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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ______


Commission File Number: 001-38073

CARVANA CO.
(Exact name of registrant as specified in its charter)


Delaware81-4549921
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1930 W. Rio Salado ParkwayTempeArizona85281
(Address of principal executive offices)(Zip Code)
(480) 719-8809
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes  ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☒ Yes  ☐ No

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

Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
  Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☒No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

As of October 26, 2020, the registrant had 70,578,738 shares of Class A common stock outstanding and 101,200,276 shares of Class B common stock outstanding.

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, Par Value $0.001 Per ShareCVNANew York Stock Exchange








INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Page
PART I.
FINANCIAL INFORMATION
Item 1.
Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019
Unaudited Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2020 and 2019
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
Item 4.
Controls and Procedures
PART II.
OTHER INFORMATION
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Defaults Upon Senior Securities
Item 4.
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits






PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September 30, 2020December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents$173,704 $76,016 
Restricted cash22,619 42,443 
Accounts receivable, net82,932 39,864 
Finance receivables held for sale, net316,972 286,969 
Vehicle inventory967,547 762,696 
Beneficial interests in securitizations112,134 98,780 
Other current assets, including $5,437 and $0, respectively, due from related parties
71,196 52,654 
Total current assets1,747,104 1,359,422 
Property and equipment, net800,181 543,471 
Operating lease right-of-use assets, including $22,483 and $44,583, respectively, from leases with related parties
141,657 123,420 
Intangible assets, net5,990 7,232 
Goodwill9,353 9,353 
Other assets, including $4,908 and $6,138, respectively, due from related parties
28,513 14,850 
Total assets$2,732,798 $2,057,748 
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities, including $12,845 and $9,549, respectively, due to related parties
$355,876 $234,443 
Short-term revolving facilities126,981 568,840 
Current portion of long-term debt54,313 48,731 
Other current liabilities, including $3,442 and $4,518, respectively, from leases with related parties
11,616 12,856 
Total current liabilities548,786 864,870 
Long-term debt, excluding current portion, including $15,000 held by a related party
1,080,929 883,060 
Operating lease liabilities, excluding current portion, including $19,482 and $41,829, respectively, from leases with related parties
140,010 116,071 
Other liabilities1,497 1,808 
Total liabilities1,771,222 1,865,809 
Commitments and contingencies (Note 16)
Stockholders' equity:
Preferred stock, $0.01 par value - 50,000 shares authorized; none issued and outstanding as of September 30, 2020 and December 31, 2019
  
Class A common stock, $0.001 par value - 500,000 shares authorized; 70,538 and 50,507 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively
71 51 
Class B common stock, $0.001 par value - 125,000 shares authorized; 101,200 and 101,219 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively
101 101 
Additional paid-in capital721,174 280,994 
Accumulated deficit(290,836)(183,034)
Total stockholders' equity attributable to Carvana Co.430,510 98,112 
Non-controlling interests531,066 93,827 
Total stockholders' equity961,576 191,939 
Total liabilities & stockholders' equity$2,732,798 $2,057,748 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1



CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Sales and operating revenues:
Used vehicle sales, net$1,289,128 $931,016 $3,245,209 $2,470,630 
Wholesale vehicle sales, including $1,323, $0, $1,365, and $0, respectively, from related parties
129,925 92,430 258,965 188,474 
Other sales and revenues, including $26,141, $15,824, $69,423, and $40,386, respectively, from related parties
124,556 71,408 255,985 177,205 
Net sales and operating revenues1,543,609 1,094,854 3,760,159 2,836,309 
Cost of sales, including $931, $997, $2,664, and $3,487, respectively, to related parties
1,282,336 957,311 3,210,258 2,472,441 
Gross profit261,273 137,543 549,901 363,868 
Selling, general and administrative expenses, including $4,712, $4,264, $13,630, and $9,884, respectively, to related parties
267,842 207,970 783,487 545,054 
Interest expense, including $332, $332, $998, and $998, respectively, to related parties
20,276 20,990 69,053 55,953 
Other (income) expense, net(9,201)827 5,126 1,760 
Net loss before income taxes(17,644)(92,244)(307,765)(238,899)
Income tax provision76  (162) 
Net loss(17,720)(92,244)(307,603)(238,899)
Net loss attributable to non-controlling interests (10,635)(62,156)(199,801)(165,373)
Net loss attributable to Carvana Co. $(7,085)$(30,088)$(107,802)$(73,526)
Net loss per share of Class A common stock, basic and diluted
$(0.10)$(0.60)$(1.73)$(1.61)
Weighted-average shares of Class A common stock, basic and diluted(1)
70,005 49,787 62,244 45,726 
(1) Weighted-average shares of Class A common stock outstanding have been adjusted for unvested restricted stock awards.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2



CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands)

Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-in CapitalAccumulated DeficitNon-controlling InterestsTotal Stockholders' Equity
Balance, December 31, 201841,208 $41 104,336 $104 $147,916 $(68,375)$147,742 $227,428 
Net loss— — — — — (23,115)(59,481)(82,596)
Exchanges of LLC Units2,020 2 (1,984)(2)1,899 — (1,899)— 
Establishment of deferred tax assets related to increases in tax basis in Carvana Group— — — — 25,582 — — 25,582 
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group— — — — (25,582)— — (25,582)
Contribution of Class A common stock from related party(72)— — — — — — — 
Issuance of Class A common stock to settle vested restricted stock units74 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes(14)— — — (433)— — (433)
Options exercised27 — — — 426 — — 426 
Equity-based compensation— — — — 8,022 — — 8,022 
Balance, March 31, 201943,243 $43 102,352 $102 $157,830 $(91,490)$86,362 $152,847 
Net loss— — — — — (20,323)(43,736)(64,059)
Issuance of Class A common stock, net of underwriters' discounts and commissions and offering expenses4,830 5 — — 297,606 — — 297,611 
Adjustments to the non-controlling interests related to equity offering— — — — (201,015)— 201,015 — 
Exchanges of LLC Units1,612 2 (971)(1)1,571 — (1,571)1 
Establishment of deferred tax assets related to increases in tax basis in Carvana Group— — — — 33,573 — — 33,573 
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group— — — — (33,573)— — (33,573)
Contribution of Class A common stock from related party(43)— — — — — — — 
Issuance of Class A common stock to settle vested restricted stock units78 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes(13)— — — (1,557)— — (1,557)
Options exercised25 — — — 372 — — 372 
3



Equity-based compensation— — — — 8,602 — — 8,602 
Balance, June 30, 201949,732 $50 101,381 $101 $263,409 $(111,813)$242,070 $393,817 
Net loss— — — — — (30,088)(62,156)(92,244)
Exchanges of LLC Units511 — (131)— 1,196 — (1,196)— 
Establishment of deferred tax assets related to increases in tax basis in Carvana Group— — — — 8,891 — — 8,891 
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group— — — — (8,891)— — (8,891)
Contribution of Class A common stock from related party(59)— — — — — — 
Issuance of Class A common stock to settle vested restricted stock units83 — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes(11)— — — (1,562)— — (1,562)
Options exercised40 — — — 694 — — 694 
Equity-based compensation— — — — 10,473 — — 10,473 
Balance, September 30, 201950,296 $50 101,250 $101 $274,210 $(141,901)$178,718 $311,178 


4



CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - (Continued)
(Unaudited)
(In thousands)

Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-in CapitalAccumulated DeficitNon-controlling InterestsTotal Stockholders' Equity
Balance, December 31, 201950,507 $51 101,219 $101 $280,994 $(183,034)$93,827 $191,939 
Net loss— — — — — (59,887)(123,670)(183,557)
Exchanges of LLC Units116 — (19)— 36 — (36)— 
Establishment of deferred tax assets related to increases in tax basis in Carvana Group— — — — 1,949 — — 1,949 
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group— — — — (1,949)— — (1,949)
Issuance of Class A common stock to settle vested restricted stock units38 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes(8)— — — (2,356)— — (2,356)
Options exercised7 — — — 145 — — 145 
Equity-based compensation— — — — 7,055 — — 7,055 
Balance, March 31, 202050,660 $51 101,200 $101 $285,874 $(242,921)$(29,879)$13,226 
Net loss— — — — — (40,830)(65,496)(106,326)
Issuances of Class A common stock, net of underwriters' discounts and commissions and offering expenses18,333 18 — — 1,058,922 — — 1,058,940 
Adjustment to non-controlling interests related to equity offerings— — — — (643,886)— 643,886 — 
Exchanges of LLC Units285 — — — 1,385 — (1,385)— 
Establishment of deferred tax assets related to increases in tax basis in Carvana Group— — — — 21,159 — — 21,159 
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group— — — — (21,159)— — (21,159)
Issuance of Class A common stock to settle vested restricted stock units61 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes(26)— — — (3,135)— — (3,135)
Options exercised101 — — — 2,676 2,676 
Equity-based compensation— — — — 7,700 — — 7,700 
Balance, June 30, 202069,414 $69 101,200 $101 $709,536 $(283,751)$547,126 $973,081 
Net loss— — — — — (7,085)(10,635)(17,720)
Exchanges of LLC Units1,039 1 — — 5,424 — (5,425)— 
5



Establishment of deferred tax assets related to increases in tax basis in Carvana Group— — — — 47,441 — — 47,441 
Establishment of valuation allowance related to deferred tax assets associated with increases in tax basis in Carvana Group— — — — (47,441)— — (47,441)
Issuance of Class A common stock to settle vested restricted stock units30 — — — — — — — 
Forfeitures of restricted stock and restricted stock surrendered in lieu of withholding taxes(2)— — — (3,129)— — (3,129)
Options exercised57 1 — — 2,086 — — 2,087 
Equity-based compensation— — — — 7,257 — — 7,257 
Balance, September 30, 202070,538 $71 101,200 $101 $721,174 $(290,836)$531,066 $961,576 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6



CARVANA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended September 30,
20202019
Cash Flows from Operating Activities:
Net loss$(307,603)$(238,899)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense52,076 27,505 
Loss on disposal of property and equipment5,708 1,046 
Provision for bad debt and valuation allowance10,752 7,030 
Gain on loan sales(129,041)(99,408)
Equity-based compensation expense18,011 25,366 
Amortization and write-off of debt issuance costs and bond premium5,745 3,569 
Originations of finance receivables(2,492,741)(1,877,336)
Proceeds from sale of finance receivables, net2,478,931 2,027,689 
Purchase of finance receivables (161,781)
Principal payments received on finance receivables held for sale60,113 54,623 
Unrealized (gain) loss on beneficial interests in securitization(4,021)219 
Changes in assets and liabilities:
Accounts receivable(45,575)(27,907)
Vehicle inventory(197,962)(213,762)
Other assets(17,743)(25,755)
Accounts payable and accrued liabilities112,495 65,452 
Operating lease right-of-use assets(18,237)(18,896)
Operating lease liabilities22,699 16,952 
Other liabilities(311)(382)
Net cash used in operating activities(446,704)(434,675)
Cash Flows from Investing Activities:
Purchases of property and equipment, including $21,657 and $6,282, respectively, from related parties
(270,486)(151,380)
Principal payments received on beneficial interests in securitizations8,782 2,577 
Net cash used in investing activities(261,704)(148,803)
Cash Flows from Financing Activities:
Proceeds from short-term revolving facilities3,425,755 3,093,039 
Payments on short-term revolving facilities(3,867,614)(3,133,186)
Proceeds from issuance of long-term debt203,047 367,349 
Payments on long-term debt(18,414)(11,087)
Payments of debt issuance costs(11,730)(8,423)
Net proceeds from issuance of Class A common stock1,058,940 297,611 
Proceeds from exercise of stock options4,907 1,492 
Tax withholdings related to restricted stock awards(8,619)(3,552)
Net cash provided by financing activities786,272 603,243 
Net increase in cash, cash equivalents and restricted cash77,864 19,765 
Cash, cash equivalents and restricted cash at beginning of period118,459 88,709 
Cash, cash equivalents and restricted cash at end of period$196,323 $108,474 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7


CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1 — BUSINESS ORGANIZATION

Description of Business

Carvana Co. and its wholly-owned subsidiary Carvana Co. Sub LLC (collectively, "Carvana Co."), together with its consolidated subsidiaries (the "Company"), is a leading e-commerce platform for buying and selling used cars. The Company is transforming the used car sales experience by giving consumers what they want — a wide selection, great value and quality, transparent pricing, and a simple, no pressure transaction. Using the website, customers can complete all phases of a used vehicle purchase transaction, including financing their purchase, trading in their current vehicle, and purchasing complementary products such as vehicle service contracts ("VSC") and GAP waiver coverage. Each element of the Company's business, from inventory procurement to fulfillment and overall ease of the online transaction, has been built for this singular purpose.

Organization

Carvana Co. is a holding company that was formed as a Delaware corporation on November 29, 2016 for the purpose of completing its initial public offering ("IPO") and related transactions in order to operate the business of Carvana Group, LLC and its subsidiaries (collectively, "Carvana Group"). Substantially all of the Company’s assets and liabilities represent the assets and liabilities of Carvana Group, except the Senior Notes (as defined in Note 9 — Debt Instruments) which were issued by Carvana Co. and guaranteed by its and Carvana Group's existing domestic restricted subsidiaries. 

In accordance with Carvana Group LLC's amended and restated limited liability company agreement (the "LLC Agreement"), Carvana Co. is the sole manager of Carvana Group and conducts, directs and exercises full control over the activities of Carvana Group. There are two classes of common ownership interests in Carvana Group, Class A common units (the "Class A Units") and Class B common units (the "Class B Units"). As further discussed in Note 10 — Stockholders' Equity, the Class A Units and Class B Units (collectively, the "LLC Units") do not hold voting rights, which results in Carvana Group being considered a variable interest entity ("VIE"). Due to Carvana Co.'s power to control and its significant economic interest in Carvana Group, it is considered the primary beneficiary of the VIE and the Company consolidates the financial results of Carvana Group. As of September 30, 2020, Carvana Co. owned approximately 40.4% of Carvana Group and the LLC Unitholders (as defined in Note 10 — Stockholders' Equity) owned the remaining 59.6%.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information. All intercompany balances and transactions have been eliminated. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. However, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included within the Company's most recent Annual Report on Form 10-K.
    
The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring items) necessary to present fairly the Company’s financial position as of September 30, 2020, results of operations and changes in stockholder's equity for the three and nine months ended September 30, 2020 and 2019, and cash flows for the nine months ended September 30, 2020 and 2019. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.

As discussed in Note 1 — Business Organization, Carvana Group is considered a VIE and Carvana Co. consolidates its financial results due to the determination that it is the primary beneficiary.

Liquidity

The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. The Company has incurred losses
8


CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
from inception through September 30, 2020, and expects to incur additional losses in the future as the Company continues to grow into new markets, build inspection and reconditioning centers ("IRCs") and vending machines, and enhance technology and software. During the nine months ended September 30, 2020, the Company has completed equity offerings of 18.3 million shares of Class A common stock for net proceeds of $1.1 billion. Since March 2020, the Company's forward flow partner has committed to purchase a total of $3.0 billion of the Company's finance receivables. In addition, subsequent to September 30, 2020, the Company increased its floor plan facility to $1.25 billion and extended the maturity to March 31, 2023. Also subsequent to September 30, 2020, the Company issued $1.1 billion in senior unsecured notes, $626.8 million of the proceeds from which were used to repay its senior notes due in 2023 and the remainder of which will be used for general corporate purposes. Management believes that the actions taken in respect of the COVID-19 pandemic, current working capital, results of operations, and existing financing arrangements are sufficient to fund operations for at least one year from the financial statement issuance date.

Use of Estimates

The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions. Certain accounting estimates involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period, which management considers to be critical accounting estimates. The judgments, assumptions and estimates used by management are based on historical experience, management’s experience, and other factors, which are believed to be reasonable under the circumstances. The COVID-19 pandemic has adversely impacted the global economy, as well as the Company's operations, and the extent and duration of the impacts remain unclear. Certain of the Company’s estimates, including, but not limited to, the Company’s allowance for loan losses, inventory valuations, fair value measurements, cancellation reserves, asset impairment charges, and discount rate assumptions, have been and may continue to be impacted and evolve as conditions change as a result of the COVID-19 pandemic. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company’s assets and liabilities and the results of operations.

Adoption of New Accounting Standards

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), which amends the guidance on the impairment of financial instruments by requiring measurement and recognition of expected credit losses for financial assets held. The Company adopted ASU 2016-13 on January 1, 2020. Financial assets measured at fair value through net income are excluded from the scope of ASU 2016-13. The Company's beneficial interests in securitizations are carried at fair value and are thus excluded from ASU 2016-13. Finance receivables originated in connection with the Company’s vehicle sales are held for sale and presented at the lower of amortized cost or fair value. The Company intends to sell the finance receivables prior to their contractual maturity, therefore the recovery of the asset is from its sale rather than maturity and the Company is not required to measure the expected lifetime credit losses. The adoption of ASU 2016-13 did not have a material effect on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13") related to updated requirements over the disclosures of fair value measurements. Under ASU 2018-13, certain disclosure requirements for fair value measurements will be eliminated, modified or added to facilitate better communication around recurring and nonrecurring fair value measurements. ASU 2018-13 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with some amendments applied prospectively, some applied retrospectively and early adoption permitted. The Company adopted ASU 2018-13 for its fiscal year beginning January 1, 2020 and it did not have a material effect on the Company's fair value disclosures within its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). The intent of this pronouncement is to align the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software as defined in ASC 350-40. Under ASU 2018-15, the capitalized implementation costs related to a cloud computing arrangement will be amortized over the term of the arrangement and all
9


CARVANA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
capitalized implementation amounts will be required to be presented in the same line items of the financial statements as the related hosting fees. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2018-15 for its fiscal year beginning January 1, 2020 and it did not have a material effect on its consolidated financial statements.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities ("ASU 2018-17"). ASU 2018-17 requires reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety for determining whether a decision-making fee is a variable interest. The standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. Entities are required to apply the amendments in ASU 2018-17 retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The Company adopted ASU 2018-15 for its fiscal year beginning January 1, 2020 and it did not have an effect on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides optional guidance for a limited period of time related to contract modifications and hedge accounting to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The standard is effective from March 12, 2020 through December 31, 2022, except for hedging relationships existing as of December 31, 2022 that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company may elect to take advantage of this optional guidance in its transition away from LIBOR within certain debt contracts but does not expect a material impact on its consolidated financial statements. As of September 30, 2020, the Company had not modified any contracts or had any hedge accounting activity in which it utilized the optional guidance under ASU 2020-04.

Accounting Standards Issued But Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company plans to adopt ASU 2019-12 for its fiscal year beginning January 1, 2021 and is currently assessing the impact, if any, the guidance will have on its consolidated financial statements.

NOTE 3 — PROPERTY AND EQUIPMENT, NET

The following table summarizes property and equipment, net as of September 30, 2020 and December 31, 2019:
September 30, 2020December 31, 2019
(in thousands)
Land and site improvements$130,890 $98,530 
Buildings and improvements346,651 229,640 
Transportation fleet148,270 110,302 
Software99,151 66,875 
Furniture, fixtures and equipment56,819 38,123 
Total property and equipment excluding construction in progress781,781 543,470 
Less: accumulated depreciation and amortization on property and equipment(146,241)(88,795)
Property and equipment excluding construction in progress, net635,540 454,675 
Construction in progress164,641 88,796 
Property and equipment, net$