lad-20201231

Certain statements in this Annual Report, including in the sections entitled “Risk Factors,” Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” constitute forward-looking statements within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Generally, you can identify forward-looking statements by terms such as “project”, “outlook,” “target”, “may,” “will,” “would,” “should,” “seek,” “expect,” “plan,” “intend,” “forecast,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “likely,” “goal,” “strategy,” “future,” “maintain,” and “continue” or the negative of these terms or other comparable terms. Examples of forward-looking statements in this Form 10-K include, among others, statements we make regarding:

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity and development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements in this Annual Report. Therefore, you should not rely on any of these forward-looking statements. The risks and uncertainties that could cause actual results to differ materially from estimated or projected results include, without limitation, the factors as discussed in Part I, Item 1A. Risk Factors, and in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and, from time to time, in our other filings we make with the Securities and Exchange Commission (SEC).

Our omni-channel strategy pragmatically disrupts the industry by leveraging our experienced teams, massive selection of owned inventories, technology and physical logistics network. We seek to provide customers with a seamless experience across online and physical offerings, broad selection and access to specialized expertise and knowledge. Our physical logistics network enables us to provide convenient touch points for customers and provide services throughout the entire ownership life cycle. We use digital technologies to further activate our physical network and generate additional revenues. This unique growth model generates significant cash flows, which funds innovation and the expansion of our nationwide network, creating personal transportation solutions wherever, whenever and however consumers desire.

In response to evolving consumer preferences, we invest in modernization that supports and expands our core business. These digital strategies combine our experienced, knowledgeable workforce with our owned inventory and physical network of stores, enabling us to be agile and adapt to consumer preferences and market specific conditions. Our investments in modernization are well under way and are taking hold with our teams as they provide digital shopping experiences, contactless test drives and home delivery or curbside pickup for vehicle purchases. Our people and these solutions power our national brands, overlaying our physical footprint in a way that we believe attracts a larger population of digital consumers seeking transparent, empowered, flexible and simple buying and servicing experiences.

Our acquisition growth strategy has been successful both financially and culturally. Our disciplined approach focuses on acquiring new vehicle franchises, which operate in markets ranging from mid-sized regional markets to metropolitan markets. Acquisition of these businesses increases our proximity to consumers throughout the United States. While we target annual after tax return of more than 15% for our acquisitions, we have averaged over a 25% return by the third year of ownership due to a disciplined approach focusing on accretive, cash flow positive targets at reasonable valuations. We have a greater than 95% acquisition employee retention rate, demonstrating the valuable career opportunities we provide to our employees. In addition to being financially accretive, acquisitions aim to drive network growth that improves our ability to serve customers through vast selection, greater density and access to customers and ability to leverage national branding and advertising.

We manage our liquidity and available cash to support our long-term plan focused on growth through acquisitions, investments in Driveway, our national e-commerce home solution, and support for our existing business. Our capital deployment strategy targets an allocation of 65% investment in acquisitions, 25% investment in capital expenditures and 10% in shareholder return in the form of dividends and share repurchases. During 2020, we invested in our facilities, utilizing $167.8 million for capital expenditures, and paid $29.1 million in dividends. As of December 31, 2020, we had available liquidity of $1.4 billion, which was comprised of $160.2 million in cash and $1.2 billion availability on our credit facilities and unfloored new vehicle inventory. In addition, our unfinanced real estate could provide additional liquidity of approximately $471 million.

Our financing activities with customers are subject to numerous federal, state and local laws and regulations. In recent years, there has been an increase in activity related to oversight of consumer lending by the Consumer Financial Protection Bureau (CFPB), which has broad regulatory powers. The CFPB does not have direct authority over automotive dealers; however, its regulation of larger automotive finance companies and other financial institutions could affect our financing activities. Claims arising out of actual or alleged violations of law may be asserted against us or our stores by individuals, a class of individuals, or governmental entities. These claims may expose us to significant damages or other penalties, including revocation or suspension of our licenses to conduct store operations and fines.

Most of our stores use above ground storage tanks, and, to a lesser extent, underground storage tanks, primarily for petroleum-based products. Storage tanks are subject to periodic testing, containment, upgrading and removal under the Resource Conservation and Recovery Act and its state law counterparts. Clean-up or other remedial action may be necessary in the event of leaks or other discharges from storage tanks or other sources. In addition, water quality protection programs under the federal Water Pollution Control Act (commonly known as the Clean Water Act), the Safe Drinking Water Act and comparable state and local programs govern certain discharges from our operations. Similarly, certain air emissions from operations, such as auto body painting, may be subject to the federal Clean Air Act and related state and local laws. Health and safety standards promulgated by the Occupational Safety and Health Administration of the United States Department of Labor and related state agencies also apply.

We incur certain costs to comply with environmental, health and safety laws and regulations in the ordinary course of our business. We do not anticipate, however, that the costs of compliance will have a material adverse effect on our business, results of operations, cash flows or financial condition, although such outcome is possible given the nature of our operations and the extensive environmental, public health and safety regulatory framework. We may become aware of minor contamination at certain of our facilities, and we conduct investigations and remediation at properties as needed. In certain cases, the current or prior property owner may conduct the investigation and/or remediation or we have been indemnified by either the current or prior property owner for such contamination. We do not currently expect to incur significant costs for remediation. However, no assurances can be given that material environmental commitments or contingencies will not arise in the future, or that they do not already exist but are unknown to us.

In a stable environment, the automotive industry has generally experienced higher volumes of vehicle unit sales in the second and third quarters of each year due to consumer buying trends and the introduction of new vehicle models and, accordingly, we expect our revenues and operating results to generally be higher during these periods. In addition, we generally experience higher volume of luxury vehicles, which have higher average selling prices and gross profit per vehicle, during the fourth quarter. The timing of our acquisition activity, which varies, and ability to integrate stores into our existing cost structure has moderated this seasonality. However, if conditions occur that weaken automotive sales, such as severe weather in the geographic areas in which our dealerships operate, war, high fuel costs, depressed economic conditions including unemployment or weakened consumer confidence or similar adverse conditions, or if our ability to acquire stores changes, our revenues for the year may be disproportionately adversely affected.

Our business is heavily dependent on consumer demand and preferences. A downturn in overall levels of consumer spending may materially and adversely affect our revenues and gross profit margins. Retail vehicle sales are cyclical and historically have experienced periodic downturns characterized by weak demand. These cycles are often dependent on general economic conditions and consumer confidence, as well as the level of discretionary personal income and credit availability. Additionally, other economic factors, such as rising and sustained periods of high crude oil and fuel prices, may impact consumer demand and preferences. As we operate in 21 states, changes in and the severity of economic conditions may vary by market. Economic conditions may be anemic for an extended period of time, or deteriorate in the future. This would have a material adverse effect on our retail business, particularly sales of new and used vehicles.

Approximately 14.6 million, 17.1 million, and 17.3 million new vehicles were sold in the United States in 2020, 2019, and 2018, respectively. Certain industry analysts have predicted that new vehicle sales will be approximately 16 million for 2021. If new vehicle production exceeds the rate at which new vehicles are sold, our gross profit per vehicle could be adversely affected by this excess and any resulting changes in manufacturer incentive and marketing programs. See the risk factor “If manufacturers or distributors discontinue or change sales incentives, warranties and other promotional programs, our business, results of operations, financial condition and cash flows may be materially adversely affected” below. Economic conditions and the other factors described above may also materially adversely impact our sales of used vehicles, parts and repair and maintenance services, and automotive finance and insurance products.

The novel coronavirus (COVID-19) pandemic has resulted in governmental authorities implementing measures to reduce the spread of COVID-19, which have adversely affected workforces, customers, supply chains, consumer sentiment, economies, and financial markets, including in states and regions in which we operate. We have modified certain business practices to conform to government restrictions and best practices encouraged by government and regulatory authorities, and implemented risk mitigation plans for critical items and services required to continue our operations. We are monitoring and managing our cash flows and have enacted cost saving measures to respond to the volatile environment. In addition, we continue to assess our capital deployment strategy. However, these measures may not be sufficient to prevent adverse impacts on our business and financial condition from COVID-19. Ongoing disruptions in our operations due to the COVID-19 pandemic may continue to adversely impact our business, results of operations, financial condition and cash flows. The impact of the COVID-19 pandemic on our business and financial performance will depend on future developments, including the duration, severity and any resurgences of the pandemic, which are uncertain and cannot be predicted.

Our dealerships are in states and regions in the U.S. in which actual or threatened natural disasters and severe weather events (such as hurricanes, earthquakes, fires, floods, landslides, wind and/or hail storms) or other extraordinary events have in the past, and may in the future, disrupt our dealership operations and impair the value of our dealership property. A disruption in our operations may adversely impact our business, results of operations, financial condition and cash flows. In addition to business interruption, the automotive retailing business is subject to substantial risk of property loss due to the significant concentration of property at dealership locations. The exposure on any single claim under our property and casualty insurance, medical insurance and workers’ compensation insurance varies based upon type of coverage. Our maximum exposure on any single claim is $5.5 million, subject to certain aggregate limit thresholds.

A significant portion of buyers finance their vehicle purchases. One of the primary finance sources used by consumers in connection with the purchase of a new or used vehicle is the manufacturer captive finance company. These captive finance companies rely, to a certain extent, on the public debt markets to provide the capital necessary to support their financing programs. In addition, the captive finance companies will occasionally change their loan underwriting criteria to alter the risk profile of their loan portfolio. In addition, sub-prime lenders have historically provided financing for consumers who, for a variety of reasons, including poor credit histories and lack of down payment, do not have access to more traditional finance sources. If lenders tighten their credit standards or there is a decline in the availability of credit in the lending market, the ability of consumers to purchase vehicles could be limited, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Vehicle manufacturers would be adversely affected by economic downturns or recessions, adverse fluctuations in currency exchange rates, significant declines in the sales of their new vehicles, increases in interest rates, declines in their credit ratings, port closures, labor strikes or similar disruptions (including within their major suppliers), supply shortages or rising raw material costs, rising employee benefit costs, adverse publicity that may reduce consumer demand for their products, product defects, vehicle recall campaigns, litigation, poor product mix or unappealing vehicle design, or other adverse events. These and other risks could materially adversely affect any manufacturer and limit its ability to profitably design, market, produce or distribute new vehicles, which, in turn, could materially adversely affect our business, results of operations, financial condition and cash flows.

Each of our stores operates pursuant to a Franchise Agreement with each of the respective manufacturers for which it serves as franchisee. Each of our stores may obtain new vehicles from manufacturers, service vehicles, sell new vehicles, and display vehicle manufacturers’ brand only to the extent permitted under these agreements. As a result of the terms of our Franchise Agreements, manufacturers exert significant control over the day-to-day operations at our stores. Such agreements contain provisions for termination or non-renewal for a variety of causes, including service retention, facility compliance, customer satisfaction and sales and financial performance. From time to time, certain of our stores have failed to comply with certain provisions of their Franchise Agreements, and we cannot ensure that our stores will be able to comply with these provisions in the future.

In addition, the lenders’ obligations to make loans or other credit accommodations under certain credit agreements is subject to the satisfaction of certain conditions precedent including, for example, that our representations and warranties in the agreement are true and correct in all material respects as of the date of the proposed credit extension. If any of our representations and warranties in those agreements are not true and correct in all material respects as of the date of a proposed credit extension, or if other conditions precedent are not satisfied, we may not be able to request new loans or other credit accommodations under those credit facilities, which could have a material adverse impact on our business, results of operations, financial condition and cash flows.

Upon the occurrence of a change in control as defined in our credit agreement, the agent under the credit agreement will have the right to declare all outstanding obligations immediately due and payable and to terminate the availability of future advances to us. Upon the occurrence of a change in control, as defined in the indentures governing our senior notes, the holders of our senior notes will have the right to require us to purchase all or any part of such holders’ notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any. There can be no assurance that we would have sufficient resources available to satisfy all of our obligations under the credit agreement in the event of a change in control or fundamental change. In the event we were unable to satisfy these obligations, it could have a material adverse impact on our business and our common stock holders. A “change in control” as defined in our credit agreement includes, among other events, the acquisition by any person, or two or more persons acting in concert, in either case other than Lithia Holdings Company, L.L.C., Sid DeBoer or Bryan DeBoer, of beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of our voting stock on a fully diluted basis.

We collect, process, and retain personally identifiable information regarding customers, associates and vendors in the normal course of our business. Our internal and third-party systems are at risk from hackers or other individuals with malicious intent to gain unauthorized access to our systems. Cyber-attacks are growing in number and sophistication thus presenting an ongoing threat to systems, whether internal or external, used to operate the business on a day-to-day basis. We invest in reasonable commercial security technology to protect our data and business processes against many of these risks. We also purchase insurance to mitigate the potential financial impact of many of these risks. Despite the security measures we have in place, our facilities and systems, and those of our third-party service providers, could be vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, human errors, acts of vandalism, or other events. Any security breach or event resulting in the misappropriation, loss, or other unauthorized disclosure of confidential information, or degradation of services provided by critical business systems, whether by us directly or our third-party service providers, could adversely affect our business operations, sales, reputation with current and potential customers, associates or vendors, as well as other operational and financial impacts derived from investigations, litigation, imposition of penalties or other means.

State dealer laws generally provide that a manufacturer may not terminate or refuse to renew a franchise agreement unless it has first provided the dealer with written notice setting forth good cause and stating the grounds for termination or non-renewal. Certain state dealer laws allow dealers to file protests or petitions or attempt to comply with the manufacturer’s criteria within the notice period to avoid the termination or non-renewal. If dealer laws are repealed in the states where we operate, manufacturers may be able to terminate our franchises without providing advance notice, an opportunity to cure or a showing of good cause. Without the protection of state dealer laws, it may also be more difficult to renew our Franchise Agreements upon expiration or on terms acceptable to us.

A significant portion of the vehicles we sell are manufactured outside the U.S., and all of the vehicles we sell include parts manufactured outside the U.S. As a result, our operations are subject to customary risks of importing merchandise, including currency fluctuation, import duties, exchange rates, trade restrictions, work stoppages, transportation costs, natural or man-made disasters, and general political and socioeconomic conditions in other countries. The U.S. or the countries from which our products are imported, may, from time to time, impose new quotas, duties, tariffs or other restrictions, or adjust presently prevailing quotas, duties or tariffs, which may affect our operations and our ability to purchase imported vehicles and/or parts at reasonable prices. Changes in U.S. trade policies, including the U.S.-Mexico-Canada Agreement or policies intended to penalize foreign manufacturing or imports, and policies of foreign countries in reaction to those changes, could increase the prices we pay for some

We are subject to federal, state and local laws and regulations in the states in which we operate, such as those relating to franchising, motor vehicle sales, retail installment sales, leasing, finance and insurance, marketing, licensing, consumer protection, consumer privacy, escheatment, anti-money laundering, environmental, vehicle emissions and fuel economy, and health and safety. In addition, with respect to employment practices, we are subject to various laws and regulations, including complex federal, state and local wage and hour and anti-discrimination laws. New laws and regulations are enacted on an ongoing basis. With the number of stores we operate, the number of personnel we employ and the large volume of transactions we handle, it is possible that technical mistakes will be made. These regulations affect our profitability and require ongoing training. Current practices in stores may become prohibited. We are responsible for ensuring that continued compliance with laws is maintained. If there are unauthorized activities, the state and federal authorities have the power to impose civil penalties and sanctions, suspend or withdraw dealer licenses or take other actions. These actions could materially impair our activities or our ability to acquire new stores in those states where violations occurred. Further, private causes of action on behalf of individuals or a class of individuals could result in significant damages or injunctive relief.

Our financing activities are subject to federal truth-in-lending, consumer leasing and equal credit opportunity laws and regulations, as well as state and local motor vehicle finance laws, installment finance laws, insurance laws, usury laws and other installment sales laws and regulations. Some states regulate finance, documentation and administrative fees that may be charged in connection with vehicle sales. In recent years, private plaintiffs and state attorneys general in the U.S. have increased their scrutiny of advertising, sales, and finance and insurance activities in the sale and leasing of motor vehicles. These activities have led many lenders to limit the amounts that may be charged to customers as fee income for these activities. If these or similar activities were to significantly restrict our ability to generate revenue from arranging financing for our customers, we could be adversely affected.

Environmental laws and regulations govern, among other things, discharges into the air and water, storage of petroleum substances and chemicals, the handling and disposal of wastes and remediation of contamination arising from spills and releases. In addition, we may also have liability in connection with materials that were sent to third-party recycling, treatment and/or disposal facilities under federal and state statutes. These federal and state statutes impose liability for investigation and remediation of contamination without regard to fault or the legality of the conduct that contributed to the contamination. Similar to many of our competitors, we have incurred and expect to continue to incur capital and operating expenditures and other costs in complying with such federal and state statutes. In addition, we may be subject to broad liabilities arising out of contamination at our currently and formerly owned or operated facilities, at locations to which hazardous substances were transported from such facilities, and at such locations related to entities formerly affiliated with us. Although for some such potential liabilities we believe we are entitled to indemnification from other entities, we cannot assure you that such entities will view their

Although we conduct what we believe to be a prudent level of investigation, an unavoidable level of risk remains regarding the actual operating condition of acquired stores and we may not have an accurate understanding of each acquired store’s financial condition and performance. Similarly, most of the dealerships we acquire do not have financial statements audited or prepared in accordance with U.S. generally accepted accounting principles. We may not have an accurate understanding of the historical financial condition and performance of our acquired businesses. Until we assume control of the business, we may not be able to ascertain the actual value or understand the potential liabilities of the acquired businesses and their earnings potential. These risks may not be adequately mitigated by the indemnification obligations we negotiated with sellers.

The level of risk we retain may change in the future as insurance market conditions or other factors affecting the economics of our insurance purchasing change. The operation of automobile dealerships is subject to a broad variety of risks. In certain instances, our insurance may not fully cover an insured loss depending on the magnitude and nature of the claim. Accordingly, we cannot assure you that we will not be exposed to uninsured or underinsured losses that could have a material adverse effect on our business, financial condition, results of operations or cash flows. Additionally, changes in the cost of insurance or the availability of insurance in the future could substantially increase our costs to maintain our current level of coverage or could cause us to reduce our insurance coverage and increase the portion of our risks that we self-insure.

Our Board of Directors is authorized to issue a series of preferred stock without any action on the part of our holders of Class A common stock. Our Board of Directors also has the power, without shareholder approval, to set the terms of any such series of preferred stock that may be issued, including voting powers, preferences over our Class A common stock with respect to dividends or if we voluntarily or involuntarily dissolve or distribute our assets, and other terms. If we issue preferred stock in the future that has preference over our Class A common stock with respect to the payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred stock with voting rights that dilute the voting power of our Class A common stock, the rights of holders of our Class A common stock or the price of our Class A common stock could be adversely affected.

Our stores and other facilities consist primarily of vehicle showrooms, display lots, service facilities, collision repair and paint shops, supply facilities, vehicle storage lots, parking lots and offices in 21 states in the locations shown in the map under the Overview section of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. We believe our facilities are currently adequate for our needs and are in good repair. Some of our facilities do not currently meet manufacturer image or size requirements and we are actively working to find a mutually acceptable outcome in terms of timing and overall cost. We own our corporate headquarters in Medford, Oregon, and numerous other properties used in our operations. Certain of our owned properties are mortgaged. As of December 31, 2020, we had outstanding mortgage debt of $611.5 million. We also lease certain properties, providing future flexibility to relocate our retail stores as demographics, economics, traffic patterns or sales methods change. Most leases provide us the option to renew the lease for one or more lease extension periods. We also hold certain vacant facilities and undeveloped land for future expansion.

The stock performance graph and table that follow compare the cumulative total stockholder return on Lithia Motors, Inc.’s Class A common stock with the cumulative total return of the Standard & Poor’s 500 Stock Index (S&P 500 Index), the Russell 2000, an auto peer group index composed of Penske Automotive Group, AutoNation, Sonic Automotive, Group 1 Automotive, and Asbury Automotive Group, and a new auto peer group index which adds CarMax to the previously utilized auto peer group index for the five years ended December 31, 2020. The peer group indexes utilize the same methods of presentation and assumptions for the total return calculation as does Lithia Motors, the S&P 500 Index, and the Russell 2000. All companies in the peer group indexes are weighted in accordance with their market capitalizations.1

During the year ended December 31, 2020, we had net income of $470.3 million, or $19.53 per diluted share, compared to net income of $271.5 million, or $11.60 per diluted share, during 2019. We experienced growth of revenue and gross profit in all major business lines in 2020 compared to 2019, primarily driven by increases in volume related to acquisitions, complimented by organic growth in used vehicles, finance and insurance and service, body and parts sales. On a same store basis, new vehicle revenues and gross profits experienced headwinds with plateauing national new vehicle sales and declining manufacturer incentives. For the year ended December 31, 2020, new vehicle sales accounted for approximately 52% of our revenue and approximately 21% of our gross profit. Used vehicle retail sales accounted for approximately 31% of our revenue and approximately 20% of our gross profit. Our parts and service and finance and insurance operations accounted for approximately 15% of our revenue and contributed approximately 58% of our gross profit.


	Year Ended December 31,
							2020 vs. 2019							2019 vs. 2018
($ in millions, except per vehicle data)	2020			2019			Change		%		2018			Change		%
Revenues
New vehicle retail	$	6,773.9		$	6,799.1		$	(25.2)	(0.4)	%	$	6,602.8		$	196.3	3.0	%
Used vehicle retail	3,998.4			3,527.2			471.2		13.4		3,079.0			448.2		14.6
Finance and insurance	579.8			518.6			61.2		11.8		454.8			63.8		14.0
Service, body and parts	1,348.7			1,325.1			23.6		1.8		1,222.3			102.8		8.4
Total revenues	13,124.3			12,672.7			451.6		3.6		11,821.4			851.3		7.2

Gross profit
New vehicle retail	$	461.0		$	385.6		$	75.4	19.6	%	$	385.1		$	0.5	0.1	%
Used vehicle retail	446.0			367.5			78.5		21.4		322.9			44.6		13.8
Finance and insurance	579.8			518.6			61.2		11.8		454.8			63.8		14.0
Service, body and parts	716.8			667.6			49.2		7.4		600.7			66.9		11.1
Total gross profit	2,225.6			1,953.8			271.8		13.9		1,777.0			176.8		9.9

Gross profit margins
New vehicle retail	6.8		%	5.7		%	110 bp				5.8		%	-10 bp
Used vehicle retail	11.2			10.4			80 bp				10.5			-10 bp
Finance and insurance	100.0			100.0			0 bp				100.0			0 bp
Service, body and parts	53.1			50.4			270 bp				49.1			130 bp
Total gross profit margin	17.0			15.4			160 bp				15.0			40 bp

Retail units sold
New vehicle retail	171,168			180,532			(9,364)		(5.2)	%	184,601			(4,069)		(2.2)	%
Used vehicle retail	183,230			170,423			12,807		7.5		151,234			19,189		12.7

Average selling price per retail unit
New vehicle retail	$	39,575		$	37,661		$	1,914	5.1	%	$	35,768		$	1,893	5.3	%
Used vehicle retail	21,822			20,697			1,125		5.4		20,359			338		1.7

Average gross profit per retail unit
New vehicle retail	$	2,693		$	2,136		$	557	26.1	%	$	2,086		$	50	2.4	%
Used vehicle retail	2,434			2,156			278		12.9		2,135			21		1.0
Finance and insurance	1,636			1,478			158		10.7		1,354			124		9.2


	Year Ended December 31,
							2020 vs. 2019										2019 vs. 2018
($ in millions, except per vehicle data)	2020			2019			Change		%		2019			2018			Change		%
Revenues
New vehicle retail	$	5,943.6		$	6,548.6		$	(605.0)	(9.2)	%	$	6,324.4		$	6,220.5		$	103.9	1.7	%
Used vehicle retail	3,594.8			3,390.7			204.1		6.0		3,296.1			2,890.7			405.4		14.0
Finance and insurance	504.2			499.8			4.4		0.9		486.2			429.1			57.1		13.3
Service, body and parts	1,188.8			1,271.0			(82.2)		(6.5)		1,230.8			1,144.0			86.8		7.6
Total revenues	11,611.5			12,193.8			(582.3)		(4.8)		11,810.8			11,111.4			699.4		6.3

Gross profit
New vehicle retail	$	411.8		$	373.5		$	38.3	10.3	%	$	359.7		$	362.9		$	(3.2)	(0.9)	%
Used vehicle retail	405.9			357.3			48.6		13.6		348.5			308.5			40.0		13.0
Finance and insurance	504.2			499.8			4.4		0.9		486.2			429.1			57.1		13.3
Service, body and parts	626.2			640.6			(14.4)		(2.2)		620.6			564.2			56.4		10.0
Total gross profit	1,968.6			1,885.7			82.9		4.4		1,829.0			1,678.1			150.9		9.0

Gross profit margins
New vehicle retail	6.9		%	5.7		%	120 bp				5.7		%	5.8		%	-10 bp
Used vehicle retail	11.3			10.5			80 bp				10.6			10.7			-10 bp
Finance and insurance	100.0			100.0			— bp				100.0			100.0			— bp
Service, body and parts	52.7			50.4			230 bp				50.4			49.3			110 bp
Total gross profit margin	17.0			15.5			150 bp				15.5			15.1			40 bp

Retail units sold
New vehicle retail	149,203			173,561			(24,358)		(14.0)	%	167,660			173,214			(5,554)		(3.2)	%
Used vehicle retail	165,097			163,443			1,654		1.0		159,078			141,145			17,933		12.7

Average selling price per retail unit
New vehicle retail	$	39,836		$	37,731		$	2,105	5.6	%	$	37,722		$	35,912		$	1,810	5.0	%
Used vehicle retail	21,774			20,745			1,029		5.0		20,720			20,480			240		1.2

Average gross profit per retail unit
New vehicle retail	$	2,760		$	2,152		$	608	28.3	%	$	2,145		$	2,095		$	50	2.4	%
Used vehicle retail	2,459			2,186			273		12.5		2,191			2,186			5		0.2
Finance and insurance	1,604			1,483			121		8.2		1,488			1,365			123		9.0

The decrease in same store new vehicle revenues for 2020 compared to 2019 was driven by the decrease in unit volume of 14.0%, partially offset by an increase in average selling prices of 5.6%. As the national new vehicle market plateaus, our stores focus on improving gross profit per new vehicle sold. On a same store basis, gross profit per new vehicle increased 28.3% during 2020 compared to 2019. Our recently acquired stores are also focused on improving gross profit per new vehicle as total company gross profit per unit increased 26.1% during 2020 compared to 2019. Pent-up demand and reduced inventory levels related to short-term production closures combined with increased manufacturer partner incentives contributed to these improvements in gross profit per unit. We believe these increases in gross profit per unit will return to normalized levels in 2021.

Used vehicle revenues increased 13.4% during 2020 compared to 2019 and 14.6% in 2019 compared to 2018. These increases are due to a combination of increased volume from acquisitions and organic growth in our core and value auto categories at our seasoned stores. Excluding the impact of acquisitions, on a same store basis, used vehicle revenues increased 6.0% during 2020 and included a 1.0% increase in unit volume and a 5.0% increase in average selling price per retail unit compared to 2019. The revenue increase in 2020 was driven by increases in our core and value auto categories of 10.1% and 7.2%, respectively, offset by a decrease in CPO vehicle revenues of 3.0%. The increase in our core vehicle category includes a 4.6% increase in volume, complimented by a 5.3% increase in average selling price per vehicle. The increase in our value auto category is due to an increase in unit sales of 1.5% and an increase in average selling price per vehicle of 5.6%.

Used vehicle gross profits increased 21.4% during 2020 compared to 2019 and 13.8% in 2019 compared to 2018. On a same store basis, used vehicle gross profit increased 13.6% in 2020 compared to 2019, led by the performance in our core and value auto categories with increases of 15.2% and 14.5%, respectively, complimented by an increase in our CPO vehicles of 8.8%. The increase in our core vehicle category was primarily driven by an increase in gross profit per unit. Gross profit per unit in our core vehicle category, which accounted for 57.0% of our used vehicle unit sales in 2020, increased 10.1%, from $2,239 in 2019 to $2,465 in 2020. The increase in same store gross profit in our value auto category was driven by a 12.8% increase in gross profit per unit from $2,211 in 2019 to $2,494 in 2020. Our CPO category experienced a decrease in volume, with unit sales decreasing 7.9% in 2020 compared to 2019, but saw an increase in gross profit per unit of 18.1%, from $2,040 in 2019 to $2,408 in 2020.

The increases in finance and insurance revenue in 2020 compared to 2019 and in 2019 compared to 2018, were primarily due to increased volume related to acquisitions, combined with expanded product offerings and increasing penetration rates. Third party extended warranty and insurance contracts yield higher profit margins than vehicle sales and contribute significantly to our profitability. During 2020, finance and insurance sales accounted for 4.4% of total revenues and 26.1% of total gross profits. On a same store basis, finance and insurance sales accounted for 4.3% of total revenues and 25.6% of total gross profits in 2020. Same store finance and insurance revenues increased 0.9% during 2020 compared to 2019 and 13.3% during 2019 compared to 2018. These increases were driven by increases in finance and insurance revenues per retail unit, combined with increases in used vehicle unit volume, offset by decreases in new vehicle unit volume. On a same store basis, our finance and insurance revenues per retail unit increased $121 per unit to $1,604 in 2020 compared to 2019 and $123 per unit to $1,488 in 2019 compared to 2018. The increase in 2020 compared to 2019 was primarily due to increases in service contract and financing penetration rates of 80 basis points and 70 basis points, respectively, from 47.9% to 48.7% and from 73.7% to 74.4%, respectively.

Our effective income tax rate in 2018 was positively affected by the enactment of tax legislation commonly known as the Tax Cuts and Jobs Act (the "Act"), signed into law on December 22, 2017, which reduced the Federal corporate income tax rate to 21.0%. Our effective income tax rate in 2018 benefited from return to provision adjustments to our income tax receivable and deferred taxes as a result of finalizing calculations supporting our 2017 federal income tax return. These adjustments are the result of tax planning undertaken in 2018 to change certain established tax accounting methods. Additionally, our effective income tax rate in 2018 was positively affected by excess tax benefits related to our stock-based compensation and the revaluation of certain acquired deferred tax liabilities. Partially offsetting these benefits was the negative impact from an increasing presence in states with higher income tax rates, including the impact of New Jersey Assembly Bill 4202.

Non-GAAP measures do not have definitions under GAAP and may be defined differently by and not comparable to similarly titled measures used by other companies. As a result, we review any non-GAAP financial measures in connection with a review of the most directly comparable measures calculated in accordance with GAAP. We caution you not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures. We believe each of the non-GAAP financial measures below improves the transparency of our disclosures, provides a meaningful presentation of our results from the core business operations because they exclude items not related to our ongoing core business operations and other non-cash items, and improves the period-to-period comparability of our results from the core business operations. We use these measures in conjunction with GAAP financial measures to assess our business, including our compliance with covenants in our credit facility and in communications with our Board of Directors concerning financial performance. These measures should not be considered an alternative to GAAP measures.


	Year Ended December 31, 2020
(Dollars in millions)	As reported		Net disposal gain on sale of stores		Asset impairment		Investment gains		Insurance reserves		Acquisition expenses		Tax attribute		Adjusted
Asset impairments	$	7.9	$	—	$	(7.9)	$	—	$	—	$	—	$	—	$	—

Selling, general and administrative	1,428.3		16.6		—		—		(6.1)		(3.0)		—		1,435.8

Operating income (loss)	697.1		(16.6)		7.9		—		6.1		3.0		—		697.5

Other income (expense), net	58.9		—		—		(43.8)		—		—		—		15.1

Income (loss) before income taxes	$	648.5	$	(16.6)	$	7.9	$	(43.8)	$	6.1	$	3.0	$	—	$	605.1
Income tax (provision) benefit	(178.2)		4.6		(2.3)		12.1		(1.6)		(0.8)		(0.8)		(167.0)
Net income (loss)	$	470.3	$	(12.0)	$	5.6	$	(31.7)	$	4.5	$	2.2	$	(0.8)	$	438.1

Diluted net income (loss) per share	$	19.53	$	(0.50)	$	0.23	$	(1.32)	$	0.19	$	0.09	$	(0.03)	$	18.19
Diluted share count	24.1

We have the option to reallocate the commitments, provided that the used vehicle inventory floor plan financing commitment does not exceed 16.5% of aggregate commitments, the revolving loan commitment does not exceed 18.75% of aggregate commitments, the service loaner floor plan financing commitment does not exceed $100 million, and the sum of these commitments plus the new vehicle inventory floor plan financing commitment does not exceed the aggregate total financing commitment of $2.8 billion. Additionally, we may request an increase in the aggregate new vehicle floor plan commitment of up to $400 million provided that the aggregate commitment does not exceed $3.2 billion total availability. All borrowings from, and repayments to, our lending group are presented in the Consolidated Statements of Cash Flows as financing activities.

The interest rate on the credit facility varies based on the type of debt, with the rate of one-month LIBOR plus 1.10% for new vehicle floor plan financing, one-month LIBOR plus 1.40% for used vehicle floor plan financing; and a variable interest rate on the revolving financing ranging from the one-month LIBOR plus 1.00% to 2.00%, depending on our leverage ratio. The annual interest rate associated with our new vehicle floor plan commitment was 1.24% at December 31, 2020. The annual interest rate associated with our used vehicle inventory financing commitment was 1.54% at December 31, 2020. The annual interest rate associated with our service loaner inventory financing commitment was 1.34% at December 31, 2020. The annual interest rate associated with our revolving line of credit was 1.14% at December 31, 2020.

On July 14, 2020, we entered into a five-year real estate backed facility with eight financial institutions, including two manufacturer affiliated finance companies, maturing in July 2025. The real-estate backed credit facility provides a total financing commitment of up to $251.5 million in working capital financing for general corporate purposes, including acquisitions and working capital, collateralized by real estate and certain other assets owned by us. The interest rate on this credit facility uses one-month LIBOR plus a margin ranging from 2.00%-2.50% based on our leverage ratio, or a base rate of 0.75% plus a margin. The facility includes financial and restrictive covenants typical of such agreements, lending conditions, and representations and warranties by us. Financial covenants include requirements to maintain minimum current and fixed charge coverage ratios, and a maximum leverage ratio, consistent with those under our existing syndicated credit facility with U.S. Bank National Association as administrative agent. As of December 31, 2020, no amounts were outstanding on the real estate backed facility.

We have floor plan agreements with manufacturer-affiliated finance companies for certain new vehicles and vehicles that are designated for use as service loaners. As discussed above in “Operating Activities,” during 2019 we entered a floor plan agreement with Chrysler Capital. This facility provides floor plan financing for new vehicle inventory at select Chrysler stores. This facility adds to our existing facility with Ford Motor Credit Company. The interest rates on these floor plan notes payable commitments vary by manufacturer and are variable rates. As of December 31, 2020, $234.2 million was outstanding on these agreements at interest rates ranging up to 5.25%. Borrowings from and repayments to manufacturer-affiliated finance companies are classified as operating activities in the Consolidated Statements of Cash Flows.

On July 24, 2017, we issued $300.0 million in aggregate principal amount of 5.250% senior notes due 2025 to eligible purchasers in a private placement under Rule 144A and Regulation S of the Securities Act of 1933. Interest accrues on the notes from July 24, 2017 and is payable semiannually on February 1 and August 1. We may redeem the notes in whole or in part at any time prior to August 1, 2020 at a price equal to 100% of the principal amount plus a make-whole premium set forth in the indenture and accrued and unpaid interest. After August 1, 2020, we may redeem some or all of the notes subject to the redemption prices set forth in the indenture. If we experience specific kinds of changes of control, as described in the indenture, we must offer to repurchase the notes at 101% of their principal amount plus accrued and unpaid interest to the date of purchase.

On December 9, 2019, we issued $400.0 million in aggregate principal amount of 4.625% senior notes due 2027 to eligible purchasers in a private placement under Rule 144A and Regulation S of the Securities Act of 1933. Interest accrues on the notes from December 9, 2019 and is payable semiannually on June 15 and December 15. We may redeem the notes in whole or in part, on or after December 15, 2022, at the redemption prices set forth in the indenture. Prior to December 15, 2022, we may redeem the notes, in whole or in part, at a price equal to 100% of the principal amount thereof plus a make-whole premium set forth in the indenture. In addition, prior to December 15, 2022, we may redeem up to 40% of the notes from the proceeds of certain equity offerings. Upon certain change of control events (as set forth in the indenture), the holders of the notes may require us to repurchase all or a portion of the notes at a purchase price of 101% of their principal amount plus accrued and unpaid interest, if any, to the date of purchase.

On October 9, 2020, we issued $550.0 million in aggregate principal amount of 4.375% senior notes due 2031 to eligible purchasers in a private placement under Rule 144A and Regulation S of the Securities Act of 1933. Interest accrues on the notes from October 9, 2020 and is payable semiannually on January 15 and July 15. We may redeem the notes in whole or in part, on or after October 15, 2025, at the redemption prices set forth in the indenture. Prior to October 15, 2025, we may redeem the notes, in whole or in part, at a price equal to 100% of the principal amount thereof plus a make-whole premium set forth in the indenture. In addition, prior to October 15, 2025, we may redeem up to 40% of the notes from the proceeds of certain equity offerings. Upon certain change of control events (as set forth in the indenture), the holders of the notes may require us to repurchase all or a portion of the notes at a purchase price of 101% of their principal amount plus accrued and unpaid interest, if any, to the date of purchase.


	Payments Due By Period
(Dollars in millions)	Total		2021		2022 and 2023		2024 and 2025		2026 and beyond
Contractual Obligation:
Floor plan notes payable: non-trade(1)	$	1,563.0	$	1,563.0	$	—	$	—	$	—
Floor plan notes payable(1)	234.2		234.2		—		—		—
Used and service loaner vehicle inventory financing commitments(1)	—		—		—		—		—
Revolving lines of credit(1)(3)	39.0		—		39.0		—		—
Real estate mortgages, including interest(3)	716.3		81.0		149.0		150.3		336.0
Finance lease obligations(2)	275.5		11.9		118.0		112.8		32.8
5.250% Senior notes due 2025, including interest(3)	378.8		15.8		31.5		331.5		—
4.625% Senior notes due 2027, including interest(3)	679.5		18.5		37.0		37.0		587.0
4.375% Senior notes due 2031, including interest(3)	808.1		17.5		48.1		48.1		694.4
Other debt, including interest	1,252.8		0.7		1.3		300.5		950.3
Charge-backs on various contracts	67.0		39.9		24.6		2.5		—
Operating leases(2)	414.6		40.5		73.8		65.3		235.0
Self-insurance programs	39.1		21.4		10.9		3.6		3.2
	$	6,467.9	$	2,044.4	$	533.2	$	1,051.6	$	2,838.7

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and reported amounts of revenues and expenses at the date of the financial statements. Certain accounting policies require us to make difficult and subjective judgments on matters that are inherently uncertain. The following accounting policies involve critical accounting estimates because they are particularly dependent on assumptions made by management. While we have made our best estimates based on facts and circumstances available to us at the time, different estimates could have been used in the current period. Changes in the accounting estimates we used are reasonably likely to occur from period to period, which may have a material impact on the presentation of our financial condition and results of operations.

We have determined the appropriate unit of accounting for testing franchise rights for impairment is on an individual store basis. We have the option to qualitatively or quantitatively assess indefinite-lived intangible assets for impairment. In 2020, we evaluated our indefinite-lived intangible assets using a qualitative assessment process. If the qualitative factors determine that it is more likely than not that the fair value of the individual store’s franchise value exceeds the carrying amount, the franchise value is not impaired, and the second step is not necessary. If the qualitative assessment determines it is more likely than not that the fair value is less than the carrying amount, then a quantitative valuation of our franchise value is performed. An impairment charge is recorded to the extent the fair value is less than the carrying value.

We are subject to equity price risk with respect to our equity investment in Shift Technologies, Inc. (Shift), which has a readily determinable fair value following Shift going public in a reverse-merger deal with Insurance Acquisition, a special purpose acquisition company, in the fourth quarter of 2020. During the period that we hold this equity investment, unrealized gains and losses will be recorded as the fair market value of this security changes over time. The fair value of this equity security was $107.3 million at December 31, 2020. A hypothetical 10% change in the equity price of this security would result in an approximate change to unrealized gain or loss of $11 million. The selected 10% hypothetical change in the equity price is not intended to reflect a best or worst case scenario, as equity price changes could be smaller or larger due to the nature of equity markets.

Our management evaluated, with the participation and under the supervision of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure and that such information is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.


Exhibit			Description

3.1			Restated Articles of Incorporation of Lithia Motors, Inc. (incorporated by reference to exhibit 3.1 to the Company’s Form 10-Q filed July 26, 2019).

3.2			Second Amended and Restated Bylaws of Lithia Motors, Inc. (incorporated by reference to exhibit 3.2 to the Company’s Form 8-K filed April 25, 2019).

4.1			Indenture, dated as of July 24, 2017, among Lithia Motors, Inc., the Guarantors and the Trustee (incorporated by reference to exhibit 4.1 to Form 8-K dated July 24, 2017 and filed with the Securities and Exchange Commission on July 24, 2017).

4.2			Form of 5.250% Senior Notes due 2025 (included as part of exhibit 4.1)(incorporated by reference to exhibit 4.1 to Form 8-K dated July 24, 2017 and filed with the Securities and Exchange Commission on July 24, 2017).

4.3			Indenture, dated as of December 9, 2019, among Lithia Motors, Inc., the Guarantors and the Trustee (incorporated by reference to exhibit 4.1 to Form 8-K dated December 9, 2019 and filed with the Securities and Exchange Commission on December 13, 2019).

4.4			Form of 4.625% Senior Notes due 2027 (included as part of exhibit 4.1)(incorporated by reference to exhibit 4.1 to Form 8-K dated December 9, 2019 and filed with the Securities and Exchange Commission on December 13, 2019).

4.5			Indenture, dated as of October 9, 2020, among Lithia Motors, Inc., the Guarantors and the Trustee (incorporated by reference to exhibit 4.1 to Form 8-K dated October 9, 2020 and filed with the Securities and Exchange Commission on October 9, 2020).

4.6			Form of 4.375% Senior Notes due 2031 (included as part of exhibit 4.1)(incorporated by reference to exhibit 4.1 to Form 8-K dated October 9, 2020 and filed with the Securities and Exchange Commission on October 9, 2020).

4.7			Description of the Registrant’s Securities under Section 12 of the Exchange Act of 1934 (incorporated by reference to exhibit 4.5 to the Company’s Form 10-K for the year ended December 31, 2019)

10.1*			Amended and Restated 2009 Employee Stock Purchase Plan (incorporated by reference to exhibit 10.1 to Form 8-K dated April 25, 2019 and filed with the Securities and Exchange Commission on April 25, 2019)


Exhibit			Description

10.2*			Lithia Motors, Inc. 2013 Amended and Restated Stock Incentive Plan (incorporated by reference to exhibit 10.1 to the Company’s Form 8-K filed May 2, 2013)

10.2.1*			RSU Deferral Plan (incorporated by reference to exhibit 10.3.1 to the Company’s Form 10-K for the year ended December 31, 2011)

10.2.2*			Amendment to RSU Deferral Plan (incorporated by reference to exhibit 10.2.2 to the Company’s Form 10-K for the year ended December 31, 2014)

10.2.3*			Restricted Stock Unit (RSU) Deferral Election Form (incorporated by reference to exhibit 10.2.3 to the Company’s Form 10-K for the year ended December 31, 2014)

10.3*			Form of Restricted Stock Unit Agreement (2018 Performance- and Time-Vesting) (for Senior Executives) (incorporated by reference to exhibit 10.3.2 to the Company’s Form 10-K for the year ended December 31, 2017)

10.3.1*			Form of Restricted Stock Unit Agreement (2019 Performance- and Time-Vesting) (for Senior Executives)(incorporated by reference to exhibit 10.3.3 to the Company’s Form 10-K for the year ended December 31, 2018)

10.3.2*			Form of Restricted Stock Unit Agreement (2020 Performance- and Time-Vesting) (for Senior Executives)(incorporated by reference to exhibit 10.3.3 to the Company’s Form 10-K for the year ended December 31, 2019)

10.3.3*			Form of Restricted Stock Unit Agreement (2021 Performance- and Time-Vesting) (for Senior Executives)

10.3.4*			Form of Restricted Stock Unit Agreement (Time-Vesting)

10.4*			Lithia Motors, Inc. Performance Bonus Plan (incorporate by reference to exhibit 10.3 to the Company’s Form 10-Q filed April 28, 2017).

10.5*			Form of Outside Director Nonqualified Deferred Compensation Agreement (incorporated by reference to exhibit 10.20 to the Company’s Form 10-K for the year ended December 31, 2005)

10.6			Third Amended and Restated Loan Agreement, dated December 9, 2019, among Lithia Motors, Inc., the subsidiaries of Lithia Motors, Inc. listed on the signature pages of the agreement or that thereafter become borrowers thereunder, the lenders party thereto from time to time, and U.S. Bank National Association (incorporated by reference to exhibit 10.1 to the Company’s Form 8-K filed December 13, 2019)

10.7*			Amended and Restated Split-Dollar Agreement (incorporated by reference to exhibit 10.17 to the Company’s Form 10-K for the year ended December 31, 2012)

10.8*			Form of Indemnity Agreement for each Named Executive Officer (incorporated by reference to exhibit 10.1 to the Company’s Form 8-K filed May 29, 2009)

10.9*			Form of Indemnity Agreement for each non-management Director (incorporated by reference to exhibit 10.2 to the Company’s Form 8-K filed May 29, 2009)

10.10*			Executive Management Non-Qualified Deferred Compensation and Long-Term Incentive Plan (incorporated by reference to exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2016)

10.10.1*			Form of Executive Management Non-Qualified Deferred Compensation and Long-Term Incentive Plan – Notice of Discretionary Contribution Award for Sidney DeBoer (incorporated by reference to exhibit 10.22.1 to the Company’s Form 10-K for the year ended December 31, 2010)

10.10.2*			Form of Executive Management Non-Qualified Deferred Compensation and Long-Term Incentive Plan – Notice of Discretionary Contribution Award (incorporated by reference to exhibit 10.22.2 to the Company’s Form 10-K for the year ended December 31, 2010)

10.10.3*			Amendment to Executive Management Non-Qualified Deferred Compensation and Long-Term Incentive Plan (Executive Management Non-Qualified Deferred Compensation and Supplemental Executive Retirement Plan)(incporated by reference to exhibit 10.10.3 to the Company’s Form 10-K filed February 21, 2019)

10.11*			Transition Agreement dated September 14, 2015 between Lithia Motors, Inc. and Sidney B. DeBoer (incorporated by reference to exhibit 10.1 to the Company’s Form 8-K filed September 17, 2015)


Exhibit			Description

10.11.1*			Amendment to Transition Agreement dated January 22, 2019 between Lithia Motors, Inc. and Sidney B. DeBoer (incorporated by reference to exhibit 10.1 to the Company’s Form 8-K filed January 25, 2019)

10.11.2*			Class B Conversion Agreement dated January 22, 2019 between Lithia Motors, Inc. and Sidney B. DeBoer (incorporated by reference to exhibit 10.2 to the Company’s Form 8-K filed January 25, 2019)

10.12*			Director Service Agreement effective January 1, 2016 between Lithia Motors, Inc. and Sidney B. DeBoer (incorporated by reference to exhibit 10.2 to the Company’s Form 8-K filed September 17, 2015)

10.13*			Form of Employment and Change in Control Agreement dated February 4, 2016 between Lithia Motors, Inc. and Bryan DeBoer (incorporated by reference to exhibit 10.1 to the Company’s Form 8-K filed February 5, 2016)(1)

10.14			Credit Agreement, dated July 14, 2020, among Lithia Motors, Inc., the subsidiaries of Lithia Motors Inc. party thereto from time to time, the lenders party thereto from time to time, and Wells Fargo Bank, National Association (incorporated by reference to exhibit 10.1 to Form 8-K filed July 16, 2020).

10.15			Lithia Motors, Inc. Short-Term Incentive Plan (incorporated by reference to exhibit 10.1 to the Company’s Form 8-K filed December 22, 2020).

21			Subsidiaries of Lithia Motors, Inc.

23			Consent of KPMG LLP, Independent Registered Public Accounting Firm

31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.

31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.

32.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

32.2			Certification of Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

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We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s goodwill and franchise value impairment assessment processes, including controls related to the identification and development of relevant qualitative factors. We compared key financial metrics across stores with similar demographics, including historical and future dealership level revenue growth and profitability, and evaluated differences for potential indicators of impairments. We evaluated the Company’s intent and ability to carry out a particular course of action by evaluating the Company’s past history of carrying out its stated intentions. Additionally, we evaluated information about recent comparable dealership sales to identify potential indicators of impairment.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal 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 as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


CONSOLIDATED BALANCE SHEETS
	December 31,
(In millions)	2020		2019
Assets
Current assets:
Cash and cash equivalents	$	160.2	$	84.0
Accounts receivable, net of allowance for doubtful accounts of $5.9 and $7.3	614.0		505.0
Inventories, net	2,492.9		2,433.7

Other current assets	70.5		47.8

Total current assets	3,337.6		3,070.5

Property and equipment, net of accumulated depreciation of $338.0 and $284.3	2,197.5		1,611.7
Operating lease right-of-use assets	264.0		251.9
Goodwill	593.0		454.6
Franchise value	350.2		306.7

Other non-current assets	1,159.8		388.5
Total assets	$	7,902.1	$	6,083.9

Liabilities and stockholders’ equity
Current liabilities:
Floor plan notes payable	$	234.2	$	425.2
Floor plan notes payable: non-trade	1,563.0		1,642.4
Current maturities of long-term debt	66.0		39.3
Trade payables	158.2		125.3
Accrued liabilities	458.3		336.9


Total current liabilities	2,479.7		2,569.1

Long-term debt, less current maturities	2,064.7		1,430.6
Deferred revenue	155.7		137.9
Deferred income taxes	146.3		131.1
Non-current operating lease liabilities	246.7		238.5
Other long-term liabilities	147.5		109.0
Total liabilities	5,240.6		4,616.2

Stockholders’ equity:
Preferred stock - no par value; authorized 15.0 shares; none outstanding	—		—
Class A common stock - no par value; authorized 100.0 shares; issued and outstanding 26.3 and 22.6	788.2		20.5
Class B common stock - no par value; authorized 25.0 shares; issued and outstanding 0.2 and 0.6	—		0.1
Additional paid-in capital	41.4		46.0

Accumulated other comprehensive loss	(6.3)		(0.7)
Retained earnings	1,838.2		1,401.8
Total stockholders’ equity	2,661.5		1,467.7
Total liabilities and stockholders’ equity	$	7,902.1	$	6,083.9


CONSOLIDATED STATEMENTS OF OPERATIONS
	Year Ended December 31,
(In millions, except per share amounts)	2020		2019		2018
Revenues:
New vehicle retail	$	6,773.9	$	6,799.1	$	6,602.8
Used vehicle retail	3,998.4		3,527.2		3,079.0
Used vehicle wholesale	308.7		301.2		331.3
Finance and insurance	579.8		518.6		454.8
Service, body and parts	1,348.7		1,325.1		1,222.3
Fleet and other	114.8		201.5		131.2
Total revenues	13,124.3		12,672.7		11,821.4
Cost of sales:
New vehicle retail	6,313.0		6,413.5		6,217.7
Used vehicle retail	3,552.4		3,159.6		2,756.1
Used vehicle wholesale	296.7		297.5		325.8
Service, body and parts	631.9		657.5		621.6
Fleet and other	104.7		190.8		123.2
Total cost of sales	10,898.7		10,718.9		10,044.4
Gross profit	2,225.6		1,953.8		1,777.0
Asset impairments	7.9		2.6		1.3
Selling, general and administrative	1,428.3		1,373.8		1,253.3
Depreciation and amortization	92.3		82.4		75.4
Operating income	697.1		495.0		447.0
Floor plan interest expense	(34.4)		(72.8)		(62.3)
Other interest expense	(73.1)		(60.6)		(56.0)
Other income, net	58.9		13.8		8.8
Income before income taxes	648.5		375.4		337.5
Income tax provision	(178.2)		(103.9)		(71.8)


Net income	$	470.3	$	271.5	$	265.7



Basic net income per share	$	19.74	$	11.70	$	10.91

Shares used in basic per share calculations	23.8		23.2		24.4



Diluted net income per share	$	19.53	$	11.60	$	10.86

Shares used in diluted per share calculations	24.1		23.4		24.5

Cash dividends paid per Class A and Class B share	$	1.22	$	1.19	$	1.14


CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
	Year Ended December 31,
(In millions)	2020		2019		2018
Total stockholders’ equity, beginning balances	$	1,467.7	$	1,197.2	$	1,083.2

Class A common stock:
Beginning balances	20.5		—		149.1
Compensation for stock and stock option issuances and excess tax benefits from option exercises	11.6		12.7		9.3
Issuance of stock in connection with employee stock plans	13.3		11.0		10.1
Class B common stock converted to class A common stock	0.1		—		—
Repurchase of class A common stock	(34.4)		(3.2)		(168.5)
Equity issuances, net of issuance costs	777.1		—		—
Ending balances	788.2		20.5		—

Class B common stock:
Beginning balances	0.1		0.1		0.1
Class B common stock converted to class A common stock	(0.1)		—		—
Ending balances	—		0.1		0.1

Additional paid-in capital:
Beginning balances	46.0		35.0		11.3
Compensation for stock and stock option issuances and excess tax benefits from option exercises	11.6		3.5		4.1
Option premiums received	—		7.5		—
Repurchase of class A common stock	(16.2)		—		19.6
Ending balances	41.4		46.0		35.0

Accumulated other comprehensive loss:
Beginning balances	(0.7)		—		—
Loss on cash flow hedges, net of tax benefit of $2.0 and $0.3	(5.6)		(0.7)		—
Ending balances	(6.3)		(0.7)		—

Retained earnings:
Beginning balances	1,401.8		1,162.1		922.7
Adjustment to adopt ASC 326 (2020), ASC 842 (2019), ASC 606 (2018)	(4.8)		0.9		1.4
Net income	470.3		271.5		265.7
Dividends paid	(29.1)		(27.6)		(27.7)
Option premiums paid	—		(5.1)		—
Ending balances	1,838.2		1,401.8		1,162.1

Total stockholders’ equity, ending balances	$	2,661.5	$	1,467.7	$	1,197.2


CONSOLIDATED STATEMENTS OF CASH FLOWS
	Year Ended December 31,
(In millions)	2020		2019		2018
Cash flows from operating activities:
Net income	$	470.3	$	271.5	$	265.7
Adjustments to reconcile net income to net cash provided by operating activities:
Asset impairments	7.9		2.6		1.3
Depreciation and amortization	92.4		82.4		75.4
Stock-based compensation	23.2		16.2		13.3

(Gain) loss on disposal of other assets	(1.7)		(0.1)		0.2
Gain from disposal activities	(16.6)		(9.7)		(15.1)
Unrealized investment gains	(43.4)		—		—
Deferred income taxes	17.2		40.1		33.0

Amortization of operating lease right-of-use assets	28.9		31.6		—
(Increase) decrease (net of acquisitions and dispositions):
Trade receivables, net	(113.5)		24.4		4.7
Inventories	228.8		(19.7)		(108.9)
Other assets	(103.6)		5.4		(16.0)

Increase (decrease) (net of acquisitions and dispositions):
Floor plan notes payable	(204.1)		100.7		196.9
Trade payables	28.2		(1.8)		15.1
Accrued liabilities	113.1		(7.8)		28.9
Other long-term liabilities and deferred revenue	15.1		(11.3)		25.2
Net cash provided by operating activities	542.2		524.5		519.7
Cash flows from investing activities:
Notes receivable issued	(12.5)		(12.5)		—
Principal payments received on notes receivable	25.0		—		—
Capital expenditures	(167.8)		(124.9)		(158.0)
Proceeds from sales of assets	6.5		1.5		3.1
Cash paid for other investments	(11.2)		(7.2)		(62.7)
Cash paid for acquisitions, net of cash acquired	(1,503.3)		(366.6)		(373.8)
Proceeds from sales of stores	57.5		46.7		34.3
Net cash used in investing activities	(1,605.8)		(463.0)		(557.1)
Cash flows from financing activities:
Repayments on floor plan notes payable: non-trade, net	(20.6)		(54.6)		(21.9)
Borrowings on lines of credit	1,825.4		3,167.0		2,691.4
Repayments on lines of credit	(1,935.4)		(3,481.6)		(2,499.6)
Principal payments on long-term debt, scheduled	(29.4)		(26.0)		(26.5)
Principal payments on long-term debt and finance lease liabilities, other	(6.3)		(11.0)		(26.1)
Proceeds from issuance of long-term debt	606.5		420.3		62.1
Payment of debt issuance costs	(10.8)		(5.8)		(0.4)
Proceeds from issuance of common stock	790.4		11.0		10.1
Repurchase of common stock	(50.6)		(3.2)		(148.9)

Dividends paid	(29.1)		(27.6)		(27.7)
Payments of contingent consideration related to acquisitions	(0.3)		—		(0.8)
Other financing activity	—		2.4		—

Net cash provided by (used in) financing activities	1,139.7		(9.1)		11.7
Increase (decrease) in cash and cash equivalents	76.2		52.4		(25.7)
Cash and cash equivalents at beginning of year	84.0		31.6		57.3
Cash and cash equivalents at end of year	$	160.2	$	84.0	$	31.6
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	107.7	$	135.8	$	117.1
Cash paid during the period for income taxes, net	135.0		38.4		32.9
Floor plan debt paid in connection with store disposals	38.4		18.6		33.1
Supplemental schedule of non-cash activities:
Debt issued in connection with acquisitions	$	—	$	26.4	$	125.1

Contingent consideration in connection with acquisitions	14.3		—		—
Debt assumed in connection with acquisitions	—		—		10.8
Acquisition of finance leases in connection with acquisitions	227.5		—		—

Right-of-use assets obtained in exchange for lease liabilities1	55.4		260.3		—


Oregon	001-14733		93-0572810
(State or other jurisdiction of incorporation or organization)	(Commission File Number)		(I.R.S. Employer Identification No.)
150 N. Bartlett Street,	Medford,	Oregon	97501
(Address of principal executive offices)			(Zip Code)


Item Number	Item	Page
PART I

Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	None
Item 2.	Properties	18
Item 3.	Legal Proceedings	18
Item 4.	Mine Safety Disclosures	Not applicable

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
Item 6.	Selected Financial Data	Not applicable
	The company has early adopted the removal of the disclosure required by this item, as permitted by SEC rule changes effective February 10, 2021.
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations:	21
	Results of operations	22
	Liquidity and capital resources	35
	Critical accounting estimates	42
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 8.	Financial Statements and Supplementary Data	45
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	None
Item 9A.	Controls and Procedures	45
Item 9B.	Other Information	None

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	46
Item 11.	Executive Compensation	46
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	46
Item 13.	Certain Relationships and Related Transactions, and Director Independence	46
Item 14.	Principal Accounting Fees and Services	46

PART IV

Item 15.	Exhibits and Financial Statement Schedules	47
Item 16.	Form 10-K Summary	None

SIGNATURES		50


	Total number of shares purchased(2)	Average price paid per share		Total number of shares purchased as part of publicly announced plan(1)	Maximum dollar value of shares that may yet be purchased under publicly announced plan (in thousands)(1)
October	—	$	—	—	$	187,522
November	184	229.57		—	187,522
December	293	294.69		—	187,522
Total	477	269.57		—	187,522


	Base Period	Indexed Returns for the Year Ended
Company/Index	2015	2016		2017		2018		2019		2020
Lithia Motors, Inc.	$100.00	$	91.82	$	108.85	$	74.05	$	144.08	$	289.31
S&P 500 Index - Total Return	100.00	111.96		136.40		130.42		171.49		203.04
Russell 2000	100.00	121.31		139.08		123.76		155.35		186.36
New Auto Peer Group	100.00	106.83		105.69		93.69		135.19		161.25
Old Auto Peer Group	100.00	98.08		96.45		77.22		115.38		151.46


	Year Ended December 31,
					2020 vs. 2019						2019 vs. 2018
(Dollars in millions)	2020		2019		Change		%		2018		Change		%
Segment income*:
Domestic	$	230.0	$	123.4	$	106.6	86.4	%	$	97.6	$	25.8	26.4	%
Import	249.8		153.9		95.9		62.3		116.2		37.7		32.4
Luxury	98.5		57.1		41.4		72.5		43.9		13.2		30.1
Total segment income for reportable segments	$	578.3	$	334.4	$	243.9	72.9	%	$	257.7	$	76.7	29.8	%


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


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


	Year Ended December 31, 2019
(Dollars in millions)	As reported		Net disposal gain on sale of stores		Asset impairment		Insurance reserves		Acquisition expenses		Adjusted
Asset impairments	$	2.6	$	—	$	(2.6)	$	—	$	—	$	—

Selling, general and administrative	1,373.8		9.7		—		(9.5)		(2.5)		1,371.5

Operating income (loss)	495.0		(9.7)		2.6		9.5		2.5		499.9



Income (loss) before income taxes	$	375.4	$	(9.7)	$	2.6	$	9.5	$	2.5	$	380.3
Income tax (provision) benefit	(103.9)		2.8		(0.7)		(2.6)		(0.7)		(105.1)
Net income (loss)	$	271.5	$	(6.9)	$	1.9	$	6.9	$	1.8	$	275.2

Diluted net income (loss) per share	$	11.60	$	(0.30)	$	0.08	$	0.30	$	0.08	$	11.76
Diluted share count	23.4


	Year Ended December 31, 2018
(Dollars in millions)	As reported		Net disposal gain on sale of stores		Asset impairment		Insurance reserves		Acquisition expenses		Tax attribute		Adjusted
Asset impairments	$	1.3	$	—	$	(1.3)	$	—	$	—	$	—	$	—

Selling, general and administrative	1,253.3		15.4		—		(1.5)		(3.3)		—		1,263.9

Operating income (loss)	447.0		(15.4)		1.3		1.5		3.3		—		437.7



Income (loss) before income taxes	$	337.5	$	(15.4)	$	1.3	$	1.5	$	3.3	$	—	$	328.2
Income tax (provision) benefit	(71.8)		4.0		(0.3)		(0.4)		(0.9)		(14.8)		(84.2)
Net income (loss)	$	265.7	$	(11.4)	$	1.0	$	1.1	$	2.4	$	(14.8)	$	244.0

Diluted net income (loss) per share	$	10.86	$	(0.47)	$	0.04	$	0.05	$	0.10	$	(0.60)	$	9.98
Diluted share count	24.5


	As of December 31,
(Dollars in millions)	2020		2019		Change		%
Cash and cash equivalents	$	160.2	$	84.0	$	76.2	90.7	%



Available credit on the credit facilities	1,237.1		574.5		662.6		115.3
Total current available funds	$	1,397.3	$	658.5	$	738.8	112.2	%


Dividend paid:	Dividend amount per share		Total amount of dividend (in millions)
March 2020	$	0.30	$	7.0
May 2020	0.30		6.8
August 2020	0.31		7.1
November 2020	0.31		8.2


(Dollars in millions)	Outstanding as of December 31, 2020		Remaining Available as of December 31, 2020
Floor plan notes payable: non-trade	$	1,563.0	$	—	(1)
Floor plan notes payable	234.2		—
Used and service loaner vehicle inventory financing commitments	—		491.0		(2)
Revolving lines of credit	39.0		632.7		(2),(3)
Real estate mortgages	611.5		—
Finance lease obligations	246.4		—
5.250% Senior notes due 2025	300.0		—
4.625% Senior notes due 2027	400.0		—
4.375% Senior notes due 2031	550.0		—
Other debt	2.4		—
Unamortized debt issuance costs	(18.6)		—		(4)
Total debt	$	3,927.9	$	1,123.7


Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted average exercise price of outstanding options, warrants and rights (b)			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) (2)
Equity compensation plans approved by shareholders	519,612	$	—	(1)	2,430,949
Equity compensation plans not approved by shareholders	—	—			—
Total	519,612	$	—		2,430,949





			Page
Report of Independent Registered Public Accounting Firm			F-1
Consolidated Balance Sheets as of December 31, 2020 and 2019			F-5
Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018			F-6
Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018			F-7
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018			F-8
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018			F-9
Notes to Consolidated Financial Statements			F-10


Date: February 19, 2021	LITHIA MOTORS, INC.
	Registrant

	By:	/s/ Bryan B. DeBoer
		Bryan B. DeBoer
		Chief Executive Officer, President, Director, and Principal Executive Officer


/s/ Bryan B. DeBoer						/s/ Tina Miller
Bryan B. DeBoer						Tina Miller
Chief Executive Officer, President, Director, and Principal Executive Officer						Chief Financial Officer, Senior Vice President, and Principal Accounting Officer

/s/ Sidney B. DeBoer						/s/ Susan O. Cain
Sidney B. DeBoer						Susan O. Cain
Chairman of the Board and Director						Director

/s/ Shauna McIntyre						/s/ Louis P. Miramontes
Shauna McIntyre						Louis P. Miramontes
Director						Director

/s/ Kenneth E. Roberts						/s/ David J. Robino
Kenneth E. Roberts						David J. Robino
Director						Director


Buildings and improvements			5 to 40 years
Service equipment			5 to 15 years
Furniture, office equipment, signs and fixtures			3 to 10 years


(Dollars in millions)	Franchise Value
Balance as of December 31, 2018	$	288.7
Adjustments to purchase price allocations1	3.5
Additions through acquisitions1	20.9
Reductions through divestitures	(6.0)
Reductions from impairments	(0.4)
Balance as of December 31, 2019	306.7

Additions through acquisitions2	51.9
Reductions through divestitures	(4.0)
Reductions from impairments	(4.4)
Balance as of December 31, 2020	$	350.2


Year Ending December 31,	(Dollars in millions)
2021	$	69.4
2022	78.9
2023	148.0
2024	87.5
2025	448.3
Thereafter	1,278.2
Total principal payments	$	2,110.3


	Repurchases Occurring in 2020			Cumulative Repurchases as of December 31, 2020
	Shares	Average Price		Shares	Average Price
Share repurchase authorization	563,953	$	81.71	3,719,048	$	84.02


Quarter declared	Dividend amount per Class A and Class B share		Total amount of dividends paid (in millions)
2018
First quarter	$	0.27	$	6.7
Second quarter	0.29		7.2
Third quarter	0.29		7.0
Fourth quarter	0.29		6.8
2019
First quarter	$	0.29	$	6.7
Second quarter	0.30		7.0
Third quarter	0.30		7.0
Fourth quarter	0.30		6.9
2020
First quarter	$	0.30	$	7.0
Second quarter	0.30		6.8
Third quarter	0.31		7.1
Fourth quarter	0.31		8.2


Year Ended December 31,	2020
Shares purchased pursuant to 2009 ESPP	113,778
Weighted average per share price of shares purchased	$	130.17
Weighted average per share discount from market value for shares purchased	$	22.97

As of December 31,	2020
Shares available for purchase pursuant to 2009 ESPP	1,412,727


	RSUs	Weighted average per share price, grant date fair value
Balance, December 31, 2019	496,682	$	90.00
Granted	148,415	130.89
Vested	(90,128)	108.45
Forfeited	(35,357)	107.91
Balance, December 31, 2020	519,612	100.78


(Dollars in millions)	December 31, 2020			December 31, 2019
Operating lease liabilities:
Current portion included in accrued liabilities	$	30.8		$	25.2
Noncurrent operating lease liabilities	246.7			238.5
Total operating lease liabilities	277.5			263.7
Finance lease liabilities:
Current portion included in current maturities of long-term debt	6.0			1.1
Long-term portion of lease liabilities in long-term debt	240.4			29.4
Total finance lease liabilities	246.4			30.5
Total lease liabilities	$	523.9		$	294.2
Finance lease right-of-use assets:
Total finance lease right-of-use assets 1	$	253.9
Weighted-average remaining lease term:
Operating leases	5 years
Finance leases	12 years
Weighted-average discount rate:
Operating leases	4.69		%
Finance leases	4.12		%


(Dollars in millions)	Operating Lease Liabilities		Finance Lease Liabilities
Year Ending December 31,
2021	$	42.7	$	11.9
2022	40.6		25.7
2023	34.7		92.3
2024	29.4		13.3
2025	26.9		99.5
Thereafter	199.7		32.8
Total minimum lease payments	374.0		275.5
Less:
Present value adjustment	(96.5)		(29.1)
Total lease liabilities	$	277.5	$	246.4


Fair Value at December 31, 2020	Level 1		Level 2		Level 3
Measured on a recurring basis:
Investments	$	97.9	$	9.4	$	—


(Dollars in millions)
Balance, December 31, 2019	$	—
Increase related to tax positions taken - current year	0.2
Balance, December 31, 2020	$	0.2


	Year Ended December 31,
(Dollars in millions, except for per share amounts)	2020		2019
Revenue	$	15,500.9	$	16,043.4
Net income	502.6		321.1
Basic net income per share	21.10		13.83
Diluted net income per share	20.87		13.73


Impact on Consolidated Balance Sheets	December 31, 2019		Adjustments		January 1, 2020
CECL Adoption:
Accounts receivable, net of allowance for doubtful accounts of $7.3	$	505.0	$	(0.5)	$	504.5
Other non-current assets	388.5		(6.0)		382.5
Total assets	6,083.9		(6.5)		6,077.4
Deferred income taxes	131.1		(1.7)		129.4
Total liabilities	4,616.2		(1.7)		4,614.5
Retained earnings	1,401.8		(4.8)		1,397.0
Total liabilities and stockholders’ equity	6,083.9		(6.5)		6,077.4


EPS Threshold			Percentage of Earned RSUs
$18.75 (highest)			150.0%
Any amount between $15.50 and $17.00 (inclusive)			100.0%
$12.25			75.0%
Any amount between $0.01 and $12.24 (inclusive)			50.0%
$ 0.00 or negative 2021 Pro Forma EPS (lowest)			0.0%


Example 1: If the 2021 Pro Forma EPS is $12.46, the percentage of Earned RSUs would be 75.0% plus an additional percentage calculated as follows: (a) 25%, multiplied by a fraction, (i) the numerator of which is the amount by which 2021 Pro Forma EPS exceeds $12.25 and (ii) the denominator of which is $3.25: 25% ($0.21/$3.25) = 1.6% The resulting percentage of Earned RSUs correlating to an EPS of $12.46 would be 76.6%. If the Award were 1,000 RSUs, the number of Earned RSUs would be 76.6% of 1,000, or 766 RSUs. The number of forfeited RSUs would be 1,000 minus 766, or 234. The Earned RSUs would be subject to the vesting according to the schedule specified in Section 1.2(b) of this Agreement.


Vesting Date			Vesting of Award
January 1, 2023			33%
January 1, 2024			33%
January 1, 2025			34%


Example 2: If there are 765 Earned RSUs, and the Committee certifies the number of Earned RSUs on February 1, 2021, the Earned RSUs would vest and entitle Recipient to receive Shares, subject to continued employment, as follows.
	Vesting Date	Vesting of Award	Shares
	January 1, 2023	33%	253
	January 1, 2024	33%	253
	January 1, 2025	34%	260


Vesting Date	Vesting of Award	Vested RSUs
January 1, 2023	33%	[ ]
January 1, 2024	33%	[ ]
January 1, 2025	34%	[ ]


NAME OF ENTITY	STATE OF ORIGIN	ASSUMED BUSINESS NAME(S) (if different than entity name)
797 Valley Street LLC	New Jersey
Austin-H, Inc.	Texas	Howdy Honda
Baierl Auto Parts, LLC	Pennsylvania
Baierl Automotive Corporation	Pennsylvania	Baierl Acura
Baierl Chevrolet, Inc.	Pennsylvania	Baierl Chevrolet Baierl Chevrolet Cadillac
Baierl Holding, LLC	Pennsylvania
Bend-CDJR, LLC	Oregon
Bend-N, LLC	Oregon
Cadillac of Portland Lloyd Center, LLC	Oregon	Cadillac of Portland
Camp Automotive, Inc.	Washington	Camp Chevrolet Camp Cadillac
Carbone Auto Body, LLC	New York
Clear Lake-I, Inc.	Texas	Clear Lake Infiniti
Cranberry Automotive, Inc.	Pennsylvania	Baierl Toyota
Dah Chong Hong CA Trading LLC	Delaware
Dah Chong Hong Trading Corporation	New Jersey
Dallas-H, Inc.	Texas	John Eagle Honda of Dallas