals, families or small retail groups. We compete primarily with other automotive retailers, both publicly- and privately-held and other used-only automotive retailers such as CarMax, Carvana, and Cazoo.
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.
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 2 loyalty, achieving store potential, developing high-performing talent, meeting and exceeding manufacturer requirements and living our core values.
As of December 31, 2022, we had available liquidity of $1.6 billion, which was comprised of $168.1 million in cash and $1.4 billion availability on our credit facilities. In addition, our unfinanced real estate could provide additional liquidity of approximately $0.5 billion.
As of December 31, 2023, we had available liquidity of $1.7 billion, which was comprised of $825.0 million in cash and $870.4 million availability on our credit facilities. In addition, our unfinanced real estate could provide additional liquidity of approximately $0.4 billion.
Certain advertising and marketing expenditures are offset by manufacturer cooperative programs, which require us to submit requests for reimbursement to manufacturers for qualifying advertising expenditures. These advertising credits are not tied to specific vehicles and are earned as qualifying expenses are incurred. These reimbursements are recognized as a 3 reduction of advertising expense.
Our manufacturer partners influence a significant portion of our advertising expense. Certain advertising and marketing expenditures are offset by manufacturer cooperative programs, which require us to submit requests for reimbursement to manufacturers for qualifying advertising expenditures. These advertising credits are not tied to specific vehicles and are earned as qualifying expenses are incurred.
We also target an investment in intangibles as a percentage of annualized revenues in the range of 15% to 30%. During 2022, we acquired 31 stores, opened one store, and divested thirteen stores. We invested $1.1 billion, net of floor plan debt, to acquire these stores and we anticipate these acquisitions to add nearly $3.5 billion in annualized revenues.
We also target an investment in intangibles as a percentage of annualized revenues in the range of 15% to 30%. During 2023, we acquired 56 stores and divested eight stores. We invested $1.1 billion, net of floor plan debt, to acquire these stores and we anticipate these acquisitions to add nearly $3.8 billion in annualized revenues.
Manufacturer cooperative advertising credits were $46.3 million in 2022, $35.6 million in 2021 and $23.9 million in 2020. Franchise Agreements Each of our stores operates under a separate franchise agreement with the manufacturer of the new vehicle brand it sells.
These reimbursements are recognized as a reduction of advertising expense. Manufacturer cooperative advertising credits were $54.2 million in 2023, $46.3 million in 2022 and $35.6 million in 2021. Franchise Agreements Each of our stores operates under a separate franchise agreement with the manufacturer of the new vehicle brand it sells.
We do not have any cost advantage in purchasing new vehicles from manufacturers. We rely on advertising and merchandising, pricing, our customer guarantees and sales model, our sales expertise, service reputation and the location of our stores to sell new vehicles. Regulation Automotive and Other Laws and Regulations We operate in a highly regulated industry.
We rely on advertising and merchandising, pricing, our customer guarantees and sales model, our sales expertise, service reputation and the location of our stores to sell new vehicles. Regulation Automotive and Other Laws and Regulations We operate in a highly regulated industry. A number of state and federal laws and regulations affect our business.
The reduction of administrative functions at our stores allows our local managers to focus on customer-facing opportunities to increase revenues and gross profit.
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 financing activities with customers are subject to numerous federal, state and local laws and regulations. In recent years, there has been an increase in activity related to oversight of consumer lending by the Consumer Financial Protection Bureau (CFPB), which has broad regulatory powers. The CFPB has supervisory authority over large non-bank auto finance companies, including DFC.
In recent years, there has been an increase in activity related to oversight of consumer lending by the Consumer Financial Protection Bureau (CFPB), which has broad regulatory powers. The CFPB has supervisory authority over large non-bank auto finance companies, including DFC. The CFPB can use this authority to conduct supervisory examinations to ensure compliance with various federal consumer protection laws.
A number of state and federal laws and regulations affect our business. In every state in which we operate, we must obtain various licenses to operate our businesses, including dealer, sales and finance and insurance licenses issued by state regulatory authorities.
In every state in which we operate, we must obtain various licenses to operate our businesses, including dealer, sales and finance and insurance licenses issued by state regulatory authorities. Numerous laws and regulations govern our business, including those relating to our sales, operations, financing, insurance, advertising and employment practices.
Certain state franchise laws also restrict us from relocating our dealerships, or establishing new dealerships of a particular brand, within any area that is served by another dealer with the same brand.
Certain state franchise laws also restrict us from relocating our dealerships, or establishing new dealerships of a particular brand, within any area that is served by another dealer with the same brand. To the extent that a market has multiple dealers of a particular brand, as certain markets we operate in do, we are subject to significant intra-brand competition.
Numerous laws and regulations govern our business, including those relating to our sales, operations, financing, insurance, advertising and employment practices. These laws and regulations include state franchise laws and regulations, consumer protection laws, privacy laws, escheatment laws, anti-money laundering laws and federal and state wage-hour, anti-discrimination and other employment practices laws.
These laws and regulations include state franchise laws and regulations, consumer protection laws, privacy laws, escheatment laws, anti-money laundering laws and federal and state wage-hour, anti-discrimination and other employment practices laws. Our financing activities with customers are subject to numerous federal, state and local laws and regulations.
Diversifying 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 Driveway and GreenCars brands compliment our in-store experiences and provide convenient, simple, and transparent platforms that serve as our e-commerce home solutions. Diversifying 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.
We compete directly with retailers with similar or greater resources in our existing metro and non-metro markets. We also compete based on dealer reputation in the various markets. If we enter other new markets, we may face competitors that have access to greater financial resources or have strong brands.
We are larger and have more financial resources than most private automotive retailers with which we currently compete in the majority of our regional markets. We compete directly with retailers with similar or greater resources in our existing metro and non-metro markets. We also compete based on dealer reputation in the various markets.
The majority of our revenues are generated within the United States and the majority of our property and equipment is located within the United States. 1 Lithia and Driveway (LAD) offers a wide array of products and services fulfilling the entire vehicle ownership lifecycle including new and used vehicles, finance and insurance products and automotive repair and maintenance.
Year Ended December 31, 2023 Total Revenue Total Gross Profit United States 90 % 92 % United Kingdom 6 % 5 % Canada 4 % 3 % Lithia and Driveway (LAD) offers a wide array of products and services fulfilling the entire vehicle ownership lifecycle including new and used vehicles, finance and insurance products and automotive repair and maintenance.
The vehicles we sell are also subject to rules and regulations of various federal and state regulatory agencies.
These claims may expose us to significant damages or other penalties, including revocation or suspension of our licenses to conduct store operations and fines. The vehicles we sell are also subject to rules and regulations of various federal and state regulatory agencies.
During 2022, our unique visitors increased over 80% on a same store basis. Total advertising expense, net of manufacturer credits, was $253.6 million in 2022, $162.2 million in 2021 and $97.4 million in 2020. In 2022, we spent 83% on digital, social, listings and owner communications, while 17% was spent on traditional media.
Total advertising expense, net of manufacturer credits, was $248.2 million in 2023, $253.6 million in 2022 and $162.2 million in 2021. Over 82% of our advertising spent in 2023 was on digital, social, listings, and one-to-one owner communications. In all of our communications, we seek to convey the promise of a positive customer experience, competitive pricing, and wide selection.
Utilizing data analysis and multi-channel communications, we strive to attract and retain customers throughout the vehicle ownership life cycle. With a vast selection represented by the nation’s largest vehicle inventory for sale online, we employ search engine optimization, search engine marketing, online display, re-targeting, social advertising, traditional media and direct marketing to reach consumers.
With a vast selection represented by the largest U.S. new and preowned vehicle inventory for sale online, we employ search engine optimization, search engine marketing, online display, retargeting, social advertising, traditional media, and direct marketing to reach consumers. Most consumers begin their shopping, buying, or selling activity on our store websites, Driveway, and GreenCars.
The CFPB can use this authority to conduct supervisory examinations to ensure compliance with various federal consumer protection laws. The CFPB does not have direct authority over automotive dealers; however, its regulation of larger automotive finance companies and other financial institutions could affect our financing activities.
The CFPB does not have direct authority over automotive dealers; however, its regulation of larger automotive finance companies and other financial institutions could affect our financing activities. Claims arising out of actual or alleged violations of law may 5 be asserted against us or our stores by individuals, a class of individuals, or governmental entities.
As our business evolves, we will remain focused on having human capital capabilities, systems and processes in place to support and align with our strategy.
As our business continues to evolve, our unwavering focus remains on ensuring that our human capital capabilities, systems, and processes are well-aligned with and in support of our strategic objectives and growth plans.
Human Capital Driven by our mission statement, “Growth Powered by People,” we place a high degree of value in each of our team members and their individual professional success. Promoting and hiring the best talent available, defining clear expectations, providing excellent training and rewarding performance helps us build dynamic teams to serve our customers.
Human Capital Inspired by our mission statement, “Growth Powered by People,” we prioritize the importance of every Lithia & Driveway associate’s professional success, well-being, and safety. Our approach to attracting, retaining, rewarding, and developing the best talent includes defining clear expectations, providing exceptional training, and recognizing employee milestones and metrics.
Removed
We deliver profitable growth through the consolidation of the largest retail sector in North America, modernizing the retail experience to be wherever, whenever and however our consumers desire. As of December 31, 2022, we operated 296 locations representing 48 brands in two countries, across 28 U.S. states and 3 Canadian provinces.
Added
Item 1. Business As used in this Annual Report, the terms “Lithia,” “Lithia and Driveway,” “LAD,” “the Company,” “we,” “us,” and “our” refer collectively to Lithia Motors, Inc. and its subsidiaries, unless otherwise required by the context. Our store operations are conducted by our subsidiaries.
Removed
Our Driveway and GreenCars brands compliment our in-store experiences and provide convenient, simple, and transparent platforms that serve as our e-commerce home solutions and allow us to deliver differentiated, proprietary digital experiences.
Added
Our highly 1 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 December 31, 2023, we operated 344 locations representing 47 brands across the United States, United Kingdom, and Canada.
Removed
Marketing One of our core values, Earn Customers for Life, defines our market strategy by appealing to our consumers’ desire for affordability, transparency and convenience. We employ national, regional and local brands to connect with consumers with advertising tailored to the individual brand and market.
Added
Marketing Lithia & Driveway’s core value, “Earn Customers for Life”, drives our marketing strategy to empower consumers throughout the vehicle ownership lifecycle. To place ease and value at our customers’ fingertips, we are constantly evolving the retail experience where customers can choose transparent, convenient ways to buy, sell, or service their vehicles wherever, whenever, and however they desire.
Removed
Most consumers begin their shopping, buying or selling activity on our store websites, Driveway, and GreenCars.
Added
Our national, regional, and local brands connect with consumers through advertising tailored to the individual brand and market. Utilizing data and omnichannel communications, we strive to create deeper and richer offerings to build lifelong loyalty throughout the vehicle ownership life cycle.
Removed
In all of our communications, we seek to convey the promise of a positive customer experience, competitive pricing and wide selection. We expect the portion of spending in digital channels to continue to increase as traditional media evolves to online consumption models. Our manufacturer partners influence a significant portion of our advertising expense.
Added
With the importance of keeping consumer communications relevant, based on where they are in the shopping process or lifecycle of ownership, we have built a proprietary customer lifecycle communication platform. In an 3 industry where the competition often relies on third parties to manage their customer data, we manage our data internally.
Removed
To the extent that a market has multiple dealers of a particular brand, as certain markets we operate in do, we are subject to significant intra-brand competition. 4 We are larger and have more financial resources than most private automotive retailers with which we currently compete in the majority of our regional markets.
Added
This goes beyond automotive needs, allowing us to leverage our customer insights across many revenue streams.
Removed
Claims arising out of actual or alleged violations of law may be asserted against us or our stores by individuals, a class of individuals, or governmental entities. These claims may expose us to significant damages or other penalties, including revocation or suspension of our licenses to conduct store operations and fines.
Added
In 2023, our unique visitors increased over 30% on a same store basis from 2022. Driveway, our online experience, puts customers in control of every aspect of their car ownership.
Removed
We cultivate an entrepreneurial, high-performance culture and strive to develop leaders from within. We continue to develop tools, training and growth opportunities that accelerate the depth of our talent. As of December 31, 2022, we employed approximately 21,875 persons on a full-time equivalent basis in our North American network of 296 retail locations.
Added
They can browse a vast nationwide inventory of new, used, and certified pre-owned vehicles (CPO), then get a vehicle shipped straight to their driveway or pick it up from one of Lithia’s 300+ stores. In 2023, approximately 31.5 million unique users visited Driveway.com, a 46% increase from 2022.
Removed
Our total workforce was comprised of approximately 22% female employees and approximately 49% of minorities. Our management consisted of approximately 24% females and approximately 23% minorities in leadership positions. In both 2022 and 2021, approximately 96% of our workforce earned above minimum wage.
Added
We believe no-haggle pricing transparency and a 7-day money-back guarantee make Driveway the better way to buy, sell, finance, or trade in a car online.
Removed
Some examples of our key programs and initiatives that are focused on attracting, retaining and developing our high performing workforce include: • AMP programs (Accelerate My Potential), which began in 2016, were initially designed with a focus on developing General Manager succession.
Added
With the industry transitioning to more sustainable practices and alternative-fuel vehicles, we are excited that GreenCars, our online education resource for sustainable mobility, had approximately 5.9 million unique visitors in 2023 at GreenCars.com, a 58% increase from 2022.
Removed
Since 2021, the programs have extended beyond General Manager succession and now focus on developing and better positioning high performers for multiple future leadership roles including Director, Group and Regional Vice President as well as General Manager. • DART (Data Analyst Rotational Training) started in 2020 as a rotational program designed to build data-minded, customer centric, proactive leaders who push the organization to be the best it can be for our customers.
Added
GreenCars is a leading source of knowledge designed to promote the acceleration of electric vehicle (EV) adoption by educating the consumer on such topics as (1) fuel-efficient offerings from model comparisons, (2) personalized incentives, and (3) local rebates to charging network. GreenCars even connects consumers with the largest new-and-preowned inventory for when they are ready to purchase their sustainable vehicle.
Removed
The program gives on-the-job exposure to various departments through rotations, while providing supplemental training necessary to accelerate individual contributors into leadership roles all while finding their best fit within the company. • Lithia Women Lead, which began in 2015, provides an avenue for women in the organization to connect, learn and develop.
Added
If we enter other new markets, we may face competitors that have access to greater financial resources or have strong brands. We do not have any cost advantage in purchasing new vehicles from manufacturers.
Removed
The program includes events throughout the year that provide women in the organization the opportunity to network, act as role models and inspire one another’s growth. • Culture Council, which began in 2021, is designed to promote diversity, equity and inclusion (DEI) in our workforce by identifying areas to improve, raising awareness, and integrating DEI elements into how we operate, train and develop our teams.
Added
These efforts are integral to building dynamic teams who will “Earn Customers for Life” and drive operational excellence. We foster an entrepreneurial, high-performance, customer-centric culture designed to encourage internal promotions, develop leadership skills, and offer professional growth opportunities.
Removed
The Culture Council is comprised of a diverse group of executive level and non-executive level members, working together with the common goal of ensuring our employees reflect the diversity of our customers, reinforcing our mission and culture and enhancing employee engagement. • Learning & Development is aimed to promote employee professional development through various programs including curated content paths in our Learning Center, targeted LinkedIn Learning curriculums, tuition reimbursement programs covering up to 75% of an employee’s undergraduate or graduate tuition costs and Master Automotive Service Excellence (ASE) training and certification and Original Equipment Manufacturer (OEM) training for our technicians.
Added
As of December 31, 2023, our subsidiaries employed approximately 27,446 persons on a full-time equivalent basis in our global network of 344 retail locations. Our total workforce was comprised of approximately 21% female employees and approximately 45% of minorities. Our management consisted of approximately 21% females and approximately 36% minorities in leadership positions.
Removed
We also continue to invest in and expand the roles and capabilities of our workforce to drive the development and support of our e-commerce and digital technology capabilities. We believe there is a competitive advantage to integrating and developing individuals with these skill sets, and they are an integral part of supporting our five-year growth plan and launch of Driveway.
Added
In both 2023 and 2022, approximately 97% of our workforce earned above minimum wage. Some examples of our key employee-focused programs and initiatives include: • In 2023, we launched a company-wide Culture Poll to amplify the employee voice. With an 80% participation rate, the survey revealed engagement scores surpassing benchmarks, indicating positive 6 progress in creating a positive workplace experience.
Added
The survey also offered valuable insights, leading to the development of action plans by managers to address opportunities to “Improve Constantly.” • The DART (Develop, Analyze, Research, and Transform) Program started in 2020 to build high-performing leaders who aid in achieving our goal to redefine the automotive industry by providing transportation solutions wherever, whenever, and however consumers desire.
Added
The DART Program is designed to give on-the-job exposure to various areas of the organization through rotations while providing supplemental training necessary to grow internal talent into leadership roles. The program identifies data-centric, customer-focused, proactive people who will push stores to be their best for our customers.
Added
DART participants learn the ins and outs of performance standards and build relationships cross-functionally to achieve milestones and accelerate their careers. • Launched in 2016, the AMP (Accelerate My Potential) Program initially targeted general manager readiness.
Added
Since 2021, it has evolved to focus on preparing high performers for various leadership roles beyond general manager. • Introduced in 2015, the Women LEAD (Learn, Explore, Achieve, and Develop) Program offers a platform for women within the organization to connect, learn, and grow together.
Added
Featuring events throughout the year, the program facilitates networking, role modeling, and learning opportunities aimed to foster professional development. • Our learning and development initiatives are dedicated to promoting employee growth through curated content paths, specialized curriculums, and tuition reimbursement programs covering up to 75% of undergraduate or graduate tuition costs.
Added
Additional programs provide Master Automotive Service Excellence (ASE) training and certification, along with Original Equipment Manufacturer training for technicians. As one of the largest global automotive retailers, we are committed to ongoing investments in expanding the roles and skills of our workforce to drive customer excellence and operational performance.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

53 edited+13 added−2 removed114 unchanged
Biggest changeOur operating margins may decline over time as we expand into markets where we do not have a leading position. 8 Changes to the automotive industry and consumer views on car ownership could materially adversely affect our business, results of operations, financial condition and cash flows.
Biggest changeChanges to the automotive industry and consumer views on car ownership could materially adversely affect our business, results of operations, financial condition and cash flows. The automotive industry is predicted to experience rapid change in the years to come, including advances in electric vehicle production, driverless technology, co-ownership and subscription business models.
Any security breach or event resulting in the misappropriation, loss, or other unauthorized disclosure of confidential information, or degradation of services provided by critical business systems, whether by us directly or our third-party service providers, could adversely affect our business operations, sales, reputation with current and potential 14 customers, associates or vendors, as well as other operational and financial impacts derived from investigations, litigation, imposition of penalties or other means.
Any security breach or event resulting in the misappropriation, loss, or other unauthorized disclosure of confidential information, or degradation of services provided by critical business systems, whether by us directly or our third-party service providers, could adversely affect our business operations, sales, reputation with current and potential customers, associates or vendors, as well as other operational and financial impacts derived from investigations, litigation, imposition of penalties or other means.
Our sales volume could be materially adversely impacted by a manufacturer’s or distributor’s inability to supply our stores with an adequate supply of vehicles. In the event of a manufacturer or distributor bankruptcy, we could be held liable for damages related to product liability claims, intellectual property suits or other legal actions.
Our sales volume could be materially adversely impacted by a manufacturer’s or distributor’s inability to supply our stores with an adequate supply of vehicles. 10 In the event of a manufacturer or distributor bankruptcy, we could be held liable for damages related to product liability claims, intellectual property suits or other legal actions.
In addition, state dealer laws restrict the ability of vehicle manufacturers to directly enter the retail market. Manufacturer lobbying efforts and lawsuits may lead to the repeal or revision of these laws. For example, Tesla has received a favorable ruling in certain states allowing direct to consumer sales and service.
In addition, state dealer laws restrict the ability of vehicle manufacturers to directly enter the retail market. Manufacturer lobbying efforts and lawsuits may lead to the repeal or revision of these laws. For example, Tesla has 15 received a favorable ruling in certain states allowing direct to consumer sales and service.
Our business and results of operations are substantially dependent on new vehicle sales levels in the United States and in our particular geographic markets and the level of gross profit margins that we can achieve on our sales of new vehicles, all of which are very difficult to predict. Our business is heavily dependent on consumer demand and preferences.
Our business and results of operations are substantially dependent on new vehicle sales levels in the United 7 States and in our particular geographic markets and the level of gross profit margins that we can achieve on our sales of new vehicles, all of which are very difficult to predict. Our business is heavily dependent on consumer demand and preferences.
As a result of the terms of our franchise agreements, manufacturers exert significant control over the day-to-day operations at our stores. Such agreements contain provisions for termination or non-renewal for a variety of causes, including service retention, facility compliance, customer satisfaction and sales and financial performance.
As a result 11 of the terms of our franchise agreements, manufacturers exert significant control over the day-to-day operations at our stores. Such agreements contain provisions for termination or non-renewal for a variety of causes, including service retention, facility compliance, customer satisfaction and sales and financial performance.
Key incentive programs include: • customer rebates; • dealer incentives on new vehicles; 10 • special financing rates on certified, pre-owned cars; and • below-market financing on new vehicles and special leasing terms. Our financial condition could be materially adversely impacted by a discontinuation or change in our manufacturers’ or distributors’ incentive programs.
Key incentive programs include: • customer rebates; • dealer incentives on new vehicles; • special financing rates on certified, pre-owned cars; and • below-market financing on new vehicles and special leasing terms. Our financial condition could be materially adversely impacted by a discontinuation or change in our manufacturers’ or distributors’ incentive programs.
Even if new financing were available, it may not be on terms acceptable to us. As a result of this risk, we could be forced to take actions that we otherwise would not take, or not take actions that we otherwise might take, in order to comply with these agreements.
Even if new financing were available, it may not be on terms acceptable to us. As a result of this risk, we could be 12 forced to take actions that we otherwise would not take, or not take actions that we otherwise might take, in order to comply with these agreements.
Economic conditions and the other factors described above may also materially adversely impact our sales of used vehicles, parts and repair and maintenance services, and automotive finance and insurance products. 7 Natural disasters, adverse weather conditions, and public health emergencies can disrupt our business.
Economic conditions and the other factors described above may also materially adversely impact our sales of used vehicles, parts and repair and maintenance services, and automotive finance and insurance products. Natural disasters, adverse weather conditions, and public health emergencies can disrupt our business.
These risks may include, but are not limited to, the following: • fluctuations in foreign currency translations within our financial statements driven by exchange rate volatility; • inability to obtain or preserve franchise rights in the foreign countries in which we operate; • compliance with changing laws and regulations; • compliance with United States Foreign Corrupt Practices Act and other anti-corruption laws; • wage inflation; 13 • treatment of revenue from international sources and changes to tax rules, including being subject to foreign tax laws; • difficulties in managing foreign operations and dealing with different customs, practices and local regulations with which we are less familiar; • large uncertainties, timing delays and expenses associated with tariffs, labor matters, import or export licenses and other trade barriers; and • changes in a country’s economic or political conditions, including inflation, recession and interest rate fluctuations, and exposure to regional or global public health issues, pandemics, or epidemics, such as the outbreak of the COVID-19 pandemic.
These risks may include, but are not limited to, the following: • fluctuations in foreign currency translations within our financial statements driven by exchange rate volatility; • inability to obtain or preserve franchise rights in the foreign countries in which we operate; • changes in distribution models in the foreign countries in which we operate; • compliance with changing laws and regulations; • compliance with United States Foreign Corrupt Practices Act and other anti-corruption laws; • wage inflation; • treatment of revenue from international sources and changes to tax rules, including being subject to foreign tax laws; • difficulties in managing foreign operations and dealing with different customs, practices and local regulations with which we are less familiar; • large uncertainties, timing delays and expenses associated with tariffs, labor matters, import or export licenses and other trade barriers; and • changes in a country’s economic or political conditions, including inflation, recession and interest rate fluctuations, and exposure to regional or global public health issues, pandemics, or epidemics, such as the outbreak of the COVID-19 pandemic.
Losses in excess of our allowance for losses could have a material adverse effect on our business and results of operations. The growth and success of our DFC business is dependent upon obtaining sufficient capital to grow our auto loan portfolio.
Losses in excess of our allowance for losses could have a material adverse effect on our business and results of operations. 13 The growth and success of our DFC business is dependent upon obtaining sufficient capital to grow our auto loan portfolio.
See Note 11 – Derivative Financial Instruments, related to current hedge activity. 12 We may not be able to satisfy our debt obligations upon the occurrence of a change in control under our debt instruments.
See Note 11 – Derivative Financial Instruments, related to current hedge activity. We may not be able to satisfy our debt obligations upon the occurrence of a change in control under our debt instruments.
Failure to comply with applicable laws and regulations, or significant additional expenditures required to maintain compliance therewith, may have a material adverse effect on our business, results of operations, financial condition, cash flows and prospects. 16 Structural and Organizational Risks Our ability to increase revenues and profitability through acquisitions depends on our ability to acquire and successfully integrate new vehicle franchises.
Failure to comply with applicable laws and regulations, or significant additional expenditures required to maintain compliance therewith, may have a material adverse effect on our business, results of operations, financial condition, cash flows and prospects. 17 Structural and Organizational Risks Our ability to increase revenues and profitability through acquisitions depends on our ability to acquire and successfully integrate new vehicle franchises.
In addition, as we expand into new markets and develop our digital e-commerce solutions, we will need to hire additional managers, engineers, data scientists and other employees. The market for qualified employees in the 17 automotive and technology-related industries is highly competitive and may subject us to increased labor costs during periods of low unemployment.
In addition, as we expand into new markets and develop our digital e-commerce solutions, we will need to hire additional managers, engineers, data scientists and other employees. The market for qualified employees in the 18 automotive and technology-related industries is highly competitive and may subject us to increased labor costs during periods of low unemployment.
Our dealerships are in states and regions in the United States and Canada in which actual or threatened natural disasters and severe weather events (such as hurricanes, earthquakes, fires, floods, landslides, wind and/or hail storms) or other extraordinary events have in the past, and may in the future, disrupt our dealership operations and impair the value of our dealership property.
Our dealerships are in states and regions in the United States, Canada, and the U.K. in which actual or threatened natural disasters and severe weather events (such as hurricanes, earthquakes, fires, floods, landslides, wind and/or hail storms) or other extraordinary events have in the past, and may in the future, disrupt our dealership operations and impair the value of our dealership property.
The impact of reducing or pausing our auto loan financing business could result in a material adverse effect on our results of operations. Risks associated with our international operations may negatively affect our business, results of operations and financial condition. We operate dealerships in the United States and Canada.
The impact of reducing or pausing our auto loan financing business could result in a material adverse effect on our results of operations. Risks associated with our international operations may negatively affect our business, results of operations and financial condition. We operate dealerships in the United States, Canada, and the U.K.
Certain manufacturers and states have declared commitments to various electric vehicle and zero emissions goals, such as the state of California’s executive order to require all new cars and passenger trucks sold in the state to be zero-emission vehicles by 2035.
Certain manufacturers and governments have declared commitments to various electric vehicle and zero emissions goals, such as the state of California’s executive order to require all new cars and passenger trucks sold in the state to be zero-emission vehicles by 2035.
We are subject to federal, state and local laws and regulations in the states in which we operate, such as those relating to franchising, motor vehicle sales, retail installment sales, leasing, finance and insurance, marketing, licensing, consumer protection, consumer privacy, escheatment, anti-money laundering, environmental, vehicle emissions and fuel economy, and health and safety.
We are subject to federal, state and local laws and regulations in the geographic regions in which we operate, such as those relating to franchising, motor vehicle sales, retail installment sales, leasing, finance and insurance, marketing, licensing, consumer protection, consumer privacy, escheatment, anti-money laundering, environmental, vehicle emissions and fuel economy, and health and safety.
The overall impact of these options on the automotive industry is uncertain, and may include lower levels of new vehicle sales or sales through channels that do not include us. Manufacturers continue to invest in increasing production and quality of electric vehicles, including Battery-Electric Vehicles (BEVs), Hybrid Electric Vehicles, and Plug-in Hybrid Electric Vehicles.
The overall impact of these options on the automotive industry is uncertain, and may include costly compliance challenges and lower levels of new vehicle sales or sales through channels that do not include us. Manufacturers continue to invest in increasing production and quality of electric vehicles, including Battery-Electric Vehicles (BEVs), Hybrid Electric Vehicles, and Plug-in Hybrid Electric Vehicles.
Any cost increase that disproportionately applies to manufacturers that sell to us could adversely affect our business compared to other vehicle retailers. 15 Our operations are subject to extensive governmental laws and regulations.
Any cost increase that disproportionately applies to manufacturers that sell to us could adversely affect our business compared to other vehicle retailers. 16 Our operations are subject to extensive governmental laws and regulations.
The automotive industry is beginning to experience change and disruption in the retail delivery model, including growing competition in the used vehicle market from companies with a primarily online e-commerce business model. Competition in this market includes companies such as CarMax, Carvana, Vroom and Shift.
The automotive industry is beginning to experience change and disruption in the retail delivery model, including growing competition in the used vehicle market from companies with a primarily online e-commerce business model. Competition in this market includes companies such as CarMax, Carvana, and Cazoo.
The United States and Canadian vehicle industry is considered a mature industry in which minimal growth is expected in unit sales of new vehicles. Accordingly, a principal component of our growth strategy is to make dealership acquisitions in our existing markets and in new geographic markets.
The vehicle industry in the United States, Canada, and the United Kingdom is considered a mature industry in which minimal growth is expected in unit sales of new vehicles. Accordingly, a principal component of our growth strategy is to make dealership acquisitions in our existing markets and in new geographic markets.
For the year ended December 31, 2022, approximately 20% of our service, body and parts revenue was for work covered by manufacturer warranties or manufacturer-sponsored maintenance services. To the extent a manufacturer reduces the labor rates or markup of replacement parts for such warranty work, our service, body and parts sales volume could be adversely affected.
For the year ended December 31, 2023, approximately 21% of our service, body and parts revenue was for work covered by manufacturer warranties or manufacturer-sponsored maintenance services. To the extent a manufacturer reduces the labor rates or markup of replacement parts for such warranty work, our service, body and parts sales volume could be adversely affected.
For example, the shortage of chip supply and labor disruptions in 2021 and 2022 have caused a significant constraint in the supply of new cars resulting in reduced volumes and increased gross profit margins on retail vehicle sales. As new vehicle availability improves, volumes may improve; however, gross profit margins may be impacted.
For example, the shortage of chip supply and labor disruptions in 2021 and 2022 caused a significant constraint in the supply of new cars resulting in reduced volumes and increased gross profit margins on retail vehicle sales. As new vehicle availability continues to improve, volumes may improve; however, gross profit margins may be impacted.
Economic conditions may be anemic for an extended period of time, or deteriorate in the future. This would have a material adverse effect on our retail business, particularly sales of new and used vehicles. The United States economy has recently experienced heightened inflationary pressures, impacting the costs of labor, fuel and other costs.
Economic conditions may be anemic for an extended period of time, or deteriorate in the future. This would have a material adverse effect on our retail business, particularly sales of new and used vehicles. The economies of the United States, Canada and the United Kingdom have recently experienced heightened inflationary pressures, impacting the costs of labor, fuel and other costs.
In addition, larger traditional automotive retailers are transforming their models to support omni-channel retail experiences, providing consumers with vehicle purchasing experiences outside of the traditional brick and mortar automotive dealership model. We continue to develop our own internal technology solutions to further expand the reach of our nationwide network of service and delivery points.
In addition, larger traditional automotive retailers are transforming their models to support omni-channel retail experiences, providing consumers with vehicle purchasing experiences outside of the traditional brick and mortar automotive dealership model. We continue to develop our own internal technology solutions to further expand the reach of the networks of service and delivery points in our geographic markets.
Costs in excess of these retained risks may be insured under various contracts with third-party insurance carriers. As of December 31, 2022, we had total reserve amounts associated with these programs of $67.4 million. The occurrence of regional epidemics or a global pandemic such as COVID-19 may adversely impact our business, results of operations, financial condition and cash flows.
Costs in excess of these retained risks may be insured under various contracts with third-party insurance carriers. As of December 31, 2023, we had total reserve amounts associated with these programs of $77.1 million. The occurrence of regional epidemics or a global pandemic such as COVID-19 may adversely impact our business, results of operations, financial condition and cash flows.
Our floor plan notes payable, credit facilities and a portion of our real estate debt are subject to variable interest rates. As of December 31, 2022, 65% of our total debt was variable rate. In the event interest rates increase, our borrowing costs may increase substantially.
Our floor plan notes payable, credit facilities and a portion of our real estate debt are subject to variable interest rates. As of December 31, 2023, 63% of our total debt was variable rate. In the event interest rates increase, our borrowing costs may increase substantially.
We have granted a security interest in a substantial portion of our assets to certain of our lenders and other secured parties, including those under our $3.8 billion syndicated credit facility and $1.1 billion CAD Canadian syndicated credit facility.
We have granted a security interest in a substantial portion of our assets to certain of our lenders and other secured parties, including those under our $4.6 billion syndicated credit facility and $1.1 billion CAD Canadian syndicated credit facility.
In the event that the cost to customers to finance vehicles becomes more expensive, due to increases in interest rates by the financing sources or their sources of capital, lenders tighten their credit standards, or available vehicle financing declines, consumers may be unable or less willing to purchase vehicles, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. 9 Adverse conditions affecting one or more key manufacturers may negatively affect our business, results of operations, financial condition and cash flows.
In the event that the cost to customers to finance vehicles becomes more expensive, due to increases in interest rates by the financing sources or their sources of capital, lenders tighten their credit standards, or available vehicle financing declines, consumers may be unable or less willing to purchase vehicles, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Additionally, other economic factors, such as rising and sustained periods of high crude oil and fuel prices, may impact consumer demand and preferences. As we operate internationally, including across 28 U.S. states and three Canadian Provinces, changes in and the severity of economic conditions may vary by market.
Additionally, other economic factors, such as rising and sustained periods of high crude oil and fuel prices, may impact consumer demand and preferences. As we operate internationally, including across the U.S., Canada, and the U.K., changes in and the severity of economic conditions may vary by market.
Breaches in our data security systems or in systems used by our vendor partners, including cyber-attacks or unauthorized data distribution by employees or affiliated vendors, or disruptions to access and connectivity of our information systems could impact our operations or result in the loss or misuse of customers’ proprietary information.
Breaches in our data security systems or in systems used by our vendor partners, including cyber-attacks or unauthorized data distribution by employees or affiliated vendors, or disruptions to access and connectivity of our information systems could impact our operations or result in the loss or misuse of customers’ proprietary information. 14 Our information technology systems are important to operating our business efficiently.
Additionally, an increase in interest rates could significantly impact new and used vehicle sales and vehicle affordability due to the direct relationship between interest rates and monthly loan payments, a critical factor for many vehicle buyers, and the impact interest rates have on customers’ borrowing capacity and disposable income.
Additionally, recent increases in interest rates have impacted new and used vehicle sales and vehicle affordability due to the direct relationship between interest rates and monthly loan payments, a critical factor for many vehicle buyers, and the impact interest rates have on customers’ borrowing capacity and disposable income.
We depend on our manufacturers to provide a supply of vehicles which supports expected sales levels. Any event that adversely affects a manufacturer’s ability to timely deliver new vehicles may adversely affect us by reducing our supply of popular new vehicles, leading to lower sales in our stores during those periods than would otherwise occur.
Any event that adversely affects a manufacturer’s ability to timely deliver new vehicles may adversely affect us by reducing our supply of popular new vehicles, leading to lower sales in our stores during those periods than would otherwise occur.
If manufacturers obtain the ability to directly retail vehicles in our markets, such competition could negatively impact our sales and have a material adverse effect on our business, results of operations, financial condition and cash flows.
If manufacturers obtain the ability to directly retail vehicles in our markets, such competition could negatively impact our sales and have a material adverse effect on our business, results of operations, financial condition and cash flows. Further, changes by manufacturers to their distribution models may impact our operations in the U.K.
Much of our debt is secured by a substantial portion of our assets. Much of our debt has a variable interest rate component that may significantly increase our interest costs in a rising rate environment.
Much of our debt has a variable interest rate component that may significantly increase our interest costs in a rising rate environment.
Our information technology systems are important to operating our business efficiently. We employ information technology systems, including websites, that allow for the secure handling and processing of customers’ proprietary information.
We employ information technology systems, including websites, that allow for the secure handling and processing of customers’ proprietary information.
Increasing competition among automotive retailers reduces our profit margins on vehicle sales and related businesses. Further, the use of the Internet in the car purchasing process could materially adversely affect us. Vehicle retailing is a highly competitive business.
Such disruptions could have a material adverse effect on our business, financial condition, results of operations, or cash flows. 8 Increasing competition among automotive retailers reduces our profit margins on vehicle sales and related businesses. Further, the use of the Internet in the car purchasing process could materially adversely affect us. Vehicle retailing is a highly competitive business.
As such, supply chain disruptions resulting from natural disasters, adverse weather events, or public health emergencies may affect the flow of inventory or parts to us or our manufacturing partners. Such disruptions could have a material adverse effect on our business, financial condition, results of operations, or cash flows.
As such, supply chain disruptions resulting from natural disasters, adverse weather events, or public health emergencies may affect the flow of inventory or parts to us or our manufacturing partners.
Approximately 13.9 million, 15.1 million, and 14.6 million new vehicles were sold in the United States in 2022, 2021, and 2020, respectively. Certain industry analysts have predicted that new vehicle sales will be approximately 14 million for 2023.
A period of sustained inflationary and interest rate pressures could impact our profitability. Approximately 15.6 million, 13.9 million, and 15.1 million new vehicles were sold in the United States in 2023, 2022, and 2021, respectively. Certain industry analysts have predicted that new vehicle sales will be approximately 15.7 million for 2024.
We collect, process, and retain personally identifiable information regarding customers, associates and vendors in the normal course of our business. Our internal and third-party systems have been and may in the future be subject to cyber-attacks, viruses, malicious software, break-ins, theft, computer hacking, phishing, employee error, or malfeasance or other security breaches or loss of service.
Our internal and third-party systems have been and may in the future be subject to cyber-attacks, viruses, malicious software, ransomware, break-ins, theft, computer hacking, phishing, exploitation of system vulnerabilities or misconfigurations, employee error, or malfeasance or other security breaches or loss of service.
If the agency model or another new model is implemented in the countries and regions in which we operate for the sale of electric or other vehicles, it could negatively affect our revenues, results of operations and financial condition. Import product restrictions, currency valuations, and foreign trade risks may impair our ability to sell foreign vehicles or parts profitably.
If the agency model or another new model is implemented in the U.K. or other countries and regions in which we operate for the sale of electric or other vehicles, it could negatively affect our revenues, results of operations and financial condition.
In an inflationary environment, depending on automotive industry and other economic conditions, we may be unable to raise prices to keep up with the rate of inflation, which would reduce our profit margins. A period of sustained inflationary and interest rate pressures could impact our profitability.
Consumer demand may be further adversely impacted if interest rates continue to increase or are sustained at current levels. In an inflationary environment, depending on automotive industry and other economic conditions, we may be unable to raise prices to keep up with the rate of inflation, which would reduce our profit margins.
The effect of driverless vehicles on the automotive industry is uncertain and could include changes in the level of new and used vehicle sales, the price of new vehicles, and the role of franchised dealers, any of which could materially and adversely affect our business.
The effect of driverless vehicles on the automotive industry is uncertain and could include changes in the level of new and used vehicle sales, the price of new vehicles, and the role of franchised dealers, any of which could materially and adversely affect our business. 9 We compete in a dynamic industry, and we may invest significant resources to pursue strategies and develop new offerings that do not prove effective.
We compete in a dynamic industry, and we may invest significant resources to pursue strategies and develop new offerings that do not prove effective. The vehicle retailing industry is experiencing significant changes as the expectations and behaviors of customers are shifting, and e-commerce and digital technology have become a more significant part of the sales process.
The vehicle retailing industry is experiencing significant changes as the expectations and behaviors of customers are shifting, and e-commerce and digital technology have become a more significant part of the sales process.
We do not have any cost advantage in purchasing new vehicles from manufacturers due to the volume of purchases or otherwise. Our finance and insurance business and other related businesses, which have higher margins than sales of new and used vehicles, are subject to strong competition from various financial institutions and others.
Our finance and insurance business and other related businesses, which have higher margins than sales of new and used vehicles, are subject to strong competition from various financial institutions and others. The Internet has become a significant part of the sales process in our industry.
The establishment of or relocation of franchises in our markets could have a material adverse effect on the business, financial condition and results of operations of our stores in the market in which the action is taken. 11 Our indebtedness and lease obligations could materially adversely affect our financial health, limit our ability to finance future acquisitions and capital expenditures and prevent us from fulfilling our financial obligations.
The establishment of or relocation of franchises in our markets could have a material adverse effect on the business, financial condition and results of operations of our stores in the market in which the action is taken.
Our competitors include publicly and privately-owned dealerships, of which certain competitors are larger and have greater financial and marketing resources than we have. Many of our competitors sell the same or similar makes of new and used vehicles that we offer in our markets at competitive prices.
Our competitors include publicly and privately-owned dealerships. Many of our competitors sell the same or similar makes of new and used vehicles that we offer in our markets at competitive prices. We do not have any cost advantage in purchasing new vehicles from manufacturers due to the volume of purchases or otherwise.
If Internet new vehicle sales are allowed to be conducted without the involvement of franchised dealers, our business could be materially adversely affected.
Customers are using the Internet to compare pricing for vehicles and related finance and insurance services, which may further reduce margins for new and used vehicles and profits for related finance and insurance services. If Internet new vehicle sales are allowed to be conducted without the involvement of franchised dealers, our business could be materially adversely affected.
In addition, we may face increasingly significant competition as we strive to gain market share through acquisitions or otherwise.
In addition, we may face increasingly significant competition as we strive to gain market share through acquisitions or otherwise. Our operating margins may decline over time as we expand into markets where we do not have a leading position.
Aspects of our operations are subject to privacy, data use and data security regulations, which impact the way we use and handle data. In addition, regulators are proposing and adopting new laws or regulations that could require us to adopt certain cybersecurity and data handling practices. The changing privacy laws (e.g.
Aspects of our operations are subject to privacy, data use and data security regulations, which impact the way we use and handle data.
California Consumer Privacy Act) create new individual privacy rights and impose increased obligations on companies handling personal data. Additionally, our expansion into Canada subjects us to additional privacy and security regulations which also impact the way we handle and secure data across borders.
Additionally, our expansion into Canada and the United Kingdom subjects us to additional privacy and security regulations which also impact the way we handle and secure data across borders. We collect, process, and retain personally identifiable information regarding customers, associates and vendors in the normal course of our business.
A significant portion of the vehicles we sell are manufactured outside of the United States, and all of the vehicles we sell include parts manufactured outside of the United States.
Import product restrictions, currency valuations, and foreign trade risks may impair our ability to sell foreign vehicles or parts profitably. A significant portion of the vehicles we sell are manufactured outside of the geographic regions in which we operate, and all of the vehicles we sell include parts manufactured outside of the geographic regions in which we operate.
Removed
The Internet has become a significant part of the sales process in our industry. Customers are using the Internet to compare pricing for vehicles and related finance and insurance services, which may further reduce margins for new and used vehicles and profits for related finance and insurance services.
Added
In addition, the U.K. government has proposed a ban on the sale of gasoline engines in new cars and new vans that would take effect as early as 2030 and a ban on the sale of gasoline hybrid engines in new cars and new vans as early as 2035.
Removed
The automotive industry is predicted to experience rapid change in the years to come, including continued increases in ride-sharing services, advances in electric vehicle production and driverless technology. Ride-sharing services such as Uber and Lyft provide consumers with mobility options outside of the traditional car ownership and lease alternatives.
Added
Adverse conditions affecting one or more key manufacturers may negatively affect our business, results of operations, financial condition and cash flows. We depend on our manufacturers to provide a supply of vehicles which supports expected sales levels.
Added
Our indebtedness and lease obligations could materially adversely affect our financial health, limit our ability to finance future acquisitions and capital expenditures and prevent us from fulfilling our financial obligations. Much of our debt is secured by a substantial portion of our assets.
Added
We collect, process, share, disclose, transfer, and otherwise use personal information about identifiable individuals including, but not limited to, our customers, employees, partners, and vendors, and so are subject to US and international laws and regulations, regarding data privacy and security such as the California Consumer Privacy Act and the UK General Data Protection Regulation.
Added
These laws impose comprehensive data privacy compliance obligations in relation to our processing of personal data, including providing privacy rights to the individuals whose data we process and introducing requirements to maintain policies, processes, and procedures regarding our data handing practices.
Added
Under an agency model, our dealerships receive a fee for facilitating the sale by the manufacturer of a new vehicle but do not hold the vehicle in inventory.
Added
The agency model will reduce reported revenues (as only the fee we receive, and not the price of the vehicle, will be reported as revenue), reduce SG&A expenses, and reduce floorplan interest expense, although the other impacts to our results of operations remain uncertain.
Added
Our U.K. dealerships are subject to different regulatory frameworks than our U.S. and Canada operations, and changes to these regulatory frameworks could negatively affect our results of operations.
Added
The majority of our dealerships in the U.K. operate under franchise agreements with vehicle manufacturers, however, unlike in the United States, the U.K. generally does not have automotive dealership franchise laws and, as a result, our U.K. dealerships operate without these types of specific protections that exist in the United States.
Added
In addition, our U.K. dealerships are also subject to U.K. antitrust regulations prohibiting certain restrictions on the sale of new vehicles and spare parts and on the provision of repairs and maintenance.
Added
For instance, authorized dealers are generally able to, subject to manufacturer facility requirements, relocate or add additional facilities throughout the European Union, offer multiple brands in the same facility, allow the operation of service facilities independent of new car sales facilities and ease restrictions on cross supplies (including on transfers of dealerships) between existing authorized dealers within the European Union.
Added
However, under the EU Motor Vehicle Block Exemption Regulation, which was retained in U.K. law following U.K.’s exit from the European Union on January 31, 2020, certain restrictions on dealerships are permissible in franchise agreements provided certain conditions are met.
Added
In October 2022, the Competition and Markets Authority of the U.K. published recommendations to introduce an updated U.K. equivalent broadly similar to the EU Motor Vehicle Block Exemption Regulations, however, changes to these protections or rules could negatively affect our revenues, results of operations and financial condition.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−3 removed2 unchanged
Biggest changeItem 2. Properties Our stores and other facilities consist primarily of vehicle showrooms, display lots, service facilities, collision repair and paint shops, supply facilities, vehicle storage lots, parking lots and offices in two countries, across 28 U.S states and three Canadian provinces in the locations shown in the map under the Overview section of Item 7.
Biggest changeItem 2. Properties Our stores and other facilities consist primarily of vehicle showrooms, display lots, service facilities, collision repair and paint shops, supply facilities, vehicle storage lots, parking lots and offices across the U.S., Canada, and the U.K. in the locations shown in the maps under the Overview section of Item 7.
We own our corporate headquarters in Medford, Oregon, and numerous other properties used in our operations. Certain of our owned properties are mortgaged or secured as part of commitments on our various real estate credit facilities. As of December 31, 2022, we had outstanding mortgage debt of $580.1 million, and no amounts outstanding on our real estate credit facilities.
We own our corporate headquarters in Medford, Oregon, and numerous other properties used in our operations. Certain of our owned properties are mortgaged or secured as part of commitments on our various real estate credit facilities. As of December 31, 2023, we had outstanding mortgage debt of $624.4 million, and $295.8 million outstanding on our real estate credit facilities.
Removed
Our corporate headquarters is LEED certified and incorporates roof-mounted solar panels to offset energy usage. Two of our stores are also LEED certified, and we have completed solar projects at a number of others. We engage in a comprehensive feasibility analysis for solar opportunities for potential integration. Our stores also integrate energy-saving practices and materials.
Removed
This includes practices such as recycling used tires, used engine oil and used oil filters; the use of waste oil heaters and carwash reclaim systems; using biodegradable products in our detail services and interior and exterior LED lighting.
Removed
We have engaged a nationwide electric vehicle (EV) charging network to meet the changing needs of our brands, while also looking ahead toward opportunities to support the public’s vehicle electrification needs, promoting the increasing number of EVs on the road and thereby reducing emissions. 18

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+1 added−0 removed0 unchanged
Biggest changeItem 3. Legal Proceedings 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.
Biggest changeAlthough 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. 20 PART II
Added
Item 3. Legal Proceedings We are party to numerous legal proceedings arising in the normal course of our business.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

2 edited+0 added−0 removed0 unchanged
Biggest changeItem 4. Mine Safety Disclosure s Not applicable PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 19 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations : 20 Results of operations 21 Liquidity and capital resources 35 Critical accounting estimates 39 Item 7A.
Biggest changeItem 4. Mine Safety Disclosure s Not applicable PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations : 23 Results of operations 23 Liquidity and capital resources 37 Critical accounting estimates 41 Item 7A.
Quantitative and Qualitative Disclosures About Market Risk 41 Item 8. Financial Statements and Supplementary Data 42
Quantitative and Qualitative Disclosures About Market Risk 43 Item 8. Financial Statements and Supplementary Data 44

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−0 removed1 unchanged
Biggest changeRepurchases of Equity Securities We made the following repurchases of our common stock during the fourth quarter of 2022: For the full calendar month of Total number of shares purchased (2) Average price paid per share Total number of shares purchased as part of publicly announced plan (1) Maximum dollar value of shares that may yet be purchased under publicly announced plan (in thousands) (1) October 174,657 $ 198.54 174,657 $ 51,368 November 44 198.15 — 501,368 December — — — 501,368 Total 174,701 198.49 174,657 501,368 (1) On November 1, 2022, our Board of Directors approved an additional $450 million repurchase authorization of our common stock.
Biggest changeRepurchases of Equity Securities We made the following repurchases of our common stock during the fourth quarter of 2023: For the full calendar month of Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plan (2) Maximum dollar value of shares that may yet be purchased under publicly announced plan (in thousands) October 142,729 $ 240.81 142,729 $ 466,996 November 66 242.21 — 466,996 December — — — 466,996 Total 142,795 240.81 142,729 (1) 66 shares repurchased in the fourth quarter of 2023 were related to tax withholding on the vesting of RSUs.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on the New York Stock Exchange under the symbol LAD. The number of shareholders of record and approximate number of beneficial holders of common stock as of February 24, 2023 was 448 and 93,246, respectively.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on the New York Stock Exchange under the symbol LAD. The number of shareholders of record and approximate number of beneficial holders of common stock as of February 23, 2024 was 428 and 90,497, respectively.
(2) 44 shares repurchased in the fourth quarter of 2022 were related to tax withholdings on the vesting of RSUs. 19 Stock Performance Graph The stock performance graph and table that follow compare the cumulative total stockholder return on Lithia Motors, Inc.’s common stock with the cumulative total return of the Standard & Poor’s 500 Stock Index (S&P 500 Index), and an auto peer group index composed of Penske Automotive Group, AutoNation, Sonic Automotive, Group 1 Automotive, Asbury Automotive Group, and CarMax for the five years ended December 31, 2022.
There is no expiration date for this share repurchase authorization. 21 Stock Performance Graph The stock performance graph and table that follow compare the cumulative total stockholder return on Lithia Motors, Inc.’s common stock with the cumulative total return of the Standard & Poor’s 500 Stock Index (S&P 500 Index), and an auto peer group index composed of Penske Automotive Group, AutoNation, Sonic Automotive, Group 1 Automotive, Asbury Automotive Group, and CarMax for the five years ended December 31, 2023.
(1) Base Period Indexed Returns for the Year Ended Company/Index 2017 2018 2019 2020 2021 2022 Lithia Motors, Inc. $100.00 $ 68.03 $ 132.36 $ 265.77 $ 270.67 $ 187.74 S&P 500 Index - Total Return 100.00 95.62 125.72 148.85 191.58 156.88 Auto Peer Group 100.00 88.62 127.86 152.48 226.73 172.15 (1) The graph and table assume that $100 was invested on the last day of trading for the calendar year ended December 31, 2017 in Lithia Motors, Inc’s common stock, the S&P 500 Index, and peer group indexes, and that all dividends were reinvested.
(1) Base Period Indexed Returns for the Year Ended Company/Index 2018 2019 2020 2021 2022 2023 Lithia Motors, Inc. $100.00 $ 194.56 $ 390.67 $ 397.87 $ 275.97 $ 447.15 S&P 500 Index - Total Return 100.00 131.49 155.68 200.37 164.08 207.21 Auto Peer Group 100.00 144.28 172.07 255.85 194.26 263.40 (1) The graph and table assume that $100 was invested on the last day of trading for the calendar year ended December 31, 2018 in Lithia Motors, Inc’s common stock, the S&P 500 Index, and peer group indexes, and that all dividends were reinvested. 22
This new authorization is in addition to the amount previously authorized by the Board for repurchase. There is no expiration date for this share repurchase authorization.
(2) On November 1, 2022, our Board of Directors approved an additional $450 million repurchase authorization of our common stock. This authorization was in addition to the amount previously authorized by the Board for repurchase.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

81 edited+24 added−25 removed48 unchanged
Biggest changeThese measures should not be considered an alternative to GAAP measures. 33 The following tables reconcile certain reported non-GAAP measures to the most comparable GAAP measure from our Consolidated Statements of Operations: Year Ended December 31, 2022 ($ in millions, except per share amounts) As reported Net disposal gain on sale of stores Investment loss Insurance reserves Acquisition expenses Adjusted Selling, general and administrative $ 3,044.1 $ 66.0 $ — $ (4.9) $ (15.0) $ 3,090.2 Operating income (loss) 1,941.1 (66.0) — 4.9 15.0 1,895.0 Other (expense) income, net (43.2) — 39.2 — — (4.0) Income (loss) before income taxes $ 1,730.0 $ (66.0) $ 39.2 $ 4.9 $ 15.0 $ 1,723.1 Income tax (provision) benefit (468.4) 19.1 — (1.3) (4.0) (454.6) Net income (loss) 1,261.6 (46.9) 39.2 3.6 11.0 1,268.5 Net income attributable to non-controlling interest (4.8) — — — — (4.8) Net income attributable to redeemable non-controlling interest (5.8) — — — — (5.8) Net income (loss) attributable to Lithia Motors, Inc. $ 1,251.0 $ (46.9) $ 39.2 $ 3.6 $ 11.0 $ 1,257.9 Diluted earnings (loss) per share attributable to Lithia Motors, Inc. $ 44.17 $ (1.65) $ 1.38 $ 0.13 $ 0.39 $ 44.42 Diluted share count 28.3 Year Ended December 31, 2021 ($ in millions, except per share amounts) As reported Asset impairment Investment loss Insurance reserves Acquisition expenses Loss on redemption of senior notes Adjusted Asset impairment $ 1.9 $ (1.9) $ — $ — $ — $ — $ — Selling, general and administrative 2,480.8 — — (5.8) (20.2) — 2,454.8 Operating income 1,662.5 1.9 — 5.8 20.2 — 1,690.4 Other (expense) income, net (52.0) — 66.4 — — 10.3 24.7 Income before income taxes $ 1,484.8 $ 1.9 $ 66.4 $ 5.8 $ 20.2 $ 10.3 $ 1,589.4 Income tax (provision) benefit (422.1) (0.5) 6.6 (1.6) (5.1) (2.7) (425.4) Net income 1,062.7 1.4 73.0 4.2 15.1 7.6 1,164.0 Net income attributable to non-controlling interest (1.7) — — — — — (1.7) Net income attributable to redeemable non-controlling interest (0.9) — — — — — (0.9) Net income attributable to Lithia Motors, Inc. $ 1,060.1 $ 1.4 $ 73.0 $ 4.2 $ 15.1 $ 7.6 $ 1,161.4 Diluted earnings per share attributable to Lithia Motors, Inc. $ 36.54 $ 0.05 $ 2.52 $ 0.14 $ 0.52 $ 0.26 $ 40.03 Diluted share count 29.0 34 Year Ended December 31, 2020 ($ in millions, except per share amounts) As reported Net disposal gain on sale of stores Asset impairment Investment gain Insurance reserves Acquisition expenses Tax attribute Adjusted Asset impairment $ 7.9 $ — $ (7.9) $ — $ — $ — $ — $ — Selling, general and administrative 1,437.9 16.6 — — (6.1) (3.0) — 1,445.4 Operating income (loss) 692.7 (16.6) 7.9 — 6.1 3.0 — 693.1 Other income (expense), net 61.8 — — (43.8) — — — 18.0 Income before income taxes $ 648.5 $ (16.6) $ 7.9 $ (43.8) $ 6.1 $ 3.0 $ — $ 605.1 Income tax (provision) benefit (178.2) 4.6 (2.3) 12.1 (1.6) (0.8) (0.8) (167.0) Net income attributable to Lithia Motors, Inc. $ 470.3 $ (12.0) $ 5.6 $ (31.7) $ 4.5 $ 2.2 $ (0.8) $ 438.1 Diluted earnings per share attributable to Lithia Motors, Inc. $ 19.53 $ (0.50) $ 0.23 $ (1.32) $ 0.19 $ 0.09 $ (0.03) $ 18.19 Diluted share count 24.1 Liquidity and Capital Resources We manage our liquidity and capital resources in the context of our overall business strategy, continually forecasting and managing our cash, working capital balances and capital structure to meet the short-term and long-term obligations of our business while maintaining liquidity and financial flexibility.
Biggest changeThese measures should not be considered an alternative to GAAP measures. 35 The following tables reconcile certain reported non-GAAP measures to the most comparable GAAP measure from our Consolidated Statements of Operations: Year Ended December 31, 2023 ($ in millions, except per share amounts) As reported Net disposal gain on sale of stores Investment loss Insurance reserves Acquisition expenses Contract buyouts Adjusted Selling, general and administrative $ 3,294.8 $ 31.2 $ — $ (5.4) $ (27.2) $ (14.3) $ 3,279.1 Operating income (loss) 1,692.4 (31.2) — 5.4 27.2 14.3 1,708.1 Other income, net 22.0 — 1.7 — — — 23.7 Income (loss) before income taxes $ 1,362.3 $ (31.2) $ 1.7 $ 5.4 $ 27.2 $ 14.3 $ 1,379.7 Income tax (provision) benefit (350.6) 8.2 (4.0) (1.4) (1.0) (3.8) (352.6) Net income (loss) 1,011.7 (23.0) (2.3) 4.0 26.2 10.5 1,027.1 Net income attributable to non-controlling interest (6.5) — — — — — (6.5) Net income attributable to redeemable non-controlling interest (4.4) — — — — — (4.4) Net income (loss) attributable to Lithia Motors, Inc. $ 1,000.8 $ (23.0) $ (2.3) $ 4.0 $ 26.2 $ 10.5 $ 1,016.2 Diluted earnings (loss) per share attributable to Lithia Motors, Inc. $ 36.29 $ (0.83) $ (0.08) $ 0.15 $ 0.95 $ 0.38 $ 36.86 Diluted share count 27.6 Year Ended December 31, 2022 ($ in millions, except per share amounts) As reported Net disposal gain on sale of stores Investment loss Insurance reserves Acquisition expenses Adjusted Selling, general and administrative 3,044.1 66.0 — (4.9) (15.0) 3,090.2 Operating income (loss) 1,941.1 (66.0) — 4.9 15.0 1,895.0 Other (expense) income, net (43.2) — 39.2 — — (4.0) Income (loss) before income taxes $ 1,730.0 $ (66.0) $ 39.2 $ 4.9 $ 15.0 $ 1,723.1 Income tax (provision) benefit (468.4) 19.1 — (1.3) (4.0) (454.6) Net income (loss) 1,261.6 $ (46.9) 39.2 3.6 11.0 1,268.5 Net income attributable to non-controlling interest (4.8) — — — — (4.8) Net income attributable to redeemable non-controlling interest (5.8) — — — — (5.8) Net income (loss) attributable to Lithia Motors, Inc. $ 1,251.0 $ (46.9) $ 39.2 $ 3.6 $ 11.0 $ 1,257.9 Diluted earnings (loss) per share attributable to Lithia Motors, Inc. $ 44.17 $ (1.65) $ 1.38 $ 0.13 $ 0.39 $ 44.42 Diluted share count 28.3 36 Year Ended December 31, 2021 ($ in millions, except per share amounts) As reported Asset impairment Investment loss Insurance reserves Acquisition expenses Loss on redemption of senior notes Adjusted Asset impairment $ 1.9 $ (1.9) $ — $ — $ — $ — $ — Selling, general and administrative 2,480.8 — — (5.8) (20.2) — 2,454.8 Operating income 1,662.5 1.9 — 5.8 20.2 — 1,690.4 Other (expense) income, net (52.0) — 66.4 — — 10.3 24.7 Income before income taxes $ 1,484.8 $ 1.9 $ 66.4 $ 5.8 $ 20.2 $ 10.3 $ 1,589.4 Income tax (provision) benefit (422.1) (0.5) 6.6 (1.6) (5.1) (2.7) (425.4) Net income $ 1,062.7 $ 1.4 $ 73.0 $ 4.2 $ 15.1 $ 7.6 $ 1,164.0 Net income attributable to non-controlling interest (1.7) — — — — — (1.7) Net income attributable to redeemable non-controlling interest (0.9) — — — — — (0.9) Net income attributable to Lithia Motors, Inc. $ 1,060.1 $ 1.4 $ 73.0 $ 4.2 $ 15.1 $ 7.6 $ 1,161.4 Diluted earnings per share attributable to Lithia Motors, Inc. $ 36.54 $ 0.05 $ 2.52 $ 0.14 $ 0.52 $ 0.26 $ 40.03 Diluted share count 29.0 Liquidity and Capital Resources We manage our liquidity and capital resources in the context of our overall business strategy, continually forecasting and managing our cash, working capital balances and capital structure to meet the short-term and long-term obligations of our business while maintaining liquidity and financial flexibility.
During 2022, actions taken to adjust ROI targets in the context of the uncertain macroeconomic environment, along with the acquisition of dealerships whose brands attract relatively more credit-worthy consumers, resulted in loans and leases originated having higher weighted average credit scores and lower weighted average contract rate and front-end loan-to-values (FE LTV) than prior periods.
Actions taken during 2022 to adjust ROI targets in the context of the uncertain macroeconomic environment, along with the acquisition of dealerships whose brands attract relatively more credit-worthy consumers, resulted in loans and leases originated subsequently having higher weighted average credit scores and lower weighted average contract rate and front-end loan-to-values (FE LTV) than prior periods.
Excluding the impact of acquisitions, on a same store basis, used vehicle revenues increased 12.7%, due to a 13.8% increase in average selling price per retail unit, partially offset by a 0.9% decrease in unit volume.
Excluding the impact of acquisitions, on a same store basis, used vehicle revenues increased 12.8%, due to a 13.7% increase in average selling price per retail unit, partially offset by a 0.8% decrease in unit volume.
We apply an 40 income approach for the fair value of intangible franchise rights which discounts the projected future net cash flow using an appropriate discount rate that reflects the risks associated with such projected future cash flow.
We apply an income approach for the fair value of intangible franchise rights which discounts the projected future net cash flow using an appropriate discount rate that reflects the risks associated with such projected future cash flow.
See Note 1 – Summary of Significant Accounting Policies and Note 16 – Acquisitions of Notes to Consolidated Financial Statements included in Part II, Item 8. Financial Statements and Supplementary Financial Data of this Annual Report.
See Note 1 – Summary of Significant Accounting Policies and Note 16 – Acquisitions of Notes to Consolidated Financial Statements included in Part II, Item 8. Financial Statements and Supplementary Financial Data of this Annual Report. 42
The annual franchise value impairment analysis, which we perform as of October 1 each year, resulted in no indications of impairment in 2022, 2021, or 2020. During the third quarter of 2021, there were indications of impairment at a certain location. We tested the franchise value for this location, which resulted in an impairment charge of $1.9 million.
The annual franchise value impairment analysis, which we perform as of October 1 each year, resulted in no indications of impairment in 2023, 2022, or 2021. During the third quarter of 2021, there were indications of impairment at a certain location. We tested the franchise value for this location, which resulted in an impairment charge of $1.9 million.
With more late-model units in operation, continued increase of vehicles in operation from 2015 to 2019, and a plateauing new vehicle market, we believe the increased number of units in operation will continue to benefit our service, body and parts revenue in the coming years as more late-model vehicles age, necessitating repairs and maintenance.
With more late-model units in operation, continued increase of vehicles in operation, and a plateauing new vehicle market, we believe the increased number of units in operation will continue to benefit our service, body and parts revenue in the coming years as more late-model vehicles age, necessitating repairs and maintenance.
For example, a store acquired in November 2021 would be included in same store operating data beginning in December 2022, after its first complete comparable month of operations.
For example, a store acquired in November 2022 would be included in same store operating data beginning in December 2023, after its first complete comparable month of operations.
Changes in the provision for loan and lease losses as a percentage of ending managed receivables reflect the effect of changes in loss experience and economic factors on our outlook for net losses expected to occur over the remaining contractual life of the loans and leases receivable. Financing Operations income does not include any allocation of corporate overhead costs.
Changes in the provision for loan and lease losses as a percentage of ending managed receivables reflect the effect of changes in loss experience, economic factors, and asset-specific risks on our outlook for net losses expected to occur over the remaining contractual life of the loans and leases receivable. 29 Financing Operations income does not include any allocation of corporate overhead costs.
We have the option to qualitatively or quantitatively assess indefinite-lived intangible assets for impairment. In 2022, we evaluated our indefinite-lived intangible assets using a qualitative assessment process.
We have the option to qualitatively or quantitatively assess indefinite-lived intangible assets for impairment. In 2023, we evaluated our indefinite-lived intangible assets using a qualitative assessment process.
We tested the goodwill and franchise value for this location. As a result, we identified it was more likely than not the fair values were less than the carrying amounts, and we recorded a non-cash impairment charge of $1.9 million, which was equal to the difference between the fair value and the carrying value for franchise value.
As a result, we identified it was more likely than not the fair values were less than the carrying amounts, and we recorded a non-cash impairment charge of $1.9 million, which was equal to the difference between the fair value and the carrying value for franchise value.
Furthermore, if a manufacturer becomes insolvent, we may be required to record a partial or total impairment on the franchise value and/or goodwill related to that manufacturer. No individual manufacturer accounted for more than 2.7% of our total franchise value and goodwill as of December 31, 2022.
Furthermore, if a manufacturer becomes insolvent, we may be required to record a partial or total impairment on the franchise value and/or goodwill related to that manufacturer. No individual manufacturer accounted for more than 2.1% of our total franchise value and goodwill as of December 31, 2023.
During 2022, our stores sold an average of 91 used vehicles per store per month. This compares to 92 used vehicles per store per month in 2021 and 78 in 2020. Used vehicle operations are generally an opportunity area for recently acquired and opened locations.
During 2023, our stores sold an average of 82 used vehicles per store per month. This compares to 91 used vehicles per store per month in 2022 and 92 in 2021. Used vehicle operations are generally an opportunity area for recently acquired and opened locations.
Income Tax Provision Our effective income tax rate was as follows: Year Ended December 31, 2022 2021 2020 Effective income tax rate 27.1 % 28.4 % 27.5 % Effective income tax rate excluding non-core items (1) 26.4 26.8 27.6 (1) See “Non-GAAP Reconciliations” for more details Our effective income tax rate was 27.1% for 2022 compared to 28.4% for 2021.
Income Tax Provision Our effective income tax rate was as follows: Year Ended December 31, 2023 2022 2021 Effective income tax rate 25.7 % 27.1 % 28.4 % Effective income tax rate excluding non-core items (1) 25.6 26.4 26.8 (1) See “Non-GAAP Reconciliations” for more details Our effective income tax rate was 25.7% for 2023 compared to 27.1% for 2022.
Our effective income tax rate in 2021 was also negatively affected by a valuation allowance established for certain deferred tax assets not expected to be realized. The increase in tax rate was offset by stock awards vesting in the current period and a reduction in the current and deferred state tax rate due to legislative updates and changing state mix.
Our effective income tax rate in 2022 was negatively affected by a valuation allowance established for certain deferred tax assets not expected to be realized. The increase in tax rate was offset by share-based awards vesting in the current period and a reduction in the current and deferred state tax rate due to legislative updates and changing state mix.
We focus on retaining customers by offering competitively-priced routine maintenance and through our marketing efforts. 2022 vs. 2021 Our service, body and parts revenue grew in all areas, primarily due to our strategic acquisition growth. On a same store basis, service, body and parts revenue increased 9.8%, primarily driven by an increase in customer pay of 10.3%.
We focus on retaining customers by offering competitively-priced routine maintenance and through our marketing efforts. 2023 vs. 2022 Our service, body and parts revenue grew in all areas, primarily due to our strategic acquisition growth. On a same store basis, service, body and parts revenue increased 5.5%, primarily driven by an increase in customer pay of 5.2%.
Adjusted net cash paid for acquisitions, a non-GAAP measure, as well as certain other acquisition-related information is presented below: Year Ended December 31, ($ in millions) 2022 2021 2020 Number of stores acquired 31 77 30 Number of stores opened 1 1 — Cash paid for acquisitions, net of cash acquired $ (1,243.6) $ (2,699.3) $ (1,503.3) Add: Borrowings on floor plan notes payable: non-trade associated with acquired new vehicle inventory 116.5 355.5 255.0 Cash paid for acquisitions, net of cash acquired – adjusted $ (1,127.1) $ (2,343.8) $ (1,248.3) 37 We evaluate potential capital investments primarily based on targeted rates of return on assets and return on our net equity investment.
Adjusted net cash paid for acquisitions, a non-GAAP measure, as well as certain other acquisition-related information is presented below: Year Ended December 31, ($ in millions) 2023 2022 2021 Number of stores acquired 56 31 77 Number of stores opened — 1 1 Cash paid for acquisitions, net of cash acquired $ (1,185.1) $ (1,243.6) $ (2,699.3) Add: Borrowings on floor plan notes payable: non-trade associated with acquired new vehicle inventory 109.2 116.5 355.5 Cash paid for acquisitions, net of cash acquired – adjusted $ (1,075.9) $ (1,127.1) $ (2,343.8) 39 We evaluate potential capital investments primarily based on targeted rates of return on assets and return on our net equity investment.
Non-Operating Expenses Asset Impairments Asset impairments recorded as a component of operations consist of the following: Year Ended December 31, ($ in millions) 2022 2021 2020 Franchise value $ — $ 1.9 $ 4.4 Goodwill — — 3.5 Total asset impairments $ — $ 1.9 $ 7.9 31 Goodwill and franchise value for our reporting units are tested for impairment annually as of October 1 or more frequently when events or changes in circumstances indicate that impairment may have occurred.
Non-Operating Expenses Asset Impairments Asset impairments recorded as a component of operations consist of the following: Year Ended December 31, ($ in millions) 2023 2022 2021 Franchise value $ — $ — $ 1.9 Goodwill — — — Total asset impairments $ — $ — $ 1.9 Goodwill and franchise value are tested for impairment annually as of October 1 or more frequently when events or changes in circumstances indicate that impairment may have occurred.
(2) The amounts available on the credit facilities are limited based on borrowing base calculations and fluctuates monthly. (3) Available credit is based on the borrowing base amount effective as of November 30, 2022. This amount is reduced by $38.8 million for outstanding letters of credit.
(2) The amounts available on the credit facilities are limited based on borrowing base calculations and fluctuates monthly. (3) Available credit is based on the borrowing base amount effective as of November 30, 2023. This amount is reduced by $37.0 million for outstanding letters of credit.
Selected Financing Operations Financial Information Year Ended December 31, ($ in millions) 2022 % (1) 2021 % (1) 2020 % (1) Interest margin: Interest, fee, and lease income $ 134.1 8.7 $ 45.9 9.2 $ 13.9 11.8 Interest expense (52.2) (3.4) (4.8) (1.0) (1.5) (1.3) Total interest margin $ 81.9 5.3 $ 41.1 8.2 $ 12.4 10.5 Provision for loan and lease losses $ (44.4) (2.9) $ (9.4) (1.9) $ 3.0 2.5 Financing operations (loss) income $ (4.0) (0.3) $ 11.0 2.2 $ 6.5 5.5 Total average managed finance receivables $ 1,542.6 $ 501.5 $ 117.9 (1) Percent of total average managed finance receivables.
Selected Financing Operations Financial Information Year Ended December 31, ($ in millions) 2023 % (1) 2022 % (1) 2021 % (1) Interest margin: Interest, fee, and lease income $ 268.5 9.6 $ 134.1 8.7 $ 45.9 9.2 Interest expense (170.5) (6.1) (52.2) (3.4) (4.8) (1.0) Total interest margin $ 98.0 3.5 $ 81.9 5.3 $ 41.1 8.2 Provision for loan and lease losses $ (98.8) (3.5) $ (44.4) (2.9) $ (9.4) (1.9) Financing operations (loss) income $ (45.9) (1.6) $ (4.0) (0.3) $ 11.0 2.2 Total average managed finance receivables $ 2,802.8 $ 1,542.6 $ 501.5 (1) Percent of total average managed finance receivables.
On a same store basis, finance and insurance revenue increased 29.0%, to $1,927 per unit. Service, body and parts We provide service, body and parts for the new vehicle brands sold by our stores, as well as service and repairs for most other makes and models.
On a same store basis, finance and insurance revenue increased 1.7%, to $2,181 per unit. 28 Service, Body and Parts We provide service, body and parts for the new vehicle brands sold by our stores, as well as service and repairs for most other makes and models.
However, actual results could differ materially from these estimates. 39 Goodwill and Franchise Value We are required to test our goodwill and franchise value for impairment at least annually on October 1, or more frequently if conditions indicate that an impairment may have occurred. Our reporting units are individual retail automotive stores.
However, actual results could differ materially from these estimates. 41 Goodwill and Franchise Value We are required to test our goodwill and franchise value for impairment at least annually on October 1, or more frequently if conditions indicate that an impairment may have occurred.
We acquired approximately $236.9 million and $559.8 million of depreciable property as part of our 2022 and 2021 acquisitions, respectively. Capital expenditures totaled $303.1 million and $260.4 million, respectively, in 2022 and 2021. These investments increase the amount of depreciable assets. See the discussion under “Liquidity and Capital Resources” for additional information.
We acquired approximately $260.5 million and $236.9 million of depreciable property as part of our 2023 and 2022 acquisitions, respectively. Capital expenditures totaled $230.2 million and $303.1 million, respectively, in 2023 and 2022. These investments increase the amount of depreciable assets. See the discussion under “Liquidity and Capital Resources” for additional information.
Financing Activities Adjusted net cash provided by financing activities, a non-GAAP measure, which is adjusted for borrowings and repayments on floor plan facilities: non-trade and borrowings and repayments associated with our Financing Operations segment was as follows: Year Ended December 31, ($ in millions) 2022 2021 2020 Cash provided by (used in) financing activities, as reported $ 2,035.9 1,106.7 $ 1,139.8 Add (less): Net (borrowings) repayments on floor plan notes payable: non-trade (737.9) 685.3 20.6 Less: Net borrowings on non-recourse notes payable (104.6) (317.6) — Cash provided by financing activities, as adjusted $ 1,193.4 $ 1,474.4 $ 1,160.4 Below are highlights of significant activity related to our cash flows from financing activities, excluding borrowings and repayments on floor plan notes payable: non-trade and non-recourse notes payable, which are discussed above: Year Ended December 31, 2022 vs. 2021 2021 vs. 2020 ($ in millions) 2022 2021 Change 2020 Change Net borrowings (repayments) on lines of credit $ 2,023.8 $ 325.4 $ 1,698.4 $ (110.0) $ 435.4 Principal payments on long-term debt and finance lease liabilities, other (171.7) (486.5) 314.8 (6.3) (480.2) Proceeds from the issuance of long-term debt 113.3 817.4 (704.1) 606.5 210.9 Proceeds from the issuance of common stock 36.1 1,136.2 (1,100.1) 790.4 345.8 Payment of debt issuance costs (11.8) (14.7) 2.9 (10.8) (3.9) Repurchases of common stock (688.3) (230.7) (457.6) (50.6) (180.1) Dividends paid (45.2) (38.8) (6.4) (29.1) (9.7) Borrowing and Repayment Activity During 2022, we raised net proceeds of $113.3 million through the issuance of debt, and had net borrowings of $2.0 billion on our lines of credit.
Financing Activities Adjusted net cash provided by financing activities, a non-GAAP measure, which is adjusted for borrowings and repayments on floor plan facilities: non-trade and borrowings and repayments associated with our Financing Operations segment was as follows: Year Ended December 31, ($ in millions) 2023 2022 2021 Cash provided by financing activities, as reported $ 2,409.8 2,035.9 $ 1,106.7 Add (less): Net (borrowings) repayments on floor plan notes payable: non-trade (878.7) (737.9) 685.3 Less: Net borrowings on non-recourse notes payable (1,283.4) (104.6) (317.6) Cash provided by financing activities, as adjusted $ 247.7 $ 1,193.4 $ 1,474.4 Below are highlights of significant activity related to our cash flows from financing activities, excluding borrowings and repayments on floor plan notes payable: non-trade and non-recourse notes payable, which are discussed above: Year Ended December 31, 2023 vs. 2022 2022 vs. 2021 ($ in millions) 2023 2022 Change 2021 Change Net borrowings on lines of credit $ 324.3 $ 2,023.8 $ (1,699.5) $ 325.4 $ 1,698.4 Principal payments on long-term debt and finance lease liabilities, other (10.6) (171.7) 161.1 (486.5) 314.8 Proceeds from the issuance of long-term debt 79.8 113.3 (33.5) 817.4 (704.1) Proceeds from the issuance of common stock 29.7 36.1 (6.4) 1,136.2 (1,100.1) Payment of debt issuance costs (16.7) (11.8) (4.9) (14.7) 2.9 Repurchases of common stock (48.9) (688.3) 639.4 (230.7) (457.6) Dividends paid (52.8) (45.2) (7.6) (38.8) (6.4) Borrowing and Repayment Activity During 2023, we raised net proceeds of $79.8 million through the issuance of debt, and had net borrowings of $0.3 billion on our lines of credit.
One of these locations was subsequently sold in the fourth quarter of 2020, with the remainder sold in 2021. See Note 1 – Summary of Significant Accounting Policies, Note 4 – Property and Equipment, Note 6 – Goodwill and Franchise Value, and Note 14 – Fair Value Measurements of Notes to Consolidated Financial Statements included in Part II, Item 8.
This location was subsequently sold in the fourth quarter of 2021. 33 See Note 1 – Summary of Significant Accounting Policies, Note 4 – Property and Equipment, Note 6 – Goodwill and Franchise Value, and Note 14 – Fair Value Measurements of Notes to Consolidated Financial Statements included in Part II, Item 8.
Below are highlights of significant activity related to our cash flows from investing activities: Year Ended December 31, 2022 vs. 2021 2021 vs. 2020 ($ in millions) 2022 2021 Change 2020 Change Capital expenditures $ (303.1) $ (260.4) $ (42.7) $ (167.8) $ (92.6) Cash paid for acquisitions, net of cash acquired (1,243.6) (2,699.3) 1,455.7 (1,503.3) (1,196.0) Proceeds from sales of stores 212.1 76.3 135.8 57.5 18.8 36 Capital Expenditures Below is a summary of our capital expenditure activities: Many manufacturers provide assistance in the form of additional incentives or assistance if facilities meet manufacturer image standards and requirements.
Below are highlights of significant activity related to our cash flows from investing activities: Year Ended December 31, 2023 vs. 2022 2022 vs. 2021 ($ in millions) 2023 2022 Change 2021 Change Capital expenditures $ (230.2) $ (303.1) $ 72.9 $ (260.4) $ (42.7) Cash paid for acquisitions, net of cash acquired (1,185.1) (1,243.6) 58.5 (2,699.3) 1,455.7 Proceeds from sales of stores 142.9 212.1 (69.2) 76.3 135.8 38 Capital Expenditures Below is a summary of our capital expenditure activities: Many manufacturers provide assistance in the form of additional incentives or assistance if facilities meet manufacturer image standards and requirements.
Operating Income Operating income as a percentage of revenue, or operating margin, was as follows: Year Ended December 31, 2022 2021 2020 Operating margin 6.9 % 7.3 % 5.3 % Operating margin adjusted for non-core charges (1) 6.7 7.4 5.3 (1) See “Non-GAAP Reconciliations” for additional information 2022 vs. 2021 Our operating margin decreased 40 basis points compared to the prior year, driven by an increase in SG&A as a percentage of gross profit.
Operating Income Operating income as a percentage of revenue, or operating margin, was as follows: Year Ended December 31, 2023 2022 2021 Operating margin 5.5 % 6.9 % 7.3 % Operating margin adjusted for non-core charges (1) 5.5 6.7 7.4 (1) See “Non-GAAP Reconciliations” for additional information 2023 vs. 2022 Our operating margin decreased 140 basis points compared to the prior year, driven by a decline in gross profit per new and used unit sold.
Our effective income tax rate was positively affected by a reduction in the current and deferred state tax rate due to legislative updates and changing state mix.
Our effective income tax rate was positively affected by a reduction in the current and deferred state tax rate, due to changing state mix, as well as a reduction in valuation allowance.
To better understand the impact of these items, adjusted net cash provided by operating activities, a non-GAAP measure, is presented below: Year Ended December 31, 2022 vs. 2021 2021 vs. 2020 ($ in millions) 2022 2021 Change 2020 Change Net cash provided by operating activities – as reported $ (610.1) 1,797.2 $ (2,407.3) $ 544.6 $ 1,252.6 Add (less): Net borrowings (repayments) on floor plan notes payable: non-trade 737.9 (685.3) 1,423.2 (20.6) (664.7) Add: Temporary pay down of outstanding borrowings on floor plan notes payable: non-trade — — — 113.4 (113.4) Less: Borrowings on floor plan notes payable: non-trade associated with acquired new vehicle inventory (116.5) (355.5) 239.0 (255.0) (100.5) Adjust: Financing receivables activity 1,363.0 640.8 722.2 114.1 526.7 Net cash provided by operating activities – adjusted $ 1,374.3 $ 1,397.2 $ (22.9) $ 496.5 $ 900.7 Inventories are one of the most significant component of our cash flow from operations.
To better understand the impact of these items, adjusted net cash provided by operating activities, a non-GAAP measure, is presented below: Year Ended December 31, 2023 vs. 2022 2022 vs. 2021 ($ in millions) 2023 2022 Change 2021 Change Net cash (used in) provided by operating activities – as reported $ (472.4) (610.1) $ 137.7 $ 1,797.2 $ (2,407.3) Add (less): Net borrowings (repayments) on floor plan notes payable: non-trade 878.7 737.9 140.8 (685.3) 1,423.2 Less: Borrowings on floor plan notes payable: non-trade associated with acquired new vehicle inventory (109.2) (116.5) 7.3 (355.5) 239.0 Adjust: Financing receivables activity 1,045.5 1,363.0 (317.5) 640.8 722.2 Net cash provided by operating activities – adjusted $ 1,342.6 $ 1,374.3 $ (31.7) $ 1,397.2 $ (22.9) Inventories are one of the most significant component of our cash flow from operations.
DFC Portfolio Information (1) Year Ended December 31, ($ in millions) 2022 2021 2020 Loan origination information Net loans originated $ 1,933.9 $ 703.7 $ 133.1 Vehicle units financed 59,604 21,357 4,478 Total penetration rate (2) 10.2 % 4.0 % 1.3 % Weighted average contract rate 7.7 % 8.4 % 9.0 % Weighted average credit score (3) 718 674 672 Weighted average FE LTV (4) 99.4 % 104.9 % 104.0 % Weighted average term (in months) 73 73 72 Loan performance information Total ending managed receivables $ 2,109.4 $ 724.9 $ 174.6 Total average managed receivables $ 1,417.2 $ 449.8 NM Allowance for loan losses $ 65.1 $ 22.5 $ 12.9 Allowance for loan losses as a percentage of ending managed receivables 3.1 % 3.1 % 7.4 % Net credit losses on managed receivables 42.9 7.8 8.5 Net credit losses as a percentage of total average managed receivables 3.0 % 1.7 % NM Past due accounts as a percentage of ending managed receivables (5) 5.4 % 4.9 % 2.3 % Average recovery rate (6) 59.3 % 74.9 % (1) Excludes Pfaff Leasing Portfolio (2) Units financed as a percentage of total new and used vehicle retail units sold.
Portfolio Information (1) Year Ended December 31, ($ in millions) 2023 2022 2021 Loan origination information Net loans originated $ 2,118.5 $ 1,933.9 $ 703.7 Vehicle units financed 70,154 59,604 21,357 Total penetration rate (2) 11.0 % 10.2 % 4.0 % Weighted average contract rate 9.6 % 7.7 % 8.4 % Weighted average credit score (3) 732 718 674 Weighted average FE LTV (4) 95.5 % 99.4 % 104.9 % Weighted average term (in months) 73 73 73 Loan performance information Total ending managed receivables $ 3,177.6 $ 2,109.4 $ 724.9 Total average managed receivables $ 2,643.5 $ 1,417.2 $ 449.8 Allowance for loan losses $ 102.2 $ 65.1 $ 22.5 Allowance for loan losses as a percentage of ending managed receivables 3.2 % 3.1 % 3.1 % Net credit losses on managed receivables 62.0 42.9 7.8 Net credit losses as a percentage of total average managed receivables 2.3 % 3.0 % 1.7 % Past due accounts as a percentage of ending managed receivables (5) 4.6 % 5.4 % 4.9 % Average recovery rate (6) 49.8 % 59.3 % 74.9 % (1) Excludes Canadian portfolio (2) Units financed as a percentage of total new and used vehicle retail units sold.
Changes in the interest margin on new originations affect Financing Operations income over time. Increases in interest rates, which affect Financing Operations’ funding costs, or other competitive pressures on consumer rates, could result in compression in the interest margin on new originations.
Increases or decreases in interest rates, which affect Financing Operations’ funding costs, or other competitive pressures on consumer rates, could result in compression or expansion in the interest margin on new originations.
During 2022, we paid dividends on our common stock as follows: Dividend paid: Dividend amount per share Total amount of dividend (in millions) March 2022 $ 0.35 $ 10.3 May 2022 0.42 11.9 August 2022 0.42 11.6 November 2022 0.42 11.4 We evaluate performance and make a recommendation to the Board of Directors on dividend payments on a quarterly basis. 38 Summary of Outstanding Balances on Credit Facilities and Long-Term Debt Below is a summary of our outstanding balances on credit facilities and long-term debt: ($ in millions) Outstanding as of December 31, 2022 Remaining Available as of December 31, 2022 Floor plan notes payable: non-trade $ 1,489.4 $ — (1) Floor plan notes payable 627.2 — Used and service loaner vehicle inventory financing commitments 877.2 17.9 (2) Revolving lines of credit 927.6 1,286.2 (2),(3) Warehouse facilities 930.0 115.3 (2) Non-recourse notes payable 422.2 — Real estate mortgages 580.1 — Finance lease obligations 56.4 — 4.625% Senior notes due 2027 400.0 — 4.375% Senior notes due 2031 550.0 — 3.875% Senior notes due 2029 800.0 — Other debt 16.6 — Unamortized debt issuance costs (29.1) — (4) Total debt $ 7,647.6 $ 1,419.4 (1) As of December 31, 2022, we had a $1.4 billion new vehicle floor plan commitment as part of our USB credit facility, and a $500 million CAD wholesale floorplan commitment as part of our BNS credit facility.
During 2023, we paid dividends on our common stock as follows: Dividend paid: Dividend amount per share Total amount of dividend (in millions) March 2023 $ 0.42 $ 11.5 May 2023 0.50 13.8 August 2023 0.50 13.8 November 2023 0.50 13.7 We evaluate performance and make a recommendation to the Board of Directors on dividend payments on a quarterly basis. 40 Summary of Outstanding Balances on Credit Facilities and Long-Term Debt Below is a summary of our outstanding balances on credit facilities and long-term debt: ($ in millions) Outstanding as of December 31, 2023 Remaining Available as of December 31, 2023 Floor plan notes payable: non-trade $ 2,288.5 $ — (1) Floor plan notes payable 1,347.0 — Used and service loaner vehicle inventory financing commitments 902.8 25.5 (2) Revolving lines of credit 1,620.7 829.6 (2),(3) Warehouse facilities 587.0 15.4 (2) Non-recourse notes payable 1,705.6 — 4.625% Senior notes due 2027 400.0 — 4.375% Senior notes due 2031 550.0 — 3.875% Senior notes due 2029 800.0 — Real estate mortgages, finance lease obligations, and other debt 730.7 — Unamortized debt issuance costs (31.8) — (4) Total debt $ 10,900.5 $ 870.4 (1) As of December 31, 2023, we had a $2.1 billion new vehicle floor plan commitment as part of our USB credit facility, and a $500 million CAD wholesale floorplan commitment as part of our BNS credit facility.
Year Ended December 31, 2022 vs. 2021 2021 vs. 2020 ($ in millions) 2022 2021 Change % 2020 Change % Depreciation and amortization $ 163.2 $ 124.8 $ 38.4 30.8 % $ 92.3 $ 32.5 35.2 % Acquisition activity contributed to the increases in depreciation and amortization in 2022 compared to 2021 and in 2021 compared to 2020.
Year Ended December 31, 2023 vs. 2022 2022 vs. 2021 ($ in millions) 2023 2022 Change % 2021 Change % Depreciation and amortization $ 195.8 $ 163.2 $ 32.6 20.0 % $ 124.8 $ 38.4 30.8 % Acquisition activity contributed to the increases in depreciation and amortization in 2023 compared to 2022 and in 2022 compared to 2021.
Adjusting for non-core charges, including storm related insurance charges and acquisition expenses, offset by a net disposal gain on sale of stores, our operating margin decreased 70 basis points. 2021 vs. 2020 Our operating margin increased 200 basis points compared to the prior year, driven by a decrease in SG&A as a percentage of gross profit and increased total gross margin.
Adjusting for non-core charges, including acquisition expenses, one-time contract buyouts, and storm related insurance charges, offset by a net disposal gain on sale of stores, our operating margin decreased 120 basis points. 2022 vs. 2021 Our operating margin decreased 40 basis points compared to the prior year, driven by an increase in SG&A as a percentage of gross profit.
Year Ended December 31, 2022 vs. 2021 2021 vs. 2020 ($ in millions) 2022 2021 Change % 2020 Change % Personnel $ 2,086.3 $ 1,737.9 $ 348.4 20.0 % $ 979.7 $ 758.2 77.4 % Advertising 253.6 162.2 91.4 56.4 97.4 64.8 66.5 Rent 72.6 54.0 18.6 34.4 41.2 12.8 31.1 Facility costs 150.3 116.8 33.5 28.7 81.0 35.8 44.2 Gain on sale of assets (66.0) (2.3) (63.7) NM (18.2) 15.9 NM Other 547.3 412.2 135.1 32.8 256.8 155.4 60.5 Total SG&A $ 3,044.1 $ 2,480.8 $ 563.3 22.7 % $ 1,437.9 $ 1,042.9 72.5 % NM - Not meaningful Year Ended December 31, 2022 vs. 2021 2021 vs. 2020 As a % of gross profit 2022 2021 Change 2020 Change Personnel 40.5 % 40.8 % (30) bps 44.0 % (320) bps Advertising 4.9 3.8 110 4.4 (60) Rent 1.4 1.3 10 1.9 (60) Facility costs 2.9 2.7 20 3.6 (90) Gain on sale of assets (1.3) (0.1) (120) (0.8) 70 Other 10.7 9.7 100 11.5 (180) Total SG&A 59.1 % 58.2 % 90 bps 64.6 % (640) bps 2022 vs. 2021 SG&A increased 22.7%, or $0.6 billion, primarily due to increased personnel costs resulting from our growth through acquisitions.
Year Ended December 31, 2023 vs. 2022 2022 vs. 2021 ($ in millions) 2023 2022 Change % 2021 Change % Personnel $ 2,163.1 $ 2,086.3 $ 76.8 3.7 % $ 1,737.9 $ 348.4 20.0 % Advertising 248.2 253.6 (5.4) (2.1) 162.2 91.4 56.4 Rent 89.3 72.6 16.7 23.0 54.0 18.6 34.4 Facility costs 183.9 150.3 33.6 22.4 116.8 33.5 28.7 Gain on sale of assets (34.1) (66.0) 31.9 NM (2.3) (63.7) NM Other 644.4 547.3 97.1 17.7 412.2 135.1 32.8 Total SG&A $ 3,294.8 $ 3,044.1 $ 250.7 8.2 % $ 2,480.8 $ 563.3 22.7 % NM - Not meaningful Year Ended December 31, 2023 vs. 2022 2022 vs. 2021 As a % of gross profit 2023 2022 Change 2021 Change Personnel 41.4 % 40.5 % 90 bps 40.8 % (30) bps Advertising 4.7 4.9 (20) 3.8 110 Rent 1.7 1.4 30 1.3 10 Facility costs 3.5 2.9 60 2.7 20 Gain on sale of assets (0.7) (1.3) 60 (0.1) (120) Other 12.4 10.7 170 9.7 100 Total SG&A 63.0 % 59.1 % 390 bps 58.1 % 100 bps 2023 vs. 2022 SG&A increased 8.2%, or $250.7 million, primarily due to increased personnel and other costs resulting from our growth through acquisitions.
Financing Operations income reflects the interest, fee, and lease income generated by DFC and Pfaff Leasing’s portfolio of auto loan and lease receivables less the interest expense associated with the debt utilized to fund the lending, a provision for estimated loan and lease losses, depreciation on vehicles leased via operating leases and directly-related expenses. 27 Total interest margin reflects the spread between interest, fee, and lease charges to consumers and our funding costs.
Financing Operations income reflects the interest, fee, and lease income generated by the portfolio of auto loan and lease receivables less the interest expense associated with the debt utilized to fund the lending, including internal capital, a provision for estimated loan and lease losses, depreciation on vehicles leased via operating leases and directly-related expenses.
Floor plan assistance is provided by manufacturers to support store financing of new vehicle inventory. Under accounting standards, floor plan assistance is recorded as a component of new vehicle gross profit when the specific vehicle is sold.
Under accounting standards, floor plan assistance is recorded as a component of new vehicle gross profit when the specific vehicle is sold.
See also Note 9 – Credit Facilities and Long-Term Debt of Notes to Consolidated Financial Statements for additional information. 2021 vs. 2020 The increase in other interest expense was due to the issuances of $800 million in aggregate principal amount of 3.875% senior notes due 2029 in May 2021 and $550 million in aggregate principal amount of 4.375% senior notes due 2031 in October 2020.
See also Note 9 – Credit Facilities and Long-Term Debt of Notes to Consolidated Financial Statements for additional information. 2022 vs. 2021 The increase in other interest expense was due to higher interest rates on our credit facilities and the full year impact of our $800 million in aggregate principal amount of 3.875% senior notes due 2029 issued in May 2021.
On a same store basis and excluding non-core charges, adjusted SG&A as a percentage of gross profit increased across all categories to 61.5% from 57.5% in the prior year. 2021 vs. 2020 SG&A increased 72.5%, or $1.0 billion, primarily due to increased personnel costs which resulted from our growth through acquisitions.
On a same store basis and excluding non-core charges, adjusted SG&A as a percentage of gross profit increased across all categories to 62.3% from 59.8% in the prior year. 2022 vs. 2021 SG&A increased 22.7%, or $563.3 million, primarily due to increased personnel costs which resulted from our growth through acquisitions.
(4) Front-end loan-to-value represents the ratio of the amount financed to the total collateral value, which is measured as the vehicle selling price plus applicable taxes, title and fees. 28 (5) Past due is defined as loans that have been on the books greater than or equal to 3 months and are 30 or more days delinquent (6) The average recovery rate represents the average percentage of the outstanding principal balance we receive when a vehicle is repossessed and liquidated, generally at wholesale auctions.
(5) Past due is defined as loans that have been on the books greater than or equal to 3 months and are 30 or more days delinquent (6) The average recovery rate represents the average percentage of the outstanding principal balance we receive when a vehicle is repossessed and liquidated, generally at wholesale auctions.
Used vehicle gross profits decreased 0.2%, due to an 11.8% decrease in average gross profit per unit. On a same store basis, used vehicle gross profit decreased 15.5%, led by a decrease in our core vehicles of 22.3% with additional declines in our value autos and CPO vehicle categories of 5.3% and 8.2%, respectively.
Used vehicle gross profits decreased 12.6%, due to a 16.4% decrease in average gross profit per unit. On a same store basis, used vehicle gross profit decreased 23.3%, led by a decrease in our CPO vehicles of 35.0% with additional declines in our core and value auto vehicle categories of 20.4% and 11.6%, respectively.
Other expenses in 2022 included acquisition expenses of $15.0 million and $4.9 million of storm related insurance charges. We also recognized a gain on the sale of stores of $66.0 million.
Other expenses in 2023 included acquisition expenses of $27.2 million and $5.4 million of storm related insurance charges. We also recognized a gain on the sale of stores of $31.2 million.
As of December 31, 2022, we had $1.9 billion of franchise value on our balance sheet associated with 265 locations. No individual location accounted for more than 3.6% of our total franchise value as of December 31, 2022.
As of December 31, 2023, we had $2.4 billion of franchise value on our balance sheet associated with 303 locations. No individual location accounted for more than 2.8% of our total franchise value as of December 31, 2023.
As of December 31, 2022, our new vehicle days’ supply was 47 days, or 23 days higher than our days’ supply as of December 31, 2021. Our days’ supply of used vehicles was 55 days, which was six days lower than our days’ supply as of December 31, 2021.
As of December 31, 2023, our new vehicle days’ supply was 65 days, or 18 days higher than our days’ supply as of December 31, 2022. Our days’ supply of used vehicles was 64 days, which was six days higher than our days’ supply as of December 31, 2022.
We offer a wide range of products and services including new and used vehicles, finance and insurance products and vehicle repair and maintenance. 21 Financial Performance We experienced growth of revenue and gross profit in all major business lines in 2022 compared to 2021, primarily driven by increases in volume related to acquisitions, complimented by organic growth in used vehicles, finance and insurance and service, body and parts sales.
Financial Performance We experienced growth of revenue and gross profit in all major business lines in 2023 compared to 2022, primarily driven by increases in volume related to acquisitions, complimented by organic growth in new vehicles, and service, body and parts sales.
We elected to perform qualitative franchise value and goodwill impairment tests as of October 1 each year. These non-cash impairment charges are included in the “Corporate and Other” category of our segment information. No impairment charges were recorded in 2022. During the third quarter of 2021, there was an indication of a triggering event at a certain reporting unit.
We elected to perform qualitative franchise value and goodwill impairment tests as of October 1 each year. These non-cash impairment charges are included in the “Corporate and Other” category of our segment information. No impairment charges were recorded in 2023 or 2022.
Year Ended December 31, 2022 vs. 2021 2021 vs. 2020 ($ in millions) 2022 2021 Change % 2020 Change % Other (expense) income, net $ (43.2) $ (52.0) $ 8.8 NM $ 61.8 $ (113.8) NM 32 2022 vs. 2021 The improvement in other (expense) income, net was primarily due to a $39.2 million unrealized investment loss related to our investment in Shift Technologies, Inc. compared to a $66.4 million unrealized loss in the prior year.
Year Ended December 31, 2022 vs. 2021 2021 vs. 2020 ($ in millions) 2023 2022 Change % 2021 Change % Other income (expense), net $ 22.0 $ (43.2) $ 65.2 NM $ (52.0) $ 8.8 NM 2023 vs. 2022 The improvement in other income (expense), net was primarily due to a $1.7 million investment loss related to equity investments compared to a $39.2 million loss in the prior year.
However, because manufacturers provide this assistance to offset inventory carrying costs, we believe a comparison of floor plan interest expense to floor plan assistance is a useful measure of the efficiency of our new vehicle sales relative to stocking levels. 30 The following tables detail the carrying costs for new vehicles and include new vehicle floor plan interest net of floor plan assistance earned: Year Ended December 31, 2022 vs. 2021 2021 vs. 2020 ($ in millions) 2022 2021 Change % 2020 Change % Floor plan interest expense (new vehicles) $ 38.8 $ 22.3 $ 16.5 74.0 % $ 34.4 $ (12.1) (35.2) % Floor plan assistance (included as an offset to cost of sales) (130.6) (120.1) (10.5) 8.7 (72.8) (47.3) 65.0 Net new vehicle carrying costs (benefit) $ (91.8) $ (97.8) $ 6.0 (6.1) % $ (38.4) $ (59.4) 154.7 Depreciation and Amortization Depreciation and amortization is comprised of depreciation expense related to buildings, significant remodels or improvements, furniture, tools, equipment and signage and amortization related to non-compete agreements.
The following tables detail the carrying costs for new vehicles and include new vehicle floor plan interest net of floor plan assistance earned: Year Ended December 31, 2023 vs. 2022 2022 vs. 2021 ($ in millions) 2023 2022 Change % 2021 Change % Floor plan interest expense (new vehicles) $ 150.9 $ 38.8 $ 112.1 288.9 % $ 22.3 $ 16.5 74.0 % Floor plan assistance (included as an offset to cost of sales) (159.2) (130.6) (28.6) 21.9 (120.1) (10.5) 8.7 Net new vehicle carrying costs (benefit) $ (8.3) $ (91.8) $ 83.5 (91.0) % $ (97.8) $ 6.0 (6.1) 32 Depreciation and Amortization Depreciation and amortization is comprised of depreciation expense related to buildings, significant remodels or improvements, furniture, tools, equipment and signage and amortization related to non-compete agreements.
Investing Activities Net cash used in investing activities totaled $1.3 billion and $2.9 billion, respectively, for 2022 and 2021. Cash flows from investing activities relate primarily to capital expenditures, acquisition and divestiture activity and sales of property and equipment.
Investing Activities Net cash used in investing activities totaled $1.3 billion and $1.3 billion, respectively, for 2023 and 2022. Cash flows from investing activities relate primarily to capital expenditures, acquisition and divestiture activity and sales of property and equipment. Our surplus of cash as of December 31, 2023, has been made available to fund upcoming acquisition activity.
Available Sources Below is a summary of our immediately available funds: As of December 31, ($ in millions) 2022 2021 Change % Change Cash $ 168.1 $ 153.0 $ 15.1 9.9 % Available credit on the credit facilities 1,419.4 1,234.7 184.7 15.0 % Total current available funds $ 1,587.5 $ 1,387.7 $ 199.8 14.4 % Information about our cash flows, by category, is presented in our Consolidated Statements of Cash Flows.
Available Sources Below is a summary of our immediately available funds: As of December 31, ($ in millions) 2023 2022 Change % Change Cash $ 825.0 $ 168.1 $ 656.9 390.8 % Available credit on the credit facilities 870.4 1,415.6 (545.2) (38.5) % Total current available funds $ 1,695.4 $ 1,583.7 $ 111.7 7.1 % Information about our cash flows, by category, is presented in our Consolidated Statements of Cash Flows.
SG&A adjusted for non-core charges was as follows: Year Ended December 31, 2022 vs. 2021 2021 vs. 2020 ($ in millions) 2022 2021 Change % 2020 Change % Personnel $ 2,086.3 $ 1,737.9 $ 348.4 20.0 % $ 979.7 $ 758.2 77.4 % Advertising 253.6 162.2 91.4 56.4 97.4 64.8 66.5 Rent 72.6 54.0 18.6 34.4 41.2 12.8 31.1 Facility costs 150.3 116.8 33.5 28.7 81.0 35.8 44.2 Adjusted gain on sale of assets (1) — (2.3) 2.3 NM (1.6) (0.7) NM Adjusted other (1) 527.4 386.2 141.2 36.6 247.7 138.5 55.9 Total adjusted SG&A (1) $ 3,090.2 $ 2,454.8 $ 635.4 25.9 % $ 1,445.4 $ 1,009.4 69.8 % NM - Not meaningful Year Ended December 31, 2022 vs. 2021 2021 vs. 2020 As a % of gross profit 2022 2021 Change 2020 Change Personnel 40.5 % 40.8 % (30) bps 44.0 % (320) bps Advertising 4.9 3.8 110 4.4 (60) Rent 1.4 1.3 10 1.9 (60) Facility costs 2.9 2.7 20 3.6 (90) Adjusted gain on sale of assets (1) — (0.1) 10 (0.1) — Adjusted other (1) 10.3 9.1 120 11.2 (210) Total adjusted SG&A (1) 60.0 % 57.6 % 240 bps 65.0 % (740) bps (1) See “Non-GAAP Reconciliations” for more details.
On a same store basis and excluding non-core charges, adjusted SG&A as a percentage of gross profit increased across all categories to 61.5% from 57.5% in the prior year. 31 SG&A adjusted for non-core charges was as follows: Year Ended December 31, 2023 vs. 2022 2022 vs. 2021 ($ in millions) 2023 2022 Change % 2021 Change % Personnel $ 2,163.1 $ 2,086.3 $ 76.8 3.7 % $ 1,737.9 $ 348.4 20.0 % Advertising 248.2 253.6 (5.4) (2.1) 162.2 91.4 56.4 Rent 89.3 72.6 16.7 23.0 54.0 18.6 34.4 Facility costs 183.9 150.3 33.6 22.4 116.8 33.5 28.7 Adjusted gain on sale of assets (1) (2.9) 0.0 (2.9) NM (2.3) 2.3 NM Adjusted other (1) 597.5 527.4 70.1 13.3 386.2 141.2 36.6 Total adjusted SG&A (1) $ 3,279.1 $ 3,090.2 $ 188.9 6.1 % $ 2,454.8 $ 635.4 25.9 % NM - Not meaningful Year Ended December 31, 2023 vs. 2022 2022 vs. 2021 As a % of gross profit 2023 2022 Change 2021 Change Personnel 41.4 % 40.5 % 90 bps 40.8 % (30) bps Advertising 4.7 4.9 (20) 3.8 110 Rent 1.7 1.4 30 1.3 10 Facility costs 3.5 2.9 60 2.7 20 Adjusted gain on sale of assets (1) (0.1) — (10) (0.1) 10 Adjusted other (1) 11.5 10.3 120 9.0 130 Total adjusted SG&A (1) 62.7 % 60.0 % 270 bps 57.5 % 250 bps (1) See “Non-GAAP Reconciliations” for more details.
Our gross margins continue to increase as our mix has shifted towards customer pay, which has higher margins than other service work. 2021 vs. 2020 Service, body and parts revenue grew in all areas, primarily due to acquisition growth and strong recovery from the impact of the COVID-19 pandemic.
Performance in body shop also saw an increase of 8.0%. Same store service, body and parts gross profit increased 7.7%. Our gross margins continue to increase as our mix has shifted towards customer pay, which has higher margins than other service work. 2022 vs. 2021 Service, body and parts revenue grew in all areas, primarily due to acquisition growth.
Year Ended December 31, 2022 vs. 2021 2021 vs. 2020 ($ in millions) 2022 2021 Change % 2020 Change % Mortgage interest $ 25.9 $ 24.9 $ 1.0 4.0 % $ 26.2 $ (1.3) (5.0) % Other interest 105.8 80.5 25.3 31.4 47.0 $ 33.5 71.3 Capitalized interest (2.6) (2.0) (0.6) 30.0 (1.6) (0.4) 25.0 Total other interest expense $ 129.1 $ 103.4 $ 25.7 24.9 % $ 71.6 $ 31.8 44.4 % 2022 vs. 2021 The increase in other interest expense was due to higher interest rates on our credit facilities and the full year impact of our $800 million in aggregate principal amount of 3.875% senior notes due 2029 issued in May 2021.
Year Ended December 31, 2023 vs. 2022 2022 vs. 2021 ($ in millions) 2023 2022 Change % 2021 Change % Mortgage interest $ 35.8 $ 25.9 $ 9.9 38.2 % $ 24.9 $ 1.0 4.0 % Other interest 168.0 105.8 62.2 58.8 80.5 $ 25.3 31.4 Capitalized interest (2.6) (2.6) — — (2.0) (0.6) 30.0 Total other interest expense $ 201.2 $ 129.1 $ 72.1 55.8 % $ 103.4 $ 25.7 24.9 % 2023 vs. 2022 The increase in other interest expense was due to higher interest rates and increased borrowings on our credit facilities.
These funds were primarily used for acquisitions, share repurchases and capital expenditures. Our debt to total capital ratio, excluding floor plan notes payable, was 49.5% at December 31, 2022 compared to 40.0% at December 31, 2021. Equity Transactions In November 2022, our Board of Directors authorized the repurchase of up to $450 million of our common stock.
These funds were primarily used for acquisitions, share repurchases and capital expenditures. Our debt to total capital ratio, excluding floor plan notes payable, was 47.1% at December 31, 2023 compared to 49.5% at December 31, 2022.
The interest rates on these floor plan notes payable commitments vary by lender and are variable rates. 2022 vs. 2021 Floor plan interest expense increased $16.5 million, primarily due to increases in new vehicle inventory levels at existing locations and growth through acquisitions. Floor plan interest expense increased 59.1% for pre-existing locations and 29.7% related to acquisition volume.
The interest rates on these floor plan notes payable commitments vary by lender and are variable rates. 2023 vs. 2022 Floor plan interest expense increased $112.1 million, primarily due to higher interest rates, increases in new vehicle inventory levels from acquisitions as well as existing locations recovering from prior year inventory shortages.
Our CPO category experienced a decrease in unit sales of 6.7% and a decrease in gross profit per unit of 1.6% to $3,808. 2021 vs. 2020 Used vehicle revenues increased 81.5%, driven by a combination of increased volume from acquisitions and organic growth in all categories of used vehicle sales at our seasoned stores.
The decrease in same store gross profit in our value auto category was driven by a 8.9% decrease in gross profit per unit to $2,433. 2022 vs. 2021 Used vehicle revenues increased 29.9%, due to a combination of increased volume from acquisitions and organic growth in all categories of used vehicle sales at our seasoned stores.
The following table summarizes our cash flows: Year Ended December 31, ($ in millions) 2022 2021 2020 Net cash (used in) provided by operating activities $ (610.1) $ 1,797.2 $ 544.6 Net cash used in investing activities (1,329.8) (2,890.4) (1,605.8) Net cash provided by financing activities 2,035.9 1,106.7 1,139.8 35 Operating Activities Cash provided by operating activities decreased $2.4 billion in 2022 compared to 2021, primarily as a result of growth in inventory levels compared to the prior year, growth in our financing receivables as we increase our auto loan portfolio, and growth in our business through acquisitions, partially offset by improved profitability.
The following table summarizes our cash flows: Year Ended December 31, ($ in millions) 2023 2022 2021 Net cash (used in) provided by operating activities $ (472.4) $ (610.1) $ 1,797.2 Net cash used in investing activities (1,270.3) (1,329.8) (2,890.4) Net cash provided by financing activities 2,409.8 2,035.9 1,106.7 37 Operating Activities Cash used in operating activities decreased $137.7 million in 2023 compared to 2022, primarily as a result of maturation of our financing receivables portfolio and an increase in manufacturer floor plan financing related to recovering new vehicle inventory levels, partially offset by reduced net income and an increase in trade receivables.
The decrease in our core vehicle category was driven by a decrease in gross profit per unit, while unit volume remained relatively flat. Gross profit per unit in our core vehicle category, which accounted for 61.5% of our used vehicle unit sales, decreased 22.4% to $2,124.
The decrease in our CPO vehicle category was driven by a decrease in gross profit per unit of 38.2% to $2,321, offset by an increase in unit volume of 5.2%. Gross profit per unit in our core vehicle category, which accounted for 58.2% of our used vehicle unit sales, decreased 11.3% to $1,992.
This location was subsequently sold in the fourth quarter of 2021. In the second quarter of 2020, there were indications of a triggering event at certain reporting units. We tested the franchise value and goodwill for these locations.
During the third quarter of 2021, there was an indication of a triggering event at a certain reporting unit. We tested the goodwill and franchise value for this location.
Based on this evaluation, we reclassified Financing Operations Income for the comparative periods from the “Corporate and Other” category to conform to current year presentation and consolidated our Domestic, Import, and Luxury segments into a new Vehicle Operations segment. 22 Vehicle Operations and Other Non-Reportable Segments Year Ended December 31, 2022 vs. 2021 2021 vs. 2020 ($ in millions, except per vehicle data) 2022 2021 Change % 2020 Change % Revenues New vehicle retail $ 12,894.5 $ 11,197.7 $ 1,696.8 15.2 % $ 6,773.9 $ 4,423.8 65.3 % Used vehicle retail 9,425.0 7,255.3 2,169.7 29.9 3,998.4 3,256.9 81.5 Finance and insurance 1,285.4 1,051.3 234.1 22.3 579.8 471.5 81.3 Service, body and parts 2,738.8 2,110.9 627.9 29.7 1,348.7 762.2 56.5 Total revenues 28,187.8 22,831.7 5,356.1 23.5 13,126.5 9,705.2 73.9 Gross profit New vehicle retail $ 1,579.7 $ 1,218.5 $ 361.2 29.6 % $ 461.0 $ 757.5 164.3 % Used vehicle retail 825.4 826.7 (1.3) (0.2) 446.0 380.7 85.4 Finance and insurance 1,285.4 1,051.3 234.1 22.3 579.8 471.5 81.3 Service, body and parts 1,463.1 1,110.5 352.6 31.8 716.8 393.7 54.9 Total gross profit 5,152.4 4,259.0 893.4 21.0 2,224.3 2,034.7 91.5 Gross profit margins New vehicle retail 12.3 % 10.9 % 140 bp 6.8 % 410 bp Used vehicle retail 8.8 11.4 -260 bp 11.2 20 bp Finance and insurance 100.0 100.0 — bp 100.0 — bp Service, body and parts 53.4 52.6 80 bp 53.1 -50 bp Total gross profit margin 18.3 18.7 -40 bp 17.0 170 bp Retail units sold New vehicle retail 271,596 260,738 10,858 4.2 % 171,168 89,570 52.3 % Used vehicle retail 311,764 275,495 36,269 13.2 183,230 92,265 50.4 Average selling price per retail unit New vehicle retail $ 47,477 $ 42,946 $ 4,531 10.6 % $ 39,575 $ 3,371 8.5 % Used vehicle retail 30,231 26,336 3,895 14.8 21,822 4,514 20.7 Average gross profit per retail unit New vehicle retail $ 5,816 $ 4,673 $ 1,143 24.5 % $ 2,693 $ 1,980 73.5 % Used vehicle retail 2,648 3,001 (353) (11.8) 2,434 567 23.3 Finance and insurance 2,203 1,961 242 12.3 1,636 325 19.9 Total vehicle (1) 6,300 5,855 445 7.6 4,226 1,629 38.5 (1) Includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail Same Store Operating Data We believe that same store comparisons are an important indicator of our financial performance.
Our Financing Operations segment provides financing to customers buying and leasing retail vehicles from our Vehicle Operations segment. 24 Vehicle Operations Year Ended December 31, 2023 vs. 2022 2022 vs. 2021 ($ in millions, except per vehicle data) 2023 2022 Change % 2021 Change % Revenues New vehicle retail $ 15,154.2 $ 12,894.5 $ 2,259.7 17.5 % $ 11,197.7 $ 1,696.8 15.2 % Used vehicle retail 9,570.2 9,425.0 145.2 1.5 7,255.3 2,169.7 29.9 Finance and insurance 1,337.0 1,285.4 51.6 4.0 1,051.3 234.1 22.3 Service, body and parts 3,197.1 2,738.8 458.3 16.7 2,110.9 627.9 29.7 Total revenues 31,042.3 28,187.8 2,854.5 10.1 22,831.7 5,356.1 23.5 Gross profit New vehicle retail $ 1,394.1 $ 1,579.7 $ (185.6) (11.7) % $ 1,218.5 $ 361.2 29.6 % Used vehicle retail 721.4 825.4 (104.0) (12.6) 826.7 (1.3) (0.2) Finance and insurance 1,337.0 1,285.4 51.6 4.0 1,051.3 234.1 22.3 Service, body and parts 1,751.4 1,463.1 288.3 19.7 1,110.5 352.6 31.8 Total gross profit 5,228.9 5,152.4 76.5 1.5 4,259.0 893.4 21.0 Gross profit margins New vehicle retail 9.2 % 12.3 % -310 bp 10.9 % 140 bp Used vehicle retail 7.5 8.8 -130 bp 11.4 -260 bp Finance and insurance 100.0 100.0 — bp 100.0 — bp Service, body and parts 54.8 53.4 140 bp 52.6 80 bp Total gross profit margin 16.8 18.3 -150 bp 18.7 -40 bp Retail units sold New vehicle retail 314,116 271,596 42,520 15.7 % 260,738 10,858 4.2 % Used vehicle retail 325,764 311,764 14,000 4.5 275,495 36,269 13.2 Average selling price per retail unit New vehicle retail $ 48,244 $ 47,477 $ 767 1.6 % $ 42,946 $ 4,531 10.6 % Used vehicle retail 29,378 30,231 (853) (2.8) 26,336 3,895 14.8 Average gross profit per retail unit New vehicle retail $ 4,438 $ 5,816 $ (1,378) (23.7) % $ 4,673 $ 1,143 24.5 % Used vehicle retail 2,215 2,648 (433) (16.4) 3,001 (353) (11.8) Finance and insurance 2,090 2,203 (113) (5.1) 1,960 243 12.4 Total vehicle (1) 5,367 6,300 (933) (14.8) 5,855 445 7.6 (1) Includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail Same Store Operating Data We believe that same store comparisons are an important indicator of our financial performance.
The revenue increase in 2022 was driven by an increase in our core vehicles of 15.8% and supported by increases in value auto and CPO vehicle categories of 10.8% and 6.1%, respectively. The increase in our core vehicle category includes a 0.2% increase in volume, complimented by a 15.6% increase in average selling price per vehicle.
The same store revenue decrease in 2023 was driven by a decrease in our core vehicles of 14.9% and decreases in value auto and CPO vehicle categories of 12.4% and 0.7%, respectively. The decrease in our core vehicle category includes a 10.3% decrease in volume and a 5.1% decrease in average selling price per vehicle.
Third-party extended warranty and insurance contracts yield higher profit margins than vehicle sales and contribute significantly to our profitability. 2022 vs. 2021 Finance and insurance revenue increased 22.3%, primarily due to increased volume related to acquisitions, combined with expanded product offerings and increasing penetration rates.
Third-party extended warranty and insurance contracts yield higher profit margins than vehicle sales and contribute significantly to our profitability. 2023 vs. 2022 Finance and insurance revenue increased 4.0%, primarily due to increased volume related to acquisitions. On a same store basis, finance and insurance revenue decreased 3.9%, to $2,158 per unit.
We have the option to qualitatively or quantitatively assess goodwill for impairment and, in 2022, we evaluated our goodwill using a qualitative assessment process. If the qualitative factors determine that it is more likely than not that the fair value of the reporting unit exceeds the carrying amount, goodwill is not impaired.
If the qualitative factors determine that it is more likely than not that the fair value of the reporting unit exceeds the carrying amount, goodwill is not impaired. If the qualitative assessment determines it is more likely than not the fair value is less than the carrying amount, we would further evaluate for potential impairment.
On a same store basis, new and used vehicle retail revenues and gross profits experienced growth primarily driven by increases in average selling prices per retail unit.
On a same store basis, new and used vehicle retail gross profits experienced declines primarily driven by decreases in gross profit per unit as margins normalize to pre-pandemic levels.
The increase in same store new vehicle revenues was driven by an increase in unit volume of 3.6% and an increase in average selling prices of 10.0%. On a same store basis, gross profit per new vehicle increased 75.0%.
The decrease in same store new vehicle revenues was driven by a decrease in unit volume of 15.4%, partially offset by an increase in average selling prices of 11.6%.
FICO scores are not a significant factor in our proprietary credit model, which relies on information from credit bureaus and other application information as discussed in Note 5 – Finance Receivables.
FICO scores are not a significant factor in our proprietary credit model, which relies on information from credit bureaus and other application information as discussed in Note 5 – Finance Receivables. (4) Front-end loan-to-value represents the ratio of the amount financed to the total collateral value, which is measured as the vehicle selling price plus applicable taxes, title and fees.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion in conjunction with Item 1. Business, Item 1A.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion in conjunction with Item 1. Business, Item 1A. Risk Factors, and our Consolidated Financial Statements and Notes thereto. Overview We are a global automotive retailer ranked #145 on the Fortune 500 in 2023.
Adjusting for non-core charges, including storm insurance charges, acquisition expenses, and asset impairments, our operating margin increased 210 basis points.
Adjusting for non-core charges, including storm insurance charges and acquisition expenses, offset by a net disposal gain on sale of stores, our operating margin decreased 70 basis points.
Excluding the valuation allowance recorded during 2022, our effective income tax rate excluding non-core items for 2022 would have been 26.4%, a decrease of 40 basis points compared to the effective income tax rate excluding non-core items for 2021.
Our 2023 effective income tax rate was negatively affected by non-deductible acquisition costs recorded during the period. 34 Adjusting for non-deductible acquisition costs and valuation allowance activity recorded during 2023, our effective income tax rate excluding non-core items is 25.6%, a decrease of 90 basis points compared to the effective income tax rate excluding non-core items for 2022.
We also recognized a $16.8 million unrealized loss on foreign currency translations in 2022. 2021 vs. 2020 The decrease in other (expense) income, net was primarily due to a $66.4 million unrealized investment loss related to our investment in Shift Technologies, Inc compared to a $43.8 million unrealized gain in the prior year.
Other notable items included a $5.1 million unrealized gain on foreign currency translations, $4.7 million of interest income from foreign currency deposit accounts, and $2.6 million net pension benefit recognized in 2023. 2022 vs. 2021 The improvement in other income (expense), net was primarily due to a $39.2 million investment loss related to equity investments compared to a $66.4 million loss in the prior year.
Excluding the impact of acquisitions, on a same store basis, used vehicle revenues increased 40.5%, due to a 16.6% increase in unit volume and a 20.5% increase in average selling price per retail unit. Used vehicle gross profits increased 85.4%, due to increased gross profit per unit of 23.3% and increased unit volume of 50.4%.
On a same store basis, used vehicle revenues decreased 11.0%, due to a 5.7% decrease in unit volume and a 5.6% decrease in average selling price per retail unit.
On a same store basis, used vehicle gross profit increased 46.7%, due to an increase in average gross profit per unit of 25.9% and increased unit volume. Third-party Finance and Insurance We believe that arranging timely vehicle financing is an important part of providing personal transportation solutions, and we attempt to arrange financing for every vehicle we sell.
Third-Party Finance and Insurance We believe that arranging timely vehicle financing is an important part of providing personal transportation solutions, and we attempt to arrange financing for every vehicle we sell. We also offer related products such as extended warranties, insurance contracts and vehicle and theft protection.
We target growing penetration to 15% of retail units by 2025. Financing Operations provides an opportunity to capture additional profits, cash flows, and sales while managing our reliance on third-party finance sources.
Our stores do not exclusively finance vehicles through Financing Operations, rather originations are earned on a competitive basis with other lenders. Financing Operations provides an opportunity to capture additional profits, cash flows, and sales while managing our reliance on third-party finance sources.
DFC is a captive lender, originating loans only from stores in the United States and Driveway. Pfaff Leasing originates loans and leases from both our Canadian stores and third-party dealerships. Our stores do not exclusively finance vehicles through DFC or Pfaff Leasing, rather originations are earned on a competitive basis with other lenders.
On a same store basis, service, body and parts revenue and gross profit increased 9.9% and 12.8%, respectively. Financing Operations In the United States, Financing Operations is a captive lender, originating loans only from stores and Driveway. In Canada, Financing Operations originates loans and leases from both our Canadian stores and third-party dealerships.
As we acquired 32 and 78 locations in 2022 and 2021, respectively, this decrease in 2022 was due to the volume of stores recently acquired still being integrated into our existing operational strategies. 25 Used vehicle demand remains high, due in part to the lower levels of new vehicle inventory available for sale.
As we acquired 56 and 32 locations in 2023 and 2022, respectively, this decrease in 2023 was due to the volume of stores recently acquired still being integrated into our existing operational strategies as well as the result of supply constraints of new vehicles during the pandemic period impacting late model availability today. 27 2023 vs. 2022 Used vehicle revenues increased 1.5%, due to increased volume from acquisitions, offset by decreased volume at our seasoned stores.
Liquidity As of December 31, 2022, we had available liquidity of $1.6 billion, which was comprised of $168.1 million in cash and $1.4 billion availability on our credit facilities and unfloored new vehicle inventory. In addition, our unfinanced real estate could provide additional liquidity of approximately $0.5 billion.
Net income decline was primarily driven by this margin normalization, increased interest expense, and increased SG&A as a percentage of gross profit. 23 Liquidity As of December 31, 2023, we had available liquidity of $1.7 billion, which was comprised of $0.8 billion in cash and $0.9 billion availability on our credit facilities and unfloored new vehicle inventory.
The fourth quarter operating results for the same store comparisons would include results for that store in only the period of December for both comparable periods. 23 Year Ended December 31, 2022 vs. 2021 2021 vs. 2020 ($ in millions, except per vehicle data) 2022 2021 Change % 2021 2020 Change % Revenues New vehicle retail $ 10,129.1 $ 10,729.8 $ (600.7) (5.6) % $ 7,159.1 $ 6,282.4 $ 876.7 14.0 % Used vehicle retail 7,886.6 6,997.9 888.7 12.7 5,246.8 3,735.3 1,511.5 40.5 Finance and insurance 1,027.2 1,010.7 16.5 1.6 697.3 540.5 156.8 29.0 Service, body and parts 2,232.9 2,032.9 200.0 9.8 1,403.6 1,260.2 143.4 11.4 Total revenues 22,649.1 21,941.2 707.9 3.2 15,216.9 12,216.2 3,000.7 24.6 Gross profit New vehicle retail $ 1,231.4 $ 1,175.9 $ 55.5 4.7 % $ 781.2 $ 430.7 $ 350.5 81.4 % Used vehicle retail 674.7 798.0 (123.3) (15.5) 618.1 421.2 196.9 46.7 Finance and insurance 1,027.2 1,010.7 16.5 1.6 697.3 540.5 156.8 29.0 Service, body and parts 1,205.3 1,069.9 135.4 12.7 756.3 669.2 87.1 13.0 Total gross profit 4,125.2 4,105.4 19.8 0.5 2,879.6 2,082.0 797.6 38.3 Gross profit margins New vehicle retail 12.2 % 11.0 % 120 bp 10.9 % 6.9 % 400 bp Used vehicle retail 8.6 11.4 -280 bp 11.8 11.3 50 bp Finance and insurance 100.0 100.0 — bp 100.0 100.0 — bp Service, body and parts 54.0 52.6 140 bp 53.9 53.1 80 bp Total gross profit margin 18.2 18.7 -50 bp 18.9 17.0 190 bp Retail units sold New vehicle retail 210,558 248,821 (38,263) (15.4) % 163,680 157,933 5,747 3.6 % Used vehicle retail 261,857 264,305 (2,448) (0.9) 198,121 169,953 28,168 16.6 Average selling price per retail unit New vehicle retail $ 48,106 $ 43,123 $ 4,983 11.6 % $ 43,738 $ 39,779 $ 3,959 10.0 % Used vehicle retail 30,118 26,477 3,641 13.8 26,483 21,978 4,505 20.5 Average gross profit per retail unit New vehicle retail $ 5,848 $ 4,726 $ 1,122 23.7 % $ 4,773 $ 2,727 $ 2,046 75.0 % Used vehicle retail 2,576 3,019 (443) (14.7) 3,120 2,479 641 25.9 Finance and insurance 2,174 1,970 204 10.4 1,927 1,648 279 16.9 Total vehicle (1) 6,159 5,900 259 4.4 5,854 4,280 1,574 36.8 (1) Includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail 24 New Vehicles Under our business strategy, we believe that our new vehicle sales create incremental profit opportunities through certain manufacturer incentive programs, providing used vehicle inventory through trade-ins, arranging of third-party financing, vehicle service and insurance contracts, future resale of used vehicles acquired through trade-in and parts and service work. 2022 vs. 2021 New vehicle revenue and gross profit grew 15.2% and 29.6%, respectively.
The fourth quarter operating results for the same store comparisons would include results for that store in only the period of December for both comparable periods. 25 Year Ended December 31, 2023 vs. 2022 2022 vs. 2021 ($ in millions, except per vehicle data) 2023 2022 Change % 2022 2021 Change % Revenues New vehicle retail $ 13,197.3 $ 12,562.0 $ 635.3 5.1 % $ 10,009.9 $ 10,607.9 $ (598.0) (5.6) % Used vehicle retail 8,173.4 9,182.3 (1,008.9) (11.0) 7,779.6 6,896.3 883.3 12.8 Finance and insurance 1,205.0 1,253.9 (48.9) (3.9) 1,016.5 999.1 17.4 1.7 Service, body and parts 2,803.1 2,657.4 145.7 5.5 2,207.8 2,009.0 198.8 9.9 Total revenues 26,708.4 27,454.4 (746.0) (2.7) 22,378.3 21,673.0 705.3 3.3 Gross profit New vehicle retail $ 1,205.3 $ 1,541.9 $ (336.6) (21.8) % $ 1,221.7 $ 1,163.6 $ 58.1 5.0 % Used vehicle retail 614.1 801.1 (187.0) (23.3) 663.7 784.2 (120.5) (15.4) Finance and insurance 1,205.0 1,253.9 (48.9) (3.9) 1,016.5 999.1 17.4 1.7 Service, body and parts 1,533.5 1,424.0 109.5 7.7 1,193.4 1,058.0 135.4 12.8 Total gross profit 4,554.2 5,018.8 (464.6) (9.3) 4,082.0 4,055.6 26.4 0.7 Gross profit margins New vehicle retail 9.1 % 12.3 % -320 bp 12.2 % 11.0 % 120 bp Used vehicle retail 7.5 8.7 -120 bp 8.5 11.4 -290 bp Finance and insurance 100.0 100.0 — bp 100.0 100.0 — bp Service, body and parts 54.7 53.6 110 bp 54.1 52.7 140 bp Total gross profit margin 17.1 18.3 -120 bp 18.2 18.7 -50 bp Retail units sold New vehicle retail 272,780 264,510 8,270 3.1 % 208,185 246,186 (38,001) (15.4) % Used vehicle retail 285,708 303,037 (17,329) (5.7) 257,968 259,978 (2,010) (0.8) Average selling price per retail unit New vehicle retail $ 48,381 $ 47,492 $ 889 1.9 % $ 48,082 $ 43,089 $ 4,993 11.6 % Used vehicle retail 28,607 30,301 (1,694) (5.6) 30,157 26,527 3,630 13.7 Average gross profit per retail unit New vehicle retail $ 4,419 $ 5,829 $ (1,410) (24.2) % $ 5,868 $ 4,726 $ 1,142 24.2 % Used vehicle retail 2,149 2,643 (494) (18.7) 2,573 3,017 (444) (14.7) Finance and insurance 2,158 2,209 (51) (2.3) 2,181 1,974 207 10.5 Total vehicle (1) 5,383 6,312 (929) (14.7) 6,175 5,907 268 4.5 (1) Includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail 26 New Vehicles Under our business strategy, we believe that our new vehicle sales create incremental profit opportunities through certain manufacturer incentive programs, providing used vehicle inventory through trade-ins, arranging of third-party financing, vehicle service and insurance contracts, future resale of used vehicles acquired through trade-in and parts and service work. 2023 vs. 2022 New vehicle revenue grew 17.5%, resulting from a 15.7% increase in unit sales due to our accelerated growth through strategic acquisitions, complemented by a 1.6% increase in average selling prices.
The decline in the average recovery rate was driven by used vehicle price depreciation and the impact of a change in repossession strategy and the transition to new vendors in the fourth quarter of 2022.
The decline in the average recovery rate was driven by used vehicle price depreciation outpacing the amortization of the principal balance on loan principal balances, due to the relatively limited seasoning of the portfolio.
These increases were offset by the payoff of our $300 million in aggregate principal amount of 5.250% senior notes in August 2021. Other (Expense) Income, Net Other (expense) income, net primarily includes other income associated with investment income and other non-recurring transactions.
Other Income (Expense), Net Other income (expense), net primarily includes other income associated with investment income and other non-recurring transactions.
Market demand remained high throughout 2022, with inventory levels recovering in the second half of 2022 from prior year shortages of available new vehicles for sale, resulting from certain component shortages in the manufacturers’ supply chains. This imbalance continued to result in higher than normal average selling prices and gross profits per unit.
Same store gross profit per new vehicle increased 24.2%, driven by demand from prior year shortages of available new vehicles for sale, resulting from certain component shortages in the manufacturers’ supply chains.

… 50 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+1 added−0 removed7 unchanged
Biggest changeBased on discounted cash flows using current interest rates for comparable debt, we have determined that the fair value of this long-term fixed interest rate debt was approximately $2.6 billion as of December 31, 2021. Foreign Currency Exchange Risk The functional currency of our Canadian subsidiaries is the CAD.
Biggest changeBased on discounted cash flows using current interest rates for comparable debt, we have determined that the fair value of this long-term fixed interest rate debt was approximately $3.9 billion as of December 31, 2023.
We currently utilize bank debt, mortgage financing, high-yield debt and internally generated cash flows for growth and investment. We monitor our credit 41 ratings and evaluate the benefit and cost of various debt types to manage, and minimize as best as possible, our interest cost.
We currently utilize bank debt, mortgage financing, high-yield debt and internally generated cash flows for growth and investment. We monitor our credit ratings and evaluate the benefit and cost of various debt types to manage, and minimize as best as possible, our interest cost.
We maintain risk management controls to monitor interest rate cash flow attributable to both our outstanding and forecasted debt obligations, as well as our offsetting hedge positions. The risk management controls include assessing the impact to future cash flows of changes in interest rates.
We maintain risk management controls to monitor interest rate cash flow attributable to both our outstanding and forecasted debt obligations, as well as our offsetting hedge positions. The risk management controls include assessing the impact to future cash flows of changes in interest rates. 43
Based on discounted cash flows using current interest rates for comparable debt, we have determined that the fair value of this long-term fixed interest rate debt was approximately $2.3 billion as of December 31, 2022.
Based on discounted cash flows using then current interest rates for comparable debt, we determined that the fair value of this long-term fixed interest rate debt was approximately $2.3 billion as of December 31, 2022.
A 10% increase in interest rates, or 14.3 basis points, would increase annual interest expense by approximately $2.2 million, net of tax, based on amounts outstanding as of December 31, 2021. Fixed Rate Debt The fair value of our long-term fixed interest rate debt is subject to interest rate risk.
A 10% increase in interest rates, or 40.8 basis points, would increase annual interest expense by approximately $15.1 million, net of tax, based on amounts outstanding as of December 31, 2022. Fixed Rate Debt The fair value of our long-term fixed interest rate debt is subject to interest rate risk.
Our variable-rate floor plan notes payable, variable rate mortgage notes payable and other credit line borrowings subject us to market risk exposure. As of December 31, 2022, we had $5.0 billion outstanding under such agreements at a weighted average interest rate of 4.1% per annum.
Our variable-rate floor plan notes payable, variable rate mortgage notes payable and other credit line borrowings subject us to market risk exposure. As of December 31, 2023, we had $6.9 billion outstanding under such agreements at a weighted average interest rate of 6.8% per annum.
A 10% increase in interest rates, or 40.8 basis points, would increase annual interest expense by approximately $15.1 million, net of tax, based on amounts outstanding as of December 31, 2022. As of December 31, 2021, we had $2.1 billion outstanding under such agreements at a weighted average interest rate of 1.43% per annum.
A 10% increase in interest rates, or 68.1 basis points, would increase annual interest expense by approximately $34.8 million, net of tax, based on amounts outstanding as of December 31, 2023. As of December 31, 2022, we had $5.0 billion outstanding under such agreements at a weighted average interest rate of 4.1% per annum.
A 10% devaluation in average exchange rates for the CAD to the USD would have resulted in a $105.7 million and $32.3 million decrease to our revenues for the years ended December 31, 2022, and 2021, respectively.
A 10% devaluation in average exchange rates would have resulted in a $303.1 million and $105.7 million decrease to our revenues for the years ended December 31, 2023, and 2022, respectively.
As of December 31, 2021, we had $2.5 billion of long-term fixed interest rate debt outstanding and recorded on the balance sheet, with maturity dates between April 1, 2022 and July 1, 2038.
As of December 31, 2023, we had $4.1 billion of long-term fixed interest rate debt outstanding and recorded on the balance sheet, with maturity dates between January 1, 2024 and December 31, 2050.
Added
Foreign Currency Exchange Risk We have foreign currency risks related to our foreign subsidiaries’ operating activities denominated in currencies other than the U.S. dollar, including the Canadian dollar and the British pound sterling.

Other LAD 10-K year-over-year comparisons