Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



x☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2018~~2019

OR



o☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-31262

ASBURY AUTOMOTIVE GROUP, INC.

(Exact name of Registrant as specified in its charter)



	Delaware				01-0609375
	(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

	2905 Premiere Parkway NW	,	Suite 300
	Duluth	,	Georgia		30097
	(Address of principal executive offices)				(Zip Code)

~~(770)~~ (770) 418-8200

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



		Trading
Title of each class		Symbol(s)		Name of each exchange on which registered
Common stock, $0.01 par value per share		ABG		New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:



Large Accelerated Filer	x☒		Accelerated Filer	o☐

Non-Accelerated Filer	o☐	~~(Do not check if a smaller reporting company)~~	Smaller Reporting Company	o☐

			Emerging Growth Company	o☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: The number of shares of common stock outstanding as of ~~October 23, 2018~~July 30, 2019 was ~~19,601,597~~.19,348,289.

ASBURY AUTOMOTIVE GROUP, INC.

TABLE OF CONTENTS



		Page
PART I—Financial Information
Item 1.	Condensed Consolidated Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018	4
	Condensed Consolidated Statements of Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	5
	Condensed Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	6
	Condensed Consolidated Statements of ~~Cash Flows~~Shareholders' Equity for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	9
	Notes to Condensed Consolidated Financial Statements	810
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2124
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4448
Item 4.	Controls and Procedures	4448

	PART II—Other Information

Item 1.	Legal Proceedings	4550
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4550
Item 4.	Mine Safety Disclosures	4550
Item 6.	Exhibits	4651
	Signatures	4752
	Index to Exhibits	4853

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

ASBURY AUTOMOTIVE GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except par value and share data)

(Unaudited)


	September 30, 2018				December 31, 2017			June 30, 2019				December 31, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	6.8			$	4.7		$	9.6			$	8.3
Contracts-in-transit	138.0				193.3			153.9				198.3
Accounts receivable, net	114.1				128.5			117.3				130.3
Inventories	962.8				826.0			1,100.8				1,067.6
Assets held for sale	28.3				30.3			19.5				26.3
Other current assets	125.5				119.3			128.4				122.2
Total current assets	1,375.5				1,302.1			1,529.5				1,553.0
PROPERTY AND EQUIPMENT, net	877.6				834.2			918.9				886.1
OPERATING LEASE RIGHT-OF-USE ASSETS								78.9				—
GOODWILL	181.2				160.8			213.2				181.2
INTANGIBLE FRANCHISE RIGHTS	69.5				49.6			65.8				65.8
OTHER LONG-TERM ASSETS	12.5				10.0			7.7				9.3
Total assets	$	2,516.3			$	2,356.7		$	2,814.0			$	2,695.4
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Floor plan notes payable—trade, net	$	102.2			$	104.2		$	123.8			$	114.0
Floor plan notes payable—non-trade, net	728.9				627.9			794.9				852.1
Current maturities of long-term debt	13.1				12.9			38.4				38.8
Current maturities of operating leases								20.5				—
Accounts payable and accrued liabilities	291.3				313.2			295.0				298.4
Total current liabilities	1,135.5				1,058.2			1,272.6				1,303.3
LONG-TERM DEBT	852.1				862.6			871.2				866.5
OPERATING LEASE LIABILITIES								62.6				—
DEFERRED INCOME TAXES	17.4				12.5			20.7				21.7
OTHER LONG-TERM LIABILITIES	30.3				29.2			30.6				30.7
COMMITMENTS AND CONTINGENCIES (Note 11)
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; 10,000,000 shares authorized; none issued or outstanding	—				—			—				—
Common stock, $.01 par value; 90,000,000 shares authorized; 41,159,319 and 40,969,987 shares issued, including shares held in treasury, respectively	0.4				0.4
Common stock, $.01 par value; 90,000,000 shares authorized; 41,140,077 and 41,065,069 shares issued, including shares held in treasury, respectively								0.4				0.4
Additional paid-in capital	571.7				563.5			577.8				572.9
Retained earnings	887.1				750.3			1,009.3				922.7
Treasury stock, at cost; 21,052,038 and 20,156,962 shares, respectively	(980.9		)		(919.1		)
Accumulated other comprehensive income (loss)	2.7				(0.9		)
Treasury stock, at cost; 21,789,579 and 21,719,339 shares, respectively								(1,028.4		)		(1,023.4		)
Accumulated other comprehensive (loss) income								(2.8		)		0.6
Total shareholders' equity	481.0				394.2			556.3				473.2
Total liabilities and shareholders' equity	$	2,516.3			$	2,356.7		$	2,814.0			$	2,695.4

See accompanying Notes to Condensed Consolidated Financial Statements

ASBURY AUTOMOTIVE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

(Unaudited)


	For the Three Months Ended September 30,								For the Nine Months Ended September 30,							For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2018				2017				2018				2017			2019				2018				2019				2018
REVENUE:
New vehicle	$	980.5			$	881.6			$	2,766.3			$	2,597.0		$	965.2			$	928.7			$	1,837.0			$	1,785.8
Used vehicle	497.5				455.6				1,499.0				1,396.6			533.6				516.9				1,043.5				1,001.5
Parts and service	206.1				197.2				609.9				589.5			224.5				204.5				442.1				403.8
Finance and insurance, net	73.3				67.7				215.0				202.5			80.2				73.5				151.7				141.7
TOTAL REVENUE	1,757.4				1,602.1				5,090.2				4,785.6			1,803.5				1,723.6				3,474.3				3,332.8
COST OF SALES:
New vehicle	938.4				840.6				2,645.0				2,474.6			926.9				888.1				1,760.8				1,706.6
Used vehicle	464.7				426.8				1,398.6				1,301.2			497.7				482.8				973.1				933.9
Parts and service	76.3				74.4				225.4				222.3			83.9				74.9				166.2				149.1
TOTAL COST OF SALES	1,479.4				1,341.8				4,269.0				3,998.1			1,508.5				1,445.8				2,900.1				2,789.6
GROSS PROFIT	278.0				260.3				821.2				787.5			295.0				277.8				574.2				543.2
OPERATING EXPENSES:
Selling, general, and administrative	188.8				182.5				563.6				549.2			200.7				190.6				391.7				374.8
Depreciation and amortization	8.5				8.1				25.2				24.0			9.0				8.5				17.6				16.7
Other operating (income) expenses, net	(0.1		)		—				(1.2		)		0.7
Other operating expense (income), net																(0.6		)		(0.9		)		1.2				(1.1		)
INCOME FROM OPERATIONS	80.8				69.7				233.6				213.6			85.9				79.6				163.7				152.8
OTHER EXPENSES:
OTHER EXPENSES (INCOME):
Floor plan interest expense	8.4				5.8				23.0				17.1			10.5				8.0				20.7				14.6
Other interest expense, net	13.2				13.4				39.4				40.2			13.6				13.2				27.5				26.2
Swap interest expense	0.1				0.4				0.5				1.6			—				0.2				—				0.4
Gain on divestiture																(11.7		)		—				(11.7		)		—
Total other expenses, net	21.7				19.6				62.9				58.9			12.4				21.4				36.5				41.2
INCOME BEFORE INCOME TAXES	59.1				50.1				170.7				154.7			73.5				58.2				127.2				111.6
Income tax expense	14.8				19.4				43.1				58.1			18.6				15.0				31.4				28.3
NET INCOME	$	44.3			$	30.7			$	127.6			$	96.6		$	54.9			$	43.2			$	95.8			$	83.3
EARNINGS PER COMMON SHARE:
EARNINGS PER SHARE:
Basic—
Net income	$	2.22			$	1.49			$	6.29			$	4.64		$	2.87			$	2.13			$	4.99			$	4.08
Diluted—
Net income	$	2.18			$	1.48			$	6.22			$	4.60		$	2.84			$	2.11			$	4.96			$	4.02
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic	20.0				20.6				20.3				20.8			19.1				20.3				19.2				20.4
Restricted stock	0.1				0.1				0.1				0.1			0.1				0.1				0.0				0.1
Performance share units	0.2				0.1				0.1				0.1			0.1				0.1				0.1				0.2
Diluted	20.3				20.8				20.5				21.0			19.3				20.5				19.3				20.7

See accompanying Notes to Condensed Consolidated Financial Statements

ASBURY AUTOMOTIVE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	For the Three Months Ended September 30,								For the Nine Months Ended September 30,							For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2018				2017				2018				2017			2019				2018				2019				2018
Net income	$	44.3			$	30.7			$	127.6			$	96.6		$	54.9			$	43.2			$	95.8			$	83.3
Other comprehensive income:
Change in fair value of cash flow swaps	0.9				0.3				4.9				0.5			(2.5		)		1.2				(4.3		)		4.0
Income tax expense associated with cash flow swaps	(0.2		)		(0.1		)		(1.3		)		(0.2		)
Income tax expense (benefit) associated with cash flow swaps																0.6				(0.4		)		1.1				(1.1		)
Comprehensive income	$	45.0			$	30.9			$	131.2			$	96.9		$	53.0			$	44.0			$	92.6			$	86.2

See accompanying Notes to Condensed Consolidated Financial Statements

ASBURY AUTOMOTIVE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Dollars in millions)

(Unaudited)



	Common Stock							Additional Paid-in Capital				Retained Earnings				Treasury Stock							Accumulated Other Comprehensive Income (Loss)				Total
	Shares			Amount				Additional Paid-in Capital				Retained Earnings				Shares			Amount				Accumulated Other Comprehensive Income (Loss)				Total
Balances, December 31, 2018	41,065,069			$	0.4			$	572.9			$	922.7			21,719,339			$	(1,023.4	)		$	0.6			$	473.2
Comprehensive Income:
Net income	—			$	—			$	—			$	40.9			—			$	—			$	—			$	40.9
Change in fair value of cash flow swaps, net of reclassification adjustment and $0.5 tax expense	—			$	—			$	—			$	—			—			$	—			$	(1.3	)		$	(1.3	)
Comprehensive income	—			$	—			$	—			$	40.9			—			$	—			$	(1.3	)		$	39.6
Cumulative effect adjustment of ASU 2018-02	—			$	—			$	—			$	0.2			—			$	—			$	(0.2	)		$	—
Share-based compensation	—			$	—			$	3.9			$	—			—			$	—			$	—			$	3.9
Issuance of common stock, net of forfeitures in connection with share-based payment arrangements	238,078			$	—			$	—			$	—			—			$	—			$	—			$	—
Repurchase of common stock associated with net share settlement of employee share-based awards	—			$	—			$	—			$	—			66,912			$	(4.7	)		$	—			$	(4.7	)
Share repurchases	—			$	—			$	—			$	—			108,978			$	(7.4	)		$	—			$	(7.4	)
Retirement of previously repurchased common stock	(108,978	)		$	—			$	(1.3	)		$	(6.1	)		(108,978	)		$	7.4			$	—			$	—
Balances, March 31, 2019	41,194,169			$	0.4			$	575.5			$	957.7			21,786,251			$	(1,028.1	)		$	(0.9	)		$	504.6
Comprehensive Income:
Net income	—			$	—			$	—			$	54.9			—			$	—			$	—			$	54.9
Change in fair value of cash flow swaps, net of reclassification adjustment and $0.6 tax expense	—			$	—			$	—			$	—			—			$	—			$	(1.9	)		$	(1.9	)
Comprehensive income	—			$	—			$	—			$	54.9			—			$	—			$	(1.9	)		$	53.0
Share-based compensation	—			$	—			$	2.9										$	—			$	—			$	2.9
Issuance of common stock, net of forfeitures in connection with share-based payment arrangements	(3,656	)		$	—			$	—			$	—										$	—			$	—
Repurchase of common stock associated with net share settlement of employee share-based awards	—			$	—			$	—			$	—			3,328			$	(0.3	)		$	—			$	(0.3	)
Share repurchases	—			$	—			$	—			$	—			50,436			$	(3.9	)		$	—			$	(3.9	)
Retirement of previously repurchased common stock	(50,436	)		$	—			$	(0.6	)		$	(3.3	)		(50,436	)		$	3.9			$	—			$	—
Balances, June 30, 2019	41,140,077			$	0.4			$	577.8			$	1,009.3			21,789,579			$	(1,028.4	)		$	(2.8	)		$	556.3



	Common Stock							Additional Paid-in Capital				Retained Earnings				Treasury Stock							Accumulated Other Comprehensive Income (Loss)				Total
	Shares			Amount				Additional Paid-in Capital				Retained Earnings				Shares			Amount				Accumulated Other Comprehensive Income (Loss)				Total
Balances, December 31, 2017	40,969,987			$	0.4			$	563.5			$	750.3			20,156,962			$	(919.1	)		$	(0.9	)		$	394.2
Comprehensive Income:
Net income	—			$	—			$	—			$	40.1			—			$	—			$	—			$	40.1
Change in fair value of cash flow swaps, net of reclassification adjustment and $0.7 tax benefit	—			$	—			$	—			$	—			—			$	—			$	2.1			$	2.1
Comprehensive income	—			$	—			$	—			$	40.1			—			$	—			$	2.1			$	42.2
Cumulative effect adjustment of ASU 2014-09	—			$	—			$	—			$	9.2			—			$	—			$	—			$	9.2
Share-based compensation	—			$	—			$	3.2			$	—			—			$	—			$	—			$	3.2
Issuance of common stock, net of forfeitures in connection with share-based payment arrangements	181,720			$	—			$	—			$	—			—			$	—			$	—			$	—
Repurchase of common stock associated with net share settlements of employee share-based awards	—			$	—			$	—			$	—			65,412			$	(4.4	)		$	—			$	(4.4	)
Share repurchases	—			$	—			$	—			$	—			296,822			$	(20.0	)		$	—			$	(20.0	)
Balances, March 31, 2018	41,151,707			$	0.4			$	566.7			$	799.6			20,519,196			$	(943.5	)		$	1.2			$	424.4
Comprehensive Income:
Net income	—							$	—			$	43.2			—			$	—			$	—			$	43.2
Change in fair value of cash flow swaps, net of reclassification adjustment and $0.4 tax benefit	—			$	—			$	—			$	—			—			$	—			$	0.8			$	0.8
Comprehensive income	—			$	—			$	—			$	43.2			—			$	—			$	0.8			$	44.0
Share-based compensation	—			$	—			$	2.5										$	—			$	—			$	2.5
Issuance of common stock, net of forfeitures in connection with share-based payment arrangements	12,877			$	—			$	—			$	—			—			$	—			$	—			$	—
Repurchase of common stock associated with net share settlements of employee share-based awards	—			$	—			$	—			$	—			3,519			$	(0.2	)		$	—			$	(0.2	)
Share repurchases	—			$	—			$	—			$	—			287,468			$	(20.2	)		$	—			$	(20.2	)
Balances, June 30, 2018	41,164,584			$	0.4			$	569.2			$	842.8			20,810,183			$	(963.9	)		$	2.0			$	450.5

See accompanying Notes to Condensed Consolidated Financial Statements

ASBURY AUTOMOTIVE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	For the Nine Months Ended September 30,							For the Six Months Ended June 30,
	2018				2017			2019				2018
CASH FLOW FROM OPERATING ACTIVITIES:
Net income	$	127.6			$	96.6		$	95.8			$	83.3
Adjustments to reconcile net income to net cash provided by operating activities—
Depreciation and amortization	25.2				24.0			17.6				16.7
Stock-based compensation	8.2				10.0
Deferred income taxes	0.6				0.1
Share-based compensation								6.8				5.7
Loaner vehicle amortization	16.7				16.8			11.8				11.2
Gain on divestiture								(11.7		)		—
Change in right-of-use asset								9.3				—
Other adjustments, net	1.9				2.3			2.9				1.6
Changes in operating assets and liabilities, net of acquisitions and divestitures—
Contracts-in-transit	55.3				50.8			44.4				48.1
Accounts receivable	14.8				30.0			12.9				16.8
Inventories	26.4				189.5			82.4				(25.8		)
Other current assets	(144.5		)		(145.6		)	(90.5		)		(96.8		)
Floor plan notes payable—trade, net	(2.0		)		1.4			(4.7		)		0.8
Accounts payable and accrued liabilities	(25.6		)		(34.3		)
Accounts payable and other current liabilities								(8.2		)		(32.8		)
Operating lease liabilities								(9.5		)		—
Other long-term assets and liabilities, net	1.8				1.6			1.2				0.3
Net cash provided by operating activities	106.4				243.2			160.5				29.1
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures—excluding real estate	(21.5		)		(21.4		)	(15.5		)		(12.2		)
Capital expenditures—real estate	(17.6		)		(0.3		)	—				(17.6		)
Purchases of previously leased real estate	(4.4		)		—			(4.9		)		—
Acquisitions	(91.3		)		(80.1		)	(118.5		)		(91.3		)
Divestiture								39.1				—
Proceeds from the sale of assets	2.0				3.8			7.5				2.0
Net cash used in investing activities	(132.8		)		(98.0		)	(92.3		)		(119.1		)
CASH FLOW FROM FINANCING ACTIVITIES:
Floor plan borrowings—non-trade	3,309.7				2,818.1			2,044.9				2,240.5
Floor plan borrowings—acquisitions	22.7				25.1			47.7				22.7
Floor plan repayments—non-trade	(3,231.4		)		(2,938.1		)	(2,121.2		)		(2,123.5		)
Floor plan repayments—divestiture								(14.1		)		—
Repayments of borrowings	(10.7		)		(11.5		)	(7.9		)		(7.1		)
Repurchases of common stock, including shares associated with net share settlement of employee share-based awards	(61.8		)		(39.4		)	(16.3		)		(44.8		)
Net cash provided by (used in) financing activities	28.5				(145.8		)
Net cash (used in) provided by financing activities								(66.9		)		87.8
Net increase (decrease) in cash and cash equivalents	2.1				(0.6		)	1.3				(2.2		)
CASH AND CASH EQUIVALENTS, beginning of period	4.7				3.4			8.3				4.7
CASH AND CASH EQUIVALENTS, end of period	$	6.8			$	2.8		$	9.6			$	2.5

See Note 1011 "Supplemental Cash Flow Information" for further details

See accompanying Notes to Condensed Consolidated Financial Statements

ASBURY AUTOMOTIVE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

We are one of the largest automotive retailers in the United ~~States, operating 97~~States. As of June 30, 2019, we owned and operated 105 new vehicle franchises ~~(83~~(86 dealership locations) representing 30 brands of automobiles and 24 collision repair centers in 17 metropolitan markets within nine ~~states as of September 30, 2018.~~states. Our stores offer an extensive range of automotive products and services, including new and used vehicles; parts and service, which includes repair and maintenance services, replacement parts and collision repair services; and finance and insurance products. As of ~~September~~June 30, ~~2018, we offered 29 brands of new vehicles and~~2019, our new vehicle revenue brand mix consisted of ~~48%~~45% imports, ~~32%~~33% luxury, and ~~20%~~22% domestic brands. ~~We also operated 25 collision repair centers that serve customers in our local markets.~~

Our retail network is made up of dealerships operating primarily under the following locally-branded dealership groups:

Coggin dealerships operating primarily in Jacksonville, Fort Pierce and Orlando, Florida;

Courtesy dealerships operating in Tampa, Florida;

Crown dealerships operating in North Carolina, South Carolina and Virginia;

Gray-Daniels dealerships operating in the Jackson, Mississippi area;

Hare and Estes dealerships operating in the Indianapolis, Indiana area;

McDavid dealerships operating in metropolitan Austin, Dallas and Houston, Texas;

Nalley dealerships operating in metropolitan Atlanta, Georgia; and

Plaza dealerships operating in metropolitan St. Louis, Missouri.

Our operating results are generally subject to changes in the economic environment as well as seasonal variations. Historically, we have generated more revenue and operating income in the second, third, and fourth quarters than in the first quarter of the calendar year. Generally, the seasonal variations in our operations are caused by factors related to weather conditions, changes in manufacturer incentive programs, model changeovers, and consumer buying patterns, among other things.

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), and reflect the consolidated accounts of Asbury Automotive Group, Inc. and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.

In the opinion of management, all adjustments, consisting only of normal, recurring adjustments, considered necessary for a fair presentation of the Condensed Consolidated Financial Statements as of ~~September~~June 30, ~~2018,~~2019, and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, have been ~~included.~~included, unless otherwise indicated. The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 are not necessarily indicative of the results that may be expected for any other interim period, or any full year period. Our Condensed Consolidated Financial Statements should be read together with our audited ~~consolidated financial statements~~Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the periods presented. Actual results could differ materially from these estimates. Estimates and assumptions are reviewed quarterly and the effects of any revisions are reflected in the ~~consolidated financial statements~~Consolidated Financial Statements in the period they are determined to be necessary. Significant estimates made in the accompanying Condensed Consolidated Financial Statements include, but are not limited to, those relating to inventory valuation reserves, variable consideration and constraint considerations related to retro-commission arrangements, reserves for chargebacks against revenue recognized from the sale of finance and insurance products, reserves for insurance programs, certain assumptions related to intangible and long-lived assets, and reserves for certain legal or similar proceedings relating to our business operations.

Contracts-In-Transit

Contracts-in-transit represent receivables from third-party finance companies for the portion of new and used vehicle purchase price financed by customers through sources arranged by us.

Revenue Recognition

~~The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and all subsequent amendments issued thereafter (collectively "ASC 606"), on January 1, 2018.~~ Refer to Note 2 "Revenue Recognition" within the accompanying Condensed Consolidated Financial Statements.

Internal Profit

Revenues and expenses associated with internal work performed by our parts and service departments on new and used vehicle inventory are eliminated in consolidation. The gross profit earned by our parts and service departments for ~~additional information related~~internal work performed is included as a reduction of Parts and Service Cost of Sales on the accompanying Consolidated Statements of Income upon the sale of the vehicle. The costs incurred by our new and used vehicle departments for work performed by our parts and service departments is included in either New Vehicle Cost of Sales or Used Vehicle Cost of Sales on the accompanying Consolidated Statements of Income, depending on the classification of the vehicle serviced. We maintain a reserve to eliminate the ~~Company’s adoption of ASC 606.~~internal profit on vehicles that have not been sold.

Income Taxes

We use the liability method to account for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis using currently enacted tax rates. ~~The effect on deferred tax assets and liabilities~~

Share Repurchases

Share repurchases may be made from time-to-time in open market transactions or through privately negotiated transactions under the authorization approved by the Board of ~~a change in tax rates is recognized in income in~~Directors. Periodically, the ~~period when~~Company may retire repurchased shares of common stock previously held by the ~~change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized.~~

~~On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to~~Company as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, a reduction in the U.S. federal corporate income tax rate from 35% to 21%.

The staff of the U.S. Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 ("SAB 118") on December 22, 2017, which provides guidance on accounting for the income tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from December 22, 2017, the Tax Act enactment date, for companies to complete the accounting under ASC 740, Income Taxes ("ASC 740").treasury stock. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but the company is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.

During the third quarter of 2018, the Internal Revenue Service (“IRS”) released Notice 2018-68 (the "Notice"), which clarified a number of changes made to Section 162(m) of the Internal Revenue Code (the “Code”) by the Tax Act . While the Notice is not comprehensive and promises additional guidance is forthcoming, we determined a reasonable estimate could be made and recorded $0.6 million of additional income tax expense as a provisional adjustment to the deferred tax assets for certain components of share-based compensation during the three months ending September 30, 2018. We will complete our accounting policy, we allocate any excess share repurchase price over par value between additional paid-in capital, which is limited to amounts initially recorded for the ~~Tax Act in 2018 after we have considered additional guidance issued by the U.S. Treasury Department, state tax authorities~~same issue, and other standard-setting bodies, and we have gathered and analyzed additional data relative to our calculations. This may result in adjustments to our provisional amounts, which would impact our provision for income taxes and the effective tax rate in the period the adjustments are made.

We remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, we are still analyzing certain aspects of the Tax Act and refining our calculations, which could potentially affect the measurement of these balances and impact future taxable income.retained earnings.

Earnings per ~~Common~~ Share

Basic earnings per ~~common~~ share is computed by dividing net income by the weighted-average common shares outstanding during the period. Diluted earnings per ~~common~~ share is computed by dividing net income by the weighted-average common shares and common share equivalents outstanding during the period. For all periods presented, there were no adjustments to the numerator necessary to compute diluted earnings per share.

Assets Held for Sale and Liabilities Associated with Assets Held for Sale

Certain amounts have been classified as Assets Held for Sale in the accompanying Condensed Consolidated Balance Sheets. Assets and liabilities classified as held for sale include assets and liabilities associated with pending dealership disposals, real estate not currently used in our operations that we are actively marketing to sell, and any related mortgage notes payable or other liabilities, if applicable. Classification as held for sale begins on the date that we have met all of the criteria for classification as held for sale.

At the time of classifying assets as held for sale, we compare the carrying value of these assets to estimates of fair value to assess for impairment. We compare the carrying value to estimates of fair value utilizing the assistance of third-party broker opinions of value and third-party desktop appraisals to assist in our fair value estimates related to real estate properties.

Statements of Cash Flows

Borrowings and repayments of floor plan notes payable to a lender unaffiliated with the manufacturer from which we purchase a particular new vehicle ("Non-Trade") and all floor plan notes payable relating to pre-owned vehicles (together referred to as "Floor Plan Notes Payable—Non-Trade") are classified as financing activities on the accompanying Condensed Consolidated Statements of Cash Flows, with borrowings reflected separately from repayments. The net change in floor plan notes payable to a lender affiliated with the manufacturer from which we purchase a particular new vehicle (collectively referred to as "Floor Plan Notes Payable—Trade") is classified as an operating activity on the accompanying Condensed Consolidated Statements of Cash Flows. Borrowings of floor plan notes payable associated with inventory acquired in connection with all acquisitions and repayments made in connection with all divestitures are classified as financing activities in

the accompanying Condensed Consolidated Statement of Cash Flows. Cash flows related to floor plan notes payable included in operating activities differ from cash flows related to floor plan notes payable included in financing activities only to the extent that the former are payable to a lender affiliated with the manufacturer from which we purchased the related inventory, while the latter are payable to a lender not affiliated with the manufacturer from which we purchased the related inventory.

Loaner vehicles account for a significant portion of Other Current Assets. We acquire loaner vehicles either with available cash or through borrowing from either our manufacturer affiliated lenders or through our senior secured credit agreement with Bank of America, as administrative agent, and the other agents and lenders party thereto ~~(the~~(as amended, the "2016 Senior Credit Facility"). Loaner vehicles are initially used by our service department for a short period of time (typically six to twelve months) before we seek to sell them. Therefore, we classify the acquisition of loaner vehicles in Other Current Assets and the borrowings and repayments of loaner vehicle notes payable in Accounts Payable and Accrued Liabilities in the accompanying Condensed Consolidated Statements of Cash Flows. Loaner vehicles are depreciated over the service period to their estimated value. At the end of the loaner service period, loaner vehicles are transferred from Other Current Assets to used vehicle inventory. These transfers are reflected as non-cash transfers between Other Current Assets and Inventories in the accompanying Condensed Consolidated Statements of Cash Flows.

Recent Accounting Pronouncements

~~In August 2016,~~Effective January 1, 2019, the ~~FASB issued~~Company adopted the new lease accounting guidance in Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) (“ASC 842”). Refer to Note 9 "Leases" within the accompanying Condensed Consolidated Financial Statements for additional information.

On January 1, 2019, the Company adopted ASU ~~2016-15,~~No. 2018-02, "Income Statement ~~of Cash Flows~~- Reporting Comprehensive Income (Topic ~~230)~~220): ~~Classification~~Reclassification of Certain ~~Cash Receipts~~Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02")." ASU 2018-02 allows entities to elect to reclassify the income tax effects resulting from the Tax Cuts and ~~CashPayments~~. ~~The amendments~~Jobs Act on items within accumulated other comprehensive income to retained earnings. During the first quarter of 2019, the Company elected to reclassify $0.2 million related to the change in ~~this update address several specific~~deferred taxes associated with our cash flow ~~issues with the objective of reducing the diversity in practice in how certain cash receipts and cash payments are presented and classified~~hedges from accumulated other comprehensive income to retained earnings. This reclassification was recognized as a cumulative effect adjustment in the ~~statement~~Condensed Consolidated Statements of ~~cash flows. The amendments in this update were effective for interim and annual periods beginning after December 15, 2017 and include retrospective application. The Company adopted this update~~Shareholders' Equity during the first quarter of ~~2018. The adoption of this update did not have a material impact to our consolidated financial statements for~~2019.

On January 1, 2019, the ~~nine months ended September 30, 2018 and 2017.~~

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business in order to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this update were to be applied prospectively and were effective for interim and annual periods beginning after December 15, 2017. The Company adopted ~~this update during the first quarter of 2018. The adoption of this update did not have a material impact to our consolidated financial statements for the nine months ended September 30, 2018.~~

~~In February 2016, the FASB issued~~ ASU ~~2016-02, Leases (Topic 842). This new standard,~~No. 2017-12, "Derivatives and its related amendments, will supersede the existing lease accounting guidance and become effective for us on January 1, 2019. The new standard establishes a right-of-use model ("ROU") that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with the classification affecting the pattern and classification of expense recognition reflected in the income statement. A modified retrospective transition approach is required, applying the new standard to all leases existing either as of the effective date or as of the beginning of the earliest comparative period presented in the financial statements at the date of adoption. We expect to elect the effective date method as our date of initial application. As a result, financial information and disclosures will not be updated under the new standard for periods ending prior to January 1, 2019.

While we are still evaluating the impact of this new standard, we expect this standard will have a material impact to our consolidated financial statements due to the recognition of ROU assets and liabilities for real estate and equipment leases on our consolidated balance sheet. We have established an implementation team to assess the impact of the new standard as well as the

changes in processes and related controls to implement this standard. We are currently finalizing our assessment of our lease arrangements as well as the practical expedients and accounting policy elections provided by the new standard. We expect to elect the package of practical expedients to use in transition, which permits us not to reassess under the new standard our prior conclusions about lease identification and lease classification. In addition, we expect to elect the short-term lease exemption for all leases that qualify as well as the practical expedient to not separate lease and non-lease components for all leases other than real estate leases.

~~In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging~~Hedging" (Topic 815): Targeted Improvements to Accounting for Hedging ~~Activities.~~Activities ("ASU 2017-12"). This update is intended to simplify hedge accounting by better aligning how an entity’s risk management activities and hedging relationships are presented in its financial statements and simplifies the application of hedge accounting guidance in certain situations. This update expands and refines hedge accounting for both non-financial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. ~~This update will become effective for us on January 1, 2019; however, early adoption is permitted.~~ For cash flow hedges existing at the adoption date, this update requires adoption on a modified retrospective basis with a cumulative-effect adjustment to retained earnings as of the effective ~~date. The~~date and the amendments to presentation guidance and disclosure requirements are required to be adopted prospectively. ~~We are currently evaluating~~The adoption of this update ~~and~~did not have a material impact on our Condensed Consolidated Financial Statements.

In June 2016, the ~~significance~~FASB issued ASU No. 2016-13, Financial Instruments- Credit Losses (Topic 326) Measurement of ~~any impact this update may have~~Credit Losses on Financial Instruments ("ASU 2016-13"), which requires an entity to ~~our consolidated~~assess impairment of its financial ~~statements.~~

~~2. REVENUE RECOGNITION~~

~~On January 1, 2018,~~instruments based on its estimate of expected credit losses versus the ~~Company adopted ASC 606 using the modified retrospective method~~current incurred loss model. The provisions of ASU 2016-13 are effective for ~~all contracts not completed as of the date of adoption. We recognized the cumulative effect of initially applying the new revenue standard as an~~fiscal years beginning after December 15, 2019. Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of ~~January 1, 2018. Therefore, prior~~the beginning of the first reporting period ~~comparative information has not been adjusted~~in which the guidance is effective. We plan to adopt ASU 2016-13 in 2020 and ~~continues to be reported under accounting standards ("previous guidance" or "ASC 605") in effect for those periods.~~ are currently evaluating the expected impact from adopting this update on our Consolidated Financial Statements.

~~Disaggregation of Revenue~~

~~The following table summarizes revenue from contracts with customers for the three and nine months ended September 30, 2018:~~

For the Three Months Ended September 30, 2018 For the Nine Months Ended September 30, 2018
(In millions)
Revenue:
   New vehicle $ 980.5
$ 2,766.3
   Used vehicle retail 448.7
1,355.4
   Used vehicle wholesale 48.8
143.6
New and used vehicle 1,478.0
4,265.3
  Sale of vehicle parts and accessories 34.3
102.4
  Vehicle repair and maintenance services 171.8
507.5
Parts and services 206.1
609.9
Finance and insurance, net 73.3
215.0
Total revenue $ 1,757.4
$ 5,090.2
2. REVENUE RECOGNITION

The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or performing a service to a customer. Sales and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the three and six months ended June 30, 2019 and 2018:



	For the Three Months Ended June 30,
	2019				2018
	(In millions)
Revenue:
New vehicle	$	965.2			$	928.7
Used vehicle retail	486.6				470.9
Used vehicle wholesale	47.0				46.0
New and used vehicle	1,498.8				1,445.6
Sale of vehicle parts and accessories	36.1				34.3
Vehicle repair and maintenance services	188.4				170.2
Parts and services	224.5				204.5
Finance and insurance, net	80.2				73.5
Total revenue	1,803.5				$	1,723.6



	For the Six Months Ended June 30,
	2019				2018
	(In millions)
Revenue:
New vehicle	$	1,837.0			$	1,785.8
Used vehicle retail	944.8				906.7
Used vehicle wholesale	98.7				94.8
New and used vehicle	2,880.5				2,787.3
Sale of vehicle parts and accessories	73.0				68.1
Vehicle repair and maintenance services	369.1				335.7
Parts and services	442.1				403.8
Finance and insurance, net	151.7				141.7
Total revenue	$	3,474.3			$	3,332.8

New vehicle and used vehicle retail

Revenue from the sale of new and used vehicles (which excludes sales and other taxes) is recognized when the terms of the customer contract are satisfied which generally occurs with the signing of the sales contract and transfer of control of the vehicle to the customer. ~~Incidental~~Costs associated with incidental items that are immaterial in the context of the contract are accrued at the time of sale.

Used vehicle wholesale

Proceeds from the sale of these vehicles are recognized in used vehicle revenue upon transfer of control to end-users at auction.

Sale of vehicle parts and accessories

The Company recognizes revenue upon transfer of control to the customer which occurs at a point in time. When the Company performs shipping and handling activities after the transfer of control to the customer (e.g., when control transfers prior to delivery), they are considered as fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized.

Vehicle repair and maintenance services

The Company provides vehicle repair and maintenance services to its customers pursuant to the terms and conditions included within the customer contract ("repair order"). Satisfaction of this performance obligation creates an asset with no alternative use for which an enforceable right to payment for performance to date exists within our contractual agreements. As such, the Company recognizes revenue over time as the Company satisfies its performance obligation. Additionally, the Company has determined that parts and labor are not individually distinct in the context of a repair order and therefore are treated as a single performance obligation.

Finance and Insurance, net

We receive commissions from third-party lending and insurance institutions for arranging customer financing and from the sale of vehicle service contracts, guaranteed auto protection (known as "GAP") insurance, and other insurance, to end-users. Finance and insurance commission revenue is recognized at the point of sale since our performance obligation is to arrange financing or facilitating the sale of a third party’s products or services to our customers.

The Company’s commission arrangements with third-party lenders and insurance administrators consists of fixed ("upfront") and variable consideration. Variable consideration includes commission ~~chargebacks~~charge backs ("chargebacks") in the event a contract is prepaid, defaulted upon, or terminated by the end-user. The Company reserves for future chargebacks based on historical chargeback experience and the termination provisions of the applicable contract and these reserves are established in the same period that the related revenue is recognized.

We also participate in future profits pursuant to retrospective commission arrangements, which meet the definition of variable consideration, for certain insurance products associated with a third-party portfolio. The Company estimates the amount of variable consideration to be included in the transaction price based on historical payment trends and further constrains the variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur. In making these assessments the Company considers the likelihood and magnitude of a potential reversal of revenue and updates its assessment when uncertainties associated with the constraint are removed.

~~Financial Statement Impact of Adopting ASC 606~~

The Company adopted ASC 606 using the modified retrospective method. The cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018 was recorded as an adjustment to retained earnings as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue guidance, the following adjustments were made to accounts on the Company's Condensed Consolidated Balance Sheet as of January 1, 2018:

As Reported Adjustments Balance at
December 31, 2017 Vehicle Repair and Maintenance Services Finance and Insurance, net January 1, 2018
(In millions)
Assets:
Inventories $ 826.0
$ (4.1 ) $ —
$ 821.9
Other current assets 119.3
6.4
10.0
135.7
Liabilities:
Deferred income taxes $ 12.5
$ 0.6
$ 2.5
$ 15.6
Equity:
Retained earnings $ 750.3
$ 1.7
$ 7.5
$ 759.5

~~Vehicle repair and maintenance services~~

Under the previous guidance, revenue was recognized at the time all repairs were completed. Under ASC 606, revenue is recognized as the Company satisfies its performance obligation. The amounts reflected within the table above relate to the Company’s measure of progress for open contracts as of January 1, 2018. In addition, contract assets are reported within Other Current Assets on the Company's Condensed Consolidated Balance Sheet.

~~Finance and Insurance, net~~

Under the previous guidance, retrospective commissions were not fixed or determinable, and as a result, the associated revenue was recognized on a cash basis. Under ASC 606, the Company recognizes an estimate of the variable consideration to be received, subject to constraint, as it satisfies its performance obligation. As the Company’s performance obligation is satisfied at the time of arranging the insurance product sale, the Company recorded a contract asset and corresponding increase to retained earnings based on an estimate, subject to constraint, of amounts expected to be received associated with previously satisfied performance obligations.

~~Impact of New Revenue Guidance on Financial Statement Line Items~~

~~In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our Condensed Consolidated Balance Sheets and Statements of Income was as follows:~~

As of September 30, 2018
As Reported Amounts Under ASC 605 Effect of Change Increase/(Decrease)
(In millions)
Balance Sheet:
Assets:
Accounts receivable $ 114.1
$ 123.6
$ (9.5 )
Inventories 962.8
965.5
(2.7 )
Other current assets 125.5
112.2
13.3
Liabilities:
Accounts payable and accrued liabilities $ 291.3
$ 291.7
$ (0.4 )
Deferred income taxes 17.4
14.3
3.1
Equity:
Retained earnings $ 887.1
$ 888.7
$ (1.6 )

For the Three Months Ended September 30, 2018
As Reported Amounts Under ASC 605 Effect of Change Increase/(Decrease)
(In millions, except per share data)
Statement of Income:
Revenue:
Parts and service $ 206.1
$ 205.8
$ 0.3
Finance and insurance, net 73.3
73.2
0.1
Cost of Sales:
Parts and service 76.3
76.1
0.2
Income before income taxes 59.1
58.9
0.2
Income tax expense 14.8
14.8
—
Net income $ 44.3
$ 44.1
$ 0.2
Earnings Per Common Share:
Basic $ 2.22
$ 2.21
$ 0.01
Diluted $ 2.18
$ 2.17
$ 0.01

For the Nine Months Ended September 30, 2018
As Reported Amounts Under ASC 605
Effect of Change Increase/(Decrease)

(In millions, except per share data)
Statement of Income:
Revenue:
Parts and service $ 609.9
$ 612.0
$ (2.1 )
Finance and insurance, net 215.0
216.0
(1.0 )
Cost of Sales:
Parts and service 225.4
226.8
(1.4 )
Income before income taxes 170.7
172.4
(1.7 )
Income tax expense 43.1
43.5
(0.4 )
Net income $ 127.6
$ 128.9
$ (1.3 )
Earnings Per Common Share:
Basic $ 6.29
$ 6.35
$ (0.06 )
Diluted $ 6.22
$ 6.29
$ (0.07 )

The following summarizes the changes to the Company’s Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2018 as a result of the adoption of ASC 606 on January 1, 2018 compared to if the Company had continued to recognize revenues under ASC 605:

ASC 606 accelerated the recognition of revenue and costs related to open vehicle repair orders in which recognition was previously deferred until the completion of the repair order. During the three months ended September 30, 2018, gross profit increased $0.1 million due to differences in open repair orders as of September 30, 2018 compared to open repair orders as of June 30, 2018. During the nine months ended September 30, 2018, gross profit decreased $0.7 million due to differences in open repair orders as of September 30, 2018 compared to open repair orders as of December 31, 2017.

ASC 606 accelerated the timing of recognition of certain retro-commission arrangements (i.e. variable consideration) reported within finance and insurance, net. Under ASC 605, retro-commission income was recorded at the time it was received from our third-party provider. During the three months ended September 30, 2018, net revenue increased $0.1 million due to the difference between the amounts received compared to the Company's estimate of variable consideration, subject to a constraint, for products arranged during the same comparative period. During the nine months ended September 30, 2018, net revenue decreased $1.0 million due to the difference between the amounts received compared to the Company's estimate of variable consideration, subject to a constraint, for products arranged during the same comparative period.

Contract Assets

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



	Vehicle Repair and Maintenance Services				Finance and Insurance, net				Total
	(In millions)
Contract Assets (Current), January 1, 2019	$	4.1			$	10.6			$	14.7
Transferred to receivables from contract assets recognized at the beginning of the period	(4.1		)		(3.3		)		(7.4		)
Increases related to revenue recognized, inclusive of adjustments to constraint, during the period	4.4				3.3				7.7
Contract Assets (Current), March 31, 2019	$	4.4			$	10.6			$	15.0
Transferred to receivables from contract assets recognized at the beginning of the period	(4.4		)		(3.2		)		(7.6		)
Increases related to revenue recognized, inclusive of adjustments to constraint, during the period	4.8				4.6				9.4
Contract Assets (Current), June 30, 2019	4.8				12.0				16.8

Vehicle Repair and Maintenance Services Finance and Insurance, net Total
(In millions)
Contract Assets (Current), January 1, 2018 $ 6.4
$ 10.0
$ 16.4
Transferred to receivables from contract assets recognized at the beginning of the period (6.4 ) (3.2 ) (9.6 )
Increases related to revenue recognized, inclusive of adjustments to constraint, during the period 5.1
2.6
7.7
Contract Assets (Current), March 31, 2018 5.1
9.4
14.5
Transferred to receivables from contract assets recognized at the beginning of the period (5.1 ) (3.2 ) (8.3 )
Increases related to revenue recognized, inclusive of adjustments to constraint, during the period 4.0
2.7
6.7
Contract Assets (Current), June 30, 2018 4.0
8.9
12.9
Transferred to receivables from contract assets recognized at the beginning of the period (4.0 ) (3.0 ) (7.0 )
Increases related to revenue recognized, inclusive of adjustments to constraint, during the period 4.3
3.1
7.4
Contract Assets (Current), September 30, 2018 $ 4.3
$ 9.0
$ 13.3

3. ACQUISITIONS AND DIVESTITURES

Results of acquired dealerships are included in our accompanying Condensed Consolidated Statements of Income commencing on the date of acquisition. Our acquisitions are accounted for such that the assets acquired and liabilities assumed are recognized at their acquisition date fair values, with any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired recorded as goodwill. Goodwill is an asset representing operational synergies and future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. The fair value of our manufacturer franchise rights are determined atas of the acquisition date, by discounting the projected cash flows specific to each franchise. Included in this analysis are market participant assumptions, at a dealership level, regarding the cash flows directly attributable to the franchise rights, revenue growth rates, future gross margins and future selling, general, and administrative expenses. Using an estimated weighted average cost of capital, estimated residual values at the end of the forecast period and estimated future capital expenditure requirements, the Company calculates the fair value of the franchise rights.

During the ~~nine~~six months ended ~~September~~June 30, 2019, we acquired the assets of eight franchises (four dealership locations) in the Indianapolis, Indiana market for a purchase price of $121.0 million. We funded these acquisitions with $70.8 million of cash, $47.7 million of floor plan borrowings for the purchase of the related new vehicle inventory, and purchase price holdbacks of $2.5 million for potential indemnity claims made by us with respect to the acquired franchises.

Below is the preliminary allocation of purchase price for the acquisitions completed during the six months ended June 30, 2019. We have not finalized our valuation for manufacturer franchise rights, which will be reclassified from goodwill once completed. The goodwill and manufacturer rights associated with our acquisitions will be deductible for federal and state income tax purposes ratably over a 15 year period.



	As of
	June 30, 2019
	(In millions)
Inventory	$	58.1
Real estate	29.8
Property and equipment	1.8
Goodwill	32.1
Liabilities assumed	(0.8		)
Total purchase price	$	121.0

During the six months ended June 30, 2018, we acquired the assets of one franchise (one dealership location) in the Indianapolis, Indiana market and two franchises (two dealership locations) in the Atlanta, Georgia market for a combined ~~aggregate~~ purchase price of $93.2 million. ~~Consideration paid (or payable) to fund~~We funded these acquisitions ~~included~~with $68.6 million of cash, $22.7 million of floor plan borrowings for the purchase of the related new vehicle inventory, and purchase price holdbacks of $1.9 million for potential indemnity claims made by us with respect to the acquired ~~franchises.~~franchise.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, we ~~acquired the assets of two franchises (two~~sold one franchise (one dealership ~~locations)~~location) and one collision center in the ~~Indianapolis, Indiana market for an aggregate purchase price of $80.1 million. We funded these acquisitions with $55.0~~Houston, Texas market. The Company divested $30.1 million of ~~cash~~assets, which primarily consisted of inventory and ~~$25.1~~property and equipment, resulting in a pre-tax gain of $11.7 million, which is presented in our accompanying Condensed Consolidated Statements of ~~floor plan borrowings for the purchase~~Income as Gain on Divestiture. The divested businesses would not be considered significant subsidiaries as defined in Rule 1-02(w) of ~~the related new vehicle inventory.~~

Below is the preliminary allocation of purchase price for the acquisitions completed during the nine months ended September 30, 2018. We have not finalized our internal valuation of manufacturer franchise rights. The $40.3~~million of goodwill and manufacturer rights associated with our acquisitions will be deductible for federal and state income tax purposes~~

~~ratably over a 15 year period.~~

As of
September 30, 2018
(In millions)
Inventory $ 27.3
Real estate 23.5
Property and equipment 0.6
Goodwill 20.4
Manufacturer franchise rights 19.9
Loaner vehicles 1.7
Liabilities assumed (0.2 )
Total purchase price $ 93.2

Regulation S-X.

4. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following:



	As of
	June 30, 2019				December 31, 2018
	(In millions)
Vehicle receivables	$	45.3			$	45.7
Manufacturer receivables	40.5				51.2
Other receivables	32.9				34.7
Total accounts receivable	118.7				131.6
Less—Allowance for doubtful accounts	(1.4		)		(1.3		)
Accounts receivable, net	$	117.3			$	130.3

As of
September 30, 2018 December 31, 2017
(In millions)
Vehicle receivables $ 42.1
$ 48.3
Manufacturer receivables 43.6
47.0
Other receivables 29.6
34.8
Total accounts receivable 115.3
130.1
Less—Allowance for doubtful accounts (1.2 ) (1.6 )
Accounts receivable, net $ 114.1
$ 128.5

5. INVENTORIES

Inventories consisted of the following:



	As of
	June 30, 2019				December 31, 2018
	(In millions)
New vehicles	$	895.1			$	867.2
Used vehicles	162.2				158.9
Parts and accessories	43.5				41.5
Total inventories	$	1,100.8			$	1,067.6

As of
September 30, 2018 December 31, 2017
(In millions)
New vehicles $ 772.6
$ 646.5
Used vehicles 149.9
135.9
Parts and accessories 40.3
43.6
Total inventories $ 962.8
$ 826.0

The lower of cost and net realizable value reserves reduced total inventories by $~~6.2~~5.6 million and ~~$5.7~~$6.1 million as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018, respectively. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, certain automobile manufacturer incentives reduced new vehicle inventory cost by ~~$8.7~~$11.2 million and ~~$7.4~~$10.1 million,, respectively, and reduced new vehicle cost of sales for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 ~~and 2017~~ by ~~$30.6~~$21.8 million and ~~$29.4~~$19.7 million, respectively.

6. ASSETS AND LIABILITIES HELD FOR SALE

Assets classified as held for sale ~~comprising~~consists of real estate not currently used in our operations ~~totaled $28.3~~that we are actively marketing to sell totaling $19.5 million and ~~$30.3~~$26.3 million as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. There were no liabilities associated with these ~~real estate assets held for sale~~properties as of ~~September~~June 30, ~~2018~~2019 or December 31, ~~2017.~~2018.

During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, we sold one vacant property with a net book value of ~~$2.0~~$6.8 million.

7. FLOOR PLAN NOTES PAYABLE

Floor plan notes payable consisted of the following:


	As of							As of
	September 30, 2018				December 31, 2017			June 30, 2019				December 31, 2018
	(In millions)							(In millions)
Floor plan notes payable—trade	$	113.6			$	114.8		$	137.0			$	125.3
Floor plan notes payable offset account	(11.4		)		(10.6		)	(13.2		)		(11.3		)
Floor plan notes payable—trade, net	$	102.2			$	104.2		$	123.8			$	114.0

Floor plan notes payable—non-trade	$	760.4			$	666.6
Floor plan notes payable—new non-trade								$	869.1			$	843.0
Floor plan notes payable—used non-trade								—				30.0
Floor plan notes payable offset account	(31.5		)		(38.7		)	(74.2		)		(20.9		)
Floor plan notes payable—non-trade, net	$	728.9			$	627.9		$	794.9			$	852.1

We have established a floor plan notes payable offset account with Ford Motor Credit Company that allows us to transfer cash to the account as an offset of our outstanding Floor Plan Notes Payable—Trade. Additionally, we have a similar floor plan offset account with Bank of America that allows us to offset our outstanding Floor Plan Notes Payable—Non-Trade. These accounts allow us to transfer cash to reduce the amount of outstanding floor plan notes payable that would otherwise accrue interest, while retaining the ability to transfer amounts from the floor plan offset accounts into our operating cash accounts within one to two days. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, we had ~~$42.9~~$87.4 million and ~~$49.3~~$32.2 million, respectively, in these floor plan offset accounts.

8. LONG-TERM DEBT

Long-term debt consisted of the following:



	As of
	June 30, 2019				December 31, 2018
	(In millions)
6.0% Senior Subordinated Notes due 2024	$	600.0			$	600.0
Mortgage notes payable bearing interest at fixed rates	128.9				132.2
2018 Bank of America Facility	25.0				25.7
2018 Wells Fargo Master Loan Facility	25.0				25.0
Prior real estate credit agreement	36.8				40.8
Restated master loan agreement	80.7				83.3
Finance lease liability	17.5				3.1
Total debt outstanding	913.9				910.1
Add—unamortized premium on 6.0% Senior Subordinated Notes due 2024	5.6				6.0
Less—debt issuance costs	(9.9		)		(10.8		)
Long-term debt, including current portion	909.6				905.3
Less—current portion, net of current portion of debt issuance costs	(38.4		)		(38.8		)
Long-term debt	$	871.2			$	866.5

As of
September 30, 2018 December 31, 2017
(In millions)
6.0% Senior Subordinated Notes due 2024 $ 600.0
$ 600.0
Mortgage notes payable bearing interest at fixed rates 134.6
139.1
Real estate credit agreement 46.2
48.5
Restated master loan agreement 84.6
88.5
Capital lease obligations 3.2
3.2
Total debt outstanding 868.6
879.3
Add—unamortized premium on 6.0% Senior Subordinated Notes due 2024 6.2
6.8
Less—debt issuance costs (9.6 ) (10.6 )
Long-term debt, including current portion 865.2
875.5
Less—current portion, net of current portion of debt issuance costs (13.1 ) (12.9 )
Long-term debt $ 852.1
$ 862.6

We are a holding company with no independent assets or operations. For all relevant periods presented, our 6.0% Senior Subordinated Notes due 2024 (our "6.0% Notes") have been fully and unconditionally guaranteed, on a joint and several basis, by substantially all of our subsidiaries. Any subsidiaries that have not guaranteed such notes are "minor" (as defined in Rule 3-10(h) of Regulation S-X). As of ~~September~~June 30, ~~2018,~~2019, there were no significant restrictions on the ability of our subsidiaries to distribute cash to us or our guarantor subsidiaries.

Effective May 1, 2019, the Company and certain of its subsidiaries entered into amendments (the “2019 Amendments”), which reduced the applicable interest rates for the 2018 Bank of America Facility and the Prior Real Estate Credit Agreement. The 2019 Amendments did not have a material impact on our Condensed Consolidated Financial Statements.

9. LEASES

Effective January 1, 2019, the Company adopted the new lease accounting guidance in ASC 842. The new standard establishes a right-of-use ("ROU") model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms in excess of 12 months. Leases will be classified as either finance or operating, with classification impacting the pattern of expense recognition in the income statement.

The Company elected the package of practical expedients permitted in ASC 842. Accordingly, the Company accounted for its existing operating leases as an operating lease under the new guidance, without reassessing (a) whether the contract contains a lease under ASC 842, (b) whether classification of the operating lease would be different in accordance with ASC 842, or (c) whether the unamortized initial direct costs before transition adjustments (as of December 31, 2018) would have met the definition of initial direct costs in ASC 842 at lease commencement. In addition, the Company opted for the transition relief method specified in Accounting Standards Update No. 2018-11, which allowed for the effective date of the new leases standard as the date of initial application on transition. As a result of this election the Company (a) did not adjust comparative period financial information for the effects of ASC 842; (b) made the new required lease disclosures for periods after the effective date; and (c) carried forward our ASC 840 disclosures for comparative periods. As a result of the adoption of ASC 842, the Company recorded a right-of-use asset of $86.9 million, which represents the lease liability reduced for deferred rent amounts of $4.4 million and a lease liability of $91.3 million which represents the present value of remaining lease payments, discounted using the Company’s incremental borrowing rates based on the remaining lease terms.

We lease real estate and equipment primarily under operating lease agreements. For leases with terms in excess of 12 months, we record a right-of-use asset and lease liability based on the present value of lease payments over the lease term. Escalation clauses, lease payments dependent on existing rates/indexes, renewal options, and purchase options are included within the determination of lease payments when appropriate. We have elected the practical expedient not to separate lease and non-lease components for all leases that qualify, except for information technology assets that are embedded within service agreements (such as software license arrangements).

When available, the rate implicit is utilized to discount lease payments to present value; however, substantially all of our leases do not provide a readily determinable implicit rate. Therefore, we estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement.

Balance Sheet Presentation



				As of
Leases		Classification		June 30, 2019
				(In millions)
Assets:
Operating		Operating lease right-of-use assets		$	78.9
Finance		Property and equipment, net		14.6
Total right-of-use assets				$	93.5
Liabilities:
Current
Operating		Current maturities of operating leases		$	20.5
Finance		Current maturities of long-term debt		0.6
Non-Current
Operating		Operating lease liabilities		62.6
Finance		Long-term debt		16.9
Total lease liabilities				$	100.6

Lease Term and Discount Rate



	As of
	June 30, 2019
Weighted Average Lease Term - Operating Leases	5.9 years
Weighted Average Lease Term - Finance Lease	1.8 years
Weighted Average Discount Rate - Operating Leases	4.7	%
Weighted Average Discount Rate - Finance Lease	4.1	%

Lease Costs

The following table provides certain information related to the lease costs for finance and operating leases during the three and six months ended June 30, 2019.



	For the Three Months Ended June 30, 2019				For the Six Months Ended June 30, 2019
	(In millions)
Finance lease cost
Interest	$	0.2			$	0.3
Operating lease cost	5.9				11.4
Short-term lease cost	0.7				1.7
Variable lease cost	0.2				0.4
	$	7.0			$	13.8

Supplemental Cash Flow Information

The following table presents supplemental cash flow information for leases during the three and six months ended June 30, 2019.



	For the Three Months Ended June 30, 2019				For the Six Months Ended June 30, 2019
	(In millions)
Supplemental Cash Flow:
Cash paid for amounts included in the measurements of lease liabilities
Operating cash flows from finance lease	$	0.2			$	0.3
Operating cash flows from operating leases	6.0				11.6
Financing cash flows from finance lease	0.1				0.2
Right-of-use assets obtained in exchange for new finance lease liabilities	—				17.7
Right-of-use assets obtained in exchange for new operating lease liabilities	10.5				10.7
Changes to finance lease right-of-use asset resulting from lease reassessment event	—				(3.1		)

During the three months ended March 31, 2019, we reassessed and remeasured an existing real estate lease, which was previously accounted for as an operating lease and finance lease for the land and building elements, respectively, due to the presence of a purchase price option which we concluded we are now reasonably certain to exercise. As reflected within the table above, we reduced a portion of the new finance lease right-of-use asset based on the existing finance lease liability at the time of remeasurement.

Undiscounted Cash Flow

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities as of June 30, 2019.



	Finance				Operating
	(In millions)
2019 (remaining six months)	$	0.6			$	11.9
2020	1.3				23.5
2021	16.7				20.4
2022	—				15.0
2023	—				7.0
Thereafter	—				19.7
Total minimum lease payments	18.6				97.5
Less: amount of lease payments representing interest	(1.1		)		(14.4		)
Present value of future minimum lease payments	17.5				83.1
Less: current obligations under leases	(0.6		)		(20.5		)
Long-term lease obligation	$	16.9			$	62.6

Future minimum payments under non-cancelable leases with initial terms in excess of one year at December 31, 2018, are as follows:



	Capital				Operating
	(In millions)
2019	$	0.4			$	22.5
2020	0.4				22.2
2021	0.4				19.2
2022	0.4				14.0
2023	0.4				6.0
Thereafter	2.8				25.5
Total minimum lease payments	4.8				109.4
Less: Amounts representing interest	(1.7		)		N/A
Total minimum lease payments excluding interest	$	3.1			$	109.4

Certain of our lease agreements include financial covenants and incorporate by reference the financial covenants set forth in the 2016 Senior Credit Facility. A breach of any of these covenants could immediately give rise to certain landlord remedies under our various lease agreements, the most severe of which include the following: (i) termination of the applicable lease and/or other leases with the same or an affiliated landlord under a cross-default provision, (ii) eviction from the premises; and (iii) the landlord having a claim for various damages.

10. FINANCIAL INSTRUMENTS AND FAIR VALUE

In determining fair value, we use various valuation approaches, including market and income approaches. Accounting standards establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the assumptions market participants would use in pricing the asset or liability, developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1-Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access.

Level 2-Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Assets and liabilities utilizing Level 2 inputs include interest rate swap instruments, ~~exchange-traded~~exchange-

traded debt securities that are not actively traded or do not have a high trading volume, mortgage notes payable, and certain real estate properties on a non-recurring basis.

Level 3-Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Asset and liability measurements utilizing Level 3 inputs include those used in estimating the fair value of certain non-financial assets and non-financial liabilities in purchase acquisitions and those used in the assessment of impairment for goodwill and manufacturer franchise rights.

The availability of observable inputs can vary and is affected by a wide variety of factors. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment required to determine fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

Fair value is a market-based exit price measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, our assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. We use inputs that are current as of the measurement date, including during periods of significant market fluctuations.

Financial instruments consist primarily of cash and cash equivalents, contracts-in-transit, accounts receivable, cash surrender value of corporate-owned life insurance policies, accounts payable, floor plan notes payable, subordinated long-term debt, mortgage notes payable, and interest rate swap instruments. The carrying values of our financial instruments, with the exception of subordinated long-term debt and mortgage notes payable, approximate fair value due to (i) their short-term nature, (ii) recently completed market transactions, or (iii) existence of variable interest rates, which approximate market rates. The fair value of our subordinated long-term debt is based on reported market prices in an inactive market that reflects Level 2 inputs. We estimate the fair value of our mortgage notes payable using a present value technique based on current market interest rates for similar types of financial instruments that reflect Level 2 inputs.

A summary of the carrying values and fair values of our 6.0% Notes and our mortgage notes payable is as follows:



	As of
	June 30, 2019				December 31, 2018
	(In millions)
Carrying Value:
6.0% Senior Subordinated Notes due 2024	$	605.6			$	606.0
Mortgage notes payable	296.4				307.0
Total carrying value	$	902.0			$	913.0

Fair Value:
6.0% Senior Subordinated Notes due 2024	$	622.5			$	570.0
Mortgage notes payable	304.9				306.7
Total fair value	$	927.4			$	876.7

As of
September 30, 2018 December 31, 2017
(In millions)
Carrying Value:
6.0% Senior Subordinated Notes due 2024 $ 606.2
$ 606.8
Mortgage notes payable 265.4
276.1
Total carrying value $ 871.6
$ 882.9

Fair Value:
6.0% Senior Subordinated Notes due 2024 $ 603.0
$ 625.5
Mortgage notes payable 256.5
275.3
Total fair value $ 859.5
$ 900.8

Interest Rate Swap Agreements

In June 2015, we entered into an interest rate swap agreement with a notional principal amount of $100.0 million. This swap was designed to provide a hedge against changes in variable rate cash flows regarding fluctuations in the one month London Interbank Offered Rate ("LIBOR"), through maturity in February 2025. The notional value of this swap was ~~$86.4~~$82.5 million as of ~~September~~June 30, ~~2018~~2019 and is reducing over its remaining term to $53.1 million at maturity.

In November 2013, we entered into an interest rate swap agreement with a notional principal amount of $75.0 million. This swap was designed to provide a hedge against changes in variable rate cash flows regarding fluctuations in the one month LIBOR, ~~rate,~~ through maturity in September 2023. The notional value of this swap was ~~$57.4~~$54.6 million as of ~~September~~June 30, ~~2018~~2019 and is reducing over its remaining term to $38.7 million at maturity.

The fair value of cash flow swaps is calculated as the present value of expected future cash flows, determined on the basis of forward interest rates and present value factors. Fair value estimates reflect a credit adjustment to the discount rate applied to all expected cash flows under the swaps. Other than this input, all other inputs used in the valuation of these swaps are designated to be Level 2 fair values. The fair value of our swaps was a ~~$3.2~~$3.7 million liability as of June 30, 2019 and a $0.6 million asset as of ~~September 30, 2018 and a $1.7 million liability as of~~ December 31, ~~2017.~~2018.

The following table provides information regarding the fair value of our interest rate swap agreements and the impact on the Condensed Consolidated Balance Sheets:



	As of
	June 30, 2019				December 31, 2018
	(In millions)
Other current liabilities/(assets)	$	0.6			$	(0.2	)
Other long-term liabilities/(assets)	3.1				(0.4		)
Total fair value	$	3.7			$	(0.6	)

As of
September 30, 2018 December 31, 2017
(In millions)
Other current assets $ (0.3 ) $ —
Accounts payable and accrued liabilities —
1.0
Other long-term (assets) liabilities (2.9 ) 0.7
Total fair value $ (3.2 ) $ 1.7

Both of our interest rate swaps qualify for cash flow hedge accounting treatment. ~~During~~These interest rate swaps are marked to market at each reporting date andany unrealized gains or losses are included in accumulated other comprehensive income and reclassified to interest expense in the ~~three and nine months ended September 30, 2018 and 2017, neither of our cash flow swaps contained any ineffectiveness, nor was any ineffectiveness recognized in~~same period or periods during which the hedged transactions affect earnings. Information about the effect of our interest rate swap agreements on the accompanying Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income, is as follows (in millions):

For the Three Months Ended September 30, Results Recognized in Accumulated Other Comprehensive Income/(Loss)
(Effective Portion) Location of Results Reclassified from Accumulated Other Comprehensive Income/(Loss) to Earnings Results Reclassified from Accumulated Other Comprehensive Income/(Loss) to Earnings
2018 $ 0.8
Swap interest expense $ (0.1 )
2017 $ (0.1 ) Swap interest expense $ (0.4 )



For the Three Months Ended June 30,		Results Recognized in Accumulated Other Comprehensive Income/(Loss)				Location of Amount Reclassified from Accumulated Other Comprehensive Income/(Loss) to Earnings		Amount Reclassified from Accumulated Other Comprehensive Income/(Loss) to Earnings
2019		$	(2.5	)		Other interest expense, net		$	0.1
2018		$	1.0			Swap interest expense		$	(0.2	)

For the Nine Months Ended September 30,
Results Recognized in Accumulated Other Comprehensive Income/(Loss)
(Effective Portion)

Location of Results Reclassified from Accumulated Other Comprehensive Income/(Loss)
to Earnings

Amount Reclassified from Accumulated Other Comprehensive Income/(Loss)
to Earnings
2018 $ 4.4
Swap interest expense $ (0.5 )
2017 $ (1.1 ) Swap interest expense $ (1.6 )



For the Six Months Ended June 30,		Results Recognized in Accumulated Other Comprehensive Income/(Loss)				Location of Amount Reclassified from Accumulated Other Comprehensive Income/(Loss) to Earnings		Amount Reclassified from Accumulated Other Comprehensive Income/(Loss) to Earnings
2019		$	(4.3	)		Other interest expense, net		$	0.1
2018		$	3.6			Swap interest expense		$	(0.4	)

On the basis of yield curve conditions as of ~~September~~June 30, ~~2018~~2019 and including assumptions about future changes in fair value, we expect the amount to be reclassified out of Accumulated Other Comprehensive ~~Income~~Loss into earnings within the next 12 months will be ~~income~~losses of ~~$0.3~~$0.6 million.

~~10.~~11. SUPPLEMENTAL CASH FLOW INFORMATION

During the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018, we made interest payments, including amounts capitalized, totaling $~~52.0~~47.3 million and $~~48.1~~39.8 million, respectively. Included in these interest payments are $~~22.5~~20.8 million and $~~16.9~~14.0 million, of floor plan interest payments during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018, respectively.

During the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, we made income tax payments, net of refunds received, totaling ~~$39.6~~$27.6 million and ~~$94.2~~$27.3 million, respectively.

During the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, we transferred ~~$139.9~~$72.5 million and ~~$111.8~~$92.4 million, respectively, of loaner vehicles from Other Current Assets to Inventories on our Condensed Consolidated Balance Sheets.

~~11.~~12. COMMITMENTS AND CONTINGENCIES

Our dealerships are party to dealer and framework agreements with applicable vehicle manufacturers. In accordance with these agreements, each dealership has certain rights and is subject to restrictions typical in the industry. The ability of these manufacturers to influence the operations of the dealerships or the loss of any of these agreements could have a materially negative impact on our operating results.

In some instances, manufacturers may have the right, and may direct us, to implement costly capital improvements to dealerships as a condition to entering into, renewing, or extending franchise agreements with them. Manufacturers also typically require that their franchises meet specific standards of appearance. These factors, either alone or in combination, could cause us to use our financial resources on capital projects that we might not have planned for or otherwise determined to undertake.

From time to time, we and our dealerships are or may become involved in various claims relating to, and arising out of, our business and our operations. These claims may involve, but not be limited to, financial and other audits by vehicle manufacturers or lenders and certain federal, state, and local government authorities, which have historically related primarily to (i) incentive and warranty payments received from vehicle manufacturers, or allegations of violations of manufacturer agreements or policies, (ii) compliance with lender rules and covenants, and (iii) payments made to government authorities relating to federal, state, and local taxes, as well as compliance with other government regulations. Claims may also arise through litigation, government proceedings, and other dispute resolution processes. Such claims, including class actions, could relate to, but may not be limited to, the practice of charging administrative fees and other fees and commissions, employment-related matters, truth-in-lending and other dealer assisted financing obligations, contractual disputes, actions brought by governmental authorities, and other matters. We evaluate pending and threatened claims and establish loss contingency reserves based upon outcomes we currently believe to be probable and reasonably estimable.

We believe we have adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable. Based on our review of the various types of claims currently known to us, there is no indication of material reasonably possible losses in excess of amounts accrued in the aggregate. We currently do not anticipate that any known claim will materially adversely affect our financial condition, liquidity, or results of operations. However, the outcome of any matter cannot be predicted with certainty, and an unfavorable resolution of one or more matters presently known or arising in the future could have a material adverse effect on our financial condition, liquidity, or results of operations.

A significant portion of our business involves the sale of vehicles, parts, or vehicles composed of parts that are manufactured outside the United States. As a result, our operations are subject to customary risks of importing merchandise, including fluctuations in the relative values of currencies, import duties, exchange controls, trade restrictions, work stoppages, and general political and socio-economic conditions in foreign countries. The United States or the countries from which our products are imported may, from time to time, impose new quotas, duties, tariffs, or other restrictions, or adjust presently prevailing quotas, duties, or tariffs, which may affect our operations, and our ability to purchase imported vehicles and/or parts at reasonable prices.

Substantially all of our facilities are subject to federal, state and local provisions regarding the discharge of materials into the environment. Compliance with these provisions has not had, nor do we expect such compliance to have, any material effect upon our capital expenditures, net earnings, financial condition, liquidity or competitive position. We believe that our current practices and procedures for the control and disposition of such materials comply with applicable federal, state, and local requirements. No assurances can be provided, however, that future laws or regulations, or changes in existing laws or regulations, would not require us to expend significant resources in order to comply therewith.

We had ~~$13.0~~$12.7 million of letters of credit outstanding as of ~~September~~June 30, ~~2018,~~2019, which are required by certain of our insurance providers. In addition, as of ~~September~~June 30, ~~2018,~~2019, we maintained a $5.0 million surety bond line in the ordinary course of our business. Our letters of credit and surety bond line are considered to be off balance sheet arrangements.

Our other material commitments include (i) floor plan notes payable, (ii) operating leases, (iii) long-term debt and (iv) interest on long-term debt, as described elsewhere herein.

13. SUBSEQUENT EVENTS

On July 29, 2019, the Company closed on the acquisition of one store in the Indianapolis market, increasing our total stores in this market to eight.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

Certain of the discussions and information included or incorporated by reference in this report may constitute "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are statements that are not historical in nature and may include statements relating to our goals, plans and projections regarding industry and general economic trends, our expected financial position, results of operations or market position and our business strategy. Such statements can generally be identified by words such as "may," "target," "could," "would," "will," "should," "believe," "expect," "anticipate," "plan," "intend," "foresee," and other similar words or phrases. Forward-looking statements may also relate to our expectations and assumptions with respect to, among other things:

our ability to execute our business strategy;

the seasonally adjusted annual rate ("SAAR") of new vehicle sales in the U.S.;

our ability to further improve our operating cash flows, and the availability of capital and liquidity;

our estimated future capital expenditures;

general economic conditions and its impact on our revenues and expenses;

our parts and service revenue due to, among other things, improvements in ~~manufacturing quality;~~vehicle technology;

the variable nature of significant components of our cost structure;

our ability to limit our exposure to regional economic downturns due to our geographic diversity and brand mix;

manufacturers' willingness to continue to use incentive programs to drive demand for their product offerings;

our ability to leverage our common systems, infrastructure and processes in a cost-efficient manner;

our capital allocation strategy, including as it relates to acquisitions and divestitures, stock repurchases, dividends and capital expenditures;

the continued availability of financing, including floor plan financing for inventory;

the ability of consumers to secure vehicle financing at favorable rates;

the growth of ~~import and luxury~~the brands that comprise our portfolio over the long-term;

our ability to mitigate any future negative trends in new vehicle sales; and

our ability to increase our cash flow and net income as a result of the foregoing and other factors.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual future results, performance or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Such factors include, but are not limited to:

changes in general economic and business conditions, including changes in employment levels, consumer demand, preferences and confidence levels, the availability and cost of credit, ~~in a rising interest rate environment,~~ fuel prices, levels of discretionary personal income and interest rates;

our ability to execute our balanced automotive retailing and service business strategy;

our ability to attract and retain skilled employees;

adverse conditions affecting the vehicle manufacturers whose brands we sell, and their ability to design, manufacture, deliver, and market their vehicles successfully;

changes in the mix, and total number, of vehicles we are able to sell;

our outstanding indebtedness and our continued ability to comply with applicable covenants in our various financing and lease agreements, or to obtain waivers of these covenants as necessary;

high levels of competition in our industry, which may create pricing and margin pressures on our products and services;

our relationships with manufacturers of the vehicles we sell and our ability to renew, and enter into new framework and dealer agreements with vehicle manufacturers whose brands we sell, on terms acceptable to us;

the availability of manufacturer incentive programs and our ability to earn these incentives;

failure of our management information systems or any security breaches;

changes in laws and regulations governing the operation of automobile franchises, including consumer protections, accounting standards, taxation requirements, and environmental laws;

changes in, or the imposition of, new tariffs or trade restrictions on imported vehicles or parts;

adverse results from litigation or other similar proceedings involving us;

our ability to generate sufficient cash flows, maintain our liquidity and obtain any necessary additional funds for working capital, capital expenditures, acquisitions, stock repurchases and/or dividends, debt maturity payments, and other corporate purposes;

any disruptions in the financial markets, which may impact our ability to access capital;

our relationships with, and the financial stability of, our lenders and lessors;

significant disruptions in the production and delivery of vehicles and parts for any reason, including natural disasters, product recalls, work stoppages, significant property loss or other occurrences that are outside of our control;

our ability to execute our initiatives and other strategies; and

our ability to leverage gains from our dealership portfolio.

Many of these factors are beyond our ability to control or predict, and their ultimate impact could be material. Moreover, the factors set forth under "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 and other cautionary statements made in this report should be read and considered as forward-looking statements subject to such uncertainties. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking statement contained herein.

OVERVIEW

We are one of the largest automotive retailers in the United States. As of ~~September~~June 30, ~~2018~~2019 we owned and operated 97105 new vehicle franchises ~~(83~~(86 dealership locations), representing 2930 brands of automobiles and 2524 collision centers in 17 metropolitan markets within nine states. Our stores offer an extensive range of automotive products and services, including new and used vehicles; parts and service, which includes repair and maintenance services, replacement parts, and collision repair services; and finance and insurance products. As of ~~September~~June 30, ~~2018,~~2019, our new vehicle revenue brand mix consisted of ~~48%~~45% imports, ~~32%~~33% luxury, and ~~20%~~22% domestic brands.

Our retail network is made up of dealerships operating primarily under the following locally-branded dealership groups:

Coggin dealerships operating primarily in Jacksonville, Fort Pierce and Orlando, Florida;

Courtesy dealerships operating in Tampa, Florida;

Crown dealerships operating in North Carolina, South Carolina and Virginia;

Gray-Daniels dealerships operating in the Jackson, Mississippi area;

Hare and Estes dealerships operating in the Indianapolis, Indiana area;

McDavid dealerships operating in metropolitan Austin, Dallas and Houston, Texas;

Nalley dealerships operating in metropolitan Atlanta, Georgia; and

Plaza dealerships operating in metropolitan St. Louis, Missouri.

Our revenues are derived primarily from: (i) the sale of new vehicles; (ii) the sale of used vehicles to individual retail customers ("used retail") and to other dealers at auction ("wholesale") (the terms "used retail" and "wholesale" collectively

referred to as "used"); (iii) repair and maintenance services, including collision repair, the sale of automotive replacement parts, and the reconditioning of used vehicles (collectively referred to as "parts and service"); and (iv) the arrangement of third-party vehicle financing and the sale of a number of vehicle protection products (defined below and collectively referred to as "F&I").

We evaluate the results of our new and used vehicle sales based on unit volumes and gross profit per vehicle sold, our parts and service operations based on aggregate gross profit, and our F&I business based on F&I gross profit per vehicle sold.

Our continued organic growth is dependent upon the execution of our balanced automotive retailing and service business strategy, the continued strength of our brand mix, and the production and allocation of desirable vehicles from the automobile manufacturers whose brands we sell. Our vehicle sales have historically fluctuated with product availability as well as local and national economic conditions, including consumer confidence, availability of consumer credit, fuel prices, and employment levels. Additionally, our ability to sell certain new and used vehicles can be negatively impacted by a number of factors, some of which are outside of our control and may include manufacturer imposed stop-sales or open safety recalls, primarily due to, but not limited to, vehicle safety concerns or a vehicle's failure to meet environmental related requirements. Further, governmental actions, such as changes in, or the imposition of, tariffs or trade restrictions on imported goods, may adversely affect vehicle sales and depress demand. However, we believe that the impact on our business of any future negative trends in new vehicle sales would be partially mitigated by (i) the expected relative stability of our parts and service operations over the long-term, (ii) the variable nature of significant components of our cost structure, and (iii) our diversified brand and geographic mix.

The seasonally adjusted annual rate ("SAAR") of new vehicle sales in the U.S. during the three months ended ~~September~~June 30, ~~2018~~2019 was 17.0 million compared to ~~17.2~~17.3 million during the three months ended ~~September~~June 30, ~~2017.~~2018. The automotive retail business continues to benefit from the availability of credit to consumers, strong consumer confidence and historically low unemployment levels. Demand for new vehicles is generally highest during the second, third, and fourth quarters of each year and, accordingly, we expect our revenues to generally be higher during these periods. We typically experience higher sales of luxury vehicles in the fourth quarter, which have higher average selling prices and gross profit per vehicle retailed. Revenues and operating results may be impacted significantly from quarter-to-quarter by changing economic conditions, vehicle manufacturer incentive programs, adverse weather events, or other developments outside our control.

Our gross profit margin varies with our revenue mix. Sales of new vehicles generally result in a lower gross profit margin than used vehicle sales, sales of parts and service, and sales of F&I products. As a result, when used vehicle, parts and service, and F&I revenue increase as a percentage of total revenue, we expect our overall gross profit margin to increase.

Selling, general, and administrative ("SG&A") expenses consist primarily of fixed and incentive-based compensation, advertising, rent, insurance, utilities, and other customary operating expenses. A significant portion of our cost structure is variable (such as sales commissions) or controllable (such as advertising), which we believe allows us to adapt to changes in the retail environment over the long-term. We evaluate commissions paid to salespeople as a percentage of retail vehicle gross profit, advertising expense on a per vehicle retailed ("PVR") basis, and all other SG&A expenses in the aggregate as a percentage of total gross profit.

We had total available liquidity of ~~$394.1~~$448.0 million as of ~~September~~June 30, ~~2018,~~2019, which consisted of cash and cash equivalents of ~~$6.8~~$9.6 million, ~~$42.9~~$87.4 million of funds in our floor plan offset accounts, ~~$190.0~~$187.5 million of availability under our new vehicle floorplan facility that is able to be re-designated to our revolving credit facility, ~~$47.0~~$47.3 million of availability under our revolving credit facility, and ~~$107.4~~$116.2 million of availability under our used vehicle revolving floor plan facility. For further discussion of our liquidity, please refer to "Liquidity and Capital Resources" below.

RESULTS OF OPERATIONS

Three Months Ended ~~September~~June 30, ~~2018~~2019 Compared to the Three Months Ended ~~September~~June 30, ~~2017~~2018


	For the Three Months Ended September 30,								Increase (Decrease)				% Change		For the Three Months Ended June 30,								Increase (Decrease)				% Change
	2018				2017				Increase (Decrease)				% Change		2019				2018				Increase (Decrease)				% Change
	(Dollars in millions, except per share data)														(Dollars in millions, except per share data)
REVENUE:
New vehicle	$	980.5			$	881.6			$	98.9			11	%	$	965.2			$	928.7			$	36.5			4	%
Used vehicle	497.5				455.6				41.9				9	%	533.6				516.9				16.7				3	%
Parts and service	206.1				197.2				8.9				5	%	224.5				204.5				20.0				10	%
Finance and insurance, net	73.3				67.7				5.6				8	%	80.2				73.5				6.7				9	%
TOTAL REVENUE	1,757.4				1,602.1				155.3				10	%	1,803.5				1,723.6				79.9				5	%
GROSS PROFIT:
New vehicle	42.1				41.0				1.1				3	%	38.3				40.6				(2.3		)		(6	)%
Used vehicle	32.8				28.8				4.0				14	%	35.9				34.1				1.8				5	%
Parts and service	129.8				122.8				7.0				6	%	140.6				129.6				11.0				8	%
Finance and insurance, net	73.3				67.7				5.6				8	%	80.2				73.5				6.7				9	%
TOTAL GROSS PROFIT	278.0				260.3				17.7				7	%	295.0				277.8				17.2				6	%
OPERATING EXPENSES:
Selling, general, and administrative	188.8				182.5				6.3				3	%	200.7				190.6				10.1				5	%
Depreciation and amortization	8.5				8.1				0.4				5	%	9.0				8.5				0.5				6	%
Other operating (income) expenses, net	(0.1		)		—				(0.1		)		—	%	(0.6		)		(0.9		)		0.3				33	%
INCOME FROM OPERATIONS	80.8				69.7				11.1				16	%	85.9				79.6				6.3				8	%
OTHER EXPENSES:
OTHER EXPENSES (INCOME):
Floor plan interest expense	8.4				5.8				2.6				45	%	10.5				8.0				2.5				31	%
Other interest expense, net	13.2				13.4				(0.2		)		(1	)%	13.6				13.2				0.4				3	%
Swap interest expense	0.1				0.4				(0.3		)		(75	)%	—				0.2				(0.2		)		(100	)%
Gain on divestiture															(11.7		)		—				(11.7		)		NM
Total other expenses, net	21.7				19.6				2.1				11	%	12.4				21.4				(9.0		)		(42	)%
INCOME BEFORE INCOME TAXES	59.1				50.1				9.0				18	%	73.5				58.2				15.3				26	%
Income tax expense	14.8				19.4				(4.6		)		(24	)%	18.6				15.0				3.6				24	%
NET INCOME	$	44.3			$	30.7			$	13.6			44	%	$	54.9			$	43.2			$	11.7			27	%
Net income per common share—Diluted	$	2.18			$	1.48			$	0.70			47	%	$	2.84			$	2.11			$	0.73			35	%

NM—Not Meaningful


	For the Three Months Ended September 30,					For the Three Months Ended June 30,
	2018			2017		2019			2018
REVENUE MIX PERCENTAGES:
New vehicle	55.8	%		55.0	%	53.5	%		53.9	%
Used vehicle retail	25.5	%		25.0	%	27.1	%		27.2	%
Used vehicle wholesale	2.8	%		3.5	%	2.6	%		2.7	%
Parts and service	11.7	%		12.3	%	12.4	%		11.9	%
Finance and insurance, net	4.2	%		4.2	%	4.4	%		4.3	%
Total revenue	100.0	%		100.0	%	100.0	%		100.0	%
GROSS PROFIT MIX PERCENTAGES:
New vehicle	15.1	%		15.8	%	13.0	%		14.6	%
Used vehicle retail	11.8	%		11.0	%	11.7	%		12.0	%
Used vehicle wholesale	—	%		—	%	0.4	%		0.2	%
Parts and service	46.7	%		47.2	%	47.7	%		46.7	%
Finance and insurance, net	26.4	%		26.0	%	27.2	%		26.5	%
Total gross profit	100.0	%		100.0	%	100.0	%		100.0	%
GROSS PROFIT MARGIN	15.8	%		16.2	%	16.4	%		16.1	%
SG&A EXPENSES AS A PERCENTAGE OF GROSS PROFIT	67.9	%		70.1	%	68.0	%		68.6	%

Total revenue during the ~~third~~second quarter of ~~2018~~2019 increased by ~~$155.3~~$79.9 million ~~(10%~~(5%) compared to the ~~third~~second quarter of ~~2017,~~2018, due to a ~~$98.9~~$36.5 million ~~(11%~~(4%) increase in new vehicle revenue, a ~~$41.9~~$16.7 million ~~(9%~~(3%) increase in used vehicle revenue, ~~an $8.9~~a $20.0 million ~~(5%~~(10%) increase in parts and service revenue, and a ~~$5.6~~$6.7 million ~~(8%~~(9%) increase in F&I, net revenue. During the three months ended ~~September~~June 30, ~~2018,~~2019, gross profit increased by ~~$17.7~~$17.2 million ~~(7%~~(6%) driven by ~~a $7.0~~an $11.0 million ~~(6%~~(8%) increase in parts and service gross profit, a ~~$5.6~~$6.7 million ~~(8%~~(9%) increase in F&I gross profit, and a ~~$4.0~~$1.8 million ~~(14%~~(5%) increase in used vehicle gross profit, ~~and~~partially offset by a ~~$1.1~~$2.3 million ~~(3%~~(6%) ~~increase~~decrease in new vehicle gross profit.

Income from operations during the ~~third~~second quarter of ~~2018~~2019 increased by ~~$11.1~~$6.3 million ~~(16%~~(8%) compared to the ~~third~~second quarter of ~~2017,~~2018, primarily due to the ~~$17.7~~$17.2 million ~~(7%~~(6%) increase in gross profit, ~~and a $0.1 million increase in other operating (income) expenses, net~~ partially offset by a ~~$6.3~~$10.1 million ~~(3%~~(5%) increase in SG&A expense, ~~and~~ a ~~$0.4~~$0.5 million ~~(5%~~(6%) increase in depreciation and amortization ~~expenses.~~expenses and a $0.3 million decrease in other operating (income) expenses, net. Total other expenses, net ~~increased~~decreased by ~~$2.1~~$9.0 million ~~(11%~~(42%), primarily due to the $11.7 million gain on divestiture, partially offset by a ~~$2.6~~$2.5 million ~~(45%~~(31%) increase in floor plan interest expense ~~partially offset by a $0.3 million (75%) decrease in swap interest expense~~ and a ~~$0.2~~$0.4 million ~~(1%~~(3%) ~~decrease~~increase in other interest expense, net during the ~~third~~second quarter of ~~2018.~~2019. As a result, income before income taxes increased ~~$9.0~~$15.3 million ~~(18%~~(26%). The $4.6 million (24%) decrease in income tax expense is primarily attributable to the decrease in our effective tax rate from 38.7% for the third quarter of 2017 to 25.0% for the third quarter of 2018. Overall, net income increased by ~~$13.6~~$11.7 million ~~(44%~~(27%) during the ~~third~~second quarter of ~~2018~~2019 as compared to the ~~third~~second quarter of ~~2017.~~

Our results for the three months ended September 30, 2017 were impacted by Hurricanes Harvey and Irma which had a net adverse impact on our results due to the temporary closure of certain dealerships in our Texas, Florida and Georgia markets. To a lesser extent, the results of our North Carolina, South Carolina, and Virginia based dealerships were negatively impacted by temporary closures caused by Hurricane Florence during the three months ended September 30, 2018. ~~The loss of business caused by these storms should be considered when comparing current results to prior periods.~~

On January 1, ~~2018,~~2019, we adopted ASC ~~606 using~~842, utilizing the ~~modified retrospective~~optional transition relief method, which allowed for ~~all contracts not completed~~the effective date of the new leases standard as the date of ~~that date and recognized a cumulative effect adjustment to retained earnings.~~initial application. Our prior period comparative information has not been adjusted and continues to be reported under accounting standards in effect for those periods. The ~~net~~adoption of this accounting standard had a minimal impact on the financial results of ~~adopting ASC 606~~the Company for the three months ended ~~September~~June 30, ~~2018 was an increase to net income of $0.2 million.~~2019. For additional information related to the impacts from the adoption ~~effects~~ of this ~~new revenue recognition standard,~~update, please refer to Note ~~2 "Revenue Recognition"~~9 "Leases" within the accompanying Condensed Consolidated Financial Statements.

On January 1, 2019, the Company adopted ASU 2017-12. This update aligns the recognition and presentation, which are to be applied prospectively, of the effects of the hedging instrument and the hedged item in the financial statements. As a result of the adoption of this update, the Company's swap interest expense is now presented within other interest expense, net. Please refer to Note 10 "Financial Instruments and Fair Value" within the accompanying Condensed Consolidated Financial Statements for additional details regarding the Company's interest rate swap agreements.

We assess the organic growth of our revenue and gross profit on a same store basis. We believe that our assessment on a same store basis represents an important indicator of comparative financial performance and provides relevant information to assess our performance. As such, for the following discussion, same store amounts consist of information from dealerships for identical months in each comparative period, commencing with the first full month we owned the dealership. Additionally, amounts related to divested dealerships are excluded from each comparative period.

New Vehicle—


	For the Three Months Ended September 30,								Increase (Decrease)				% Change		For the Three Months Ended June 30,								Increase (Decrease)				% Change
	2018				2017				Increase (Decrease)				% Change		2019				2018				Increase (Decrease)				% Change
	(Dollars in millions, except for per vehicle data)														(Dollars in millions, except for per vehicle data)
As Reported:
Revenue:
Luxury	$	297.8			$	288.3			$	9.5			3	%	$	316.3			$	299.9			$	16.4			5	%
Import	485.2				414.2				71.0				17	%	429.2				435.6				(6.4		)		(1	)%
Domestic	197.5				179.1				18.4				10	%	219.7				193.2				26.5				14	%
Total new vehicle revenue	$	980.5			$	881.6			$	98.9			11	%	$	965.2			$	928.7			$	36.5			4	%
Gross profit:
Luxury	$	18.6			$	18.5			$	0.1			1	%	$	19.2			$	19.4			$	(0.2	)		(1	)%
Import	15.4				14.4				1.0				7	%	9.5				12.5				(3.0		)		(24	)%
Domestic	8.1				8.1				—				—	%	9.6				8.7				0.9				10	%
Total new vehicle gross profit	$	42.1			$	41.0			$	1.1			3	%	$	38.3			$	40.6			$	(2.3	)		(6	)%
New vehicle units:
Luxury	5,685				5,499				186				3	%	5,746				5,590				156				3	%
Import	17,046				14,997				2,049				14	%	15,256				15,478				(222		)		(1	)%
Domestic	5,019				4,691				328				7	%	5,447				5,001				446				9	%
Total new vehicle units	27,750				25,187				2,563				10	%	26,449				26,069				380				1	%

Same Store:
Revenue:
Luxury	$	297.8			$	288.3			$	9.5			3	%	$	315.1			$	299.9			$	15.2			5	%
Import	458.4				414.2				44.2				11	%	423.3				423.8				(0.5		)		—	%
Domestic	191.3				179.1				12.2				7	%	181.4				193.2				(11.8		)		(6	)%
Total new vehicle revenue	$	947.5			$	881.6			$	65.9			7	%	$	919.8			$	916.9			$	2.9			—	%
Gross profit:
Luxury	$	18.7			$	18.5			$	0.2			1	%	$	19.2			$	19.4			$	(0.2	)		(1	)%
Import	14.3				14.4				(0.1		)		(1	)%	9.5				12.0				(2.5		)		(21	)%
Domestic	7.9				8.1				(0.2		)		(2	)%	7.6				8.7				(1.1		)		(13	)%
Total new vehicle gross profit	$	40.9			$	41.0			$	(0.1	)		—	%	$	36.3			$	40.1			$	(3.8	)		(9	)%
New vehicle units
Luxury	5,685				5,499				186				3	%	5,719				5,590				129				2	%
Import	16,114				14,997				1,117				7	%	15,031				15,053				(22		)		—	%
Domestic	4,829				4,691				138				3	%	4,483				5,001				(518		)		(10	)%
Total new vehicle units	26,628				25,187				1,441				6	%	25,233				25,644				(411		)		(2	)%

New Vehicle Metrics—


	For the Three Months Ended September 30,								Increase (Decrease)				% Change		For the Three Months Ended June 30,								Increase (Decrease)				% Change
	2018				2017				Increase (Decrease)				% Change		2019				2018				Increase (Decrease)				% Change
As Reported:
Revenue per new vehicle sold	$	35,333			$	35,002			$	331			1	%	$	36,493			$	35,625			$	868			2	%
Gross profit per new vehicle sold	$	1,517			$	1,628			$	(111	)		(7	)%	$	1,448			$	1,557			$	(109	)		(7	)%
New vehicle gross margin	4.3		%		4.7		%		(0.4		)%				4.0		%		4.4		%		(0.4		)%

Luxury:
Gross profit per new vehicle sold	$	3,272			$	3,364			$	(92	)		(3	)%	$	3,341			$	3,470			$	(129	)		(4	)%
New vehicle gross margin	6.2		%		6.4		%		(0.2		)%				6.1		%		6.5		%		(0.4		)%
Import:
Gross profit per new vehicle sold	$	903			$	960			$	(57	)		(6	)%	$	623			$	808			$	(185	)		(23	)%
New vehicle gross margin	3.2		%		3.5		%		(0.3		)%				2.2		%		2.9		%		(0.7		)%
Domestic:
Gross profit per new vehicle sold	$	1,614			$	1,727			$	(113	)		(7	)%	$	1,762			$	1,740			$	22			1	%
New vehicle gross margin	4.1		%		4.5		%		(0.4		)%				4.4		%		4.5		%		(0.1		)%

Same Store:
Revenue per new vehicle sold	$	35,583			$	35,002			$	581			2	%	$	36,452			$	35,755			$	697			2	%
Gross profit per new vehicle sold	$	1,536			$	1,628			$	(92	)		(6	)%	$	1,439			$	1,564			$	(125	)		(8	)%
New vehicle gross margin	4.3		%		4.7		%		(0.4		)%				3.9		%		4.4		%		(0.5		)%

Luxury:
Gross profit per new vehicle sold	$	3,289			$	3,364			$	(75	)		(2	)%	$	3,357			$	3,470			$	(113	)		(3	)%
New vehicle gross margin	6.3		%		6.4		%		(0.1		)%				6.1		%		6.5		%		(0.4		)%
Import:
Gross profit per new vehicle sold	$	887			$	960			$	(73	)		(8	)%	$	632			$	797			$	(165	)		(21	)%
New vehicle gross margin	3.1		%		3.5		%		(0.4		)%				2.2		%		2.8		%		(0.6		)%
Domestic:
Gross profit per new vehicle sold	$	1,636			$	1,727			$	(91	)		(5	)%	$	1,695			$	1,740			$	(45	)		(3	)%
New vehicle gross margin	4.1		%		4.5		%		(0.4		)%				4.2		%		4.5		%		(0.3		)%

New vehicle revenue increased by ~~$98.9~~$36.5 million ~~(11%~~(4%) due to a ~~$71.0~~$26.5 million ~~(17%) increase in import brands revenue, a $18.4 million (10%~~(14%) increase in domestic brands revenue, ~~and~~ a ~~$9.5~~$16.4 million ~~(3%~~(5%) increase in luxury brands revenue, partially offset by a $6.4 million (1%) decrease in import brands revenue. The ~~11%~~4% increase in new vehicle revenue is the result of ~~a 10%~~an increase in new vehicle units sold, coupled with a 1%2% increase in revenue per new vehicle sold. Same store new vehicle revenue increased by ~~$65.9~~$2.9 million ~~(7%~~(0%) due to a ~~$9.5~~$15.2 million ~~(3%~~(5%) increase in luxury brands revenue, ~~a $12.2~~partially offset by an $11.8 million ~~(7%~~(6%) ~~increase~~decrease in domestic brands revenue and a ~~$44.2~~$0.5 million ~~(11%~~(0%) ~~increase~~decrease in import ~~brands revenue.~~brands.

~~Despite U.S.~~New vehicle gross profit and same store new vehicle ~~SAAR decreasing 1%~~gross profit decreased by $2.3 million (6)% and $3.8 million (9)%, ~~from 17.2 million~~respectively, for the three months ended ~~September~~June 30, ~~2017 to 17.0 million for the three months ended September 30, 2018, our same store unit volumes increased 7% at our import brand dealerships and 3% at our luxury and domestic brand dealerships.~~

2019. Same store new vehicle gross profit margin for the three months ended ~~September~~June 30, ~~2018~~2019 decreased by 4050 basis points to ~~4.3%~~3.9%. ~~We attribute the~~The decrease in our same store gross profit margin was primarily attributable to ~~a shift in~~margin pressures among our ~~revenue and unit volume mix towards our lower margin~~ import brands due in part to the ~~failure~~inability to achieve aggressive sales and marketing targets set by certain ~~manufacturers, and smaller dealer incentive opportunities.~~manufacturers.

We ~~believe that our~~ended the quarter with approximately 86 days of supply of new vehicle inventory ~~continues to be well-aligned with current consumer demand, with approximately 73 days~~which is greater than our target of ~~supply in our inventory as of September 30, 2018.~~70 - 75 days.

Used Vehicle—


	For the Three Months Ended September 30,								Increase (Decrease)				% Change		For the Three Months Ended June 30,								Increase (Decrease)				% Change
	2018				2017				Increase (Decrease)				% Change		2019				2018				Increase (Decrease)				% Change
	(Dollars in millions, except for per vehicle data)														(Dollars in millions, except for per vehicle data)
As Reported:
Revenue:
Used vehicle retail revenue	$	448.7			$	400.1			$	48.6			12	%	$	486.6			$	470.9			$	15.7			3	%
Used vehicle wholesale revenue	48.8				55.5				(6.7		)		(12	)%	47.0				46.0				1.0				2	%
Used vehicle revenue	$	497.5			$	455.6			$	41.9			9	%	$	533.6			$	516.9			$	16.7			3	%
Gross profit:
Used vehicle retail gross profit	$	32.7			$	28.9			$	3.8			13	%	$	34.7			$	33.6			$	1.1			3	%
Used vehicle wholesale gross profit	0.1				(0.1		)		0.2				NM		1.2				0.5				0.7				140	%
Used vehicle gross profit	$	32.8			$	28.8			$	4.0			14	%	$	35.9			$	34.1			$	1.8			5	%
Used vehicle retail units:
Used vehicle retail units	20,824				18,777				2,047				11	%	22,259				21,685				574				3	%

Same Store:
Revenue:
Used vehicle retail revenue	$	436.0			$	399.0			$	37.0			9	%	$	465.2			$	462.5			$	2.7			1	%
Used vehicle wholesale revenue	48.1				55.2				(7.1		)		(13	)%	45.3				44.9				0.4				1	%
Used vehicle revenue	$	484.1			$	454.2			$	29.9			7	%	$	510.5			$	507.4			$	3.1			1	%
Gross profit:
Used vehicle retail gross profit	$	31.7			$	28.8			$	2.9			10	%	$	32.9			$	33.3			$	(0.4	)		(1	)%
Used vehicle wholesale gross profit	0.3				—				0.3				—	%	1.2				0.5				0.7				140	%
Used vehicle gross profit	$	32.0			$	28.8			$	3.2			11	%	$	34.1			$	33.8			$	0.3			1	%
Used vehicle retail units:
Used vehicle retail units	20,098				18,695				1,403				8	%	21,176				21,252				(76		)		—	%

Used Vehicle Metrics—


	For the Three Months Ended September 30,								Increase (Decrease)				% Change		For the Three Months Ended June 30,								Increase (Decrease)				% Change
	2018				2017				Increase (Decrease)				% Change		2019				2018				Increase (Decrease)				% Change
As Reported:
Revenue per used vehicle retailed	$	21,547			$	21,308			$	239			1	%	$	21,861			$	21,715			$	146			1	%
Gross profit per used vehicle retailed	$	1,570			$	1,539			$	31			2	%	$	1,559			$	1,549			$	10			1	%
Used vehicle retail gross margin	7.3		%		7.2		%		0.1		%				7.1		%		7.1		%		—		%

Same Store:
Revenue per used vehicle retailed	$	21,694			$	21,343			$	351			2	%	$	21,968			$	21,763			$	205			1	%
Gross profit per used vehicle retailed	$	1,577			$	1,541			$	36			2	%	$	1,554			$	1,567			$	(13	)		(1	)%
Used vehicle retail gross margin	7.3		%		7.2		%		0.1		%				7.1		%		7.2		%		(0.1		)%

Used vehicle revenue increased by ~~$41.9~~$16.7 million ~~(9%~~(3%) ~~primarily~~ due to a ~~$48.6~~$15.7 million ~~(12%~~(3%) increase in used vehicle retail revenue ~~partially offset by~~and a ~~$6.7~~$1.0 million ~~(12)% decrease~~(2%) increase in used vehicle wholesale revenue. Same store used vehicle revenue increased by ~~$29.9~~$3.1 million ~~(7%~~(1%) due to a ~~$37.0~~$2.7 million ~~(9%~~(1%) increase in used vehicle retail revenue ~~partially offset by~~and a ~~$7.1~~$0.4 million ~~(13)% decrease~~(1%) increase in used vehicle wholesale revenue. ~~For the three months ended September 30, 2018 same store used vehicle retail units increased by 8% from 18,695 unit to 20,098 units.~~

For the three months ended ~~September~~June 30, ~~2018,~~2019, both total Company and same store used vehicle retail gross profit margins were consistent with the prior comparable period.

We believe that our used vehicle inventory continues to be well-aligned with current customer demand, with approximately 3533 days of supply in our inventory as of ~~September~~June 30, ~~2018.~~2019.

Parts and Service—


	For the Three Months Ended September 30,								Increase (Decrease)				% Change		For the Three Months Ended June 30,								Increase (Decrease)				% Change
	2018				2017				Increase (Decrease)				% Change		2019				2018				Increase (Decrease)				% Change
	(Dollars in millions)														(Dollars in millions)
As Reported:
Parts and service revenue	$	206.1			$	197.2			$	8.9			5	%	$	224.5			$	204.5			$	20.0			10	%
Parts and service gross profit:
Customer pay	73.0				68.1				4.9				7	%	79.8				74.2				5.6				8	%
Warranty	19.2				20.6				(1.4		)		(7	)%	22.3				18.3				4.0				22	%
Wholesale parts	5.6				5.3				0.3				6	%	5.8				5.5				0.3				5	%
Parts and service gross profit, excluding reconditioning and preparation	$	97.8			$	94.0			$	3.8			4	%	$	107.9			$	98.0			$	9.9			10	%
Parts and service gross margin, excluding reconditioning and preparation	47.5		%		47.7		%		(0.2		)%				48.1		%		47.9		%		0.2		%
Reconditioning and preparation	$	32.0			$	28.8			$	3.2			11	%
Reconditioning and preparation *															$	32.7			$	31.6			$	1.1			3	%
Total parts and service gross profit	$	129.8			$	122.8			$	7.0			6	%	$	140.6			$	129.6			$	11.0			8	%
Total parts and service gross margin	63.0		%		62.3		%		0.7		%

Same Store:
Parts and service revenue	$	201.4			$	197.2			$	4.2			2	%	$	217.5			$	201.8			$	15.7			8	%
Parts and service gross profit:
Customer pay	71.4				68.1				3.3				5	%	77.2				73.3				3.9				5	%
Warranty	18.9				20.6				(1.7		)		(8	)%	21.6				18.2				3.4				19	%
Wholesale parts	5.4				5.3				0.1				2	%	5.7				5.4				0.3				6	%
Parts and service gross profit, excluding reconditioning and preparation	$	95.7			$	94.0			$	1.7			2	%	$	104.5			$	96.9			$	7.6			8	%
Parts and service gross margin, excluding reconditioning and preparation	47.5		%		47.7		%		(0.2		)%				48.0		%		48.0		%		—		%
Reconditioning and preparation	$	31.3			$	28.8			$	2.5			9	%
Reconditioning and preparation *															$	31.3			$	31.0			$	0.3			1	%
Total parts and service gross profit	$	127.0			$	122.8			$	4.2			3	%	$	135.8			$	127.9			$	7.9			6	%
Total parts and service gross margin	63.1		%		62.3		%		0.8		%

* Reconditioning and preparation represents the gross profit earned by our parts and service departments for internal work performed and is included as a reduction of Parts and Service Cost of Sales on the accompanying Condensed Consolidated Statements of Income upon the sale of the vehicle.

The ~~$8.9~~$20.0 million ~~(5%~~(10%) increase in parts and service revenue was due to ~~a $8.0~~an $11.7 million ~~(6%~~(8%) increase in customer pay revenue, a $6.7 million (19%) increase in warranty revenue, and a ~~$4.1~~$1.6 million ~~(15%~~(5%) increase in wholesale parts ~~revenue, partially offset by a $3.2 million (8%) decrease in warranty~~ revenue. Same store parts and service revenue increased by ~~$4.2~~$15.7 million (8%) to ~~$201.4~~$217.5 million during the three months ended ~~September~~June 30, ~~2018~~2019 from ~~$197.2~~$201.8 million during the three months ended ~~September~~June 30, ~~2017.~~2018. The increase in same store parts and service revenue was due to ~~a $5.0~~an $8.6 million ~~(4%~~(6%) increase in customer pay revenue, a $5.7 million (16%) increase in warranty revenue, and a ~~$3.1~~$1.4 million ~~(12%~~(5%) increase in wholesale parts revenue ~~partially offset by a $3.9 million (10%) decrease in warranty revenue.~~

Parts and service gross profit, excluding reconditioning and preparation, increased by ~~$3.8~~$9.9 million ~~(4%~~(10%) to ~~$97.8~~$107.9 million and same store parts and service gross profit, excluding reconditioning and preparation, increased by ~~$1.7~~$7.6 million ~~(2%~~(8%) to ~~$95.7~~$104.5 million. ~~The increase in same store gross profit is primarily due~~We continue to ~~increases in~~focus on increasing our ~~higher margin~~ customer pay ~~business~~parts and ~~additional gross profit~~service revenue over the long-term by upgrading equipment, improving the customer experience, and capitalizing on our dealership training programs. Further, we have recently enhanced our technicians benefit package with the goal of improving retention and attracting new technicians in ~~reconditioning and preparation, which benefited from a 8% increase in used vehicle retail unit sales.~~order to further grow the business.

Finance and Insurance, net—


	For the Three Months Ended September 30,								Increase (Decrease)				% Change		For the Three Months Ended June 30,								Increase (Decrease)				% Change
	2018				2017				Increase (Decrease)				% Change		2019				2018				Increase (Decrease)				% Change
	(Dollars in millions, except for per vehicle data)														(Dollars in millions, except for per vehicle data)
As Reported:
Finance and insurance, net	$	73.3			$	67.7			$	5.6			8	%	$	80.2			$	73.5			$	6.7			9	%
Finance and insurance, net per vehicle sold	$	1,509			$	1,540			$	(31	)		(2	)%	$	1,647			$	1,539			$	108			7	%

Same Store:
Finance and insurance, net	$	71.2			$	67.6			$	3.6			5	%	$	77.0			$	71.8			$	5.2			7	%
Finance and insurance, net per vehicle sold	$	1,524			$	1,540			$	(16	)		(1	)%	$	1,659			$	1,531			$	128			8	%

Finance and insurance ("F&I"), net revenue increased by ~~$5.6~~$6.7 million ~~(8%~~(9%) during the ~~third~~second quarter of ~~2018~~2019 as compared to the ~~third~~second quarter of ~~2017~~2018 and same store F&I, net revenue increased by ~~$3.6~~$5.2 million ~~(5%~~(7%) over the same period. ~~The 2% decrease in F&I PVR is primarily due to changes in our brand mix and acquisitions.~~ We continued to benefit from a ~~generally~~ favorable consumer lending environment, which allowed more of our customers to take advantage of a broader array of F&I products and our continued focus on improving F&I results at our lower-performing stores through our F&I training programs. In addition, during the second quarter of 2019, the Company recognized additional retrospective commissions as a result of favorable payment trends, which contributed approximately $28 of F&I income per retail vehicle sale.

Selling, General, and Administrative Expense—


	For the Three Months Ended September 30,														Increase (Decrease)				% of Gross Profit Increase (Decrease)		For the Three Months Ended June 30,														Increase (Decrease)				% of Gross Profit Increase (Decrease)
	2018				% of Gross Profit			2017				% of Gross Profit			Increase (Decrease)				% of Gross Profit Increase (Decrease)		2019				% of Gross Profit			2018				% of Gross Profit			Increase (Decrease)				% of Gross Profit Increase (Decrease)
	(Dollars in millions)																				(Dollars in millions)
As Reported:
Personnel costs	$	90.8			32.7	%		$	87.4			33.6	%		$	3.4			(0.9	)%	$	94.7			32.1	%		$	90.2			32.5	%		$	4.5			(0.4	)%
Sales compensation	29.4				10.6	%		27.4				10.5	%		2.0				0.1	%	30.9				10.5	%		29.6				10.7	%		1.3				(0.2	)%
Share-based compensation	2.5				0.9	%		3.6				1.4	%		(1.1		)		(0.5	)%	2.9				1.0	%		2.5				0.9	%		0.4				0.1	%
Outside services	21.1				7.6	%		19.9				7.6	%		1.2				—	%	20.9				7.1	%		20.2				7.3	%		0.7				(0.2	)%
Advertising	7.5				2.7	%		6.6				2.5	%		0.9				0.2	%	9.8				3.3	%		8.3				3.0	%		1.5				0.3	%
Rent	6.4				2.3	%		6.5				2.5	%		(0.1		)		(0.2	)%	6.8				2.3	%		6.3				2.3	%		0.5				—	%
Utilities	4.4				1.6	%		4.1				1.6	%		0.3				—	%	3.8				1.3	%		4.1				1.5	%		(0.3		)		(0.2	)%
Insurance	2.4				0.9	%		4.5				1.7	%		(2.1		)		(0.8	)%	4.3				1.5	%		5.2				1.9	%		(0.9		)		(0.4	)%
Other	24.3				8.6	%		22.5				8.7	%		1.8				(0.1	)%	26.6				8.9	%		24.2				8.5	%		2.4				0.4	%
Selling, general, and administrative expense	$	188.8			67.9	%		$	182.5			70.1	%		$	6.3			(2.2	)%	$	200.7			68.0	%		$	190.6			68.6	%		$	10.1			(0.6	)%
Gross profit	$	278.0						$	260.3												$	295.0						$	277.8

Same Store:
Personnel costs	$	88.4			32.6	%		$	87.2			33.5	%		$	1.2			(0.9	)%	$	91.1			32.2	%		$	88.9			32.5	%		$	2.2			(0.3	)%
Sales compensation	28.4				10.5	%		27.4				10.5	%		1.0				—	%	29.5				10.4	%		28.9				10.6	%		0.6				(0.2	)%
Share-based compensation	2.5				0.9	%		3.6				1.4	%		(1.1		)		(0.5	)%	2.9				1.0	%		2.5				0.9	%		0.4				0.1	%
Outside services	20.5				7.6	%		19.8				7.6	%		0.7				—	%	19.9				7.0	%		19.8				7.2	%		0.1				(0.2	)%
Advertising	7.0				2.6	%		6.6				2.5	%		0.4				0.1	%	8.7				3.1	%		8.1				3.0	%		0.6				0.1	%
Rent	6.4				2.4	%		6.5				2.5	%		(0.1		)		(0.1	)%	6.7				2.4	%		6.3				2.3	%		0.4				0.1	%
Utilities	4.2				1.5	%		4.1				1.6	%		0.1				(0.1	)%	3.7				1.3	%		4.0				1.5	%		(0.3		)		(0.2	)%
Insurance	2.2				0.8	%		4.5				1.7	%		(2.3		)		(0.9	)%	4.0				1.4	%		5.1				1.9	%		(1.1		)		(0.5	)%
Other	24.1				8.9	%		22.3				8.6	%		1.8				0.3	%	25.6				9.0	%		23.7				8.6	%		1.9				0.4	%
Selling, general, and administrative expense	$	183.7			67.8	%		$	182.0			69.9	%		$	1.7			(2.1	)%	$	192.1			67.8	%		$	187.3			68.5	%		$	4.8			(0.7	)%
Gross profit	$	271.1						$	260.2												$	283.2						$	273.6

SG&A expense as a percentage of gross profit decreased ~~220~~60 basis points from ~~70.1%~~68.6% for the ~~third~~second quarter of ~~2017~~2018 to ~~67.9%~~68.0% for the ~~third~~second quarter of ~~2018.~~2019. Same store SG&A expense as a percentage of gross profit decreased ~~210~~70 basis points, from ~~69.9%~~

68.5% for the ~~third~~second quarter of ~~2017~~2018 to 67.8% over the same period. On both a total Company and same store basis, the Company benefited from ~~a 90 basis point decrease~~decreases in personnel and insurance expense as a percentage of gross profit. Insurance expense was higher in the second quarter of 2018 primarily as a result of favorable workers compensation claims development factors. In addition, the Company benefited from a 50 basis point decrease in share-based compensation expense on both a total Company and same store basis. During the three months ended September 30, 2017 the Company recorded $1.5 million of expenses associated with our CEO transition. The decreases in insurance expense and share-based compensation expense were offsetproperty damage caused by ~~slightly higher outside services and other expenses, including those associated with our omni-channel investments.~~weather related events.

Floor Plan Interest Expense —

Floor plan interest expense increased by ~~$2.6~~$2.5 million ~~(45%~~(31%) to ~~$8.4~~$10.5 million during the three months ended ~~September~~June 30, ~~2018~~2019 compared to ~~$5.8~~$8.0 million for the three months ended ~~September~~June 30, ~~2017,~~2018, primarily due to higher new vehicle inventory levels and interest ~~rates coupled with increased borrowings as a result of recent acquisitions.~~rates.

Income Tax Expense —

The ~~$4.6~~$3.6 million (24%) ~~decrease~~increase in income tax expense was the result of a $15.3 million (26%) increase in income before income taxes, partially offset by a lower estimated annual effective rate. Our effective tax rate ~~due~~for the three months ended June 30, 2019 was 25.3% compared to 25.8% in the ~~enactment of the Tax Act in December 2017. We~~prior comparative period. For 2019, we expect our effective tax rate to be between 25% and 26% ~~for 2018.~~.

During the third quarter of 2018, the IRS released Notice 2018-68, which clarified a number of changes made to Section 162(m) of the Code by the Tax Act. While the Notice is not comprehensive and promises additional guidance is forthcoming, we determined a reasonable estimate could be made and recorded a $0.6 million provisional adjustment to the deferred tax assets for certain components of share-based compensation. This amount was recorded as a discrete item of additional income tax expense for the third quarter of 2018. We will complete our accounting for the Tax Act in 2018 after we have considered additional guidance issued by the U.S. Treasury Department, state tax authorities and other standard-setting bodies, and we have gathered and analyzed additional data relative to our calculations. This may result in adjustments to our provisional amounts, which would impact our provision for income taxes and the effective tax rate in the period the adjustments are made.

RESULTS OF OPERATIONS

~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 Compared to the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018


	For the Nine Months Ended September 30,								Increase (Decrease)				% Change		For the Six Months Ended June 30,								Increase (Decrease)				% Change
	2018				2017				Increase (Decrease)				% Change		2019				2018				Increase (Decrease)				% Change
	(Dollars in millions, except per share data)														(Dollars in millions, except per share data)
REVENUE:
New vehicle	$	2,766.3			$	2,597.0			$	169.3			7	%	$	1,837.0			$	1,785.8			$	51.2			3	%
Used vehicle	1,499.0				1,396.6				102.4				7	%	1,043.5				1,001.5				42.0				4	%
Parts and service	609.9				589.5				20.4				3	%	442.1				403.8				38.3				9	%
Finance and insurance, net	215.0				202.5				12.5				6	%	151.7				141.7				10.0				7	%
TOTAL REVENUE	5,090.2				4,785.6				304.6				6	%	3,474.3				3,332.8				141.5				4	%
GROSS PROFIT:
New vehicle	121.3				122.4				(1.1		)		(1	)%	76.2				79.2				(3.0		)		(4	)%
Used vehicle	100.4				95.4				5.0				5	%	70.4				67.6				2.8				4	%
Parts and service	384.5				367.2				17.3				5	%	275.9				254.7				21.2				8	%
Finance and insurance, net	215.0				202.5				12.5				6	%	151.7				141.7				10.0				7	%
TOTAL GROSS PROFIT	821.2				787.5				33.7				4	%	574.2				543.2				31.0				6	%
OPERATING EXPENSES:
Selling, general, and administrative	563.6				549.2				14.4				3	%	391.7				374.8				16.9				5	%
Depreciation and amortization	25.2				24.0				1.2				5	%	17.6				16.7				0.9				5	%
Other operating (income) expenses, net	(1.2		)		0.7				(1.9		)		NM
Other operating expense (income), net															1.2				(1.1		)		2.3				NM
INCOME FROM OPERATIONS	233.6				213.6				20.0				9	%	163.7				152.8				10.9				7	%
OTHER EXPENSES:
OTHER EXPENSES (INCOME):
Floor plan interest expense	23.0				17.1				5.9				35	%	20.7				14.6				6.1				42	%
Other interest expense, net	39.4				40.2				(0.8		)		(2	)%	27.5				26.2				1.3				5	%
Swap interest expense	0.5				1.6				(1.1		)		(69	)%	—				0.4				(0.4		)		(100	)%
Gain on divestiture															(11.7		)		—				(11.7		)		NM
Total other expenses, net	62.9				58.9				4.0				7	%	36.5				41.2				(4.7		)		(11	)%
INCOME BEFORE INCOME TAXES	170.7				154.7				16.0				10	%	127.2				111.6				15.6				14	%
Income tax expense	43.1				58.1				(15.0		)		(26	)%	31.4				28.3				3.1				11	%
NET INCOME	$	127.6			$	96.6			$	31.0			32	%	$	95.8			$	83.3			$	12.5			15	%
Net income per common share—Diluted	$	6.22			$	4.60			$	1.6			35	%
Net income per share—Diluted															$	4.96			$	4.02			$	0.9			23	%

NM—Not Meaningful


	For the Nine Months Ended September 30,					For the Six Months Ended June 30,
	2018			2017		2019			2018
REVENUE MIX PERCENTAGES:
New vehicle	54.3	%		54.3	%	52.9	%		53.6	%
Used vehicle retail	26.7	%		26.0	%	27.2	%		27.2	%
Used vehicle wholesale	2.8	%		3.2	%	2.8	%		2.8	%
Parts and service	12.0	%		12.3	%	12.7	%		12.1	%
Finance and insurance, net	4.2	%		4.2	%	4.4	%		4.3	%
Total revenue	100.0	%		100.0	%	100.0	%		100.0	%
GROSS PROFIT MIX PERCENTAGES:
New vehicle	14.8	%		15.5	%	13.3	%		14.6	%
Used vehicle retail	12.0	%		12.1	%	11.9	%		12.1	%
Used vehicle wholesale	0.2	%		0.1	%	0.4	%		0.3	%
Parts and service	46.8	%		46.6	%	48.0	%		46.9	%
Finance and insurance, net	26.2	%		25.7	%	26.4	%		26.1	%
Total gross profit	100.0	%		100.0	%	100.0	%		100.0	%
GROSS PROFIT MARGIN	16.1	%		16.5	%	16.5	%		16.3	%
SG&A EXPENSES AS A PERCENTAGE OF GROSS PROFIT	68.6	%		69.7	%	68.2	%		69.0	%

Total revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 increased by ~~$304.6~~$141.5 million ~~(6%~~(4%) compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, due to a ~~$169.3~~$51.2 million ~~(7%~~(3%) increase in new vehicle revenue, a ~~$102.4~~$42.0 million ~~(7%~~(4%) increase in used vehicle revenue, a ~~$20.4~~$38.3 million ~~(3%~~(9%) increase in parts and service revenue, and a ~~$12.5~~$10.0 million ~~(6%~~(7%) increase in F&I revenue, net. The ~~$33.7~~$31.0 million ~~(4%~~(6%) increase in gross profit during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was driven by a ~~$17.3~~$21.2 million ~~(5%~~(8%) increase in parts and service gross profit, a ~~$12.5~~$10.0 million ~~(6%~~(7%) increase in F&I gross profit, and a ~~$5.0~~$2.8 million ~~(5%~~(4%) increase in used vehicle gross profit, partially offset by a decrease of ~~$1.1~~$3.0 million ~~(1%~~(4%) in new vehicle gross profit.

Income from operations during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 increased by ~~$20.0~~$10.9 million ~~(9%~~(7%) compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, due to the ~~$33.7~~$31.0 million (6%) increase in gross profit, ~~a $1.9 million increase in other operating (income) expenses, net,~~ partially offset by a ~~$14.4~~$16.9 million ~~(3%~~(5%) increase in SG&A expenses, a $2.3 million decrease in other operating expense (income), net, and a ~~$1.2~~$0.9 million (5%) increase in depreciation and amortization expense. Total other expenses, ~~increased~~net decreased by ~~$4.0~~$4.7 million ~~(7%~~(11%), ~~due to~~as a ~~$5.9~~result of an $11.7 million ~~(35%~~gain on a dealership divestiture during the second quarter of 2019, partially offset by a $6.1 million (42%) increase in floor plan interest expense ~~partially offset by a $1.1 million (69%) decrease in swap interest expense,~~ and a ~~$0.8~~$1.3 million ~~(2%~~(5%) ~~decrease~~increase in other interest expense, net. As a result, income before income taxes increased ~~$16.0~~$15.6 million ~~(10%~~(14%) to ~~$170.7~~$127.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018. The decrease in income tax expense of $15.0 million (26%) is due to a lower effective tax rate, partially offset by the $16.0 million (10%) increase in income before income taxes.~~2019. Overall, net income increased by ~~$31.0~~$12.5 million ~~(32%~~(15%) during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018.

On January 1, ~~2018,~~2019, we adopted ASC ~~606 using~~842, utilizing the ~~modified retrospective~~optional transition relief method, which allowed for ~~all contracts not completed~~the effective date of the new leases standard as the date of ~~that date and recognized a cumulative effect adjustment to retained earnings.~~initial application. Our prior period comparative information has not been adjusted and continues to be reported under accounting standards in effect for those periods. The ~~net~~adoption of this accounting standard had a minimal impact on the financial results of ~~adopting ASC 606~~the Company for the ~~nine~~six months ended ~~September~~June 30, ~~2018 was a reduction to net income of $1.3 million.~~2019. For additional information related to the impacts from the adoption ~~effects~~ of this ~~new revenue recognition standard,~~update, please refer to Note ~~2 "Revenue Recognition"~~9 "Leases" within the accompanying Condensed Consolidated Financial Statements.

On January 1, 2019, the Company adopted ASU 2017-12. This update aligns the recognition and presentation, which are to be applied prospectively, of the effects of the hedging instrument and the hedged item in the financial statements. As a result of the adoption of this update, the Company's swap interest expense is now presented within other interest expense, net. Please refer to Note 10 "Financial Instruments and Fair Value" within the accompanying Condensed Consolidated Financial Statements for additional details regarding the Company's interest rate swap agreements.

New Vehicle—


	For the Nine Months Ended September 30,								Increase (Decrease)				% Change		For the Six Months Ended June 30,								Increase (Decrease)				% Change
	2018				2017				Increase (Decrease)				% Change		2019				2018				Increase (Decrease)				% Change
	(Dollars in millions, except for per vehicle data)														(Dollars in millions, except for per vehicle data)
As Reported:
Revenue:
Luxury	$	883.8			$	852.3			$	31.5			4	%	$	605.3			$	586.0			$	19.3			3	%
Import	1,319.3				1,205.7				113.6				9	%	834.1				834.1				—				—	%
Domestic	563.2				539.0				24.2				4	%	397.6				365.7				31.9				9	%
Total new vehicle revenue	$	2,766.3			$	2,597.0			$	169.3			7	%	$	1,837.0			$	1,785.8			$	51.2			3	%
Gross profit:
Luxury	$	57.5			$	54.7			$	2.8			5	%	$	38.3			$	38.9			$	(0.6	)		(2	)%
Import	39.1				42.8				(3.7		)		(9	)%	21.3				23.7				(2.4		)		(10	)%
Domestic	24.7				24.9				(0.2		)		(1	)%	16.6				16.6				—				—	%
Total new vehicle gross profit	$	121.3			$	122.4			$	(1.1	)		(1	)%	$	76.2			$	79.2			$	(3.0	)		(4	)%
New vehicle units:
Luxury	16,527				16,117				410				3	%	10,908				10,842				66				1	%
Import	46,545				43,504				3,041				7	%	29,699				29,499				200				1	%
Domestic	14,406				14,163				243				2	%	9,951				9,387				564				6	%
Total new vehicle units	77,478				73,784				3,694				5	%	50,558				49,728				830				2	%

Same Store:
Revenue:
Luxury	$	883.8			$	852.3			$	31.5			4	%	$	603.6			$	586.0			$	17.6			3	%
Import	1,259.3				1,204.7				54.6				5	%	809.4				810.0				(0.6		)		—	%
Domestic	546.7				537.6				9.1				2	%	342.8				365.7				(22.9		)		(6	)%
Total new vehicle revenue	$	2,689.8			$	2,594.6			$	95.2			4	%	$	1,755.8			$	1,761.7			$	(5.9	)		—	%
Gross profit:
Luxury	$	57.6			$	54.7			$	2.9			5	%	$	38.3			$	38.9			$	(0.6	)		(2	)%
Import	36.7				42.8				(6.1		)		(14	)%	20.6				22.9				(2.3		)		(10	)%
Domestic	24.0				24.8				(0.8		)		(3	)%	13.7				16.6				(2.9		)		(17	)%
Total new vehicle gross profit	$	118.3			$	122.3			$	(4.0	)		(3	)%	$	72.6			$	78.4			$	(5.8	)		(7	)%
New vehicle units:
Luxury	16,527				16,117				410				3	%	10,869				10,842				27				—	%
Import	44,438				43,467				971				2	%	28,789				28,639				150				1	%
Domestic	13,923				14,125				(202		)		(1	)%	8,543				9,387				(844		)		(9	)%
Total new vehicle units	74,888				73,709				1,179				2	%	48,201				48,868				(667		)		(1	)%

New Vehicle Metrics—


	For the Nine Months Ended September 30,								Increase (Decrease)				% Change		For the Six Months Ended June 30,								Increase (Decrease)				% Change
	2018				2017				Increase (Decrease)				% Change		2019				2018				Increase (Decrease)				% Change
As Reported:
Revenue per new vehicle sold	$	35,704			$	35,197			$	507			1	%	$	36,335			$	35,911			$	424			1	%
Gross profit per new vehicle sold	$	1,566			$	1,659			$	(93	)		(6	)%	$	1,507			$	1,593			$	(86	)		(5	)%
New vehicle gross margin	4.4		%		4.7		%		(0.3		)%				4.1		%		4.4		%		(0.3		)%

Luxury:
Gross profit per new vehicle sold	$	3,479			$	3,394			$	85			3	%	$	3,511			$	3,588			$	(77	)		(2	)%
New vehicle gross margin	6.5		%		6.4		%		0.1		%				6.3		%		6.6		%		(0.3		)%
Import:
Gross profit per new vehicle sold	$	840			$	984			$	(144	)		(15	)%	$	717			$	803			$	(86	)		(11	)%
New vehicle gross margin	3.0		%		3.5		%		(0.5		)%				2.6		%		2.8		%		(0.2		)%
Domestic:
Gross profit per new vehicle sold	$	1,715			$	1,758			$	(43	)		(2	)%	$	1,668			$	1,768			$	(100	)		(6	)%
New vehicle gross margin	4.4		%		4.6		%		(0.2		)%				4.2		%		4.5		%		(0.3		)%

Same Store:
Revenue per new vehicle sold	$	35,918			$	35,201			$	717			2	%	$	36,427			$	36,050			$	377			1	%
Gross profit per new vehicle sold	$	1,580			$	1,659			$	(79	)		(5	)%	$	1,506			$	1,604			$	(98	)		(6	)%
New vehicle gross margin	4.4		%		4.7		%		(0.3		)%				4.1		%		4.5		%		(0.4		)%

Luxury:
Gross profit per new vehicle sold	$	3,485			$	3,394			$	91			3	%	$	3,524			$	3,588			$	(64	)		(2	)%
New vehicle gross margin	6.5		%		6.4		%		0.1		%				6.3		%		6.6		%		(0.3		)%
Import:
Gross profit per new vehicle sold	$	826			$	985			$	(159	)		(16	)%	$	716			$	800			$	(84	)		(11	)%
New vehicle gross margin	2.9		%		3.6		%		(0.7		)%				2.5		%		2.8		%		(0.3		)%
Domestic:
Gross profit per new vehicle sold	$	1,724			$	1,756			$	(32	)		(2	)%	$	1,604			$	1,768			$	(164	)		(9	)%
New vehicle gross margin	4.4		%		4.6		%		(0.2		)%				4.0		%		4.5		%		(0.5		)%

New vehicle revenue increased by ~~$169.3~~$51.2 million ~~(7%~~(3%) ~~due to~~primarily as a 5% increase in new vehicle units sold, coupled with a 1% increase in revenue per new vehicle sold. Same store new vehicle revenue increased by $95.2 million (4%) due to a 2% increase in revenue per new vehicle sold, coupled withresult of a 2% increase in new vehicle units sold. Same store new vehicle revenue remained relatively flat as the result of a 1% decrease in new vehicle units sold, partially offset by slightly higher revenue per unit sold.

~~Same~~For the six months ended June 30, 2019, new vehicle gross profit and same store new vehicle gross profit ~~for the nine months ended September 30, 2018~~ decreased by ~~$4.0~~$3.0 million ~~(3%~~(4)% and $5.8 million (7%), ~~due to a 5% decrease in gross profit per new vehicle sold.~~respectively. Same store new vehicle gross margin for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 decreased 3040 basis points to ~~4.4%. The decrease in our same store gross profit margin was primarily attributable to~~4.1% as a result of margin pressure inacross our ~~import brands due in part to the failure to achieve aggressive sales and marketing targets set by certain manufacturers and smaller dealer incentive opportunities.~~brand offerings.

Used Vehicle—


	For the Nine Months Ended September 30,								Increase (Decrease)				% Change		For the Six Months Ended June 30,								Increase (Decrease)				% Change
	2018				2017				Increase (Decrease)				% Change		2019				2018				Increase (Decrease)				% Change
	(Dollars in millions, except for per vehicle data)														(Dollars in millions, except for per vehicle data)
As Reported:
Revenue:
Used vehicle retail revenue	$	1,355.4			$	1,245.7			$	109.7			9	%	$	944.8			$	906.7			$	38.1			4	%
Used vehicle wholesale revenue	143.6				150.9				(7.3		)		(5	)%	98.7				94.8				3.9				4	%
Used vehicle revenue	$	1,499.0			$	1,396.6			$	102.4			7	%	$	1,043.5			$	1,001.5			$	42.0			4	%
Gross profit:
Used vehicle retail gross profit	$	98.5			$	94.4			$	4.1			4	%	$	68.3			$	65.8			$	2.5			4	%
Used vehicle wholesale gross profit	1.9				1.0				0.9				90	%	2.1				1.8				0.3				17	%
Used vehicle gross profit	$	100.4			$	95.4			$	5.0			5	%	$	70.4			$	67.6			$	2.8			4	%
Used vehicle retail units:
Used vehicle retail units	63,079				59,107				3,972				7	%	43,342				42,255				1,087				3	%

Same Store:
Revenue:
Used vehicle retail revenue	$	1,321.4			$	1,235.4			$	86.0			7	%	$	901.7			$	890.7			$	11.0			1	%
Used vehicle wholesale revenue	141.0				149.8				(8.8		)		(6	)%	95.4				93.2				2.2				2	%
Used vehicle revenue	$	1,462.4			$	1,385.2			$	77.2			6	%	$	997.1			$	983.9			$	13.2			1	%
Gross profit:
Used vehicle retail gross profit	$	95.8			$	93.7			$	2.1			2	%	$	64.6			$	64.8			$	(0.2	)		—	%
Used vehicle wholesale gross profit	2.1				1.3				0.8				62	%	2.1				1.8				0.3				17	%
Used vehicle gross profit	$	97.9			$	95.0			$	2.9			3	%	$	66.7			$	66.6			$	0.1			—	%
Used vehicle retail units:
Used vehicle retail units	61,165				58,463				2,702				5	%	41,107				41,402				(295		)		(1	)%

Used Vehicle Metrics—


	For the Nine Months Ended September 30,								Increase (Decrease)				% Change		For the Six Months Ended June 30,								Increase (Decrease)				% Change
	2018				2017				Increase (Decrease)				% Change		2019				2018				Increase (Decrease)				% Change
As Reported:
Revenue per used vehicle retailed	$	21,487			$	21,075			$	412			2	%	$	21,799			$	21,458			$	341			2	%
Gross profit per used vehicle retailed	$	1,562			$	1,597			$	(35	)		(2	)%	$	1,576			$	1,557			$	19			1	%
Used vehicle retail gross margin	7.3		%		7.6		%		(0.3		)%				7.2		%		7.3		%		(0.1		)%

Same Store:
Revenue per used vehicle retailed	$	21,604			$	21,131			$	473			2	%	$	21,935			$	21,513			$	422			2	%
Gross profit per used vehicle retailed	$	1,566			$	1,603			$	(37	)		(2	)%	$	1,572			$	1,565			$	7			—	%
Used vehicle retail gross margin	7.2		%		7.6		%		(0.4		)%				7.2		%		7.3		%		(0.1		)%

Used vehicle revenue increased by ~~$102.4~~$42.0 million ~~(7%~~(4%) due to a ~~$109.7~~$38.1 million ~~(9%~~(4%) increase in used vehicle retail revenue ~~partially offset by~~and a ~~$7.3~~$3.9 million ~~(5%~~(4%) ~~decrease~~increase in used vehicle wholesale revenue. Same store used vehicle revenue increased by ~~$77.2~~$13.2 million ~~(6%~~(1%) due to ~~a $86.0~~an $11.0 million ~~(7%~~(1%) increase in same store used vehicle retail revenue ~~partially offset by~~and a ~~$8.8~~$2.2 million ~~(6%~~(2%) ~~decrease~~increase in same store used vehicle wholesale revenues.

For the ~~nine~~six months ended ~~September~~June 30, ~~2018, same store used vehicle retail unit sales increased 2,702 units (5%).~~

~~We primarily attribute the 40 basis point decrease in~~2019, both total Company and same store used vehicle retail gross ~~margin to increased competition and price transparency within~~profit margins were consistent with the ~~used vehicle marketplace.~~prior comparable period.

Parts and Service—


	For the Nine Months Ended September 30,								Increase (Decrease)				% Change		For the Six Months Ended June 30,								Increase (Decrease)				% Change
	2018				2017				Increase (Decrease)				% Change		2019				2018				Increase (Decrease)				% Change
	(Dollars in millions)														(Dollars in millions)
As Reported:
Parts and service revenue	$	609.9			$	589.5			$	20.4			3	%	$	442.1			$	403.8			$	38.3			9	%
Parts and service gross profit:
Customer pay	217.8				203.8				14.0				7	%	157.1				144.8				12.3				8	%
Warranty	56.5				61.7				(5.2		)		(8	)%	43.9				37.3				6.6				18	%
Wholesale parts	16.8				15.7				1.1				7	%	11.8				11.3				0.5				4	%
Parts and service gross profit, excluding reconditioning and preparation	$	291.1			$	281.2			$	9.9			4	%	$	212.8			$	193.4			$	19.4			10	%
Parts and service gross margin, excluding reconditioning and preparation	47.7		%		47.7		%		—		%				48.1		%		47.9		%		0.2		%
Reconditioning and preparation	$	93.4			$	86.0			$	7.4			9	%
Reconditioning and preparation *															$	63.1			$	61.3			$	1.8			3	%
Total parts and service gross profit	$	384.5			$	367.2			$	17.3			5	%	$	275.9			$	254.7			$	21.2			8	%
Total parts and service gross margin	63.0		%		62.3		%		0.7		%

Same Store:
Parts and service revenue	$	598.2			$	589.0			$	9.2			2	%	$	427.8			$	398.3			$	29.5			7	%
Parts and service gross profit:
Customer pay	213.8				203.5				10.3				5	%	151.9				143.1				8.8				6	%
Warranty	55.6				61.7				(6.1		)		(10	)%	42.6				36.9				5.7				15	%
Wholesale parts	16.5				15.7				0.8				5	%	11.6				11.1				0.5				5	%
Parts and service gross profit, excluding reconditioning and preparation	$	285.9			$	280.9			$	5.0			2	%	$	206.1			$	191.1			$	15.0			8	%
Parts and service gross margin, excluding reconditioning and preparation	47.8		%		47.7		%		0.1		%				48.2		%		48.0		%		0.2		%
Reconditioning and preparation	$	91.0			$	85.7			$	5.3			6	%
Reconditioning and preparation *															$	60.5			$	60.0			$	0.5			1	%
Total parts and service gross profit	$	376.9			$	366.6			$	10.3			3	%	$	266.6			$	251.1			$	15.5			6	%
Total parts and service gross margin	63.0		%		62.2		%		0.8		%

* Reconditioning and preparation represents the gross profit earned by our parts and service departments for internal work performed is included as a reduction of Parts and Service Cost of Sales on the accompanying Condensed Consolidated Statements of Income upon the sale of the vehicle.

The ~~$20.4~~$38.3 million ~~(3%~~(9%) increase in parts and service revenue was primarily due to a ~~$20.8~~$22.5 million ~~(5%~~(8%) increase in customer pay revenue, $11.3 million (16%) increase in warranty revenue and a ~~$9.8~~$4.5 million ~~(12%~~(7%) increase in wholesale parts ~~revenue, partially offset by a $10.2 million (9%) decrease in warranty~~ revenue. Same store parts and service revenue increased by ~~$9.2~~$29.5 million ~~(2%~~(7%) from ~~$589.0~~$398.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 to ~~$598.2~~$427.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The increase in same store parts and service revenue was primarily due to a ~~$13.5~~$16.6 million ~~(3%~~(6%) increase in customer pay revenue, a $9.3 million (13%) increase in warranty and a ~~$7.7~~$3.6 million ~~(9%~~(6%) increase in wholesale parts ~~revenue, partially offset by a $12 million (10%) decrease in warranty~~ revenue.

Parts and service gross profit, excluding reconditioning and preparation, increased by ~~$9.9~~$19.4 million ~~(4%~~(10%) to ~~$291.1~~$212.8 million and same store gross profit, excluding reconditioning and preparation, increased by ~~$5.0~~$15.0 million ~~(2%~~(8%) to ~~$285.9~~$206.1 million. The increase in same store gross profit is primarily ~~due~~attributable to the increase in customer pay gross profit, which has continued to benefit from our strategic focus to improve customer ~~retention.~~retention, as well as additional warranty work.

Finance and Insurance, net—


	For the Nine Months Ended September 30,								Increase (Decrease)				% Change		For the Six Months Ended June 30,								Increase (Decrease)				% Change
	2018				2017				Increase (Decrease)				% Change		2019				2018				Increase (Decrease)				% Change
	(Dollars in millions, except for per vehicle data)														(Dollars in millions, except for per vehicle data)
As Reported:
Finance and insurance, net	$	215.0			$	202.5			$	12.5			6	%	$	151.7			$	141.7			$	10.0			7	%
Finance and insurance, net per vehicle sold	$	1,530			$	1,524			$	6			—	%	$	1,616			$	1,541			$	75			5	%

Same Store:
Finance and insurance, net	$	210.1			$	201.5			$	8.6			4	%	$	145.0			$	138.5			$	6.5			5	%
Finance and insurance, net per vehicle sold	$	1,544			$	1,525			$	19			1	%	$	1,624			$	1,534			$	90			6	%

F&I revenue, net ~~revenue~~ increased ~~$12.5~~$10.0 million ~~(6%~~(7%) during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 when compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, with same store F&I, net revenue increasing by ~~$8.6~~$6.5 million ~~(4%~~(5%) over the same period. We continued to benefit from a favorable consumer lending environment, which allowed ~~more of~~for our customers to take advantage of a ~~broader~~broad array of F&I products and our continued focus on improving the F&I results at our lower-performing ~~stores through our~~stores. In addition, during the six months ended June 30, 2019, the Company recognized additional retrospective commissions as a result of favorable payment trends, which contributed approximately $15 of F&I ~~training programs.~~income per retail vehicle sale.

Selling, General, and Administrative Expense—


	For the Nine Months Ended September 30,														Increase (Decrease)				% of Gross Profit Increase (Decrease)		For the Six Months Ended June 30,														Increase (Decrease)				% of Gross Profit Increase (Decrease)
	2018				% of Gross Profit			2017				% of Gross Profit			Increase (Decrease)				% of Gross Profit Increase (Decrease)		2019				% of Gross Profit			2018				% of Gross Profit			Increase (Decrease)				% of Gross Profit Increase (Decrease)
	(Dollars in millions)																				(Dollars in millions)
As Reported:
Personnel costs	$	270.1			32.9	%		$	261.1			33.2	%		$	9.0			(0.3	)%	$	187.1			32.6	%		$	179.3			33.0	%		$	7.8			(0.4	)%
Sales compensation	86.3				10.5	%		83.5				10.6	%		2.8				(0.1	)%	59.3				10.3	%		56.9				10.5	%		2.4				(0.2	)%
Share-based compensation	8.2				1.0	%		10.0				1.3	%		(1.8		)		(0.3	)%	6.8				1.2	%		5.7				1.0	%		1.1				0.2	%
Outside services	61.4				7.5	%		60.7				7.7	%		0.7				(0.2	)%	40.4				7.0	%		40.3				7.4	%		0.1				(0.4	)%
Advertising	23.5				2.9	%		22.7				2.9	%		0.8				—	%	17.8				3.1	%		16.0				2.9	%		1.8				0.2	%
Rent	19.0				2.3	%		20.2				2.6	%		(1.2		)		(0.3	)%	13.6				2.4	%		12.6				2.3	%		1.0				0.1	%
Utilities	12.3				1.5	%		11.8				1.5	%		0.5				—	%	8.0				1.4	%		8.0				1.5	%		—				(0.1	)%
Insurance	10.6				1.3	%		11.4				1.4	%		(0.8		)		(0.1	)%	7.6				1.3	%		8.2				1.5	%		(0.6		)		(0.2	)%
Other	72.2				8.7	%		67.8				8.5	%		4.4				0.2	%	51.1				8.9	%		47.8				8.9	%		3.3				—	%
Selling, general, and administrative expense	$	563.6			68.6	%		$	549.2			69.7	%		$	14.4			(1.1	)%	$	391.7			68.2	%		$	374.8			69.0	%		$	16.9			(0.8	)%
Gross profit	$	821.2						$	787.5												$	574.2						$	543.2

Same Store:
Personnel costs	$	263.8			32.8	%		$	259.8			33.1	%		$	4.0			(0.3	)%	$	179.7			32.6	%		$	176.5			33.0	%		$	3.2			(0.4	)%
Sales compensation	84.0				10.5	%		83.1				10.6	%		0.9				(0.1	)%	56.4				10.2	%		55.6				10.4	%		0.8				(0.2	)%
Share-based compensation	8.2				1.0	%		10.0				1.3	%		(1.8		)		(0.3	)%	6.8				1.2	%		5.7				1.1	%		1.1				0.1	%
Outside services	60.1				7.5	%		60.1				7.7	%		—				(0.2	)%	38.4				7.0	%		39.5				7.4	%		(1.1		)		(0.4	)%
Advertising	22.5				2.8	%		22.3				2.8	%		0.2				—	%	16.0				2.9	%		15.6				2.9	%		0.4				—	%
Rent	19.0				2.4	%		20.2				2.6	%		(1.2		)		(0.2	)%	13.5				2.5	%		12.6				2.4	%		0.9				0.1	%
Utilities	12.0				1.5	%		11.6				1.5	%		0.4				—	%	7.7				1.4	%		7.9				1.5	%		(0.2		)		(0.1	)%
Insurance	10.2				1.3	%		11.3				1.4	%		(1.1		)		(0.1	)%	7.0				1.3	%		8.0				1.5	%		(1.0		)		(0.2	)%
Other	$	70.9			8.8	%		$	67.7			8.5	%		3.2				0.3	%	$	49.3			8.9	%		$	46.7			8.7	%		2.6				0.2	%
Selling, general, and administrative expense	$	550.7			68.6	%		$	546.1			69.5	%		$	4.6			(0.9	)%	$	374.8			68.0	%		$	368.1			68.9	%		$	6.7			(0.9	)%
Gross profit	$	803.2						$	785.4												$	550.9						$	534.6

SG&A expense as a percentage of gross profit was ~~68.6%~~68.2% for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 compared to ~~69.7%~~69.0% for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Same store SG&A expense as a percentage of gross profit decreased 90 basis points from ~~69.5%~~68.9% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 to ~~68.6%~~68.0% for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The Company benefited from 40 basis point decreases in ~~rent expense~~both outside services and ~~share-based compensation expense~~personnel costs on both a total Company and ~~same store~~same-store basis ~~partially offset~~during the six months ended June 30, 2019 when compared to the six months ended June 30, 2018. In addition, insurance expense was higher for the six months ended June 30, 2018 primarily as a result of property damage caused by ~~increases in other expenses, including those associated with our omni-channel investments.~~weather related events.

Other Operating (Income) Expenses, net —

Other operating (income) expenses, net ~~which~~ includes gains and losses from the sale of property and equipment, ~~income derived from lease arrangements,~~ and other ~~non-core~~ operating items ~~was~~not considered core to our business. During the six months ended June 30, 2019, the Company recorded expense of $1.2 million, net, which included a $2.4 million pre-tax loss related to the write-off of fixed assets.

Included in the $1.1 million of other operating income, net for the ~~nine~~six months ended ~~September~~June 30, 2018 ~~compared to $0.7 million of expenses in the prior comparative period.~~

~~During the nine months ended September 30, 2018, we recognized~~, was a $0.7 million gain resulting from legal settlements and ~~$0.5~~$0.4 million of other non-core operating income.

During the nine months ended September 30, 2017, we recognized expenses associated with a lease termination of $2.9 million, partially offset by a $0.9 million gain recognized for legal settlements and $0.8 million of other income.

Floor Plan Interest Expense —

Floor plan interest expense increased by ~~$5.9~~$6.1 million ~~(35%~~(42%) to ~~$23.0~~$20.7 million during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 compared to ~~$17.1~~$14.6 million during the ~~nine~~six months ended ~~September~~June 30, ~~2017, primarily~~2018 as a result of an increase in ~~the~~ LIBOR ~~rate~~ from which our floor plan interest rate is calculated ~~coupled with~~and increased floor plan ~~borrowings.~~borrowings as a result of higher new vehicle inventory levels.

Income Tax Expense —

The ~~$15.0~~$3.1 million ~~(26%~~(11%) ~~decrease~~increase in income tax expense was primarily the result of a $15.6 million (14%) increase in income before income taxes, partially offset by a lower estimated annual effective rate and an excess tax ~~rate due~~benefit related to the ~~enactment~~vesting of ~~the Tax Act in December 2017.~~share-based awards. Our effective tax rate ~~was 25.2%~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was 24.7% compared to ~~37.6% for~~25.4% in the ~~nine months ended September 30, 2017.~~prior comparative period. For 2019, we expect our effective tax rate to be between 25% and 26%.

LIQUIDITY AND CAPITAL RESOURCES

As of ~~September~~June 30, ~~2018~~2019, we had total available liquidity of $~~394.1~~448.0 million, which consisted of ~~$6.8~~$9.6 million of cash and cash equivalents, $~~42.9~~87.4 million of available funds in our floor plan offset accounts, ~~$190.0~~$187.5 million of availability under our new vehicle floor plan facility that is able to be re-designated to our revolving credit facility, ~~$47.0~~$47.3 million of availability under our revolving credit facility, and ~~$107.4~~$116.2 million of availability under our used vehicle revolving floor plan facility. The borrowing capacities under our revolving credit facility and our used vehicle revolving floor plan facility are limited by borrowing base calculations and, from time to time, may be further limited by our required compliance with ~~certain financial~~customary operating and other restrictive covenants. As of ~~September~~June 30, ~~2018~~2019, these ~~financial~~ covenants did not further limit our availability under our credit facilities. For more information on our ~~financial~~ covenants, see "Covenants" and "Share Repurchases and Dividend Restrictions" below.

We continually evaluate our liquidity and capital resources based upon (i) our cash and cash equivalents on hand, (ii) the funds that we expect to generate through future operations, (iii) current and expected borrowing availability under our 2016 Senior Credit Facility, our other floor plan facilities, our Real Estate Credit Agreement, our Restated Master Loan Agreement, and our mortgage financings (each, as defined below), (iv) amounts in our new vehicle floor plan notes payable offset accounts, and (v) the potential impact of our capital allocation strategy and any contemplated or pending future transactions, including, but not limited to, financings, acquisitions, dispositions, equity and/or debt repurchases, dividends, or other capital expenditures. We believe we will have sufficient liquidity to meet our debt service and working capital requirements; commitments and contingencies; debt repayment, maturity and repurchase obligations; acquisitions; capital expenditures; and any operating requirements for at least the next twelve months.

We currently are party to the following material credit facilities and agreements, and have the following material indebtedness outstanding. For a more detailed description of the material terms of these agreements and facilities, and this indebtedness, please refer to Note 813 "Long-Term Debt" and our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018.

~~2016 Senior Credit Facility~~ —On July 25, 2016, the Company and certain of its subsidiaries entered into an amended and restated senior secured credit agreement with Bank of America, as administrative agent, and the other lenders party thereto.


•	2016 Senior Credit Facility —On July 25, 2016, the Company and certain of its subsidiaries entered into an amended and restated senior secured credit agreement with Bank of America, as administrative agent, and the other lenders party thereto.

The 2016 Senior Credit Facility provides for the following:

Revolving Credit Facility—A $250.0 million revolving credit facility (the "Revolving Credit Facility") for, among other things, acquisitions, working capital and capital expenditures, including a $50.0 million sub-limit for letters of credit. As described below, as of ~~September~~June 30, ~~2018,~~2019, we re-designated $190.0 million of availability from the Revolving Credit Facility to the New Vehicle Floor Plan Facility (as defined below), resulting in $60.0 million of borrowing capacity. In addition, we had ~~$13.0~~$12.7 million in outstanding letters of credit as of ~~September~~June 30, ~~2018,~~2019, resulting in ~~$47.0~~$47.3 million of borrowing availability as of ~~September~~June 30, ~~2018.~~2019.

New Vehicle Floor Plan Facility— A $900.0 million new vehicle revolving floor plan facility (the "New Vehicle Floor Plan Facility"). In connection with the New Vehicle Floor Plan Facility, we established an account with Bank of America that allows us to transfer cash as an offset to floor plan notes payable. These transfers reduce the amount of outstanding new vehicle floor plan notes payable that would otherwise accrue interest, while retaining the ability to transfer amounts from the offset account into our operating cash accounts within one to two days. As a result of the use of our floor plan offset account, we experience a reduction in

Floor Plan Interest Expense on our Condensed Consolidated Statements of Income. As of ~~September~~June 30, ~~2018,~~ 2019,

we had ~~$728.9~~$794.9 million, which is net of ~~$31.5~~$74.2 million in our floor plan offset account, outstanding under the

New Vehicle Floor Plan Facility.

Used Vehicle Floor Plan Facility—A $150.0 million used vehicle revolving floor plan facility (the "Used Vehicle Floor Plan Facility") to finance the acquisition of used vehicle inventory and for, among other things, working capital and capital expenditures, as well as to refinance used vehicles. Our borrowing capacity under the Used Vehicle Floor Plan Facility was limited to ~~$107.4~~$116.2 million based on our borrowing base calculation as of ~~September~~June 30, ~~2018. There were no outstanding borrowings at~~2019. We began the ~~beginning of the year.~~year with $30.0 drawn on our used vehicle floor plan facility. During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, we had borrowings of ~~$210.0~~$40.0 million and repayments of ~~$210.0~~$70.0 million, resulting in no outstanding borrowings on our Used Vehicle Floor Plan Facility as of ~~September~~June 30, ~~2018.~~2019.

Subject to compliance with certain conditions, the agreement governing the 2016 Senior Credit Facility provides that we have the ability, at our option and subject to the receipt of additional commitments from existing or new lenders, to increase the size of the facilities by up to $325.0 million in the aggregate without lender consent.

At our option, we have the ability to re-designate a portion of our availability under the Revolving Credit Facility to the New Vehicle Floor Plan Facility or the Used Vehicle Floor Plan Facility. The maximum amount we are allowed to re-designate is determined based on our current borrowing availability under the Revolving Credit Facility, less $50.0 million. In addition, we are able to re-designate any amounts moved to the New Vehicle Floor Plan Facility or the Used Vehicle Floor Plan Facility back to the Revolving Credit Facility. As of ~~September~~June 30, ~~2018,~~2019, $190.0 million of availability under the Revolving Credit Facility was re-designated to the New Vehicle Floor Plan Facility. We re-designated this amount to take advantage of the lower commitment fee rates on the New Vehicle Floor Plan Facility when compared to the Revolving Credit Facility.

Borrowings under the 2016 Senior Credit Facility bear interest, at our option, based on LIBOR or the Base Rate, in each case plus an Applicable Margin. The Base Rate is the highest of the (i) Bank of America prime rate, (ii) Federal Funds rate plus 0.50%, and (iii) one month LIBOR plus 1.00%. The Applicable Margin, for borrowings under the Revolving Credit Facility, ranges from 1.25% to 2.50% for LIBOR loans and 0.25% to 1.50% for Base Rate loans, in each case based on the Company's total lease adjusted leverage ratio. Borrowings under the New Vehicle Floor Plan Facility bear interest, at the option of the Company, based on LIBOR plus 1.25% or the Base Rate plus 0.25%. Borrowings under the Used Vehicle Floor Plan Facility bear interest, at the option of the Company, based on LIBOR plus 1.50% or the Base Rate plus 0.50%.

In addition to the payment of interest on borrowings outstanding under the 2016 Senior Credit Facility, we are required to pay a quarterly commitment fee on the total commitments thereunder. The fee for commitments under the Revolving Credit Facility is between 0.20% and 0.45% per year, based on the Company's total lease adjusted leverage ratio, and the fee for commitments under the New Vehicle Facility Floor Plan and the Used Vehicle Facility Floor Plan Facility is 0.15% per year.

~~Manufacturer affiliated new vehicle floor plan and other financing facilities~~ — we have a floor plan facility with the Ford Motor Credit Company ("Ford Credit") to purchase new Ford and Lincoln vehicle inventory, which matures on December 5, 2019. We also have established a floor plan offset account with Ford Credit, which operates in a similar manner to our floor plan offset account with Bank of America. As of September 30, 2018, we had $102.2 million, net of $11.4 million in our floor plan offset account, outstanding under our floor plan facility. Additionally, we

•

Manufacturer affiliated new vehicle floor plan and other financing facilities — we have a floor plan facility with the Ford Motor Credit Company ("Ford Credit") to purchase new Ford and Lincoln vehicle inventory, which matures on December 5, 2019. We also have established a floor plan offset account with Ford Credit, which operates in a similar manner to our floor plan offset account with Bank of America. As of June 30, 2019, we had $123.8 million, net of $13.2 million in our floor plan offset account, outstanding under our floor plan facility. Additionally, we had $88.4 million outstanding under facilities with certain manufacturers for the financing of loaner vehicles, which were

~~had $86.7 million outstanding under facilities with certain manufacturers for the financing of loaner vehicles, which were~~ presented within Accounts Payable and Accrued Liabilities in our Condensed Consolidated Balance Sheets. Neither our floor plan facility with Ford Credit nor our facilities for loaner vehicles have stated borrowing limitations.

~~6.0% Senior Subordinated Notes due 2024~~ — as of September 30, 2018 we had $600.0 million in aggregate principal amount outstanding related to our 6.0% Notes. We are required to pay interest on the 6.0% Notes on June 15 and December 15 of each year until maturity on December 15, 2024.

~~Mortgage notes~~ — ~~as of September 30, 2018, we had $134.6 million of mortgage note obligations. These obligations are collateralized by the associated real estate at our dealership locations.~~

~~Restated Master Loan Agreement~~ — provides for term loans to certain of our subsidiaries (the "Restated Master Loan Agreement"). Borrowings under the Restated Master Loan Agreement are guaranteed by us and are collateralized by the real property financed under the Restated Master Loan Agreement. As of September 30, 2018, the outstanding balance under the Restated Master Loan Agreement was $84.6 million. There is no further borrowing availability under this agreement.

~~Real Estate Credit Agreement~~ — a real estate term loan credit agreement with borrowings collateralized by first priority liens, subject to certain permitted exceptions, on all of the real property financed thereunder (the "Real Estate Credit Agreement"). As of September 30, 2018, we had $46.2


•	6.0% Senior Subordinated Notes due 2024 — as of June 30, 2019 we had $600.0 million in aggregate principal amount outstanding related to our 6.0% Notes. We are required to pay interest on the 6.0% Notes on June 15 and December 15 of each year until maturity on December 15, 2024.


•	Mortgage notes — as of June 30, 2019, we had $128.9 million of mortgage note obligations. These obligations are collateralized by the associated real estate at our dealership locations.

•

Restated Master Loan Agreement — provides for term loans to certain of our subsidiaries (the "Restated Master Loan Agreement"). Borrowings under the Restated Master Loan Agreement are guaranteed by us and are collateralized by the real property financed under the Restated Master Loan Agreement. As of June 30, 2019, the outstanding balance under the Restated Master Loan Agreement was $80.7 million. There is no further borrowing availability under this agreement.

•

Prior Real Estate Credit Agreement — a real estate term loan credit agreement with borrowings collateralized by first priority liens, subject to certain permitted exceptions, on all of the real property financed thereunder (the "Prior Real Estate Credit Agreement"). As of June 30, 2019, we had $36.8 million of mortgage note obligations outstanding under the Prior Real Estate Credit Agreement. There is no further borrowing availability under this agreement.

•

2018 Bank of America Facility —On November 13, 2018, the Company and certain of its subsidiaries entered into a real estate term loan credit agreement (the “Bank of America Credit Agreement") with Bank of America N.A., which provides for term loans in an aggregate amount not to exceed $128.1 million (the "Bank of America Facility"). On November 13, 2018, we borrowed an aggregate amount of $25.0 million under the Bank of America Credit Agreement, a portion of which was used to refinance certain of the Company’s other outstanding mortgage indebtedness. All of the real property financed by an operating dealership subsidiary of the Company under the Bank of America Facility is collateralized by first priority liens, subject to certain permitted exceptions. As of June 30, 2019, we had $25.0 million of outstanding borrowings under the 2018 Bank of America Facility.

Effective May 1, 2019, the Company and certain of its subsidiaries entered into the 2019 Amendments, which reduced the applicable interest rates for the 2018 Bank of America Facility and the Prior Real Estate Credit Agreement. ~~There is no further borrowing availability under this agreement.~~

•

2018 Wells Fargo Master Loan Facility—On November 16, 2018, certain subsidiaries of the Company entered into a master loan agreement (the “Wells Fargo Master Loan Agreement”) with Wells Fargo Bank, National Association, as lender which provides for term loans to certain of the Company’s subsidiaries that are borrowers under the Wells Fargo Master Loan Agreement in an aggregate amount not to exceed $100.0 million (the "Wells Fargo Master Loan Facility"). On November 16, 2018, we borrowed an aggregate amount of $25.0 million under the Wells Fargo Master Loan Facility, the proceeds of which were used for general corporate purposes. Borrowings under the Wells Fargo Master Loan Facility are guaranteed by the Company pursuant to a unconditional guaranty, and all of the real property financed by any operating dealership subsidiary of the Company under the Wells Fargo Master Loan Facility is collateralized by first priority liens, subject to certain permitted exceptions. As of June 30, 2019, we had $25.0 million outstanding borrowings under the Wells Fargo Master Loan Facility.

Covenants

We are subject to a number of customary operating and other restrictive covenants in our various debt and lease agreements. We were in compliance with all of our covenants as of ~~September~~June 30, ~~2018.~~2019.

Share Repurchases and Dividend Restrictions

Our ability to repurchase shares or pay dividends on our common stock is subject to our compliance with the covenants and restrictions in our various debt and lease agreements. Our 2016 Senior Credit Facility and our indenture governing our 6.0% Notes permit us to make an unlimited amount of restricted payments, such as share repurchases or dividends, so long as our Consolidated Total Leverage Ratio, as defined in those agreements, does not exceed 3.0 to 1.0 on a pro forma basis after giving effect to any proposed payments. As of ~~September~~June 30, ~~2018,~~2019, our Consolidated Total Leverage Ratio did not exceed 3.0 to 1.0.

On January 30, 2014, our Board of Directors authorized our current share repurchase program (the "Repurchase Program"). On October 19, 2018, our Board of Directors reset the authorization under our Repurchase Program to $100.0 million in the aggregate, for the repurchase of our common stock in open market transactions or privately negotiated transactions from time to time.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, we repurchased ~~239,768~~50,436 and ~~824,058~~159,414 shares, respectively, of our common stock under the Repurchase Program for a total of ~~$16.9~~$3.9 million and ~~$57.1~~$11.4 million, respectively. As of ~~September~~June 30, ~~2018,~~2019, we had remaining authorization to repurchase ~~$42.8~~$70.2 million in shares of our common stock under the Repurchase Program.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, we also repurchased ~~2,087~~3,328 and ~~71,018~~70,240 shares, respectively, of our common stock for ~~$0.1~~$0.2 million and ~~$4.7~~$5.0 million, respectively, from employees in connection with a net share settlement feature of employee equity-based awards.

Cash Flows

Classification of Cash Flows Associated with Floor Plan Notes Payable

Borrowings and repayments of floor plan notes payable to a lender unaffiliated with the manufacturer from which we purchase a particular new vehicle ("Non-Trade"), and all floor plan notes payable relating to used vehicles (together referred to as "Floor Plan Notes Payable—Non-Trade"), are classified as financing activities on the accompanying Condensed Consolidated Statements of Cash Flows, with borrowings reflected separately from repayments. The net change in floor plan notes payable to a lender affiliated with the manufacturer from which we purchase a particular new vehicle (collectively referred to as "Floor Plan Notes Payable—Trade") is classified as an operating activity on the accompanying Condensed Consolidated Statements of Cash Flows. Borrowings of floor plan notes payable associated with inventory acquired in connection with all acquisitions and repayments made in connection with all divestitures are classified as a financing activity in the accompanying Condensed Consolidated Statements of Cash Flows. Cash flows related to floor plan notes payable included

in operating activities differ from cash flows related to floor plan notes payable included in financing activities only to the extent that the former are payable to a lender affiliated with the manufacturer from which we purchased the related inventory, while the latter are payable to a lender not affiliated with the manufacturer from which we purchased the related inventory. The majority of our floor plan notes are payable to parties unaffiliated with the entities from which we purchase our new vehicle inventory, with the exception of floor plan notes payable relating to the financing of new Ford and Lincoln vehicles.

Floor plan borrowings are required by all vehicle manufacturers for the purchase of new vehicles, and all floor plan lenders require amounts borrowed for the purchase of a vehicle to be repaid within a short time period after the related vehicle is sold. As a result, we believe that it is important to understand the relationship between the cash flows of all of our floor plan notes payable and new vehicle inventory in order to understand our working capital and operating cash flow and to be able to compare our operating cash flow to that of our competitors (i.e., if our competitors have a different mix of trade and non-trade floor plan financing as compared to us). In addition, we include all floor plan borrowings and repayments in our internal operating cash flow forecasts. As a result, we use the non-GAAP measure "cash provided by operating activities, as adjusted" (defined below) to compare our results to forecasts. We believe that splitting the cash flows of floor plan notes payable between operating activities and financing activities, while all new vehicle inventory activity is included in operating activities, results in significantly different operating cash flow than if all the cash flows of floor plan notes payable were classified together in operating activities.

Cash provided by operating activities, as adjusted, includes borrowings and repayments of floor plan notes payable to lenders not affiliated with the manufacturer from which we purchase the related new vehicles. Cash provided by operating activities, as adjusted, has material limitations, and therefore, may not be comparable to similarly titled measures of other companies and should not be considered in isolation, or as a substitute for analysis of our operating results in accordance with GAAP. In order to compensate for these potential limitations we also review the related GAAP measures.

We have provided below a reconciliation of cash flow from operating activities, as if all changes in floor plan notes payable, except for (i) borrowings associated with acquisitions and repayments associated with divestitures and (ii) borrowings and repayments associated with the purchase of used vehicle inventory, were classified as an operating activity.


	For the Nine Months Ended September 30,							For the Six Months Ended June 30,
	2018				2017			2019				2018
	(In millions)							(In millions)
Reconciliation of Cash provided by operating activities to Cash provided by operating activities, as adjusted
Cash provided by operating activities, as reported	$	106.4			$	243.2		$	160.5			$	29.1
New vehicle floor plan borrowings (repayments)—non-trade, net	78.3				(120.0		)
New vehicle floor plan borrowings —non-trade, net								(75.1		)		92.0
Cash provided by operating activities, as adjusted	$	184.7			$	123.2		$	85.4			$	121.1

Operating Activities—

Net cash provided by operating activities totaled ~~$106.4~~$160.5 million and ~~$243.2~~$29.1 million, for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Net cash provided by operating activities, as adjusted, totaled ~~$184.7~~$85.4 million and ~~$123.2~~$121.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

The ~~$61.5~~$35.7 million ~~increase~~decrease in our net cash provided by operating activities, as adjusted, for the ~~nine~~six months ended ~~September~~June 30, ~~2018 as~~2019 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was primarily the result of the following:

•$65.6 million decrease in inventory, net of floor plan borrowings;

~~$31.8~~• $7.6 million ~~increase~~decrease related to the ~~change in floor plan notes payable, net~~timing of ~~inventory;~~collection of accounts receivable and contracts-in-transit; and

~~$30.4~~• $2.3 million ~~related to an increase in non-cash adjustments to net income;~~

~~$8.7 million increase related to the change in accounts payable and accrued liabilities; and~~

~~$1.3 million increase~~decrease related to the change in other current assets and ~~non-current~~other long-term assets and liabilities, net.

The ~~increase~~decrease in our cash provided by operating activities, as adjusted, was partially offset ~~by a $10.7~~by:

$24.6 million ~~decrease~~increase related to the ~~timing of collection of~~change in accounts ~~receivable~~payable and ~~contracts-in-transit during 2018 compared~~other current liabilities; and

$14.0 million increase related to ~~2017.~~

non-cash adjustments to net income.

Investing ~~Activities—~~Activities��

Net cash used in investing activities totaled ~~$132.8~~$92.3 million and ~~$98.0~~$119.1 million, for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Capital expenditures, excluding the purchase of real estate, were ~~$21.5~~$15.5 million and ~~$21.4~~$12.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. We expect that capital expenditures for ~~2018~~2019 will total approximately ~~$50.0~~$45.0 million to upgrade or replace our existing facilities, construct new facilities, expand our service capacity, and invest in technology and equipment.

During the ~~nine~~six months ended ~~September~~June 30, 2019, we acquired the assets of eight franchises (four dealership locations) in the Indianapolis, Indiana market for a purchase price of $121.0 million. Consideration paid (or payable) to fund these acquisitions included $70.8 million of cash, $47.7 million of floor plan borrowings for the purchase of the related new vehicle inventory, and purchase price holdbacks of $2.5 million for potential indemnity claims made by us with respect to the acquired franchises.

During the six months ended June 30, 2018, we acquired three franchises (three dealership locations) for an aggregate purchase price of $93.2 million which included purchase price holdbacks of $1.9 million for potential indemnity claims made by us with respect to the acquired franchises.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, we ~~acquired two franchises (two~~divested one franchise (one dealership ~~locations)~~location) and one collision center in the Houston, Texas market for ~~an aggregate purchase price~~proceeds of ~~$80.1~~$39.1 million. In connection with the divestiture we repaid $2.7 million of outstanding mortgage debt.

During the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, we received cash proceeds of ~~$2.0~~$7.5 million and ~~$3.8~~$2.0 million, respectively, from the sale of ~~property~~vacant properties previously included in Assets Held for Sale.

During the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, purchases of real estate, including previously leased real estate, totaled ~~$17.6~~$4.9 million and ~~$0.3~~$17.6 million, respectively.

As part of our capital allocation strategy, we continually evaluate opportunities to purchase properties currently under lease and acquire properties in connection with future dealership relocations. No assurances can be provided that we will have or be able to access capital at times or on terms in amounts deemed necessary to execute this strategy.

Financing Activities—

Net cash used in financing activities totaled $66.9 million for the six months ended June 30, 2019. Net cash provided by financing activities totaled ~~$28.5~~$87.8 million for the ~~nine~~six months ended ~~September~~June 30, 2018. ~~Net cash used in financing activities totaled $145.8 million for the nine months ended September 30, 2017.~~

During the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, we had non-trade floor plan borrowings, excluding floor plan borrowings associated with acquisitions, of ~~$3.3~~$2.04 billion and ~~$2.8~~$2.24 billion, respectively, and non-trade floor plan repayments, excluding floor plan repayments associated with our divestiture, of ~~$3.2~~$2.12 billion and ~~$2.9~~$2.12 billion, respectively.

~~In addition, during~~During the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, we had floor plan borrowings of $47.7 million and ~~2017,~~$22.7 million, respectively, related to acquisitions.

During the six months ended June 30, 2019, we had non-trade floor plan ~~borrowings~~repayments associated with a divestiture of ~~$22.7 million and $25.1 million, respectively, related to acquisitions.~~$14.1 million.

Repayments of borrowings totaled ~~$10.7~~$7.9 million and ~~$11.5~~$7.1 million, for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, we repurchased a total of ~~824,058~~159,414 shares of our common stock under our Repurchase Program for a total of ~~$57.1~~$11.4 million and ~~71,018~~70,240 shares of our common stock for ~~$4.7~~$5.0 million from employees in connection with a net share settlement feature of employee equity-based awards.

Off Balance Sheet Arrangements

We had no off balance sheet arrangements during any of the periods presented other than those disclosed in Note 1112 "Commitments and Contingencies" ofwithin the ~~Notes hereto.~~accompanying Condensed Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We are exposed to risk from changes in interest rates on a significant portion of our outstanding indebtedness. Based on ~~$818.1~~$949.1 million of total variable interest rate debt, which includes our floor plan notes payable and certain mortgage liabilities, outstanding as of ~~September~~June 30, ~~2018~~,2019, a 100 basis point change in interest rates could result in a change of as much as ~~$8.2~~$9.5 million to our total annual interest expense in our Consolidated Statements of Income.

We periodically receive floor plan assistance from certain automobile manufacturers, which is accounted for as a reduction in our new vehicle inventory cost. Floor plan assistance reduced our cost of sales for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 ~~and 2017~~ by ~~$28.4~~$20.0 million and ~~$26.6~~$18.3 million, respectively. We cannot provide assurance as to the future amount of floor plan assistance and these amounts may be negatively impacted due to future changes in interest rates.

As part of our strategy to mitigate our exposure to fluctuations in interest rates, we have various interest rate swap agreements. All of our interest rate swaps qualify for cash flow hedge accounting treatment and do not contain any ineffectiveness.

In June 2015, we entered into an interest rate swap agreement with a notional principal amount of $100.0 million. This swap was designed to provide a hedge against changes in variable rate cash flows regarding fluctuations in the one month LIBOR, ~~rate,~~ through maturity in February 2025. The notional value of this swap was ~~$86.4~~$82.5 million as of ~~September~~June 30, ~~2018~~2019 and is reducing over its remaining term to $53.1 million at maturity.

In November 2013, we entered into an interest rate swap agreement with a notional principal amount of $75.0 million. This swap was designed to provide a hedge against changes in variable rate cash flows regarding fluctuations in the one month LIBOR, ~~rate,~~ through maturity in September 2023. The notional values of this swap as of ~~September~~June 30, ~~2018~~2019 was ~~$57.4~~$54.6 million and will reduce over its remaining term to $38.7 million at maturity.

For additional information about the effect of our derivative instruments, onplease refer to Note 10 within the accompanying Condensed Consolidated Financial ~~Statements, see Note 9 "Financial Instruments and Fair Value".~~Statements.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"). Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of such period such disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is (i) recorded, processed, summarized, and reported within the time period specified in the rules and forms of the U.S. Securities and Exchange Commission, and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding disclosure. Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives. Management, including the principal executive officer and the principal financial officer, does not expect that our disclosure controls and procedures can prevent all possible errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that objectives of the control system are met. There are inherent limitations in all control systems, including the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the intentional acts of one or more persons. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and while our disclosure controls and procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control system, misstatements due to possible errors or fraud may occur and not be detected.

Changes in Internal Control Over Financial Reporting

~~There~~The adoption of ASC 842 effective January 1, 2019, required the implementation of new accounting processes and a new information technology application to calculate right-of-use assets and lease liabilities which changed our internal controls over lease accounting and financial reporting. Otherwise, there were no changes in our internal control over financial reporting

during the quarter ended ~~September~~June 30, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we and our dealerships may become involved in various claims relating to, and arising out of our business and our operations. These claims may involve, but are not limited to, financial and other audits by vehicle manufacturers or lenders, and certain federal, state, and local government authorities, which relate primarily to (i) incentive and warranty payments received from vehicle manufacturers, or allegations of violations of manufacturer agreements or policies, (ii) compliance with lender rules and covenants and (iii) payments made to government authorities relating to federal, state, and local taxes, as well as compliance with other government regulations. Claims may also arise through litigation, government proceedings, and other dispute resolution processes. Such claims, including class actions, can relate to, but are not limited to, the practice of charging administrative fees, employment-related matters, truth-in-lending practices, contractual disputes, actions brought by governmental authorities, and other matters. We evaluate pending and threatened claims and establish loss contingency reserves based upon outcomes we currently believe to be probable and reasonably estimable.

We currently do not anticipate that any known claim will materially adversely affect our financial condition, liquidity or results of operations. However, the outcome of any matter cannot be predicted with certainty, and an unfavorable resolution of one or more matters presently known or arising in the future could have a material adverse effect on our financial condition, liquidity or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information regarding common stock repurchases by the Company on a monthly basis during the three month period ended ~~September~~June 30, ~~2018:~~2019:

Period Total Number of Shares Purchased(1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Program (in millions)(1)
07/01/2018 - 07/31/2018 77,155
$ 68.28
75,489
$ 54.6
08/01/2018 - 08/31/2018 15,406
$ 70.35
15,406
$ 53.5
09/01/2018 - 09/30/2018 149,294
$ 71.87
148,873
$ 42.8
Total 241,855
239,768



Period		Total Number of Shares Purchased(1)			Average Price Paid per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs			Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Program (in millions)(1)
04/01/2019 - 04/30/2019		3,057			$	—			—			$	74.1
05/01/2019 - 05/31/2019		28,103			$	78.72			28,103			$	71.9
06/01/2019 - 06/30/2019		22,604			$	77.60			22,333			$	70.2
Total		53,764							50,436

(1) On January 30, 2014, our Board of Directors authorized our Repurchase Program. On October 19, 2018, our Board of Directors reset the authorization under our Repurchase Program to $100.0 million in the aggregate, for the repurchase of shares of our common stock in open market transactions or privately negotiated transactions. Any repurchases will be subject to applicable limitations in our debt or other financing agreements that may be in existence from time to time. During the three months ended ~~September~~June 30, ~~2018,~~2019, we repurchased ~~239,768~~50,436 shares of our common stock under the Repurchase Program for a total of ~~$16.9~~$3.9 million and ~~2,087~~3,328 shares of our common stock for ~~$0.1~~$0.2 million from employees in connection with a net share settlement feature of employee equity-based awards. As of ~~September~~June 30, ~~2018,~~2019, we had remaining authorization to repurchase ~~$42.8~~$70.2 million in shares of our common stock under the Repurchase Program.

Item 4. Mine Safety Disclosures

Not applicable.

Item 6. Exhibits



Exhibit Number		Description of Documents
10.1		First Amendment to Credit Agreement, dated as of June 7, 2019, effective May 1, 2019, among Asbury Automotive Group, Inc., certain subsidiaries of Asbury Automotive Group, Inc. and Bank of America, N.A.
10.2		Second Amendment to Credit Agreement, dated June 7, 2019, effective May 1, 2019, among Asbury Automotive Group, Inc., certain subsidiaries of Asbury Automotive Group, Inc. and Bank of America, N.A.
31.1		Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		Asbury Automotive Group, Inc.

Date:	~~October 24, 2018~~July 31, 2019	By:		/s/ David W. Hult
		Name:		David W. Hult
		Title:		Chief Executive Officer and President



		Asbury Automotive Group, Inc.

Date:	~~October 24, 2018~~July 31, 2019	By:		/s/ Sean D. Goodman
		Name:		Sean D. Goodman
		Title:		Senior Vice President and Chief Financial Officer

INDEX TO EXHIBITS



Exhibit Number		Description of Documents
10.1		First Amendment to Credit Agreement, dated as of June 7, 2019, effective May 1, 2019, among Asbury Automotive Group, Inc., certain subsidiaries of Asbury Automotive Group, Inc. and Bank of America, N.A.
10.2		Second Amendment to Credit Agreement, dated June 7, 2019, effective May 1, 2019, among Asbury Automotive Group, Inc., certain subsidiaries of Asbury Automotive Group, Inc. and Bank of America, N.A.
31.1		Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

4853