ABG 10-K & 10-Q changes, risk factors and insider trading

We are subject to substantial risk of property loss due to the significant concentration of property at dealership locations, including vehicles and parts. We have historically experienced business interruptions from time to time at several of our dealerships, due to actual or threatened adverse weather conditions or natural disasters, such as hurricanes, earthquakes, tornadoes, floods, hail storms,hailstorms, fires or other extraordinary events. For example, in 2024, Hurricanes Helene and Milton impacted store operations in Florida, Georgia, and South Carolina, leading to temporary store closures and reduced customer traffic. Concentration of property at dealership locations also makes the automotive retail business particularly vulnerable to theft, fraud and misappropriation of assets. Illegal or unethical conduct by employees, customers, vendors, and unaffiliated third parties can result in loss of assets, disrupt operations, impact brand reputation, jeopardize manufacturer and other relationships, result in the imposition of fines or penalties, and subject us to governmental investigations or lawsuits. While we maintain insurance to protect against a number ofvarious losses, this insurance coverage often contains significant deductibles. In addition, we "self-insure" a portion of our potential liabilities, meaning we do not carry insurance from a third-partythird party for such liabilities, and are wholly responsible for any related losses including for certain potential liabilities that some states prohibit the maintenance of insurance to protect against. In certain instances, our insurance may not fully cover a loss depending on the applicable deductible or the magnitude and nature of the claim. Additionally, changes in the cost or 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 our self-insured risks. To the extent we incur significant additional costs for insurance, suffer losses that are not covered by in-force insurance or suffer losses for which we are self-insured, our financial condition, results of operations and cash flows could be materially adversely impacted.

We believe that the automotive retailing industry is a mature industry whose sales are significantly impacted by the prevailing economic climate, both nationally and in local markets. Accordingly, we believe that our future growth depends in part on our ability to manage expansion, control costs in our operations and acquire and effectively integrate acquired dealerships into our organization. For example, with the consummation of the Koons acquisition in 2023 and the pending Herb Chambers acquisition,acquisition in 2025, we have experienced, and expect to continue to experience, significantly more sales, and have more assets and employees than we did previously.prior However,to therethe cantransaction. beThe nointegration assuranceprocesses thatrequire thereus willto beexpend sufficientsignificant revenuecapital and significantly expand the scope of our operations and financial systems. Integration also requires support or other actions by third parties such as vendors, suppliers, and licensing agencies and the untimely or inadequate responses from such acquisitionsthird toparties offsetcan increaseddelay expensesor andotherwise costsnegatively arisingimpact outthe ofintegration such acquisitions.process.

When seeking to acquire other dealerships, we often compete with several other national, regional and local dealership groups, and other strategic and financial buyers, some of which may have greater financial resources than us. Competition for attractive acquisition targets may result in fewer acquisition opportunities for us and we may have to forgo acquisition opportunities to the extent we cannot negotiate such acquisitions on acceptable terms. The integration processes require us to expend significant capital and significantly expand the scope of our operations and financial systems. Integration also requires support or other actions by third parties such as vendors, suppliers, and licensing agencies, and the untimely or inadequate responses from such third parties can delay or otherwise negatively impact integration processes.

We also face additional risks commonly encountered with growth through acquisitions. These risks include, but are not limited to: (i) failing to obtain manufacturers’ consents to acquisitions of additional franchises; (ii) manufacturers' requirements to divest certain franchises when acquiring additional franchises; (iii) incurring significant transaction-related costs for completed,both failedcompleted and pendingfailed acquisitions; (iviii) incurring significantly higher capital expenditures and operating expenses; (v) the inability to obtain the necessary financing in order to complete acquisitions; (viiv) failing to successfully integrate the operations and personnel of the acquired dealerships and impairing relationships with employees; (vii) impairing relationships with employees of the acquired dealerships; (viiiv) incorrectly valuing entities to be acquired or incurring undisclosed liabilities at acquired dealerships; (ixvi) disrupting our ongoing business and diverting our management resources to newly acquired dealerships; (xvii) failing to achieve expected performance levels and financial results on a same store basis after integration; (xiviii) impairing relationships with manufacturers and customers as a result of changes in management; (xii) delays or difficulties related to our ability to obtain future necessary regulatory approvals for TCA in jurisdictions applicable to acquired dealerships; (xiii) difficulties in entering geographic markets in which we have no or limited direct prior experience; (xivix) failing to realize expected benefits and synergies from the transaction; and (xvix) failing to implement or improve controls, policies and information systems and related security measures in the acquired businesses.

Our inability to execute a substantial portion of our business strategy,strategy could adversely affect our business, results of operations, financial condition and cash flows.flow. We seek to execute on our strategic plan using a variety of growth efforts, which includesinclude driving same-store revenue growth and acquiring additional revenue through strategic acquisitions. Many of the factors that impact our ability to execute our strategic vision, such as the advancement of certain technologies, general economic conditions and legal and regulatory obstaclesobstacles, are beyond our control.

Consumers are increasingly shopping for new and used vehicles, automotive repair and maintenance serviceservices and other automotive products and services online and through mobile applications, including through third-party online and mobile sales platforms, with which we compete, that are designed to generate consumer sales that are sold to automotive dealers.compete. We have invested and will continue to invest in our omni-channel and other online applications in furtherance of our strategic vision. We face increased competition for market share from other automotive retailers and other sales platforms that have also invested in digital channels. There can be no assurance that our initiatives and investments in digital channels will be successful or result in improved financial performance.

We may not adequately anticipate all the demands that our growth will impose on our personnel, procedures and structures, including our financial and reporting control systems, information technology systems, data processing systems, and management structure. Furthermore, we may decide to alter or discontinue aspects of our strategic plan and may adopt alternative or additional strategies in response to business or competitive factors or other factors or events beyond our control. We cannot give assurance that we will be able to execute a substantial portion of our strategic plan which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The loss or transition of key personnel and limited management and personnel resources could adversely affect our business.

Our success depends, to a significant degree, upon the continued contributions of our management team,team and service and sales personnel.personnel, and the ability of the Company to establish an effective succession plan to ensure leadership continuity when key personnel leave, retire or unexpectedly depart. In addition, manufacturer dealer orand framework agreements may require the prior approval of the applicable manufacturer before any change is made in dealership general managers or other management positions. The loss of the services of one or more of these key employees may materially impair the profitability of our operations,operations or may result in a violation of an applicable dealer or framework agreement. In addition, the market for qualified employees in the industry and in the states in which we operate, specifically for general managers and sales and service personnel, is highly competitive and may subject us to increased labor costs during periods of low unemployment. The loss of the services of such employees or the inability to attract additional qualified employees may adversely affect the ability of our dealerships to conduct their operations in accordance with the standards set by us or the manufacturers. If we are unable to retain our key personnel, we may be unable to successfully execute our business plans, which may have a material adverse effect on our business.

We may not realize the strategic benefits and cost synergies that are anticipated from the planned Herb Chambers Dealerships acquisition.

Our future growth depends in part on our ability to acquire and effectively integrate acquired dealerships into our organization, such as the pending Herb Chambers Dealerships acquisition. The benefits that are expected to result from the Herb Chambers Dealerships acquisition will depend, in part, on our ability to consummate the Herb Chambers Dealerships acquisition within the anticipated time period, or at all, and to integrate and realize the anticipated revenue and cost synergies from the Herb Chambers Dealerships acquisition. There is a significant degree of difficulty and management distraction inherent in the process of integrating an acquisition. Some members of our management may be required to devote considerable time to this integration process, which will decrease the time they will have to manage the Company, service existing customers, attract new customers and develop new businesses or strategies. If management is not able to effectively manage the integration process, orincluding without limitation the rollout of our TCA products to the Herb Chambers dealerships and the transition of the Herb Chambers platform to Tekion,or if any significant business activities are interrupted as a result of the integration process, our business, financial condition and results of operations could suffer. We also cannot guarantee that the benefits and cost synergies that we currently expect to realize as a result of the Herb Chambers Dealerships acquisition will be achieved within our anticipated time frames or at all. Additionally, we may incur substantial expenses in connection with the integration of the Herb Chambers Dealerships,dealerships, which may exceed expectations and offset certain anticipated benefits.benefits, and in connection with certain ongoing obligations under the Herb Chambers Transaction Agreement.

Our future performance will be impacted by general economic conditionsconditions, including among other things: changes in employment levels; consumer demand, preferences and confidence levels; the availability and cost of credit; fuel prices; levels of discretionary personal income; inflation; interest rates; and changes in U.S. trade policy, including the imposition of tariffs and resulting consequences. Recently,Inflation inflationcontinues hasto increasedbe an issue throughout the U.S. economy. Inflation can adversely affect us by increasing the costs of labor, fuel and other costs as well as by reducing demand for automobiles. Sales of certain vehicles, particularly trucks and sport utility vehicles that historically have provided us with higher gross profit per vehicle retailed, may be sensitive to fuel prices. In addition, rapid changes in fuel prices can cause shifts in consumer preferences which are difficult to accommodate given the long lead-time of inventory acquisition. Inflation is also often accompanied by higher interest rates, which could reduce the fair value of our outstanding debt obligations. Changes in interest rates can also significantly impact new and used vehicle sales and vehicle affordability due to the direct relationship between interest rates and monthly loan payments, a critical factor for many vehicle buyers, and the impact interest rates have on customers’ borrowing capacity and disposable income. In an inflationary environment, depending on automotive industry and other economic conditions, we may be unable to raise prices to keep up with the rate of inflation, which would reduce our profit margins. We have experienced, and continue to experience, increases in the prices of labor, fuel and other costs of providing service. Continued inflationary pressures could impact our profitability.

In addition, ifIf a vehicle manufacturer’s financial condition worsens and it seeks protection from creditors in bankruptcy or similar proceedings, or otherwise under the laws of its jurisdiction of organization, (i) the manufacturer could seek to terminate or reject all or certain of our franchises, (ii) if the manufacturer is successful in terminating all or certain of our franchises, we may not receive adequate compensation for those franchises, (iii) our cost to obtain financing for our new vehicle inventory may increase or no longer be available from such manufacturer’s captive finance subsidiary, (iv) consumer demand for such manufacturer’s products could be materially adversely affected, especially if costs related to improving such manufacturer’s financial condition are factored into the price of its products, (v) there may be a significant disruption in the availability of consumer credit to purchase or lease that manufacturer’s vehicles or negative changes in the terms of such financing, which may negatively impact our sales, or (vi) there may be a reduction in the value of receivables and inventory associated with that manufacturer, among other things. The occurrence of any one or more of these events could have a material adverse effect on our business, results of operations, financial condition, and cash flows.

Furthermore,In addition, the automotive manufacturing supply chain spans the globe. As such, supply chain disruptions resulting from natural disasters, adverse weather, pandemics, tariffs, labor stoppages, wars, conflicts and other events may affect the flow of vehicle and parts inventories to us or our manufacturing partners. If we experience disruptions in the supply of vehicle and parts inventories, such disruptions could have a material adverse effect on our business, results of operations, financial condition, and cash flows.

We havemay identifiedidentify a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements or otherwise adversely affect the accuracy, reliability or timeliness of our financial statements.

As described under Item 9A. "Controls and Procedures" below, we havepreviously concluded that a material weakness in our internal control over financial reporting existed as of December 31, 2024 and, accordingly, internal control over financial reporting and our disclosure controls and procedures were not effective as of such date. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. As a result of management's evaluation, managementManagement identified the material weakness as a result of deficiencies in information technology general controls ("ITGCs") at a third-party software vendor who supports the Dealer Management System ("DMS") utilized by the Koons dealership group that we acquired in December 2023.

ManagementDuring has2025, developedwe its remediation plan and plans to implement it during 2025. Untilcompleted the remediation planmeasures isrelated fully implemented, tested and deemed effective, we cannot provide assurance that our actions will adequately remediateto the material weakness orand we have concluded that additional material weaknesses in our internal controls will not be identified in the future. Effective internal control over financial reporting is necessaryeffective foras usof December 31, 2025. Completion of remediation does not provide assurance that our remediation or other controls will continue to provideoperate reliableproperly. and timely financial reports and, together with adequate disclosure controls and procedures, are designedFailure to reasonablymaintain detect and prevent fraud. The occurrence of, or failure to remediate, this material weakness and any future material weaknesses in oureffective internal control over financial reporting may adversely affect the accuracy, reliabilityaccuracy and timelinessreliability of our financial statements and have other consequences that couldmay materially and adversely affect our business.

A failure of any of our information systems or those of our third-party service providers, the inability to successfully transition from one key information system platform to a different platform, or a data security breach with regard to personally identifiable information ("PII") about our customers or employees, or other cybersecurity incident, could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We depend on the efficient operation of our information systems and those of our third-party service providers. We rely on information systems at our dealerships in all aspects of our sales and service efforts, as well as in the preparation of our consolidated financial and operating data. All of our dealerships currently operate on three dealer management systems ("DMS"). We have piloted a new DMS, and the inability to successfully transition from our existing DMS to a new DMS could have a material adverse effect on the management of our day-to-day business activities. Additionally, in the ordinary course of business, we and our partners receive significant PII about our customers in order to complete the sale or service of a vehicle and related products. We also receive PII from our employees. The regulatory environment surrounding information security and privacy is increasingly demanding, with numerous state and federal regulations, as well as payment card industry and other vendor standards, governing the collection and maintenance of PII from consumers and other individuals.

CyberCybersecurity incidents can result from human error or intentional (or deliberate) attacks or unintentional events by insiders (e.g., employees) or third parties, including cybercriminals, competitors, nation-states and "“hacktivists,"” among others. CyberCybersecurity incidents can include, for example, phishing, credential harvesting or use of stolen access credentials, unauthorized access to systems, networks or devices (for example, through hacking activity), structured query language attacks, infection from or spread of malware, ransomware, computer viruses or other malicious software code, corruption of data, exfiltration of data to malicious sites, the dark web or other locations or threat actors, the use of fraudulent or fake websites, and other attacks (including, but not limited to, denial-of-service attacks on websites), which shut down, disable, slow, impair or otherwise disrupt operations, business processes, technology, connectivity or website or internet access, functionality or performance. In addition to intentional cybercybersecurity incidents, unintentional cybercybersecurity incidents can occur (for example, the inadvertent release of confidential or non-public personal information). Changes to our business, processes, systems, or technology, if not implemented properly, can increase our vulnerability to cybercybersecurity incidents.

Our business could be significantly disrupted if (i) the DMS fails to integrate with other third-party information systems, customer relations management tools or other software, or to the extent that any of these systems become unavailable to us or fail to perform as designed for an extended period of time for any reason or (ii) our relationship with our DMS providers or any other third-party provider deteriorates. Additionally, any disruption to access and connectivity of our information systems due to natural disasters, power loss or other reasons could disrupt our business operations, impact sales and results of operations, expose us to customer or third-party claims, or result in adverse publicity. In addition, we believe the automotive dealership industry is a particular target of identity thieves and other threat actors, as there are numerous opportunities for cybersecurity incidents, including cybersecurity breaches, burglary, lost or misplaced data, malware, ransomware, computer viruses or other malicious software code, corruption of data, exfiltration of data to malicious sites, the dark web or other locations or threat actors, or misappropriation of data by employees, vendors or unaffiliated third parties. Because of the increasing number and sophistication of some cybersecurity incidents and cyber-attacks, including increased artificial intelligence driven "deep fake" and social engineering, and despite the security measures we have in place and any additional measures we may implement or adopt in the future, our facilities and systems, and those of our third-party service providers and business partners, which include but are not limited to vehicle manufacturers, could be vulnerable to cybersecurity incidents, security breaches, computer viruses, lost or misplaced data, programming errors, scams, burglary, human errors, acts of vandalism and/or other events. While weAdvances and the increased use and availability of artificial intelligence by the Company and others, including but not limited to business partners andpartners, service providers onand whichthreat weactors, relymay havemake experienced cybersecuritycyber incidents inmore thedifficult past,to identify, contain and may experience additional incidents in the future, we are not aware of any incident having a material adverse effect on our business, results of operations or financial condition to date. However, there can be no assurance that we or the business partners and service providers on which we rely will not experience future cybersecurity incidents that may be material. Although we believe we have systems and processes in place to protect against risks associated with cybersecurity incidents in the future, depending on the nature of an incident, these protections may not be fully sufficient. In addition, because techniques used in cybersecurity attacks and incidents change frequently and may not be recognized until launched against a target, we or our business partners and service providers may be unable to anticipate these techniques or to implement adequate preventative measures. An incident may not be detected until well after it occurs and the severity and potential impact may not be fully known for a substantial period of time after it has been discovered. Any such alleged or actual incident can increase costs of doing business, negatively affect customer satisfaction and loyalty, expose us to negative publicity, individual claims or consumer class actions, administrative, civil or criminal investigations or actions, and infringe on proprietary information, any of which could have a material adverse effect on our business, financial condition, results of operations or cash flows.mitigate.

In May 2016, we signed a consent order with the FTC to settle allegations that in certain instances our advertisements did not adequately disclose information about used vehicles with open safety recalls. Under the consent order, we did not agree to make any payments or admit wrong-doing, but we did agree to make certain disclosures in marketing materials and at the point of sale and comply with certain record-keeping obligations. Our failure to comply with the consent order may result in the imposition of significant fines and/or penalties, which could have a material adverse effect on our results of operations. In January 2024, the FTC published the Combatting Auto Retail Scams Final Rule (the "CARS Rule"), which prohibits a broad range of current accepted industry sales and marketing practices and imposes significant new dealer disclosure obligations and record-keeping requirements throughout the vehicle-buying process. The FTC stayed the CARS Rule’s original effective date of July 30, 2024 pending the resolution of a judicial challenge to the CARS Rule. On January 27, 2025, the United States Court of Appeals for the Fifth Circuit ruled to vacate the CARS Rule on the basis that the FTC violated procedural rules by not providing advance notice of the planned regulation. Although currently nullified based on the Fifth Circuit's ruling, compliance with the CARS Rule, if it becomes effective, would be burdensome and cause us to incur increased costs. A failure to comply with the CARS Rule would expose us to potential significant damages, penalties and adverse publicity, which could have a material adverse effect on our business, operations and financial results.

Continued pressure from the CFPB, FTC, and other federal agencies could lead to significant changes in the manner that dealers are compensated for arranging customer financing and vehicle protection products, and while it is difficult to predict how any such changes might impact us, any adverse changes could have a material adverse impact on our finance and insurance business and results of operations. Furthermore, we expect that new laws and regulations, particularly at the federal level, in other areas may be enacted, which could also materially adversely impact our business. On August 3, 2022, we received a Civil Investigative Demand ("“CID"”) from the FTC requesting information and documents concerning the Company’s corporate structure and operation of six of its dealerships. We responded to the CID by producing information and documents for the period August 1, 2019 to April 24, 2023. On February 8, 2024, the FTC staff counsel sent to us a proposed consent order and draft complaint, alleging that the Company and three of our dealerships had violated Section 5 of the Federal Trade Commission Act ("“FTC Act"”) and certain provisions of the Equal Credit Opportunity Act ("ECOA") in connection with the sale of add-on products (e.g., vehicle service contracts, maintenance plans, etc.), and advised that it would recommend the filing of an enforcement action if the Company did not settle the FTC’s claims. The Company vigorously disputed, and continues to vigorously dispute, the FTC’s allegations that it violated the FTC Act and the ECOA.allegations. As a result, on August 16, 2024, the FTC initiated an administrative proceeding by filing an enforcement action against the Company; David McDavid Honda Frisco, David McDavid Honda Irving, and David McDavid Ford Fort Worth, three of the Company’s dealerships; and an individual general manager at one of the dealerships pursuant to the allegations set forth above. On October 4, 2024, the Company filed a lawsuit against the FTC in the United States District Court for the Northern District of Texas, seeking to enjoin the FTC’s administrative proceeding on the ground that the administrative proceeding was unconstitutional. Among other things, the Company’s lawsuit asserts that the FTC’s administrative proceeding violates Asbury’sthe Company’s constitutional rights by denying it the right to a jury trial and by allowing the FTC to serve as both prosecutor and judge in the same proceeding. The Company’s lawsuit also contends that FTC commissioners and in-house administrative law judges are effectively insulated from removal by the President in contravention of the Constitution’s requirements. AtThe thisFTC’s time,administrative weproceeding and the Company’s lawsuit remain pending. We are unable to reasonably predict the possible outcome of the Company’s dispute with the FTC,FTC at this time, or provide a reasonably possible range of loss, if any. There can be no assurance that the Company will succeed in either the FTC’s administrative proceeding against the Company or in the Company’s lawsuit against the FTC, and the FTC’s allegations, whether meritorious or not, may adversely affect our ability to attract customers, result in the loss of existing customers, harm our reputation and cause us to incur defense costs and other expenses.

This MD&A should be read in conjunction with the accompanying audited consolidated financial statements and notes. Forward-looking statements in this MD&A are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to the "Forward-Looking Statements" and Part I, Item 1A. Risk Factors for a discussion of these risks and uncertainties. TheAn discussionanalysis of our financial condition andconsolidated results of operations for the2024 yearand ended2023 Decemberand 31,year-to-year 2022comparisons isbetween included2024 and 2023 can be found in MD&A in Part II, Item 7. Management's Discussion and Analysis7 of Financialthe Condition and Results of Operations in our Annual Report onCompany’s Form 10-K for the year ended December 31, 2023.2024.

We are one of the largest automotive retailers in the United States. As of December 31, 2024,2025, through our Dealerships segment, we owned and operated 198223 new vehicle franchises (152171 dealership locations), representing 3136 brands of automobiles, within 1415 states. We also operated 3739 collision centers, and Total Care Auto, Powered by LandcarAsbury ("TCA"), our F&I product provider. Our stores offer an extensive range of automotive products and services, including new and used vehicles; parts and service, which include repair and maintenance services, replacement parts, and collision repair service; and finance and insurance products. The finance and insurance products are provided by both TCA and independent third parties. The F&I products offered by TCA are sold through affiliated dealerships. For the year ended December 31, 2024,2025, our new vehicle revenue brand mix consisted of 41%40% imports, 30%32% luxury, and 29%28% domestic brands. The Company manages its operations in two reportable segments: Dealerships and TCA.

Our dealershipsDealerships segment gross profit margin varies with our revenue mix. Historically, the sales of new vehicles generally results in a lower gross profit margin than used vehicle sales, sales of parts and service, and sales of F&I products. As a result, when used vehicle, parts and service, and F&I revenue increase as a percentage of total revenue, we expect our overall gross profit margin to increase. However, during and after the COVID-pandemic, new vehicle gross profit margins have been above historical levels and higher than used vehicle gross margins as a result of inventory disruptions from supply chain issues.

JimHerb KoonsChambers Acquisitionacquisition

•The increase in consolidated revenue and consolidated gross profit iswas primarily due to the effects of the KoonsHerb Chambers acquisition and growth in parts and services gross profit. This increase was offset by lower gross profit per vehicle sold for both new and usedvehicles as margins continue to shift downward from the historic highs in recent years.

•The effects of dealership divestitures also impacted consolidated revenue and gross profit. During the year ended December 31, 2024,2025, we divested five24 franchises (five15 dealership locations). These divested dealerships contributed $121.2approximately $436.3 million of revenue during the year ended December 31, 2024.2025.

•Our capital allocation priorities were supported by share repurchases of approximately 830,297 million432,752 shares for $183.0$99.9 million during the year ended December 31, 2024.2025.

The Company's full year results for 20242025 include the results of the KoonsHerb Chambers dealerships acquired in theJuly fourth quarter of 2023.2025. Accordingly, the significant increases in revenue, gross profit and income from operations for 20242025 compared to 20232024 are largely a result of this acquisition.

Total revenue during 20242025 increased by $2,385.9$810.4 million (16%5%) compared to 2023,2024, due to a $1,219.0$646.5 million (16%7%) increase in new vehicle revenue, ana $803.9$152.1 million (18%) increase in used vehicle revenue, a $273.2 million (13%6%) increase in parts and service revenue, a $7.2 million increase in used vehicle revenue and ana $89.8$4.6 million (13%1%) increase in F&I revenue.

The $192.8$123.0 million (7%4%) increase in gross profit during 20242025 was the result of a $200.6$121.3 million (17%9%) increase in parts and service gross profit, a $13.6 million (6%) increase in used vehicle gross profit and a $73.4$6.5 million (11%1%) increase in F&I gross profit, partially offset by aan $62.6$18.4 million (9%3%) decrease in new vehicle gross profit and an $18.6 million (7%) decrease in used vehicle gross profit. Our total gross profit margin decreased 1469 basis points from 18.6% in 2023 to 17.2% in 2024.2024 to 17.1% in 2025.

Income from operations during 20242025 decreasedincreased by $117.9$25.0 million (12%3%) compared to 2023,2024, primarily due to a $271.2$123.0 million (17%4%) increase in gross profit and an $8.5 million (6%) decrease in asset impairments, partially offset by a $99.0 million (5%) increase in selling, general and administrative expenses and aan $32.3$8.5 million (28%6%) increase in assetdepreciation impairments,and partiallyamortization offset by a $192.8 million (7%) increase in gross profit.expense.

Total other expenses, net increaseddecreased by $108.1$61.9 million (71%24%) from expenses of $152.2$260.3 million in 20232024 to $260.3$198.4 million of expenses in 2024,2025, primarily due to ana $80.2$71.6 million (NM828%) increase in floorgain planon interestdealership expense,divestitures, anet, $23.0partially offset by an $8.3 million (15%5%) increase in other interest expense, net and a $4.9$1.3 million (36%1%) decreaseincrease in gainfloor onplan dealershipinterest divestitures, net.expense. As a result, income before income taxes decreasedincreased by $226.0$86.9 million (28%15%) to $575.3$662.2 million in 2024.2025. The $53.8$25.3 million (27%17%) decreaseincrease in income tax expense was primarily attributable to the 28%15% decreaseincrease in income before taxes, partially offset byand a 4050 basis point increase in the 20242025 effective tax rate. Overall, net income decreasedincreased by $172.2$61.6 million (29%14%) from $602.5 million in 2023 to $430.3 million in 2024.2024 to $492.0 million in 2025.

During 2024,2025, new vehicle revenue increased by $1,219.0$646.5 million (16%7%) when compared to 2023,2024, as a result of a 16%5% increase in new vehicle unit sales.sales, combined with a 3% increase in revenue per new vehicle sold which increased to $52,406 for the year ended December 31, 2025, from $51,090 for the year ended December 31, 2024. Same store new vehicle revenue increased by $28.5$316.0 million (4%) mainly driven by an increase in the number of units sold which increased by 4,392 (3%) for the year ended December 31, 2025 as compared to the same period in the prior year. In addition, same store revenue per new vehicle sold increased from $51,251$51,285 for the year ended December 31, 20232024 to $51,484$51,830 for the year ended December 31, 2024.2025.

New vehicle gross profit decreased by $62.6$18.4 million (9%3%) infor 2024the year ended December 31, 2025 when compared to 2023,the same period in the prior year, as a result of a 21%7% decrease in gross profit per new vehicle sold which decreased from $3,697 for the year ended December 31, 2024 to $3,432 for the year ended December 31, 2025, partially offset by a 16%5% increase in unit volumes.volumes sold. Same store new vehicle gross profit decreased by $149.9$49.0 million (22%8%) in 20242025 as a result of aan 22%11% decrease in gross profit per new vehicle sold. Same store new vehicle gross margin decreased 20583 basis points from 7.3% for the year ended December 31, 2024 to 7.2%6.4% infor 2024.the year ended December 31, 2025. The decrease in our new vehicle gross profit margin was primarily attributable to the continued easingsoftening of new vehicle inventory constraints which softened the historically high new vehicle margins seen in recent years.

The seasonally adjusted annual rate ("SAAR") for new vehicle sales in the U.S. during the year ended December 31, 20242025 was approximately 15.816.2 million which increased as compared to approximately 15.415.8 million during the year ended December 31, 2023. The increase in new vehicle sales revenue on a same store basis for the year ended December 31, 2024 over the same period in the prior year is primarily attributable to an increase of $234 of revenue per new vehicle sold, while new vehicle units sold remained relatively flat for the year ended December 31, 2024 as compared to the same period in the prior year.2024. The increase in SAAR period over period reflects higher inventory supply, including fleet, coupled with continuedincreased consumer demand due to concerns with respect to rising vehicle prices in light of, among other things, tariffs. In addition, we saw increased demand for new vehicles.electric However,vehicles we continue to be negatively impacted bybefore the significantexpiration variationof federal tax credits in newSeptember vehicle days supply among brands and models.2025. We ended the year with approximately 4952 days of supply of new vehicle inventory which reflects an increase from 4349 days of supply as of December 31, 20232024, but remains well below historical levels.

Used vehicle revenue increased by $803.9$7.2 million (18%),million, due to a $588.4$63.5 million (15%) increase in used vehicle retail revenue and a $215.5 million (54%10%) increase in used vehicle wholesale revenue, partially offset by a $56.3 million (1%) decrease in used vehicle retail revenue. Same store used vehicle revenue decreased by $140.5$185.0 million (3%4%) due to a $211.2$210.9 million (5%) decrease in used vehicle retail revenue, partially offset by a $70.7$25.9 million (19%4%) increase in used vehicle wholesale revenue. Used vehicle revenues and unit volume have continued to contract during 2024, along with margins2025, on both an all store and same store basis. Used vehicle revenue and unit volumes havecontinue beento be negatively impacted by the affordability headwinds and lack of inventory availability, especially in vehicles with lower mileage.

The $273.2$152.1 million (13%6%) increase in parts and service revenue was due to a $185.6$95.8 million (17%8%) increase in customer pay revenue, a $65.7$66.4 million (24%19%) increase in warranty revenue, partially offset by a $15.3$4.9 million (3%1%) increasedecrease in wholesale parts revenue and a $6.6$5.1 million (2%) increasedecrease in collision revenue. Same store parts and service revenue increased $35.9$73.7 million (2%3%) from $2.03$2,212.70 billionmillion in 20232024 to $2.06$2,286.4 billionmillion in 2024.2025. The increase in same store parts and service revenue was due to a $42.7$52.0 million (4%) increase in customer pay revenue and a $33.0$38.2 million (12%) increase in warranty revenue, partially offset by a $15.6$13.8 million (4%5%) decrease in collision revenue and a $2.7 million (1%) decrease in wholesale parts revenue and a $24.2 million (9%) decrease in collision revenue.

Parts and service gross profit, excluding reconditioning and preparation, increased by $167.4$107.9 million (18%10%) to $1.10$1,211.9 billionmillion and same store gross profit, excluding reconditioning and preparation, increased by $55.4$57.2 million (6%5%) to $968.2$1,100.1 million. The $55.4$57.2 million increase in same store gross profit, excluding reconditioning and preparation, is primarily due to a $44.5$41.0 million (8%6%) increase in customer pay gross profit and a $21.3$21.7 million (15%12%) increase in warranty gross profit, partially offset by ana $8.1$5.8 million (7%5%) decrease in collision gross profitprofit. and a $2.3 million (3%) decrease in wholesaleWholesale parts gross profit.profit held steady on a same store basis for the year ended year ended December 31, 2025 as compared to the same period in the prior year. As a result of the shortage of new vehicle inventory in recent years, coupled with inflationary headwinds, many customers have elected to keep their current vehicles longer which has generated additional customer pay gross profit for the service departments. In addition, the increasing complexity of vehicles due to advanced systems is increasing the frequency of recalls resulting in an increase in warranty gross profit. We continue to focus on increasing our customer pay parts and service revenue over the long-term by improving the customer experience, providing competitive benefits to our technicians, capitalizing on our dealership training programs and upgrading equipment.

F&I revenue, net increased by $89.8$4.6 million (13%1%) in 20242025 when compared to 20232024 primarily as a result of a 17%$17 (1%) increase in F&I per vehicle retailed which was partially offset by a decline in new and used retail unit sales, partially offset by a $107 (5%) decrease in F&I per vehicle retailed.sales.

SG&A expense as a percentage of gross profit increased 53666 basis points from 58.7% in 2023 to 64.0% in 2024.2024 to 64.7% in 2025. Same store SG&A expense as a percentage of gross profit increased 52816 basis points from 58.3% in 2023 to 63.5% in 2024.2024 to 63.7% in 2025. The increase in SG&A as a percentage of gross profit is primarily the result of higher cost in personnel and other categories in SG&A expense partially offset by higher gross profits for 20242025 as compared to 2023.2024. SG&A expense as reported for the year ended December 31, 2025 increased by $99.0 million (0.7%) as compared to the year ended December 31, 2024 primarily due to the acquisition of the Herb Chambers stores in July 2025 and an increase in professional and legal fees including those related to the Herb Chambers acquisition ($15.4 million) and the Tekion implementation project ($8.6 million) which was partially offset by an insurance recovery of $15.0 million. On a same store basis, the increase in SG&A expense for the year ended December 31, 20242025 includesas $7.1 million of expense relatedcompared to hail damage and $6.4 million of expense related to Hurricane Milton. SG&A expense for the year ended December 31, 20232024 includesis $4.3due to an increase in professional and legal fees offset by the insurance recovery of $15.0 million of expense related to hail damage, a $3.6 million gain fromand the saledecrease in personnel costs of real$5.5 estate and $4.1 million of professional fees related to the Koons acquisition.million.

During the year ended December 31, 2024,2025, we recognized asset impairment charges of $149.5$141.0 million as compared to $117.2$149.5 million of impairment charges during the year ended December 31, 2023.2024. The asset impairment charges resulted from our interim and annual franchise rights impairment tests and the classification of certain asset disposal groups as held for sale which resulted in additional franchise rights and goodwill impairment charges.

During the year ended December 31, 2023,2025, we sold 124 franchisefranchises (115 dealership locationlocations) infor Austin,an Texas.aggregate purchase price of approximately $566.5 million. The Company recorded a pre-tax gain totaling $13.5$80.2 million.million, which is presented in our accompanying consolidated statements of income as a gain on dealership divestitures, net.

The $53.8$25.3 million (27%17%) decreaseincrease in income tax expense was primarily the result of a $226.0$86.9 million (28%15%) decreaseincrease in income before income taxes. Our effective tax rate increased 4050 basis points from 24.8% in 2023 to 25.2% in 2024.2024 to 25.7% in 2025. The increase in our effective tax rate was primarily due to our acquisition and divestiture activity. Stores acquired are located in relatively high tax rate states while the stores divested are located in relatively low or no tax rate states.

We are one of the largest automotive retailers in the United States. As of MarchJune 31,30, 2026, through our Dealerships segment, we owned and operated 202 new vehicle franchises (158 dealership locations), representing 34 brands of automobiles, within 14 states. We also operated 37 collision centers, and Total Care Auto, Powered by Asbury ("TCA"), our F&I product provider. Our stores offer an extensive range of automotive products and services, including new and used vehicles; parts and service, which include repair and maintenance services, replacement parts and collision repair service; and finance and insurance products. The finance and insurance products are provided by both TCA and independent third parties. The F&I products offered by TCA are sold through affiliated dealerships. For the threesix months ended MarchJune 31,30, 2026, our new vehicle revenue brand mix consisted of 40%41% imports, 35%33% luxury,luxury and 26% domestic brands. The Company manages its operations in two reportable segments: Dealerships and TCA.

The Company's operating results for the three and six months ended MarchJune 31,30, 2026 include the results of the Herb Chambers Businesses acquired in the third quarter of 2025. Accordingly, the three and six months ended MarchJune 31,30, 2026,2026 includes increases in revenue and gross profit related to the Herb Chambers Businesses, which have been offset by declines in revenues and gross profits due to several dealership divestitures in the second through fourth quarters of 2025 and February 2026.

Three Months Ended MarchJune 31,30, 2026 Compared to the Three Months Ended MarchJune 31,30, 2025

Total revenue for the three months ended MarchJune 31,30, 2026 decreasedincreased by $35.5$11.5 million (1%) compared to the three months ended MarchJune 31,30, 2025, due to a $37.3$33.1 million (2%6%) decreaseincrease in parts and service revenue, a $26.3 million (1%) increase in new vehicle revenue, and a $29.5$1.9 million (2%1%) decrease in used vehicle revenue, and a $7.9 million (4%) decreaseincrease in F&I, net revenue, offset by a $39.2$49.8 million (7%4%) increasedecrease in partsused and servicevehicle revenue. During the three months ended MarchJune 31,30, 2026, gross profit increased by $2.7$1.2 million driven by a $22.5$19.4 million (7%5%) increase in parts and service gross profitprofit, a $3.3 million (2%) increase in F&I gross profit, and a $1.8$0.4 million (3%1%) increase in used vehicle gross profit, offset by a $14.6$21.8 million (10%14%) decrease in new vehicle gross profit and a $7.0 million (4%) decrease in F&I gross profit.

Income from operations during the three months ended MarchJune 31,30, 2026 decreased by $40.4$37.9 million (17%15%) compared to the three months ended MarchJune 31,30, 2025, primarily due to a $54.0$30.9 million (12%7%) increase in selling, general and administrative expensesexpenses, a $4.2 million increase in asset impairment expense, and a $3.4$4.0 million (18%21%) increase in depreciation and amortization expense, partially offset by a $14.3 million decrease in asset impairment expense and a $2.7$1.2 million increase in gross profit.

Total other income,expenses, net increased by $115.6$14.5 million (27%) during the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, primarily as a result of a $121.6$5.9 million increasedecrease in gain on dealership divestitures, net, offset by a $5.7$5.1 million (14%12%) increase in other interest expense, netnet, and a $0.4$3.5 million (2%19%) increase in floor plan interest expense. Income before income taxes increaseddecreased $75.2$52.5 million (43%26%) to $250.6$151.3 million for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025. Overall, net income increaseddecreased by $55.7$38.2 million (42%25%) during the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025.

For the three months ended MarchJune 31,30, 20262026, new vehicle gross profit and same store new vehicle gross profit decreased by $14.6$21.8 million (10%14%) and $26.9$34.7 million (20%24%), respectively. Same store new vehicle gross margin for the three months ended MarchJune 31,30, 2026 decreased 81128 basis points to 5.9%.5.6%. A 57101 basis point decrease was seen in new vehicle gross profit margins, as reported. The decrease in our new vehicle gross profit margin was primarily attributable to the continued easingsoftening of new vehicle inventory constraints which softened the historically high new vehicle margins seen in recent years, combined with affordability constraints which have also served to compress margins.

The seasonally adjusted annual rate ("SAAR") for new vehicle sales in the U.S. during the three months ended MarchJune 31,30, 2026 was approximately 15.616.2 million which decreasedincreased slightly as compared to approximately 16.516.1 million during the three months ended MarchJune 31,30, 2025. The decreasestart in SAAR period over period was due to higher consumer demand for new vehicles driven by automobile tariff uncertainty inof the firstsecond quarter of 2025 thatreflected didsurging notdemand recurdue to tariff uncertainty but tapered off in the firstlatter half of the quarter. The second quarter of 2026. In addition, severe weather events in January and February 2026 ledsaw a sluggish start to a decrease in new unitvehicle sales duringdue theto threeclimbing monthsgas endedprices; Marchhowever, 31,demand 2026rebounded as comparedconsumers returned to the samemarket periodlikely boosted by lowering gas prices, manufacturer incentives and strength in the priorequity year.markets in the second quarter of 2026 despite the broader economic uncertainty. We also continue to be impacted by the significant variation in new vehicle days supply among brands and models.

For the three months ended MarchJune 31,30, 2026, used vehicle revenue decreased by $29.5$49.8 million (2%4%) compared to the same period of the prior year, due to a $19.3$35.4 million (2%3%) decrease in used vehicle retail revenue and a $10.1$14.4 million (6%9%) decrease in used vehicle wholesale revenue. Same store used vehicle revenue decreased by $132.8$130.5 million (12%11%), due to a $104.5$104.4 million (11%10%) decrease in used vehicle retail revenue and a $28.3$26.2 million (19%18%) decrease in used vehicle wholesale revenue. Total used vehicle retail unit sales decreased by 6%9% on an all store basis and by 12%14% on a same store basis during the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025. While revenue per used vehicle retailed increased on both an all store and same store basis by 5%6% and 1%,4%, respectively, the decrease in unit volumes on both an all store and same store basis negatively impacted used vehicle revenue for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025. Used vehicle revenue per vehicle sold increased due to the continued tight inventory levels heightened by consumers moving to the used vehicle market due to higher new vehicle prices. Used vehicle unit volumes werecontinued to be negatively impacted by severe weather in January and February, lower new vehicle unit sales which reduced trade-ins, our primary source of used vehicle inventory, and the continued lack of inventory availability, especially in vehicles with lower mileage.

For the three months ended MarchJune 31,30, 2026, both the total company and same store used vehicle retail gross profit margin increased by 5854 basis points and 34 basis points, respectively, as compared to the three months ended MarchJune 31,30, 2025. The used vehicle retail gross margin increased from 5.2%5.5% to 5.8%6.1% on an all store basis and increased from 5.4%5.6% to 5.9%6.0% on a same store basis. We attribute the increases in used vehicle retail gross profit margins to our continued strong execution around sourcing and disciplined focus on profitability over units sold. Additionally, the increase in used vehicle gross margins on a total company basis was driven by the addition of the Herb Chambers Dealerships in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025.

Used vehicle retail gross profit increased $5.2$3.9 million (9%6%) for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025 and decreased $0.5$2.7 million (1%5%) on a same store basis for the same period. On a total company and same store basis, our gross profit per used vehicle retailed increased by $261$282 (16%) and $201$182 (12%10%), respectively, when compared to the prior year period. This was primarily driven by increases in used vehicle market prices due to the tight used vehicle inventory market.

The $39.2$33.1 million (7%6%) increase in parts and service revenue was primarily due to a $25.1$26.2 million (8%) increase in customer pay revenue,revenue and a $15.2$9.5 million (16%10%) increase in warranty revenue, and a $2.0 million (2%) increase in wholesale parts revenue, partially offset by a $3.1$1.5 million (5%2%) decrease in collision revenue and a $1.1 million (1%) decrease in wholesale parts revenue. Same store parts and service revenue increased by $2.3$5.3 million (1%) to $533.6$550.7 million during the three months ended MarchJune 31,30, 2026 from $531.4$545.4 million during the three months ended MarchJune 31,30, 2025. The increase in same store parts and service revenue was due to a $3.8$5.4 million (1%2%) increase in customer pay revenue,revenue and a $3.3$2.5 million (3%2%) increase in wholesale parts revenue, and a $1.3 million (2%) increase in warranty revenue, partially offset by a $6.1$2.5 million (10%4%) decrease in collision revenue. The average age of vehicles continues to grow in 2026 isreaching a historically high at 12.813.0 years. Consumers are retaining vehicles for longer periods of time due to various factors, including the higher cost of vehicles, higher interest rates, as well as the vehicle inventory constraints experienced in the automotive industry in recent years.

For the three months ended MarchJune 31,30, 2026, total parts and service gross profit increased by $22.5$19.4 million (7%5%) to $365.1$374.2 million and same store total parts and service gross profit decreased by $3.8$2.6 million (1%) to $309.3$322.8 million when compared to the same period of the prior year. The all store increase is primarily due to the Herb Chambers acquisition, offset by store divestitures, while the same store decreaseincrease is primarily due to a decrease in internal work and the collision business profitability offset by increased customer pay and warrantywholesale volume,parts business offset by a decrease in the collision business profitability, which is in line with the increasing trend of aged vehicles.

F&I revenue, net decreasedincreased by $7.9$1.9 million (4%1%) during the three months ended MarchJune 31,30, 2026 when compared to the three months ended MarchJune 31,30, 2025, as a result of a 6% decrease in total retail units sold, partially offset by a $41$132 (2%6%) increase in F&I per vehicle retailed.retailed, partially offset by a 4% decrease in total retail units sold.

On a same store basis, F&I revenue, net decreased by $19.4$9.0 million (11%5%) during the three months ended MarchJune 31,30, 2026 when compared to the three months ended MarchJune 31,30, 2025, primarily due to a 12%10% decrease in total retail units sold.sold, partially offset by a $113 (5%) increase in F&I per vehicle retailed. F&I revenue, net was negatively impacted by the deferral of commission revenue on the sale of TCA products, which we continue to roll out to all of our stores, as compared to the immediate revenue recognition on the sale of third party F&I products. In addition, customers continue to look for ways to manage lower monthly payments in a high interest rate environment.

Revenue generated by TCA is earned over the period of the related product contract. The method for recognizing revenue is assigned based on contract type and expected claim patterns. Premium revenues are supplemented with investment gains or losses and income earned associated with the performance of TCA's investment portfolio. During the three months ended MarchJune 31,30, 2026, TCA generated $25.2$18.8 million of revenue, after dealership eliminations, consisting primarily of earned premiums and $5.5$5.4 million of investment income from the investment portfolio. F&I revenue decreasedincreased by $5.8$3.2 million (19%21%) for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025 due to the continued roll-out of TCA products across Asbury dealerships resulting in the deferral of F&I revenue over the TCA contract term as opposed to the immediate recognition of revenue associated with third-party F&I product sales.

Direct expenses incurred for the acquisition of F&I contracts on which revenue has not yet been recognized have been deferred and are amortized over the related contract period. During the three months ended MarchJune 31,30, 2026, TCA recorded $12.1$12.4 million of cost of sales consisting primarily of claims expense. Commissions expense paid by TCA to our affiliated dealerships and reflected as F&I revenue in our Dealerships segment is eliminated in the TCA segment upon consolidation.

SG&A expense asOn a percentage of gross profit increased 720 basis points from 63.0% for the three months ended March 31, 2025 to 70.2% for the three months ended March 31, 2026, while same store basis, SG&A expense as a percentage of gross profit increased 635360 basis points from 62.4% to 68.7% over the same period. The increase in SG&A expense as a percentage of gross profit on a total company basis during the three months ended March 31, 2026 is primarily due to the relatively flat gross profit62.8% for the three months ended MarchJune 31,30, 2026 as compared2025 to 66.4% for the three months ended MarchJune 31, 2025 and an increase in SG&A expense driven by the Herb Chambers Businesses and offset by store divestitures in 2025 and the first quarter of30, 2026. The increase in SG&A expense as a percentage of gross profit on a same store basis for the three months ended MarchJune 31,30, 2026 is the result of highera decrease in gross profit, partially offset by a decrease in SG&A expense and lower gross profit for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025. On a same store basis, personnel costs decreased by $16.1$16.8 million (1.1%0.7%) for the three months ended MarchJune 31,30, 2026 as compared to the same period in the prior year due to a reduction in commissions payable on lower gross profits earned during the relevant periods. InThis addition,was partially offset by an increase in rent and related expense increasedof $6.6 million (1.3%) on a same store basis by $14.8 million (2.6%) primarily due to a $10.0$5.0 million cyber insurance recovery received in 2025. Lastly, other expense increased on a same store basis by $6.1 million (2.3%) due to $6.1 million of Tekion implementation costs.

Floor plan interest expense increased by $0.4$3.5 million (2%19%) to $21.0$21.6 million during the three months ended MarchJune 31,30, 2026 as compared to $20.7$18.1 million for the three months ended MarchJune 31,30, 2025, as a result of higher non-manufacturer floor plan balances in 2026 due to the Herb Chambers acquisition, partially offset by lower non-manufacturer floor plan balances due to store divestitures in 2025 and February 2026.

Other interest expense increased $5.7$5.1 million (14%12%) from $42.3$41.4 million during the three months ended MarchJune 31,30, 2025 to $48.0$46.5 million during the three months ended MarchJune 31,30, 2026. This increase was primarily due to a $1.8 million increase in our mortgage facilities interest expense and $2.1 million of credit facility interest expense as a result of borrowings incurred in connection with the Herb Chambers acquisition.

There were no divestitures during the three months ended June 30, 2026. During the three months ended MarchJune 31,30, 2026,2025, we sold 14seven franchises (10five dealership locations) for an aggregate purchase price of approximately $361.5$188.8 million. The Company recorded a pre-tax gain totaling $125.8$5.9 million, which is presented in our accompanying condensed consolidated statements of income as a gain on dealership divestitures, net.

The $19.4$14.3 million increase(28%) decrease in income tax expense was primarily the result of a $75.2$52.5 million increase(26%) decrease in income before income taxes.taxes and a benefit for interest income relating to tax overpayments. Our effective tax rate for the three months ended MarchJune 31,30, 2026 was 25.0%24.3% compared to 24.7%25.0% in the prior year comparative period, which differed from the U.S. statutory rate primarily due to the favorable effects of amended state income tax returns and the aforementioned interest income benefit offset by the unfavorable effects of the shortfall component of equity compensation as well as the favorable effects of amended state income tax returns,compensation, which are discrete items, and the unfavorable effects of various permanent tax adjustments such as executive compensation. We estimate our effective tax rate for the year ended December 31, 2026 at approximately 25%. This estimated effective tax rate includes the effects of the tax benefits related to the purchase of transferable tax credits.