Asbury Automotive Group Annual Report 2016

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2016oroTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For 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 ofincorporation or organization) (I.R.S. EmployerIdentification No.)2905 Premiere Parkway, NW, Suite 300Duluth, Georgia 30097(Current address of principal executive offices) (Zip Code)(770) 418-8200(Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon Stock, par value $.01 per share New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act:None. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No xIndicate 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 preceding12 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 oTable of ContentsIndicate by check mark whether the registrant has submitted electronically and posted on its website, if any, every Interactive Data File required to be submitted and postedpursuant 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 postsuch files). Yes x No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant'sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 ofthe Act).Large Accelerated Filer x Accelerated filer o Non-Accelerated Filer o Smaller reporting company oIndicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No xBased on the closing price of the registrant's common stock as of June 30, 2016, the aggregate market value of the common stock held by non-affiliates of the registrant was$1,145.6 million (based upon the assumption, solely for purposes of this computation, that all of the officers and directors of the registrant were affiliates of the registrant).Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: The number of shares of common stockoutstanding as of February 22, 2017 was 21,146,186.DOCUMENTS INCORPORATED BY REFERENCEList hereunder the following documents if incorporated by reference and the Part of the Form 10-K into which the document is incorporated:Portions of the registrant's definitive Proxy Statement for the 2017 Annual Meeting of Stockholders, to be filed within 120 days after the end of the registrant's fiscal year, areincorporated by reference into Part III, Items 10 through 14 of this Annual Report on Form 10-K. Table of ContentsASBURY AUTOMOTIVE GROUP, INC.ANNUAL REPORT ON FORM 10-KFOR THE YEAR ENDEDDECEMBER 31, 2016 PagePART IItem 1.Business6Item 1A.Risk Factors15Item 1B.Unresolved Staff Comments24Item 2.Properties24Item 3.Legal Proceedings24Item 4.Mine Safety Disclosures24 PART II Item 5.Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities25Item 6.Selected Financial Data27Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations29Item 7A.Quantitative and Qualitative Disclosures About Market Risk55Item 8.Financial Statements and Supplementary Data57Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure87Item 9A.Controls and Procedures87Item 9B.Other Information88 PART III Item 10.Directors, Executive Officers, and Corporate Governance88Item 11.Executive Compensation88Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters88Item 13.Certain Relationships and Related Transactions, and Director Independence89Item 14.Principal Accountant Fees and Services89 PART IV Item 15.Exhibits, Financial Statement Schedules90Item 16.Form 10-K Summary93Table of ContentsPART I.Forward-Looking InformationCertain of the discussions and information included or incorporated by reference in this report may constitute "forward-looking statements" within themeaning of the federal securities laws. Forward-looking statements are statements that are not historical in nature and may include statements relating to ourgoals, plans and projections regarding industry and general economic trends, our expected financial position, results of operations or market position and ourbusiness 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 assumptionswith respect to, among other things:•our ability to execute our business strategy;•the annual rate 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;•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 brands 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 orachievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Suchfactors include, but are not limited to:•changes in general economic and business conditions, including changes in employment levels, consumer demand, preferences and confidencelevels, the availability and cost of credit, fuel prices, levels of discretionary personal income and interest rates;•our ability to execute our balanced automotive retailing and service business strategy;•adverse conditions affecting the vehicle manufacturers whose brands we sell, and their ability to design, manufacture, deliver, and market theirvehicles 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 toobtain waivers of these covenants as necessary;4Table of Contents•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 withvehicle 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 trade restrictions, consumer protections, accountingstandards, taxation requirements, and environmental laws;•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, capitalexpenditures, 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, workstoppages, import restrictions or limitations, 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 "Item1A. Risk Factors" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" below and other cautionarystatements made in this report should be read and considered as forward-looking statements subject to such uncertainties. We urge you to carefully considerthose factors.Forward-looking statements speak only as of the date of this report. We expressly disclaim any obligation to update any forward-looking statementcontained herein.Additional InformationOur annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to such reports filed pursuant toSection 13(a) or 15(d) of the Securities Exchange Act of 1934, are made available free of charge on our website at http://www.asburyauto.com as soon aspractical after such reports are filed with the U.S. Securities and Exchange Commission (the "Commission"). In addition, the proxy statement that will bedelivered to our stockholders in connection with our 2017 Annual Meeting of Stockholders, when filed, will also be available on our website, and at the URLstated in such proxy statement. We also make available on our website copies of our certificate of incorporation, bylaws, and other materials that outline ourcorporate governance policies and practices, including: •the respective charters of our audit committee, governance and nominating committee, compensation and human resources committee, and riskmanagement committee; •our criteria for independence of the members of our board of directors, audit committee, and compensation and human resources committee; •our Corporate Governance Guidelines; and •our Code of Business Conduct and Ethics for Directors, Officers, and Employees.We intend to provide any information required by Item 5.05 of Form 8-K (relating to amendments or waivers of our Code of Business Conduct and Ethicsfor Directors, Officers, and Employees) by disclosure on our website.You may also obtain a printed copy of the foregoing materials by sending a written request to: Investor Relations Department, Asbury AutomotiveGroup, Inc., 2905 Premiere Parkway, NW, Suite 300, Duluth, Georgia 30097. In addition, the Commission makes available on its website, free of charge,reports, proxy and information statements, and other information5Table of Contentsregarding issuers, such as us, that file electronically with the Commission. The Commission's website is http://www.sec.gov. Unless otherwise specified,information contained on our website, available by hyperlink from our website or on the Commission's website, is not incorporated into this report or otherdocuments we file with, or furnish to, the Commission.Except as the context otherwise requires, "we," "our," "us," "Asbury," and "the Company" refer to Asbury Automotive Group, Inc. and its subsidiaries.Item 1. BUSINESSAsbury Automotive Group, Inc., a Delaware corporation organized in 2002, is one of the largest automotive retailers in the United States. Our storeoperations are conducted by our subsidiaries.As of December 31, 2016, we owned and operated 93 new vehicle franchises, representing 28 brands of automobiles at 77 dealership locations, and 23collision centers in the United States. In addition, we owned and operated two stand-alone used vehicle stores in Florida. Our stores offer an extensive rangeof automotive products and services, including new and used vehicles; parts and service, including vehicle repair and maintenance services, replacementparts, and collision repair services; and finance and insurance products, including arranging vehicle financing through third parties and aftermarket products,such as extended service contracts, guaranteed asset protection ("GAP") insurance, prepaid maintenance, and credit life and disability insurance.Our operations provide a diverse revenue base that we believe mitigates the impact of fluctuations in new vehicle sales volumes and gross profit margins.In addition, our geographic footprint decreases our exposure to regional economic downturns and our brand diversification decreases our exposure tomanufacturer-specific risks, such as brand perception or production disruptions. Approximately 82% of our gross profit is derived from used vehicles, partsand service, and finance and insurance which historically have been more stable throughout economic cycles.The following charts present the contribution to total revenue and gross profit by each line of business for the year ended December 31, 2016:6Table of ContentsOur new vehicle franchise retail network is made up of dealerships located in 16 metropolitan markets in 8 states operating primarily under seven locally-branded dealership groups. The following chart provides a detailed breakdown of our markets, brand names, and franchises as of December 31, 2016:Dealership Group Market Franchise Brand Name Coggin Automotive Group Fort Pierce, FL Acura, BMW, Honda, Mercedes-Benz Jacksonville, FL Buick, Chevrolet, Ford, GMC, Honda(a), Nissan(a), Toyota Orlando, FL Ford, Honda(a), Hyundai, Lincoln Courtesy Autogroup Tampa, FL Chrysler, Dodge, Honda, Hyundai, Infiniti, Jeep, Kia, Mercedes-Benz, Nissan, smart,Sprinter, Toyota Crown Automotive Company Charlottesville, VA BMW Durham, NC Honda Fayetteville, NC Dodge, Ford Greensboro, NC Acura, BMW, Chrysler, Dodge, Honda, Jeep, Nissan, Volvo Greenville, SC Jaguar, Land Rover, Lexus, Nissan, Porsche, Toyota, Volvo Richmond, VA Acura, BMW(a), MINI David McDavid Auto Group Austin, TX Acura Dallas/Fort Worth, TX Acura, Ford, Honda(a), Lincoln Houston, TX Nissan Gray-Daniels Auto Family Jackson, MS Chevrolet, Ford, Lincoln, Nissan(a), Toyota Nalley Automotive Group Atlanta, GA Acura, Audi, Bentley, BMW, Ford, Honda, Hyundai, Infiniti(a), Kia, Lexus(a), Nissan,Toyota(a), Volkswagen Plaza Motor Company St. Louis, MO Audi, BMW, Infiniti, Jaguar, Land Rover, Lexus, Mercedes-Benz(a), smart, Sprinter(a)_____________________________(a)This market has two of these franchises.7Table of ContentsOperationsNew Vehicle SalesThe following table reflects the number of franchises we owned as of December 31, 2016 and the percentage of new vehicle revenues represented by classand franchise for the year ended December 31, 2016:Class/Franchise Number ofFranchises Owned % of NewVehicle RevenuesLuxury Mercedes-Benz 4 7%Lexus 4 7BMW 7 6Acura 6 4Infiniti 4 3Audi 2 2Lincoln 3 2Volvo 2 1Land Rover 2 1Jaguar 2 1Porsche 1 *Bentley 1 *Total Luxury 38 34%Import Honda 11 17%Toyota 6 12Nissan 9 11Kia 2 2Hyundai 3 2Volkswagen 1 1MINI 1 *smart 2 *Sprinter 3 *Total Import 38 45%Domestic Ford 6 13%Chevrolet 2 3Dodge 3 3Jeep 2 1GMC 1 1Chrysler 2 *Buick 1 *Total Domestic 17 21%Total Franchises 93 100%* Franchise accounted for less than 1% of new vehicle revenues for the year ended December 31, 2016.Our new vehicle revenues include new vehicle sales and lease transactions arranged by our dealerships with third-party financial institutions. We believethat leasing provides a number of benefits to our other business lines, including the historical customer loyalty to the leasing dealership for repairs andmaintenance services and the fact that lessors typically give the leasing dealership the first option to purchase the off-lease vehicle.8Table of ContentsUsed Vehicle SalesWe sell used vehicles at all of our franchised dealership locations and our two stand-alone stores. Used vehicle sales include the sale of used vehicles toindividual retail customers ("used retail") and the sale of used vehicles to other dealers at auction ("wholesale") (the terms "used retail" and "wholesale"collectively referred to as "used").Gross profit from the sale of used vehicles depends primarily on our dealerships' ability to obtain a high quality supply of used vehicles and our use oftechnology to manage our inventory. Our new vehicle operations typically provide our used vehicle operations with a large supply of trade-ins and off-leasevehicles, which we believe are good sources of high quality used vehicles. We also purchase a portion of our used vehicle inventory at "open" auctions andauctions restricted to new vehicle dealers. Additionally, our used vehicle sales benefit from our ability to sell certified pre-owned vehicles from ourfranchised dealerships.Parts and ServiceWe provide vehicle repair and maintenance services, sell replacement parts, and recondition used vehicles at all of our dealerships. In addition, weprovide collision repair services at our 23 free-standing collision repair centers that we operate either on the premises of, or in close proximity to, ourdealerships. Historically, parts and service revenues have been more stable than those from vehicle sales. Industry-wide, parts and service revenues haveconsistently increased over time primarily due to the increased cost of maintaining vehicles, the added technical complexity of vehicles, and the increasingnumber of vehicles on the road.The automotive parts and service industry tends to be highly fragmented, with franchised dealerships and independent repair shops competing for thisbusiness. We believe, however, that the increased use of advanced technology in vehicles is making it difficult for independent repair shops to competeeffectively with franchised dealerships as they may not be able to make the investment necessary to perform major or technical repairs. In an effort tomaintain the necessary knowledge to service vehicles and further develop our technician staff, we focus on our internal and manufacturer specific trainingand development programs for new and existing technicians. We believe our parts and service business is also well-positioned to benefit from the servicework potentially generated through the sale of extended service contracts to customers who purchase new and used vehicles from us, as historically thesecustomers tend to have their vehicles serviced at the location where they purchased the extended service contract. In addition, our franchised dealershipsbenefit from manufacturer policies requiring that warranty and recall related repairs be performed at a franchised dealership. We believe that our collisionrepair centers provide us with an attractive opportunity to grow our business due to the high margins provided by collision repair services and the fact that weare able to source original equipment manufacturer parts from our franchised dealerships.Finance and InsuranceWe offer a wide variety of automotive finance and insurance ("F&I") products to our customers. We arrange third-party financing for the sale or lease ofvehicles to our customers in exchange for a fee paid to us by the third-party financial institution. We do not directly finance our customers' vehicle purchasesor leases, therefore our exposure to losses in connection with those third-party financing arrangements is limited generally to the fees that we receive. Thefees we receive are subject to chargeback, or repayment, to the finance company if a customer defaults or prepays the retail installment contract typicallyduring some limited time period at the beginning of the contract term. We have negotiated agreements with certain lenders pursuant to which we receiveadditional fees upon reaching a certain volume of business.We offer our customers a variety of vehicle protection products in connection with the purchase of vehicles. These products are underwritten andadministered by independent third-parties. Under our arrangements with the providers of these products, we primarily sell the products on a straightcommission basis. We are subject to chargebacks for insurance contracts as a result of early termination, default, or prepayment of the contract. In addition,we participate in future profits associated with the performance of the third-party held underlying portfolio for certain products pursuant to retrospectivecommission arrangements. The following is a brief description of some of the vehicle protection products we offer to our customers:•Extended service contracts – covers certain repair work after the expiration of the manufacturer warranty;•GAP debt cancellation – covers the customer after a total loss for the difference between the value of the vehicle and the outstanding loan or leaseobligation after insurance proceeds;•Prepaid maintenance – covers certain routine maintenance work, such as oil changes, cleaning and adjusting of brakes, multi-point vehicleinspections, and tire rotations; and•Credit life and disability – covers the remaining amounts due on an auto loan or a lease in the event of death or disability.9Table of ContentsRecent DevelopmentsIn January 2017, we acquired the assets of two franchises (two dealership locations) and one collision center in the Indianapolis, Indiana market.From January 1, 2017 through February 22, 2017, we repurchased 222,200 shares of our common stock under the Repurchase Program for a total of $14.3million. As such, based on our authorization from our Board of Directors, we have the ability to repurchase up to an additional $73.8 million of our commonstock under our Repurchase Program.Business StrategyWe seek to create long-term value for our stockholders by striving to drive operational excellence and deploy capital to its highest returns. To achievethese objectives, we employ the strategies described below.Drive Operational ExcellenceAttract and retain the best talentWe believe that local management of dealership operations enables our retail network to provide market specific responses to sales, customer service, andinventory requirements. The general manager of each of our dealerships is responsible for the operations, personnel, and financial performance of thatdealership as well as other day-to-day operations. We believe our general managers' familiarity with their respective markets enables them to effectively runday-to-day operations, market to customers, and recruit new employees. The general manager of each dealership is supported, in most cases, by a new vehiclesales manager, a used vehicle sales manager, an F&I manager, a parts manager, and a service manager. Our dealership management teams typically have manyyears of experience in the automotive retail industry. This management structure is complemented by support from our market-based management teams andthe corporate office, which we refer to as the Dealership Support Center ("DSC"), through our advanced technology solutions, centralized processes,marketing support, and financial oversight.Implement best practices and improve productivityWhile new vehicle sales are critical to drawing customers to our dealerships, used vehicles, parts and service, and F&I sales generally provide higherprofit margins and account for the majority of our gross profit. In order to maximize the growth of these higher margin businesses, we have discipline-specificexecutives at the DSC, market and dealership levels who focus on increasing the penetration of current services and expanding the breadth of our offerings tocustomers through the implementation of best practices and continuous training on our technology solutions throughout our dealership network. In addition,we have marketing initiatives designed to attract customers to our online channels and mobile applications.In order to mitigate the impact of significant fluctuations in vehicle sales, we tie management and employee compensation at various operational levelsto performance through incentive-based pay systems based on various metrics. We compensate our general managers, department managers, and sales andother dealership personnel with incentive-based pay, using metrics such as dealership profitability, departmental profitability and individual performance, asappropriate. In addition, a portion of management's compensation is variable based in nature, including an annual cash bonus based on achieving certainEBITDA targets and a component of equity compensation tied to our financial performance in comparison to our peer group.Provide an exceptional customer experienceWe are focused on providing a high level of customer service and have designed our dealerships' services to meet the needs of an increasinglysophisticated and demanding automotive consumer. We endeavor to establish relationships which we believe will result in both repeat business andadditional business through customer referrals. Furthermore, we provide our dealership managers with appropriate incentives to employ efficient sellingapproaches, engage in extensive follow-up to develop long-term relationships with customers, and extensively train our sales staff to meet customer needs.We continually evaluate opportunities, and implement appropriate new technologies, to improve the buying experience for our customers, and believe thatour ability to share best practices across our multi-jurisdictional platform gives us an advantage over independent dealerships. For example, we haveimplemented a common customer relations management tool in all of our dealerships to facilitate communications with customers before, during, and afterthe sale. We continue to invest in technologies designed to improve our sales process and employee productivity, all with the goal of improving the customerexperience. In addition, our higher margin parts and service operations are an integral part of our overall approach to customer service, providing anopportunity to foster ongoing relationships and improve customer loyalty. We continue to train our technicians and service advisors on processes andtechnologies to both educate our customers on their service needs and ensure that our customers continue to receive excellent service. We believe our partsand service business provides us with an opportunity for future10Table of Contentsgrowth due to improved customer retention, the added technical complexity of vehicles and the increasing number of vehicles on the road.Centralize, streamline, and automate processesOur DSC management is responsible for our capital expenditures and determining our operating strategy, while the implementation of our operatingstrategy rests with our market-based management teams and each dealership management team based on the policies and procedures established by DSCmanagement. DSC management and our market-based management teams continually evaluate the financial and operating results of our dealerships, as wellas each dealership's geographical location, and from time to time, make decisions to evaluate new technologies and/or processes to further enhance ouroperational performance. As part of our investment in our IT systems, we have deployed a common dealer management system ("DMS"). We believe a singleDMS provides the foundation for future efficiencies and creates a more efficient retail operation. We consolidate financial, accounting, and operational datareceived from our dealerships through customized financial products. Our IT approach enables us to efficiently integrate and aggregate information from ourdealerships. Through the combination of a common DMS and our corporate IT products, management has access to the financial, accounting, and operationaldata at various levels of the organization. In addition, we are in the process of centralizing business processes throughout our organization which we expectwill deliver future cost synergies and enhanced performance.Leverage our scale and cost structure to improve our operating efficienciesWe are positioned to leverage our significant scale so that we are able to achieve competitive operating margins by centralizing and streamlining variousback-office functions. We are able to improve financial controls and lower servicing costs by maintaining key store-level accounting and administrativeactivities in our shared service centers, and we leverage our scale to reduce costs related to purchasing certain equipment, supplies, and services throughnational vendor relationships.Deploy Capital to Highest ReturnsWe continually evaluate our investment opportunities based upon: (i) our cash and cash equivalents on hand, (ii) the funds that we expect to generatethrough future operations, (iii) current and expected borrowing availability under our credit facilities and mortgage financings, (iv) amounts in our newvehicle floor plan notes payable offset accounts, and (v) the potential impact of any contemplated or pending future transactions, including, but not limitedto, financings, acquisitions, dispositions or other capital expenditures.Seek opportunities to further invest in our business; acquire real estate currently being operated under lease agreementsWe continually evaluate our existing dealership network and seek to make strategic investments which will increase the capacity of our dealerships andimprove the customer experience. In addition, we continue to execute on our strategy of selectively acquiring our leased properties where financing ratesmake it attractive to be an owner.Evaluate opportunities to refine our dealership portfolio, including acquiring value added operating assets and dealershipsWe evaluate dealership acquisition opportunities based on market position and geography, brand representation and availability, key personnel, andother factors. We believe our financial position, information technology systems, management structure, and experience, positions us to efficiently andopportunistically complete, integrate, and benefit from dealership acquisitions. We also evaluate the financial and operating results of our owned dealerships,as well as each dealership's geographical location, and based on various financial and strategic rationales, may make decisions to dispose of dealerships torefine our dealership portfolio.Return capital to stockholders through share repurchase programs and/or dividendsOur capital allocation decisions are primarily based on our desire to maintain sufficient liquidity and a prudent capital structure. We believe our cashposition and borrowing capacity, combined with our current and expected future cash generation capability, provides us with significant financial flexibilityto enhance shareholder value through the repurchase of our common stock and/or dividends. Our share repurchase decisions are based on many factors,including a comparison of the market price of our common stock versus our view of its intrinsic value.CompetitionThe automotive retail and service industry is highly competitive with respect to price, service, location, and selection. For new vehicle sales, ourdealerships compete with other franchised dealerships, primarily in their regions. Our new vehicle store competitors also have franchise agreements with thevarious vehicle manufactures, and as such, generally obtain new vehicle inventory from vehicle manufactures on the same terms as us. The franchiseagreements grant the franchised dealership a non-exclusive right to sell the manufacturer's (or distributor's) brand of vehicles and offer related parts andservice within a specified11Table of Contentsmarket area. State automotive franchise laws restrict competitors from relocating their stores or establishing new stores of a particular vehicle brand within aspecified area that is served by our dealership of the same vehicle brand. We rely on our advertising and merchandising, sales expertise, service reputation,strong local branding, and location of our dealerships to assist in the sale of new vehicles.Our used vehicle operations compete with other franchised dealerships, non-franchised automotive dealerships, regional and national vehicle rentalcompanies, and Internet-based vehicle brokers for the supply and resale of used vehicles.We compete with other franchised dealerships to perform warranty and recall related repairs and with other franchised dealerships and independentservice centers for non-warranty repair and maintenance services. We compete with other automobile dealers, service stores, and auto parts retailers in ourparts operations. We believe that we have a competitive advantage in parts and service sales due to our ability to use factory-approved replacement parts, ourcompetitive prices, our familiarity with manufacturer brands and models, and the quality of our customer service.We compete with a broad range of financial institutions in arranging financing for our customers vehicle purchases. In addition, many financialinstitutions are now offering F&I products through the Internet, which has increased competition and may reduce our profits on certain of these items. Webelieve that the principal competitive factors in providing financing are convenience, interest rates, and flexibility in contract length.SeasonalityThe automobile industry has historically been subject to seasonal variations. Demand for new vehicles is generally highest during the second and thirdquarters of each year and, accordingly, we expect our revenues and operating results to generally be higher during these periods. We typically experiencehigher sales of luxury vehicles in the fourth quarter, which have higher average selling prices and gross profit per vehicle retailed. Revenues and operatingresults may be impacted significantly from quarter to quarter by changing economic conditions, vehicle manufacturer incentive programs, or adverse weatherevents.Dealer and Framework AgreementsEach of our dealerships operate pursuant to a dealer agreement between the dealership and the manufacturer (or in some cases the distributor) of eachbrand of new vehicles sold and/or serviced at the dealership. The dealer agreements grant the franchised dealership a non-exclusive right to sell themanufacturer's (or distributor's) brand of vehicles and offer related parts and service within a specified market area. Each dealer agreement also grants ourdealerships the right to use the manufacturer's trademarks and service marks in connection with the dealerships operations and they also impose numerousoperational requirements related to, among other things, the following:•inventories of new vehicles and manufacturer replacement parts; •maintenance of minimum net working capital requirements, and in some cases, minimum net worth requirements; •achievement of certain sales and customer satisfaction targets; •advertising and marketing practices; •facilities and signs; •products offered to customers; •dealership management; •personnel training; •information systems;•geographic market, including but not limited to requirements to meet sales and service targets within an assigned market area, geographiclimitations on where the dealership may locate or advertise, and restrictions on the export of vehicles; and •dealership monthly and annual financial reporting.Our dealer agreements are for various terms, ranging from one year to indefinite. We expect that we will be able to renew expiring agreements in theordinary course of business. However, typical dealer agreements give the manufacturer the right to terminate or the option of non-renewal of the dealeragreement under certain circumstances, subject to applicable state franchise laws, including:12Table of Contents•insolvency or bankruptcy of the dealership;•failure to adequately operate the dealership or to maintain required capitalization levels;•impairment of the reputation or financial condition of the dealership;•change of ownership or management of the dealership without manufacturer consent;•certain extraordinary corporate transactions such as a merger or sale of all or substantially all of our assets without manufacturer consent;•failure to complete facility upgrades required by the manufacturer or agreed to by the dealer;•failure to maintain any license, permits or authorization required to conduct the dealership's business;•conviction of a dealer/manager or owner for certain crimes; or•material breach of other provisions of a dealer agreement.Notwithstanding the terms of any dealer agreement, the states in which we operate have automotive dealership franchise laws that provide that it isunlawful for a manufacturer to terminate or not renew a franchise unless "good cause" exists.In addition to requirements under dealer agreements, we are subject to provisions contained in supplemental agreements, framework agreements, dealeraddenda and manufacturers' policies, collectively referred to as "framework agreements." Framework agreements impose requirements on us in addition tothose described above. Such agreements also define other standards and limitations, including:•company-wide performance criteria;•capitalization requirements;•limitations on changes in our ownership or management;•limitations on the number of a particular manufacturer's franchises owned by us;•restrictions or prohibitions on our ability to pledge the stock of certain of our subsidiaries; and•conditions for consent to proposed acquisitions, including sales and customer satisfaction criteria, as well as limitations on the total local, regional,and national market share percentage that would be represented by a particular manufacturer's franchises owned by us after giving effect to aproposed acquisition.Some dealer agreements and framework agreements grant the manufacturer the right to terminate or not renew our dealer and framework agreements, or tocompel us to divest our dealerships, for a number of reasons, including default under the agreement, any unapproved change of control (which specificchanges vary from manufacturer to manufacturer, but which include material changes in the composition of our Board of Directors during a specified timeperiod, the acquisition of 5% or more of our voting stock by another vehicle manufacturer or distributor, the acquisition of 20% or more of our voting stockby third parties, and the acquisition of an ownership interest sufficient to direct or influence management and policies), or certain other unapproved events(including certain extraordinary corporate transactions such as a merger or sale of all or substantially all of our assets). Triggers of the clauses are often basedupon actions by our stockholders and are generally outside of our control. Some of our dealer agreements and framework agreements also give themanufacturer a right of first refusal if we propose to sell any dealership representing the manufacturer's brands to a third-party. These agreements may alsoattempt to limit the protections available under applicable state laws and require us to resolve disputes through binding arbitration. For additionalinformation, please refer to the risk factor captioned "We are dependent upon our relationships with the manufacturers of vehicles that we sell and are subjectto restrictions imposed by, and significant influence from, these vehicle manufacturers. Any of these restrictions or any changes or deterioration of theserelationships could have a material adverse effect on our business, financial condition, results of operations, and cash flows."Our framework agreements with certain manufacturers contain provisions that, among other things, attempt to limit the protections available to dealersunder these laws. If these laws are repealed in the states in which we operate, manufacturers may be able to terminate our franchises without providingadvance notice, an opportunity to cure or a showing of good cause. Without the protection of these laws, it may also be more difficult for us to renew ourdealer agreements upon expiration. Changes in laws that provide manufacturers the ability to terminate our dealer agreements could materially adverselyaffect our business, financial condition and results of operations. Furthermore, if a manufacturer seeks protection from creditors in bankruptcy, courts haveheld that the federal bankruptcy laws may supersede these laws, resulting in either the termination,13Table of Contentsnon-renewal or rejection of franchises by such manufacturers, which, in turn, could materially adversely affect our business, financial condition, and results ofoperations. For additional information, please refer to the risk factor captioned "If state laws that protect automotive retailers are repealed, weakened, orsuperseded by our framework agreements with manufacturers, our dealerships will be more susceptible to termination, non-renewal or renegotiation of theirdealer agreements which could have a materially adverse effect on our business, financial condition, and results of operations."RegulationsWe operate in a highly regulated industry. In every state in which we operate, we must obtain one or more licenses issued by state regulatory authoritiesin order to operate our business. In addition, we are subject to numerous complex federal, state, and local laws regulating the conduct of our business,including those relating to our sales, operations, finance and insurance, advertising, and employment practices. These laws and regulations include statefranchise laws and regulations, consumer protection laws, privacy laws, anti-money laundering laws, and other extensive laws and regulations applicable tonew and used motor vehicle dealers. These laws also include federal and state wage and hour, anti-discrimination, and other laws governing employmentpractices.Our financing activities with customers are subject to federal truth-in-lending, consumer leasing, and equal credit opportunity laws and regulations, aswell as state and local motor vehicle finance laws, leasing laws, installment finance laws, usury laws, and other installment state and leasing laws andregulations. Some U.S. states regulate finance fees and charges that may be paid as a result of vehicle sales. Claims arising out of actual or alleged violationsof law may be asserted against us or our stores by individuals or governmental entities and may expose us to significant damages, fines or other penalties,including revocation or suspension of our license to conduct store operations.In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law and established the Consumer Financial ProtectionBureau ("CFPB") with broad regulatory powers. Although automotive dealers are generally excluded from the CFPB's regulatory authority, we are required tocomply with regulations applicable to privacy notices, and the CFPB has announced its intention to regulate automotive financing activities, through itsregulation of automotive finance companies and other financial institutions that service the automotive industry. The CFPB has issued regulatory guidanceinstructing financial institutions to monitor dealer loans for potential discrimination, resulting from the system used to compensate dealers for assisting in thecustomer financing transaction. The CFPB has instructed lenders that, if discrimination is found, the lender would be required to change dealer compensationpractices. In addition, the CFPB has announced its intention to regulate the sale of other finance and insurance products. The Federal Trade Commission hascertain regulatory authority over automotive dealers and has implemented an enforcement initiative relating to the advertising practices of automotivedealers. For additional information, please refer to the risk factor captioned "Our operations are subject to extensive governmental laws and regulations. If weare 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 thatadversely affect our operations, our business, our reputation, financial condition, results of operations, and prospects could suffer."Environmental, Health and Safety Laws and RegulationsWe are subject to a wide range of environmental laws and regulations, including those governing discharges into water, air emissions, storage ofpetroleum substances and chemicals, handling and disposal of solid and hazardous wastes, remediation of various types of contamination, and otherwiserelating to health, safety and protection of the environment. For example and without creating an exhaustive list: as with automobile dealerships generally,and service and parts and collision repair center operations in particular, our business involves the generation, use, handling, and disposal of hazardous ortoxic substances and wastes and the use of above ground and underground storage tanks (ASTs and USTs). Operations involving the management of wastesand the use of ASTs and USTs are subject to requirements of the Resource Conservation and Recovery Act, analogous state statutes, and their implementingregulations. Pursuant to these laws, federal and state environmental agencies have established approved methods for handling, storing, treating, transporting,and disposing of regulated substances and wastes with which we must comply. We also are subject to laws and regulations governing responses to anyreleases of contamination at or from our facilities or at facilities that receive our hazardous wastes for treatment or disposal. The ComprehensiveEnvironmental Response, Compensation and Liability Act ("CERCLA") and similar state statutes, can impose strict and joint and several liability for cleanupcosts on those that are considered to have contributed to the release of a "hazardous substance." We also are subject to the Clean Water Act, analogous statestatutes, and their implementing regulations which, among other things, prohibit discharges of pollutants into regulated waters without permits, requirecontainment of potential discharges of oil or hazardous substances, and require preparation of spill contingency plans. Currently, we are not aware of anynon-compliance with these or any other environmental requirements applicable to our operations, nor are we aware of any material remedial liabilities towhich we are subject.We have incurred, and will continue to incur, costs and capital expenditures to comply with these laws and regulations and to obtain and maintain allnecessary environmental permits. We believe that our operations currently are being conducted in14Table of Contentssubstantial compliance with all applicable environmental laws. From time to time, we may experience incidents and encounter conditions that are not incompliance with environmental laws and regulations. We occasionally receive notices from environmental agencies regarding potential violations ofenvironmental laws or regulations. In such cases, we work with the agencies to address any issues and to implement appropriate corrective action whennecessary. However, none of our dealerships have been subject to any material environmental liabilities in the past, nor do we know of any fact or conditionthat would result in any material environmental liabilities being incurred in the future.EmployeesAs of December 31, 2016, we employed approximately 7,900 full-time and part-time employees, none of whom were covered by collective bargainingagreements. We believe we have good relations with our employees.InsuranceDue to the inherent risk in the automotive retail industry, our operations expose us to a variety of liabilities. These risks generally require significantlevels of insurance covering liabilities such as claims from employees, customers, or other third parties, for personal injury and property related lossesoccurring in the course of our operations. We may be subject to fines and civil and criminal penalties in connection with alleged violations of federal andstate laws or regulatory environments. Further, the automobile retail industry is subject to substantial risk of real and personal property loss, due to thesignificant concentration of property values located at the various dealership locations.Our insurance programs include multiple umbrella policies with a total per occurrence and aggregate limit of $100.0 million. We are self-insured forcertain employee medical claims and maintain stop loss insurance for individual claims. We have large deductible insurance programs in place for workerscompensation, property, and general liability claims.Provisions for retained losses and deductibles are made by charges to expense based upon periodic evaluations of the estimated ultimate liabilities onreported and unreported claims. The insurance companies that underwrite our insurance require that we secure certain of our obligations for deductiblereimbursements with collateral. Our collateral requirements are set by the insurance companies and, to date, have been satisfied by posting surety bonds,letters of credit, and/or cash deposits. Our collateral requirements may change from time to time based on, among other things, our claims experience.Item 1A. Risk FactorsIn addition to the other information contained, referred to or incorporated by reference into this report, you should consider carefully the following factorswhen evaluating our business and before making an investment decision. Our business, operations, ability to implement our strategy, reputation, results ofoperations, financial condition, cash flows, and prospects may be materially adversely affected by the risks described below. In addition, other risks oruncertainties not presently known to us or that we currently do not deem material could arise, any of which could also materially adversely affect us.The automotive retail industry is sensitive to unfavorable changes in general economic conditions and various other factors that could affect demandfor our products and services, which could have a material adverse effect on our business, our ability to implement our strategy, and our results ofoperations.Our future performance will be impacted by general economic conditions including: changes in employment levels; consumer demand, preferences andconfidence levels; the availability and cost of credit; fuel prices; levels of discretionary personal income; and interest rates. We also are subject to economic,competitive, and other conditions prevailing in the various markets in which we operate, even if those conditions are not prominent nationally.Retail vehicle sales are cyclical and historically have experienced periodic downturns characterized by oversupply and weak demand, which could resultin a need for us to lower the prices at which we sell vehicles, which would reduce our revenue per vehicle sold and our margins. Additionally, a shift inconsumer's vehicle preferences driven by pricing, fuel costs or other factors may have a material adverse effect on our revenues, margins and results ofoperations.Changes in general economic conditions may make it difficult for us to execute our business strategy. In such an event, we may be required to enter intocertain transactions in order to generate additional cash, which may include, but not be limited to, selling certain of our dealerships or other assets orincreasing borrowings under our existing, or any future, credit facilities. There can be no assurance that, if necessary, we would be able to enter into any suchtransactions in a timely manner or on reasonable terms, if at all. Furthermore, in the event we were required to sell dealership assets, the sale of any materialportion of such assets could have a material adverse effect on our revenue and profitability.15Table of ContentsAdverse conditions affecting one or more of the vehicle manufacturers with which we hold franchises or their inability to deliver a desirable mix ofvehicles that our consumers demand, could have a material adverse effect on our business, results of operations, financial condition, and cash flows.Historically, we have generated most of our revenue through new vehicle sales, and new vehicle sales also tend to lead to sales of higher-margin productsand services, such as finance and insurance products and vehicle related parts and service. As a result, our profitability is dependent to a great extent onvarious aspects of vehicle manufacturers' operations, many of which are outside of our control. Our ability to sell new vehicles is dependent on manufacturers'ability to design and produce, and willingness to allocate and deliver to our dealerships, a desirable mix of popular new vehicles that consumers demand.Popular vehicles may often be difficult to obtain from manufacturers for a number of reasons, including the fact that manufacturers generally allocate theirvehicles to dealerships based on sales history and capital expenditures associated with such dealerships. Further, if a manufacturer fails to produce desirablevehicles or develops a reputation for producing undesirable vehicles or produces vehicles that do not comply with applicable laws or governmentregulations, and we own dealerships that sell that manufacturer's vehicles, our revenues from those dealerships could be adversely affected as consumers shifttheir vehicle purchases away from that brand.Although we seek to limit our dependence on any one vehicle manufacturer, there can be no assurance that the brand mix allocated and delivered to ourdealerships by the manufacturers will be appropriate or sufficiently diverse, to protect us from a significant decline in the desirability of vehiclesmanufactured by a particular manufacturer or disruptions in a manufacturer's ability to produce vehicles. For the year ended December 31, 2016,manufacturers representing 5% or more of our revenues from new vehicle sales were as follows:Manufacturer (Vehicle Brands): % of TotalNew VehicleRevenuesAmerican Honda Motor Co., Inc. (Honda and Acura) 21%Toyota Motor Sales, U.S.A., Inc. (Toyota and Lexus) 19%Ford Motor Company (Ford and Lincoln) 15%Nissan North America, Inc. (Nissan and Infiniti) 14%Mercedes-Benz USA, LLC (Mercedes-Benz, Smart and Sprinter) 8%BMW of North America, LLC (BMW and Mini) 7%Similar to automotive retailers, vehicle manufacturers may be affected by the long-term U.S. and international economic climate. In addition, we remainvulnerable to other matters that may impact the manufacturers of the vehicles we sell, many of which are outside of our control, including: (i) changes in theirrespective financial condition; (ii) changes in their respective marketing efforts; (iii) changes in their respective reputation; (iv) manufacturer and otherproduct defects, including recalls; (v) changes in their respective management; (vi) disruptions in the production and delivery of vehicles and parts due tonatural disasters or other reasons; and (vii) issues with respect to labor relations. Our business is highly dependent on consumer demand and brandpreferences for our manufacturers products. Manufacturer recall campaigns are a common occurrence that have accelerated in frequency and scope over thelast several years. Manufacturer recall campaigns could adversely affect our new and used vehicle sales or customer residual trade-in valuations, could causeus to temporarily remove vehicles from our inventory, could force us to incur increased costs, and could expose us to litigation and adverse publicity relatedto the sale of recalled vehicles, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. Vehiclemanufacturers that produce vehicles outside of the U.S. are subject to additional risks including changes in duties, fluctuations in foreign currency exchangerates, regulations governing imports and the costs related thereto, and foreign governmental regulations.Adverse conditions that materially affect a vehicle manufacturer and its ability to profitably design, market, produce or distribute desirable new vehiclescould in turn materially adversely affect our ability to (i) sell vehicles produced by that manufacturer, (ii) obtain or finance our new vehicle inventories, (iii)access or benefit from manufacturer financial assistance programs, (iv) collect in full or on a timely basis any amounts due therefrom, and/or (v) obtain othergoods and services provided by the impacted manufacturer. In addition, we depend on manufacturers' ability to design, produce, and supply parts to us andany failure to do so could have a material adverse effect on our parts and services business. Our business, results of operations, financial condition, and cashflows could be materially adversely affected as a result of any event that has an adverse effect on any vehicle manufacturer.In addition, if a vehicle manufacturer's financial condition worsens and it seeks protection from creditors in bankruptcy or similar proceedings, orotherwise under the laws of its jurisdiction of organization, (i) the manufacturer could seek to terminate or reject all or certain of our franchises, (ii) if themanufacturer is successful in terminating all or certain of our franchises, we may not receive adequate compensation for those franchises, (iii) our cost toobtain financing for our new vehicle inventory16Table of Contentsmay increase or no longer be available from such manufacturer's captive finance subsidiary, (iv) consumer demand for such manufacturer's products could bematerially adversely affected, especially if costs related to improving such manufacturer's financial condition are factored into the price of its products, (v)there may be a significant disruption in the availability of consumer credit to purchase or lease that manufacturer's vehicles or negative changes in the termsof such financing, which may negatively impact our sales, or (vi) there may be a reduction in the value of receivables and inventory associated with thatmanufacturer, among other things. The occurrence of any one or more of these events could have a material adverse effect on our business, results ofoperations, financial condition, and cash flows.Our outstanding indebtedness, ability to incur additional debt and the provisions in the agreements governing our debt, and certain other agreements,could have a material adverse effect on our business, financial condition, results of operations, and cash flows.As of December 31, 2016, we had total debt of $931.3 million, which excludes total floor plan notes payable of $781.8 million. We have the ability toincur substantial additional debt in the future to finance, among other things, acquisitions, working capital and capital expenditures, and new and usedvehicle inventory, as well as to refinance new and used vehicle inventory, subject in each case to the restrictions contained in our debt instruments and otheragreements existing at the time such indebtedness is incurred.Our debt service obligations could have important consequences to us for the foreseeable future, including the following: (i) our ability to obtainadditional financing for acquisitions, capital expenditures, working capital or other general corporate purposes may be impaired; (ii) a substantial portion ofour cash flow from operating activities must be dedicated to the payment of principal and interest on our debt, thereby reducing the funds available to us forour operations and other corporate purposes; (iii) some of our borrowings are and will continue to be at variable rates of interest, which exposes us to risks ofinterest rate increases; and (iv) we may be or become substantially more leveraged than some of our competitors, which may place us at a relative competitivedisadvantage and make us more vulnerable to changes in market conditions and governmental regulations.In addition to our ability to incur additional debt in the future, there are operating and financial restrictions and covenants, such as leverage covenants, incertain of our debt and mortgage agreements, including the agreement governing our senior credit facility, the indenture governing our senior notes and ourmortgage agreements and related mortgage guarantees, as well as certain other agreements to which we are a party that may adversely affect our ability tofinance our future operations or capital needs or to pursue certain business activities. These limit, among other things, our ability to incur certain additionaldebt, create certain liens or other encumbrances, and make certain payments (including dividends and repurchases of our common stock and for investments).Certain of these agreements also require us to maintain compliance with certain financial ratios.Our failure to comply with any of these covenants in the future could constitute a default under the relevant agreement, which could, depending on therelevant agreement, (i) entitle the creditors under such agreement to terminate our ability to borrow under the relevant agreement and accelerate ourobligations to repay outstanding borrowings; (ii) require us to repay those borrowings; (iii) entitle the creditors under such agreement to foreclose on theproperty securing the relevant indebtedness; or (iv) prevent us from making debt service payments on certain of our other indebtedness, any of which wouldhave a material adverse effect on our business, financial condition, results of operations or cash flows. In many cases, a default under one of our debt,mortgage, or other agreements, could trigger cross-default provisions in one or more of our other debt or mortgage agreements. There can be no assurance thatour creditors would agree to an amendment or waiver of our covenants. In the event we obtain an amendment or waiver, we would likely incur additional feesand higher interest expense.In addition to the financial and other covenants contained in our various debt or mortgage agreements, certain of our lease agreements contain covenantsthat give our landlords the right to terminate the lease, seek significant cash damages, or evict us from the applicable property, if we fail to comply. Similarly,our failure to comply with any financial or other covenants in any of our framework agreements, would give the relevant manufacturer certain rights,including the right to reject proposed acquisitions, and may give it the right to repurchase its franchises from us. Events that give rise to such rights, and ourinability to acquire additional dealerships or the requirement that we sell one or more of our dealerships at any time, could inhibit the growth of our business,and could have a material adverse effect on our business, financial condition, results of operations and cash flows. Manufacturers may also have the right torestrict our ability to provide guarantees of our operating companies, pledges of the capital stock of our subsidiaries and liens on our assets, which couldmaterially adversely effect our ability to obtain financing for our business and operations on favorable terms or at desired levels, if at all.The occurrence of any one of these events may limit our ability to take strategic actions that would otherwise enable us to manage our business, in amanner in which we otherwise would, absent such limitations, which could materially adversely affect our business, financial condition, results of operationsand cash flows.17Table of ContentsOur business, financial condition, and results of operations may be materially adversely affected by increases in interest rates.We generally finance our purchases of new vehicle inventory, have the ability to finance the purchases of used vehicle inventory, and have theavailability to borrow funds for working capital under our senior secured credit facilities that charge interest at variable rates. Therefore, our interest expensefrom variable rate debt will rise with increases in interest rates. In addition, a significant rise in interest rates may also have the effect of depressing demand inthe interest rate sensitive aspects of our business, particularly new and used vehicle sales and the related profit margins and F&I revenue per vehicle, becausemost of our customers finance their vehicle purchases. As a result, rising interest rates may have the effect of simultaneously increasing our capital costs andreducing our revenues. Given our variable interest rate debt and floor plan notes payable outstanding as of December 31, 2016, each one percent increase inmarket interest rates would increase our total annual interest expense by as much as $7.7 million. When considered in connection with reduced expectedsales as and if interest rates increase, any such increase could materially adversely affect our business, financial condition and results of operations.Our vehicle sales, financial condition, and results of operations may be materially adversely affected by changes in costs or availability of consumerfinancing.The majority of vehicles purchased by our customers are financed. Reductions in the availability of credit to consumers have contributed to declines inour vehicle sales in past periods. Reductions in available consumer credit or increased costs of that credit, could result in a decline in our vehicle sales, whichwould have a material adverse effect on our financial condition and results of operations.Lenders that have historically provided financing to those buyers who, for various reasons, do not have access to traditional financing, including thosebuyers who have a poor credit history or lack the down payment necessary to purchase a vehicle, are often referred to as subprime lenders. If marketconditions cause subprime lenders to tighten credit standards, or if interest rates increase, the ability to obtain financing from subprime lenders for theseconsumers to purchase vehicles could become limited, resulting in a decline in our vehicle sales, which, in turn, could have a material adverse effect on ourfinancial condition and results of operations.Substantial competition in automobile sales and services may have a material adverse effect on our results of operations.The automotive retail and service industry is highly competitive with respect to price, service, location, and selection. Our competition includes: (i)franchised automobile dealerships in our markets that sell the same or similar new and used vehicles; (ii) privately negotiated sales of used vehicles; (iii)other used vehicle retailers, including regional and national vehicle rental companies; (iv) Internet-based used vehicle brokers that sell used vehicles toconsumers; (v) service center and parts supply chain stores; and (vi) independent service and repair shops.We do not have any cost advantage over other retailers in purchasing new vehicles from manufacturers. We typically rely on our advertising,merchandising, sales expertise, service reputation, strong local branding, and dealership location to sell new vehicles. Because our dealer agreements onlygrant us a non-exclusive right to sell a manufacturer's product within a specified market area, our revenues, gross profit and overall profitability may bematerially adversely affected if competing dealerships expand their market share. Further, our vehicle manufacturers may decide to award additionalfranchises in our markets in ways that negatively impact our sales.The Internet has become a significant part of the advertising and sales process in our industry. Customers are using the Internet to shop, and compareprices, for new and used vehicles, automotive repair and maintenance services, finance and insurance products, and other automotive products. If we areunable to effectively use the Internet to attract customers to our own on-line channels and mobile applications, and, in turn, to our stores, our business,financial condition, results of operations, and cash flows could be materially adversely affected. Additionally, the growing use of social media by consumersincreases the speed and extent that information and opinions can be shared, and negative posts or comments on social media about us or any of our stores,could damage our reputation and brand names, which could have a material adverse effect on our business, financial condition, results of operations, and cashflows.We are dependent upon our relationships with the manufacturers of vehicles that we sell and are subject to restrictions imposed by, and significantinfluence from, these vehicle manufacturers. Any of these restrictions or any changes or deterioration of these relationships could have a materialadverse effect on our business, financial condition, results of operations, and cash flows.We are dependent on our relationships with the manufacturers of the vehicles we sell, which have the ability to exercise a great deal of control andinfluence over our day-to-day operations, as a result of the terms of our dealer, framework, and related agreements. We may obtain new vehicles frommanufacturers, service vehicles, sell new vehicles, and display vehicle manufacturers' trademarks only to the extent permitted under these agreements. Theterms of these agreements may conflict18Table of Contentswith our interests and objectives and may impose limitations on key aspects of our operations, including acquisition strategy and capital spending.For example, manufacturers can set performance standards with respect to sales volume, sales effectiveness and customer satisfaction, and require us toobtain manufacturer consent before we can acquire dealerships selling a manufacturer's automobiles. From time to time, we may be precluded underagreements with certain manufacturers from acquiring additional franchises, or subject to other adverse actions, to the extent we are not meeting certainperformance criteria at our existing stores (with respect to matters such as sales volume, customer satisfaction and sales effectiveness) until our performanceimproves in accordance with the agreements, subject to applicable state franchise laws. In addition, many vehicle manufacturers place limits on the totalnumber of franchises that any group of affiliated dealerships may own and certain manufacturers place limits on the number of franchises or share of totalbrand vehicle sales that may be maintained by an affiliated dealership group on a national, regional or local basis, as well as limits on store ownership incontiguous markets. If we reach any of these limits, we may be prevented from making further acquisitions, which could adversely affect our future growth.We cannot provide assurance that manufacturers will approve future acquisitions timely, if at all, which could significantly impair the execution of ouracquisition strategy.In addition, certain manufacturers use a dealership's manufacturer-determined customer satisfaction index ("CSI") score as a factor governing participationin incentive programs. To the extent we do not meet minimum score requirements, our future payments may be materially reduced or we may be precludedfrom receiving certain incentives, which could materially adversely affect our business, financial condition, results of operations and cash flows.Manufacturers also typically establish facilities and minimum capital requirements for dealerships on a case-by-case basis. In certain circumstances,including as a condition to obtaining consent to a proposed acquisition, a manufacturer may require us to remodel, upgrade or move our facilities, andcapitalize the subject dealership at levels we would not otherwise choose to fund, causing us to divert our financial resources away from uses thatmanagement believes may be of higher long-term value to us. Delays in obtaining, or failing to obtain, manufacturer consent, would impede our ability toexecute acquisitions that we believe would integrate well with our overall strategy and limit our ability to expand our business.Manufacturers can also establish new franchises or relocate existing franchises, subject to applicable state franchise laws. The establishment or relocationof franchises in our markets could have a material adverse effect on the business, financial condition and results of operations of our dealerships in the marketin which the action is taken.Manufacturers may also limit our ability to divest one or more of our dealerships in a timely manner or at all. Most of our dealer agreements provide themanufacturer with a right of first refusal to purchase any of the manufacturer's franchises we seek to sell. Divestitures may also require manufacturer consentand failure to obtain consent would require us to find another potential buyer or wait until the buyer is able to meet the requirements of the manufacturer. Adelay in the sale of a dealership could have a negative impact on our business, financial condition, results of operations, and cash flows.Manufacturers may terminate or may not renew our dealer and framework agreements, or may compel us to divest our dealerships, for a number of reasons,including default under the agreement, any unapproved change of control (which specific changes vary from manufacturer to manufacturer, but whichinclude material changes in the composition of our Board of Directors during a specified time period, the acquisition of 5% or more of our voting stock byanother vehicle manufacturer or distributor, the acquisition of 20% or more of our voting stock by third parties, and the acquisition of an ownership interestsufficient to direct or influence management and policies), or certain other unapproved events (including certain extraordinary corporate transactions such asa merger or sale of all or substantially all of our assets). Triggers of these clauses are often based upon actions by our stockholders and are generally outside ofour control. Restrictions on any unapproved changes of ownership or management may adversely impact our value, as they may prevent or deter prospectiveacquirers from gaining control of us. In addition, actions taken by a manufacturer to exploit its bargaining position in negotiating the terms of renewals offranchise agreements or otherwise, could also have a material adverse effect on our revenues and profitability.There can be no assurances that we will be able to renew our dealer and framework agreements on a timely basis, on acceptable terms, or at all. Ourbusiness, financial condition, and results of operations may be materially adversely affected to the extent that our rights become compromised or ouroperations are restricted due to the terms of our dealer or framework agreements or if we lose franchises representing a significant percentage of our revenuesdue to termination or failure to renew such agreements.If vehicle manufacturers reduce or discontinue sales incentive, warranty or other promotional programs, our financial condition, results of operations,and cash flows may be materially adversely affected.We benefit from certain sales incentive, warranty, and other promotional programs of vehicle manufacturers that are intended to promote and support theirrespective new vehicle sales. Key incentive programs include: (i) customer rebates on19Table of Contentsnew vehicles; (ii) dealer incentives on new vehicles; (iii) special financing or leasing terms; (iv) warranties on new and used vehicles; and (v) sponsorship ofused vehicle sales by authorized new vehicle dealers.Vehicle manufacturers often make many changes to their incentive programs. Any reduction or discontinuation of manufacturers' incentive programs forany reason, including a supply and demand imbalance, may reduce our sales volume which, in turn, could have a material adverse effect on our results ofoperations, cash flows, and financial condition.If state laws that protect automotive retailers are repealed, weakened, or superseded by our framework agreements with manufacturers, ourdealerships will be more susceptible to termination, non-renewal, or renegotiation of their dealer agreements, which could have a material adverseeffect our business, financial condition, and results of operations.Applicable state laws generally provide that an automobile manufacturer may not terminate or refuse to renew a dealer agreement unless it has firstprovided the dealer with written notice setting forth "good cause" and stating the grounds for termination or non-renewal. Some state laws allow dealers tofile protests or petitions or allow them to attempt to comply with the manufacturer's criteria within a notice period to avoid the termination or non-renewal.Our framework agreements with certain manufacturers contain provisions that, among other things, attempt to limit the protections available to dealers underthese laws, and, though unsuccessful to date, manufacturers' ongoing lobbying efforts may lead to the repeal or revision of these laws. If these laws arerepealed in the states in which we operate, manufacturers may be able to terminate our franchises without providing advance notice, an opportunity to cure ora showing of good cause. Without the protection of these state laws, it may also be more difficult for us to renew our dealer agreements upon expiration.Changes in laws that provide manufacturers the ability to terminate our dealer agreements could materially adversely affect our business, financial condition,and results of operations. Furthermore, if a manufacturer seeks protection from creditors in bankruptcy, courts have held that the federal bankruptcy laws maysupersede the state laws that protect automotive retailers resulting in either the termination, non-renewal or rejection of franchises by such manufacturers,which, in turn, could materially adversely affect our business, financial condition, and results of operations.A failure of any of our management information systems or a data security breach with regard to personally identifiable information ("PII") about ourcustomers or employees could have a material adverse effect on our business, financial condition, results of operations, and cash flows.We depend on the efficient operation of our information systems. We rely on management information systems at our dealerships in all aspects of oursales and service efforts, as well in the preparation of our consolidated financial and operating data. All of our dealerships currently operate on a commonDMS. Our business could be significantly disrupted if (i) the DMS fails to integrate with other third-party management information systems, customerrelations management tools or other software, or to the extent any of these systems become unavailable to us for an extended period of time, or (ii) ourrelationship with our DMS provider or any other third-party provider deteriorates.Additionally, in the ordinary course of business, we and our partners receive significant PII about our customers in order to complete the sale or service ofa vehicle and related products. We also receive PII from our employees. Numerous state and federal regulations, as well as payment card industry and othervendor standards, govern the collection and maintenance of PII from consumers and other individuals. We believe the automotive dealership industry is aparticular target of identity thieves, as there are numerous opportunities for a data security breach, including cyber-security breaches, burglary, lost ormisplaced data, scams, or misappropriation of data by employees, vendors or unaffiliated third parties. Because cyber-attacks are increasing in number andsophistication and despite the security measures we have in place and any additional measures we may implement or adopt in the future, our facilities andsystems, and those of our third-party service providers, could be vulnerable to security breaches, computer viruses, lost or misplaced data, programmingerrors, scams, burglary, human errors, and/or acts of vandalism, or other events. Alleged or actual data security breaches can increase costs of doing business,negatively affect customer satisfaction and loyalty, expose us to negative publicity, individual claims or consumer class actions, administrative, civil orcriminal investigations or actions, and infringe on proprietary information, any of which could have a material adverse effect on our business, financialcondition, or results of operations.Our operations are subject to extensive governmental laws and regulations. If we are found to be in purported violation of or subject to liabilitiesunder any of these laws or regulations, or if new laws or regulations are enacted that adversely affect our operations, our business, our reputation,financial condition, results of operations, and prospects could suffer.The automotive retail industry, including our facilities and operations, is subject to a wide range of federal, state, and local laws and regulations, such asthose relating to motor vehicle sales, retail installment sales, leasing, finance and insurance, marketing, licensing, consumer protection, consumer privacy,escheatment, anti-money laundering, environmental, vehicle emissions and fuel economy, and health and safety. In addition, with respect to employmentpractices, we are subject to various laws and regulations, including complex federal, state, and local wage and hour and anti-discrimination laws. Theviolation of20Table of Contentsthe laws or regulations to which we are subject could result in administrative, civil, or criminal sanctions against us, which may include a cease and desistorder against the subject operations or even revocation or suspension of our license to operate the subject business, as well as significant fines and penalties.Violation of certain laws and regulations to which we are subject may also subject us to consumer class action or other lawsuits or governmentalinvestigations and adverse publicity. We currently devote significant resources to comply with applicable federal, state, and local regulation of health, safety,environmental, zoning, and land use regulations, and we may need to spend additional time, effort, and money to keep our operations and existing oracquired facilities in compliance therewith.In addition, there is a risk that our employees could engage in misconduct that violates the laws or regulations to which we are subject. It is not alwayspossible to detect or deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in all cases. If any of ouremployees were to engage in misconduct or were to be accused of such misconduct, our business and reputation could be adversely affected.The Dodd-Frank Act, which was signed into law on July 21, 2010, established the CFPB, a new independent federal agency funded by the United StatesFederal Reserve with broad regulatory powers and limited oversight from the United States Congress. Although automotive dealers are generally excluded,the Dodd-Frank Act could lead to additional, indirect regulation of automotive dealers, in particular, their sale and marketing of finance and insuranceproducts, through its regulation of automotive finance companies and other financial institutions. In addition, the CFPB possesses supervisory authority withrespect to certain non-bank lenders, including automotive finance companies, participating in automotive financing. The Dodd-Frank Act also provided theFTC with new and expanded authority regarding automotive dealers. Since then, the FTC has been gathering information on consumer protection issuesthrough roundtables, public comments and consumer surveys. The FTC may exercise its additional rulemaking authority to expand consumer protectionregulations relating to the sale, financing and leasing of motor vehicles. In 2014, the FTC implemented an enforcement initiative relating to the advertisingpractices of automotive dealers. In connection therewith, in May 2016, we signed a consent order with the FTC to settle allegations that in certain instances our advertisements did not adequately disclose information about used vehicles with open safety recalls. Under the consent order, which remains subject toFTC approval, we did not agree to make any payments or admit wrong-doing, but we did agree to make certain disclosures in advertisements and complywith certain recordkeeping obligations.In March 2013, the CFPB issued supervisory guidance highlighting its concern that the practice of automotive dealers being compensated for arrangingcustomer financing through discretionary markup of wholesale rates offered by financial institutions ("dealer markup") results in a significant risk of pricingdisparity in violation of The Equal Credit Opportunity Act ("ECOA"). The CFPB recommended that financial institutions under its jurisdiction take steps toensure compliance with the ECOA, which may include imposing controls on dealer markup, monitoring and addressing the effects of dealer markup policies,and eliminating dealer discretion to markup buy rates and fairly compensating dealers using a different mechanism. In response, certain financial institutionsare conducting monitoring programs relating to dealer markups and may take further steps. Since issuing its supervisory guidance, the CFPB has announcedthe resolution of certain enforcement actions against automotive lenders involving allegations that certain presumed-minority borrowers who had obtainedautomobile financing were charged higher dealer markups as a result of such lender's policy and practice of allowing dealer markup. In each case, therespective automotive lender paid restitution to the affected borrowers and either paid financial penalties or agreed to reduce dealer discretion. Additionalinvestigations and actions by the CFPB and the United States Department of Justice (the "DOJ") against automotive lenders are likely to occur in the future.Continued pressure from the CFPB, DOJ, and other federal agencies could lead to significant changes in the manner that dealers are compensated forarranging customer financing, and while it is difficult to predict how any such changes might impact us, any adverse changes could have a material adverseimpact on our finance and insurance business and results of operations. Furthermore, we expect that new laws and regulations, particularly at the federal level,in other areas may be enacted, which could also materially adversely impact our business.Environmental laws and regulations govern, among other things, discharges into the air and water, storage of petroleum substances and chemicals, thehandling and disposal of solid and hazardous wastes, investigation and remediation of contamination, and otherwise protective of health, safety and theenvironment. Similar to many of our competitors, we have incurred and expect to continue to incur capital and operating expenditures and other costs tocomply with such federal and state statutes. In addition, we may become subject to broad liabilities arising out of contamination at our currently and formerlyowned or operated facilities, at locations to which hazardous substances were transported from such facilities, and at such locations related to entitiesformerly affiliated with us. For such potential liabilities, we believe we are entitled to indemnification from other entities. However, we cannot assure you thatsuch entities will view their obligations as we do or will be able or willing to satisfy them. Failure to comply with applicable laws and regulations, orsignificant additional expenditures required to maintain compliance therewith, could have a material adverse effect on our business, results of operations,financial condition, or cash flows.A significant judgment against us or the imposition of a significant fine could have a material adverse effect on our business, financial condition andfuture prospects. We further expect that, from time to time, new laws and regulations,21Table of Contentsparticularly in the environmental area will be enacted, and compliance with such laws, or penalties for failure to comply, could significantly increase ourcosts. For example, vehicle manufacturers are subject to government-mandated fuel economy and greenhouse gas emission standards, which continue tochange and become more stringent over time. Specifically, vehicle manufacturers are subject to corporate average fuel economy standards ("CAFE") forpassenger cars and light trucks. Failure of a manufacturer to develop passenger vehicles and light trucks that meet CAFE and/or greenhouse gas emissionstandards could subject the manufacturer to substantial penalties, increase the cost of vehicles sold to us, and adversely affect our ability to market and sellvehicles to meet consumer needs and desires, which could have a material adverse effect on our business, results of operations, financial condition, or cashflows.We are subject to risks related to the provision of employee health care benefits, which could have a material adverse effect on our business, financialcondition, results of operations, and cash flows.We use a combination of insurance and self-insurance for health care plans. We record expenses under those plans based on estimates of the costs ofexpected claims, administrative costs, stop-loss insurance premiums, and expected health care trends. Actual costs under these plans are subject to variabilitythat is dependent upon participant enrollment, demographics, and the actual costs of claims made. Negative trends in any of these areas could cause us toincur additional unplanned health care costs, which could adversely impact our business, financial condition, results of operations, and cash flows. Inaddition, if enrollment in our health care plans increases significantly, the additional costs that we will incur may be significant enough to materially affectour business, financial condition, results of operations, and cash flows.The Patient Protection and Affordable Care Act, signed into law on March 23, 2010, has and may continue to increase our annual employee health carecosts that we fund. We cannot predict the extent of the effect that this statute, or any future state or federal healthcare legislation or regulation, will have onus. However, any change to the current healthcare regulatory framework or additional expansion in government’s role in the U.S. healthcare industry couldresult in significant long-term costs to us, which could in turn adversely affect our business, results of operations and financial condition.We are, and expect to continue to be, subject to legal and administrative proceedings, which, if the outcomes are adverse to us, could have a materialadverse effect on our business, financial condition, results of operations, and cash flows.We are involved and expect to continue to be involved in numerous legal proceedings arising out of the conduct of our business, including litigationwith customers, employment-related lawsuits, class actions, purported class actions, and actions brought by governmental authorities. We do not believe thatthe ultimate resolution of any known matters will have a material adverse effect on our business, financial condition, results of operations, or cash flows.However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a materialadverse effect on our business, financial condition, results of operations and cash flows.Property loss or other uninsured liabilities could have a material adverse impact on our results of operations.We are subject to substantial risk of property loss due to the significant concentration of property at dealership locations, including vehicles and parts.We have historically experienced business interruptions from time to time at several of our dealerships, due to adverse weather conditions or otherextraordinary events, such as hurricanes, tornadoes, floods, and hail storms. Concentration of property at dealership locations also makes the automotiveretail business particularly vulnerable to theft, fraud, and misappropriation of assets. Illegal or unethical conduct by employees, customers, vendors, andunaffiliated third parties can result in loss of assets, disrupt operations, impact brand reputation, jeopardize manufacturer and other relationships, result in theimposition of fines or penalties, and subject us to governmental investigations or lawsuits. While we maintain insurance to protect against a number of losses,this insurance coverage often contains significant deductibles, which we must pay prior to obtaining insurance coverage. In addition, we "self-insure" aportion of our potential liabilities, meaning we do not carry insurance from a third-party for such liabilities, and are wholly responsible for any related lossesincluding for certain potential liabilities that some states prohibit the maintenance of insurance to protect against. In certain instances, our insurance may notfully cover a loss depending on the applicable deductible or the magnitude and nature of the claim. Additionally, changes in the cost or availability ofinsurance in the future could substantially increase our costs to maintain our current level of coverage or could cause us to reduce our insurance coverage andincrease our self-insured risks. To the extent we incur significant additional costs for insurance, suffer losses that are not covered by in-force insurance orsuffer losses for which we are self-insured, our financial condition, results of operations, or cash flows could be materially adversely impacted.A decline in our credit rating or a general disruption in the credit markets could negatively impact our liquidity and ability to conduct our operations.A deterioration of our credit rating, or a general disruption in the credit markets, could limit our ability to obtain credit on terms acceptable to us, or at all.In addition, uncertain economic conditions or the re-pricing of certain credit risks may make it more difficult for us to obtain one or more types of funding inthe amounts, or at rates considered acceptable to us, at any given22Table of Contentstime. Our inability to access necessary or desirable funding, or to enter into certain related transactions, at times and at costs deemed appropriate by us, couldhave a negative impact on our liquidity and our ability to conduct our operations. Any of these developments could also reduce the ability or willingness ofthe financial institutions that have extended credit commitments to us, or that have entered into hedge or similar transactions with us, to fulfill theirobligations to us, which also could have a material adverse effect on our liquidity and our ability to conduct our operations.We are subject to risks of doing business with manufacturers that produce vehicles outside of the United States including import product restrictions orlimitations, foreign trade risks, and currency valuations.A 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 risks of doing business outside of the United States and importing merchandise, including import duties, exchange rates, traderestrictions, work stoppages, natural or man-made disasters, and general political and socio-economic conditions in other countries. The United States or thecountries from which our products are imported may, from time to time, impose new quotas, duties, tariffs or other restrictions or limitations, or adjustpresently prevailing quotas, duties, or tariffs, which may affect our operations and our ability to purchase imported vehicles and/or parts at reasonable prices.Relative weakness of the U.S. dollar against foreign currencies in the future may result in an increase in costs to us and in the retail price of such vehicles orparts, which could discourage consumers from purchasing such vehicles and adversely impact our revenues and profitability.If we are unable to acquire and successfully integrate additional dealerships into our business, our revenue and earnings growth may be adverselyaffected.We believe that the automotive retailing industry is a mature industry whose sales are significantly impacted by the prevailing economic climate, bothnationally and in local markets. Accordingly, we believe that our future growth depends in part on our ability to manage expansion, control costs in ouroperations and acquire and effectively integrate acquired dealerships into our organization. When seeking to acquire other dealerships, we often competewith several other national, regional and local dealership groups, and other strategic and financial buyers, some of which may have greater financial resourcesthan us. Competition for attractive acquisition targets may result in fewer acquisition opportunities for us and we may have to forgo acquisition opportunitiesto the extent we cannot negotiate such acquisitions on acceptable terms.We also face additional risks commonly encountered with growth through acquisitions. These risks include, but are not limited to: (i) failing to obtainmanufacturers' consents to acquisitions of additional franchises; (ii) incurring significant transaction-related costs for both completed and failed acquisitions;(iii) incurring significantly higher capital expenditures and operating expenses; (iv) failing to integrate the operations and personnel of the acquireddealerships and impairing relationships with employees; (v) incorrectly valuing entities to be acquired or incurring undisclosed liabilities at acquireddealerships; (vi) disrupting our ongoing business and diverting our management resources to newly acquired dealerships; (vii) failing to achieve expectedperformance levels; and (viii) impairing relationships with manufacturers and customers as a result of changes in management.We may not adequately anticipate all the demands that our growth will impose on our personnel, procedures and structures, including our financial andreporting control systems, data processing systems, and management structure. Moreover, our failure to retain qualified management personnel at anyacquired dealership may increase the risks associated with integrating the acquired dealership. If we cannot adequately anticipate and respond to thesedemands, we may fail to realize acquisition synergies and our resources will be focused on incorporating new operations into our structure rather than onareas that may be more profitable.We are a holding company and as a result are dependent on our operating subsidiaries to generate sufficient cash and distribute cash to us to serviceour indebtedness and fund our ongoing operations.Our ability to make payments on our indebtedness and fund our ongoing operations depends on our operating subsidiaries' ability to generate cash in thefuture and distribute that cash to us. It is possible that our subsidiaries may not generate cash from operations in an amount sufficient to enable us to serviceour indebtedness. In addition, many of our subsidiaries are required to comply with the provisions of franchise agreements, dealer agreements, otheragreements with manufacturers, mortgages, and credit facility providers. Many of these agreements contain minimum working capital or net worthrequirements, and are subject to change at least annually. Although the requirements contained in these agreements did not restrict our subsidiaries fromdistributing cash to us as of December 31, 2016, unexpected changes to our franchise agreements, dealer agreements, or other agreements with manufacturerscould require us to alter the manner in which we distribute or use cash. If our operating subsidiaries are unable to generate and distribute sufficient cash to usto service our indebtedness and fund our ongoing operations, our financial condition may be materially adversely affected.23Table of ContentsGoodwill and manufacturer franchise rights comprise a significant portion of our total assets. We must test our goodwill and manufacturer franchiserights for impairment at least annually, which could result in a material, non-cash write-down of goodwill or manufacturer franchise rights and couldhave a material adverse effect on our results of operations and stockholders' equity.Our principal intangible assets are goodwill and our rights under our franchise agreements with vehicle manufacturers. Goodwill and indefinite-livedintangible assets, including manufacturer franchise rights, are subject to impairment assessments at least annually (or more frequently when events or changesin circumstances indicate that an impairment may have occurred), by applying a qualitative or quantitative assessment. A decrease in our marketcapitalization or profitability increases the risk of goodwill impairment. Negative or declining cash flows or a decline in actual or planned revenues for ourstores increases the risk of manufacturer franchise rights impairment. An impairment loss could have a material adverse effect on our results of operations andstockholders' equity.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesWe lease our corporate headquarters, which is located at 2905 Premiere Parkway, NW, Suite 300, Duluth, Georgia 30097. As of December 31, 2016, ouroperations encompassed 77 franchised dealership locations throughout 8 states, two stand-alone used vehicle stores in Florida, and 23 collision repair centersas follows: Dealerships Collision Repair CentersDealership Group: Owned Leased Owned LeasedCoggin Automotive Group 12 4(a) 5 2Courtesy Autogroup 5 3 1 1Crown Automotive Company 13 5(b) 3 —David McDavid Auto Group 7 — 4 1Gray-Daniels Auto Family — 5(b) — 1Nalley Automotive Group 14 2 2 2Plaza Motor Company 6 1(b) — 1Stand-alone used vehicle stores 1 1 — — Total 58 21 15 8________________________________________(a)Includes one dealership that leases a new vehicle facility and operates a separate used vehicle facility that is owned.(b)Includes one dealership location where we lease the underlying land but own the building facilities on that land.Item 3. Legal ProceedingsFrom time to time, we and our dealerships are involved and will continue to be involved in various claims relating to, and arising out of, our businessand 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 ofviolations of manufacturer agreements or policies, (ii) compliance with lender rules and covenants and (iii) payments made to government authorities relatingto 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 evaluatepending and threatened claims and establish loss contingency reserves based upon outcomes we currently believe to be probable and reasonably estimable.We do not believe that the ultimate resolution of the claims we are involved in will have a material adverse effect on our business, results of operations,financial condition, cash flow and prospects.Item 4. Mine Safety DisclosuresNot applicable.24Table of ContentsPART IIItem 5.Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity SecuritiesOur common stock is traded on the New York Stock Exchange (the "NYSE") under the symbol "ABG." Quarterly information concerning our high and lowclosing sales price per share of our common stock as reported by the NYSE is as follows: High LowFiscal Year Ended December 31, 2015 First Quarter$83.10 $70.12Second Quarter92.73 82.26Third Quarter95.54 76.54Fourth Quarter$87.27 $66.76Fiscal Year Ended December 31, 2016 First Quarter$66.52 $45.07Second Quarter62.61 51.97Third Quarter61.44 50.57Fourth Quarter$65.30 $48.85We did not pay any dividends during any of these periods. On February 22, 2017, the last reported sale price of our common stock on the NYSE was$68.45 per share, and there were approximately 143 record holders of our common stock.Our credit agreement with Bank of America, N.A. ("Bank of America"), as administrative agent, and the other agents and lenders party thereto (the "2016Senior Credit Facility") and the Indenture governing our 6.0% Notes (the "Indenture") currently allow for us to make certain restricted payments, includingpayments to repurchase shares of our common stock, among other things, subject to our continued compliance with certain covenants. For additionalinformation, see the "Covenants and Defaults" section within "Liquidity and Capital Resources."On January 30, 2014, our Board of Directors authorized our current share repurchase program (the "Repurchase Program"). On January 27, 2016, our Boardof Directors reset the authorization under our Repurchase Program to $300.0 million in the aggregate, for the repurchase of our common stock in open markettransactions or privately negotiated transactions, from time to time. During the year ended December 31, 2016, we repurchased 3,730,642 shares of ourcommon stock under the Repurchase Program for a total of $211.9 million. As of December 31, 2016 we had the authorization from our Board of Directors torepurchase up to an additional $88.1 million of our common stock.The following table sets forth information about our share repurchases during each month in the quarter ended December 31, 2016.Period Total Number ofShares Purchased Average PricePaid per Share Total Number of SharesPurchased as Part ofPublicly Announced Plansor Programs Approximate Dollar Value ofShares that May Yet bePurchased Under the Plans orPrograms (in millions)10/01/2016 - 10/31/2016 39,700 $50.27 39,700 $136.111/01/2016 - 11/30/2016 572,347 $52.75 572,347 $105.912/01/2016 - 12/31/2016 290,565 $61.37 290,565 $88.125Table of ContentsPERFORMANCE GRAPHThe following graph furnished by us shows the value as of December 31, 2016, of a $100 investment in our common stock made on December 31, 2011,as compared with similar investments based on (i) the value of the S&P 500 Index (with dividends reinvested) and (ii) the value of a market-weighted PeerGroup Index composed of the common stock of AutoNation, Inc.; Sonic Automotive, Inc.; Group 1 Automotive, Inc.; Penske Automotive Group, Inc.; andLithia Motors, Inc., in each case on a "total return" basis assuming the reinvestment of any dividends. The market-weighted Peer Group Index values werecalculated from the beginning of the performance period. The historical stock performance shown below is not necessarily indicative of future expectedperformance.The forgoing graph is not, and shall not be deemed to be, filed as part of our annual report on Form 10-K. Such graph is not, and will not be deemed, filedor incorporated by reference into any filing by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent specificallyincorporated by reference therein by us.26Table of ContentsItem 6. Selected Financial DataThe following table sets forth selected consolidated financial data as of and for the years ended December 31, 2016, 2015, 2014, 2013, and 2012. Certainreclassifications of amounts previously reported have been made to the accompanying income statement data and balance sheet data in order to conform tocurrent presentation. The following information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition andResults of Operations" and our Consolidated Financial Statements and the Notes thereto, included elsewhere in this annual report on Form 10-K. For the Years Ended December 31,Income Statement Data: 2016 2015 2014 2013 2012 (in millions, except per share data)REVENUE: New vehicle $3,611.9 $3,652.5 $3,230.6 $2,952.2 $2,608.3Used vehicle 1,876.4 1,931.7 1,741.5 1,564.2 1,301.6Parts and service 778.5 740.7 666.6 611.6 565.3Finance and insurance, net 261.0 263.4 229.0 206.9 166.6TOTAL REVENUE 6,527.8 6,588.3 5,867.7 5,334.9 4,641.8COST OF SALES 5,469.1 5,527.5 4,900.5 4,458.9 3,878.0GROSS PROFIT 1,058.7 1,060.8 967.2 876.0 763.8OPERATING EXPENSES: Selling, general, and administrative expenses 732.5 729.9 671.6 617.8 554.8Depreciation and amortization 30.7 29.5 26.4 24.3 22.6Other operating (income) expense, net (2.3) (0.2) 1.0 7.8 0.4INCOME FROM OPERATIONS 297.8 301.6 268.2 226.1 186.0OTHER (INCOME) EXPENSE: Floor plan interest expense 19.3 16.1 12.4 12.5 11.6Other interest expense, net 53.1 44.0 38.9 39.0 35.6Swap interest expense 3.1 3.0 2.0 2.5 5.0Convertible debt discount amortization — — — — 0.4Loss on extinguishment of long-term debt, net — — 31.9 6.8 —(Gain) loss on divestitures (45.5) (34.9) — — 0.1Total other (income) expenses, net 30.0 28.2 85.2 60.8 52.7INCOME FROM CONTINUING OPERATIONS BEORE INCOME TAX 267.8 273.4 183.0 165.3 133.3Income tax expense 100.6 104.0 71.0 64.2 50.0INCOME FROM CONTINUING OPERATIONS 167.2 169.4 112.0 101.1 83.3Discontinued operations, net of tax — (0.2) (0.4) 8.0 (1.1)NET INCOME $167.2 $169.2 $111.6 $109.1 $82.2Income from continuing operations per common share: Basic $7.43 $6.44 $3.75 $3.29 $2.68Diluted $7.40 $6.42 $3.72 $3.25 $2.6427Table of Contents As of December 31,Balance Sheet Data: 2016 2015 2014 2013 2012 (in millions)Working capital $227.5 $323.4 $225.4 $265.1 $195.7Inventories (a) 894.9 917.2 886.0 767.7 655.1Total assets 2,336.1 2,294.1 2,178.0 1,879.4 1,652.3Floor plan notes payable (b) 781.8 712.2 766.8 609.5 562.1Total debt 926.7 954.3 697.4 545.1 457.0Total shareholders' equity $279.7 $314.5 $444.9 $490.6 $402.8______________________________(a)Includes amounts classified as assets held for sale on our Consolidated Balance Sheets.(b)Includes amounts classified as liabilities associated with assets held for sale on our Consolidated Balance Sheets.28Table of ContentsItem 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsOVERVIEWWe are one of the largest automotive retailers in the United States. As of December 31, 2016 we owned and operated 93 new vehicle franchises (77dealership locations), representing 28 brands of automobiles, and 23 collision centers, in 16 metropolitan markets, within eight states. Our stores offer anextensive range of automotive products and services, including new and used vehicles; parts and service, which include repair and maintenance services,replacement parts, and collision repair service; and finance and insurance products. As of December 31, 2016, our new vehicle revenue brand mix consistedof 45% imports, 34% luxury, and 21% domestic brands. In addition, as of December 31, 2016 we owned and operated two stand-alone used vehicle stores inFlorida.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 otherdealers at auction ("wholesale") (the terms "used retail" and "wholesale" collectively referred to as "used"); (iii) repair and maintenance services, includingcollision repair, the sale of automotive replacement parts, and the reconditioning of used vehicles (collectively referred to as "parts and service"); and (iv) thearrangement of third-party vehicle financing and the sale of a number of vehicle protection products (defined below and collectively referred to as "F&I"). Weevaluate 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 onaggregate gross profit, and our F&I business based on F&I gross profit per vehicle sold.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 animportant indicator of comparative financial performance and provides relevant information to assess our performance. Same store amounts consist ofinformation from dealerships for identical months in each comparative period, commencing with the first month we owned the dealership. Additionally,amounts related to divested dealerships are excluded from each comparative period.Our continued organic growth is dependent upon the execution of our balanced automotive retailing and service business strategy, the continued strengthof our brand mix, and the production and allocation of desirable vehicles from the automobile manufacturers whose brands we sell. Our vehicle sales havehistorically fluctuated with product availability as well as local and national economic conditions, including consumer confidence, availability of consumercredit, 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, vehiclesafety concerns or a vehicle's failure to meet environmental related requirements. We believe that the impact on our business of any future negative trends innew vehicle sales would be partially mitigated by (i) the expected relative stability of our parts and service operations over the long-term, (ii) the variablenature of significant components of our cost structure, and (iii) our diversified brand mix.The United States automotive retail market showed continued year-over-year improvement in 2016, with new vehicle sales increasing slightly to 17.6million compared to 17.5 million in 2015. The automotive retail business continues to benefit from the availability of credit to consumers, relatively lowoverall unemployment levels, fuel prices, and interest rates. Demand for new vehicles is generally highest during the second and third quarters of each yearand, accordingly, we expect our revenues to generally be higher during these periods. We typically experience higher sales of luxury vehicles in the fourthquarter, which have higher average selling prices and gross profit per vehicle retailed. Revenues and operating results may be impacted significantly fromquarter-to-quarter by changing economic conditions, vehicle manufacturer incentive programs, or adverse weather events.Our gross profit margin varies with our revenue mix. Sales of new vehicles generally result in lower gross profit margin than used vehicle sales, sales ofparts 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, weexpect 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 asadvertising), which we believe allows us to adapt to changes in the retail environment over the long-term. We evaluate commissions paid to salespeople as apercentage of retail vehicle gross profit, advertising expense on a per vehicle retailed ("PVR") basis, and all other SG&A expenses in the aggregate as apercentage of total gross profit.We had total available liquidity of $406.0 million as of December 31, 2016, which consisted of cash and cash equivalents of $3.4 million, $70.9 millionof funds in our floor plan offset accounts, $190.0 million of availability under our new vehicle floor plan facility that is able to be re-designated to ourrevolving credit facility, $51.1 million of availability under our revolving29Table of Contentscredit facility, and $90.6 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.CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATESPreparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management tomake estimates and assumptions, that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities, as of the date of thefinancial statements, and reported amounts of revenues and expenses during the periods presented. On an ongoing basis, management evaluates theirestimates and assumptions and the effects of any such revisions are reflected in the financial statements, in the period in which they are determined to benecessary. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our Consolidated FinancialStatements. Set forth below are the policies and estimates that we have identified as critical to our business operations and understanding our results ofoperations, based on the high degree of judgment or complexity in their application.Revenue RecognitionRevenue from the sale of new and used vehicles (which excludes sales tax), is recognized upon the latest of delivery, signing of the sales contract orapproval of financing. Manufacturer incentives and rebates, including manufacturer holdbacks, floor plan interest assistance and certain advertisingassistance, are recognized as a reduction of new vehicle cost of sales at the time the related vehicles are sold.Revenue from the sale of parts, service, and collision repair work (which excludes sales tax), is recognized upon the delivery of parts to the customer or atthe time vehicle service or repair work is completed, as applicable.We receive commissions from third-party lending and insurance institutions for arranging customer financing and from the sale of vehicle servicecontracts, guaranteed auto protection (known as "GAP") insurance, and other insurance to customers (collectively "F&I"). We may be charged back for F&Icommissions in the event a contract is prepaid, defaulted upon, or terminated ("chargebacks"). F&I commissions are recorded at the time the associatedvehicle is sold. F&I commissions, net of estimated future chargebacks, are included in Finance and Insurance, net in the accompanying ConsolidatedStatements of Income. Additionally, we participate in future profits associated with the performance of the third-party held underlying portfolio for certainproducts pursuant to retrospective commission arrangements. Our retrospective portfolio income is recorded as revenue at the time it is received from ourthird-party providers.Used Vehicle Inventory Lower of Cost or Market Reserves—Our used vehicle inventory is stated at the lower of cost or market. We use the specific identification method to value our used vehicle inventories. Wemaintain a reserve for used vehicle inventory when cost basis exceeds fair value. In assessing lower of cost or market for used vehicles, we consider (i) the ageof our used vehicles, (ii) historical sales experience of used vehicles and (iii) current market conditions and trends in used vehicle sales. We also review andconsider the following metrics related to used vehicle sales (both on a recent and longer-term historical basis): (i) days of supply in our used vehicleinventory, (ii) used vehicle units sold at less than original cost as a percentage of total used vehicles sold and (iii) average vehicle selling price of usedvehicle units sold at less than original cost. We then determine the appropriate level of reserve required to reduce our used vehicle inventory to the lower ofcost or market, and record the resulting adjustment in the period in which we determine a loss has occurred. The level of reserve determined to be appropriatefor each reporting period is considered to be a permanent inventory write-down and therefore is only released upon the sale of the related inventory. Our usedvehicle inventory reserves are as follows:Used vehicle lower of cost or market reserve: Reserve Amount (inmillions) Percentage of GrossUsed Vehicle InventoryAs of December 31, 2016 $5.8 4.2%As of December 31, 2015 $5.4 3.9%A 100 basis point change in our estimated reserve rate would change our used vehicle inventory reserve by approximately $1.4 million as ofDecember 31, 2016.F&I Chargeback Reserve—We reserve for chargebacks on finance, insurance, or vehicle service contract commissions received. The reserve is established based on historicaloperating results and the termination provisions of the applicable contracts. This data is30Table of Contentsevaluated on a product-by-product basis. Our loss histories vary depending on the product, but generally range from 9% to 15% of F&I revenues. Our F&Icash chargebacks for the years ended December 31, 2016, 2015, and 2014 were $34.9 million, $31.3 million, and $25.8 million, respectively. Our chargebackreserves were $43.0 million and $38.1 million as of December 31, 2016 and December 31, 2015, respectively. Total chargebacks as a percentage of F&Irevenue for the years ended December 31, 2016, 2015, and 2014, were 14%, 13%, and 12%, respectively. A 100 basis point change in our estimated reserverate for future chargebacks, would change our finance and insurance chargeback reserve by approximately $3.5 million as of December 31, 2016.Insurance Reserves—We are self-insured for employee medical claims and maintain stop loss insurance for large-dollar individual claims. We have large deductible insuranceprograms for workers compensation, property and general liability claims. We maintain and review our claim and loss history to assist in assessing ourexpected future liability for these claims. We also use professional service providers, such as account administrators and actuaries, to help us accumulate andassess this information. Provisions for retained losses and deductibles are made by charges to expense based upon periodic evaluations of the estimatedultimate liabilities on reported and unreported claims.We had $14.5 million and $13.3 million of insurance reserves for both known and unknown employee medical, workers compensation, property, andgeneral liability claims, net of anticipated insurance recoveries, as of December 31, 2016 and December 31, 2015, respectively. Expenses associated withemployee medical, workers compensation, property, and general liability claims, including premiums for insurance coverage, for the years endedDecember 31, 2016, 2015, and 2014, totaled $30.9 million, $26.9 million, and $27.1 million, respectively.Goodwill and Manufacturer Franchise Rights—Goodwill represents the excess cost of an acquired business over the fair market value of its identifiable assets and liabilities. We have determined that,based on how we integrate acquisitions into our business, how the components of our business share resources and interact with one another, and how wereview the results of our operations, that we have several geographic market-based operating segments. We have determined that the dealerships in each ofour operating segments are components that are aggregated into several geographic market-based reporting units for the purpose of testing goodwill forimpairment, as they (i) have similar economic characteristics, (ii) offer similar products and services (all of our franchised dealerships offer new and usedvehicles, parts and service, and arrange for third-party vehicle financing and the sale of insurance products), (iii) have similar customers, (iv) have similardistribution and marketing practices (all of our dealerships distribute products and services through dealership facilities that market to customers in similarways) and (v) operate under similar regulatory environments.Our only significant identifiable intangible assets, other than goodwill, are our rights under franchise agreements with manufacturers, which are recordedat an individual franchise level. The fair value of our manufacturer franchise rights are determined at the acquisition date, by discounting the projected cashflows specific to each franchise. We have determined that manufacturer franchise rights have an indefinite life as there are no economic, contractual or otherfactors that limit their useful lives, and they are expected to generate cash flows indefinitely due to the historically long lives of the manufacturers' brandnames. Furthermore, to the extent that any agreements evidencing our manufacturer franchise rights would expire, we expect that we would be able to renewthose agreements in the ordinary course of business.We do not amortize goodwill and other intangible assets that are deemed to have indefinite lives. We review goodwill and manufacturer franchise rightsfor impairment annually as of October 1st, or more often if events or circumstances indicate that any impairment may have occurred. We are subject tofinancial statement risk to the extent that goodwill becomes impaired due to decreases in the fair value of our automotive retail business or manufacturerfranchise rights become impaired due to decreases in the fair value of our individual franchises.We completed our annual intangible impairment tests as of October 1, 2016, and no impairments of goodwill or manufacturer franchise rights wererecognized as a result of such tests.31Table of ContentsRESULTS OF OPERATIONSThe Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015 For the Year Ended December 31, Increase(Decrease) %Change 2016 2015 (Dollars in millions, except per share data)REVENUE: New vehicle$3,611.9 $3,652.5 $(40.6) (1)%Used vehicle1,876.4 1,931.7 (55.3) (3)%Parts and service778.5 740.7 37.8 5 %Finance and insurance, net261.0 263.4 (2.4) (1)%TOTAL REVENUE6,527.8 6,588.3 (60.5) (1)%GROSS PROFIT: New vehicle187.1 203.0 (15.9) (8)%Used vehicle127.3 131.8 (4.5) (3)%Parts and service483.3 462.6 20.7 4 %Finance and insurance, net261.0 263.4 (2.4) (1)%TOTAL GROSS PROFIT1,058.7 1,060.8 (2.1) — %OPERATING EXPENSES (INCOME): Selling, general, and administrative732.5 729.9 2.6 — %Depreciation and amortization30.7 29.5 1.2 4 %Other operating income, net(2.3) (0.2) (2.1) NMINCOME FROM OPERATIONS297.8 301.6 (3.8) (1)%OTHER EXPENSES (INCOME): Floor plan interest expense19.3 16.1 3.2 20 %Other interest expense, net53.1 44.0 9.1 21 %Swap interest expense3.1 3.0 0.1 3 %Gain on divestitures(45.5) (34.9) (10.6) 30 %Total other expenses (income), net30.0 28.2 1.8 6 %INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES267.8 273.4 (5.6) (2)%Income tax expense100.6 104.0 (3.4) (3)%INCOME FROM CONTINUING OPERATIONS167.2 169.4 (2.2) (1)%Discontinued operations, net of tax— (0.2) 0.2 (100)%NET INCOME$167.2 $169.2 $(2.0) (1)%Income from continuing operations per common share—Diluted$7.40 $6.42 $0.98 15 %Net income per common share—Diluted$7.40 $6.41 $0.99 15 %______________________________NM—Not Meaningful32Table of Contents For the Year Ended December 31, 2016 2015REVENUE MIX PERCENTAGES: New vehicles55.3 % 55.4 %Used retail vehicles25.7 % 26.1 %Used vehicle wholesale3.1 % 3.3 %Parts and service11.9 % 11.2 %Finance and insurance, net4.0 % 4.0 %Total revenue100.0 % 100.0 %GROSS PROFIT MIX PERCENTAGES: New vehicles17.7 % 19.1 %Used retail vehicles12.3 % 12.9 %Used vehicle wholesale(0.3)% (0.4)%Parts and service45.6 % 43.6 %Finance and insurance, net24.7 % 24.8 %Total gross profit100.0 % 100.0 %GROSS PROFIT MARGIN16.2 % 16.1 %SG&A EXPENSES AS A PERCENTAGE OF GROSS PROFIT69.2 % 68.8 %Total revenue during 2016 decreased by $60.5 million (1%) compared to 2015, due to a $55.3 million (3%) decrease in used vehicle revenue, a $40.6million (1%) decrease in new vehicle revenue, and a $2.4 million (1%) decrease in F&I revenue, partially offset by a $37.8 million (5%) increase in parts andservice revenue. The $2.1 million decrease in gross profit during 2016 was the result of a $15.9 million (8%) decrease in new vehicle gross profit, a $4.5million (3%) decrease in used vehicle gross profit, and a $2.4 million (1%) decrease in F&I gross profit, partially offset by a $20.7 million (4%) increase inparts and service gross profit. Our total gross profit margin increased 10 basis points to 16.2%, primarily due to our parts and service business, which hashigher margins than new and used vehicle sales, representing a larger percentage of our total revenue for the year ended 2016 compared to the year ended2015.Income from operations during 2016 decreased by $3.8 million (1%) compared to 2015, primarily due to the $2.1 million decrease in gross profit,increases in SG&A expenses and depreciation and amortization of $2.6 million and $1.2 million, respectively, partially offset by a $2.1 million increase inother operating income, net. Total other expenses increased by $1.8 million, primarily due to increases in floor plan interest expense and other interestexpense, net of $3.2 million and $9.1 million, respectively, partially offset by a $10.6 million increase in the gain on divestitures. As a result, income fromcontinuing operations before income taxes decreased by $5.6 million (2%) to $267.8 million in 2016. The decrease in income from continuing operationsbefore income taxes, resulted in a decrease in income tax expense of $3.4 million (3%). Net income decreased by $2.0 million (1%) to $167.2 million in2016.We assess the organic growth of our revenue and gross profit on a same store basis. We believe that our assessment on asame store basis represents an important indicator of comparative financial performance and provides relevant information toassess our performance. As such, for the following discussion, same store amounts consist of information from dealerships for identical months in eachcomparative period, commencing with the first month we owned the dealership. Additionally, amounts related to divested dealerships are excluded from eachcomparative period.33Table of ContentsNew Vehicle— For the Year Ended December 31, Increase(Decrease) %Change 2016 2015 (Dollars in millions, except for per vehicle data)As Reported: Revenue: Luxury$1,251.3 $1,302.6 $(51.3) (4)%Import1,617.8 1,667.5 (49.7) (3)%Domestic742.8 682.4 60.4 9 %Total new vehicle revenue$3,611.9 $3,652.5 $(40.6) (1)%Gross profit: Luxury$84.4 $87.2 $(2.8) (3)%Import68.9 77.3 (8.4) (11)%Domestic33.8 38.5 (4.7) (12)%Total new vehicle gross profit$187.1 $203.0 $(15.9) (8)%New vehicle units: Luxury23,875 25,441 (1,566) (6)%Import58,466 61,633 (3,167) (5)%Domestic20,019 18,907 1,112 6 %Total new vehicle units102,360 105,981 (3,621) (3)% Same Store: Revenue: Luxury$1,226.5 $1,253.5 $(27.0) (2)%Import1,544.6 1,514.4 30.2 2 %Domestic667.8 639.7 28.1 4 %Total new vehicle revenue$3,438.9 $3,407.6 $31.3 1 %Gross profit: Luxury$82.4 $83.7 $(1.3) (2)%Import66.4 71.2 (4.8) (7)%Domestic29.8 36 (6.2) (17)%Total new vehicle gross profit$178.6 $190.9 $(12.3) (6)%New vehicle units: Luxury23,424 24,539 (1,115) (5)%Import55,960 56,224 (264) — %Domestic17,804 17,669 135 1 %Total new vehicle units97,188 98,432 (1,244) (1)%34Table of ContentsNew Vehicle Metrics— For the Year Ended December 31, Increase(Decrease) %Change 2016 2015 As Reported: Revenue per new vehicle sold$35,286 $34,464 $822 2 %Gross profit per new vehicle sold$1,828 $1,915 $(87) (5)%New vehicle gross margin5.2% 5.6% (0.4)% Luxury: Gross profit per new vehicle sold3,535 3,428 107 3 %New vehicle gross margin6.7% 6.7% — % Import: Gross profit per new vehicle sold$1,178 $1,254 $(76) (6)%New vehicle gross margin4.3% 4.7% (0.4)% Domestic: Gross profit per new vehicle sold$1,688 $2,036 $(348) (17)%New vehicle gross margin4.5% 5.6% (1.1)% Same Store: Revenue per new vehicle sold$35,384 $34,619 $765 2 %Gross profit per new vehicle sold$1,838 $1,939 $(101) (5)%New vehicle gross margin5.2% 5.6% (0.4)% Luxury: Gross profit per new vehicle sold$3,518 $3,411 $107 3 %New vehicle gross margin6.7% 6.7% — % Import: Gross profit per new vehicle sold$1,187 $1,266 $(79) (6)%New vehicle gross margin4.3% 4.7% (0.4)% Domestic: Gross profit per new vehicle sold$1,674 $2,037 $(363) (18)%New vehicle gross margin4.5% 5.6% (1.1)% New vehicle revenue decreased by $40.6 million (1%), primarily as a result of a 3% decrease in new vehicle units sold, partially offset by a 2% increase inrevenue per new vehicle sold. Same store new vehicle revenue increased by $31.3 million (1%) as a result of a 2% increase in revenue per new vehicle sold,partially offset by a 1% decrease in new vehicle units sold.U.S. new vehicle sales were 17.6 million in 2016 and, was relatively stable compared to 17.5 million in 2015. Our 1% decrease in same store unitvolumes, was primarily the result of a 5% decrease in luxury units, partially offset by a 1% increase in domestic units. We attribute the decrease in luxury unitvolumes to a consumer preference shift from cars to trucks, due in part to lower gas prices, which tends to favor domestic brands.Same store new vehicle gross profit in 2016 decreased by $12.3 million (6%), as a result of the 1% decrease in unit volumes and a 5% decrease in grossprofit per new vehicle sold. New vehicle gross margin in 2016 decreased by 40 basis points to 5.2%, primarily attributable to the decrease in luxury unitvolumes, which have higher margins than import and domestic vehicles, reduced manufacturer incentives and increased competition in the marketplace forimport and domestic vehicles. 35Table of ContentsUsed Vehicle— For the Year Ended December 31, Increase(Decrease) %Change 2016 2015 (Dollars in millions, except for per vehicle data)As Reported: Revenue: Used vehicle retail revenues$1,675.0 $1,717.5 $(42.5) (2)%Used vehicle wholesale revenues201.4 214.2 (12.8) (6)%Used vehicle revenue$1,876.4 $1,931.7 $(55.3) (3)%Gross profit: Used vehicle retail gross profit$131.0 $136.1 $(5.1) (4)%Used vehicle wholesale gross profit(3.7) (4.3) 0.6 (14)%Used vehicle gross profit$127.3 $131.8 $(4.5) (3)%Used vehicle retail units: Used vehicle retail units79,259 82,589 (3,330) (4)% Same Store: Revenue: Used vehicle retail revenues$1,578.0 $1,561.3 $16.7 1 %Used vehicle wholesale revenues191.9 198.2 (6.3) (3)%Used vehicle revenue$1,769.9 $1,759.5 $10.4 1 %Gross profit: Used vehicle retail gross profit$123.6 $125.1 $(1.5) (1)%Used vehicle wholesale gross profit(3.2) (3.1) (0.1) 3 %Used vehicle gross profit$120.4 $122.0 $(1.6) (1)%Used vehicle retail units: Used vehicle retail units74,027 74,312 (285) — %Used Vehicle Metrics— For the Year Ended December 31, Increase(Decrease) %Change 2016 2015 As Reported: Revenue per used vehicle retailed$21,133 $20,796 $337 2 %Gross profit per used vehicle retailed$1,653 $1,648 $5 — %Used vehicle retail gross margin7.8% 7.9% (0.1)% Same Store: Revenue per used vehicle retailed$21,317 $21,010 $307 1 %Gross profit per used vehicle retailed$1,670 $1,683 $(13) (1)%Used vehicle retail gross margin7.8% 8.0% (0.2)% Used vehicle revenue decreased by $55.3 million (3%), as a result of a 4% decrease in used vehicle retail units sold, partially offset by a 2% increase inrevenue per used vehicle retailed. Same store used vehicle revenue increased by $10.4 million (1%), due to a 1% increase in revenue per used vehicleretailed.In 2016, same store used vehicle retail gross profit decreased by $1.5 million (1%), resulting in a slight decrease in gross margin from 8.0% in 2015 to7.8% in 2016. We primarily attribute the 20 basis point decrease in same store used vehicle retail gross profit margin, to increased competition and pricetransparency within the used vehicle marketplace. In addition, our effort to retail more used vehicles, specifically in the fourth quarter of 2016, resulted inlower margins on used vehicles, but delivered on our strategic focus to grow our reconditioning and preparation and finance and insurance businesses.36Table of ContentsWe believe that our used vehicle inventory continues to be well-aligned with current consumer demand, with approximately 30 days of supply as ofDecember 31, 2016.Parts and Service— For the Year EndedDecember 31, Increase(Decrease) %Change 2016 2015 (Dollars in millions)As Reported: Parts and service revenue$778.5 $740.7 $37.8 5 %Parts and service gross profit: Customer pay$268.2 $250.9 $17.3 7 %Warranty73.7 71.0 2.7 4 %Wholesale parts20.7 21.2 (0.5) (2)%Parts and service gross profit, excluding reconditioning and preparation$362.6 $343.1 $19.5 6 %Parts and service gross margin, excluding reconditioning and preparation46.6% 46.3% 0.3 % Reconditioning and preparation120.7 119.5 1.2 1 %Total parts and service gross profit483.3 462.6 20.7 4 %Total parts and service gross margin62.1% 62.5% (0.4)% Same Store: Parts and service revenue$736.1 $683.4 $52.7 8 %Parts and service gross profit: Customer pay$255.1 $234.6 $20.5 9 %Warranty70.3 65.4 4.9 7 %Wholesale parts19.2 18.9 0.3 2 %Parts and service gross profit, excluding reconditioning and preparation$344.6 $318.9 $25.7 8 %Parts and service gross margin, excluding reconditioning and preparation46.8% 46.7% 0.1 % Reconditioning and preparation114.3 109.4 4.9 4 %Total parts and service gross profit458.9 428.3 30.6 7 %Total parts and service gross margin62.3% 62.7% (0.4)% The $37.8 million (5%) increase in parts and service revenue was primarily the result of a $29.8 million (6%) increase in customer pay revenue and a $9.6million (7%) increase in warranty revenue. Same store parts and service revenue increased by $52.7 million (8%) from $683.4 million in 2015 to $736.1million in 2016. The increase in same store parts and service revenue was primarily due to a $37.4 million (8%) increase in customer pay revenue and a $13.3million (11%) increase in warranty revenue. On a same store basis our parts and service gross margin decreased by 40 basis points, primarily due to a shift inparts and service revenue towards customer pay and warranty.Parts and service gross profit, excluding reconditioning and preparation, increased by $19.5 million (6%) to $362.6 million and same store gross profit,excluding reconditioning and preparation, increased by $25.7 million (8%) to $344.6 million. The increase in same store gross profit is primarily due to anincrease in customer pay gross profit, which has continued to benefit from our strategic focus to improve customer retention and the recent trend of increasingnew vehicle sales over the past few years.We continue to focus on increasing our parts and service revenue, specifically our customer pay business, over the long-term by upgrading equipment,focusing on improving customer retention and customer satisfaction, and capitalizing on our dealer training programs.37Table of ContentsFinance and Insurance, net— For the Year Ended December 31, Increase(Decrease) %Change 2016 2015 (Dollars in millions, except for per vehicle data)As Reported: Finance and insurance, net$261.0 $263.4 $(2.4) (1)%Finance and insurance, net per vehicle sold$1,437 $1,397 $40 3 % Same Store: Finance and insurance, net$247.6 $243.3 $4.3 2 %Finance and insurance, net per vehicle sold$1,446 $1,408 $38 3 %F&I revenue decreased by $2.4 million (1%) during 2016 when compared to 2015 primarily as a result of a 4% decrease in new and used retail unit salespartially offset by a $40 (3% ) increase in F&I per vehicle retailed.On a same store basis F&I revenue increased by $4.3 million (2%) in 2016 when compared to 2015 primarily as a result of a $38 (3%) increase in F&I pervehicle retailed partially offset by a 1% decrease in new and used retail unit sales.At the beginning of the fourth quarter of 2016, we began operating under an amended agreement with our primary insurance products underwriter. Underthe terms of our amended agreement, we receive additional up-front commissions and pay reduced administrative expenses than we otherwise would haveunder the original agreement. 38Table of ContentsSelling, General, and Administrative Expense— For the Year Ended December 31, Increase(Decrease) % of GrossProfit Increase(Decrease) 2016 % of GrossProfit 2015 % of GrossProfit (Dollars in millions)As Reported: Personnel costs$343.1 32.4% $334.6 31.5% $8.5 0.9 %Sales compensation112.0 10.6% 115.5 10.9% (3.5) (0.3)%Share-based compensation12.0 1.1% 10.0 0.9% 2.0 0.2 %Outside services78.3 7.4% 77.4 7.3% 0.9 0.1 %Advertising34.0 3.2% 40.1 3.8% (6.1) (0.6)%Rent29.9 2.8% 31.3 3.0% (1.4) (0.2)%Utilities15.5 1.5% 16.7 1.6% (1.2) (0.1)%Insurance15.9 1.5% 11.8 1.1% 4.1 0.4 %Other91.8 8.7% 92.5 8.7% (0.7) — %Selling, general, and administrative expense$732.5 69.2% $729.9 68.8% $2.6 0.4 %Gross profit$1,058.7 $1,060.8 Same Store: Personnel costs$324.8 32.3% $309.2 31.4% $15.6 0.9 %Sales compensation105.8 10.5% 106.0 10.8% (0.2) (0.3)%Share-based compensation12.0 1.2% 10.0 1.0% 2.0 0.2 %Outside services73.4 7.3% 71.1 7.2% 2.3 0.1 %Advertising30.3 3.0% 34.2 3.5% (3.9) (0.5)%Rent29.9 3.0% 31.2 3.2% (1.3) (0.2)%Utilities14.4 1.4% 15.1 1.5% (0.7) (0.1)%Insurance14.9 1.5% 10.5 1.1% 4.4 0.4 %Other87.9 8.8% 85.6 8.6% 2.3 0.2 %Selling, general, and administrative expense$693.4 69.0% $672.9 68.3% $20.5 0.7 %Gross profit$1,005.5 $984.5 SG&A expense as a percentage of gross profit was 69.2% for 2016 compared to 68.8% for 2015. Same store SG&A expense as a percentage of gross profitincreased by 70 basis points, from 68.3% in 2015 to 69.0% in 2016. The increase, was due primarily to increased personnel costs, which was a result of higheremployee benefit costs, and higher insurance expense, which includes expenses associated with hail storm damage incurred at certain of our dealershipsduring 2016. We continue to be engaged in numerous productivity initiatives designed to reduce our fixed cost structure and we continue to focus onrefining our centralized business processes to further enhance our performance.Depreciation and Amortization Expense —The $1.2 million (4%) increase in depreciation and amortization expense during 2016 compared to 2015, was primarily the result of increased capitalexpenditures and the completion of construction projects, resulting in newly depreciable assets placed into service during the year.Other Operating Income, net —Other operating expense, net includes gains and losses from the sale of property and equipment, income derived from lease arrangements, and other non-core operating items. The $2.3 million in other operating income, net for 2016, was primarily due to $6.6 million in gains resulting from legal settlements,partially offset by $5.7 million of real estate related charges, including impairments and lease terminations.39Table of ContentsFloor Plan Interest Expense —The $3.2 million (20%) increase in floor plan interest expense during 2016 compared to 2015, was the result of higher average new vehicle inventorylevels and higher interest rates throughout 2016 compared with 2015.Other Interest Expense —Other interest expense increased $9.1 million (21%) from $44.0 million in 2015 to $53.1 million in 2016. The increase in interest expense, was primarilythe result of our add-on issuance of $200.0 million aggregate principal amount of our 6.0% Senior Subordinated Notes due 2024, which we completed inOctober 2015.Gain on Divestitures —Included in the results of 2016, were $45.5 million of gains related to the current year sale of five franchises (four dealership locations) and two collisioncenters.Income Tax Expense—The $3.4 million (3%) decrease in income tax expense, was primarily a result of the $5.6 million (2%) decrease in income before income taxes in 2016compared to 2015. Our effective tax rate was 37.6% in 2016 compared to 38.0% in 2015. Our effective tax rate, which we generally expect to approximate38.0%, is highly dependent on our level of income before income taxes and permanent differences between book and tax income.40Table of ContentsRESULTS OF OPERATIONSThe Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014 For the Year Ended December 31, Increase(Decrease) %Change 2015 2014 (Dollars in millions, except per share data)REVENUE: New vehicle$3,652.5 $3,230.6 $421.9 13 %Used vehicle1,931.7 1,741.5 190.2 11 %Parts and service740.7 666.6 74.1 11 %Finance and insurance, net263.4 229.0 34.4 15 %TOTAL REVENUE6,588.3 5,867.7 720.6 12 %GROSS PROFIT: New vehicle203.0 198.3 4.7 2 %Used vehicle131.8 127.7 4.1 3 %Parts and service462.6 412.2 50.4 12 %Finance and insurance, net263.4 229.0 34.4 15 %TOTAL GROSS PROFIT1,060.8 967.2 93.6 10 %OPERATING EXPENSES (INCOME): Selling, general, and administrative729.9 671.6 58.3 9 %Depreciation and amortization29.5 26.4 3.1 12 %Other operating (income) expense, net(0.2) 1.0 (1.2) NMINCOME FROM OPERATIONS301.6 268.2 33.4 12 %OTHER EXPENSES (INCOME): Floor plan interest expense16.1 12.4 3.7 30 %Other interest expense, net44.0 38.9 5.1 13 %Swap interest expense3.0 2.0 1.0 50 %Loss on extinguishment of long-term debt, net— 31.9 (31.9) NMGain on divestitures(34.9) — (34.9) NMTotal other expenses, net28.2 85.2 (57.0) (67)%INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES273.4 183.0 90.4 49 %Income tax expense104.0 71.0 33.0 46 %INCOME FROM CONTINUING OPERATIONS169.4 112.0 57.4 51 %Discontinued operations, net of tax(0.2) (0.4) 0.2 (50)%NET INCOME$169.2 $111.6 $57.6 52 %Income from continuing operations per common share—Diluted$6.42 $3.72 $2.70 73 %Net income per common share—Diluted$6.41 $3.71 $2.70 73 %______________________________NM—Not Meaningful41Table of Contents For the Year Ended December 31, 2015 2014REVENUE MIX PERCENTAGES: New vehicles55.4 % 55.1 %Used retail vehicles26.1 % 26.1 %Used vehicle wholesale3.3 % 3.5 %Parts and service11.2 % 11.4 %Finance and insurance, net4.0 % 3.9 %Total revenue100.0 % 100.0 %GROSS PROFIT MIX PERCENTAGES: New vehicles19.1 % 20.5 %Used retail vehicles12.9 % 13.4 %Used vehicle wholesale(0.4)% (0.2)%Parts and service43.6 % 42.6 %Finance and insurance, net24.8 % 23.7 %Total gross profit100.0 % 100.0 %GROSS PROFIT MARGIN16.1 % 16.5 %SG&A EXPENSES AS A PERCENTAGE OF GROSS PROFIT68.8 % 69.4 %Total revenue during 2015 increased by $720.6 million (12%) compared to 2014, as a result of a $421.9 million(13%) increase in new vehicle revenue, a $190.2 million (11%) increase in used vehicle revenue, a $74.1 million (11%)increase in parts and service revenue, and a $34.4 million (15%) increase in F&I revenue. The $93.6 million (10%) increasein gross profit during 2015, was driven by a $50.4 million (12%) increase in parts and service gross profit, a $34.4 million(15%) increase in F&I gross profit, a $4.7 million (2%) increase in new vehicle gross profit, and a $4.1 million (3%)increase in used vehicle gross profit. Our total gross profit margin decreased 40 basis points to 16.1%, primarily due to competitive pressures negativelyimpacting our gross margins across our new vehicle and used vehicle businesses, partially offset by an increase in gross margin for our parts and servicebusiness and growth in our F&I business.Income from operations during 2015 increased by $33.4 million (12%) compared to 2014, primarily due to the $93.6 million increase in gross profit,partially offset by increases in SG&A expenses and depreciation and amortization of $58.3 million and $3.1 million, respectively. Total other expensesdecreased by $57.0 million, primarily due to a $34.9 million gain on divestitures in 2015 and a $31.9 million loss on extinguishment of long-term debt in2014. As a result, income from continuing operations before income taxes increased by $90.4 million (49%) to $273.4 million in 2015. The increase inincome from continuing operations before income taxes, resulted in an increase in income tax expense of $33.0 million (46%). Net income increased by$57.6 million (52%) to $169.2 million in 2015.We assess the organic growth of our revenue and gross profit on a same store basis. As such, for the following discussion,same store amounts consist of information from dealerships for identical months in each comparative period, commencing withthe first month we owned the dealership. Additionally, amounts related to divested dealerships are excluded from eachcomparative period.42Table of ContentsNew Vehicle— For the Year Ended December 31, Increase %Change 2015 2014 (Dollars in millions, except for per vehicle data)As Reported: Revenue: Luxury$1,302.6 $1,241.2 $61.4 5 %Import1,667.5 1,539.3 128.2 8 %Domestic682.4 450.1 232.3 52 %Total new vehicle revenue$3,652.5 $3,230.6 $421.9 13 %Gross profit: Luxury$87.2 $90.7 $(3.5) (4)%Import77.3 79.3 (2.0) (3)%Domestic38.5 28.3 10.2 36 %Total new vehicle gross profit$203.0 $198.3 $4.7 2 %New vehicle units: Luxury25,441 24,275 1,166 5 %Import61,633 57,980 3,653 6 %Domestic18,907 13,309 5,598 42 %Total new vehicle units105,981 95,564 10,417 11 % Same Store: Revenue: Luxury$1,253.5 $1,169.3 $84.2 7 %Import1,473.7 1,368.7 105.0 8 %Domestic465.4 401.5 63.9 16 %Total new vehicle revenue$3,192.6 $2,939.5 $253.1 9 %Gross profit: Luxury$83.7 $85.2 $(1.5) (2)%Import69 71.1 (2.1) (3)%Domestic26.4 25.5 0.9 4 %Total new vehicle gross profit$179.1 $181.8 $(2.7) (1)%New vehicle units: Luxury24,539 22,918 1,621 7 %Import54,734 51,796 2,938 6 %Domestic12,924 11,793 1,131 10 %Total new vehicle units92,197 86,507 5,690 7 %43Table of ContentsNew Vehicle Metrics— For the Year Ended December 31, Increase %Change 2015 2014 As Reported: Revenue per new vehicle sold$34,464 $33,806 $658 2 %Gross profit per new vehicle sold$1,915 $2,075 $(160) (8)%New vehicle gross margin5.6% 6.1% (0.5)% Luxury: Gross profit per new vehicle sold$3,428 $3,736 $(308) (8)%New vehicle gross margin6.7% 7.3% (0.6)% Import: Gross profit per new vehicle sold$1,254 $1,368 $(114) (8)%New vehicle gross margin4.7% 5.2% (0.5)% Domestic: Gross profit per new vehicle sold$2,036 $2,126 $(90) (4)%New vehicle gross margin5.7% 6.4% (0.7)% Same Store: Revenue per new vehicle sold$34,628 $33,980 $648 2 %Gross profit per new vehicle sold$1,943 $2,102 $(159) (8)%New vehicle gross margin5.6% 6.2% (0.6)% Luxury: Gross profit per new vehicle sold$3,411 $3,718 $(307) (8)%New vehicle gross margin6.7% 7.3% (0.6)% Import: Gross profit per new vehicle sold$1,261 $1,373 $(112) (8)%New vehicle gross margin4.7% 5.2% (0.5)% Domestic: Gross profit per new vehicle sold$2,043 $2,126 $(83) (4)%New vehicle gross margin5.7% 6.4% (0.7)% New vehicle revenue increased by $421.9 million (13%), as a result of an 11% increase in new vehicle units and a2% increase in revenue per new vehicle sold. Same store new vehicle revenue increased by $253.1 million (9%), due to a 7%increase in new vehicle units sold and a 2% increase in revenue per new vehicle sold.Same store unit volumes for our luxury, import, and domestic brands increased 7%, 6%, and 10%, respectively, reflectingconsumer demand for the broad range of attractive vehicles we offer and the continued availability of credit at termsfavorable to our customers. Overall, same store new vehicle unit volumes increased by 7% in 2015, compared to new vehiclesales in the U.S. which increased by 6% over the same period.Total new vehicle gross profit increased by $4.7 million (2%) in 2015. Same store new vehicle gross profit decreased by$2.7 million (1%), resulting in a 60 basis point decrease in gross margin to 5.6% in 2015. The decrease in same store gross margin was due to decreases in ourluxury and import brand categories by $1.5 million (2%) and $2.1 million (3%), respectively, partially offset by a $0.9 million (4%) increase in our domesticbrand category. Our same store gross profit per new vehicle sold decreased by $159 (8%). The decrease in new vehicle gross profit and gross margin isprimarily driven by a shift in consumer preference from cars to trucks, due in part to lower gas prices, and increased competition in the marketplace. 44Table of ContentsUsed Vehicle— For the Year Ended December 31, Increase(Decrease) %Change 2015 2014 (Dollars in millions, except for per vehicle data)As Reported: Revenue: Used vehicle retail revenues$1,717.5 $1,534.9 $182.6 12 %Used vehicle wholesale revenues214.2 206.6 7.6 4 %Used vehicle revenue$1,931.7 $1,741.5 $190.2 11 %Gross profit: Used vehicle retail gross profit$136.1 $130.0 $6.1 5 %Used vehicle wholesale gross profit(4.3) (2.3) (2.0) 87 %Used vehicle gross profit$131.8 $127.7 $4.1 3 %Used vehicle retail units: Used vehicle retail units82,589 75,173 7,416 10 % Same Store: Revenue: Used vehicle retail revenues$1,475.0 $1,389 $86.0 6 %Used vehicle wholesale revenues186.9 183.3 3.6 2 %Used vehicle revenue$1,661.9 $1,572.3 $89.6 6 %Gross profit: Used vehicle retail gross profit$119 $118.4 $0.6 1 %Used vehicle wholesale gross profit(2.9) (1.5) (1.4) 93 %Used vehicle gross profit$116.1 $116.9 $(0.8) (1)%Used vehicle retail units: Used vehicle retail units69,983 67,800 2,183 3 %Used Vehicle Metrics— For the Year Ended December 31, Increase(Decrease) %Change 2015 2014 As Reported: Revenue per used vehicle retailed$20,796 $20,418 $378 2 %Gross profit per used vehicle retailed$1,648 $1,729 $(81) (5)%Used vehicle retail gross margin7.9% 8.5% (0.6)% Same Store: Revenue per used vehicle retailed$21,077 $20,487 $590 3 %Gross profit per used vehicle retailed$1,700 $1,746 $(46) (3)%Used vehicle retail gross margin8.1% 8.5% (0.4)% Used vehicle revenue increased by $190.2 million (11%), primarily as a result of a 10% increase in used vehicle retail units. Same store used vehiclerevenue increased by $89.6 million (6%) due to an $86.0 million (6%) increase in used vehicle retail revenue. The 6% increase in same store used vehicleretail revenue is the result of a 3% increase in same store used vehicle unit volumes and a 3% increase in same store revenue per used vehicle sold. Theincrease in same store used vehicle retail unit sales reflects consumer demand, the continued availability of credit at terms favorable to the customer, and theongoing impact of our volume-driven initiatives.45Table of ContentsIn 2015, used vehicle retail gross profit and same store used vehicle retail gross profit increased by $6.1 million (5%) and$0.6 million (1%), respectively. We primarily attribute the 40 basis point decrease in same store used vehicle retail gross profit margin from 8.5% to 8.1% toour efforts to grow sales volumes during the current year, increased competition in the used vehicle marketplace, and pressure caused by the decrease in newvehicle gross profit per vehicle retailed.Parts and Service— For the Year EndedDecember 31, Increase(Decrease) %Change 2015 2014 (Dollars in millions)As Reported: Parts and service revenue$740.7 $666.6 $74.1 11%Parts and service gross profit: Customer pay$250.9 $232.2 $18.7 8%Warranty71.0 57.5 13.5 23%Wholesale parts21.2 20.6 0.6 3%Parts and service gross profit, excluding reconditioning and preparation$343.1 $310.3 $32.8 11%Parts and service gross margin, excluding reconditioning and preparation46.3% 46.5% (0.2)% Reconditioning and preparation119.5 101.9 17.4 21%Total parts and service gross profit$462.6 $412.2 $50.4 12%Total parts and service gross margin62.5% 61.8% 0.7 % Same Store: Parts and service revenue$656.6 $602.5 $54.1 9%Parts and service gross profit: Customer pay$225.9 $213.9 $12.0 6%Warranty62.5 50.7 11.8 23%Wholesale parts18.3 17.8 0.5 3%Parts and service gross profit, excluding reconditioning and preparation$306.7 $282.4 $24.3 9%Parts and service gross margin, excluding reconditioning and preparation46.7% 46.9% (0.2)% Reconditioning and preparation104.3 93.0 11.3 12%Total parts and service gross profit$411.0 $375.4 $35.6 9%Total parts and service gross margin62.6% 62.3% 0.3 % The $74.1 million (11%) increase in parts and service revenue was primarily the result of increases in customer pay revenue and warranty revenue of $44.7million (10%) and $25.9 million (24%), respectively. Same store parts and service revenue increased by $54.1 million (9% ) from $602.5 million in 2014 to$656.6 million in 2015. The increase in same store parts and service revenue was primarily due to increases in customer pay revenue and warranty revenue of$29.4 million (7%) and $22.5 million (24%), respectively. On a same store basis our parts and service gross margin increased by 30 basis points, primarilydue to increases in our higher margin parts and service businesses, which includes the reconditioning and preparation of used vehicles, and warranty work.Parts and service gross profit, excluding reconditioning and preparation, increased by $32.8 million (11%) to $343.1 million and same store gross profit,excluding reconditioning and preparation, increased by $24.3 million (9%) to $306.7 million. The increase in same store gross profit is primarily due toincreases in customer pay gross profit, due to our strategic focus to improve customer retention, and warranty gross profit, due to manufacturer recallcampaigns that occurred during 2015. Further, both our customer pay and warranty business lines, have continued to benefit from the recent trend ofincreasing new vehicle sales over the past few years.46Table of ContentsFinance and Insurance, net— For the Year Ended December 31, Increase %Change 2015 2014 (Dollars in millions, except for per vehicle data)As Reported: Finance and insurance, net$263.4 $229.0 $34.4 15%Finance and insurance, net per vehicle sold$1,397 $1,341 $56 4% Same Store: Finance and insurance, net$225.1 $208.1 $17.0 8%Finance and insurance, net per vehicle sold$1,388 $1,349 $39 3%F&I increased by $34.4 million (15%) during 2015 compared to 2014. Same store F&I increased by $17.0 million(8%), due to a 5% increase in same store retail unit sales and a 3% increase in same store F&I per vehicle sold. During2015, we continued to benefit from a favorable consumer lending environment, which allowed more of our customers to takeadvantage of our broad array of F&I products, and our continued focus on improving the F&I results at our lower-performingstores through our F&I training programs, which include implementing a certification process and certain best practicesinitiatives.47Table of ContentsSelling, General, and Administrative Expense— For the Year Ended December 31, Increase(Decrease) % of GrossProfit (Decrease)Increase 2015 % of GrossProfit 2014 % of GrossProfit (Dollars in millions)As Reported: Personnel costs$334.6 31.5% $311.2 32.2% $23.4 (0.7)%Sales compensation115.5 10.9% 101.3 10.5% 14.2 0.4 %Share-based compensation10.0 0.9% 8.6 0.9% 1.4 — %Outside services77.4 7.3% 71.8 7.4% 5.6 (0.1)%Advertising40.1 3.8% 34.0 3.5% 6.1 0.3 %Rent31.3 3.0% 30.8 3.2% 0.5 (0.2)%Utilities16.7 1.6% 15.6 1.6% 1.1 — %Insurance11.8 1.1% 11.4 1.2% 0.4 (0.1)%Other92.5 8.7% 86.9 8.9% 5.6 (0.2)%Selling, general, and administrative expense$729.9 68.8% $671.6 69.4% $58.3 (0.6)%Gross profit$1,060.8 $967.2 Same Store: Personnel costs$294.3 31.6% $283.5 32.1% $10.8 (0.5)%Sales compensation98.9 10.6% 91.8 10.4% 7.1 0.2 %Share-based compensation10.0 1.1% 8.6 1.0% 1.4 0.1 %Outside services68.3 7.3% 65.8 7.5% 2.5 (0.2)%Advertising31.6 3.4% 28.6 3.2% 3.0 0.2 %Rent31.2 3.4% 30.7 3.5% 0.5 (0.1)%Utilities14.5 1.6% 14.0 1.6% 0.5 — %Insurance9.6 1.0% 10.0 1.1% (0.4) (0.1)%Other83.4 8.9% 79.5 9.0% 3.9 (0.1)%Selling, general, and administrative expense$641.8 68.9% $612.5 69.4% $29.3 (0.5)%Gross profit$931.3 $882.2 SG&A expense as a percentage of gross profit was 68.8% for 2015 compared to 69.4% for 2014. Same store SG&A expense as a percentage of gross profitdecreased by 50 basis points, from 69.4% in 2014 to 68.9% in 2015, primarily driven by a decrease in personnel costs as a percentage of gross profit. Wecontinue to be engaged in numerous productivity initiatives designed to further reduce our fixed cost structure and we continue to focus on refining ourcentralized business processes to further enhance our performance.Depreciation and Amortization Expense —The $3.1 million (12%) increase in depreciation and amortization expense during 2015 compared to 2014, was primarily the result of additional fixedassets acquired in acquisitions and the completion of construction projects that resulted in newly depreciable assets placed into service during the year.Floor Plan Interest Expense —The $3.7 million (30%) increase in floor plan interest expense during 2015 compared to 2014, was primarily driven by higher new vehicle inventorylevels due to acquisitions made in late 2014 and 2015.48Table of ContentsOther Interest Expense —Other interest expense increased $5.1 million (13%) from $38.9 million in 2014 to $44.0 million in 2015. During 2015, our mortgage interest expenseincreased approximately $2.2 million (19%) as a result of mortgaging certain owned dealership properties during 2014 and 2015. In addition, there was anincrease in interest expense during 2015, as a result of our add-on issuance of $200.0 million aggregate principal amount of our 6.0% Senior SubordinatedNotes due 2024, which we completed in October 2015.Gain on Divestitures —Included in the results of 2015, were $34.9 million of gains related to the current year sale of seven franchises (five dealership locations) and one collisioncenter.Income Tax Expense—The $33.0 million (46%) increase in income tax expense, was primarily a result of the $90.4 million (49%) increase in income before income taxes in2015 compared to 2014. Our effective tax rate was 38.0% in 2015 compared to 38.8% in 2014. Our effective tax rate is highly dependent on our level ofincome before income taxes and permanent differences between book and tax income.LIQUIDITY AND CAPITAL RESOURCESAs of December 31, 2016, we had total available liquidity of $406.0 million, which consisted of cash and cash equivalents of $3.4 million, $70.9 millionof available funds in our floor plan offset accounts, $190.0 million of availability under our new vehicle floor plan facility that is able to be re-designated toour revolving credit facility, $51.1 million of availability under our revolving credit facility, and $90.6 million of availability under our used vehiclerevolving floor plan facility. The borrowing capacities under our revolving credit facility and our used vehicle revolving floor plan facility are limited byborrowing base calculations and, from time to time, may be further limited by our required compliance with certain financial covenants. As of December 31,2016, these financial covenants did not further limit our availability under our other credit facilities. For more information on our financial covenants, see"Covenants and Defaults" 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 generatethrough future operations, (iii) current and expected borrowing availability under our 2016 Senior Credit Facility, our other floor plan facilities, our RealEstate Credit Agreement, our Restated Master Loan Agreement, and our mortgage financings (each, as defined below), (iv) amounts in our new vehicle floorplan 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 wewill have sufficient liquidity to meet our debt service and working capital requirements; commitments and contingencies; debt repayment, maturity andrepurchase 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 moredetailed description of the material terms of these agreements and facilities, and this indebtedness, refer to the "Long-Term Debt" footnote included in theNotes to Consolidated Financial Statements.•2016 Senior Credit Facility — On July 25, 2016, the Company and certain of its subsidiaries entered into an amended and restated senior securedcredit agreement with Bank of America, as administrative agent, and the other lenders party thereto. The 2016 Senior Credit Facility amended andrestated the Company's pre-existing senior secured credit agreement, dated as of August 8, 2013, by and among the Company and certain of itssubsidiaries and Bank of America, as administrative agent, and the other agents and lenders party thereto (the "Restated Credit Agreement").The 2016 Senior Credit Facility provides for the following:Revolving Credit Facility — A $250.0 million revolving credit facility for, among other things, acquisitions, working capital and capitalexpenditures, including a $50.0 million sublimit for letters of credit. As of December 31, 2016, we re-designated $190.0 million ofavailability from our revolving credit facility to our new vehicle floor plan facility, resulting in $60.0 million of borrowing capacity. Inaddition, we had $8.9 million in outstanding letters of credit, resulting in $51.1 million of borrowing availability as of December 31, 2016.49Table of ContentsNew Vehicle Floor Plan Facility — A $900.0 million new vehicle revolving floor plan facility. In connection, with the new vehicle floorplan facility, we established an account with Bank of America that allows us to transfer cash as an offset to floor plan notes payable. Thesetransfers reduce the amount of outstanding new vehicle floor plan notes payable that would otherwise accrue interest, while retaining theability 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 floorplan offset account, we experience a reduction in Floor Plan Interest Expense on our Consolidated Statements of Income. As of December 31,2016, we had $673.5 million, which is net of $59.2 million in our floor plan offset account, outstanding under our new vehicle floor planfacility.Used Vehicle Floor Plan Facility — A $150.0 million used vehicle revolving floor plan facility to finance the acquisition of used vehicleinventory and for, among other things, working capital and capital expenditures, as well as to refinance used vehicles. Our borrowingcapacity under the used vehicle floor plan facility was limited to $90.6 million, based on our borrowing base calculation as of December 31,2016. We began the year with nothing drawn on our used vehicle floor plan facility and during the year ended December 31, 2016, we hadborrowings of $55.0 million and made repayments of $55.0 million, resulting in no outstanding amounts under our used vehicle floor planfacility as of December 31, 2016.Subject to compliance with certain conditions, the agreement governing the 2016 Senior Credit Facility provides that we have the ability, at ouroption and subject to the receipt of additional commitments from existing or new lenders, to increase the size of the facilities by up to $325.0million in the aggregate without lender consent.At our option, we have the ability to re-designate a portion of our availability under our revolving credit facility to the new vehicle floor planfacility or the used vehicle floor plan facility. The maximum amount we are allowed to re-designate is determined based on our current borrowingavailability under our Revolving Credit Facility, less $50.0 million. In addition, we are able to re-designate any amounts moved to the new vehiclefloor plan facility or used vehicle floor plan facility back to the revolving credit facility. As of December 31, 2016, we re-designated $190.0 millionof availability under our revolving credit facility to our new vehicle floor plan facility. We re-designated this amount to take advantage of the lowercommitment fee rates on our new vehicle floor plan facility when compared to our revolving credit facility.Borrowings under the 2016 Senior Credit Facility bear interest, at our option, based on the London Interbank Offered Rate ("LIBOR") or the BaseRate, 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% forLIBOR 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 underthe 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 Rateplus 0.50%.In addition to the payment of interest on borrowings outstanding under the 2016 Senior Credit Facility, we are required to pay a quarterlycommitment 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 theUsed Vehicle Facility Floor Plan Facility is 0.15% per year.•Manufacturer affiliated new vehicle floor plan facilities and other financing facilities — We have a floor plan facility with the Ford Motor CreditCompany ("Ford Credit") to purchase new Ford and Lincoln vehicle inventory, which matures on December 5, 2019. During August 2016, weestablished a floor plan offset account with Ford Credit, which operates in a similar manner to our floor plan offset account with Bank of America. Asof December 31, 2016, we had $108.3 million, net of $11.7 million in our floor plan offset account, outstanding under our floor plan facility.Additionally, we had $80.9 million outstanding under facilities with certain manufacturers for the financing of loaner vehicles, which werepresented within Accounts Payable and Accrued Liabilities in our Consolidated Balance Sheets. Neither our floor plan facility with Ford Credit norour facilities for loaner vehicles have stated borrowing limitations.•6.0% Senior Subordinated Notes due 2024 ("6.0% Notes") — as of December 31, 2016 we had $600.0 million in aggregate principal amountsoutstanding 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 onDecember 15, 2024. 50Table of Contents•Mortgage notes — as of December 31, 2016, we had $182.8 million of mortgage note obligations. These obligations are collateralized by theassociated real estate at our dealership locations.•Restated Master Loan Agreement — provides for term loans to certain of our subsidiaries in an aggregate amount not to exceed $100.0 million.Borrowings under the Master Loan Facility are guaranteed by us and are collateralized by the real property financed under the Master LoanAgreement. As of December 31, 2016, the outstanding balance under the Restated Master Loan Agreement was $93.6 million. There is no furtherborrowing availability under this facility.•Real Estate Credit Agreement — a real estate term loan credit agreement with an initial principal value of $75.0 million collateralized by firstpriority liens, subject to certain permitted exceptions, on all of the real property financed thereunder. As of December 31, 2016, we had $51.5million of mortgage note obligations outstanding under the Real Estate Credit Agreement. There is no further borrowing availability under thisagreement.Covenants and DefaultsWe are subject to a number of customary covenants in our various debt and lease agreements, including those described below. We were in compliancewith all of our covenants as of December 31, 2016. Failure to comply with any of our debt covenants would constitute a default under the relevant debtagreements, which would entitle the lenders under such agreements to terminate our ability to borrow under the relevant agreements and accelerate ourobligations to repay outstanding borrowings, if any, unless compliance with the covenants were waived. In many cases, defaults under one of our agreementscould trigger cross-default provisions in our other agreements. If we are unable to remain in compliance with our financial or other covenants, we would berequired to seek waivers or modifications of our covenants from our lenders, or we would need to raise debt and/or equity financing or sell assets to generateproceeds sufficient to repay such debt. We cannot give any assurance that we would be able to successfully take any of these actions on terms, or at times,that may be necessary or desirable.The representations and covenants contained in the 2016 Senior Credit Facility include, among others, a requirement to comply with a minimumconsolidated current ratio, consolidated fixed charge coverage ratio and a maximum consolidated total lease adjusted leverage ratio, in each case as set out inthe 2016 Senior Credit Facility. In addition, certain other covenants could restrict our ability to incur additional debt, pay dividends or acquire or dispose ofassets.The 2016 Senior Credit Facility also provides for events of default that are customary for financing transactions of this nature, including cross-defaults toother material indebtedness. In certain instances, an event of default under either the revolving credit facility or the used vehicle floor plan facility could be,or result in, an event of default under the new vehicle floor plan facility, and vice versa. Upon the occurrence of an event of default, we could be required toimmediately repay all amounts outstanding under the 2016 Senior Credit Facility.The representations and covenants contained in the Real Estate Credit Agreement are customary for financing transactions of this nature including,among others, a requirement to comply with a minimum consolidated current ratio, minimum consolidated fixed charge coverage ratio, and a maximumconsolidated total lease adjusted leverage ratio, in each case as set out in the Real Estate Credit Agreement. In addition, certain other covenants could restrictour ability to incur additional debt, pay dividends or acquire or dispose of assets.The representations, warranties, and covenants contained in the Restated Master Loan Agreement and the related documents include, among others, arequirement to comply with a minimum consolidated current ratio, minimum consolidated fixed charge coverage ratio and maximum consolidated total leaseadjusted leverage ratio, in each case as set out in such documents. In addition, certain other covenants could restrict our ability to incur additional debt, paydividends, or acquire or dispose of assets. The Restated Master Loan Agreement also provides for events of default that are customary for financingtransactions of this nature, including cross-defaults to other material indebtedness. Upon the occurrence of an event of default, the Real Estate Borrowers or,failing such compliance, we could be required to immediately repay all amounts outstanding under the Restated Master Loan Agreement.Certain of our lease agreements also require compliance with various financial covenants and incorporate by reference the financial covenants set forth inthe 2016 Senior Credit Facility. A breach of any of these covenants could immediately give rise to certain landlord remedies under our various leaseagreements, the most severe of which include the following: (i) termination of the applicable lease and/or other leases with the same or an affiliated landlordunder a cross-default provision, (ii) eviction from the premises, and (iii) the landlord having a claim for various damages.The 2016 Senior Credit Facility and the Indenture currently allow for restricted payments without limit so long as our consolidated total leverage ratio (asdefined in the 2016 Senior Credit Facility and the Indenture) is no greater than 3.0 to 1.051Table of Contentsafter giving effect to such proposed restricted payments. Restricted payments generally include items such as dividends, share repurchases, unscheduledrepayments of subordinated debt, or purchases of certain investments. In the event that our consolidated total leverage ratio does (or would) exceed 3.0 to 1.0,the 2016 Senior Credit Facility and the Indenture would then also allow for restricted payments under the following mutually exclusive parameters, subjectto certain exclusions:•Restricted payments in an aggregate amount not to exceed $20.0 million in any fiscal year;•General restricted payments allowance of $150.0 million; and•Subject to our continued compliance with a fixed charge coverage ratio as set out in the Indenture, restricted payments capacity additions (orsubtractions if negative) equal to (i) 50% of our net income (as defined in the 2016 Senior Credit Facility and the Indenture) beginning on October1, 2014 and ending on the date of the most recently completed fiscal quarter (the "Measurement Period"), plus (ii) 100% of any cash proceeds wereceive from the sale of equity interests during the Measurement Period minus (iii) the dollar amount of share purchases made and dividends paid onor after December 4, 2014.Share Repurchases and Dividend RestrictionsOur ability to repurchase shares or pay dividends on our common stock is subject to our compliance with the covenants and restrictions described in"Covenants and Defaults" above. On January 30, 2014, our Board of Directors authorized our current share repurchase program (the "Repurchase Program"). On January 27, 2016, our Boardof Directors reset the authorization under our Repurchase Program to $300.0 million in the aggregate, for the repurchase of our common stock in open markettransactions or privately negotiated transactions from time to time. During 2016, we repurchased 3,730,642 shares of our common stock under theRepurchase Program for a total of $211.9 million. As of December 31, 2016 we had remaining authorization to repurchase $88.1 million in shares of ourcommon stock under the Repurchase Program.During 2016, we repurchased 70,411 shares of our common stock for $3.7 million from employees in connection with a net share settlement feature ofemployee equity-based awards.Contractual ObligationsAs of December 31, 2016, we had the following contractual obligations (in millions): Payments due by period 2017 2018 2019 2020 2021 Thereafter TotalFloor plan notes payable (Note 10)$781.8 $— $— $— $— $— $781.8Operating leases (Note 18)27.7 25.9 23.9 21.4 18.3 35.2 152.4Long-term debt (Note 13)15.4 16.8 41.4 32.1 15.1 810.5 931.3Interest on long-term debt (a)50.1 49.5 48.7 47.0 46.3 137.1 378.7Total contractual obligations$875.0 $92.2 $114.0 $100.5 $79.7 $982.8 $2,244.2________________________________________(a)Includes variable rate interest payments calculated using an estimated LIBOR rate of 0.77%, and assumes that borrowings will not be refinancedupon maturity.Cash FlowsClassification of Cash Flows Associated with Floor Plan Notes PayableBorrowings 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 asfinancing activities on the accompanying Consolidated Statements of Cash Flows, with borrowings reflected separately from repayments. The net change infloor plan notes payable to a lender affiliated with the manufacturer from which we purchase a particular new vehicle (collectively referred to as "Floor PlanNotes Payable—Trade") is classified as an operating activity on the accompanying Consolidated Statements of Cash Flows. Borrowings of floor plan notespayable associated with inventory acquired in connection with all acquisitions and repayments made in connection with all divestitures are classified as afinancing activity in the accompanying Consolidated Statement of Cash Flows. Cash flows related to floor plan notes payable included in operatingactivities 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 lenderaffiliated with the manufacturer from which we purchased the related inventory, while the latter are payable to a lender not52Table of Contentsaffiliated with the manufacturer from which we purchased the related inventory. The majority of our floor plan notes are payable to parties unaffiliated withthe entities from which we purchase our new vehicle inventory, with the exception of floor plan notes payable relating to the financing of new Ford andLincoln vehicles.Floor plan borrowings are required by all vehicle manufacturers for the purchase of new vehicles, and all floor plan lenders require amounts borrowed forthe 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 therelationship between the cash flows of all of our floor plan notes payable and new vehicle inventory in order to understand our working capital and operatingcash 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 floorplan 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 thatsplitting the cash flows of floor plan notes payable between operating activities and financing activities, while all new vehicle inventory activity is includedin operating activities, results in significantly different operating cash flow than if all the cash flows of floor plan notes payable were classified together inoperating activities.Cash provided by operating activities, as adjusted, includes borrowings and repayments of floor plan notes payable to lenders not affiliated with themanufacturer from which we purchase the related new vehicles and all floor plan notes payable relating to used vehicles. Cash provided by operatingactivities, as adjusted, has material limitations, and therefore, may not be comparable to similarly titled measures of other companies and should not beconsidered in isolation, or as a substitute for analysis of our operating results in accordance with GAAP. In order to compensate for these potential limitationswe 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) borrowingsassociated with acquisitions and repayments associated with divestitures and (ii) borrowings and repayments associated with the purchase of used vehicleinventory, were classified as an operating activity. For the Years Ended December 31, 2016 2015 2014 (In millions)Reconciliation of Cash provided by operating activities to Cash provided by operating activities, as adjusted Cash provided by operating activities, as reported$142.3 $155.4 $84.2New vehicle floor plan borrowings (repayments)—non-trade, net118.0 (36.5) 109.0Cash provided by operating activities, as adjusted$260.3 $118.9 $193.2Operating Activities—Net cash provided by operating activities totaled $142.3 million, $155.4 million, and $84.2 million for the years ended December 31, 2016, 2015, and2014, respectively. Net cash provided by operating activities, as adjusted, totaled $260.3 million, $118.9 million, and $193.2 million for the years endedDecember 31, 2016, 2015, and 2014 respectively. Net cash provided by operating activities, as adjusted, includes net income, adjustments to reconcile netincome to net cash provided by operating activities, changes in working capital, and changes in floor plan notes payable—non-trade.The $141.4 million increase in our net cash provided by operating activities, as adjusted, for the year ended December 31, 2016 compared to the yearended December 31, 2015, was primarily the result of the following:•$126.1 million related to an increase in net floor plan notes payable, including both trade and non-trade, primarily as a result of a $66.5 million netdecrease in our floor plan offset accounts;•$55.2 million related to a decrease in inventory, due primarily to inventory turnover and the divestiture of five franchises (four dealership locations)and two collision centers in 2016; and•$4.9 million related to sales volume and the timing of collection of accounts receivable and contracts-in-transit during 2016 as compared to 2015.The increase in our net cash provided by operating activities, as adjusted, was partially offset by:•$33.8 million related to the net increase in other current assets, primarily related to an increase in our loaner vehicle inventory and the turnover ofthat inventory;53Table of Contents•$8.7 million related to a decrease in accounts payable, accrued liabilities and other long-term assets and liabilities during 2016 when compared to2015; and•$2.3 million decrease in net income adjusted for non-cash items, primarily attributable to the $45.5 million gain on divestitures in 2016 compared tothe $34.9 million gain on divestitures in 2015, the $3.6 million of impairment expenses in 2016, and the $4.4 million decrease in the excess taxbenefit on share-based arrangements.The $74.3 million decrease in our net cash provided by operating activities, as adjusted, for the year ended December 31, 2015 as compared to the yearended December 31, 2014 was primarily the result of the following:•$136.9 million related to a decrease in net floor plan notes payable, including both trade and non-trade, primarily as a result of an $111.5 million netincrease in our floor plan offset account;•$8.4 million decrease in net income adjusted for non-cash items primarily attributable to the $34.9 million gain on divestitures in 2015, the $31.9million loss on debt extinguishment in 2014, and the $7.8 million decrease in deferred income tax expense;•$7.7 million related to the net increase in other current assets, primarily related to an increase in our loaner vehicle inventory and the turnover of thatinventory; and•$5.1 million related to sales volume and the timing of collection of accounts receivable and contracts-in-transit during 2015 as compared to 2014.The decrease in our net cash provided by operating activities, as adjusted, was partially offset by:•$44.3 million related to an increase in accounts payable, accrued liabilities and other long-term assets and liabilities during 2015 when compared to2014; and•$39.5 million related to a decrease in inventory, due primarily to inventory turnover and the divestiture of seven franchises (five dealershiplocations) and one collision center in 2015.Investing Activities—Net cash provided by investing activities totaled $4.9 million for the year ended December 31, 2016, and net cash used in investing activities totaled$61.9 million and $230.8 million for the years ended December 31, 2015 and 2014, respectively. Cash flows from investing activities relate primarily tocapital expenditures, acquisitions, divestitures, and the sale of property and equipment.Capital expenditures, excluding the purchase of real estate and acquisitions, were $81.4 million, $71.7 million, and $58.3 million for the years endedDecember 31, 2016, 2015, and 2014, respectively. Purchases of real estate totaled $10.6 million, $30.3 million, and $15.9 million for the years endedDecember 31, 2016, 2015, and 2014, respectively. In addition, we purchased previously leased facilities for $19.6 million and $5.0 million during the yearsended December 31, 2016 and 2014, respectively. There were no purchases of previously leased facilities during the year ended December 31, 2015.We expect that capital expenditures during 2017 will total approximately $70.0 million to upgrade or replace our existing facilities, construct newfacilities, expand our service capacity, and invest in technology and equipment. As part of our capital allocation strategy, we continually evaluateopportunities to purchase properties currently under lease and acquire properties in connection with future dealership relocations. No assurances can beprovided that we will have or be able to access capital at times or on terms in amounts deemed necessary to execute this strategy.We did not acquire any franchises during the year ended December 31, 2016. During the years ended December 31, 2015 and 2014 we acquired twofranchises (two dealership locations) for an aggregate purchase price of $69.4 million and four franchises (three dealership locations) for an aggregatepurchase price of $152.2 million, respectively.During the year ended December 31, 2016, we divested five franchises (four dealership locations) and two collision centers for proceeds of $114.3 million.In addition, $13.1 million of mortgage note repayments were paid directly by the buyer as part of these divestitures. During the year ended December 31,2015, we divested seven franchises (five dealership locations) and one collision center for proceeds of $105.9 million. In addition, $19.3 million of mortgagenote repayments were paid directly by the buyer as part of these divestitures. There were no divestitures during the year ended December 31, 2014.Additionally, proceeds from the sale of assets, unrelated to the dealership divestitures, were $2.2 million, $3.6 million and $0.6 million for the years endedDecember 31, 2016, 2015, and 2014, respectively.54Table of ContentsFinancing Activities—Net cash used in financing activities totaled $146.6 million and $93.6 million for the years ended December 31, 2016 and 2015, respectively, and netcash provided by financing activities totaled $144.1 million for the year ended December 31, 2014.During the years ended December 31, 2016, 2015, and 2014, we had non-trade floor plan borrowings of $3.87 billion, $4.13 billion, and $3.72 billion,respectively. Included in our non-trade floor plan borrowings, were borrowings of $55.0 million and $254.0 million, for the years ended December 31, 2016and 2015, respectively, related to our used vehicle floor plan facility. There were no borrowings on our used vehicle floor plan facility during the year endedDecember 31, 2014. In addition, during the years ended December 31, 2015, and 2014, we had non-trade floor plan borrowings of $16.7 million, and $45.7million, respectively, related to acquisitions. There were no borrowings related to acquisitions during the year ended December 31, 2016. The majority of ourfloor plan notes are payable to parties unaffiliated with the entities from which we purchase our new vehicle inventory, with the exception of floor plan notespayable relating to the financing of new Ford and Lincoln vehicles.During the years ended December 31, 2016, 2015, and 2014, we made non-trade floor plan repayments of $3.75 billion, $4.17 billion, and $3.61 billion,respectively. Included in our non-trade floor plan repayments were repayments of $55.0 million and $256.0 million, for the years ended December 31, 2016and 2015, respectively, related to our used vehicle floor plan facility. There were no repayments on our used vehicle floor plan facility during the year endedDecember 31, 2014. In addition, during the years ended December 31, 2016 and 2015, we had floor plan repayments associated with dealership divestituresof $31.2 million and $44.0 million, respectively. There were no repayments made related to divestitures during the year ended December 31, 2014.Proceeds from borrowings totaled $293.1 million, and $473.2 million, for the years ended December 31, 2015, and 2014, respectively. There were noproceeds from borrowings during the year ended December 31, 2016. Repayments of borrowings totaled $15.2 million, $11.3 million, and $311.0 million, forthe years ended December 31, 2016, 2015, and 2014, respectively.During the year ended December 31, 2016, we repurchased a total of 3,730,642 shares of our common stock under our Repurchase Program for a total of$211.9 million and 70,411 shares of our common stock for $3.7 million from employees in connection with a net share settlement feature of employeeequity-based awards.Off Balance Sheet ArrangementsWe had no off balance sheet arrangements during any of the periods presented other than those disclosed in Note 18 "Lease Obligations" and Note 19"Commitments and Contingencies" of the Notes to Consolidated Financial Statements thereto.Item 7A. Quantitative and Qualitative Disclosures About Market RiskInterest Rate RiskWe are exposed to risk from changes in interest rates on a significant portion of our outstanding indebtedness. Based on $767.3 million of total variableinterest rate debt, which includes our floor plan notes payable and certain mortgage liabilities, outstanding as of December 31, 2016, a 100 basis pointchange in interest rates could result in a change of as much as $7.7 million in annual interest expense.We periodically receive floor plan assistance from certain automobile manufacturers. Floor plan assistance reduced our cost of sales for the years endedDecember 31, 2016, 2015, and 2014, by $35.3 million, $33.6 million, and $27.6 million, respectively. We cannot provide assurance as to the future amountof 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 rateswaps qualify for hedge accounting treatment and do not contain any ineffectiveness.In June 2015, we entered into a new interest rate swap agreement with a notional principal amount of $100.0 million. This swap was designed to provide ahedge against changes in variable rate cash flows regarding fluctuations in the one month LIBOR rate, through maturity in February 2025. The notionalvalue of this swap was $95.6 million and $100.0 million as of December 31, 2016 and 2015, respectively, and is reducing over its remaining term to $53.1million 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 providea hedge against changes in variable rate cash flows regarding fluctuations in the one month LIBOR rate, through maturity in September 2023. The notionalvalues of this swap as of December 31, 2016 and 2015, were $64.0 million and $67.7 million, respectively, and the notional value will reduce over itsremaining term to $38.7 million at maturity.55Table of ContentsFor additional information about the effect of our derivative instruments on the accompanying Consolidated Financial Statements, see Note 14 "FinancialInstruments and Fair Value" of the Notes thereto.56Table of ContentsItem 8.Financial Statements and Supplementary DataINDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReports of Independent Registered Public Accounting Firm58 Consolidated Balance Sheets as of December 31, 2016 and 201560 Consolidated Statements of Income for the Years Ended December 31, 2016, 2015, and 201461 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2016, 2015, and 201462 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2016, 2015, and 201463 Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015, and 201464 Notes to Consolidated Financial Statements6557Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMON THE CONSOLIDATED FINANCIAL STATEMENTSThe Board of Directors and Shareholders ofAsbury Automotive Group, Inc.We have audited the accompanying consolidated balance sheets of Asbury Automotive Group, Inc. as of December 31, 2016 and 2015, and the relatedconsolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31,2016. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financialstatements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Asbury AutomotiveGroup, Inc. at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period endedDecember 31, 2016, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Asbury Automotive Group,Inc.'s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 23, 2017 expressed an unqualifiedopinion thereon./s/ Ernst &Young LLPAtlanta, GeorgiaFebruary 23, 201758Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMON INTERNAL CONTROL OVER FINANCIAL REPORTINGThe Board of Directors and Shareholders ofAsbury Automotive Group, Inc.We have audited Asbury Automotive Group, Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established inInternal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSOcriteria). Asbury Automotive Group, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for itsassessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control OverFinancial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.In our opinion, Asbury Automotive Group, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31,2016, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of Asbury Automotive Group, Inc. as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income,shareholders' equity and cash flows for each of the three years in the period ended December 31, 2016 of Asbury Automotive Group, Inc. and our report datedFebruary 23, 2017 expressed an unqualified opinion thereon./s/ Ernst &Young LLPAtlanta, GeorgiaFebruary 23, 201759Table of ContentsASBURY AUTOMOTIVE GROUP, INC.CONSOLIDATED BALANCE SHEETS(In millions, except par value and share data) As of December 31, 2016 2015ASSETS CURRENT ASSETS: Cash and cash equivalents$3.4 $2.8Contracts-in-transit, net182.6 175.7Accounts receivable, net138.4 119.5Inventories, net894.9 917.2Assets held for sale16.1 27.6Other current assets97.0 88.4Total current assets1,332.4 1,331.2PROPERTY AND EQUIPMENT, net815.4 772.8GOODWILL128.1 130.2INTANGIBLE FRANCHISE RIGHTS48.5 48.5OTHER LONG-TERM ASSETS11.7 11.4Total assets$2,336.1 $2,294.1LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Floor plan notes payable—trade, net$108.3 $138.8Floor plan notes payable—non-trade, net673.5 573.4Current maturities of long-term debt14.0 13.9Accounts payable and accrued liabilities309.1 281.7Total current liabilities1,104.9 1,007.8LONG-TERM DEBT912.7 940.4DEFERRED INCOME TAXES8.9 1.9OTHER LONG-TERM LIABILITIES29.9 29.5COMMITMENTS AND CONTINGENCIES (Note 19) 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; 40,750,765 and 40,507,313 shares issued,including shares held in treasury, respectively0.4 0.4Additional paid-in capital549.4 537.2Retained earnings611.5 444.3Treasury stock, at cost; 19,497,596 and 15,696,543 shares, respectively(879.5) (663.9)Accumulated other comprehensive loss(2.1) (3.5)Total shareholders' equity279.7 314.5Total liabilities and shareholders' equity$2,336.1 $2,294.1See accompanying Notes to Consolidated Financial Statements60Table of ContentsASBURY AUTOMOTIVE GROUP, INC.CONSOLIDATED STATEMENTS OF INCOME(In millions, except per share data) For the Year Ended December 31, 2016 2015 2014REVENUE: New vehicle$3,611.9 $3,652.5 $3,230.6Used vehicle1,876.4 1,931.7 1,741.5Parts and service778.5 740.7 666.6Finance and insurance, net261.0 263.4 229.0TOTAL REVENUE6,527.8 6,588.3 5,867.7COST OF SALES: New vehicle3,424.8 3,449.5 3,032.3Used vehicle1,749.1 1,799.9 1,613.8Parts and service295.2 278.1 254.4TOTAL COST OF SALES5,469.1 5,527.5 4,900.5GROSS PROFIT1,058.7 1,060.8 967.2OPERATING EXPENSES (INCOME): Selling, general, and administrative732.5 729.9 671.6Depreciation and amortization30.7 29.5 26.4Other operating (income) expense, net(2.3) (0.2) 1.0INCOME FROM OPERATIONS297.8 301.6 268.2OTHER EXPENSES (INCOME): Floor plan interest expense19.3 16.1 12.4Other interest expense, net53.1 44.0 38.9Swap interest expense3.1 3.0 2.0Loss on extinguishment of long-term debt, net— — 31.9Gain on divestitures(45.5) (34.9) —Total other expenses (income), net30.0 28.2 85.2INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES267.8 273.4 183.0Income tax expense100.6 104.0 71.0INCOME FROM CONTINUING OPERATIONS167.2 169.4 112.0Discontinued operations, net of tax— (0.2) (0.4)NET INCOME$167.2 $169.2 $111.6EARNINGS PER COMMON SHARE: Basic— Continuing operations$7.43 $6.44 $3.75Discontinued operations— (0.01) (0.02)Net income$7.43 $6.43 $3.73Diluted— Continuing operations$7.40 $6.42 $3.72Discontinued operations— (0.01) (0.01)Net income$7.40 $6.41 $3.71WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic22.5 26.3 29.9Restricted stock0.0 0.0 0.1Performance share units0.1 0.1 0.1Diluted22.6 26.4 30.1 See accompanying Notes to Consolidated Financial Statements61Table of ContentsASBURY AUTOMOTIVE GROUP, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In millions) For the Year Ended December 31, 2016 2015 2014Net income$167.2 $169.2 $111.6Other comprehensive income (loss): Change in fair value of cash flow swaps2.3 (3.1) (2.9)Income tax (expense) benefit associated with cash flow swaps(0.9) 1.1 1.2Comprehensive income$168.6 $167.2 $109.9See accompanying Notes to Consolidated Financial Statements62Table of ContentsASBURY AUTOMOTIVE GROUP, INC.CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(Dollars in millions) Common Stock AdditionalPaid-inCapital RetainedEarnings Treasury Stock AccumulatedOtherComprehensiveIncome (Loss) Total Shares Amount Shares Amount Balances, December 31, 201340,095,557 $0.4 $510.5 $163.5 9,330,443 $(184.0) $0.2 $490.6Comprehensive Income: Net income— — — 111.6 — — — 111.6Change in fair value of cash flow swaps,net of reclassification adjustment and$1.2 tax benefit— — — — — — (1.7) (1.7)Comprehensive income (loss)— — — 111.6 — — (1.7) 109.9Share-based compensation— — 8.6 — — — — 8.6Issuance of common stock in connectionwith share-based payment arrangements,including $3.5 excess tax benefit232,068 — 3.5 — — — — 3.5Repurchase of common stock associatedwith net share settlements of employeeshare-based awards— — — — 123,774 (6.3) — (6.3)Purchase of treasury shares— — — — 2,349,494 (161.4) — (161.4)Balances, December 31, 201440,327,625 $0.4 $522.6 $275.1 11,803,711 $(351.7) $(1.5) $444.9Comprehensive Income: Net income— — — 169.2 — — — 169.2Change in fair value of cash flow swaps,net of reclassification adjustment and$1.1 tax benefit— — — — — — (2.0) (2.0)Comprehensive income (loss)— — — 169.2 — — (2.0) 167.2Share-based compensation— — 10.0 — — — — 10.0Issuance of common stock in connectionwith share-based payment arrangements,including $4.6 excess tax benefit179,688 — 4.6 — — — — 4.6Repurchase of common stock associatedwith net share settlements of employeeshare-based awards— — — — 99,646 (8.0) — (8.0)Purchase of treasury shares— — — — 3,793,186 (304.2) — (304.2)Balances, December 31, 201540,507,313 $0.4 $537.2 $444.3 15,696,543 $(663.9) $(3.5) $314.5Comprehensive Income: Net income— — — 167.2 — — — 167.2Change in fair value of cash flow swaps,net of reclassification adjustment and$0.9 tax expense— — — — — — 1.4 1.4Comprehensive income— — — 167.2 — — 1.4 168.6Share-based compensation— — 12.0 — — — — 12.0Issuance of common stock in connectionwith share-based payment arrangements,including $0.2 excess tax benefit243,452 — 0.2 — — — — 0.2Repurchase of common stock associatedwith net share settlements of employeeshare-based awards— — — — 70,411 (3.7) — (3.7)Purchase of treasury shares— — — — 3,730,642 (211.9) — (211.9)Balances, December 31, 201640,750,765 $0.4 $549.4 $611.5 19,497,596 $(879.5) $(2.1) $279.7See accompanying Notes to Consolidated Financial Statements63Table of ContentsASBURY AUTOMOTIVE GROUP, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions) For the Year Ended December 31, 2016 2015 2014CASH FLOW FROM OPERATING ACTIVITIES: Net income$167.2 $169.2 $111.6Adjustments to reconcile net income to net cash provided by operating activities— Depreciation and amortization30.7 29.5 26.4Share-based compensation12.0 10.0 8.6Deferred income taxes6.1 9.5 17.3Impairment expenses3.6 — 0.9Loss on extinguishment of debt— — 31.9Loaner vehicle amortization21.5 19.0 14.0Excess tax benefit on share-based arrangements(0.2) (4.6) (3.5)Gain on divestitures(45.5) (34.9) —Other adjustments, net4.1 4.2 3.1Changes in operating assets and liabilities, net of acquisitions and divestitures— Contracts-in-transit(6.9) (20.1) (14.7)Accounts receivable(19.5) (11.2) (14.0)Proceeds from the sale of accounts receivable— — 2.5Inventories105.3 50.1 10.6Other current assets(152.2) (118.4) (110.7)Floor plan notes payable—trade, net(17.2) 11.2 2.6Accounts payable and accrued liabilities31.4 37.7 (2.6)Other long-term assets and liabilities, net1.9 4.2 0.2Net cash provided by operating activities142.3 155.4 84.2CASH FLOW FROM INVESTING ACTIVITIES: Capital expenditures—excluding real estate(81.4) (71.7) (58.3)Capital expenditures—real estate(10.6) (30.3) (15.9)Purchases of previously leased real estate(19.6) — (5.0)Acquisitions— (69.4) (152.2)Divestitures114.3 105.9 —Proceeds from the sale of assets2.2 3.6 0.6Net cash provided by (used in) investing activities4.9 (61.9) (230.8)CASH FLOW FROM FINANCING ACTIVITIES: Floor plan borrowings—non-trade3,866.3 4,130.3 3,721.3Floor plan borrowings—acquisitions— 16.7 45.7Floor plan repayments—non-trade(3,748.3) (4,168.8) (3,612.3)Floor plan repayments—divestitures(31.2) (44.0) —Proceeds from borrowings— 293.1 473.2Repayments of borrowings(15.2) (11.3) (311.0)Payment of debt issuance costs(2.8) (2.0) (8.7)Repurchases of common stock, including amounts associated with net share settlements of employee share-based awards(215.6) (312.2) (167.7)Excess tax benefit on share-based arrangements0.2 4.6 3.5Proceeds from the exercise of stock options— — 0.1Net cash (used in) provided by financing activities(146.6) (93.6) 144.1Net increase (decrease) in cash and cash equivalents0.6 (0.1) (2.5)CASH AND CASH EQUIVALENTS, beginning of period2.8 2.9 5.4CASH AND CASH EQUIVALENTS, end of period$3.4 $2.8 $2.9See Note 17 for supplemental cash flow informationSee accompanying Notes to Consolidated Financial Statements64Table of ContentsASBURY AUTOMOTIVE GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(December 31, 2016, 2015, and 2014)1. DESCRIPTION OF BUSINESSWe are one of the largest automotive retailers in the United States. As of December 31, 2016 we owned and operated 93 new vehicle franchises (77dealership locations), representing 28 brands of automobiles, and 23 collision centers, in 16 metropolitan markets, within eight states. Our stores offer anextensive range of automotive products and services, including new and used vehicles, repair and maintenance services, collision repair services, and financeand insurance products. As of December 31, 2016, our new vehicle revenue brand mix consisted of 45% imports, 34% luxury, and 21% domestic brands. Inaddition, as of December 31, 2016 we owned and operated two stand-alone used vehicle stores in Florida.Our operating results are generally subject to seasonal variations. Demand for new vehicles is generally highest during the second and third quarters ofeach year and, accordingly, we expect our revenues to generally be higher during these periods. We typically experience higher sales of luxury vehicles inthe fourth quarter, which have higher average selling prices and gross profit per vehicle retailed. Revenues and operating results may be impactedsignificantly from quarter to quarter by changing economic conditions, vehicle manufacturer incentive programs, or adverse weather events.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of PresentationThe accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the UnitedStates of America ("GAAP"), and reflect the consolidated accounts of Asbury Automotive Group, Inc. and our wholly owned subsidiaries. All intercompanytransactions have been eliminated in consolidation. In addition, certain reclassifications of amounts previously reported have been made to theaccompanying Consolidated Financial Statements in order to conform to current presentation.Use of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts ofrevenues and expenses during the periods presented. Actual results could differ materially from these estimates. Estimates and assumptions are reviewedquarterly, and the effects of any revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Significantestimates made in the accompanying consolidated financial statements include, but are not limited to, those relating to inventory valuation reserves, reservesfor chargebacks against revenue recognized from the sale of finance and insurance products, reserves for insurance programs, certain assumptions related tointangible and long-lived assets, and reserves for certain legal or similar proceedings relating to our business operations.Cash and Cash EquivalentsCash and cash equivalents include investments in money market accounts and short-term certificates of deposit, which have maturity dates of less than 90days when purchased.Contracts-In-TransitContracts-in-transit represent receivables from third-party finance companies for the portion of new and used vehicle purchase price financed bycustomers through sources arranged by us.InventoriesInventories are stated at the lower of cost or market. We use the specific identification method to value vehicle inventories and the "first-in, first-out"method ("FIFO") to account for our parts inventories. Our new vehicle sales histories have indicated that the vast majority of the new vehicles we sell are soldfor, or in excess of, our cost to purchase those vehicles. Therefore, we generally do not maintain a reserve for new vehicle inventory. We maintain a reserve forused vehicle inventory where cost basis exceeds market value. In assessing lower of cost or market for used vehicles, we consider (i) the aging of our usedvehicles, (ii) historical sales experience of used vehicles, and (iii) current market conditions and trends in used vehicle sales. We also review and consider thefollowing metrics related to used vehicle sales (both on a recent and longer-term historical basis): (i) days of supply in our used vehicle inventory, (ii) usedvehicle units sold at less than original cost as a percentage of total used vehicles sold, and (iii) average vehicle selling price of used vehicle units sold at lessthan original cost. We then determine the appropriate level of reserve required to reduce our used vehicle inventory to the lower of cost or market, and65Table of Contentsrecord the resulting adjustment in the period in which we determine a loss has occurred. The level of reserve determined to be appropriate for each reportingperiod is considered to be a permanent inventory write-down, and therefore is only released upon the sale of the related inventory.We receive assistance from certain automobile manufacturers in the form of advertising and floor plan interest credits. Manufacturer advertising creditsthat are reimbursements of costs associated with specific advertising programs are recognized as a reduction of advertising expense in the period they areearned. All other manufacturer advertising and floor plan interest credits are accounted for as purchase discounts, and are recorded as a reduction of inventoryand recognized as a reduction to New Vehicle Cost of Sales in the accompanying Consolidated Statements of Income in the period the related vehicle is sold.Property and EquipmentProperty and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives. Depreciation is included inDepreciation and Amortization on the accompanying Consolidated Statements of Income. Leasehold improvements are capitalized and amortized over thelesser of the life of the lease or the useful life of the related asset. The ranges of estimated useful lives are as follows (in years): Buildings and improvements10-40Machinery and equipment5-10Furniture and fixtures3-10Company vehicles3-5Expenditures for major additions or improvements, which extend the useful lives of assets, are capitalized. Minor replacements, maintenance and repairs,which do not improve or extend the lives of such assets, are expensed as incurred. We capitalize interest on borrowings during the active construction periodof capital projects. Capitalized interest is added to the cost of the assets and is depreciated over the estimated useful lives of the assets.We review property and equipment for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable.When we test our long-lived assets for impairment, we first compare the carrying amount of the underlying assets to their net recoverable value by reviewingthe undiscounted cash flows expected to result from the use and eventual disposition of the underlying assets. If the carrying amount of the underlying assetsis less than their net recoverable value, then we calculate an impairment equal to the excess of the carrying amount over the fair market value, and theimpairment loss would be charged to operations in the period identified. As a result of impairment tests conducted in 2016, 2015, and 2014, we did notrecord an impairment of our property and equipment.AcquisitionsAcquisitions are accounted for under the acquisition method of accounting, and the assets acquired and liabilities assumed are recorded at their fair value,at the acquisition date. The results of operations of acquired dealerships are included in the accompanying Consolidated Statements of Income, commencingon the date of acquisition.Goodwill and Other Intangible AssetsGoodwill represents the excess cost of an acquired business over the fair market value of its identifiable net assets. We have determined that, based onhow we integrate acquisitions into our business, how the components of our business share resources and interact with one another, and how we review theresults of our operations, that we have several geographic market-based operating segments. We have determined that the dealerships in each of our operatingsegments are components that are aggregated into several geographic market-based reporting units for the purpose of testing goodwill for impairment, as they(i) have similar economic characteristics, (ii) offer similar products and services (all of our dealerships offer new and used vehicles, service, parts and third-party finance and insurance products), (iii) have similar customers, (iv) have similar distribution and marketing practices (all of our dealerships distributeproducts and services through dealership facilities that market to customers in similar ways), and (v) operate under similar regulatory environments.Our only significant identifiable intangible assets, other than goodwill, are our rights under franchise agreements with manufacturers, which are recordedat an individual franchise level. The fair value of our manufacturer franchise rights are determined at the acquisition date, by discounting the projected cashflows specific to each franchise. We have determined that manufacturer franchise rights have an indefinite life, as there are no economic, contractual or otherfactors that limit their useful lives, and they are expected to generate cash flows indefinitely due to the historically long lives of the manufacturers' brandnames. Furthermore, to the extent that any agreements evidencing our manufacturer franchise rights would expire, we expect that we would be able to renewthose agreements in the ordinary course of business.66Table of ContentsWe do not amortize goodwill and other intangible assets that are deemed to have indefinite lives. We review goodwill and manufacturer franchise rightsfor impairment annually as of October 1st, or more often if events or circumstances indicate that impairment may have occurred. We are subject to financialstatement risk to the extent that goodwill becomes impaired due to decreases in the fair value of our automotive retail business or manufacturer franchiserights become impaired due to decreases in the fair value of our individual franchises.We completed our annual impairment tests as of October 1, 2016. Based on our qualitative assessment regarding goodwill impairment, we determinedthat it was more likely than not that the fair value exceeded the carrying value. Based on our qualitative assessment regarding manufacturer franchise rightsimpairment, we determined that we should perform a quantitative test regarding certain franchises. Based on our quantitative assessment regarding thesefranchises, we determined that it was more likely than not that the fair value exceeded the carrying value. For the remainder of our manufacturer franchiserights, we determined that it was more likely than not that the fair value exceeded the carrying value, based on our qualitative assessment and we weretherefore not required to perform a quantitative test. As such, there were no impairment charges related to goodwill or manufacturer franchise rights recordedfor the year ended December 31, 2016.Debt Issuance CostsDebt issuance costs are presented as a contra-liability within Current Maturities of Long-Term Debt or Long-Term Debt on our Consolidated BalanceSheets, except for debt issuance costs associated with our line-of-credit arrangements, which are presented as an asset within Other Current Assets or OtherLong-Term Assets on our Consolidated Balance Sheets. Debt issuance costs are amortized to Floor Plan Interest Expense and Other Interest Expense, net inthe accompanying Consolidated Statements of Income through maturity using the effective interest method.Derivative Instruments and Hedging ActivitiesFrom time to time, we utilize derivative financial instruments to manage our interest rate risk. The types of risks hedged are those relating to thevariability of cash flows caused by fluctuations in interest rates. We document our risk management strategy and assess hedge effectiveness at each interestrate swaps inception and during the term of each hedge. Derivatives are reported at fair value on the accompanying Consolidated Balance Sheets.The effective portion of the gain or loss on our hedges is reported as a component of Accumulated Other Comprehensive Loss on the accompanyingConsolidated Balance Sheets, and reclassified to Swap Interest Expense in the accompanying Consolidated Statements of Income in the period during whichthe hedged transaction affects earnings.Measurements of hedge effectiveness are based on comparisons between the gains or losses of the actual interest rate swaps and the gains or losses ofhypothetical interest rate swaps, which have the same critical terms of the defined hedged items. Ineffective portions of these interest rate swaps are reportedas a component of Swap Interest Expense in the accompanying Consolidated Statements of Income, in the period during which any ineffectiveness isidentified.InsuranceWe are self-insured for employee medical claims and maintain stop loss insurance for large-dollar individual claims. We have high deductible insuranceprograms for workers compensation, property and general liability claims. We maintain and review our claim and loss history to assist in assessing ourexpected future liability for these claims. We also use professional service providers, such as account administrators and actuaries, to help us accumulate andassess this information. Provisions for retained losses and deductibles are made by charges to expense based upon periodic evaluations of the estimatedultimate liabilities on reported and unreported claims.Revenue RecognitionRevenue from the sale of new and used vehicles (which excludes sales tax) is recognized upon the latest of delivery, signing of the sales contract orapproval of financing. Revenue from the sale of parts, service and collision repair work (which excludes sales tax) is recognized upon delivery of parts to thecustomer or at the time vehicle service or repair work is completed, as applicable. Manufacturer incentives and rebates, including manufacturer holdbacks,floor plan interest assistance and certain advertising assistance, are recognized as a reduction of New Vehicle Cost of Sales at the time the related vehicles aresold, in the accompanying Consolidated Statements of Income.We receive commissions from third-party lending and insurance institutions for arranging customer financing and from the sale of vehicle servicecontracts, guaranteed auto protection (known as "GAP") insurance, and other insurance, to customers (collectively "F&I"). We may be charged back for F&Icommissions in the event a contract is prepaid, defaulted upon, or terminated ("chargebacks"). F&I commissions are recorded at the time a vehicle is sold anda reserve for future chargebacks is established based on historical chargeback experience and the termination provisions of the applicable contract. F&I67Table of Contentscommissions, net of estimated future chargebacks, are included in Finance and Insurance, net in the accompanying Consolidated Statements of Income.Additionally, we participate in future profits associated with the performance of the third-party held underlying portfolio for certain products, pursuant toretrospective commission arrangements. Our retrospective portfolio income is recorded as revenue at the time it is received from our third-party providers.Internal ProfitRevenues and expenses associated with internal work performed by our parts and service departments on new and used vehicle inventory are eliminatedin consolidation. The gross profit earned by our parts and service departments for internal work performed is included as a reduction of Parts and Service Costof Sales on the accompanying Consolidated Statements of Income upon the sale of the vehicle. The costs incurred by our new and used vehicle departmentsfor 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 accompanyingConsolidated Statements of Income, depending on the classification of the vehicle serviced. We maintain a reserve to eliminate the internal profit on vehiclesthat have not been sold.Share-Based CompensationWe record share-based compensation expense under the fair value method on a straight-line basis over the vesting period, unless the awards are subject toperformance conditions, in which case we recognize the expense over the requisite service period of each separate vesting tranche.Earnings per Common ShareBasic earnings per common share is computed by dividing net income by the weighted-average common shares outstanding during the period. Dilutedearnings per common share is computed by dividing net income by the weighted-average common shares and common share equivalents outstanding duringthe period. For all periods presented, there were no adjustments to the numerator necessary to compute diluted earnings per share.AdvertisingWe expense costs of advertising as incurred and production costs when the advertising initially takes place, net of certain advertising credits and otherdiscounts. Advertising expense from continuing operations totaled $34.0 million, $40.1 million and $34.0 million for the years ended December 31, 2016,2015 and 2014, which was net of earned advertising credits of $16.8 million, $17.1 million, and $16.2 million, respectively, and is included in Selling,General, and Administrative expense in the accompanying Consolidated Statements of Income.Income TaxesWe use the liability method to account for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future taxconsequences of differences between the carrying amounts of assets and liabilities and their respective tax basis using currently enacted tax rates. The effecton deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. Deferred tax assets are reducedby a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized.In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, to simplify theclassification of deferred taxes on the balance sheet. The guidance requires that deferred taxes be classified as non-current assets and liabilities based on thetax paying jurisdiction. We adopted this standard as of December 31, 2016 with retrospective application. In accordance with the retrospective application ofthis standard, we have reclassified $11.8 million of deferred tax assets from Deferred Income Taxes (current assets) to Deferred Income Taxes (non-currentliabilities) as of December 31, 2015.Discontinued OperationsWe evaluated our dealership divestitures in 2015 and 2016 to determine whether they would be considered discontinued operations. Based on ourevaluation, we determined that none of our dealership divestitures would be considered discontinued operations.68Table of ContentsAssets Held for Sale and Liabilities Associated with Assets Held for SaleCertain amounts have been classified as Assets Held for Sale as of December 31, 2016 and 2015 in the accompanying 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 ouroperations that we are actively marketing to sell, and any related mortgage notes payable, if applicable. Classification as held for sale begins on the date thatwe 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. Wecompare the carrying value to estimates of fair value utilizing the assistance of third-party broker opinions of value and third-party desktop appraisals toassist in our fair value estimates related to real estate properties.Statements of Cash FlowsBorrowings 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 classifiedas financing activities on the accompanying Consolidated Statements of Cash Flows, with borrowings reflected separately from repayments. The net changein floor plan notes payable to a lender affiliated with the manufacturer from which we purchase a particular new vehicle (collectively referred to as "FloorPlan Notes Payable—Trade") is classified as an operating activity on the accompanying Consolidated Statements of Cash Flows. Borrowings of floor plannotes payable associated with inventory acquired in connection with all acquisitions and repayments made in connection with all divestitures are classifiedas a financing activity in the accompanying Consolidated Statement of Cash Flows. Cash flows related to floor plan notes payable included in operatingactivities 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 lenderaffiliated with the manufacturer from which we purchased the related inventory, while the latter are payable to a lender not affiliated with the manufacturerfrom 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 borrowingsfrom either our manufacturer affiliated lenders or through our senior secured credit agreement with Bank of America, as administrative agent, and the otheragents and lenders party thereto (the "2016 Senior Credit Facility"). Loaner vehicles are initially used by our service department for only a short period oftime (typically 6 to 12 months) before we seek to sell them. Therefore, we classify the acquisition of loaner vehicles in Other Current Assets and theborrowings and repayments of loaner vehicle notes payable in Accounts Payable and Accrued Liabilities in the accompanying Consolidated Statements ofCash Flows. Loaner vehicles are depreciated over the service period to their estimated value. At the end of the loaner service period, loaner vehicles aretransferred from Other Current Assets to used vehicle inventory. These transfers are reflected as non-cash transfers between Other Current Assets and Inventoryin the accompanying Consolidated Statements of Cash Flows.Business and Credit Concentration RiskFinancial instruments, which potentially subject us to a concentration of credit risk, consist principally of cash deposits. We maintain cash balances atfinancial institutions with strong credit ratings. Generally, amounts maintained with these financial institutions are in excess of FDIC insurance limits.We have substantial debt service obligations. As of December 31, 2016, we had total debt of $931.3 million, excluding floor plan notes payable, the debtpremium on the 6.0% Senior Subordinated Notes due 2024 ("6.0% Notes"), and debt issuance costs. In addition, we and our subsidiaries have the ability toobtain additional debt from time to time to finance acquisitions, real property purchases, capital expenditures, share repurchases or for other purposes,although such borrowings are subject to the restrictions contained in the second amended and restated senior secured credit agreement with Bank of America,N.A. ("Bank of America"), as administrative agent, and the other lenders party thereto (the "2016 Senior Credit Facility") and the indenture governing our6.0% Senior Subordinated Notes due 2024 (the "Indenture"). We will have substantial debt service obligations, consisting of required cash payments ofprincipal and interest, for the foreseeable future.We are subject to operating and financial restrictions and covenants in certain of our leases and in our debt instruments, including the 2016 Senior CreditFacility, the Indenture, and the credit agreements covering our mortgage obligations. These agreements contain restrictions on, among other things, ourability to incur additional indebtedness, to create liens or other encumbrances, and to make certain payments (including dividends and repurchases of ourshares and investments). These agreements may also require us to maintain compliance with certain financial and other ratios. Our failure to comply with anyof these covenants in the future would constitute a default under the relevant agreement, which would, depending on the relevant agreement, (i) entitle thecreditors under such agreement to terminate our ability to borrow under the relevant agreement and accelerate our obligations to repay outstandingborrowings; (ii) require us to apply our available cash to repay69Table of Contentsthese borrowings; (iii) entitle the creditors under such agreement to foreclose on the property securing the relevant indebtedness; and/or (iv) prevent us frommaking debt service payments on certain of our other indebtedness, any of which would have a material adverse effect on our business, financial condition orresults of operations. In many cases, a default under one of our debt or mortgage, agreements could trigger cross-default provisions in one or more of our otherdebt or mortgages.A number of our dealerships are located on properties that we lease. Each of the leases governing such properties has certain covenants with which wemust comply. If we fail to comply with the covenants under our leases, the respective landlords could terminate the leases and seek damages from us.Concentrations of credit risk with respect to contracts-in-transit and accounts receivable are limited primarily to automotive manufacturers and financialinstitutions. Credit risk arising from receivables from commercial customers is minimal due to the large number of customers comprising our customer base.A significant portion of our new vehicle sales are derived from a limited number of automotive manufacturers. For the year ended December 31, 2016,manufacturers representing 5% or more of our revenues from new vehicle sales were as follows: Manufacturer (Vehicle Brands): % of TotalNew VehicleRevenuesAmerican Honda Motor Co., Inc. (Honda and Acura) 21%Toyota Motor Sales, U.S.A., Inc. (Toyota and Lexus) 19%Ford Motor Company (Ford and Lincoln) 15%Nissan North America, Inc. (Nissan and Infiniti) 14%Mercedes-Benz USA, LLC (Mercedes-Benz, Smart and Sprinter) 8%BMW of North America, LLC (BMW and Mini) 7%No other manufacturers individually accounted for more than 5% of our total new vehicle revenue for the year ended December 31, 2016.Segment ReportingOur operations are organized by management into geographic market-based dealership groups. Our Chief Operating Decision Maker is our ChiefExecutive Officer who manages the business, regularly reviews financial information and allocates resources at the geographic market level. The geographicoperating segments have been aggregated into one reportable segment as their operations (i) have similar economic characteristics (our markets all havesimilar long-term average gross margins), (ii) offer similar products and services (all of our markets offer new and used vehicles, parts and service, and third-party finance and insurance products), (iii) have similar customers, (iv) have similar distribution and marketing practices (all of our markets distributeproducts and services through dealership facilities that market to customers in similar ways), and (v) operate under similar regulatory environments.Recent Accounting PronouncementsIn May 2014, the FASB issued Accounting Standard Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606), a new standard onrevenue recognition. Further, the FASB has issued a number of additional ASU's regarding the new revenue recognition standard. The new standard, asamended, will supersede existing revenue recognition guidance and apply to all entities that enter into contracts to provide goods or services to customers.The guidance also addresses the measurement and recognition of gains and losses on the sale of certain non-financial assets, such as real estate, property, andequipment. The new standard will become effective for annual reporting periods beginning on or after December 15, 2017 and interim periods within thatyear. The standard can be adopted either retrospectively to each reporting period presented or as a cumulative effect adjustment as of the date of adoption.Early adoption of the standard is permitted, but not before annual reporting periods beginning on or after December 15, 2016. We have performed apreliminary evaluation of this standard and plan to adopt it effective January 1, 2018. We cannot currently estimate the impact of this change upon adoptionof this standard and will continue to review the impact of this standard on potential disclosure changes in our financial statements, as well as which transitionapproach will be applied. Our evaluation of this standard will continue through the date of adoption.In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, to simplify the measurement ofinventory by changing the subsequent measurement guidance from the lower of cost or market to the lower of cost and net realizable value. Application ofthe standard, which is required to be applied prospectively, is required70Table of Contentsfor fiscal years beginning on or after December 15, 2016 and for interim periods within that year. We do not expect the adoption of this new guidance to havea material impact on our consolidated financial statements.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), a new standard on lease accounting. The new standard will supersede the existinglease accounting guidance and apply to all entities. The guidance defines new principles for the recognition, measurement, presentation, and disclosure ofleases for both lessees and lessors. The new standard will become effective for annual reporting periods beginning on or after December 15, 2018 and forinterim periods within that year. A modified retrospective approach is required and early adoption of this standard is permitted. While we are still evaluatingthe impact of this standard, we expect that the right-of-use assets and the associated lease liabilities will be material to our financial statements. We plan toadopt this standard effective January 1, 2019.In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718), to simplify the accounting for share-based paymenttransactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.Application of the standard is required for fiscal years beginning on or after December 15, 2016 and for interim periods within that year. Further, applicationcan be either prospective or retrospective depending on each of the provisions in the guidance. We are currently evaluating the expected impact of adoptingthis new guidance on our consolidated financial statements.3. ACQUISITIONS AND DIVESTITURESResults of acquired dealerships are included in our accompanying Consolidated Statements of Income commencing on the date of acquisition. Ouracquisitions are accounted for using the acquisition method of accounting, which requires, among other things, that the assets acquired and liabilitiesassumed be recognized at their acquisition date fair values, with any excess of the consideration transferred over the estimated fair values of the identifiablenet assets acquired recorded as goodwill. Goodwill is an asset representing operational synergies and future economic benefits arising from other assetsacquired in a business combination that are not individually identified and separately recognized.We did not acquire any dealerships during the year ended December 31, 2016. During the year ended December 31, 2015, we acquired the assets of twofranchises (two dealership locations) in our existing markets of Jacksonville, FL and Atlanta, GA for a combined purchase price of $69.4 million. We financedthese acquisitions with $52.7 million of cash and $16.7 million of floor plan borrowings for the purchase of the related new vehicle inventory. Below is theallocation of purchase price for these acquisitions. Goodwill and manufacturer franchise rights associated with our acquisitions will be deductible for federaland state income tax purposes ratably over a 15-year period. 2015 (In millions)Inventory$19.0Real estate15.2Property and equipment0.9Goodwill28.3Manufacturer franchise rights6.3Liabilities assumed(0.3)Total purchase price$69.4During the year ended December 31, 2016, we sold the remaining five franchises (four dealership locations) and two collision centers in the Little Rock,AR market. We recorded a gain associated with the sale of the franchises totaling $45.5 million ($28.4 million net of tax) in our accompanying ConsolidatedStatements of Income.During the year ended December 31, 2015, we sold two franchises (two dealership locations) in Princeton, NJ; one franchise in the St. Louis, MO market;one collision center in Austin, TX; and four franchises (three dealership locations) in the Little Rock, AR market. We recorded a gain associated with the saleof the franchises totaling $34.9 million ($21.6 million net of tax) in our accompanying Consolidated Statements of Income.None of our divestitures during the years ended December 31, 2016 or 2015, are considered significant subsidiaries as defined in Rule 1-02(w) ofRegulation S-X.71Table of Contents4. ACCOUNTS RECEIVABLEAccounts receivable consisted of the following: As of December 31, 2016 2015 (In millions)Vehicle receivables$53.2 $46.3Manufacturer receivables45.5 43.1Other receivables41.6 31.4Total accounts receivable140.3 120.8Less—Allowance for doubtful accounts(1.9) (1.3)Accounts receivable, net$138.4 $119.55. INVENTORIESInventories consisted of the following: As of December 31, 2016 2015 (In millions)New vehicles$720.6 $739.2Used vehicles132.7 134.1Parts and accessories41.6 43.9Total inventories$894.9 $917.2The lower of cost or market reserves reduced total inventory cost by $6.5 million and $6.2 million as of December 31, 2016 and December 31, 2015,respectively. As of December 31, 2016 and December 31, 2015, certain automobile manufacturer incentives reduced new vehicle inventory cost by $8.2million and $9.6 million, respectively, and reduced new vehicle cost of sales from continuing operations for the years ended December 31, 2016, 2015, and2014 by $40.6 million, $38.8 million, and $30.3 million, respectively.6. ASSETS HELD FOR SALEAssets held for sale, comprising real estate not currently used in our operations and that we are actively marketing to sell, totaled $16.1 million and $27.6million as of December 31, 2016 and 2015, respectively, and there were no liabilities associated with the real estate assets held for sale. Additionally, duringthe years ended December 31, 2016 and 2015, we sold one vacant property with a net book value of $2.3 million and four vacant properties with a combinednet book value of $3.7 million, respectively.During the years ended December 31, 2016 and 2014, we recorded $2.7 million and $0.9 million, respectively, of impairment expense related to realestate properties we were actively marketing to sell, based on offers received from prospective buyers and third-party brokers' opinion of value. We did notrecord any impairment expense associated with real estate properties we were actively marketing to sell during the year ended December 31, 2015. Theseimpairment expenses were included in Other Operating (Income) Expense, net in our Consolidated Statements of Income.7. OTHER CURRENT ASSETSOther current assets consisted of the following: As of December 31, 2016 2015 (In millions)Service loaner vehicles$82.2 $78.5Prepaid expenses4.5 5.0Prepaid taxes4.0 3.4Other6.3 1.5Other current assets$97.0 $88.472Table of Contents8. PROPERTY AND EQUIPMENT, NETProperty and equipment, net consisted of the following: As of December 31, 2016 2015 (In millions)Land$307.7 $294.1Buildings and leasehold improvements530.2 503.0Machinery and equipment84.0 82.1Furniture and fixtures57.7 55.9Company vehicles8.8 9.8Construction in progress37.8 33.2Gross property and equipment1,026.2 978.1Less—Accumulated depreciation(210.8) (205.3)Property and equipment, net$815.4 $772.8During the years ended December 31, 2016, 2015, and 2014, we capitalized $1.1 million, $0.2 million, and $0.8 million, respectively, of interest inconnection with various capital projects to upgrade or remodel our facilities. Depreciation expense was $30.7 million, $29.5 million, and $26.4 million forthe years ended December 31, 2016, 2015, and 2014, respectively.9. GOODWILL AND INTANGIBLE FRANCHISE RIGHTSOur acquisitions have resulted in the recording of goodwill and intangible franchise rights. Goodwill is an asset representing operational synergies andfuture economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.Intangible franchise rights is an asset representing our rights under franchise agreements with vehicle manufacturers. The changes in goodwill and intangiblefranchise rights for the years ended December 31, 2016 and 2015 are as follows: Goodwill (In millions)Balance as of December 31, 2014 (a)$104.0Acquisitions28.3Divestitures(2.1)Balance as of December 31, 2015 (a)130.2Divestitures(2.1)Balance as of December 31, 2016 (a)$128.1______________________________(a)Net of accumulated impairment losses of $537.7 million recorded prior to the year ended December 31, 2014. Intangible FranchiseRights (In millions)Balance as of December 31, 2014$48.6Acquisitions6.3Divestitures(6.4)Balance as of December 31, 2015 and December 31, 2016$48.573Table of Contents10. FLOOR PLAN NOTES PAYABLE—TRADEWe consider floor plan notes payable to a party that is affiliated with the entity from which we purchase our new vehicle inventory as Floor Plan NotesPayable—Trade on our Consolidated Balance Sheets. Floor plan notes payable—trade, net consisted of the following: As of December 31, 2016 2015 (In millions)Floor plan notes payable—trade$120.0 $138.8Floor plan notes payable offset account(11.7) —Total floor plan notes payable—trade, net$108.3 $138.8We have a floor plan facility with the Ford Motor Credit Company ("Ford Credit") to purchase new Ford and Lincoln vehicle inventory. Our floor planfacility with Ford Credit matures on December 5, 2019 and does not have a stated borrowing limitation.During August 2016, we established a floor plan offset account with Ford Credit, 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 totransfer amounts from the offset account into our operating cash accounts within one to two days. As a result of using our floor plan offset account, weexperience a reduction in Floor Plan Interest Expense on our Consolidated Statements of Income.The representations and covenants contained in the agreement governing our floor plan facility with Ford Credit are customary for financing transactionsof this nature. Further, the agreement governing our floor plan facility with Ford Credit also provides for events of default that are customary for financingtransactions of this nature, including cross-defaults to other material indebtedness. Upon the occurrence of an event of default, the Company could berequired to immediately repay all outstanding amounts under our floor plan facility with Ford Credit.11. FLOOR PLAN NOTES PAYABLE—NON-TRADEWe consider floor plan notes payable to a party that is not affiliated with the entity from which we purchase our new vehicle inventory as Floor Plan NotesPayable—Non-Trade on our Consolidated Balance Sheets. Floor plan notes payable—non-trade, net consisted of the following: As of December 31, 2016 2015 (In millions)Floor plan notes payable—non-trade$732.7 $710.8Floor plan notes payable offset account(59.2) (137.4)Total floor plan notes payable—non-trade, net$673.5 $573.4On July 25, 2016, the Company and certain of its subsidiaries entered into a second amended and restated senior secured credit agreement with Bank ofAmerica, as administrative agent, and the other lenders party thereto. The 2016 Senior Credit Facility amended and restated the Company's pre-existingsenior secured credit agreement, dated as of August 8, 2013, by and among the Company and certain of its subsidiaries and Bank of America, asadministrative agent, and the other agents and lenders party thereto (the "Restated Credit Agreement").The 2016 Senior Credit Facility provides for the following, in each case subject to limitations on availability as set forth therein:•a $250.0 million revolving credit facility (the "Revolving Credit Facility") with a $50.0 million sublimit for letters of credit;•a $900.0 million new vehicle revolving floor plan facility (the "New Vehicle Floor Plan Facility"); and•a $150.0 million used vehicle revolving floor plan facility (the "Used Vehicle Floor Plan Facility").74Table of ContentsSubject to compliance with certain conditions, the agreement governing the 2016 Senior Credit Facility provides that the Company and its subsidiariesthat are borrowers under the 2016 Senior Credit Facility (collectively, the "Borrowers") have the ability, at their option and subject to the receipt ofadditional 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 our revolving credit facility to the new vehicle floor plan facility orthe used vehicle floor plan facility. The maximum amount we are allowed to re-designate is determined based on our current borrowing availability, less$50.0 million. In addition, we are able to re-designate any amounts moved to the new vehicle floor plan facility or used vehicle floor plan facility back to therevolving credit facility. As of December 31, 2016, we re-designated $190.0 million of availability under our Revolving Credit Facility to our New VehicleFloor Plan Facility. We re-designated this amount to take advantage of the lower commitment fee rates on our new vehicle floor plan facility when comparedto our revolving credit 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 floorplan notes payable. These transfers reduce the amount of outstanding new vehicle floor plan notes payable that would otherwise accrue interest, whileretaining 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 floorplan offset account, we experience a reduction in Floor Plan Interest Expense on our Consolidated Statements of Income.In addition to using proceeds from borrowings under the 2016 Senior Credit Facility to repay amounts outstanding under the Restated Credit Agreement,proceeds from borrowings from time to time under the (i) Revolving Credit Facility may be used for, among other things, acquisitions, working capital andcapital expenditures; (ii) New Vehicle Floor Plan Facility may be used to finance the acquisition of new vehicle inventory and to refinance new vehicleinventory at acquired dealerships; and (iii) Used Vehicle Floor Plan Facility may be used to finance the acquisition of used vehicle inventory and for, amongother things, other working capital and capital expenditures.Borrowings under the 2016 Senior Credit Facility bear interest, at the option of the Company, based on the London Interbank Offered Rate ("LIBOR") orthe 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%. Borrowings under the New Vehicle Floor Plan Facility bear interest, at the option of the Company, based on LIBORplus 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 LIBORplus 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 arerequired to pay a quarterly commitment fee of 0.15% per year on both the New Vehicle Facility Floor Plan and the Used Vehicle Facility Floor Plan Facility.The 2016 Senior Credit Facility is guaranteed by each existing, and will be guaranteed by each future, direct and indirect domestic subsidiary of theCompany, other than, at the option of the Company, certain immaterial subsidiaries. The 2016 Senior Credit Facility is also guaranteed by the Company. Theobligations under each of the Revolving Credit Facility and the Used Vehicle Floor Plan Facility are collateralized by liens on substantially all of the presentand future assets, other than real property, of the Company and the guarantors. The obligations under the New Vehicle Floor Plan Facility are collateralizedby liens on substantially all of the present and future assets, other than real property, of the Borrowers under the New Vehicle Floor Plan Facility.Each of the above provisions is subject to limitations on borrowing availability as set out in the 2016 Senior Credit Facility. Based on these borrowingbase limitations, as of December 31, 2016 we had $90.6 million of borrowing availability under our used vehicle revolving floor plan facility. The 2016Senior Credit Facility matures, and all amounts outstanding thereunder will be due and payable, on July 25, 2021.See the "Representations and Covenants" section below under our "Long-Term Debt" footnote for a description of the representations, covenants andevents of default contained in the 2016 Senior Credit Facility.75Table of Contents12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIESAccounts payable and accrued liabilities consisted of the following: As of December 31, 2016 2015 (In millions)Accounts payable$81.9 $85.5Loaner vehicle notes payable80.9 76.6Accrued compensation24.5 26.1Taxes payable41.2 27.3Accrued finance and insurance chargebacks22.9 19.9Accrued insurance19.9 13.3Accrued advertising7.6 4.0Accrued interest4.9 4.8Other25.3 24.2Accounts payable and accrued liabilities$309.1 $281.713. LONG-TERM DEBTLong-term debt consisted of the following: As of December 31,2016 2015(In millions)6.0% Senior Subordinated Notes due 2024$600.0 $600.0Mortgage notes payable bearing interest at fixed rates (the weighted average interest rate was 5.4% for the yearsended December 31, 2016 and 2015)182.8 194.3Real estate credit agreement51.5 64.0Restated master loan agreement93.6 97.9Capital lease obligations3.4 3.5Total debt outstanding931.3 959.7Add—unamortized premium on 6.0% Senior Subordinated Notes due 20247.6 8.4Less—debt issuance costs(12.2) (13.8)Long-term debt, including current portion926.7 954.3Less—current portion, net of current portion of debt issuance costs(14.0) (13.9)Long-term debt$912.7 $940.4The aggregate maturities of long-term debt as of December 31, 2016 are as follows (in millions): 2017$15.4201816.8201941.4202032.1202115.1Thereafter810.5Total maturities of long-term debt$931.36.0% Senior Subordinated Notes due 2024In December 2014, we completed a refinancing of certain of our long-term debt, which included the issuance of $400.0 million of 6.0% Notes, theproceeds of which were used to redeem the $300.0 million in outstanding aggregate principal of our 8.375% Senior Subordinated Notes due 2020 (the"8.375% Notes"). We recognized a $31.9 million loss for the year ended December 31, 2014 in connection with this refinancing, which is included in Loss onExtinguishment of Long-Term Debt, net in the accompanying Consolidated Statements of Income and consisted of $33.9 million of premiums in connectionwith the redemption of the 8.375% Notes, a $6.1 million write-off of unamortized debt issuance costs associated with the 8.375% Notes76Table of Contentsand $0.1 million of third-party costs associated with the redemption of the 8.375% Notes, partially offset by $8.2 million in unamortized premium associatedwith our 8.375% Notes.In October 2015, we completed an add-on issuance of $200.0 million aggregate principal amount of our 6.0% Notes at a price of 104.25% of par, plusaccrued interest from June 15, 2015 (the "October 2015 Offering"). After deducting the initial purchasers' discounts and expenses we received net proceeds ofapproximately $210.2 million from this offering. The $8.5 million premium paid by the initial purchasers of the 6.0% Notes was recorded as a component ofLong-Term Debt on our Consolidated Balance Sheet and is being amortized as a reduction of interest expense over the remaining term of the 6.0% Notes.Based on the amortization of the debt premium, the effective interest rate on the October 2015 Offering is 5.41%. In addition, we capitalized $3.8 million ofcosts associated with the issuance and sale of the 6.0% Notes, of which $2.8 million of underwriters fees were withheld from the proceeds received from theissuance. These costs are being amortized to interest expense over the remaining term of the 6.0% Notes using the effective interest method.We are a holding company with no independent assets or operations. For all relevant periods presented, our 6.0% Notes have been fully andunconditionally guaranteed, on a joint and several basis, by substantially all of our subsidiaries. Any subsidiaries which have not guaranteed such notes are"minor" (as defined in Rule 3-10(h) of Regulation S-X). As of December 31, 2016, there were no significant restrictions on the ability of our subsidiaries todistribute cash to us or our guarantor subsidiaries.Mortgage Notes PayableWe have multiple mortgage agreements with finance companies affiliated with our vehicle manufacturers ("captive mortgages") and other lenders. As ofDecember 31, 2016 and 2015, we had total mortgage notes payable outstanding of $182.8 million and $194.3 million, respectively, which are collateralizedby the associated real estate.Real Estate Credit AgreementWe are currently party to a real estate term loan credit agreement with Bank of America, as the lender. The real estate credit agreement provides for termloans in an aggregate amount not to exceed $75.0 million, subject to customary terms and conditions. Term loans under the real estate credit agreement bearinterest, at our option, based on the LIBOR plus 2.50% or the Base Rate (as described below) plus 1.50%. The Base Rate is the highest of (i) the FederalFunds rate plus 0.50%, (ii) the Bank of America prime rate, and (iii) one month LIBOR plus 1.00%. We are required to make quarterly principal payments of1.25% of the initial amount of each loan on a twenty year repayment schedule, with a balloon repayment of the outstanding principal amount of loans due onSeptember 26, 2023, subject to an earlier maturity if our existing revolving credit facility matures or is not otherwise refinanced by certain dates.Borrowings under the real estate credit agreement are guaranteed by each operating dealership subsidiary of ours whose real estate is financed under thereal estate credit agreement, and collateralized by first priority liens, subject to certain permitted exceptions, on all of the real property financed thereunder.Restated Master Loan AgreementOn February 3, 2015, certain of our subsidiaries entered into an amended and restated master loan agreement (the "Restated Master Loan Agreement") withWells Fargo. In June 2015, we made additional borrowings under the Restated Master Loan Agreement with Wells Fargo, resulting in our having drawn thefull $100.0 million (the "Restated Master Loan Facility") of availability thereunder. In connection with our final draw under the Restated Master LoanAgreement, in June 2015 we entered into a cash flow interest rate swap with Wells Fargo, effectively fixing the interest rate at 4.80%. We paid a total of $1.2million in debt issuance costs associated with the Master Loan Agreement.77Table of ContentsBelow is a summary of our outstanding mortgage notes payable, the carrying values of the related collateralized real estate, and years of maturity as ofDecember 31, 2016 and 2015: As of December 31, 2016 As of December 31, 2015Mortgage Agreement AggregatePrincipalOutstanding Carrying Value ofCollateralizedRelated Real Estate MaturityDates AggregatePrincipalOutstanding Carrying Value ofCollateralizedRelated Real Estate MaturityDatesCaptive mortgages $159.7 $225.5 2018-2024 $170.3 $241.1 2018-2024Other mortgage debt 23.1 46.2 2018-2022 24.0 45.7 2018-2022Real estate credit agreement 51.5 91.5 2023 64.0 131.7 2023Restated master loan agreement 93.6 134.2 2025 97.9 134.7 2025Total mortgage debt $327.9 $497.4 $356.2 $553.2 Revolving Credit FacilityAs discussed above under our "Floor Plan Notes Payable—Non-Trade" footnote, the 2016 Senior Credit Facility includes a $250.0 million RevolvingCredit Facility. We may request Bank of America to issue letters of credit on our behalf thereunder up to $50.0 million. Availability under the RevolvingCredit Facility is limited by borrowing base calculations. Availability is reduced on a dollar-for-dollar basis by the aggregate face amount of any outstandingletters of credit. As of December 31, 2016, we re-designated $190.0 million of borrowing capacity from our Revolving Credit Facility to our New VehicleRevolving Floor Plan Facility, resulting in $60.0 million of borrowing capacity. In addition, we had $8.9 million in outstanding letters of credit, resulting in$51.1 million of borrowing availability as of December 31, 2016. Proceeds from borrowings from time to time under the revolving credit facility may be usedfor among other things, acquisitions, working capital and capital expenditures.Borrowings under the 2016 Senior Credit Facility bear interest, at the option of the Company, based on the London Interbank Offered Rate ("LIBOR") orthe 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 LIBORloans and 0.25% to 1.50% for Base Rate loans, in each case based on the Company's total lease adjusted leverage ratio. In addition to the payment of intereston borrowings outstanding under the 2016 Senior Credit Facility, we are required to pay a quarterly commitment fee between 0.20% and 0.45% per year,based on the Company's total lease adjusted leverage ratio on the Revolving Credit Facility.Stock Repurchase and Dividend RestrictionsThe 2016 Senior Credit Facility and the Indenture currently allow for restricted payments without limit so long as our consolidated total leverage ratio (asdefined in the 2016 Senior Credit Facility and the Indenture) is not greater than 3.0 to 1.0 after giving effect to such proposed restricted payments. Restrictedpayments generally include items such as dividends, share repurchases, unscheduled repayments of subordinated debt, or purchases of certain investments. Inthe event that our consolidated total leverage ratio does (or would) exceed 3.0 to 1.0, the 2016 Senior Credit Facility and the Indenture would then also allowfor restricted payments under the following mutually exclusive parameters, subject to certain exclusions:•Restricted payments in an aggregate amount not to exceed $20.0 million in any fiscal year;•General restricted payments allowance of $150.0 million; and•Subject to our continued compliance with a fixed charge coverage ratio as set out in the Indenture, restricted payments capacity additions (orsubtractions if negative) equal to (i) 50% of our net income (as defined in the 2016 Senior Credit Facility and the Indenture) beginning on October1, 2014 and ending on the date of the most recently completed fiscal quarter (the "Measurement Period"), plus (ii) 100% of any cash proceeds wereceive from the sale of equity interests during the Measurement Period, minus (iii) the dollar amount of share repurchases made and dividends paidon or after December 4, 2014.Representations and CovenantsWe are subject to a number of covenants in our various debt and lease agreements, including those described below. We were in compliance with all ofour covenants throughout 2016. Failure to comply with any of our debt covenants would constitute a default under the relevant debt agreements, whichwould entitle the lenders under such agreements to terminate our ability to borrow under the relevant agreements and accelerate our obligations to repayoutstanding borrowings, if any, unless78Table of Contentscompliance with the covenants is waived. In many cases, defaults under one of our agreements could trigger cross-default provisions in our otheragreements. If we are unable to remain in compliance with our financial or other covenants, we would be required to seek waivers or modifications of ourcovenants from our lenders, or we would need to raise debt and/or equity financing or sell assets to generate proceeds sufficient to repay such debt. Wecannot give any assurance that we would be able to successfully take any of these actions on terms, or at times, that may be necessary or desirable.The representations and covenants contained in the Real Estate Credit Agreement are customary for financing transactions of this nature including,among others, a requirement to comply with a minimum consolidated current ratio, minimum consolidated fixed charge coverage ratio, and a maximumconsolidated total lease adjusted leverage ratio, in each case as set out in the Real Estate Credit Agreement. In addition, certain other covenants could restrictour ability to incur additional debt, pay dividends or acquire or dispose of assets.Our guarantees under the Restated Master Loan Agreement also require compliance with certain financial covenants, including a consolidated currentratio, consolidated fixed charge coverage ratio, and an adjusted net worth calculation. Further, the Restated Master Loan Agreement contains customaryrepresentations and warranties and the guarantees under such agreements contain negative covenants, including, among other things, covenants not to, withpermitted exceptions, (i) incur any additional debt; (ii) create any additional liens on the Property, as defined in the Restated Master Loan Agreement; and(iii) enter into any sale-leaseback transactions in connection with the underlying properties.The representations and covenants contained in the agreement governing the 2016 Senior Credit Facility are customary for financing transactions of thisnature including, among others, a requirement to comply with a minimum consolidated current ratio, minimum consolidated fixed charge coverage ratio andmaximum consolidated total lease adjusted leverage ratio, in each case as set out in the agreement governing the 2016 Senior Credit Facility. In addition,certain other covenants could restrict the Company's ability to incur additional debt, pay dividends or acquire or dispose of assets.The agreement governing the 2016 Senior Credit Facility also provides for events of default that are customary for financing transactions of this nature,including cross-defaults to other material indebtedness. In certain instances, an event of default under either the Revolving Credit Facility or the UsedVehicle Floor Plan Facility could be, or result in, an event of default under the New Vehicle Floor Plan Facility, and vice versa. Upon the occurrence of anevent of default, the Company could be required to immediately repay all amounts outstanding under the applicable facility.14. FINANCIAL INSTRUMENTS AND FAIR VALUEIn determining fair value, we use various valuation approaches, including market and income approaches. Accounting standards establish a hierarchy forinputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the mostobservable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed basedon market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the assumptions market participantswould use in pricing the asset or liability, developed based on the best information available in the circumstances. The hierarchy is broken down into threelevels 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 debt securities that are not actively traded or do nothave 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 utilizingLevel 3 inputs include those used in estimating the fair value of certain non-financial assets and non-financial liabilities in purchase acquisitions and thoseused in the assessment of impairment for 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 thatare less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment required todetermine 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 ofthe fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed isdetermined based on the lowest level input that is significant to the fair value measurement.79Table of ContentsFair value is a market-based exit price measure considered from the perspective of a market participant who holds the asset or owes the liability ratherthan an entity-specific measure. Therefore, even when market assumptions are not readily available, our assumptions are set to reflect those that marketparticipants would use in pricing the asset or liability at the measurement date. We use inputs that are current as of the measurement date, including duringperiods of significant market fluctuations.Financial instruments consist primarily of cash and cash equivalents, contracts-in-transit, accounts receivable, cash surrender value of corporate-ownedlife 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 dueto (i) their short-term nature, (ii) recently completed market transactions, or (iii) existence of variable interest rates, which approximate market rates. The fairvalue of our subordinated long-term debt is based on reported market prices in an inactive market which reflects Level 2 inputs. We estimate the fair value ofour mortgage notes payable using a present value technique based on current market interest rates for similar types of financial instruments which reflectLevel 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 December 31, 2016 2015 (In millions)Carrying Value: 6.0% Senior Subordinated Notes due 2024$607.6 $608.4Mortgage notes payable327.9 356.2Total carrying value$935.5 $964.6 Fair Value: 6.0% Senior Subordinated Notes due 2024$613.5 $618.0Mortgage notes payable339.5 362.6Total fair value$953.0 $980.6Interest Rate Swap AgreementsIn June 2015, we entered into a new interest rate swap agreement with a notional principal amount of $100.0 million. This swap was designed to provide ahedge against changes in variable rate cash flows regarding fluctuations in the one month LIBOR rate, through maturity in February 2025. The notionalvalues of this swap as of December 31, 2016 and 2015, were $95.6 million and $100.0 million, respectively, and the notional value will reduce over itsremaining 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 providea hedge against changes in variable rate cash flows regarding fluctuations in the one month LIBOR rate, through maturity in September 2023. The notionalvalues of this swap as of December 31, 2016 and 2015, were $64.0 million and $67.7 million, respectively, and the notional value will reduce over itsremaining 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 andpresent value factors. Fair value estimates reflect a credit adjustment to the discount rate applied to all expected cash flows under the swaps. Other than thisinput, all other inputs used in the valuation for these swaps are designated to be Level 2 fair values. The fair value liabilities recorded related to the swaps forthe years ended December 31, 2016 and 2015, are $3.6 million and $6.0 million, respectively. The following table provides information regarding the fairvalue of our interest rate swap agreements and the impact on the Consolidated Balance Sheets: As of December 31, 2016 2015 (In millions)Accounts payable and accrued liabilities$2.2 $2.8Other long-term liabilities1.4 3.2Total fair value$3.6 $6.080Table of ContentsAll of our interest rate swaps qualify for cash flow hedge accounting treatment. For the years ended December 31, 2016, 2015, and 2014, neither of ourcash flow swaps contained any ineffectiveness, nor was any ineffectiveness recognized in earnings. Information about the effect of our interest rate swapagreements on the accompanying Consolidated Statements of Income and Consolidated Statements of Comprehensive Income, are as follows (in millions):For the Year Ended December 31, Results Recognized in Accumulated OtherComprehensive Loss(Effective Portion) Location of Results Reclassified fromAccumulated Other ComprehensiveLoss to Earnings Results Reclassified from AccumulatedOther Comprehensive Loss to Earnings2016 $(0.8) Swap interest expense $(3.1)2015 $(6.1) Swap interest expense $(3.0)2014 $(4.9) Swap interest expense $(2.0) On the basis of yield curve conditions as of December 31, 2016 and including assumptions about future changes in fair value, we expect the amount to bereclassified out of Accumulated Other Comprehensive Loss into earnings within the next 12 months will be losses of $2.2 million.15. INCOME TAXESThe components of income tax expense from continuing operations are as follows: For the Years Ended December 31, 2016 2015 2014 (In millions)Current: Federal$83.8 $84.9 $47.1State10.7 10.2 7.0Total current income tax expense94.5 95.1 54.1Deferred: Federal4.9 6.8 15.0State1.2 2.1 1.9Total deferred income tax expense6.1 8.9 16.9Total income tax expense$100.6 $104.0 $71.0A reconciliation of the statutory federal rate to the effective tax rate from continuing operations is as follows (dollar amounts shown in millions): For the Years Ended December 31, 2016 % 2015 % 2014 %Income tax provision at the statutory rate$93.7 35.0 $95.7 35.0 $64.1 35.0State income tax expense, net of federal benefit7.8 2.9 8.0 2.9 5.8 3.2Non-deductible expenses, net0.2 0.1 0.3 0.1 1.2 0.7Adjustments and settlements(0.8) (0.3) — — (0.5) (0.3)Other, net(0.3) (0.1) — — 0.4 0.2Income tax expense$100.6 37.6 $104.0 38.0 $71.0 38.881Table of ContentsDeferred income tax asset and liability components consisted of the following: As of December 31, 2016 2015 (In millions)Deferred income tax assets: F&I chargeback liabilities$16.5 $14.8Other accrued liabilities4.7 4.4Stock-based compensation5.2 4.5Intangible asset amortization— 0.3Other, net8.4 9.2Total deferred income tax assets34.8 33.2Deferred income tax liabilities: Intangible asset amortization(7.3) —Depreciation(34.9) (33.4)Other, net(1.5) (1.7)Total deferred income tax liabilities(43.7) (35.1)Net deferred income tax liabilities$(8.9) $(1.9)There were no valuation allowances recorded against the deferred tax assets as of December 31, 2016 or 2015. Additionally, there were income taxespayable included in Accounts Payable and Accrued Liabilities of $19.8 million and $5.7 million as of December 31, 2016 and 2015, respectively.As of December 31, 2016, the net amount of our unrecognized tax benefits was $0.8 million, which if recognized, would not impact our effective tax rate.There were no unrecognized tax benefits as of December 31, 2015. As of December 31, 2014, the net amount of our unrecognized tax benefits was $0.3million, which if recognized, would impact our effective tax rate. We recognize interest and penalties related to unrecognized tax benefits in income taxexpense. It is reasonably possible that the $0.8 million in unrecognized tax benefits as of December 31, 2016 will reverse within the next 12 months.The statutes of limitations related to our consolidated Federal income tax returns are closed for all tax years up to and including 2012. The expiration ofthe statutes of limitations related to the various state income tax returns that we and our subsidiaries file varies by state. The 2011 through 2015 tax yearsgenerally remain subject to examination by most state tax authorities. We believe that our tax positions comply with applicable tax law and that we haveadequately provided for these matters.16. OTHER LONG-TERM LIABILITIESOther long-term liabilities consisted of the following: As of December 31, 2016 2015 (In millions)Accrued finance and insurance chargebacks$20.1 $18.2Deferred rent5.8 5.8Swap fair value1.4 3.2Other2.6 2.3Other long-term liabilities$29.9 $29.517. SUPPLEMENTAL CASH FLOW INFORMATIONDuring the years ended December 31, 2016, 2015, and 2014, we made interest payments, including amounts capitalized, totaling $73.8 million, $60.6million, and $52.5 million, respectively. Included in these interest payments are $19.1 million, $15.7 million, and $12.1 million, of floor plan interestpayments for the years ended December 31, 2016, 2015, and 2014, respectively.During the years ended December 31, 2016, 2015, and 2014 we made income tax payments, net of refunds received, totaling $79.6 million, $73.2 million,and $55.8 million, respectively.82Table of ContentsDuring the years ended December 31, 2016, 2015, and 2014, we transferred $121.9 million, $110.3 million, and $79.5 million, respectively, of loanervehicles from Other Current Assets to Inventory on our Consolidated Balance Sheets.During the years ended December 31, 2016 and 2015, we received $114.3 million and $105.9 million, respectively, of proceeds from the sale ofdealerships, and $13.1 million and $19.3 million, respectively, of mortgage note repayments were paid directly by the buyer as part of these divestitures.There were no divestitures during the year ended December 31, 2014.The following items are included in Other Adjustments, net to reconcile net income to net cash provided by operating activities: For the Years Ended December 31, 2016 2015 2014Amortization of deferred financing fees$2.6 $2.5 $2.4Loss on disposal of fixed assets0.4 1.2 1.2Other individually immaterial items1.1 0.5 (0.5)Other adjustments, net$4.1 $4.2 $3.118. LEASE OBLIGATIONSWe lease various facilities, real estate, and equipment primarily under operating lease agreements, most of which have terms from one to twenty years.Certain of our leases contain renewal options and rent escalation clauses. We record rent expense on a straight-line basis over the life of the lease for leaseagreements where the rent escalates at fixed rates over time. Rent expense from continuing operations totaled $29.9 million, $31.3 million, and $30.8 millionfor the years ended December 31, 2016, 2015, and 2014, respectively. As of December 31, 2016 and 2015, we had one significant capital lease obligationtotaling $3.4 million and $3.5 million, respectively. The capital lease agreement was entered into in 2011 and has a term of 20 years.During the year ended December 31, 2016, we entered into three transactions in which we purchased previously leased real estate for an aggregatepurchase price of $19.6 million. These transactions included the termination of the related lease obligations, resulting in $2.1 million of lease terminationcharges and $0.9 million of real estate impairment charges, which were based on the associated property appraisals. Both the lease termination charges andthe real estate impairment charges were included in Other Operating (Income) Expense, net in our Consolidated Statement of Income for the year endedDecember 31, 2016. We did not purchase any previously leased real estate during the year ended December 31, 2015. During the year ended December 31,2014, we entered into two transactions in which we purchased previously leased real estate for an aggregate purchase price of $5.4 million. These transactionsincluded the termination of the related lease obligations, resulting in $0.1 million of lease termination charges, which were included in Other Operating(Income) Expense, net in our Consolidated Statement of Income for the year ended December 31, 2014.Future minimum payments under long-term, non-cancellable operating leases as of December 31, 2016, are as follows: Total (In millions)2017$27.7201825.9201923.9202021.4202118.3Thereafter35.2Total minimum lease payments$152.4Certain of our lease agreements include financial covenants and incorporate by reference the financial covenants set forth in the 2016 Senior CreditFacility. A breach of any of these covenants could immediately give rise to certain landlord remedies under our various lease agreements, the most severe ofwhich 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.19. COMMITMENTS AND CONTINGENCIESOur dealerships are party to dealer and framework agreements with applicable vehicle manufacturers. In accordance with these agreements, eachdealership has certain rights and is subject to restrictions typical in the industry. The ability of these83Table of Contentsmanufacturers to influence the operations of the dealerships or the loss of any of these agreements could have a materially negative impact on our operatingresults.In some instances, manufacturers may have the right, and may direct us, to implement costly capital improvements to dealerships as a condition toentering into, renewing, or extending franchise agreements with them. Manufacturers also typically require that their franchises meet specific standards ofappearance. These factors, either alone or in combination, could cause us to use our financial resources on capital projects that we might not have planned foror 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 localgovernment authorities, which have historically related primarily to (i) incentive and warranty payments received from vehicle manufacturers, or allegationsof violations of manufacturer agreements or policies, (ii) compliance with lender rules and covenants, and (iii) payments made to government authoritiesrelating to federal, state, and local taxes, as well as compliance with other government regulations. Claims may also arise through litigation, governmentproceedings, and other dispute resolution processes. Such claims, including class actions, could relate to, but may not be limited to, the practice of chargingadministrative fees and other fees and commissions, employment-related matters, truth-in-lending and other dealer assisted financing obligations, contractualdisputes, actions brought by governmental authorities, and other matters. We evaluate pending and threatened claims and establish loss contingency reservesbased 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 ofthe various types of claims currently known to us, there is no indication of material reasonably possible losses in excess of amounts accrued in theaggregate. We currently do not anticipate that any known claim will materially adversely affect our financial condition, liquidity, or results ofoperations. However, the outcome of any matter cannot be predicted with certainty, and an unfavorable resolution of one or more matters presently known orarising 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. Asa 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 thecountries from which our products are imported may, from time to time, impose new quotas, duties, tariffs, or other restrictions; or adjust presently prevailingquotas, 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. Compliancewith these provisions has not had, nor do we expect such compliance to have, any material effect upon our capital expenditures, net earnings, financialcondition, liquidity or competitive position. We believe that our current practices and procedures for the control and disposition of such materials complywith applicable federal, state, and local requirements. No assurances can be provided, however, that future laws or regulations, or changes in existing laws orregulations, would not require us to expend significant resources in order to comply therewith.We had $8.9 million of letters of credit outstanding as of December 31, 2016, which are required by certain of our insurance providers. In addition, as ofDecember 31, 2016, we maintained a $5.0 million surety bond line in the ordinary course of our business. Our letters of credit and surety bond line areconsidered 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, asdescribed elsewhere herein.20. SHARE-BASED COMPENSATION AND EMPLOYEE BENEFIT PLANSOn March 13, 2012, our Board of Directors, upon the recommendation of our Compensation and Human Resources Committee, approved the 2012 EquityIncentive Plan (the "Plan"). On April 18, 2012, our shareholders approved the Plan, which replaced our previous equity incentive plan. The Plan expires onMarch 13, 2022 and provides for the grant of options, performance share units, restricted share units, and shares of restricted stock to our directors, officers,and employees in the total amount of 1.5 million shares. Since the inception of the Plan, we have granted 0.6 million performance share units and 0.5 millionshares of restricted stock. There have been 0.6 million shares that have either been forfeited or repurchased in association with the net share settlement ofemployee's share-based awards, both of which are added back to shares available for grant. As such, there were approximately 1.0 million shares available forgrant in accordance with the Plan as of December 31, 2016.84Table of ContentsWe issue shares of our common stock upon the vesting of performance share units or restricted stock. These shares are issued from our authorized and notoutstanding common stock. In addition, in connection with the vesting of performance share units or restricted stock, we expect to repurchase a portion of theshares issued equal to the amount of employee income tax withholding.We have recognized $12.0 million ($4.5 million tax benefit), $10.0 million ($3.8 million tax benefit), and $8.6 million ($3.3 million tax benefit) in share-based compensation expense for the years ended December 31, 2016, 2015, and 2014, respectively. As of December 31, 2016, there was $12.6 million of totalunrecognized share-based compensation expense related to non-vested share-based awards granted under the Plan, and the weighted average period overwhich it is expected to be recognized is 2.23 years. Further, we expect to recognize $7.4 million of this expense in 2017, $4.0 million in 2018, and $1.2million in 2019.Performance Share UnitsDuring the year ended December 31, 2016, the Compensation and Human Resources Committee of the Board of Directors approved the grant of up to214,297 performance share units, which represents 150% of the target award. Performance share units provide an opportunity for the employee-recipient toreceive a number of shares of our common stock based on our performance during a specified year period following the grant as measured against objectiveperformance goals as determined by the Compensation and Human Resources Committee of our Board of Directors. The actual number of units earned mayrange from 0% to 150% of the target number of units depending upon achievement of the performance goals. Performance share units vest in three equalannual installments with one-third of the award vesting on each of the (i) later of the first anniversary of the grant date, or the date the Compensation andHuman Resources Committee determines the actual award, (ii) second anniversary of the grant date and (iii) third anniversary of the grant date. Upon vesting,each performance share unit equals one share of common stock of the Company. Compensation cost for performance share units is based on the closing priceof our common stock on the date of grant and the ultimate performance level achieved, and is recognized on a graded basis, net of estimated forfeitures, overthe three-year vesting period.The following table summarizes information about performance share units for 2016: Shares Weighted AverageGrant Date Fair ValueNon-vested at January 1, 2016191,853 $54.89Granted214,297 46.70Vested(115,753) 46.79Forfeited or unearned(13,554) 60.61Non-vested at December 31, 2016276,843 $51.66 The weighted average grant-date fair value of performance share units and total fair value of performance share units vested are summarized in thefollowing table: For the Years Ended December 31, 2016 2015 2014Weighted average grant-date fair value of performance share units granted$46.70 $77.92 $49.50Total fair value of performance share units vested (in millions)$6.0 $9.3 $7.1Restricted Stock AwardsDuring the year ended December 31, 2016, the Compensation and Human Resources Committee of the Board of Directors approved the grant of 136,356shares of restricted stock. Restricted stock awards vest in three equal annual installments commencing on the first anniversary of the grant date.Compensation cost for restricted stock awards is based on the closing price of our common stock on the date of grant and is recognized on a straight-linebasis, net of estimated forfeitures, over the three-year vesting period.85Table of ContentsThe following table summarizes information about restricted stock awards for 2016: Shares Weighted Average Grant Date Fair ValueNon-vested at January 1, 2016158,845 $63.82Granted136,356 47.07Vested(72,397) 54.03Forfeited(19,604) 64.05Non-vested at December 31, 2016203,200 $56.05The weighted average grant-date fair value of restricted stock awards and total fair value of restricted stock awards vested are summarized in the followingtable: For the Years Ended December 31, 2016 2015 2014Weighted average grant-date fair value of restricted stock granted$47.07 $82.17 $52.82Total fair value of restricted stock awards vested (in millions)$3.7 $11.1 $9.1Employee Retirement PlanWe sponsor the Asbury Automotive Retirement Savings Plan (the "Retirement Savings Plan"), a 401(k) plan, for eligible employees. Employees areeligible to participate in the Retirement Savings Plan on or after 60 days of service with us. Employees electing to participate in the Retirement Savings Planmay contribute up to 75% of their annual eligible compensation. IRS rules limited total participant contributions during 2016 to $18,000, or $24,000 if age50 or more; however, we limit participant contributions for employees considered Highly Compensated Employees with an annual salary or base salary equalto or greater than $120,000 to $13,000 per year, or $19,000 if age 50 or more. For non-highly compensated employees, after one year of employment wematch 50% of employees' contributions up to 4% of their eligible compensation, with a maximum match of $3,000 per participant. Employer contributionsvest by graded schedule over 4 years after the date of hire. Expenses from continuing operations related to employer matching contributions totaled $2.7million, $2.2 million, and $1.3 million for the years ended December 31, 2016, 2015, and 2014, respectively.21. CONDENSED QUARTERLY REVENUES AND EARNINGS (UNAUDITED): For the Three Months Ended March 31, June 30, September 30, December 31, (In millions, except per share data)2015: Revenues$1,541.8 $1,689.6 $1,716.4 $1,640.5Gross profit$256.4 $271.3 $272.7 $260.4Net income (2)(3)$35.9 $41.1 $51.1 $41.1Net income per common share: Basic (1)(2)(3)$1.31 $1.53 $1.97 $1.65Diluted (1)(2)(3)$1.30 $1.52 $1.96 $1.642016: Revenues$1,550.8 $1,627.4 $1,683.1 $1,666.5Gross profit$260.8 $267.6 $265.7 $264.6Net income (4)(5)(6)$31.0 $36.7 $32.4 $67.1Net income per common share: Basic (1)(4)(5)(6)$1.28 $1.66 $1.47 $3.11Diluted (1)(4)(5)(6)$1.27 $1.65 $1.47 $3.08____________________________(1)The sum of income per common share for the four quarters does not equal total income per common share due to changes in the average number ofshares outstanding during the respective periods.(2)Results for the three months ended September 30, 2015 were increased by $13.1 million from gains on divestitures, net of tax, and a $0.8 income taxbenefit, or $0.54 and $0.53 per basic and diluted share, respectively, in the aggregate.86Table of Contents(3)Results for the three months ended December 31, 2015 were increased by $8.4 million from gains on divestitures, net of tax, or $0.34 per basic anddiluted share.(4)Results for the three months ended March 31, 2016 were decreased by $2.1 million as a result of real estate-related charges, net of tax, or $0.09 perbasic and diluted share.(5)Results for the three months ended September 31, 2016 were decreased by $1.1 million as a result of real estate-related charges, net of tax, or $0.05per basic and diluted share.(6)Results for the three months ended December 31, 2016 were increased by $28.4 million from gains on divestitures, $4.1 million from gains on legalsettlements, partially offset by a $0.3 million loss on real estate-related charges, all previous items were net of tax, and a $0.9 income tax benefit, or$1.53 and $1.52 per basic and diluted share, respectively, in the aggregate.22. SUBSEQUENT EVENTSIn January 2017, we acquired the assets of two franchises (two dealership locations) and one collision center in the Indianapolis, Indiana market.Item 9. Changes in and Disagreements With Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresDisclosure Controls and ProceduresAs of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our principalexecutive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined inRule 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 andprincipal financial officer concluded that as of the end of such period such disclosure controls and procedures were effective to ensure that informationrequired 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 periodspecified in the rules and forms of the U.S. Securities and Exchange Commission, and (ii) accumulated and communicated to our management, including ourprincipal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding disclosure. Management necessarily applies itsjudgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regardingmanagement's control objectives. Management, including the principal executive officer and the principal financial officer, does not expect that ourdisclosure controls and procedures can prevent all possible errors or fraud. A control system, no matter how well conceived and operated, can provide onlyreasonable, not absolute, assurance that objectives of the control system are met. There are inherent limitations in all control systems, including the realitiesthat judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can becircumvented by the intentional acts of one or more persons. The design of any system of controls is based in part upon certain assumptions about thelikelihood of future events, and while our disclosure controls and procedures are designed to be effective under circumstances where they should reasonablybe 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.Management's Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over our company's financial reporting, as such term is definedin Exchange Act Rule 13(a)-15(f). Our internal control system was designed to provide reasonable assurance to our management and our board of directorsregarding the preparation and fair presentation of published financial statements. Our internal control over financial reporting also includes those policiesand procedures that: •Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; •Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our managementand directors; and •Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use, or disposition of our assets that could havea material effect on the financial statements.87Table of ContentsBecause of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree orcompliance with the policies or procedures may deteriorate.Our management, including the principal executive officer and the principal financial officer, assessed the effectiveness of our internal control overfinancial reporting as of December 31, 2016. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of theTreadway Commission (COSO) in Internal Control—Integrated Framework (2013 framework). Our assessment included a review of the documentation ofcontrols, evaluation of the design effectiveness of controls and testing of the effectiveness of controls. Based on our assessment under the framework inInternal Control—Integrated Framework issued by COSO, our management concluded that our internal control over financial reporting was effective as ofDecember 31, 2016. Our auditors, Ernst & Young LLP, an independent registered public accounting firm, have audited and reported on our consolidatedfinancial statements and on the effectiveness of our internal controls over financial reporting. Their reports are contained herein.Changes in Internal Control Over Financial ReportingThere were no changes in our internal control over financial reporting during the quarter ended December 31, 2016 that have materially affected, or arereasonably likely to materially affect, the Company's internal control over financial reporting.Item 9B. Other InformationOn and as of February 21, 2017, the Company entered into an amended and restated severance pay agreement with George A. Villasana, the Company'sSenior Vice President, General Counsel and Secretary (the "Amended and Restated Severance Agreement"). The Amended and Restated Severance Agreementsupersedes and replaces the previously existing severance agreement between the Company and Mr. Villasana, and was entered into to clarify, but notexpand any of, the previously disclosed rights and obligations of the Company upon the termination of Mr. Villasana. Consistent with prior disclosures ofthe Company, the Amended and Restated Severance Agreement provides that Mr. Villasana would receive one year of base salary, one of year of benefitscontinuation and a pro-rated bonus (which includes any payment under a non-equity incentive compensation plan) for the year of termination equal to theamount of the bonus that he would have received if his employment had not been terminated during such year multiplied by the percentage of such year thathas expired through the date of termination (collectively, the "Severance Payments") if he is terminated by the Company without cause (as defined in theAmended and Restated Severance Agreement) or if he terminates his employment due to the occurrence of certain events (as described in the Amended andRestated Severance Agreement). Also consistent with the prior severance agreement, the Amended and Restated Severance Agreement requires him toexecute a general release in favor of the Company as a condition to receiving any Severance Payments, and also contains certain confidentiality, non-compete and non-solicit obligations and provides that, if such obligations are breached by him, the Company has the right to stop making any otherwiserequired Severance Payments. Additionally, the Amended and Restated Severance Agreement provides that he will not receive any Severance Payment in theevent of termination due to death, disability, retirement, voluntary resignation or termination by the Company for cause.PART IIIItem 10. Directors, Executive Officers, and Corporate Governance.Reference is made to the information to be set forth in the "Proposal No. 1 Election of Directors," "Governance of the Company," "2016 DirectorCompensation Table-Code of Business Conduct and Ethics and Corporate Governance Guidelines," "Section 16(a) Beneficial Ownership ReportingCompliance," and "Executive Officers" sections of our Proxy Statement to be filed within 120 days after the end of our fiscal year, which information isincorporated herein by reference.Item 11. Executive Compensation.Reference is made to the information to be set forth in the "Compensation Discussion & Analysis," "Compensation and Human Resources CommitteeReport," "Compensation Committee Interlocks and Insider Participation," "Executive Compensation," "2016 Director Compensation Table," and"Governance of the Company" sections of our Proxy Statement to be filed within 120 days after the end of our fiscal year, which information is incorporatedherein by reference.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.Reference is made to the information to be set forth in the "Securities Owned by Management and Certain Beneficial Owners" and "Securities Authorizedfor Issuance under Equity Compensation Plans" sections of our Proxy Statement to be filed within 120 days after the end of our fiscal year, which informationis incorporated herein by reference.88Table of ContentsItem 13. Certain Relationships and Related Transactions, and Director Independence.Reference is made to the information to be set forth in the "Related Person Transactions" and "Governance of the Company" sections of our ProxyStatement to be filed within 120 days after the end of our fiscal year, which information is incorporated herein by reference.Item 14. Principal Accountant Fees and Services.Reference is made to the information to be set forth in the "Independent Auditors' Fees" section of our Proxy Statement to be filed within 120 days afterthe end of our fiscal year, which information is incorporated herein by reference.89Table of ContentsPART IVItem 15. Exhibits, Financial Statement Schedules(a)The following documents are filed as a part of this report on Form 10-K:(1)Financial Statements: See index to Consolidated Financial Statements.(2)Financial Statement Schedules: None required.(3)Exhibits required to be filed by Item 601 of Regulation S-K:The Exhibits listed below are identified by numbers corresponding to the Exhibit Table of Item 601 of Regulation S-K.ExhibitNumber Description of Documents3.1 Amended and Restated Certificate of Incorporation of Asbury Automotive Group, Inc. (filed as Exhibit 3.1 to the Company's CurrentReport on Form 8-K, filed with the SEC on April 25, 2016)*3.2 Bylaws of Asbury Automotive Group, Inc. (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on April21, 2014)*4.1 Indenture, dated as of December 4, 2014, among Asbury Automotive Group, Inc., each of the Guarantors named therein and U.S. BankNational Association, as Trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the SEC on December 4,2014)*4.2 Form of 6.0% Senior Subordinated Note due 2024 (included as Exhibit A in Exhibit 4.1 to the Company's Current Report on Form 8-Kfiled with the SEC on December 4, 2014)*4.3 First Supplemental Indenture, dated as of July 29, 2015, by and among Asbury Automotive Group, Inc., Asbury Jax Ford, LLC and U.S.Bank National Association, as Trustee (filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2015).*4.4 Second Supplemental Indenture, dated as of October 28, 2015, among Asbury Automotive Group, Inc., each of the guarantors namedtherein and U.S. Bank National Association, as Trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed with theSEC on October 28, 2015).*4.5 Third Supplemental Indenture, dated as of July 20, 2016, among Asbury Automotive Group, Inc., each of the guarantors named therein andU.S. Bank National Association, as Trustee (filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2016).*4.6 Fourth Supplemental Indenture, dated as of February 17, 2017, among Asbury Automotive Group, Inc., Asbury IN Chev, LLC, andU.S.Bank National Association, as Trustee.10.1** Amended and Restated 2002 Equity Incentive Plan (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SECon February 14, 2012)*10.2** 2012 Equity Incentive Plan (filed as Appendix A to the Company's Definitive Proxy Statement on Schedule 14A filed with the SEC onMarch 16, 2012)*10.3** First Amendment to 2012 Equity Incentive Plan (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC onJanuary 27, 2017)*10.4** Amended and Restated Key Executive Incentive Compensation Plan (filed as Exhibit 10.2 to the Company's Current Report on Form 8-Kfiled with the SEC on May 4, 2009) *10.5** Form of Officer/Director Indemnification Agreement (filed as Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the quarterended March 31, 2010)*10.6** Severance Pay Agreement for Key Employee by and between Asbury Automotive Group, Inc. and Keith R. Style, dated as of January 1,2014 (filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 2013)*10.7** Letter Agreement by and between Asbury Automotive Group, Inc. and Keith R. Style, dated as of December 10, 2013 (filed as Exhibit 10.1to the Company's Current Report on Form 8-K filed with the SEC on December 11, 2013)*90Table of Contents10.8** Employment Agreement between Asbury Automotive Group, Inc. and David W. Hult, dated as of October 23, 2014 (filed as Exhibit 10.1 tothe Company's Current Report on Form 8-K filed with the SEC on October 23, 2014)*10.9** Amended and Restated Employment Agreement by and between Asbury Automotive Group, Inc. and Craig T. Monaghan, dated as ofDecember 30, 2011 (filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011)*10.10** First Amendment to Amended and Restated Employment Agreement by and between Asbury Automotive Group, Inc. and Craig T.Monaghan, dated as of March 7, 2012 (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on March 8,2012)*10.11** Letter Agreement by and between Asbury Automotive Group, Inc. and George A. Villasana, dated as of March 13, 2012 (filed as Exhibit10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012)*10.12** Amended and Restated Severance Pay Agreement for Key Employee between Asbury Automotive Group, Inc. and George A. Villasana,dated as of February 21, 2017.10.13** Severance Pay Agreement for Key Employee between Asbury Automotive Group, Inc. and Jed M. Milstein, dated as of February 21, 2017.10.14** Severance Pay Agreement for Key Employee between Asbury Automotive Group, Inc. and William F. Stax, dated as of February 21, 2017.10.15** Form of Equity Award Agreement under the Amended and Restated Asbury Automotive Group, Inc. 2002 Equity Incentive Plan for CEOand COO (filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012)*10.16** Form of Equity Award Agreement under the Amended and Restated Asbury Automotive Group, Inc. 2002 Equity Incentive Plan for otherExecutive Officers (filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012)*10.17** Form of Equity Award Agreement under the 2012 Equity Incentive Plan (filed as Exhibit 10.19 to the Company's Annual Report on Form10-K for the year ended December 31, 2012)*10.18** Form of Performance Share Unit Award Agreement (filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterended March 31, 2010)*10.19** Form of Restricted Share Award Agreement for Non-Employee Directors (filed as Exhibit 10.26 to the Company's Annual Report on Form10-K for the year ended December 31, 2007, File No. 001-31262)*10.20** Form of Restricted Share Award Agreement (filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2010)*10.21** Form of Restricted Stock Unit Award Agreement (filed as Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the quarterended March 31, 2010)*10.22 Ford Sales and Service Agreement (filed as Exhibit 10.13 to Amendment No. 2 to the Company's Registration Statement on Form S-1, FileNo. 333-65998, filed with the SEC on October 12, 2001)*10.23 General Motors Dealer Sales and Service Agreement (filed as Exhibit 10.14 to Amendment No. 2 to the Company's Registration Statementon Form S-1, File No. 333-65998, filed with the SEC on October 12, 2001)*10.24 Honda Automobile Dealer Sales and Service Agreement (filed as Exhibit 10.15 to Amendment No. 2 to the Company's RegistrationStatement on Form S-1, File No. 333-65998, filed with the SEC on October 12, 2001)*10.25 Mercedes-Benz Passenger Car Dealer Agreement (filed as Exhibit 10.16 to Amendment No. 2 to the Company's Registration Statement onForm S-1, File No. 333-65998, filed with the SEC on October 12, 2001)*91Table of Contents10.26 Nissan Dealer Sales and Service Agreement (filed as Exhibit 10.17 to Amendment No. 2 to the Company's Registration Statement on FormS-1, File No. 333-65998, filed with the SEC on October 12, 2001)*10.27 Toyota Dealer Agreement (filed as Exhibit 10.18 to Amendment No. 2 to the Company's Registration Statement on Form S-1, File No. 333-65998, filed with the SEC on October 12, 2001)*10.28 Second Amended and Restated Credit Agreement, dated as of July 25, 2016, by and among Asbury Automotive Group, Inc., as a Borrower,and certain of its Subsidiaries, as Vehicle Borrowers, Bank of America, N.A., as Administrative Agent, Revolving Swing Line Lender, NewVehicle Floorplan Swing Line Lender, Used Vehicle Floorplan Swing Line Lender and an L/C Issuer, and the other Lenders party thereto,JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A., as Co-Syndication Agents, Toyota Motor Credit Corporation and Mercedes-BenzFinancial Services USA LLC, as Co-Documentation agents, and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Sole Lead Arrangerand Sole Bookrunner (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10‑Q for the quarter ended June 30, 2016)*10.29 Second Amended and Restated Company Guaranty Agreement, dated as of July 25, 2016, by and among Asbury Automotive Group, Inc.and Bank of America, N.A., as Administrative Agent (filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterended June 30, 2016)*10.30 Second Amended and Restated Subsidiary Guaranty Agreement, dated as of July 25, 2016, by and among certain subsidiaries of AsburyAutomotive Group, Inc. and Bank of America, N.A., as Administrative Agent (filed as Exhibit 10.3 to the Company's Quarterly Report onForm 10-Q for the quarter ended June 30, 2016)*10.31 Second Amended and Restated Security Agreement, dated as of July 25, 2016, by and among Asbury Automotive Group, Inc., certain of itssubsidiaries and Bank of America, N.A., as Administrative Agent (filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q forthe quarter ended June 30, 2016)*10.32 Second Amended and Restated Escrow & Security Agreement, dated as of July 25, 2016, by and among Asbury Automotive Group, Inc.,certain of its subsidiaries and Bank of America, N.A., a national banking association, as Administrative Agent (filed as Exhibit 10.5 to theCompany's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016)*10.33 Amended and Restated Master Loan Agreement, dated as of February 3, 2015, by and among certain subsidiaries of Asbury AutomotiveGroup, Inc. and Wells Fargo Bank, National Association (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with theSEC on February 4, 2015)*10.34 Second Amended and Restated Unconditional Guaranty, dated as of February 3, 2015, by and between Asbury Automotive Group, Inc. andWells Fargo Bank, National Association (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC onFebruary 4, 2015)*21 Subsidiaries of the Company23.1 Consent of Ernst & Young LLP31.1 Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)of the Securities Exchange Act of 1934, as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 200231.2 Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)of the Securities Exchange Act of 1934, as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 200232.1 Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of200232.2 Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002101.INS XBRL Instance Document101.SCH XBRL Taxonomy Extension Schema Document101.CAL XBRL Taxonomy Extension Calculation Linkbase Document101.DEF XBRL Taxonomy Extension Definition Linkbase Document101.LAB XBRL Taxonomy Extension Label Linkbase Document92Table of Contents101.PRE XBRL Taxonomy Extension Presentation Linkbase Document* Incorporated by reference.** Management contract or compensatory plan or arrangement.Item 16. Form 10-K SummaryNone.93Table of ContentsSIGNATURESPursuant 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 itsbehalf by the undersigned, thereunto duly authorized. Asbury Automotive Group, Inc. Date: February 23, 2017By: /s/ Craig T. Monaghan Name: Craig T. Monaghan Title: Chief Executive Officer and PresidentPursuant 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 itsbehalf by the undersigned, thereunto duly authorized. Signature Title Date /s/ Craig T. Monaghan Chief Executive Officer, President and Director February 23, 2017(Craig T. Monaghan) /s/ Keith R. Style Senior Vice President and Chief Financial Officer February 23, 2017(Keith R. Style) /s/ William F. Stax Controller and Chief Accounting Officer February 23, 2017(William F. Stax) /s/ Thomas C. DeLoach, Jr. Director February 23, 2017(Thomas C. DeLoach, Jr.) Non-Executive Chairman of the Board /s/ Joel Alsfine Director February 23, 2017(Joel Alsfine) /s/ Dennis E. Clements Director February 23, 2017(Dennis E. Clements) /s/ Juanita T. James Director February 23, 2017(Juanita T. James) /s/ Eugene S. Katz Director February 23, 2017(Eugene S. Katz) /s/ Philip F. Maritz Director February 23, 2017(Philip F. Maritz) /s/ Thomas J. Reddin Director February 23, 2017(Thomas J. Reddin) /s/ Scott L. Thompson Director February 23, 2017(Scott L. Thompson) 94Table of ContentsINDEX TO EXHIBITSExhibitNumber Description of Documents3.1 Amended and Restated Certificate of Incorporation of Asbury Automotive Group, Inc. (filed as Exhibit 3.1 to the Company's CurrentReport on Form 8-K, filed with the SEC on April 25, 2016)*3.2 Bylaws of Asbury Automotive Group, Inc. (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on April21, 2014)*4.1 Indenture, dated as of December 4, 2014, among Asbury Automotive Group, Inc., each of the Guarantors named therein and U.S. BankNational Association, as Trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the SEC on December 4,2014)*4.2 Form of 6.0% Senior Subordinated Note due 2024 (included as Exhibit A in Exhibit 4.1 to the Company's Current Report on Form 8-Kfiled with the SEC on December 4, 2014)*4.3 First Supplemental Indenture, dated as of July 29, 2015, by and among Asbury Automotive Group, Inc., Asbury Jax Ford, LLC and U.S.Bank National Association, as Trustee (filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2015).*4.4 Second Supplemental Indenture, dated as of October 28, 2015, among Asbury Automotive Group, Inc., each of the guarantors namedtherein and U.S. Bank National Association, as Trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed with theSEC on October 28, 2015).*4.5 Third Supplemental Indenture, dated as of July 20, 2016, among Asbury Automotive Group, Inc., each of the guarantors named therein andU.S. Bank National Association, as Trustee (filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2016).*4.6 Fourth Supplemental Indenture, dated as of February 17, 2017, among Asbury Automotive Group, Inc., Asbury IN Chev, LLC, andU.S.Bank National Association, as Trustee.10.1** Amended and Restated 2002 Equity Incentive Plan (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SECon February 14, 2012)*10.2** 2012 Equity Incentive Plan (filed as Appendix A to the Company's Definitive Proxy Statement on Schedule 14A filed with the SEC onMarch 16, 2012)*10.3** First Amendment to 2012 Equity Incentive Plan (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC onJanuary 27, 2017)*10.4** Amended and Restated Key Executive Incentive Compensation Plan (filed as Exhibit 10.2 to the Company's Current Report on Form 8-Kfiled with the SEC on May 4, 2009)*10.5** Form of Officer/Director Indemnification Agreement (filed as Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the quarterended March 31, 2010)*10.6** Severance Pay Agreement for Key Employee by and between Asbury Automotive Group, Inc. and Keith R. Style, dated as of January 1,2014 (filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 2013)*10.7** Letter Agreement by and between Asbury Automotive Group, Inc. and Keith R. Style, dated as of December 10, 2013 (filed as Exhibit 10.1to the Company's Current Report on Form 8-K filed with the SEC on December 11, 2013)*10.8** Employment Agreement between Asbury Automotive Group, Inc. and David W. Hult, dated as of October 23, 2014 (filed as Exhibit 10.1 tothe Company's Current Report on Form 8-K filed with the SEC on October 23, 2014)*95Table of Contents10.9** Amended and Restated Employment Agreement by and between Asbury Automotive Group, Inc. and Craig T. Monaghan, dated as ofDecember 30, 2011 (filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011)*10.10** First Amendment to Amended and Restated Employment Agreement by and between Asbury Automotive Group, Inc. and Craig T.Monaghan, dated as of March 7, 2012 (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on March 8,2012)*10.11** Letter Agreement by and between Asbury Automotive Group, Inc. and George A. Villasana, dated as of March 13, 2012 (filed as Exhibit10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012)*10.12** Amended and Restated Severance Pay Agreement for Key Employee between Asbury Automotive Group, Inc. and George A. Villasana,dated as of February 21, 2017.10.13** Severance Pay Agreement for Key Employee between Asbury Automotive Group, Inc. and Jed M. Milstein, dated as of February 21, 2017.10.14** Severance Pay Agreement for Key Employee between Asbury Automotive Group, Inc. and William F. Stax, dated as of February 21, 2017.10.15** Form of Equity Award Agreement under the Amended and Restated Asbury Automotive Group, Inc. 2002 Equity Incentive Plan for CEOand COO (filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012)*10.16** Form of Equity Award Agreement under the Amended and Restated Asbury Automotive Group, Inc. 2002 Equity Incentive Plan for otherExecutive Officers (filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012)*10.17** Form of Equity Award Agreement under the 2012 Equity Incentive Plan (filed as Exhibit 10.19 to the Company's Annual Report on Form10-K for the year ended December 31, 2012)*10.18** Form of Performance Share Unit Award Agreement (filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterended March 31, 2010)*10.19** Form of Restricted Share Award Agreement for Non-Employee Directors (filed as Exhibit 10.26 to the Company's Annual Report on Form10-K for the year ended December 31, 2007, File No. 001-31262)*10.20** Form of Restricted Share Award Agreement (filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2010)*10.21** Form of Restricted Stock Unit Award Agreement (filed as Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the quarterended March 31, 2010)*10.22 Ford Sales and Service Agreement (filed as Exhibit 10.13 to Amendment No. 2 to the Company's Registration Statement on Form S-1, FileNo. 333-65998, filed with the SEC on October 12, 2001)*10.23 General Motors Dealer Sales and Service Agreement (filed as Exhibit 10.14 to Amendment No. 2 to the Company's Registration Statementon Form S-1, File No. 333-65998, filed with the SEC on October 12, 2001)*10.24 Honda Automobile Dealer Sales and Service Agreement (filed as Exhibit 10.15 to Amendment No. 2 to the Company's RegistrationStatement on Form S-1, File No. 333-65998, filed with the SEC on October 12, 2001)*10.25 Mercedes-Benz Passenger Car Dealer Agreement (filed as Exhibit 10.16 to Amendment No. 2 to the Company's Registration Statement onForm S-1, File No. 333-65998, filed with the SEC on October 12, 2001)*10.26 Nissan Dealer Sales and Service Agreement (filed as Exhibit 10.17 to Amendment No. 2 to the Company's Registration Statement on FormS-1, File No. 333-65998, filed with the SEC on October 12, 2001)*96Table of Contents10.27 Toyota Dealer Agreement (filed as Exhibit 10.18 to Amendment No. 2 to the Company's Registration Statement on Form S-1, File No. 333-65998, filed with the SEC on October 12, 2001)*10.28 Second Amended and Restated Credit Agreement, dated as of July 25, 2016, by and among Asbury Automotive Group, Inc., as a Borrower,and certain of its Subsidiaries, as Vehicle Borrowers, Bank of America, N.A., as Administrative Agent, Revolving Swing Line Lender, NewVehicle Floorplan Swing Line Lender, Used Vehicle Floorplan Swing Line Lender and an L/C Issuer, and the other Lenders party thereto,JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A., as Co-Syndication Agents, Toyota Motor Credit Corporation and Mercedes-BenzFinancial Services USA LLC, as Co-Documentation agents, and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Sole Lead Arrangerand Sole Bookrunner (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10‑Q for the quarter ended June 30, 2016)*10.29 Second Amended and Restated Company Guaranty Agreement, dated as of July 25, 2016, by and among Asbury Automotive Group, Inc.and Bank of America, N.A., as Administrative Agent (filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterended June 30, 2016)*10.30 Second Amended and Restated Subsidiary Guaranty Agreement, dated as of July 25, 2016, by and among certain subsidiaries of AsburyAutomotive Group, Inc. and Bank of America, N.A., as Administrative Agent (filed as Exhibit 10.3 to the Company's Quarterly Report onForm 10-Q for the quarter ended June 30, 2016)*10.31 Second Amended and Restated Security Agreement, dated as of July 25, 2016, by and among Asbury Automotive Group, Inc., certain of itssubsidiaries and Bank of America, N.A., as Administrative Agent (filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q forthe quarter ended June 30, 2016)*10.32 Second Amended and Restated Escrow & Security Agreement, dated as of July 25, 2016, by and among Asbury Automotive Group, Inc.,certain of its subsidiaries and Bank of America, N.A., a national banking association, as Administrative Agent (filed as Exhibit 10.5 to theCompany's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016)*10.33 Amended and Restated Master Loan Agreement, dated as of February 3, 2015, by and among certain subsidiaries of Asbury AutomotiveGroup, Inc. and Wells Fargo Bank, National Association (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with theSEC on February 4, 2015)*10.34 Second Amended and Restated Unconditional Guaranty, dated as of February 3, 2015, by and between Asbury Automotive Group, Inc. andWells Fargo Bank, National Association (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC onFebruary 4, 2015)*21 Subsidiaries of the Company23.1 Consent of Ernst & Young LLP31.1 Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)of the Securities Exchange Act of 1934, as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 200231.2 Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)of the Securities Exchange Act of 1934, as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 200232.1 Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of200232.2 Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002101.INS XBRL Instance Document101.SCH XBRL Taxonomy Extension Schema Document101.CAL XBRL Taxonomy Extension Calculation Linkbase Document101.DEF XBRL Taxonomy Extension Definition Linkbase Document101.LAB XBRL Taxonomy Extension Label Linkbase Document97Table of Contents101.PRE XBRL Taxonomy Extension Presentation Linkbase Document* Incorporated by reference.** Management contract or compensatory plan or arrangement.98Exhibit 4.6FOURTH SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of February 17, 2017, among Asbury IN Chev, LLC, a Delawarelimited liability company (the “Guaranteeing Subsidiary”), Asbury Automotive Group, Inc., a Delaware corporation (the “Company”), and U.S. BankNational Association, as trustee under the indenture referred to below (the “Trustee”).W I T N E S S E T HWHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture, dated as of December 4, 2014 (as supplemented by theFirst Supplemental Indenture, dated as of July 29, 2015, the Second Supplemental Indenture, dated as of October 28, 2015 and the Third SupplementalIndenture, dated as of July 20, 2016, collectively, the “Indenture”) providing for the issuance of 6.0% Senior Subordinated Notes due 2024 (the “Notes”);WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee asupplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company’s Obligations under the Notesand the Indenture on the terms and conditions set forth herein (the “Subsidiary Guarantee”); andWHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged,the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:1.CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in theIndenture.2.AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees, jointly and severally along with all Guarantorsnamed in the Indenture, to guarantee the Company’s obligations under the Notes on the terms and subject to the conditions set forth in Article 11 of theIndenture and to be bound by all other applicable provisions of the Indenture and the Notes.3.RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURES PART OF INDENTURE. Except as expressly amendedhereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. ThisSupplemental Indenture shall form a part of the Indenture for all purposes, and every Holder heretofore or hereafter authenticated and delivered shall bebound hereby.4.NEW YORK LAW TO GOVERN. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUETHIS SUPPLEMENTAL INDENTURE.5.COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be anoriginal, but all of them together represent the same agreement.6.EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.7. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of thisSupplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and theCompany.IN WITNESS HEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.SIGNATURES ASBURY AUTOMOTIVE GROUP,INC. By: /s/ George A. VillasanaName: George A. VillasanaTitle: Senior Vice President, GeneralCounsel& Secretary ASBURY IN CHEV, LLC By: /s/ Matthew PettoniName: Matthew PettoniTitle: Treasurer U.S. BANK NATIONALASSOCIATION By: /s/ David FerrellName: DAVID FERRELLTitle: VICE PRESIDENTExhibit 10.12AMENDED AND RESTATED SEVERANCE PAY AGREEMENTFOR KEY EMPLOYEEThis Amended and Restated Severance Pay Agreement is entered into as of February 21, 2017 (the “Effective Date”) between Asbury AutomotiveGroup, Inc. (“Asbury”) and George A. Villasana (“Executive”).WHEREAS, Asbury and the Executive are parties to that certain severance pay agreement dated April 16, 2012 (the “Original Agreement”); andWHEREAS, effective as of the Effective Date, Asbury and Executive mutually desire to amend and restate the Original Agreement as set forth in thisAmended and Restated Severance Pay Agreement (the “Agreement”).NOW, THEREFORE, in consideration of the promises and mutual covenants and agreements contained herein, Asbury and Executive agree toamend and restate the Original Agreement as follows:1.Severance Pay ArrangementIf a Termination (as defined in Section 2 below) of Executive’s employment occurs at any time during Executive’s employment, Asbury will payExecutive 12 months of Executive’s base salary as of the date of Termination (hereinafter such pay shall be referred to as “Severance Pay”). The SeverancePay will be subject to required withholding and will be made by Asbury to Executive monthly over the course of 12 months on the regular payroll datesbeginning on the first regular payroll date after the effective date of the release referenced in Section B below that Executive executes.In addition to the payment of Severance Pay, if a Termination (as defined in Section 2 below) of Executive’s employment occurs at any time duringExecutive’s employment with Asbury, to the extent that Executive participates in a bonus compensation plan at the date of Termination, Asbury shall payExecutive a pro rata portion of that bonus for the year of the Termination equal to the amount of the bonus that Executive would have received if Executive’semployment had not been terminated during such year, multiplied by the percentage of such year that has expired through the date of Termination. Suchbonus shall be paid at such time as bonuses are paid under the bonus compensation plan to Asbury’s other employees whose employment was not terminatedin such year.Asbury further agrees that, if Executive, upon a Termination (as defined in Section 2 below) of Executive’s employment occurs at any time duringExecutive’s employment with Asbury, timely and properly elects COBRA for any medical, dental and vision benefit plans in which Executive wasparticipating immediately prior to the end of Executive’s employment with Asbury, Asbury shall continue to pay its portion of the monthly premium forthose COBRA-covered medical, dental and vision benefit plans for a period of 12 months after the last day of Executive’s employment with Asbury.Notwithstanding the above, if Executive obtains other employment (prior to the end of the 12 month COBRA reimbursement period) under which Executiveis eligible to be covered by benefits equal to the benefits in his COBRA-elected plans, Asbury’s obligation to reimburse Executive ceases upon Executive’seligibility for such equal benefits.Notwithstanding anything herein to the contrary, if Executive is determined to be a “specified employee” within the meaning of Section 409A of theInternal Revenue Code of 1986, as amended the (“Code”) and if one or more of the payments or benefits to be received by Executive pursuant to thisAgreement would be considered deferred compensation subject to Section 409A of the Code, then no such payment shall be made or benefit provided untilsix (6) months following Executive’s date of Termination.2.Termination Triggering Severance PayA “Termination” triggering the Severance Pay set forth above in Section 1 is defined as a termination of Executive’s employment with Asbury: (1)by Asbury without “cause”, or (2) by Executive because of (x) a material change in the geographic location at which the Executive must perform Executive’sservices (which shall in no event include a relocation of Executive’s current principal place of business to a location less than 50 miles away), (y) a materialdiminution in Executive’s base compensation, or (z) a material diminution in Executive’s authority, duties, or responsibilities. For avoidance of doubt, a“Termination” shall not include a termination of Executive’s employment by Asbury for “cause” or due to Executive’s, death, disability, retirement orvoluntary resignation. For the purposes of this Agreement, the definition of “cause” is: (a) Executive’s gross negligence or serious misconduct (including, without limitation, anycriminal, fraudulent or dishonest conduct) that is or may be injurious to Asbury; or (b) Executive’s being convicted of, or entering a plea of nolo contendereto, any crime that constitutes a felony or involves moral turpitude; or (c) Executive’s breach of Sections 3, 4 or 5 below; or (d) Executive’s willful andcontinued failure to perform Executive’s duties on behalf of Asbury; or (e) Executive’s material breach of a written policy of Asbury. For purposes of thisAgreement, the definition of “disability” is a physical or mental disability or infirmity that prevents the performance by Executive of his duties lasting (orlikely to last, based on competent medical evidence presented to Asbury) for a continuous period of six months or longer.3.Confidential Information and Nondisclosure ProvisionAs a condition to the receipt of the Severance Pay and benefits described in Section 1 above, during and after employment with Asbury, Executiveshall agree not to disclose to any person (other than to an employee or director of Asbury, or to Asbury’s attorneys, accountants and other advisors or exceptas may be required by law) and not use to compete with Asbury any confidential or proprietary information, knowledge or data that is not in the publicdomain that was obtained by Executive while employed by Asbury regarding Asbury or any products, improvements, customers, methods of distribution,sales, prices, profits, costs, contracts, suppliers, business prospects, business methods, techniques, research, trade secrets or know-how of Asbury (collectively,“Confidential Information”). In the event that Executive’s employment with Asbury ends for any reason, Executive will deliver to Asbury on or before theExecutive’s last day of employment all documents and data of any nature (whether in tangible or electronic form) pertaining to Executive’s work with Asburyand will not take any documents or data or any reproduction, or any documents containing or pertaining to any Confidential Information. Executive agreesthat in the event of a breach by Executive of this provision, Asbury shall be entitled to inform all potential or new employers of such breach and to ceasepayments and benefits that would otherwise be made pursuant to Section 1 above, as well as to obtain injunctive relief and damages, including reasonableattorneys fees, and which may include recovery of amounts paid to Executive under this Agreement.4.Non-Solicitation/Non-Hire of EmployeesExecutive agrees that, during his employment at Asbury and for a 12-month period after the end of his employment with Asbury for any reason, hewill not, directly or indirectly, solicit, recruit or hire any employee of Asbury (or any person who was an employee of Asbury during the 12 month periodpreceding the last day of Executive’s employment with Asbury) or encourage any such employee to terminate employment with Asbury.5.Covenant Not to CompeteExecutive agrees that, during his employment at Asbury and for a 12-month period after the end of his employment with Asbury for any reason, hewill not (except on behalf of or with the prior written consent of Asbury, which consent may be withheld in Asbury’s sole discretion):(a)provide services of a leadership, management, executive, operational, or advisory capacity and/or participate in the ownershipof or provide financial backing to an automotive dealership that is located within a fifty-mile radius of any address set forth on Exhibit A (the“Area”);(b)provide senior/corporate level leadership, executive, operational, or advisory services to any corporate competitor of Asburywho owns or operates one or more automotive dealerships within the Area; and(c)provide services of a leadership, management, executive, operational, or advisory capacity for anyone or any business whosefocus is buying, conglomerating, or otherwise acquiring one or more automotive dealerships that are located within the Area.For purposes of this Section 5, Executive acknowledges and agrees that Asbury conducts business in the Area and that the Area is a reasonablegeographic limitation.Notwithstanding anything to the contrary contained in this Agreement, Asbury hereby agrees that the foregoing covenant shall not be deemedbreached as a result of the passive ownership by Executive of: (i) less than an aggregate of 5% of any class of stock of a business that competes with Asbury;or (ii) less than an aggregate of 10% in value of any instrument of indebtedness of a business that competes with Asbury. Asbury further agrees that nothingin this Section 5 prohibits Executive from accepting employment from, and performing services for, businesses engaged in the finance industry, andbusinesses engaged in the manufacturing and/or sale of automobile parts or the provision of automotive service, provided such businesses do not also engagein the retail of automobiles within the Area. By way of example, nothing in this Section 5 would prohibit Executive from working with such businesses asAmerican General Finance, NAPA Auto Parts, or Goodyear.Within one day of the end of Executive’s employment with Asbury for any reason, Executive agrees to re-confirm his commitment to the post-employment restrictive covenants in this Agreement. Executive further agrees that, as part of that re-confirmation, the term “Area” and Exhibit A hereto maybe amended by Asbury, but only to the extent necessary to list the addresses of Asbury’s headquarters and any automotive dealerships that Asbury ownsand/or operates as of the last day of Executive’s employment with Asbury.6.Construction/Enforcement of Post-Employment CovenantsExecutive agrees that the provisions of Sections 3, 4, and 5 are reasonable and properly required for the adequate protection of the business and thegoodwill of Asbury. However, if a judicial determination is made that any of the provisions of Sections 3, 4 or 5 constitutes an unreasonable or otherwiseunenforceable restriction against Executive, such provision(s) shall be modified or severed so as to permit enforcement of the provision(s) to the extentreasonable.7.Violation of Post-Employment CovenantsExecutive agrees that, in the event of a material breach by Executive of any Section of this Agreement, including Sections 3, 4, or 5, Asbury shall beentitled to: (i) inform all potential or new employers of such breach; (ii) cease payments and benefits that would otherwise be made pursuant to Section 1above (and in lieu of such payments and benefits pay Executive five hundred dollars ($500.00)); (iii) obtain injunctive relief and damages, includingreasonable attorney’s fees; and (iv) recover the amounts paid to Executive under this Agreement (other than the above-referenced $500.00) during any periodof material breach by Executive. To the extent that Executive is determined through agreement or resolution of any pending claim to not have violated anycovenant at issue, he shall receive any and all severance that has not been paid under the Agreement and/or which was recovered from Executive under thisSection 7.GENERAL PROVISIONSA.Employment is At WillExecutive and Asbury acknowledge and agree that Executive is an “at will” employee, which means that either Executive or Asbury may terminatethe employment relationship at any time, for any reason, with or without cause or notice, and that nothing in this Agreement shall be construed as an expressor implied contract of employment.B.Execution of ReleaseExecutive agrees that, as a condition to the receipt of the Severance Pay and other compensation and insurance benefits described in Section 1above, Executive shall execute a release of all claims against Asbury (and its corporate parents, subsidiaries, franchisors, franchisees, management companies,divisions, and affiliates) and the past, present and future officers, directors, agents, officials, employees, insurers and attorneys of Asbury (and its corporateparents, subsidiaries, franchisors, franchisees, management companies, divisions, and affiliates) arising out of Executive’s employment or the end of hisemployment with Asbury, such release to not be revoked by Executive and to completely waive and release any claim of discrimination, harassment orwrongful discharge under local, state or federal law.C.Alternative Dispute ResolutionAny disputes arising under or in connection with this Agreement shall be resolved by binding arbitration before an arbitrator (who shall be anattorney with at least ten years’ experience in employment law) in the city where Executive was employed with Asbury and in accordance with the rules andprocedures of the most recent employment rules of the American ArbitrationAssociation. Each party may choose to retain legal counsel and shall pay its own attorneys’ fees, regardless of the outcome of the arbitration. Executive maybe required to pay a filing fee limited to the equivalent cost of filing in the court of jurisdiction. Asbury will pay the fees and costs of conducting thearbitration. Judgment upon the award rendered by the arbitrator may be entered in any court of jurisdiction.D.Non-DisparagementExecutive agrees not to make any disclosures, issue any statements or otherwise cause to be disclosed any information which is designed, intendedor might reasonably be anticipated to disparage Asbury, its officers or directors, its business, services, products, technologies and/or personnel. Nothing inthis section is intended, nor shall be construed, to: (i) prohibit Executive from any communications to, or participation in any investigation or proceedingconducted by, any governmental agency with jurisdiction concerning the terms, conditions and privileges of employment or jurisdiction over Asbury’sbusiness; (ii) interfere with, restrain, or prevent Executive’s communications regarding the terms and conditions of employment; or (iii) prevent Executivefrom otherwise engaging in any legally protected activity.E.Other Provisions(a)This Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of Executive and Asbury,including any successor to or assign of Asbury.(b)Upon the end of Executive’s employment with Asbury for any reason, the provisions of this Agreement shall survive to theextent necessary to give effect to the provisions herein, including Sections 3, 4 and 5.(c)The headings and captions are provided for reference and convenience only and shall not be considered part of this Agreement.(d)Executive also covenants to reasonably cooperate with Asbury if Executive is needed as a witness in any litigation or legalmatters involving Asbury.(e)Any notice or other communication required or permitted to be delivered under this Agreement shall be (i) in writing, (ii)delivered personally, by nationally recognized overnight courier service or by certified or registered mail, first-class postage prepaid and returnreceipt requested, (iii) deemed to have been received on the date of delivery or on the third business day after mailing, and (iv) addressed as follows(or to such other address as the party entitled to notice shall later designate in accordance with these terms):If to Asbury: Asbury Automotive Group, Inc.c/o The Office of the General Counsel2905 Premiere Parkway, Suite 300Duluth, GA 30097 If to Executive: To the most recent address of Executive set forth in the personnel records of Asbury.(f)This Agreement supersedes any and all prior agreements between Asbury and Executive relating to payments upon Terminationof employment or Severance Pay and may only be modified in a writing signed by Asbury and Executive.(g)This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia.(h)All payments hereunder shall be subject to any required withholding of federal, state, local and foreign taxes pursuant to anyapplicable law or regulation.(i)If any provision of this Agreement shall be held invalid or unenforceable, such holding shall not affect any other provisions, andthis Agreement shall be construed and enforced as if such provisions had not been included. No provision of this Agreement shall be waived unlessthe waiver is agreed to in writing and signed by Executive and the Chief Human Resources Officer of Asbury. No waiver by either party of anybreach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other conditionor provision or of the same condition or provision at another time.(j)The parties hereto acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with,and incorporate the terms and conditions required by, Section 409A of the Code and the Department of Treasury regulations and other interpretiveguidance issued thereunder. Notwithstanding any provision of this Agreement to the contrary, in the event that Asbury determines that any amountspayable hereunder will be immediately taxable to Executive under Section 409A of the Code and related Department of Treasury guidance, Asburyand Executive shall cooperate in good faith to (x) adopt such amendments to this Agreement and appropriate policies and procedures, includingamendments and policies with retroactive effect, that they mutually determine to be necessary or appropriate to preserve the intended tax treatmentof the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or taxconsequences for Asbury and/or (y) take such other actions as mutually determined to be necessary or appropriate to exempt the amounts payablehereunder from Section 409A of the Code or to comply with the requirements of Section 409A of the Code and thereby avoid the application ofpenalty taxes thereunder.This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together willconstitute one and the same instrument.AGREED TO AS OF FEBRUARY 21, 2017EXECUTIVE: ASBURY AUTOMOTIVE GROUP, INC./s/ George A. Villasana /s/ Craig T. MonaghanName: George A. Villasana Name: Craig T. MonaghanTitle: SVP, General Counsel & Secretary Title: CEO and PresidentExhibit AAs used in the Severance Pay Agreement, “Area” means a 50-mile radius from any of the following addresses:Corporate Headquarters2905 Premiere Parkway NWDuluth, GA 30097 2551 The Nalley WayAtlanta, GA 3036011505 Alpharetta HighwayRoswell, GA 30076 11130 Alpharetta HwyRoswell, GA 3007610995 Westside Pkwy.Alpharetta, GA 30009 7969 Mall Pkwy Lithonia, GA 300381355 Cobb Parkway SouthMarietta, GA 30060-6542 1550 Mansell RdAlpharetta, GA 300091606 Church StreetDecatur, GA 30033 1310 Buford Hwy.Cumming, GA 300417555 Roswell Rd. Atlanta, GA 30350 5400 South U.S. Highway 1Ft. Pierce, FL 34982-73704197 Jonesboro RoadUnion City, GA 30291 4429 US 1 SouthFt. Pierce, FL 339547909 Mall Pkwy Lithonia, GA 30038 7245 Blanding Blvd.Jacksonville, FL 322442550 The Nalley WayAtlanta, GA 30360 10880 Philips HwyJacksonville, FL 322562020 Cobb ParkwayMarietta, GA 30080 2655 N. Volusia AveOrange City, FL 32763-22147849 Mall Pkwy Lithonia, GA 30038 2677 N. Volusia AveOrange City, FL 32763-22142750 S. Cobb ParkwaySmyrna, GA 30080 2308 S. Woodland Blvd. Deland, FL 32720980 Mansell RoadRoswell, GA 30076 9650 Atlantic Blvd.Jacksonville, FL 32225 11003 Atlantic Blvd.Jacksonville, FL 32225 4450 US 1 SouthFt. Pierce, FL 34982 256 Swain StreetFayetteville, NC 2830311051 S. Orange Blossom Trail,Orlando, FL 32837 3908 W. Wendover AvenueGreensboro, NC 274072925 US 1 SouthSt Augustine, FL 32086 3902 W. Wendover AvenueGreensboro, NC 2740710600 Atlantic Blvd.Jacksonville, FL 32225 3710 W. Wendover AvenueGreensboro, NC 2740710859 Philips HighwayJacksonville, FL 32256 3633 W. Wendover AvenueGreensboro, NC 2740711340 Philips HwyJacksonville, FL 32256 3900 W. Wendover AvenueGreensboro, NC 2740731200 US Highway 19 NorthPalm Harbor, FL 34684 3604 W, Wendover AvenueGreensboro, NC 274074500 US 1 SouthFt. Pierce, FL 34982 8704W. Broad StreetRichmond, VA 232946060 1-55 North Frontage RoadJackson, MS 39211 8712 W. Broad StreetRichmond, VA 23294201 Octavia St.Brandon, MS 39042 8710 W. Broad StreetRichmond, VA 23294108 Gray-Daniels Blvd.Brandon, MS 39042 12100 Midlothian TurnpikeMidlothian, VA 231136080 I-55 North Frontage RoadJackson, MS 39211 2712 Laurens RoadGreenville, SC 29607104 Gray-Daniels BlvdBrandon, MS 39042 2660 Laurens RoadGreenville, SC 296071295 Richmond AvenueCharlottesville, VA 22911 2668 Laurens RoadGreenville, SC 296071001 Southpoint Auto Park Blvd.Durham, NC 27713 2700 Laurens Road Greenville, SC 29607436 N. McPherson Church RoadFayetteville, NC 28303 2686 Laurens RoadGreenville, SC 29607 4400 W. Hillsborough AvenueTampa. FL 3361411654 Olive Blvd.Creve Coeur, MO 63141 4051 West Plano ParkwayPlano, TX 75093755 N. New BallasCreve Coeur, MO 63141 13553 US Hwy 183 NorthAustin, TX 78750777 Decker Lane.Creve Coeur, MO 63141 300 West Loop 820 SouthFort Worth, TX 7610811910 Olive Blvd.Creve Coeur, MO 63141 1601 N. Dallas Parkway(7200 State Highway 121)Frisco, TX 7503411830 Olive Blvd.Creve Coeur, MO 63141 3700 West Airport FreewayIrving, TX 75062951 Technology Dr.O'Fallon, Mo 63368 11911 Gulf Freeway Houston, TX 7703411830 Olive Blvd.Creve Coeur, MO 63141 3333 W. Plano PkwyPlano , TX 750759207 Adamo DriveTampa, FL 33619 1207 E. Brandon Blvd,Brandon, FL 335113810 W. Hillsborough AvenueTampa. FL 33614 2320 Colonial Blvd.Ft. Myers, FL 339669205 Adamo Dr.Tampa, FL 33619 3102 US Highway 19Holiday, FL 346913800 W. Hillsborough Ave.Tampa, FL 33614 6601 W. Hillsborough Ave.Tampa, FL 336349210 Adamo DriveTampa, FL 33619 4600 N. Dale Mabry Hwy.Tampa, FL 33614 4400 N. Dale Mabry HwyTampa, FL 33614 Exhibit 10.13SEVERANCE PAY AGREEMENTFOR KEY EMPLOYEEThis Agreement is entered into as of February 21, 2017 (the “Effective Date”) between Asbury Automotive Group, Inc. (“Asbury”) and Jed M.Milstein (“Executive”).IN CONSIDERATION of the promises and mutual covenants and agreements contained herein, the Asbury and Executive agree as follows:1.Severance Pay ArrangementIf a Termination (as defined in Section 2 below) of Executive’s employment occurs at any time during Executive’s employment, Asbury will payExecutive 12 months of Executive’s base salary as of the date of Termination (hereinafter such pay shall be referred to as “Severance Pay”). The SeverancePay will be subject to required withholding and will be made by Asbury to Executive monthly over the course of 12 months on the regular payroll datesbeginning on the first regular payroll date after the effective date of the release referenced in Section B below that Executive executes.In addition to the payment of Severance Pay, if a Termination (as defined in Section 2 below) of Executive’s employment occurs at any time duringExecutive’s employment with Asbury, to the extent that Executive participates in a bonus compensation plan at the date of Termination, Asbury shall payExecutive a pro rata portion of that bonus for the year of the Termination equal to the amount of the bonus that Executive would have received if Executive’semployment had not been terminated during such year, multiplied by the percentage of such year that has expired through the date of Termination. Suchbonus shall be paid at such time as bonuses are paid under the bonus compensation plan to Asbury’s other employees whose employment was not terminatedin such year.Asbury further agrees that, if Executive, upon a Termination (as defined in Section 2 below) of Executive’s employment occurs at any time duringExecutive’s employment with Asbury, timely and properly elects COBRA for any medical, dental and vision benefit plans in which Executive wasparticipating immediately prior to the end of Executive’s employment with Asbury, Asbury shall continue to pay its portion of the monthly premium forthose COBRA-covered medical, dental and vision benefit plans for a period of 12 months after the last day of Executive’s employment with Asbury.Notwithstanding the above, if Executive obtains other employment (prior to the end of the 12 month COBRA reimbursement period) under which Executiveis eligible to be covered by benefits equal to the benefits in his COBRA-elected plans, Asbury’s obligation to reimburse Executive ceases upon Executive’seligibility for such equal benefits.Notwithstanding anything herein to the contrary, if Executive is determined to be a “specified employee” within the meaning of Section 409A of theInternal Revenue Code of 1986, as amended the (“Code”) and if one or more of the payments or benefits to be received by Executive pursuant to thisAgreement would be considered deferred compensation subject to Section 409A of the Code, then no such payment shall be made or benefit provided untilsix (6) months following Executive’s date of Termination.2.Termination Triggering Severance PayA “Termination” triggering the Severance Pay set forth above in Section 1 is defined as a termination of Executive’s employment with Asbury: (1)by Asbury without “cause”, or (2) by Executive because of (x) a material change in the geographic location at which the Executive must perform Executive’sservices (which shall in no event include a relocation of Executive’s current principal place of business to a location less than 50 miles away), (y) a materialdiminution in Executive’s base compensation, or (z) a material diminution in Executive’s authority, duties, or responsibilities. For avoidance of doubt, a“Termination” shall not include a termination of Executive’s employment by Asbury for “cause” or due to Executive’s, death, disability, retirement orvoluntary resignation. For the purposes of this Agreement, the definition of “cause” is: (a) Executive’s gross negligence or serious misconduct (including, without limitation, anycriminal, fraudulent or dishonest conduct) that is or may be injurious to Asbury; or (b) Executive’s being convicted of, or entering a plea of nolo contendereto, any crime that constitutes a felony or involves moral turpitude; or (c) Executive’s breach of Sections 3, 4 or 5 below; or (d) Executive’s willful andcontinued failure to perform Executive’s duties on behalf of Asbury; or (e) Executive’s material breach of a written policy of Asbury. For purposes of thisAgreement, the definition of “disability” is a physical or mental disability or infirmity that prevents the performance by Executive of his duties lasting (orlikely to last, based on competent medical evidence presented to Asbury) for a continuous period of six months or longer.3.Confidential Information and Nondisclosure ProvisionAs a condition to the receipt of the Severance Pay and benefits described in Section 1 above, during and after employment with Asbury, Executiveshall agree not to disclose to any person (other than to an employee or director of Asbury, or to Asbury’s attorneys, accountants and other advisors or exceptas may be required by law) and not use to compete with Asbury any confidential or proprietary information, knowledge or data that is not in the publicdomain that was obtained by Executive while employed by Asbury regarding Asbury or any products, improvements, customers, methods of distribution,sales, prices, profits, costs, contracts, suppliers, business prospects, business methods, techniques, research, trade secrets or know-how of Asbury (collectively,“Confidential Information”). In the event that Executive’s employment with Asbury ends for any reason, Executive will deliver to Asbury on or before theExecutive’s last day of employment all documents and data of any nature (whether in tangible or electronic form) pertaining to Executive’s work with Asburyand will not take any documents or data or any reproduction, or any documents containing or pertaining to any Confidential Information. Executive agreesthat in the event of a breach by Executive of this provision, Asbury shall be entitled to inform all potential or new employers of such breach and to ceasepayments and benefits that would otherwise be made pursuant to Section 1 above, as well as to obtain injunctive relief and damages, including reasonableattorneys fees, and which may include recovery of amounts paid to Executive under this Agreement.4.Non-Solicitation/Non-Hire of EmployeesExecutive agrees that, during his employment at Asbury and for a 12-month period after the end of his employment with Asbury for any reason, hewill not, directly or indirectly, solicit, recruit or hire any employee of Asbury (or any person who was an employee of Asbury during the 12 month periodpreceding the last day of Executive’s employment with Asbury) or encourage any such employee to terminate employment with Asbury.5.Covenant Not to CompeteExecutive agrees that, during his employment at Asbury and for a 12-month period after the end of his employment with Asbury for any reason, hewill not (except on behalf of or with the prior written consent of Asbury, which consent may be withheld in Asbury’s sole discretion):(a)provide services of a leadership, management, executive, operational, or advisory capacity and/or participate in the ownershipof or provide financial backing to an automotive dealership that is located within a fifty-mile radius of any address set forth on Exhibit A (the“Area”);(b)provide senior/corporate level leadership, executive, operational, or advisory services to any corporate competitor of Asburywho owns or operates one or more automotive dealerships within the Area; and(c)provide services of a leadership, management, executive, operational, or advisory capacity for anyone or any business whosefocus is buying, conglomerating, or otherwise acquiring one or more automotive dealerships that are located within the Area.For purposes of this Section 5, Executive acknowledges and agrees that Asbury conducts business in the Area and that the Area is a reasonablegeographic limitation.Notwithstanding anything to the contrary contained in this Agreement, Asbury hereby agrees that the foregoing covenant shall not be deemedbreached as a result of the passive ownership by Executive of: (i) less than an aggregate of 5% of any class of stock of a business that competes with Asbury;or (ii) less than an aggregate of 10% in value of any instrument of indebtedness of a business that competes with Asbury. Asbury further agrees that nothingin this Section 5 prohibits Executive from accepting employment from, and performing services for, businesses engaged in the finance industry, andbusinesses engaged in the manufacturing and/or sale of automobile parts or the provision of automotive service, provided such businesses do not also engagein the retail of automobiles within the Area. By way of example, nothing in this Section 5 would prohibit Executive from working with such businesses asAmerican General Finance, NAPA Auto Parts, or Goodyear.Within one day of the end of Executive’s employment with Asbury for any reason, Executive agrees to re-confirm his commitment to the post-employment restrictive covenants in this Agreement. Executive further agrees that, as part of that re-confirmation, the term “Area” and Exhibit A hereto maybe amended by Asbury, but only to the extent necessary to list the addresses of Asbury’s headquarters and any automotive dealerships that Asbury ownsand/or operates as of the last day of Executive’s employment with Asbury.6.Construction/Enforcement of Post-Employment CovenantsExecutive agrees that the provisions of Sections 3, 4, and 5 are reasonable and properly required for the adequate protection of the business and thegoodwill of Asbury. However, if a judicial determination is made that any of the provisions of Sections 3, 4 or 5 constitutes an unreasonable or otherwiseunenforceable restriction against Executive, such provision(s) shall be modified or severed so as to permit enforcement of the provision(s) to the extentreasonable.7.Violation of Post-Employment CovenantsExecutive agrees that, in the event of a material breach by Executive of any Section of this Agreement, including Sections 3, 4, or 5, Asbury shall beentitled to: (i) inform all potential or new employers of such breach; (ii) cease payments and benefits that would otherwise be made pursuant to Section 1above (and in lieu of such payments and benefits pay Executive five hundred dollars ($500.00)); (iii) obtain injunctive relief and damages, includingreasonable attorney’s fees; and (iv) recover the amounts paid to Executive under this Agreement (other than the above-referenced $500.00) during any periodof material breach by Executive. To the extent that Executive is determined through agreement or resolution of any pending claim to not have violated anycovenant at issue, he shall receive any and all severance that has not been paid under the Agreement and/or which was recovered from Executive under thisSection 7.GENERAL PROVISIONSA.Employment is At WillExecutive and Asbury acknowledge and agree that Executive is an “at will” employee, which means that either Executive or Asbury may terminatethe employment relationship at any time, for any reason, with or without cause or notice, and that nothing in this Agreement shall be construed as an expressor implied contract of employment.B.Execution of ReleaseExecutive agrees that, as a condition to the receipt of the Severance Pay and other compensation and insurance benefits described in Section 1above, Executive shall execute a release of all claims against Asbury (and its corporate parents, subsidiaries, franchisors, franchisees, management companies,divisions, and affiliates) and the past, present and future officers, directors, agents, officials, employees, insurers and attorneys of Asbury (and its corporateparents, subsidiaries, franchisors, franchisees, management companies, divisions, and affiliates) arising out of Executive’s employment or the end of hisemployment with Asbury, such release to not be revoked by Executive and to completely waive and release any claim of discrimination, harassment orwrongful discharge under local, state or federal law.C.Alternative Dispute ResolutionAny disputes arising under or in connection with this Agreement shall be resolved by binding arbitration before an arbitrator (who shall be anattorney with at least ten years’ experience in employment law) in the city where Executive was employed with Asbury and in accordance with the rules andprocedures of the most recent employment rules of the American Arbitration Association. Each party may choose to retain legal counsel and shall pay its ownattorneys’ fees, regardless of the outcome of the arbitration. Executive may be required to pay a filing fee limited to the equivalent cost of filing in the courtof jurisdiction. Asbury will pay the fees and costs of conducting the arbitration. Judgment upon the award rendered by the arbitrator may be entered in anycourt of jurisdiction.D.Non-DisparagementExecutive agrees not to make any disclosures, issue any statements or otherwise cause to be disclosed any information which is designed, intendedor might reasonably be anticipated to disparage Asbury, its officers or directors, its business, services, products, technologies and/or personnel. Nothing inthis section is intended, nor shall be construed, to: (i) prohibit Executive from any communications to, or participation in any investigation or proceedingconducted by, any governmental agency with jurisdictionconcerning the terms, conditions and privileges of employment or jurisdiction over Asbury’s business; (ii) interfere with, restrain, or prevent Executive’scommunications regarding the terms and conditions of employment; or (iii) prevent Executive from otherwise engaging in any legally protected activity.E.Other Provisions(a)This Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of Executive and Asbury,including any successor to or assign of Asbury.(b)Upon the end of Executive’s employment with Asbury for any reason, the provisions of this Agreement shall survive to theextent necessary to give effect to the provisions herein, including Sections 3, 4 and 5.(c)The headings and captions are provided for reference and convenience only and shall not be considered part of this Agreement.(d)Executive also covenants to reasonably cooperate with Asbury if Executive is needed as a witness in any litigation or legalmatters involving Asbury.(e)Any notice or other communication required or permitted to be delivered under this Agreement shall be (i) in writing, (ii)delivered personally, by nationally recognized overnight courier service or by certified or registered mail, first-class postage prepaid and returnreceipt requested, (iii) deemed to have been received on the date of delivery or on the third business day after mailing, and (iv) addressed as follows(or to such other address as the party entitled to notice shall later designate in accordance with these terms):If to Asbury: Asbury Automotive Group, Inc.c/o The Office of the General Counsel2905 Premiere Parkway, Suite 300Duluth, GA 30097 If to Executive: To the most recent address of Executive set forth in the personnel records of Asbury.(f)This Agreement supersedes any and all prior agreements between Asbury and Executive relating to payments upon Terminationof employment or Severance Pay and may only be modified in a writing signed by Asbury and Executive.(g)This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia.(h)All payments hereunder shall be subject to any required withholding of federal, state, local and foreign taxes pursuant to anyapplicable law or regulation.(i)If any provision of this Agreement shall be held invalid or unenforceable, such holding shall not affect any other provisions, andthis Agreement shall be construed and enforced as if such provisions had not been included. No provision of this Agreement shall be waived unlessthe waiver is agreed to in writing and signed by Executive and the Chief Human Resources Officer of Asbury. No waiver by either party of anybreach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other conditionor provision or of the same condition or provision at another time.(j)The parties hereto acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with,and incorporate the terms and conditions required by, Section 409A of the Code and the Department of Treasury regulations and other interpretiveguidance issued thereunder. Notwithstanding any provision of this Agreement to the contrary, in the event that Asbury determines that any amountspayable hereunder will be immediately taxable to Executive under Section 409A of the Code and related Department of Treasury guidance, Asburyand Executive shall cooperate in good faith to (x) adopt such amendments to this Agreement and appropriate policies and procedures, includingamendments and policies with retroactive effect, that they mutually determine to be necessary or appropriate to preserve the intended tax treatmentof the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or taxconsequences for Asbury and/or (y) take such other actions as mutually determined to be necessary or appropriate to exempt the amounts payablehereunder from Section 409A ofthe Code or to comply with the requirements of Section 409A of the Code and thereby avoid the application of penalty taxes thereunder.This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together willconstitute one and the same instrument.AGREED TO AS OF FEBRUARY 21, 2017EXECUTIVE: ASBURY AUTOMOTIVE GROUP, INC./s/ Jed M. Milstein /s/ Craig T. MonaghanName: Jed M. Milstein Name: Craig T. MonaghanTitle: VP, Chief Human Resources Officer Title: CEO and PresidentExhibit AAs used in the Severance Pay Agreement, “Area” means a 50-mile radius from any of the following addresses:Corporate Headquarters2905 Premiere Parkway NWDuluth, GA 30097 11130 Alpharetta HwyRoswell, GA 3007611505 Alpharetta HighwayRoswell, GA 30076 7969 Mall Pkwy Lithonia, GA 3003810995 Westside Pkwy.Alpharetta, GA 30009 1550 Mansell RdAlpharetta, GA 300091355 Cobb Parkway SouthMarietta, GA 30060-6542 1310 Buford Hwy.Cumming, GA 300411606 Church StreetDecatur, GA 30033 5400 South U.S. Highway 1Ft. Pierce, FL 34982-73707555 Roswell Rd. Atlanta, GA 30350 4429 US 1 SouthFt. Pierce, FL 339544197 Jonesboro RoadUnion City, GA 30291 7245 Blanding Blvd.Jacksonville, FL 322447909 Mall Pkwy Lithonia, GA 30038 10880 Philips HwyJacksonville, FL 322562550 The Nalley WayAtlanta, GA 30360 2655 N. Volusia AveOrange City, FL 32763-22142020 Cobb ParkwayMarietta, GA 30080 2677 N. Volusia AveOrange City, FL 32763-22147849 Mall Pkwy Lithonia, GA 30038 2308 S. Woodland Blvd. Deland, FL 327202750 S. Cobb ParkwaySmyrna, GA 30080 9650 Atlantic Blvd.Jacksonville, FL 32225980 Mansell RoadRoswell, GA 30076 11003 Atlantic Blvd.Jacksonville, FL 322252551 The Nalley WayAtlanta, GA 30360 4450 US 1 SouthFt. Pierce, FL 34982 11051 S. Orange Blossom Trail,Orlando, FL 32837 2925 US 1 SouthSt Augustine, FL 32086 3902 W. Wendover AvenueGreensboro, NC 2740710600 Atlantic Blvd.Jacksonville, FL 32225 3710 W. Wendover AvenueGreensboro, NC 2740710859 Philips HighwayJacksonville, FL 32256 3633 W. Wendover AvenueGreensboro, NC 2740711340 Philips HwyJacksonville, FL 32256 3900 W. Wendover AvenueGreensboro, NC 2740731200 US Highway 19 NorthPalm Harbor, FL 34684 3604 W, Wendover AvenueGreensboro, NC 274074500 US 1 South Ft. Pierce, FL 34982 8704W. Broad Street Richmond, VA 232946060 1-55 North Frontage RoadJackson, MS 39211 8712 W. Broad Street Richmond, VA 23294201 Octavia St.Brandon, MS 39042 8710 W. Broad Street Richmond, VA 23294108 Gray-Daniels Blvd.Brandon, MS 39042 12100 Midlothian TurnpikeMidlothian, VA 231136080 I-55 North Frontage RoadJackson, MS 39211 2712 Laurens RoadGreenville, SC 29607104 Gray-Daniels Blvd Brandon, MS 39042 2660 Laurens RoadGreenville, SC 296071295 Richmond Avenue Charlottesville, VA 22911 2668 Laurens Road Greenville, SC 296071001 Southpoint Auto Park Blvd.Durham, NC 27713 2700 Laurens Road Greenville, SC 29607436 N. McPherson Church RoadFayetteville, NC 28303 2686 Laurens RoadGreenville, SC 29607256 Swain Street Fayetteville, NC 28303 11654 Olive Blvd.Creve Coeur, MO 631413908 W. Wendover AvenueGreensboro, NC 27407 755 N. New BallasCreve Coeur, MO 63141 777 Decker Lane.Creve Coeur, MO 63141 1601 N. Dallas Parkway (7200 State Highway 121)Frisco, TX 7503411910 Olive Blvd.Creve Coeur, MO 63141 3700 West Airport FreewayIrving, TX 7506211830 Olive Blvd. Creve Coeur, MO 63141 11911 Gulf FreewayHouston, TX 77034951 Technology Dr. O'Fallon, Mo 63368 3333 W. Plano PkwyPlano , TX 7507511830 Olive Blvd. Creve Coeur, MO 63141 1207 E. Brandon Blvd,Brandon, FL 335119207 Adamo DriveTampa, FL 33619 2320 Colonial Blvd.Ft. Myers, FL 339663810 W. Hillsborough AvenueTampa. FL 33614 3102 US Highway 19Holiday, FL 346919205 Adamo Dr.Tampa, FL 33619 6601 W. Hillsborough Ave.Tampa, FL 336343800 W. Hillsborough Ave.Tampa, FL 33614 9210 Adamo DriveTampa, FL 33619 4600 N. Dale Mabry Hwy.Tampa, FL 33614 4400 N. Dale Mabry HwyTampa, FL 33614 4400 W. Hillsborough AvenueTampa. FL 33614 4051 West Plano ParkwayPlano, TX 75093 13553 US Hwy 183 NorthAustin, TX 78750 300 West Loop 820 SouthFort Worth, TX 76108 Exhibit 10.14SEVERANCE PAY AGREEMENTFOR KEY EMPLOYEEThis Severance Pay Agreement (“Agreement”) is entered into as of February 21, 2017 between Asbury Automotive Group, Inc. (“Asbury”) andWilliam F. Stax (“Employee”), in order to provide for an agreed-upon compensation in the event that Employee’s employment is terminated following aChange in Control as defined in this Agreement.1.Severance Pay Arrangement.If a “Termination” of Employee’s employment occurs at any time in the two years following a “Change of Control” (as these terms are defined inSection 2 below), Asbury will pay Employee 12 months of Employee’s base salary as of the date of Termination as “Severance Pay.” Severance Pay shall besubject to any required withholding of federal, state, local and foreign taxes pursuant to any applicable law or regulation. The Severance Pay will be subjectto required withholding and will be made by Asbury to Employee monthly over the course of 12 months on the regular payroll dates beginning on the firstregular payroll date after the effective date of the release referenced herein that Employee executes.If Employee participates in a bonus compensation plan at the date of Termination, Severance Pay will also include a portion of the target bonus forthe year of Termination in an amount equal to the target bonus multiplied by the percentage of such year that has expired through the date of Termination.In addition, if Employee, upon the end of his employment with Asbury, timely and properly elects COBRA for any medical, dental and visionbenefit plans in which Employee was participating immediately prior to the end of Employee’s employment with Asbury, Asbury shall reimburse Employeethe entire monthly premium for those COBRA-covered medical and dental benefit plans for a period of 12 months after the last day of Employee’semployment with Asbury. Notwithstanding the above, if Employee obtains other employment (prior to the end of the 12 month COBRA reimbursementperiod) under which Employee is eligible to be covered by benefits equal to the benefits in his COBRA-elected plans, Asbury’s obligation to reimburseEmployee ceases upon Employee’s eligibility for such equal benefits.Notwithstanding anything herein to the contrary, if Employee is determined to be a “specified employee” within the meaning of Section 409A of theInternal Revenue Code of 1986, as amended the (“Code”) and if one or more of the payments or benefits to be received by Employee pursuant to thisAgreement would be considered deferred compensation subject to Section 409A of the Code, then no such payment shall be made or benefit provided untilsix (6) months following Employee’s date of Termination.2.Definitions of Change of Control and Termination Triggering Severance Pay.Severance Pay will be paid to Employee by Asbury if a “Termination” occurs at any time in the two years following a “Change of Control” ofAsbury.A “Termination” triggering the Severance Pay set forth above in Section 1 is defined as a termination of Employee’s employment with Asbury (1) byAsbury without “cause,” or (2) by Employee because of (x) a material change in the geographic location at which the Employee must perform Employee’sservices (which shall in no event include a relocation of Employee’s current principal place of business to a location less than 50 miles away), (y) a materialdiminution in Employee’s base compensation, or (z) a material diminution in Employee’s authority, duties, or responsibilities. For avoidance of doubt, a“Termination” shall not include a termination of Employee’s employment by Asbury for “cause” or due to Employee’s death, disability, retirement orvoluntary resignation. For the purposes of this Agreement, the definition of “cause” is: (a) Employee’s gross negligence or serious misconduct (including, without limitation, anycriminal, fraudulent or dishonest conduct) that is or may be injurious to Asbury; or (b) Employeebeing convicted of, or entering a plea of nolo contendere to, any crime that constitutes a felony or involves moral turpitude; or (c) Employee’s breach ofSections 3, 4 or 5 below; or (d) Employee’s willful and continued failure to perform Employee’s duties on behalf of Asbury; or (e) Employee’s material breachof a written policy of Asbury. For purposes of this Agreement, the definition of “disability” is a physical or mental disability or infirmity that prevents theperformance by Employee of his duties lasting (or likely to last, based on competent medical evidence presented to Asbury) for a continuous period of sixmonths or longer.“Change of Control” means:(1)the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgatedunder the Exchange Act) of voting securities of Asbury where such acquisition causes such person to own thirty-five percent (35%) or more of thecombined voting power of the then outstanding voting securities of Asbury entitled to vote generally in the election of directors (the “OutstandingCompany Voting Securities”); or(2)individuals who, as of the date hereof, constitute the Board of Directors (the “Incumbent Board”) cease for any reason toconstitute at least two-thirds (2/3) of the Board of Directors; provided, however, that any individual becoming a director subsequent to the datehereof whose election, or nomination for election by Asbury’s shareholders, was approved by a vote of at least two-thirds of the directors thencomprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for thispurpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to theelection or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board ofDirectors; or(3)approval by the shareholders of Asbury of a complete liquidation or dissolution of Asbury.Notwithstanding the foregoing, no Change of Control shall be deemed to have occurred for purposes of this Agreement by reason of any actions orevents in which Employee participates in any capacity other than in his capacity as an employee of Asbury.3.Confidential Information and Nondisclosure Provision.As a condition to the receipt of the Severance Pay and benefits described in Section 1 above, Employee agrees not to disclose during and afteremployment with Asbury to any person (other than to an employee or director of Asbury, or to Asbury’s attorneys, accountants and other advisors or exceptas may be required by law) and not use to compete with Asbury any confidential or proprietary information, knowledge or data that is not in the publicdomain that was obtained by Employee while employed by Asbury regarding Asbury or any products, improvements, customers, methods of distribution,sales, prices, profits, costs, contracts, suppliers, business prospects, business methods, techniques, research, trade secrets or know-how of Asbury (collectively,“Confidential Information”). In the event that Employee’s employment terminates for any reason, Employee will deliver to Asbury on or before the date oftermination all documents and data of any nature (whether in tangible or electronic form) pertaining to Employee’s work with Asbury and will not take anydocuments or data or any reproduction, or any documents containing or pertaining to any Confidential Information. Employee agrees that in the event of abreach by Employee of this provision, Asbury shall be entitled to inform all potential or new employers of such breach and to cease payments and benefitsthat would otherwise be made pursuant to Section 1 above, as well as to obtain injunctive relief and damages, including reasonable attorneys fees, and whichmay include recovery of amounts paid to Employee under this Agreement.4.Non-Solicitation/Non-Hire of Employees.Employee agrees that during his employment at Asbury and for a 12-month period after the date of termination of his employment with Asbury forany reason, he will not, directly or indirectly, solicit, recruit or hire any employee of Asbury (or any person who was an employee of Asbury during the 12-month period preceding Employee’s date of termination) or encourage any such employee to terminate employment with Asbury.5.Covenant Not to Compete.Employee agrees that during his employment at Asbury and for a 12-month period after the date his employment is terminated, he will not (excepton behalf of or with the prior written consent of Asbury, which consent may be withheld in Asbury’s sole discretion):(a)provide services of a leadership, management, executive, operational, or advisory capacity and/or participate in the ownershipof or provide financial backing to an automotive dealership that is located within a fifty-mile radius of any address set forth on Exhibit A (the“Area”);(b)provide senior/corporate level leadership, executive, operational, or advisory services to any corporate competitor of Asburywho owns or operates one or more automotive dealerships within the Area; and(c)provide services of a leadership, management, executive, operational, or advisory capacity for anyone or any business whosefocus is buying, conglomerating, or otherwise acquiring one or more automotive dealerships that are located within the Area.For purposes of this Section 5, Employee acknowledges and agrees that Asbury conducts business in the Area and that the Area is a reasonablegeographic limitation.Notwithstanding anything to the contrary contained in this Agreement, Asbury hereby agrees that the foregoing covenant shall not be deemedbreached as a result of the passive ownership by Employee of: (i) less than an aggregate of 5% of any class of stock of a business that competes with Asbury;or (ii) less than an aggregate of 10% in value of any instrument of indebtedness of a business that competes with Asbury. Asbury further agrees that nothingin this Section 5 prohibits Employee from accepting employment from, and performing services for, businesses engaged in the finance industry, andbusinesses engaged in the manufacturing and/or sale of automobile parts or the provision of automotive service, provided such businesses do not also engagein the retail of automobiles within the Area. By way of example, nothing in this Section 5 would prohibit Employee from working with such businesses asAmerican General Finance, NAPA Auto Parts, or Goodyear.Upon Employee’s termination of employment with Asbury, Employee agrees to re-confirm his commitment to the post-employment restrictivecovenants in this Agreement. Employee further agrees that as part of that re-confirmation, the term “Area” and Exhibit A hereto may be amended by Asbury,but only to the extent necessary to list the addresses of Asbury’s headquarters and any automotive dealerships that Asbury owns and/or operates as of the dateof termination.6.Construction/Enforcement of Post-Employment Covenants.Employee agrees that the provisions of Sections 3, 4, and 5 are reasonable and properly required for the adequate protection of the business and thegoodwill of Asbury. However, if a judicial determination is made that any of the provisions of Sections 3, 4, or 5 constitutes an unreasonable or otherwiseunenforceable restriction against Employee, such provision(s) shall be modified or severed so as to permit enforcement of the provision(s) to the extentreasonable.7.Violation of Post-Employment Covenants.Employee agrees that, in the event of a material breach by Employee of any Section of this Agreement, including Sections 3, 4, or 5, Asbury shall beentitled to: (i) inform all potential or new employers of such breach; (ii) cease payments and benefits that would otherwise be made pursuant to Section 1above (and in lieu of such payments and benefits pay Employee five hundred dollars ($500.00)); (iii) obtain injunctive relief and damages, includingreasonable attorney’s fees; and (iv) recover the amounts paid to Employee under this Agreement (other than the above-referenced $500.00) during any periodof material breach by Employee. To the extent that Employee is determined through agreement or resolution of any pending claim to not have violated anycovenant at issue, he shall receive any and all severance that has not been paid under the Agreement and/or which was recovered from Employee under thisSection 7.GENERAL PROVISIONSA.Employment is At WillEmployee and Asbury acknowledge and agree that Employee is an “at will” employee, which means that either Employee or Asbury may terminatethe employment relationship at any time, for any reason, with or without cause or notice, and that nothing in this Agreement shall be construed as an expressor implied contract of employment.B.Execution of ReleaseEmployee agrees that, as a condition to the receipt of the Severance Pay and other compensation and insurance benefits described in Section 1above, Employee shall execute a release of all claims against Asbury (and its corporate parents, subsidiaries, franchisors, franchisees, management companies,divisions, and affiliates) and the past, present and future officers, directors,agents, officials, employees, insurers and attorneys of Asbury (and its corporate parents, subsidiaries, franchisors, franchisees, management companies,divisions, and affiliates) arising out of Employee’s employment or the end of his employment with Asbury, such release to not be revoked by Employee andto completely waive and release any claim of discrimination, harassment or wrongful discharge under local, state or federal law.C.Alternative Dispute ResolutionAny disputes arising under or in connection with this Agreement shall be resolved by binding arbitration before an arbitrator (who shall be anattorney with at least ten years’ experience in employment law) in the city where Employee was employed with Asbury and in accordance with the rules andprocedures of the most recent employment rules of the American Arbitration Association. Each party may choose to retain legal counsel and shall pay its ownattorneys’ fees, regardless of the outcome of the arbitration. Employee may be required to pay a filing fee limited to the equivalent cost of filing in the courtof jurisdiction. Asbury will pay the fees and costs of conducting the arbitration. Judgment upon the award rendered by the arbitrator may be entered in anycourt of jurisdiction.D.Non-DisparagementEmployee agrees not to make any disclosures, issue any statements or otherwise cause to be disclosed any information which is designed, intendedor might reasonably be anticipated to disparage Asbury, its officers or directors, its business, services, products, technologies and/or personnel. Nothing inthis section is intended, nor shall be construed, to: (i) prohibit Employee from any communications to, or participation in any investigation or proceedingconducted by, any governmental agency with jurisdiction concerning the terms, conditions and privileges of employment or jurisdiction over Asbury’sbusiness; (ii) interfere with, restrain, or prevent Employee’s communications regarding the terms and conditions of employment; or (iii) prevent Employeefrom otherwise engaging in any legally protected activity.E.Other Provisions(a)This Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of Employee and Asbury,including any successor to or assign of Asbury.(b)Upon the end of Employee’s employment with Asbury for any reason, the provisions of this Agreement shall survive to theextent necessary to give effect to the provisions herein, including Sections 3, 4 and 5.(c)The headings and captions are provided for reference and convenience only and shall not be considered part of this Agreement.(d)Employee also covenants to reasonably cooperate with Asbury if Employee is needed as a witness in any litigation or legalmatters involving Asbury.(e)Any notice or other communication required or permitted to be delivered under this Agreement shall be (i) in writing, (ii)delivered personally, by nationally recognized overnight courier service or by certified or registered mail, first-class postage prepaid and returnreceipt requested, (iii) deemed to have been received on the date of delivery or on the third business day after mailing, and (iv) addressed as follows(or to such other address as the party entitled to notice shall later designate in accordance with these terms):If to Asbury: Asbury Automotive Group, Inc.c/o The Office of the General Counsel2905 Premiere Parkway, Suite 300Duluth, GA 30097 If to Employee: To the most recent address of Employee set forth in the personnel records of Asbury.(f)This Agreement supersedes any and all prior agreements between Asbury and Employee relating to payments upon Terminationof employment or Severance Pay and may only be modified in a writing signed by Asbury and Employee.(g)This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia.(h)All payments hereunder shall be subject to any required withholding of federal, state, local and foreign taxes pursuant to anyapplicable law or regulation.(i)If any provision of this Agreement shall be held invalid or unenforceable, such holding shall not affect any other provisions, andthis Agreement shall be construed and enforced as if such provisions had not been included. No provision of this Agreement shall be waived unlessthe waiver is agreed to in writing and signed by Employee and the Chief Human Resources Officer of Asbury. No waiver by either party of anybreach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other conditionor provision or of the same condition or provision at another time.(j)The parties hereto acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with,and incorporate the terms and conditions required by, Section 409A of the Code and the Department of Treasury regulations and other interpretiveguidance issued thereunder. Notwithstanding any provision of this Agreement to the contrary, in the event that Asbury determines that any amountspayable hereunder will be immediately taxable to Employee under Section 409A of the Code and related Department of Treasury guidance, Asburyand Employee shall cooperate in good faith to (x) adopt such amendments to this Agreement and appropriate policies and procedures, includingamendments and policies with retroactive effect, that they mutually determine to be necessary or appropriate to preserve the intended tax treatmentof the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or taxconsequences for Asbury and/or (y) take such other actions as mutually determined to be necessary or appropriate to exempt the amounts payablehereunder from Section 409A of the Code or to comply with the requirements of Section 409A of the Code and thereby avoid the application ofpenalty taxes thereunder.This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together willconstitute one and the same instrument.AGREED TO AS OF FEBRUARY 21, 2017EXECUTIVE: ASBURY AUTOMOTIVE GROUP, INC./s/ William F. Stax /s/ Craig T. MonaghanName: William F. Stax Name: Craig T. MonaghanTitle: Controller and Chief Accounting Officer Title: CEO and PresidentExhibit AAs used in the Severance Pay Agreement, “Area” means a 50-mile radius from any of the following addresses:Corporate Headquarters2905 Premiere Parkway NWDuluth, GA 30097 11130 Alpharetta HwyRoswell, GA 3007611505 Alpharetta HighwayRoswell, GA 30076 7969 Mall Pkwy Lithonia, GA 3003810995 Westside Pkwy.Alpharetta, GA 30009 1550 Mansell RdAlpharetta, GA 300091355 Cobb Parkway SouthMarietta, GA 30060-6542 1310 Buford Hwy.Cumming, GA 300411606 Church StreetDecatur, GA 30033 5400 South U.S. Highway 1Ft. Pierce, FL 34982-73707555 Roswell Rd. Atlanta, GA 30350 4429 US 1 SouthFt. Pierce, FL 339544197 Jonesboro RoadUnion City, GA 30291 7245 Blanding Blvd.Jacksonville, FL 322447909 Mall Pkwy Lithonia, GA 30038 10880 Philips HwyJacksonville, FL 322562550 The Nalley WayAtlanta, GA 30360 2655 N. Volusia AveOrange City, FL 32763-22142020 Cobb ParkwayMarietta, GA 30080 2677 N. Volusia AveOrange City, FL 32763-22147849 Mall Pkwy Lithonia, GA 30038 2308 S. Woodland Blvd. Deland, FL 327202750 S. Cobb ParkwaySmyrna, GA 30080 9650 Atlantic Blvd.Jacksonville, FL 32225980 Mansell RoadRoswell, GA 30076 11003 Atlantic Blvd.Jacksonville, FL 322252551 The Nalley WayAtlanta, GA 30360 4450 US 1 SouthFt. Pierce, FL 34982 11051 S. Orange Blossom Trail,Orlando, FL 32837 256 Swain Street Fayetteville, NC 283032925 US 1 SouthSt Augustine, FL 32086 3908 W. Wendover AvenueGreensboro, NC 2740710600 Atlantic Blvd.Jacksonville, FL 32225 3902 W. Wendover AvenueGreensboro, NC 2740710859 Philips HighwayJacksonville, FL 32256 3710 W. Wendover AvenueGreensboro, NC 2740711340 Philips HwyJacksonville, FL 32256 3633 W. Wendover AvenueGreensboro, NC 2740731200 US Highway 19 NorthPalm Harbor, FL 34684 3900 W. Wendover AvenueGreensboro, NC 274074500 US 1 South Ft. Pierce, FL 34982 3604 W, Wendover AvenueGreensboro, NC 274076060 1-55 North Frontage RoadJackson, MS 39211 8704W. Broad Street Richmond, VA 23294201 Octavia St.Brandon, MS 39042 8712 W. Broad Street Richmond, VA 23294108 Gray-Daniels Blvd.Brandon, MS 39042 8710 W. Broad Street Richmond, VA 232946080 I-55 North Frontage RoadJackson, MS 39211 12100 Midlothian TurnpikeMidlothian, VA 23113104 Gray-Daniels Blvd Brandon, MS 39042 2712 Laurens RoadGreenville, SC 296071295 Richmond Avenue Charlottesville, VA 22911 2660 Laurens RoadGreenville, SC 296071001 Southpoint Auto Park Blvd.Durham, NC 27713 2668 Laurens Road Greenville, SC 29607436 N. McPherson Church RoadFayetteville, NC 28303 2700 Laurens Road Greenville, SC 29607 2686 Laurens RoadGreenville, SC 29607 4400 N. Dale Mabry HwyTampa, FL 3361411654 Olive Blvd.Creve Coeur, MO 63141 4400 W. Hillsborough AvenueTampa. FL 33614755 N. New BallasCreve Coeur, MO 63141 4051 West Plano ParkwayPlano, TX 75093777 Decker Lane.Creve Coeur, MO 63141 13553 US Hwy 183 NorthAustin, TX 7875011910 Olive Blvd.Creve Coeur, MO 63141 300 West Loop 820 SouthFort Worth, TX 7610811830 Olive Blvd. Creve Coeur, MO 63141 1601 N. Dallas Parkway (7200 State Highway 121)Frisco, TX 75034951 Technology Dr. O'Fallon, Mo 63368 3700 West Airport FreewayIrving, TX 7506211830 Olive Blvd. Creve Coeur, MO 63141 11911 Gulf FreewayHouston, TX 770349207 Adamo DriveTampa, FL 33619 3333 W. Plano PkwyPlano , TX 750753810 W. Hillsborough AvenueTampa. FL 33614 1207 E. Brandon Blvd,Brandon, FL 335119205 Adamo Dr.Tampa, FL 33619 2320 Colonial Blvd.Ft. Myers, FL 339663800 W. Hillsborough Ave.Tampa, FL 33614 3102 US Highway 19Holiday, FL 346919210 Adamo DriveTampa, FL 33619 6601 W. Hillsborough Ave.Tampa, FL 336344600 N. Dale Mabry Hwy.Tampa, FL 33614 Exhibit 21Entity Name Domestic State Foreign QualificationAF Motors, L.L.C. DE FLANL, L.P. DE FLArkansas Automotive Services, L.L.C. DE ARAsbury AR Niss L.L.C. DE ARAsbury Atlanta AC L.L.C. DE GAAsbury Atlanta AU L.L.C. DE GAAsbury Atlanta BM L.L.C. DE GAAsbury Atlanta Chevrolet L.L.C. DE GAAsbury Atlanta Ford, LLC DE GAAsbury Atlanta Hon L.L.C. DE GAAsbury Atlanta Hund L.L.C. DE GAAsbury Atlanta Inf L.L.C. DE GAAsbury Atlanta Infiniti L.L.C. DE GAAsbury Atlanta Jaguar L.L.C. DE GAAsbury Atlanta K L.L.C. DE GAAsbury Atlanta Lex L.L.C. DE GAAsbury Atlanta Nis II, LLC DE GAAsbury Atlanta Nis L.L.C. DE GAAsbury Atlanta Toy 2 L.L.C. DE GAAsbury Atlanta Toy L.L.C. DE GAAsbury Atlanta VB L.L.C. DE GAAsbury Atlanta VL L.L.C. DE GAAsbury Automotive Arkansas Dealership Holdings L.L.C. DE AR,MSAsbury Automotive Arkansas L.L.C. DE AR,MSAsbury Automotive Atlanta II L.L.C. DE GAAsbury Automotive Atlanta L.L.C. DE GAAsbury Automotive Brandon, L.P. DE FLAsbury Automotive Central Florida, L.L.C. DE FLAsbury Automotive Deland, L.L.C. DE FLAsbury Automotive Fresno L.L.C. DE Asbury Automotive Group L.L.C. DE CT,NJAsbury Automotive Jacksonville GP L.L.C. DE FLAsbury Automotive Jacksonville, L.P. DE FLAsbury Automotive Management L.L.C. DE GA,NYAsbury Automotive Mississippi L.L.C. DE MSAsbury Automotive North Carolina Dealership Holdings L.L.C. DE NCAsbury Automotive North Carolina L.L.C. DE NC,NJ,SC,VAAsbury Automotive North Carolina Management L.L.C. DE NCAsbury Automotive North Carolina Real Estate Holdings L.L.C. DE NC,NJ,SC,VAAsbury Automotive Oregon L.L.C. DE Asbury Automotive Southern California L.L.C. DE Asbury Automotive St. Louis II L.L.C. DE MOAsbury Automotive St. Louis, L.L.C. DE MOAsbury Automotive Tampa GP L.L.C. DE FLAsbury Automotive Tampa, L.P. DE FLAsbury Automotive Texas L.L.C. DE TXAsbury Automotive Texas Real Estate Holdings L.L.C. DE TXAsbury CH MOTORS L.L.C. DE FLAsbury Deland Hund, LLC DE FLAsbury Deland Imports 2, L.L.C. DE FLAsbury Fresno Imports L.L.C. DE Asbury Ft. Worth Ford, LLC DE TXAsbury In Chev, LLC DE INAsbury Jax AC, LLC DE FLAsbury Jax Ford, LLC DE FLAsbury Jax Holdings, L.P. DE FLAsbury Jax Hon L.L.C. DE FLAsbury Jax K L.L.C. DE FLAsbury Jax Management L.L.C. DE FLAsbury Jax VW L.L.C. DE FLAsbury Management Services, LLC DE AR,AZ,FL,GA,MO,MS,NC,NY,SC,TN,TX,VAAsbury MS CHEV L.L.C. DE IN,MSAsbury MS Gray-Daniels L.L.C. DE MSAsbury No Cal Niss L.L.C. DE Asbury Sacramento Imports L.L.C. DE Asbury SC JPV L.L.C. DE SCAsbury SC Lex L.L.C. DE SCAsbury SC Toy L.L.C. DE SCAsbury So Cal DC L.L.C. DE Asbury So Cal Hon L.L.C. DE Asbury So Cal Niss L.L.C. DE Asbury South Carolina Real Estate Holdings L.L.C. DE SCAsbury St. Louis Cadillac L.L.C. DE MOAsbury St. Louis FSKR, L.L.C. DE MOAsbury St. Louis Lex L.L.C. DE MOAsbury St. Louis LR L.L.C. DE MOAsbury St. Louis M L.L.C. DE MOAsbury Tampa Management L.L.C. DE FLAsbury Texas D FSKR, L.L.C. DE TXAsbury Texas H FSKR, L.L.C. DE TXAsbury-Deland Imports, L.L.C. DE FLAtlanta Real Estate Holdings L.L.C. DE GAAvenues Motors, Ltd. FL Bayway Financial Services, L.P. DE FLBFP Motors L.L.C. DE FLC & O Properties, Ltd. FL Camco Finance II L.L.C. DE NC,SC,VACFP Motors L.L.C. DE FLCH Motors L.L.C. DE FLCHO Partnership, Ltd. FL CK Chevrolet L.L.C. DE FLCK Motors LLC DE FLCN Motors L.L.C. DE FLCoggin Automotive Corp. FL Coggin Cars L.L.C. DE FLCoggin Chevrolet L.L.C. DE FLCoggin Management, L.P. DE FLCP-GMC Motors L.L.C. DE FLCrown Acura/Nissan, LLC NC Crown CHH L.L.C. DE NCCrown CHO L.L.C. DE NCCrown CHV L.L.C. DE NCCrown FDO L.L.C. DE NCCrown FFO Holdings L.L.C. DE NCCrown FFO L.L.C. DE NCCrown GAC L.L.C. DE NCCrown GBM L.L.C. DE NCCrown GCA L.L.C. DE NCCrown GDO L.L.C. DE NCCrown GHO L.L.C. DE NCCrown GNI L.L.C. DE NCCrown GPG L.L.C. DE NCCrown GVO L.L.C. DE NCCrown Honda, LLC NC Crown Motorcar Company L.L.C. DE VACrown PBM L.L.C. DE NJCrown RIA L.L.C. DE VACrown RIB L.L.C. DE VACrown SJC L.L.C. DE SCCrown SNI L.L.C. DE SCCSA Imports L.L.C. DE FLEscude-NN L.L.C. DE MSEscude-NS L.L.C. DE MSEscude-T L.L.C. DE MSFlorida Automotive Services L.L.C. DE FLHFP Motors L.L.C. DE FLJC Dealer Systems, LLC DE FLKP Motors L.L.C. DE FLMcDavid Austin-Acra L.L.C. DE TXMcDavid Frisco-Hon L.L.C. DE TXMcDavid Grande L.L.C. DE TXMcDavid Houston-Hon, L.L.C. DE TXMcDavid Houston-Niss, L.L.C. DE TXMcDavid Irving-Hon, L.L.C. DE TXMcDavid Outfitters, L.L.C. DE TXMcDavid Plano-Acra, L.L.C. DE TXMid-Atlantic Automotive Services, L.L.C. DE NC,NJ,SC,VAMississippi Automotive Services, L.L.C. DE MSMissouri Automotive Services, L.L.C. DE MONP FLM L.L.C. DE ARNP MZD L.L.C. DE ARNP VKW L.L.C. DE ARPlano Lincoln-Mercury, Inc. DE TXPrecision Computer Services, Inc. FL Precision Enterprises Tampa, Inc. FL Precision Infiniti, Inc. FL Precision Motorcars, Inc. FL Precision Nissan, Inc. FL Premier NSN L.L.C. DE ARPremier Pon L.L.C. DE ARPrestige Bay L.L.C. DE ARPrestige Toy L.L.C. DE ARQ Automotive Brandon FL, LLC DE FLQ Automotive Cumming GA, LLC DE GAQ Automotive Ft. Myers FL, LLC DE FLQ Automotive Group L.L.C. DE FLQ Automotive Holiday FL, LLC DE FLQ Automotive Jacksonville FL, LLC DE FLQ Automotive Kennesaw GA, LLC DE GAQ Automotive Orlando FL, LLC DE FLQ Automotive Tampa FL, LLC DE FLSouthern Atlantic Automotive Services, L.L.C. DE GA,SCTampa Hund, L.P. DE FLTampa Kia, L.P. DE FLTampa LM, L.P. DE Tampa Mit, L.P. DE Texas Automotive Services, L.L.C. DE TXThomason Auto Credit Northwest, Inc. OR Thomason Dam L.L.C. DE Thomason Frd L.L.C. DE Thomason Hund L.L.C. DE Thomason Pontiac-GMC L.L.C. DE WMZ Motors, L.P. DE WTY Motors, L.P. DE FLExhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements:1)Registration Statement (Form S-8 No. 333-180980) of Asbury Automotive Group, Inc.,2)Registration Statement (Form S-8 No. 333-165136) of Asbury Automotive Group, Inc.,3)Registration Statement (Form S-8 No. 333-105450) of Asbury Automotive Group, Inc.,4)Registration Statement (Form S-8 No. 333-84646) of Asbury Automotive Group, Inc., and5)Registration Statement (Form S-3 No. 333-123505) of Asbury Automotive Group, Inc.;of our reports dated February 23, 2017, with respect to the consolidated financial statements of Asbury Automotive Group, Inc. and the effectiveness ofinternal control over financial reporting of Asbury Automotive Group, Inc. included in this Annual Report (Form 10-K) of Asbury Automotive Group, Inc. forthe year ended December 31, 2016./s/ Ernst & Young LLPAtlanta, GeorgiaFebruary 23, 2017Exhibit 31.1CERTIFICATION PURSUANT TORULE 13a-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934AS ADOPTED PURSUANT TOSECTION 302 OF THE SARBANES‑OXLEY ACT OF 2002I, Craig T. Monaghan, certify that:1.I have reviewed this annual report on Form 10-K of Asbury Automotive Group, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and we have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known tous by others within those entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions aboutthe effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant'smost recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant's internal control over financial reporting;5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalentfunctions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting whichare reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant'sinternal control over financial reporting./s/ Craig T. Monaghan Craig T. MonaghanChief Executive OfficerFebruary 23, 2017 Exhibit 31.2CERTIFICATION PURSUANT TORULE 13a-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934AS ADOPTED PURSUANT TOSECTION 302 OF THE SARBANES‑OXLEY ACT OF 2002I, Keith R. Style, certify that:1.I have reviewed this annual report on Form 10-K of Asbury Automotive Group, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and we have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known tous by others within those entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions aboutthe effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant'smost recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant's internal control over financial reporting;5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalentfunctions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting whichare reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and(a)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant'sinternal control over financial reporting./s/ Keith R. Style Keith R. StyleChief Financial OfficerFebruary 23, 2017 Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002In connection with the Annual Report of Asbury Automotive Group, Inc. (the "Company") on Form 10-K for the year ended December 31, 2016, asfiled with the Securities and Exchange Commission on the date hereof (the "Report"), I, Craig T. Monaghan, Chief Executive Officer of the Company, certify,pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes‑Oxley Act of 2002, that, to the best of my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany./s/ Craig T. Monaghan Craig T. MonaghanChief Executive OfficerFebruary 23, 2017 Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002In connection with the Annual Report of Asbury Automotive Group, Inc. (the "Company") on Form 10-K for the year ended December 31, 2016, asfiled with the Securities and Exchange Commission on the date hereof (the "Report"), I, Keith R. Style, Chief Financial Officer of the Company, certify,pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes‑Oxley Act of 2002, that, to the best of my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany./s/ Keith R. Style Keith R. StyleChief Financial OfficerFebruary 23, 2017

Continue reading text version or see original annual report in PDF format above