The following discussion should be read in conjunction with Part I, including matters set forth in the "Risk Factors" section of this Form 10-K, and our Consolidated Financial Statements and notes thereto included in Part II, Item 8 of this Form 10-K. This section of this Form 10-K includes discussion of year-to-year comparisons between 2022 and 2021. Discussion of year-to-year comparisons between 2021 and 2020 can be found in "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 . Except to the extent that differences among reportable segments are material to an understanding of our business taken as a whole, we present the discussion in Management's Discussion and Analysis of Financial Condition and Results of Operations on a consolidated basis.
Overview
AutoNation, Inc. , through its subsidiaries, is one of the largest automotive retailers inthe United States . As ofDecember 31, 2022 , we owned and operated 343 new vehicle franchises from 247 stores located inthe United States , predominantly in major metropolitan markets in the Sunbelt region. Our stores, which we believe include some of the most recognizable and well known in our key markets, sell 33 different new vehicle brands. The core brands of new vehicles that we sell, representing approximately 89{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} of the new vehicles that we sold in 2022, are manufactured by Toyota (including Lexus), Honda, BMW, Ford, Mercedes-Benz, General Motors, Stellantis, andVolkswagen (including Audi and Porsche). As ofDecember 31, 2022 , we also owned and operated 55 AutoNation-branded collision centers, 13AutoNation USA used vehicle stores, 4 AutoNation-branded automotive auction operations, 3 parts distribution centers, and an auto finance company. We offer a diversified range of automotive products and services, including new vehicles, used vehicles, "parts and service" (also referred to as "After-Sales"), which includes automotive repair and maintenance services as well as wholesale parts and collision businesses, and automotive "finance and insurance" products (also referred to as "Customer Financial Services "), which include vehicle service and other protection products, as well as the arranging of financing for vehicle purchases through third-party finance sources. We also offer indirect financing on certain vehicles we sell, as well as on installment contracts acquired by our captive finance company through third-party independent dealers. As ofDecember 31, 2022 , we had three reportable segments: Domestic, Import, and Premium Luxury. Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by General Motors, Ford, and Stellantis. Our Import segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda, Hyundai, Subaru, and Nissan. Our Premium Luxury segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Mercedes-Benz, BMW, Audi, Lexus, and Jaguar Land Rover. The franchises in each segment also sell used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products. For the year endedDecember 31, 2022 , new vehicle sales accounted for 44{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} of our total revenue and 26{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} of our total gross profit. Used vehicle sales accounted for 36{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} of our total revenue and 11{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} of our total gross profit. Our parts and service operations, while comprising 15{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} of our total revenue, contributed 36{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} of our total gross profit. Our finance and insurance sales, while comprising 5{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} of our total revenue, contributed 27{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} of our total gross profit.
Market Conditions
Full-yearU.S. industry new vehicle unit sales were 13.9 million in 2022, as compared to 15.1 million in 2021, and 14.6 million in 2020. There continues to be a shortage of available new vehicles for sale as compared to historical inventory levels driven largely by disruptions in the manufacturers' supply chains. Although new vehicle inventory levels for certain manufacturers improved slightly during the second half of 2022, the demand for vehicles generally continued to exceed supply throughout the year. This demand and supply imbalance continues to result in higher levels of profitability for available new vehicles. The reduced levels of total new vehicle availability is currently expected to continue into 2023; however, there is still significant uncertainty as to the extent to which new vehicle availability will improve, as well as duration and/or degree of the higher levels of profitability being realized during this time. In addition, the decline in new vehicle unit volume could adversely impact the availability of nearly new vehicle inventory, which could have an adverse 28
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impact on our used vehicle sales volume. Additionally, worsening economic
conditions could adversely impact consumer demand for vehicles.
Results of Operations
We had net income of$1.4 billion and diluted earnings per share of$24.29 in 2022, as compared to net income of$1.4 billion and diluted earnings per share of$18.31 in 2021. Our total gross profit increased 6{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} during 2022, driven by increases in new vehicle gross profit of 14{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}, parts and service gross profit of 14{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}, and finance and insurance gross profit of 4{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}, each as compared to 2021. New vehicle gross profit benefited from an increase in gross profit per vehicle retailed ("PVR") resulting from strong demand and historically low new vehicle inventory levels. Parts and service results benefited primarily from increases in gross profit from customer-pay service and the preparation of vehicles for sale. Finance and insurance gross profit benefited from higher realized margins on vehicle protection products and an increase in product penetration. The increases in gross profit were partially offset by a decrease in used vehicle gross profit of 20{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} due to margin pressure as a result of a decline in used vehicle values from historically high levels and a decrease in used vehicle unit volume.
SG&A expenses increased largely due to newly acquired and opened stores and
expenditures associated with investments in technology and strategic
initiatives. Other interest expense increased due to higher average debt
balances. Floorplan interest expense increased due to higher average interest
rates.
Net income during 2022 was adversely impacted by the recognition of an initial credit loss expense of$25.8 million (after-tax) associated with the auto loans receivable acquired as part of our acquisition of CIG Financial. During 2022 and 2021, net income benefited from after-tax gains related to business/property divestitures, net of asset impairments, of$11.1 million and$10.9 million , respectively. Net income during 2021 also benefited from after-tax gains of$8.3 million related to sales of a minority equity investment as well as changes in the fair value of other minority equity investments held as of the end of the year. Strategic Initiatives
To better service the personal transportation needs of our customers, we
continue to expand our footprint through dealership acquisitions and the
expansion of our
strategic partnerships and initiatives to expand the scope and scale of our
business, broaden our product offerings, expand our reach to customers, and
continue to provide a peerless customer experience.
OnOctober 1, 2022 , we closed on the acquisition of CIG Financial, an auto finance company headquartered inIrvine, California , for$83 million and the repayment of certain obligations totaling$21 million . The acquisition of CIG Financial aligns with our strategic business model and will further extend our relationship with our customers beyond the buying experience and throughout the vehicle ownership life cycle. OnNovember 4, 2022 , we acquired a minority ownership stake in TrueCar, Inc., a leading automotive digital marketplace that lets auto buyers and sellers connect to its nationwide network of certified dealers. Our investment in TrueCar signals our continued commitment to emerging technologies and our constant focus on providing peerless customer experiences. OnJanuary 26, 2023 , we closed on the acquisition of RepairSmith, a mobile solution for automotive repair and maintenance, headquartered inLos Angeles, California , for approximately$190 million . With a significant operational footprint in the southern and westernUnited States , RepairSmith expands AutoNation's ability to penetrate the extensive After-Sales service market and conveniently responds to our customers' needs by broadening the reach of our existing After-Sales network. We expect that these initiatives will expand and strengthen the AutoNation retail brand, improve the customer experience, provide new growth opportunities, and enable us to expand our footprint in our core and other markets. The roll-out of these strategic initiatives may be impacted by a number of variables, including customer adoption, market conditions, availability of used vehicle inventory, availability and cost of building supplies and materials, and our ability to identify, acquire, and build out suitable locations in a timely manner. See "Risk Factors" in Part I, Item 1A of this Form 10-K. 29
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Inventory Management
Our new and used vehicle inventories are stated at the lower of cost or net realizable value in our Consolidated Balance Sheets. We monitor our vehicle inventory levels based on current economic conditions and seasonal sales trends. Our new vehicle inventory units atDecember 31, 2022 and 2021, were 18,136 and 10,090, respectively. By historical standards, our inventory unit levels are significantly lower, driven by strong demand and disruptions in the manufacturers' supply chains. Inadequate levels of new vehicle availability could adversely affect our financial results. We have typically not experienced significant losses on the sale of new vehicle inventory, in part due to incentives provided by manufacturers to promote sales of new vehicles and our inventory management practices. We monitor our new vehicle inventory values as compared to net realizable values, and had no new vehicle inventory write-downs atDecember 31, 2022 or 2021. We recondition the majority of used vehicles acquired for retail sale in our parts and service departments and capitalize the related costs to the used vehicle inventory. We monitor our used vehicle inventory values as compared to net realizable values. Typically, used vehicles that are not sold on a retail basis are sold at wholesale auctions. Our used vehicle inventory balance was net of cumulative write-downs of$7.4 million atDecember 31, 2022 , and$3.6 million atDecember 31, 2021 . Parts, accessories, and other inventory are carried at the lower of cost or net realizable value. We estimate the amount of potentially damaged and/or obsolete inventory based upon historical experience, manufacturer return policies, and industry trends. Our parts, accessories, and other inventory balance was net of cumulative write-downs of$7.4 million atDecember 31, 2022 , and$5.8 million atDecember 31, 2021 .
Critical Accounting Estimates
We prepare our Consolidated Financial Statements in conformity withU.S. generally accepted accounting principles ("U.S. GAAP"), which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimates on an ongoing basis and we base our estimates on historical experience and various other assumptions we believe to be reasonable. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our Consolidated Financial Statements. Set forth below are the accounting estimates that we have identified as critical to our business operations and an understanding of our results of operations, based on the high degree of judgment or complexity in their application. See Note 1 of the Notes to Consolidated Financial Statements for a discussion of other significant accounting policies.
Goodwill for our reporting units is tested for impairment annually onApril 30 or more frequently when events or changes in circumstances indicate that the carrying value of a reporting unit exceeds its fair value. We may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. When assessing goodwill for impairment, our decision to perform a qualitative assessment for an individual reporting unit is influenced by a number of factors, including the carrying value of the reporting unit's goodwill, the significance of the excess of the reporting unit's estimated fair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments, macroeconomic conditions, automotive industry and market conditions, and our operating performance. If we do not perform a qualitative assessment, or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds its carrying amount, we calculate the estimated fair value of the reporting unit using an "income" valuation approach, which discounts projected free cash flows of the reporting unit at a computed weighted average cost of capital as the discount rate. The income valuation approach requires the use of significant estimates and assumptions, which include revenue growth rates and future operating margins used to calculate projected future cash flows, weighted average cost of capital, and future economic and market conditions. In connection with this process, we also reconcile the estimated aggregate fair values of our reporting units to our market capitalization, including consideration of a control premium based upon our stock price and/or average stock price over a reasonable period as of the measurement date. We base our cash flow forecasts on our knowledge of the automotive industry, our recent performance, our expectations of our future performance, and other assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. 30
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Actual future results may differ from those estimates. We also make certain
judgments and assumptions in allocating shared assets and liabilities to
determine the carrying values for each of our reporting units.
Under accounting standards, we chose to make a qualitative evaluation about the likelihood of goodwill impairment for our annual impairment testing as ofApril 30, 2022 and 2021, and we determined that it was not more likely than not that the fair values of our reporting units were less than their carrying amounts. As ofDecember 31, 2022 , we have$236.3 million of goodwill related to the Domestic reporting unit,$518.7 million related to the Import reporting unit,$482.1 million related to the Premium Luxury reporting unit,$78.4 million related to the AutoNation Finance reporting unit, and$4.6 million related to the Collision Centers reporting unit. Other Intangible Assets Our principal identifiable intangible assets are individual store rights under franchise agreements with vehicle manufacturers, which have indefinite lives and are tested for impairment annually as ofApril 30 or more frequently when events or changes in circumstances indicate that impairment may have occurred. We may first perform a qualitative assessment to determine whether it is more likely than not that a franchise right asset is impaired. The quantitative impairment test for franchise rights requires the comparison of the franchise rights' estimated fair value to carrying value by store. Fair values of rights under franchise agreements are estimated using unobservable (Level 3) inputs by discounting expected future cash flows of the store. The forecasted cash flows contain inherent uncertainties, including significant estimates and assumptions related to growth rates, margins, working capital requirements, capital expenditures, and cost of capital, for which we utilize certain market participant-based assumptions, using third-party industry projections, economic projections, and other marketplace data we believe to be reasonable.
We elected to perform quantitative tests for our annual franchise rights
impairment testing as of
resulted from these quantitative tests.
If the fair value of each of our franchise rights had been determined to be a
hypothetical 10{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} lower as of the valuation dates of April 30, 2022 and 2021, no
impairment would have resulted. The effect of a hypothetical 10{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} decrease in
fair value estimates is not intended to provide a sensitivity analysis of every
potential outcome.
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Reported Operating Data
Years Ended December 31,
2022 vs. 2021 2021 vs. 2020
Variance Variance
Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
($ in millions, except per vehicle data) 2022 2021 (Unfavorable) Variance 2020 (Unfavorable) Variance
Revenue:
New vehicle $ 11,754.4 $ 12,081.7 $ (327.3) (2.7) $ 10,418.6 $ 1,663.1 16.0
Retail used vehicle 9,020.9 8,062.4 958.5 11.9 5,260.5 2,801.9 53.3
Wholesale 640.9 576.4 64.5 11.2 340.8 235.6 69.1
Used vehicle 9,661.8 8,638.8 1,023.0 11.8 5,601.3 3,037.5 54.2
Finance and insurance, net 1,437.3 1,384.5 52.8 3.8 1,059.3 325.2 30.7
Total variable operations(1) 22,853.5 22,105.0 748.5 3.4 17,079.2 5,025.8 29.4
Parts and service 4,100.6 3,706.6 394.0 10.6 3,257.4 449.2 13.8
Other 30.9 32.4 (1.5) 53.4 (21.0)
Total revenue $ 26,985.0 $ 25,844.0 $ 1,141.0 4.4 $ 20,390.0 $ 5,454.0 26.7
Gross profit:
New vehicle $ 1,366.6 $ 1,201.6 $ 165.0 13.7 $ 584.1 $ 617.5 105.7
Retail used vehicle 538.3 622.3 (84.0) (13.5) 414.5 207.8 50.1
Wholesale 14.8 65.8 (51.0) 44.5 21.3
Used vehicle 553.1 688.1 (135.0) (19.6) 459.0 229.1 49.9
Finance and insurance 1,437.3 1,384.5 52.8 3.8 1,059.3 325.2 30.7
Total variable operations(1) 3,357.0 3,274.2 82.8 2.5 2,102.4 1,171.8 55.7
Parts and service 1,900.3 1,672.7 227.6 13.6 1,460.8 211.9 14.5
Other 8.0 5.7 2.3 3.2 2.5
Total gross profit 5,265.3 4,952.6 312.7 6.3 3,566.4 1,386.2 38.9
Selling, general, and administrative expenses 3,026.1 2,876.2 (149.9) (5.2) 2,422.0 (454.2) (18.8)
Depreciation and amortization 200.3 193.3 (7.0) 198.9 5.6
Goodwill impairment - - - 318.3 318.3
Franchise rights impairment - - - 57.5 57.5
Other (income) expense, net 14.4 (19.7) (34.1) 6.5 26.2
Operating income 2,024.5 1,902.8 121.7 6.4 563.2 1,339.6 237.9
Non-operating income (expense) items:
Floorplan interest expense (41.4) (25.7) (15.7) (63.8) 38.1
Other interest expense (134.9) (93.0) (41.9) (93.7) 0.7
Other income (loss), net (14.7) 24.3 (39.0) 144.4 (120.1)
Income from continuing operations before income taxes $ 1,833.5 $ 1,808.4 $ 25.1 1.4 $ 550.1 $ 1,258.3 228.7
Retail vehicle unit sales:
New vehicle 229,971 262,403 (32,432) (12.4) 249,654 12,749 5.1
Used vehicle 299,806 304,364 (4,558) (1.5) 241,182 63,182 26.2
529,777 566,767 (36,990) (6.5) 490,836 75,931 15.5
Revenue per vehicle retailed:
New vehicle $ 51,113 $ 46,043 $ 5,070 11.0 $ 41,732 $ 4,311 10.3
Used vehicle $ 30,089 $ 26,489 $ 3,600 13.6 $ 21,811 $ 4,678 21.4
Gross profit per vehicle retailed:
New vehicle $ 5,942 $ 4,579 $ 1,363 29.8 $ 2,340 $ 2,239 95.7
Used vehicle $ 1,795 $ 2,045 $ (250) (12.2) $ 1,719 $ 326 19.0
Finance and insurance $ 2,713 $ 2,443 $ 270 11.1 $ 2,158 $ 285 13.2
Total variable operations(2) $ 6,309 $ 5,661 $ 648 11.4 $ 4,193 $ 1,468 35.0
(1) Total variable operations includes new vehicle, used vehicle (retail and wholesale), and finance and insurance results.
(2) Total variable operations gross profit per vehicle retailed is calculated by dividing the sum of new vehicle, retail used vehicle, and finance and insurance gross profit by total retail vehicle unit
sales.
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Years Ended December 31,
2022 ({194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}) 2021 ({194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}) 2020 ({194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6})
Revenue mix percentages:
New vehicle 43.6 46.7 51.1
Used vehicle 35.8 33.4 27.5
Parts and service 15.2 14.3 16.0
Finance and insurance, net 5.3 5.4 5.2
Other 0.1 0.2 0.2
Total 100.0 100.0 100.0
Gross profit mix percentages:
New vehicle 26.0 24.3 16.4
Used vehicle 10.5 13.9 12.9
Parts and service 36.1 33.8 41.0
Finance and insurance 27.3 28.0 29.7
Other 0.1 - -
Total 100.0 100.0 100.0
Operating items as a percentage of revenue:
Gross profit:
New vehicle 11.6 9.9 5.6
Used vehicle-retail 6.0 7.7 7.9
Parts and service 46.3 45.1 44.8
Total 19.5 19.2 17.5
Selling, general, and administrative expenses 11.2 11.1 11.9
Operating income 7.5 7.4 2.8
Other operating items as a percentage of total gross
profit:
Selling, general, and administrative expenses
57.5 58.1 67.9
Operating income 38.4 38.4 15.8
December 31,
2022 2021
Days supply:
New vehicle (industry standard of selling days) 19 days 9 days
Used vehicle (trailing calendar month days) 31 days 40 days
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Same Store Operating Data
We have presented below our operating results on a same store basis to reflect
our internal performance. The "Same Store" amounts presented below include the
results of our stores for the identical months in each period presented in the
comparison, commencing with the first full month in which the store was owned by
us. Results from divested stores are excluded from both current and prior
periods. Therefore, the amounts presented in the year 2021 column that is being
compared to the year 2022 column may differ from the amounts presented in the
year 2021 column that is being compared to the year 2020 column. We believe the
presentation of this information provides a meaningful comparison of
period-over-period results of our operations.
Years Ended December 31, Years Ended December 31,
Variance Variance
($ in millions, except per vehicle Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
data) 2022 2021 (Unfavorable) Variance 2021 2020 (Unfavorable) Variance
Revenue:
New vehicle $ 11,400.6 $ 12,034.9 $ (634.3) (5.3) $ 11,989.1 $ 10,400.6 $ 1,588.5 15.3
Retail used vehicle 8,637.9 8,027.7 610.2 7.6 7,965.2 5,249.9 2,715.3 51.7
Wholesale 616.3 574.9 41.4 7.2 572.6 340.3 232.3 68.3
Used vehicle 9,254.2 8,602.6 651.6 7.6 8,537.8 5,590.2 2,947.6 52.7
Finance and insurance, net 1,388.3 1,380.7 7.6 0.6 1,374.5 1,057.4 317.1 30.0
Total variable operations(1) 22,043.1 22,018.2 24.9 0.1 21,901.4 17,048.2 4,853.2 28.5
Parts and service 3,966.0 3,644.6 321.4 8.8 3,635.0 3,149.1 485.9 15.4
Other 30.3 32.5 (2.2) 32.4 52.9 (20.5)
Total revenue $ 26,039.4 $ 25,695.3 $ 344.1 1.3 $ 25,568.8 $ 20,250.2 $ 5,318.6 26.3
Gross profit:
New vehicle $ 1,326.9 $ 1,198.0 $ 128.9 10.8 $ 1,190.3 $ 583.2 $ 607.1 104.1
Retail used vehicle 516.8 620.0 (103.2) (16.6) 614.7 413.7 201.0 48.6
Wholesale 17.1 65.8 (48.7) 67.0 44.6 22.4
Used vehicle 533.9 685.8 (151.9) (22.1) 681.7 458.3 223.4 48.7
Finance and insurance 1,388.3 1,380.7 7.6 0.6 1,374.5 1,057.4 317.1 30.0
Total variable operations(1) 3,249.1 3,264.5 (15.4) (0.5) 3,246.5 2,098.9 1,147.6 54.7
Parts and service 1,832.0 1,647.1 184.9 11.2 1,641.4 1,448.6 192.8 13.3
Other 7.6 5.7 1.9 5.7 2.7 3.0
Total gross profit $ 5,088.7 $ 4,917.3 $ 171.4 3.5 $ 4,893.6 $ 3,550.2 $ 1,343.4 37.8
Retail vehicle unit sales:
New vehicle 223,479 261,556 (38,077) (14.6) 260,546 249,058 11,488 4.6
Used vehicle 286,908 303,082 (16,174) (5.3) 300,689 240,411 60,278 25.1
Total 510,387 564,638 (54,251) (9.6) 561,235 489,469 71,766 14.7
Revenue per vehicle retailed:
New vehicle $ 51,014 $ 46,013 $ 5,001 10.9 $ 46,015 $ 41,760 $ 4,255 10.2
Used vehicle $ 30,107 $ 26,487 $ 3,620 13.7 $ 26,490 $ 21,837 $ 4,653 21.3
Gross profit per vehicle retailed:
New vehicle $ 5,937 $ 4,580 $ 1,357 29.6 $ 4,568 $ 2,342 $ 2,226 95.0
Used vehicle $ 1,801 $ 2,046 $ (245) (12.0) $ 2,044 $ 1,721 $ 323 18.8
Finance and insurance $ 2,720 $ 2,445 $ 275 11.2 $ 2,449 $ 2,160 $ 289 13.4
Total variable operations(2)
$ 667 11.8$ 5,665 $ 4,197 $ 1,468 35.0
(1) Total variable operations includes new vehicle, used vehicle (retail and wholesale), and finance and insurance results.
(2) Total variable operations gross profit per vehicle retailed is calculated by dividing the sum of new vehicle, retail used vehicle, and finance and insurance gross profit by total retail vehicle
unit sales.
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Years Ended December 31, Years Ended December 31,
2022 ({194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}) 2021 ({194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}) 2021 ({194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}) 2020 ({194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6})
Revenue mix percentages:
New vehicle 43.8 46.8 46.9 51.4
Used vehicle 35.5 33.5 33.4 27.6
Parts and service 15.2 14.2 14.2 15.6
Finance and insurance, net 5.3 5.4 5.4 5.2
Other 0.2 0.1 0.1 0.2
Total 100.0 100.0 100.0 100.0
Gross profit mix percentages:
New vehicle 26.1 24.4 24.3 16.4
Used vehicle 10.5 13.9 13.9 12.9
Parts and service 36.0 33.5 33.5 40.8
Finance and insurance 27.3 28.1 28.1 29.8
Other 0.1 0.1 0.2 0.1
Total 100.0 100.0 100.0 100.0
Operating items as a percentage of revenue:
Gross profit:
New vehicle 11.6 10.0 9.9 5.6
Used vehicle-retail 6.0 7.7 7.7 7.9
Parts and service 46.2 45.2 45.2 46.0
Total 19.5 19.1 19.1 17.5
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New Vehicle
Years Ended December 31,
2022 vs. 2021 2021 vs. 2020
Variance Variance
Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
($ in millions, except per vehicle data) 2022 2021 (Unfavorable) Variance 2020 (Unfavorable) Variance
Reported:
Revenue $ 11,754.4 $ 12,081.7 $ (327.3) (2.7) $ 10,418.6 $ 1,663.1 16.0
Gross profit $ 1,366.6 $ 1,201.6 $ 165.0 13.7 $ 584.1 $ 617.5 105.7
Retail vehicle unit sales 229,971 262,403 (32,432) (12.4) 249,654 12,749 5.1
Revenue per vehicle retailed $ 51,113 $ 46,043 $ 5,070 11.0 $ 41,732 $ 4,311 10.3
Gross profit per vehicle retailed $ 5,942 $ 4,579 $ 1,363 29.8 $ 2,340 $ 2,239 95.7
Gross profit as a percentage of revenue 11.6{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 9.9{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 5.6{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
Inventory days supply (industry standard of selling
days) 19 days 9 days
Years Ended December 31,
2022 vs. 2021 2021 vs. 2020
Variance Variance
Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
2022 2021 (Unfavorable) Variance 2021 2020 (Unfavorable) Variance
Same Store:
Revenue $ 11,400.6 $ 12,034.9 $ (634.3) (5.3) $ 11,989.1 $ 10,400.6 $ 1,588.5 15.3
Gross profit $ 1,326.9 $ 1,198.0 $ 128.9 10.8 $ 1,190.3 $ 583.2 $ 607.1 104.1
Retail vehicle unit sales 223,479 261,556 (38,077) (14.6) 260,546 249,058 11,488 4.6
Revenue per vehicle retailed $ 51,014 $ 46,013 $ 5,001 10.9 $ 46,015 $ 41,760 $ 4,255 10.2
Gross profit per vehicle retailed $ 5,937 $ 4,580 $ 1,357 29.6 $ 4,568 $ 2,342 $ 2,226 95.0
Gross profit as a percentage of revenue 11.6{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 10.0{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 9.9{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 5.6{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
The following discussion of new vehicle results is on a same store basis. The
difference between reported amounts and same store amounts in the above tables
of $353.8 million , $46.8 million , and $18.0 million in new vehicle revenue and
$39.7 million , $3.6 million , and $0.9 million in new vehicle gross profit for
2022, 2021, and 2020, respectively, is related to acquisition and divestiture
activity, as applicable in a given year.
2022 compared to 2021
Same store new vehicle revenue decreased during 2022, as compared to 2021, due
to a decrease in same store unit volume, partially offset by an increase in same
store revenue PVR. Same store unit volume was adversely impacted by historically
low inventory levels due to manufacturer supply shortages.
Same store revenue PVR and gross profit PVR both increased during 2022, as
compared to 2021, primarily due to strong demand and reduced availability of new
vehicle inventory. Same store revenue PVR and gross profit PVR also benefited
from a shift in mix away from Import vehicles, which have relatively lower
average selling prices and gross profit PVR, due to a more limited supply of
these vehicles.
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Net New Vehicle Inventory Carrying Benefit
The following table details net new vehicle inventory carrying benefit, consisting of new vehicle floorplan interest expense net of floorplan assistance earned (amounts received from manufacturers specifically to support store financing of new vehicle inventory). Floorplan assistance is accounted for as a component of new vehicle gross profit in accordance withU.S. GAAP. Years Ended December 31, Variance 2022 Variance 2021 ($ in millions) 2022 2021 vs. 2021 2020 vs. 2020 Floorplan assistance$ 108.9 $ 121.4
New vehicle floorplan interest expense (35.5)
(22.3) (13.2) (58.0) 35.7 Net new vehicle inventory carrying benefit$ 73.4 $ 99.1 $ (25.7) $ 52.7 $ 46.4 2022 compared to 2021 The net new vehicle inventory carrying benefit decreased during 2022, as compared to the same period in 2021, due to an increase in floorplan interest expense and a decrease in floorplan assistance. Floorplan interest expense increased due to higher average interest rates, partially offset by lower average vehicle floorplan balances. Floorplan interest rates are variable and, therefore, increase and decrease with changes in the underlying benchmark interest rates. Floorplan assistance decreased due to a decrease in unit volume, partially offset by an increase in the average floorplan assistance rate per unit. 37
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Used Vehicle
Years Ended December 31,
2022 vs. 2021 2021 vs. 2020
Variance Variance
Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
($ in millions, except per vehicle data) 2022 2021 (Unfavorable) Variance 2020 (Unfavorable) Variance
Reported:
Retail revenue $ 9,020.9 $ 8,062.4 $ 958.5 11.9 $ 5,260.5 $ 2,801.9 53.3
Wholesale revenue 640.9 576.4 64.5 11.2 340.8 235.6 69.1
Total revenue $ 9,661.8 $ 8,638.8 $ 1,023.0 11.8 $ 5,601.3 $ 3,037.5 54.2
Retail gross profit $ 538.3 $ 622.3 $ (84.0) (13.5) $ 414.5 $ 207.8 50.1
Wholesale gross profit 14.8 65.8 (51.0) 44.5 21.3
Total gross profit $ 553.1 $ 688.1 $ (135.0) (19.6) $ 459.0 $ 229.1 49.9
Retail vehicle unit sales 299,806 304,364 (4,558) (1.5) 241,182 63,182 26.2
Revenue per vehicle retailed $ 30,089 $ 26,489 $ 3,600 13.6 $ 21,811 $ 4,678 21.4
Gross profit per vehicle retailed $ 1,795 $ 2,045 $ (250) (12.2) $ 1,719 $ 326 19.0
Gross profit as a percentage of retail revenue 6.0{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 7.7{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 7.9{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
Inventory days supply (trailing calendar month
days) 31 days 40 days
Years Ended December 31,
2022 vs. 2021 2021 vs. 2020
Variance Variance
Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
2022 2021 (Unfavorable) Variance 2021 2020 (Unfavorable) Variance
Same Store:
Retail revenue $ 8,637.9 $ 8,027.7 $ 610.2 7.6 $ 7,965.2 $ 5,249.9 $ 2,715.3 51.7
Wholesale revenue 616.3 574.9 41.4 7.2 572.6 340.3 232.3 68.3
Total revenue $ 9,254.2 $ 8,602.6 $ 651.6 7.6 $ 8,537.8 $ 5,590.2 $ 2,947.6 52.7
Retail gross profit $ 516.8 $ 620.0 $ (103.2) (16.6) $ 614.7 $ 413.7 $ 201.0 48.6
Wholesale gross profit 17.1 65.8 (48.7) 67.0 44.6 22.4
Total gross profit $ 533.9 $ 685.8 $ (151.9) (22.1) $ 681.7 $ 458.3 $ 223.4 48.7
Retail vehicle unit sales 286,908 303,082 (16,174) (5.3) 300,689 240,411 60,278 25.1
Revenue per vehicle retailed
3,620 13.7$ 26,490 $ 21,837 $ 4,653 21.3
Gross profit per vehicle retailed
(245) (12.0)$ 2,044 $ 1,721 $ 323 18.8 Gross profit as a percentage of retail revenue 6.0{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 7.7{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 7.7{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 7.9{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} The following discussion of used vehicle results is on a same store basis. The difference between reported amounts and same store amounts in the above tables of$383.0 million ,$34.7 million , and$10.6 million in retail used vehicle revenue and$21.5 million ,$2.3 million , and$0.8 million in retail used vehicle gross profit for 2022, 2021, and 2020, respectively, is related to acquisition and divestiture activity, as well as the opening ofAutoNation USA stores, as applicable in a given year.
2022 compared to 2021
Same store retail used vehicle revenue increased during 2022, as compared to
2021, due to an increase in same store revenue PVR, partially offset by a
decrease in same store unit volume of lower-priced entry-level vehicles.
Same store revenue PVR increased during 2022, as compared to 2021, primarily due
to reduced availability of new vehicle inventory.
Same store gross profit PVR decreased during 2022, as compared to 2021,
primarily due to margin pressure as a result of declining used vehicle values,
which also adversely impacted used vehicle wholesale gross profit.
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Parts & Service
Years Ended December 31,
2022 vs. 2021 2021 vs. 2020
Variance Variance
Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
($ in millions) 2022 2021 (Unfavorable) Variance 2020 (Unfavorable) Variance
Reported:
Revenue $ 4,100.6 $ 3,706.6 $ 394.0 10.6 $ 3,257.4 $ 449.2 13.8
Gross profit $ 1,900.3 $ 1,672.7 $ 227.6 13.6 $ 1,460.8 $ 211.9 14.5
Gross profit as a percentage of revenue 46.3{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 45.1{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 44.8{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
Years Ended December 31,
2022 vs. 2021 2021 vs. 2020
Variance Variance
Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
2022 2021 (Unfavorable) Variance 2021 2020 (Unfavorable) Variance
Same Store:
Revenue $ 3,966.0 $ 3,644.6 $ 321.4 8.8 $ 3,635.0 $ 3,149.1 $ 485.9 15.4
Gross profit $ 1,832.0 $ 1,647.1 $ 184.9 11.2 $ 1,641.4 $ 1,448.6 $ 192.8 13.3
Gross profit as a percentage
of revenue 46.2{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 45.2{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 45.2{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 46.0{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
Parts and service revenue is primarily derived from vehicle repairs paid
directly by customers or via reimbursement from manufacturers and others under
warranty programs, as well as from wholesale parts sales, collision services,
and the preparation of vehicles for sale.
The following discussion of parts and service is on a same store basis. The
difference between reported amounts and same store amounts in the above tables
of $134.6 million , $62.0 million , and $108.3 million in parts and service
revenue and $68.3 million , $25.6 million , and $12.2 million in parts and service
gross profit for 2022, 2021, and 2020, respectively, is related to acquisition
and divestiture activity and the opening of AutoNation USA stores, as applicable
in a given year.
2022 compared to 2021
During 2022, same store parts and service gross profit increased compared to the
same period in 2021, primarily due to increases in gross profit associated with
customer-pay service of $76.5 million and the preparation of vehicles for sale
of $46.6 million .
Gross profit associated with customer-pay service and the preparation of
vehicles for sale both benefited from higher value repair orders, partially
offset by decreases in repair order volume. Gross profit associated with the
preparation of vehicles for sale also benefited from improved margin
performance.
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Finance and Insurance
Years Ended December 31,
2022 vs. 2021 2021 vs. 2020
Variance Variance
($ in millions, except per vehicle Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
data) 2022 2021 (Unfavorable) Variance 2020 (Unfavorable) Variance
Reported:
Revenue and gross profit $ 1,437.3 $ 1,384.5 $ 52.8 3.8 $ 1,059.3 $ 325.2 30.7
Gross profit per vehicle retailed
$ 270 11.1$ 2,158 $ 285 13.2 Years Ended December 31, 2022 vs. 2021 2021 vs. 2020 Variance Variance Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 2022 2021 (Unfavorable) Variance 2021 2020 (Unfavorable) Variance Same Store: Revenue and gross profit$ 1,388.3 $ 1,380.7 $ 7.6 0.6$ 1,374.5 $ 1,057.4 $ 317.1 30.0 Gross profit per vehicle retailed$ 2,720 $ 2,445 $ 275 11.2$ 2,449 $ 2,160 $ 289 13.4 Revenue on finance and insurance products represents commissions earned by us for the placement of: (i) loans and leases with financial institutions in connection with customer vehicle purchases financed, (ii) vehicle service contracts with third-party providers, and (iii) other vehicle protection products with third-party providers. We sell these products on a commission basis, and we also participate in the future underwriting profit on certain products pursuant to retrospective commission arrangements with the issuers of those products. The following discussion of finance and insurance results is on a same store basis. The difference between reported amounts and same store amounts in finance and insurance revenue and gross profit in the above tables of$49.0 million ,$3.8 million , and$1.9 million for 2022, 2021, and 2020, respectively, is related to acquisition and divestiture activity, as well as the opening of new add-points andAutoNation USA stores, as applicable in a given year.
2022 compared to 2021
Same store finance and insurance revenue and gross profit was relatively flat
during 2022, as compared to 2021, due to an increase in finance and insurance
gross profit PVR, largely offset by a decrease in vehicle unit volume. The
increase in finance and insurance gross profit PVR was primarily due to higher
realized margins on vehicle protection products and an increase in product
penetration. Finance and insurance gross profit PVR also benefited from
increases in amounts financed per transaction and gross profit per transaction
associated with arranging customer financing.
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Segment Results
In the following table of financial data, revenue and segment income of our
reportable segments are reconciled to consolidated revenue and consolidated
operating income, respectively.
Years Ended December 31,
2022 vs. 2021 2021 vs. 2020
Variance Variance
Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
($ in millions) 2022 2021 (Unfavorable) Variance 2020 (Unfavorable) Variance
Revenue:
Domestic $ 7,987.5 $ 7,959.9 $ 27.6 0.3 $ 6,490.6 $ 1,469.3 22.6
Import 7,690.3 7,798.5 (108.2) (1.4) 5,988.0 1,810.5 30.2
Premium Luxury 10,278.1 9,229.9 1,048.2 11.4 7,202.8 2,027.1 28.1
Total 25,955.9 24,988.3 967.6 3.9 19,681.4 5,306.9 27.0
Corporate and other 1,029.1 855.7 173.4 20.3 708.6 147.1 20.8
Total consolidated revenue
1,141.0 4.4$ 20,390.0 $ 5,454.0 26.7 Segment income(1): Domestic$ 565.3 $ 595.8 $ (30.5) (5.1)$ 355.2 $ 240.6 67.7 Import 734.2 714.7 19.5 2.7 386.4 328.3 85.0 Premium Luxury 969.1 837.4 131.7 15.7 478.2 359.2 75.1 Total 2,268.6 2,147.9 120.7 5.6 1,219.8 928.1 76.1 Corporate and other (285.5) (270.8) (14.7) (720.4) 449.6 Floorplan interest expense 41.4 25.7 (15.7) 63.8 38.1 Operating income$ 2,024.5 $ 1,902.8 $ 121.7 6.4$ 563.2 $ 1,339.6 237.9 Retail new vehicle unit sales: Domestic 66,375 76,211 (9,836) (12.9) 80,687 (4,476) (5.5) Import 95,886 118,863 (22,977) (19.3) 109,077 9,786 9.0 Premium Luxury 67,710 67,329 381 0.6 59,890 7,439 12.4 229,971 262,403 (32,432) (12.4) 249,654 12,749 5.1 Retail used vehicle unit sales: Domestic 97,642 105,031 (7,389) (7.0) 83,406 21,625 25.9 Import 100,131 103,418 (3,287) (3.2) 82,841 20,577 24.8 Premium Luxury 83,858 83,447 411 0.5 66,611 16,836 25.3 281,631 291,896 (10,265) (3.5) 232,858 59,038 25.4
(1) Segment income represents income for each of our reportable segments and is defined as operating income less floorplan interest expense.
41
-------------------------------------------------------------------------------- Table of Contents Domestic
The Domestic segment operating results included the following:
Years Ended December 31,
2022 vs. 2021 2021 vs. 2020
Variance Variance
Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
($ in millions) 2022 2021 (Unfavorable) Variance 2020 (Unfavorable) Variance
Revenue:
New vehicle $ 3,409.1 $ 3,601.8 $ (192.7) (5.4) $ 3,411.1 $ 190.7 5.6
Used vehicle 3,022.3 2,875.0 147.3 5.1 1,781.4 1,093.6 61.4
Parts and service 1092.7 1007.6 85.1 8.4 891.5 116.1 13.0
Finance and insurance, net 460.3 469.1 (8.8) (1.9) 370.5 98.6 26.6
Other 3.1 6.4 (3.3) 36.1 (29.7)
Total Revenue $ 7,987.5 $ 7,959.9 $ 27.6 0.3 $ 6,490.6 $ 1,469.3 22.6
Segment income $ 565.3 $ 595.8 $ (30.5) (5.1) $ 355.2 $ 240.6 67.7
Retail new vehicle unit sales 66,375 76,211 (9,836) (12.9) 80,687 (4,476)
(5.5)
Retail used vehicle unit sales 97,642 105,031 (7,389) (7.0) 83,406 21,625 25.9
2022 compared to 2021
Domestic revenue increased slightly during 2022, as compared to 2021, primarily
due to increases in used vehicle revenue and parts and service revenue. Used
vehicle revenue increased due to an increase in used vehicle revenue PVR
primarily due to reduced availability of new vehicle inventory, partially offset
by a decrease in used vehicle unit volume. Parts and service revenue benefited
from increases in revenue associated with customer-pay service, wholesale parts
sales, and the preparation of vehicles for sale. Additionally, Domestic revenue
benefited from the acquisitions we completed in 2021 and 2022. Increases in
Domestic revenue were partially offset by a decrease in new vehicle unit volume,
which was adversely impacted by historically low new vehicle inventory levels
due to manufacturer supply shortages.
Domestic segment income decreased during 2022, as compared to 2021, primarily
due to a decrease in used vehicle gross profit due to margin pressure as a
result of a decline in used vehicle values and a decrease in used vehicle unit
volume. Domestic segment income was also adversely impacted by a decrease in
finance and insurance gross profit due to a decrease in vehicle unit volume, as
well as increases in SG&A expenses and floorplan interest expense. Decreases in
segment income were partially offset by increases in parts and service gross
profit associated with the preparation of vehicles for sale, customer-pay
service, and wholesale parts sales. Additionally, Domestic segment income
benefited from the acquisitions we completed in 2021 and 2022.
42
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Table of Contents
Import
The Import segment operating results included the following:
Years Ended December 31,
2022 vs. 2021 2021 vs. 2020
Variance Variance
Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
($ in millions) 2022 2021 (Unfavorable) Variance 2020 (Unfavorable) Variance
Revenue:
New vehicle $ 3,473.0 $ 3,969.8 $ (496.8) (12.5) $ 3,283.7 $ 686.1 20.9
Used vehicle 2,652.7 2,370.5 282.2 11.9 1,516.5 854.0 56.3
Parts and service 1,050.9 950.0 100.9 10.6 811.3 138.7 17.1
Finance and insurance, net 494.1 489.6 4.5 0.9 361.7 127.9 35.4
Other 19.6 18.6 1.0 14.8 3.8
Total Revenue $ 7,690.3 $ 7,798.5 $ (108.2) (1.4) $ 5,988.0 $ 1,810.5 30.2
Segment income $ 734.2 $ 714.7 $ 19.5 2.7 $ 386.4 $ 328.3 85.0
Retail new vehicle unit sales 95,886 118,863 (22,977) (19.3) 109,077 9,786 9.0
Retail used vehicle unit sales 100,131 103,418 (3,287) (3.2) 82,841 20,577 24.8
2022 compared to 2021
Import revenue decreased during 2022, as compared to 2021, primarily due to a
decrease in new and used vehicle unit volume, partially offset by increases in
new and used vehicle revenue PVR. New vehicle unit volume was adversely impacted
by historically low new vehicle inventory levels due to manufacturer supply
shortages, which also favorably impacted new and used vehicle revenue PVR.
Decreases in Import revenue were partially offset by increases in parts and
service revenue associated with customer-pay service, the preparation of
vehicles for sale, and wholesale parts sales. Additionally, Import revenue
benefited from the acquisitions we completed in 2021 and 2022.
Import segment income increased during 2022, as compared to 2021, primarily due
to increases in parts and service gross profit and new vehicle gross profit.
Parts and service results benefited from increases in gross profit associated
with customer-pay service and the preparation of vehicles for sale, partially
offset by a decrease in gross profit associated with warranty service. New
vehicle gross profit benefited from reduced availability of new vehicle
inventory. Import segment income also benefited from the acquisitions we
completed in 2021 and 2022. Increases to Import segment income were partially
offset by a decrease in used vehicle gross profit due to margin pressure as a
result of a decline in used vehicle values, as well as an increase in SG&A
expenses.
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-------------------------------------------------------------------------------- Table of Contents Premium Luxury
The Premium Luxury segment operating results included the following:
Years Ended December 31,
2022 vs. 2021 2021 vs. 2020
Variance Variance
Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
($ in millions) 2022 2021 (Unfavorable) Variance 2020 (Unfavorable) Variance
Revenue:
New vehicle $ 4,872.3 $ 4,510.1 $ 362.2 8.0 $ 3,723.8 $ 786.3 21.1
Used vehicle 3,499.8 3,067.4 432.4 14.1 2,125.9 941.5 44.3
Parts and service 1,448.6 1,246.7 201.9 16.2 1,058.1 188.6 17.8
Finance and insurance, net 453.8 401.0 52.8 13.2 294.7 106.3 36.1
Other 3.6 4.7 (1.1) 0.3 4.4
Total Revenue $ 10,278.1 $ 9,229.9 $ 1,048.2 11.4 $ 7,202.8 $ 2,027.1 28.1
Segment income $ 969.1 $ 837.4 $ 131.7 15.7 $ 478.2 $ 359.2 75.1
Retail new vehicle unit sales 67,710 67,329 381 0.6 59,890 7,439 12.4
Retail used vehicle unit sales 83,858 83,447 411 0.5 66,611 16,836 25.3
2022 compared to 2021
Premium Luxury revenue increased during 2022, as compared to 2021, primarily due
to the acquisitions we completed in 2021. Premium Luxury revenue also benefited
from increases in new and used vehicle revenue PVR, which benefited from
historically low new vehicle inventory levels due to manufacturer supply
shortages. Additionally, Premium Luxury revenue benefited from increases in
parts and service revenue associated with customer-pay service, warranty
service, and the preparation of vehicles for sale.
Premium Luxury segment income increased during 2022, as compared to 2021,
primarily due to increases in new vehicle gross profit, parts and service gross
profit, and finance and insurance gross profit. New vehicle gross profit
benefited from reduced availability of new vehicle inventory. Parts and service
results benefited from increases in gross profit associated with customer-pay
service, warranty service, and the preparation of vehicles for sale. Finance and
insurance gross profit benefited from an increase in finance and insurance gross
profit PVR. Additionally, Premium Luxury segment income benefited from the
acquisitions we completed in 2021. Increases to Premium Luxury segment income
were partially offset by an increase in SG&A expenses.
44
-------------------------------------------------------------------------------- Table of Contents Corporate and other
Corporate and other results included the following:
Years Ended December 31,
2022 vs. 2021 2021 vs. 2020
Variance Variance
Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
($ in millions) 2022 2021 (Unfavorable) Variance 2020 (Unfavorable) Variance
Revenue:
Used vehicle $ 487.0 $ 325.9 $ 161.1 49.4 $ 177.5 $ 148.4 83.6
Parts and service 508.4 502.3 6.1 1.2 496.5 5.8 1.2
Finance and insurance, net 29.1 24.8 4.3 17.3 32.4 (7.6) (23.5)
Other 4.6 2.7 1.9 70.4 2.2 0.5 22.7
Revenue $ 1,029.1 $ 855.7 $ 173.4 20.3 $ 708.6 $ 147.1 20.8
Income (loss) $ (285.5) $ (270.8) $ (14.7) $ (720.4) $ 449.6
"Corporate and other" is comprised of our other businesses, including AutoNation
USA used vehicle stores, collision centers, parts distribution centers, and
auction operations, all of which generate revenues but do not meet the
quantitative thresholds for reportable segments, as well as the results of our
auto finance company, unallocated corporate overhead expenses, and other income
items.
As of December 31, 2022 , we had 55 AutoNation-branded collision centers, 13
AutoNation USA stores, 4 AutoNation-branded automotive auction operations, 3
parts distribution centers, and an auto finance company that we acquired in the
fourth quarter of 2022, referred to as AutoNation Finance.
AutoNation
During 2022, we opened fourAutoNation USA used vehicle stores and currently have over 20 stores under development. These stores play an integral part of both our long-term growth plans and the achievement of scale, scope, and density in markets to better serve and meet the needs of customers. We are targeting to have over 130 stores throughout the country. A number of variables may impact the implementation of our expansion plans, including customer adoption, market conditions, availability of used vehicle inventory, availability and cost of building supplies and materials, and our ability to identify, acquire, and build out suitable locations in a timely manner.
AutoNation Finance
AutoNation Finance, our captive finance company, provides financing to qualified retail customers on certain vehicles we sell, as well as on installment contracts acquired through third-party independent dealers. AutoNation Finance operating results include the interest and fee income generated by auto loans receivable less the interest expense associated with the debt issued to fund these receivables, a provision for estimated credit losses on the auto loans receivable originated or acquired, and direct expenses. During the fourth quarter of 2022, we recognized an initial credit loss expense of$34.2 million associated with the auto loans receivable portfolio we acquired as part of the acquisition of the auto finance company. AutoNation Finance results are included in Other (Income) Expense, Net in our Consolidated Income Statement. See Notes 5 and 10 of the Notes to Consolidated Financial Statements for more information on auto loans receivable, the related allowance for credit losses, and the related debt of our captive finance company. 45 -------------------------------------------------------------------------------- Table of Contents Selling, General, and Administrative Expenses Our SG&A expenses consist primarily of compensation, including store and corporate salaries, commissions, and incentive-based compensation, as well as advertising (net of reimbursement-based manufacturer advertising rebates), and store and corporate overhead expenses, which include occupancy costs, outside service costs, information technology expenses, service loaner and rental inventory expenses, legal, accounting, and professional services, and general corporate expenses. The following table presents the major components of our SG&A. Years Ended December 31, 2022 vs. 2021 2021 vs. 2020 Variance Variance Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Favorable / {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} ($ in millions) 2022 2021 (Unfavorable) Variance 2020 (Unfavorable) Variance Reported: Compensation$ 2,061.3 $ 2,017.1 $ (44.2) (2.2)$ 1,573.0 $ (444.1) (28.2) Advertising 184.3 170.3 (14.0) (8.2) 161.7 (8.6) (5.3) Store and corporate overhead 780.5 688.8 (91.7) (13.3) 687.3 (1.5) (0.2) Total$ 3,026.1 $ 2,876.2 $ (149.9) (5.2)$ 2,422.0 $ (454.2) (18.8) SG&A as a {194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} of total gross profit: Compensation 39.1 40.7 160 bps 44.1 340 bps Advertising 3.6 3.5 (10) bps 4.5 100 bps Store and corporate overhead 14.8 13.9 (90) bps 19.3 540 bps Total 57.5 58.1 60 bps 67.9 980 bps 2022 compared to 2021 SG&A expenses increased in 2022, as compared to 2021, primarily due to newly acquired and opened stores, expenditures associated with investments in technology and strategic initiatives, and performance-driven increases in compensation expense, combined with modest inflationary pressures. Increases were partially offset by a decrease in deferred compensation obligations of$31.0 million as a result of changes in market performance of the underlying investments, as well as by divested stores. Additionally, gross advertising expenses increased$20.8 million , partially offset by an increase in advertising reimbursements from manufacturers of$6.8 million . As a percentage of total gross profit, SG&A expenses decreased to 57.5{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} during 2022, from 58.1{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} in 2021, primarily due to improvements in gross profit PVR and effective cost management.
Other (Income) Expense, Net (Operating)
Other (Income) Expense, Net includes the gains or losses associated with business/property divestitures, legal settlements, and asset impairments, among other items, and for 2022, the results of our recently acquired auto finance company, including net interest margin, the provision for expected credit losses, and direct expenses. See "Segment - Results - Corporate and other" above and Notes 5 and 10 of the Notes to Consolidated Financial Statements for more information about our auto finance company. During 2022, we recognized an initial credit loss expense of$34.2 million associated with the acquired loan portfolio of CIG Financial, the auto finance company we acquired in the fourth quarter of 2022. We also recognized a net gain of$16.3 million related to business/property divestitures and a gain on a legal settlement of$6.3 million .
During 2021, we recognized a gain of
and net gains of
partially offset by asset impairments of
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Non-Operating Income (Expenses)
Floorplan Interest Expense
Floorplan interest rates are variable and, therefore, increase and decrease with
changes in the underlying benchmark interest rates.
Floorplan interest expense was$41.4 million in 2022 and$25.7 million in 2021. The increase in floorplan interest expense of$15.7 million in 2022, as compared to 2021, was the result of higher average interest rates, partially offset by lower average vehicle floorplan balances.
Interest Expense
Interest expense includes the interest related to non-vehicle long-term debt and finance lease obligations. Other interest expense was$134.9 million in 2022 compared to$93.0 million in 2021. The increase of$41.9 million was driven by higher average debt balances. Other Income (Loss),Net During 2022 and 2021, we recognized a net loss of$19.4 million and a net gain of$12.7 million , respectively, related to changes in the cash surrender value of corporate-owned life insurance ("COLI") for deferred compensation plan participants primarily as a result of changes in market performance of the underlying investments. Gains and losses related to the COLI are substantially offset by corresponding increases and decreases, respectively, in the deferred compensation obligations, which are reflected in SG&A expenses. During 2022, we recorded an unrealized gain of$2.9 million related to changes in fair value of the underlying securities of certain of our minority equity investments. In the first quarter of 2021, we sold the remaining shares of one of our minority equity investments and recorded a realized gain of$7.5 million . Additionally, we recorded an unrealized gain of$3.4 million during the second quarter of 2021 based on an observable price change of our minority equity investment that does not have a readily determinable fair value. During the period that we hold our minority equity investments, unrealized gains and losses will be recorded as the fair market values of securities with readily determinable fair values change over time, or as observable price changes are identified for securities without readily determinable fair values. See Note 20 of the Notes to Consolidated Financial Statements for more information.
Income Tax Provision
Income taxes are provided based upon our anticipated underlying annual blended
federal and state income tax rates, adjusted, as necessary, for any discrete tax
matters occurring during the period. As we operate in various states, our
effective tax rate is also dependent upon our geographic revenue mix. Our
effective income tax rate was 24.9{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} in 2022 and 24.1{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} in 2021.
Discontinued Operations
Discontinued operations are related to stores that were sold or terminated prior toJanuary 1, 2014 . Results from discontinued operations, net of income taxes, were primarily related to carrying costs for real estate we have not yet sold associated with stores that were closed prior toJanuary 1, 2014 , and other adjustments related to disposed operations.
Liquidity and Capital Resources
We manage our liquidity to ensure access to sufficient funding at acceptable
costs to fund our ongoing operating requirements and future capital expenditures
while continuing to meet our financial obligations. We believe that our cash and
cash equivalents, funds generated through operations, and amounts available
under our revolving credit facility, commercial paper program, and secured used
vehicle floorplan facilities will be sufficient to fund our working capital
requirements, service our debt, pay our tax obligations and commitments and
contingencies, and meet any seasonal operating requirements for the foreseeable
future.
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Available Liquidity Resources
We had the following sources of liquidity available for the years endedDecember 31, 2022 and 2021: December 31, December 31, (In millions) 2022 2021 Cash and cash equivalents$ 72.6 $ 60.4 Revolving credit facility$ 1,799.6 (1)$ 1,760.3 Secured used vehicle floorplan facilities(2) $ 0.3 $ 0.1 (1) AtDecember 31, 2022 , we had$0.4 million of letters of credit outstanding. In addition, we use the revolving credit facility under our credit agreement as a liquidity backstop for borrowings under the commercial paper program. We had$50.0 million of commercial paper notes outstanding atDecember 31, 2022 . See Note 10 of the Notes to Consolidated Financial Statements for additional information. (2) Based on the eligible used vehicle inventory that could have been pledged as collateral. See Note 6 of the Notes to Consolidated Financial Statements for additional information. In the ordinary course of business, we are required to post performance and surety bonds, letters of credit, and/or cash deposits as financial guarantees of our performance primarily relating to insurance matters. AtDecember 31, 2022 , surety bonds, letters of credit, and cash deposits totaled$109.6 million , including the$0.4 million of letters of credit issued under our revolving credit facility. We do not currently provide cash collateral for outstanding letters of credit. InFebruary 2022 , we filed an automatic shelf registration statement with theSEC that enables us to offer for sale, from time to time and as the capital markets permit, an unspecified amount of common stock, preferred stock, debt securities, warrants, subscription rights, depositary shares, stock purchase contracts, and units. Capital Allocation Our capital allocation strategy is focused on growing long-term value per share. We invest capital in our business to maintain and upgrade our existing facilities and to build new facilities for existing franchises and newAutoNation USA used vehicle stores, as well as for other strategic and technology initiatives. We also deploy capital opportunistically to complete acquisitions or investments, build facilities for newly awarded franchises, and/or repurchase our common stock and/or debt. Our capital allocation decisions are based on factors such as the expected rate of return on our investment, the market price of our common stock versus our view of its intrinsic value, the market price of our debt, the potential impact on our capital structure, our ability to complete acquisitions that meet our market and vehicle brand criteria and/or return on investment threshold, and limitations set forth in our debt agreements. Share Repurchases Our Board of Directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary limit. A summary of shares repurchased under our share repurchase program authorized by our Board of Directors follows: (In millions, except per share data) 2022 2021 2020 Shares repurchased 15.6 22.3
7.2
Aggregate purchase price$ 1,710.2 $ 2,303.2 $
382.3
Average purchase price per share
The decision to repurchase shares at any given point in time is based on such
factors as the market price of our common stock versus our view of its intrinsic
value, the potential impact on our capital structure (including compliance with
our maximum leverage ratio and other financial covenants in our debt agreements
as well as our available liquidity), and the expected return on competing uses
of capital such as acquisitions or investments, capital investments in our
current businesses, or repurchases of our debt.
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As ofFebruary 15, 2023 , andDecember 31, 2022 ,$1.1 billion and$1.2 billion , respectively, remained available under our stock repurchase limit most recently authorized by our Board of Directors.
Capital Expenditures
The following table sets forth information regarding our capital expenditures over the past three years: (In millions) 2022 2021 2020
Purchases of property and equipment, including operating
lease buy-outs (1)
$ 336.2
(1) Includes accrued construction in progress and excludes property associated with leases entered into
during the year.
AtDecember 31, 2022 , we owned approximately 80{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} of our new vehicle franchise store locations with a net book value of$2.3 billion , as well as other properties associated with our collision centers,AutoNation USA used vehicle stores, parts distribution centers, auction operations, and other excess properties with a net book value of$697.2 million . None of these properties are mortgaged or encumbered. We continue to expand ourAutoNation USA used vehicle stores and are targeting to have over 130 stores. The planned expansion may be impacted by a number of variables, including customer adoption, market conditions, availability of used vehicle inventory, availability and cost of building supplies and materials, and our ability to identify, acquire, and build out suitable locations in a timely manner.
Acquisitions and Divestitures
The following table sets forth information regarding cash used in business
acquisitions, net of cash acquired, and cash received from business
divestitures, net of cash relinquished, over the past three years:
(In millions) 2022 2021
2020
Cash used in business acquisitions, net(1)
Cash received from business divestitures, net$ 55.2 $ 48.7 $ 9.0 (1) Excludes finance leases. During 2022, we acquired CIG Financial, an auto finance company, and we also purchased four stores. During 2021, we purchased 20 stores and four collision centers. We did not purchase any stores during 2020.
During 2022, we divested three stores and terminated two franchises. During
2021, we divested three stores and 18 collision centers.
On
solution for automotive repair and maintenance for approximately
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Debt
The following table sets forth our non-vehicle long-term debt as ofDecember 31, 2022 and 2021: (in millions) Debt Description Maturity Date Interest Payable 2022 2021 3.5{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes November 15, 2024 May 15 and November 15$ 450.0 $ 450.0 4.5{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes October 1, 2025 April 1 and October 1 450.0 450.0 3.8{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes November 15, 2027 May 15 and November 15 300.0 300.0 1.95{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes August 1, 2028 February 1 and August 1 400.0 400.0 4.75{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes June 1, 2030 June 1 and December 1 500.0 500.0 2.4{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes August 1, 2031 February 1 and August 1 450.0 450.0 3.85{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes March 1, 2032 March 1 and September 1 700.0 - Revolving credit facility March 26, 2025 Monthly - - Finance leases and other debt Various dates through 2041 375.5 330.6 3,625.5 2,880.6 Less: unamortized debt discounts and debt issuance costs (26.0) (22.2) Less: current maturities (12.6) (12.2) Long-term debt, net of current maturities$ 3,586.9 $ 2,846.2
On
3.85{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes due 2032, which were sold at 99.835{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} of the aggregate
principal amount.
We had$50.0 million and$340.0 million of commercial paper notes outstanding as ofDecember 31, 2022 and 2021, respectively. We also had$181.8 million of non-recourse debt outstanding under our warehouse facilities and$146.9 million of non-recourse debt under term securitizations of consolidated variable interest entities ("VIEs") as ofDecember 31, 2022 . A downgrade in our credit ratings could negatively impact the interest rate payable on our 3.5{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes, 4.5{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes, 3.8{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes, and 4.75{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes and could negatively impact our ability to issue, or the interest rates for, commercial paper notes. Additionally, an increase in our leverage ratio could negatively impact the interest rates charged for borrowings under our revolving credit facility.
See Note 10 of the Notes to Consolidated Financial Statements for more
information on our non-vehicle long-term debt, commercial paper, and
non-recourse debt.
Restrictions and Covenants
Our credit agreement and the indentures for our senior unsecured notes contain customary financial and operating covenants that place restrictions on us, including our ability to incur additional indebtedness to create liens or other encumbrances, to sell (or otherwise dispose of) assets, and to merge or consolidate with other entities. Under our credit agreement, we are required to remain in compliance with a maximum leverage ratio and maximum capitalization ratio. The leverage ratio is a contractually defined amount principally reflecting non-vehicle debt divided by a contractually defined measure of earnings with certain adjustments. The capitalization ratio is a contractually defined amount principally reflecting vehicle floorplan payable and non-vehicle debt divided by our total capitalization including vehicle floorplan payable. The specific terms of these covenants can be found in our credit agreement, which we filed with our Current Report on Form 8-K onMarch 26, 2020 .
The indentures for our senior unsecured notes contain certain limited covenants,
including limitations on liens and sale and leaseback transactions.
In addition, our failure to comply with the covenants contained in our credit
agreement and the indentures for our senior unsecured notes could result in the
acceleration of other indebtedness of AutoNation.
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As ofDecember 31, 2022 , we were in compliance with the requirements of the financial covenants under our credit agreement and the indentures for our senior unsecured notes. Under the terms of our credit agreement, atDecember 31, 2022 , our leverage ratio and capitalization ratio were as follows: December 31, 2022 Requirement Actual Leverage ratio ? 3.75x 1.62x Capitalization ratio ? 70.0{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} 59.9{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6}
Vehicle Floorplan Payable
The components of vehicle floorplan payable are as follows:
(In millions) 2022 2021
Vehicle floorplan payable - trade $ 946.6 $ 489.9
Vehicle floorplan payable - non-trade 1,162.7 967.7
Vehicle floorplan payable $ 2,109.3 $ 1,457.6
Vehicle floorplan facilities are due on demand, but in the case of new vehicle
inventories, are generally paid within several business days after the related
vehicles are sold. Vehicle floorplan facilities are primarily collateralized by
vehicle inventories and related receivables.
Prior to October 2021 , our vehicle floorplan facilities utilized LIBOR-based
interest rates. In connection with global reference rate reform initiatives,
particularly related to LIBOR, in October 2021 , we began modifying our floorplan
agreements to replace the reference rate from LIBOR to an alternative reference
rate. The floorplan agreement modifications will be accounted for by
prospectively adjusting the effective interest rate in accordance with
accounting standards. We do not expect the change from LIBOR to an alternative
reference rate to have a material impact on our annual floorplan interest
expense. See Note 6 of the Notes to Consolidated Financial Statements for more
information on our vehicle floorplan payable.
Cash Flows
The following table summarizes the changes in our cash provided by (used in)
operating, investing, and financing activities:
Years Ended
(In millions) 2022 2021 2020
Net cash provided by operating activities $ 1,668.1 $ 1,627.7 $ 1,207.6
Net cash used in investing activities
Net cash used in financing activities
Cash Flows from Operating Activities
Our primary sources of operating cash flows result from the sale of vehicles and finance and insurance products, collections from customers for the sale of parts and services, and proceeds from vehicle floorplan payable-trade. Our primary uses of cash from operating activities are repayments of vehicle floorplan payable-trade, purchases of inventory, personnel-related expenditures, and payments related to taxes and leased properties.
2022 compared to 2021
Net cash provided by operating activities increased during 2022, as compared to
2021, primarily due to an increase in earnings, partially offset by an increase
in working capital requirements.
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Cash Flows from Investing Activities
Net cash flows from investing activities consist primarily of cash used in
capital additions and activity from business acquisitions, business
divestitures, property dispositions, originations and collections of auto loans
receivable acquired through third-party dealers, and other transactions.
We will make facility and infrastructure upgrades and improvements from time to time as we identify projects that are required to maintain our current business or that we expect to provide us with acceptable rates of return.
2022 compared to 2021
Net cash used in investing activities increased during 2022, as compared to 2021, primarily due to an increase in purchases of property and equipment, a decrease in proceeds from the sale of equity securities, an increase in net cash outflows related to auto loans receivable due to our recently acquired captive finance company, and a decrease in proceeds from the disposal of assets held for sale, partially offset by a decrease in cash used in acquisitions, net of cash acquired.
Cash Flows from Financing Activities
Net cash flows from financing activities primarily include repurchases of common stock, debt activity, changes in vehicle floorplan payable-non-trade, payments of tax withholdings for stock-based awards, and proceeds from stock option exercises.
2022 compared to 2021
During 2022, we repurchased 15.6 million shares of common stock for an aggregate purchase price of$1.7 billion (average purchase price per share of$109.86 ), including repurchases for which settlement occurred subsequent toDecember 31, 2022 . During 2021, we repurchased 22.3 million shares of our common stock for an aggregate purchase price of$2.3 billion (average purchase price per share of$103.18 ). During 2022, we issued$700.0 million aggregate principal amount of 3.85{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes due 2032. Cash flows from financing activities during 2022, reflect cash payments of$6.6 million for debt issuance costs associated with the senior notes issuance that are being amortized to interest expense over the term of the related senior notes. During 2021, we repaid the outstanding$300.0 million of 3.35{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes due 2021 and issued$400.0 million aggregate principal amount of 1.95{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes due 2028 and$450.0 million aggregate principal amount of 2.4{194d821e0dc8d10be69d2d4a52551aeafc2dee4011c6c9faa8f16ae7103581f6} Senior Notes due 2031. Cash flows from financing activities during 2021, reflect cash payments of$8.0 million for debt issuance costs associated with the senior note issuances that are being amortized to interest expense over the terms of the related senior notes. Cash flows from financing activities include changes in commercial paper notes outstanding totaling net payments of$290.0 million during 2022 compared to net proceeds of$340.0 million during 2021 and vehicle floorplan payable-non-trade totaling net proceeds of$178.6 million during 2022 compared to net repayments of$263.9 million during 2021. 52 -------------------------------------------------------------------------------- Table of Contents Material Cash Requirements The following table summarizes our current and long-term material cash requirements as ofDecember 31, 2022 . The amounts presented are based upon, among other things, the terms of any relevant agreements. Future events that may occur related to the following payment obligations could cause actual payments to differ significantly from these amounts. Payments Due by Period More Than Less Than 1 1 - 3 Years 3 - 5 Years 5 Years Year (2024 and (2026 and (2028 and (In millions) Total (2023) 2025) 2027) thereafter)
Vehicle floorplan payable (Note 6 )(1)
Non-vehicle long-term debt, including finance 3,625.5
12.6 982.0 330.0 2,300.9 leases (Note 10)(1)(2) Commercial paper (Note 10)(1) 50.0 50.0 - - - Interest payments(3) 848.2 132.3 246.9 181.2 287.8 Operating lease and other commitments (Note 453.7 55.9 95.1 79.0 223.7
9)(1)(4)
Unrecognized tax benefits, net (Note 13)(1) 11.7 - 3.0 8.7 - Deferred compensation obligations(5) 107.8 5.3 - - 102.5 Estimated chargeback liability (Note 197.0 107.3 76.6 12.6 0.5
11)(1)(6)
Estimated self-insurance obligations (Note 94.5 37.6 31.6 12.1 13.2
12)(1)(7)
Purchase obligations and other commitments(8) 274.0 209.5 45.6 13.9 5.0 Total$ 7,771.7 $ 2,719.8 $ 1,480.8 $ 637.5 $ 2,933.6
(1)See Notes to Consolidated Financial Statements.
(2)Amounts for non-vehicle long-term debt obligations reflect principal payments
and are not reduced for unamortized debt discounts of
issuance costs of
(3)Primarily represents scheduled fixed interest payments on our outstanding senior unsecured notes and finance leases. Estimates of future interest payments for vehicle floorplan payables and commercial paper are excluded due to the short-term nature of these facilities. (4)Amounts for operating lease commitments do not include certain operating expenses such as maintenance, insurance, and real estate taxes. In 2022, these charges totaled approximately$26 million . Additionally, operating leases that are on a month-to-month basis are not included.
(5)Due to uncertainty regarding timing of payments expected beyond one year,
long-term obligations for deferred compensation arrangements have been
classified in the “More Than 5 Years” column.
(6)Our estimated chargeback obligations do not have scheduled maturities,
however, the timing of future payments is estimated based on historical
patterns.
(7)Our estimated self-insurance obligations are based on management estimates and actuarial calculations. Although these obligations do not have scheduled maturities, the timing of future payments is estimated based on historical patterns.
(8)Primarily represents purchase orders and contracts in connection with real
estate construction projects and information technology and communication
systems.
We expect that the amounts above will be funded through cash flows from
operations or borrowings under our commercial paper program or credit agreement.
In the case of payments due upon the maturity of our debt instruments, we
currently expect to be able to refinance such instruments in the normal course
of business.
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The table above excludes the non-recourse debt that relates to auto loans receivable funded through asset-backed term securitizations and/or warehouse facilities. These receivables can only be used as collateral to settle obligations of this non-recourse debt. In addition, the investors and/or creditors in the non-recourse debt have no recourse to our assets for payment of the debt beyond the related receivables, the amounts on deposit in reserve accounts, and the restricted cash from collections on auto loans receivable. Non-recourse debt, net of unamortized debt discounts and issuance costs, totaled$323.6 million atDecember 31, 2022 . See Note 5 and Note 10 to the Consolidated Financial Statements for more information. In the ordinary course of business, we are required to post performance and surety bonds, letters of credit, and/or cash deposits as financial guarantees of our performance. AtDecember 31, 2022 , surety bonds, letters of credit, and cash deposits totaled$109.6 million , of which$0.4 million were letters of credit. We do not currently provide cash collateral for outstanding letters of credit. We have negotiated a letter of credit sublimit as part of our revolving credit facility. The amount available to be borrowed under this revolving credit facility is reduced on a dollar-for-dollar basis by the cumulative amount of any outstanding letters of credit.
As further discussed in Note 13 of the Notes to Consolidated Financial
Statements, there are various tax matters where the ultimate resolution may
result in us owing additional tax payments.
Off-Balance Sheet Arrangements
As of
arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
Forward-Looking Statements
Our business, financial condition, results of operations, cash flows, and prospects, and the prevailing market price and performance of our common stock may be adversely affected by a number of factors, including the matters discussed below. Certain statements and information set forth in this Annual Report on Form 10-K, including, without limitation, statements regarding our strategic acquisitions, initiatives, partnerships, or investments, including the planned expansion of ourAutoNation USA used vehicle stores and our investments in digital and online capabilities and mobility solutions; our expectations for the future performance of our business and the automotive retail industry; as well as other written or oral statements made from time to time by us or by our authorized executive officers on our behalf that describe our objectives, goals, or plans constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact, including statements that describe our objectives, plans or goals are, or may be deemed to be, forward-looking statements. Words such as "anticipate," "expect," "intend," "goal," "target," "project," "plan," "believe," "continue," "may," "will," "could," and variations of such words and similar expressions are intended to identify such forward-looking statements. Our forward-looking statements reflect our current expectations concerning future results and events, and they involve known and unknown risks, uncertainties and other factors that are difficult to predict and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these statements. These forward-looking statements speak only as of the date of this report, and we undertake no obligation to revise or update these statements to reflect subsequent events or circumstances. The risks, uncertainties, and other factors that our stockholders and prospective investors should consider include, but are not limited to, the following: •The automotive retail industry is sensitive to changing economic conditions and various other factors, including, but not limited to, unemployment levels, consumer confidence, fuel prices, interest rates, and tariffs. Our business and results of operations are substantially dependent on new and used vehicle sales levels inthe United States and in our particular geographic markets, as well as the gross profit margins that we can achieve on our sales of vehicles, all of which are very difficult to predict. •The COVID-19 pandemic disrupted, and may continue to disrupt, our business, results of operations, and financial condition going forward. Future epidemics, pandemics, and other outbreaks could also disrupt our business, results of operations, and financial condition.
•Our new vehicle sales are impacted by the incentive, marketing, and other
programs of vehicle manufacturers.
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•We are dependent upon the success and continued financial viability of the
vehicle manufacturers and distributors with which we hold franchises.
•We are subject to restrictions imposed by, and significant influence from,
vehicle manufacturers that may adversely impact our business, financial
condition, results of operations, cash flows, and prospects, including our
ability to acquire additional stores.
•We are investing significantly in various strategic initiatives, including the planned expansion of ourAutoNation USA stores, and if they are not successful, we will have incurred significant expenses without the benefit of improved financial results. •If we are not able to maintain and enhance our retail brands and reputation or to attract consumers to our own digital channels, or if events occur that damage our retail brands, reputation, or sales channels, our business and financial results may be harmed. •We are subject to various risks associated with originating and servicing auto finance loans through indirect lending to customers, any of which could have an adverse effect on our business. •New laws, regulations, or governmental policies in response to climate change, including fuel economy and greenhouse gas emission standards, or changes to existing standards, could adversely impact our business, results of operations, financial condition, cash flow, and prospects.
•We are subject to numerous legal and administrative proceedings, which, if the
outcomes are adverse to us, could materially adversely affect our business,
results of operations, financial condition, cash flows, and prospects.
•Our operations are subject to extensive governmental laws and regulations. If we are found to be in purported violation of or subject to liabilities under any of these laws or regulations, or if new laws or regulations are enacted that adversely affect our operations, our business, operating results, and prospects could suffer. •A failure of our information systems or any security breach or unauthorized disclosure of confidential information could have a material adverse effect on our business.
•Our debt agreements contain certain financial ratios and other restrictions on
our ability to conduct our business, and our substantial indebtedness could
adversely affect our financial condition and operations and prevent us from
fulfilling our debt service obligations.
•We are subject to interest rate risk in connection with our vehicle floorplan payables, revolving credit facility, commercial paper program, and warehouse facilities that could have a material adverse effect on our profitability. •Goodwill and other intangible assets comprise a significant portion of our total assets. We must test our goodwill and other intangible assets for impairment at least annually, which could result in a material, non-cash write-down of goodwill or franchise rights and could have a material adverse impact on our results of operations and shareholders' equity. •Our minority equity investments with readily determinable fair values are required to be measured at fair value each reporting period, which could adversely impact our results of operations and financial condition. The carrying value of our minority equity investment that does not have a readily determinable fair value is required to be adjusted for observable price changes or impairments, both of which could adversely impact our results of operations and financial condition. •Our largest stockholders, as a result of their ownership stakes in us, may have the ability to exert substantial influence over actions to be taken or approved by our stockholders. In addition, future share repurchases and fluctuations in the levels of ownership of our largest stockholders could impact the volume of trading, liquidity, and market price of our common stock.
•Natural disasters and adverse weather events, including the effects of climate
change, can disrupt our business.
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Additional Information
Investors and others should note that we announce material financial information using our company website (www.autonation.com), our investor relations website (investors.autonation.com),SEC filings, press releases, public conference calls, and webcasts. Information about AutoNation, its business, and its results of operations may also be announced by posts on AutoNation's
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