GROUP 1 AUTOMOTIVE INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Actual results of Group 1 Automotive, Inc. may differ materially from those discussed in the forward-looking statements because of various factors. See “Cautionary Statement about Forward - Looking Statements.” Unless the context requires otherwise, references to “we,” “us” and “our” are intended to mean the business and operations of Group 1 Automotive, Inc. and its subsidiaries. Overview We are a leading operator in the automotive retail industry. Through our dealerships, we sell new and used cars and light trucks; arrange related vehicle financing; sell service and other insurance contracts; provide automotive maintenance and repair services; and sell vehicle parts. Our operations are aligned into three regions, which comprise our reportable segments: (1) U.S., (2) U.K. and (3) Brazil. The U.S. and Brazil segments are led by the President, U.S. and Brazilian Operations, and the U.K. segment is led by an Operations Director, each reporting directly to our Chief Executive Officer. The President, U.S. and Brazilian Operations, and the U.K. Operations Director are responsible for the overall performance of their respective regions, as well as for overseeing field level management. The U.S. segment includes the activities of our corporate office. As of September 30, 2020 , our retail network consisted of 119 dealerships in the U.S., 50 dealerships in the U.K. and 17 dealerships in Brazil. Our operations are primarily located in major metropolitan areas in 15 states in the U.S., 33 towns in the U.K. and three states in Brazil. Long-Term Strategy Our business strategy primarily focuses on the performance of our existing dealerships to achieve growth, capture market share and maximize the investment return to our stockholders. We are also focused on enhancing our dealership portfolio through strategic acquisitions and dispositions. We constantly evaluate opportunities to improve the overall profitability of our dealerships. Our long-term strategic areas of emphasis include: Digital Initiatives to Enhance the Customer Experience Our digital initiatives focus on ensuring that we can do business with our customers where and when they want to do business. Our online new and used vehicle retail platform, AcceleRide®, which was deployed to all of our U.S. dealerships in 2019, allows a customer to complete a vehicle transaction entirely online or start the sales process online and complete the transaction at one of our dealerships. In addition, our parts and service digital efforts focus on our online customer scheduling appointment system. We have seen continued growth in the percentage of appointments scheduled online over the past few years as we have continued to enhance this tool. These digital platforms were instrumental in allowing us to connect with and service our customers during the restricted social distancing environment as a result of the COVID-19 pandemic. During the third quarter of 2020, AcceleRide® sales were up 73.1% from a year ago. Used Vehicle Retail Growth • Gross profit from the sale of used vehicles depends primarily on a dealership’s ability to obtain a high-quality supply of used vehicles at reasonable prices. Our new vehicle operations generally provide our used vehicle operations with a large supply of high-quality trade-ins and off-lease vehicles, which are our best source of used vehicle inventory. Our dealerships also purchase used vehicle inventory directly from customers and supplement their used vehicle inventory with purchases at auctions, including manufacturer-sponsored auctions available only to franchised dealers. • Our data-driven pricing strategies ensure that our used vehicles are priced at market to generate more traffic to our websites. We review our market pricing on a regular basis and work to limit discounting from our advertised prices. • We will continue efforts to expand our “Val-U-Line®” sales program, a strategic used vehicle initiative that targets a growing customer niche and enables us to retail lower cost, higher mileage units that would otherwise have been sent to auction. The Val-U-Line® initiative is expected to increase used retail volume by leveraging our scale, internal on-line buying center, internal auction capability and transportation infrastructure. Parts and Service Growth We remain focused on sustained growth in our higher margin parts and service operations which continue to hinge on the retention and hiring of skilled service technicians and advisors. Our four-day work week implemented in 2019 has allowed us to extend our hours of operations and increase service technician and advisor retention, thereby expanding our service capacity without investing additional capital in facilities. We seek to increase the retention of our customers through more convenient service hours, training of our service advisors, selling service contracts with vehicles sales and customer relationship management software that allows us to provide target marketing to our customers. The increasing complexity of vehicles, especially in the area of electronics and technological advancements, is making it difficult for independent repair shops to retain the expertise and technology to work on these vehicles and provides us the opportunity to increase our market share. 27 Table of Contents Cost Management We continue our efforts to fully leverage our scale and cost structure. As our business evolves, we will manage our costs carefully and look for additional opportunities to improve our processes and disseminate best practices. We believe that our management structure supports rapid decision making and facilitates an efficient and effective roll-out of new processes. Additionally, see “COVID-19 Pandemic” section below for specific cost-cutting measures in response to the COVID-19 pandemic. Employee Training and Retention A key to the execution of our business strategy is the leverage of what we believe to be one of our key strengths - the talent of our people. We are focused on the retention and training of our talented dealership employees. We believe that we have developed a distinguished management team with substantial industry expertise. With our management structure and level of executive talent, we plan to continue empowering the operators of our dealerships to make appropriate decisions to grow their respective dealership operations and to control fixed and variable costs. We believe this approach allows us to provide the best possible service to our customers, as well as attract and retain talented employees. Strategic Acquisitions and Dispositions We will continue to focus on opportunities to enhance our current dealership portfolio through strategic acquisitions and improving or disposing of underperforming dealerships. We believe that substantial opportunities for growth through acquisitions remain in our industry in the U.S., the U.K. and Brazil. Further, we intend to continue to critically evaluate our return on invested capital in our current dealership portfolio for disposition opportunities. COVID-19 Pandemic Since emerging in December 2019 , the COVID-19 pandemic has spread globally, including to all of our markets in the U.S., U.K. and Brazil, significantly impacting our operating results starting in March 2020. There have been extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 across the world, including mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. Beginning in mid-March 2020, these measures significantly reduced operating capacity of all of our dealerships in the U.S., the U.K. and Brazil. The primary COVID-19 impacts on our global business and our response to date include: U.S. Virtually all of our U.S. dealerships are located in markets that operated in some form of restricted social distancing environments in accordance with applicable state and local orders during most of March 2020 and April 2020. As the market shutdowns began, March 2020 U.S. sales dropped sharply from February 2020, with new and used retail unit sales dropping approximately 50% and service repair orders also declining by approximately 50% for the last two weeks of March 2020 compared to the last two weeks of March 2019 and the first two weeks of April 2020 compared to the first two weeks of April 2019. In early May 2020, as restricted social distancing environment policies began to be partially lifted, our used vehicle business returned to near normal levels and our new vehicle sales pace started improving. Our new vehicle sales pace has improved during the third quarter, however the recovery of new vehicle unit sales was limited as a result of low inventory levels due to reduced OEM production rates. Thus far, we have been able to offset the volume declines with higher gross margins in new and used vehicles and higher F&I per retail unit. As a result, our margin improvement outweighed our volume declines. Beginning in mid-April 2020, we saw continued improvement in our parts and service business as well and we are near prior year levels at the end of the third quarter. Our online selling platform AcceleRide® and our online service scheduling platforms continue to show increased utilization rates as we remain in a restricted social distancing environment and such higher utilization rates are expected to continue after the pandemic. 28 Table of Contents U.K . U.K. vehicle sales levels were well above prior year levels in most of our brands through February 2020. March, which is a plate change month, is one of the largest selling months of the year with many vehicles delivered from orders placed in January 2020 and February 2020. Due to the closure of our facilities and various business restrictions put in place as a result of a shut-down order from the government, we were not able to deliver approximately 35% of our vehicles at the end of March 2020 that we had contracted to sell prior to the shut-down restrictions. We closed all of our U.K. dealerships from late March 2020 through May 18, 2020 for service, with the exception of emergency vehicle repairs. Our vehicle showrooms were closed for more than two months and did not reopen until June 1, 2020. Operations in the U.K. significantly improved in June 2020 and continued to improve throughout the third quarter. As vehicle sales and service operations reopened, our revenues and margins in all departments increased versus prior year levels. As a result, the U.K. operations made a significant contribution to our quarterly financial results for the third quarter of 2020. While new vehicle volumes have rebounded, our new vehicle inventory is still well below normal levels due to reduced OEM production rates. On October 31, 2020, the U.K. government announced a national lockdown of non-essential businesses, which includes our dealership vehicle showrooms, beginning November 5, 2020 through December 2, 2020, at which time the government will determine whether the lockdown restrictions will be extended. Our dealership service operations will remain open, however this mandate will adversely impact our U.K. vehicle sales in the fourth quarter. See Part II, “Item 1A. Risk Factors” of this Form 10-Q for further discussion of the potential risks if the lockdown is extended. Brazil Effective March 20, 2020, all of our dealerships were required to close. Despite restrictions being lifted and businesses reopening in Brazil during the second quarter, the recovery has been limited as the impacts of COVID-19 are still impacting operations significantly. Cost-Cutting Actions In all regions we have taken aggressive actions to reduce costs and preserve liquidity, with approximately 8,000 employees furloughed or terminated in early April 2020. As sales have improved in the U.S. and U.K., we have been able to return some of the furloughed employees to a point where our U.S. and U.K. headcounts are approximately 75% of our pre-COVID levels. Along with this, we modified our employee productivity targets in our U.S. and U.K. operations. In addition, other measures were implemented significantly reducing costs in all three regions including reductions of as much as 50% in management compensation, 100% of Board of Directors’ cash compensation, over 75% reduction in advertising expense and cuts across all other cost categories. Additionally, as announced in April 2020, we suspended our dividend and canceled our share repurchase program, as well as implemented capital expenditure deferrals. By the end of the third quarter as market conditions improved, we restored many of these cost reductions and on October 6, 2020 announced a $200 million share repurchase program. As discussed in “Liquidity and Capital Resources,” we have sufficient liquidity currently and do not anticipate any material liquidity constraints or issues with our ability to remain in compliance with debt covenants. The demand outlook remains uncertain and the long-term impact of the COVID-19 pandemic is difficult to predict, especially with the recently announced lockdown in the U.K. and rising cases in some of our markets. However, we expect our used vehicle and service operations in the fourth quarter to return to near prior year levels. Reduced new vehicle inventory levels in the U.S. and U.K. will likely persist in the fourth quarter and will limit the recovery in new vehicle unit sales in the fourth quarter. However, we expect to continue the trend set in the third quarter of offsetting much or all of the decline in volume with improvements in gross margin. We will remain vigilant and are prepared to adjust our cost structure to adapt to the market conditions. While some of the cost reductions taken in the first and second quarters were reinstated in the third quarter as market conditions improved, we expect to be more cost efficient going forward compared to pre-pandemic levels. Any potential impact of the COVID-19 pandemic will depend on future developments and new information that may emerge regarding the severity and duration of the pandemic and the actions taken by authorities to contain it or address its impact, all of which are beyond our control. Critical Accounting Policies and Accounting Estimates The preparation of our Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions. For additional discussion of our critical accounting policies and accounting estimates, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K. 29 Table of Contents Results of Operations The “same store” amounts presented below include the results of dealerships and corporate headquarters for the identical months in each period presented in comparison, commencing with the first full month in which the dealership was owned by us and, in the case of dispositions, ending with the last full month it was owned by us. For example, for a dealership acquired on August 15, 2020, the results from this dealership will appear in our same store comparison beginning in 2021 for the period September 2021 through December 2021, when comparing to September 2020 through December 2020 results. If we disposed of a store on August 15, 2020, the results from this store would be excluded from same store results beginning in August 2020 as July 2020 was the last full month the dealership was owned by us. Same store results provide a measurement of our ability to grow revenues and profitability of our existing stores and also provide a metric for peer group comparisons. For these reasons, same store results allows management to manage and monitor the performance of the business and is also useful to investors. We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our underlying business and results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our current period reported results for entities reporting in currencies other than USD using comparative period exchange rates rather than the actual exchange rates in effect during the respective periods. The constant currency performance measures should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with U.S. GAAP. Additionally, we caution investors not to place undue reliance on non-GAAP measures, but also to consider them with the most directly comparable U.S. GAAP measures. Our management also uses constant currency and adjusted cash flows from operating, investing and financing activities in conjunction with U.S. GAAP financial measures to assess our business, including communication with our Board of Directors, investors and industry analysts concerning financial performance. We disclose these non-GAAP measures, and the related reconciliations, because we believe investors use these metrics in evaluating longer-term period-over-period performance. These metrics also allow investors to better understand and evaluate the information used by management to assess operating performance. Certain amounts in the financial statements may not compute due to rounding. All computations have been calculated using unrounded amounts for all periods presented. 30 Table of Contents The following tables summarize our operating results on a reported basis and on a same store basis: Reported Operating Data - Consolidated (In millions, except unit data) Three Months Ended September 30, 2020 2019 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change Revenues: New vehicle retail sales $ 1,580.7 $ 1,652.3 $ (71.7 ) (4.3 )% $ 4.6 (4.6 )% Used vehicle retail sales 867.2 869.7 (2.5 ) (0.3 )% 7.3 (1.1 )% Used vehicle wholesale sales 86.7 85.2 1.5 1.7 % 0.8 0.7 % Total used 953.9 955.0 (1.1 ) (0.1 )% 8.1 (1.0 )% Parts and service sales 375.6 383.5 (7.9 ) (2.1 )% (0.1 ) (2.0 )% F&I, net 129.5 127.5 2.0 1.5 % 0.3 1.3 % Total revenues $ 3,039.6 $ 3,118.3 $ (78.7 ) (2.5 )% $ 12.9 (2.9 )% Gross profit: New vehicle retail sales $ 99.2 $ 75.4 $ 23.8 31.6 % $ (0.2 ) 31.9 % Used vehicle retail sales 71.1 54.3 16.8 31.0 % 0.5 30.2 % Used vehicle wholesale sales 5.9 0.3 5.6 1,745.3 % — 1,743.5 % Total used 77.0 54.6 22.5 41.2 % 0.5 40.3 % Parts and service sales 206.2 208.1 (1.9 ) (0.9 )% 0.3 (1.1 )% F&I, net 129.5 127.5 2.0 1.5 % 0.3 1.3 % Total gross profit $ 512.0 $ 465.6 $ 46.3 10.0 % $ 0.8 9.8 % Gross margin: New vehicle retail sales 6.3 % 4.6 % 1.7 % Used vehicle retail sales 8.2 % 6.2 % 2.0 % Used vehicle wholesale sales 6.9 % 0.4 % 6.5 % Total used 8.1 % 5.7 % 2.4 % Parts and service sales 54.9 % 54.3 % 0.6 % F&I, net 100.0 % 100.0 % — % Total gross margin 16.8 % 14.9 % 1.9 % Units sold: Retail new vehicles sold 39,869 44,632 (4,763 ) (10.7 )% Retail used vehicles sold 38,347 41,297 (2,950 ) (7.1 )% Wholesale used vehicles sold 11,581 12,889 (1,308 ) (10.1 )% Total used 49,928 54,186 (4,258 ) (7.9 )% Average sales price per unit sold: New vehicle retail $ 39,647 $ 37,022 $ 2,625 7.1 % $ 115 6.8 % Used vehicle retail $ 22,614 $ 21,060 $ 1,554 7.4 % $ 190 6.5 % Gross profit per unit sold: New vehicle retail sales $ 2,489 $ 1,689 $ 800 47.4 % $ (5 ) 47.6 % Used vehicle retail sales $ 1,854 $ 1,314 $ 540 41.1 % $ 12 40.2 % Used vehicle wholesale sales $ 513 $ 25 $ 488 1,953.7 % $ 1 1,951.7 % Total used $ 1,543 $ 1,007 $ 536 53.2 % $ 9 52.3 % F&I PRU $ 1,655 $ 1,484 $ 171 11.5 % $ 4 11.3 % Other: SG&A expenses $ 305.8 $ 353.9 $ (48.1 ) (13.6 )% $ — (13.6 )% SG&A as % gross profit 59.7 % 76.0 % (16.3 )% Floorplan expense: Floorplan interest expense $ 8.1 $ 15.3 $ (7.2 ) (47.1 )% $ 0.1 (47.5 )% Less: floorplan assistance (1) 12.7 13.3 (0.6 ) (4.8 )% — (4.8 )% Net floorplan expense $ (4.6 ) $ 2.0 $ (6.6 ) (326.0 )% $ 0.1 (328.6 )% (1) Floorplan assistance is included within New vehicle retail sales Gross profit above and New vehicle retail sales Cost of sales in our Condensed Consolidated Statements of Operations. 31 Table of Contents Same Store Operating Data - Consolidated (In millions, except unit data) Three Months Ended September 30, 2020 2019 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change Revenues: New vehicle retail sales $ 1,549.8 $ 1,644.4 $ (94.6 ) (5.8 )% $ 4.1 (6.0 )% Used vehicle retail sales 843.8 864.0 (20.3 ) (2.3 )% 6.9 (3.1 )% Used vehicle wholesale sales 84.5 84.2 0.3 0.4 % 0.8 (0.5 )% Total used 928.3 948.2 (19.9 ) (2.1 )% 7.7 (2.9 )% Parts and service sales 367.3 377.0 (9.7 ) (2.6 )% (0.3 ) (2.5 )% F&I, net 127.8 127.0 0.8 0.6 % 0.3 0.4 % Total revenues $ 2,973.2 $ 3,096.7 $ (123.5 ) (4.0 )% $ 11.8 (4.4 )% Gross profit: New vehicle retail sales $ 96.9 $ 74.9 $ 22.0 29.4 % $ (0.2 ) 29.7 % Used vehicle retail sales 69.3 54.0 15.3 28.3 % 0.4 27.5 % Used vehicle wholesale sales 5.8 0.3 5.5 1,635.0 % — 1,634.2 % Total used 75.1 54.3 20.8 38.3 % 0.4 37.5 % Parts and service sales 201.0 205.1 (4.0 ) (2.0 )% 0.2 (2.1 )% F&I, net 127.8 127.0 0.8 0.6 % 0.3 0.4 % Total gross profit $ 500.8 $ 461.3 $ 39.5 8.6 % $ 0.7 8.4 % Gross margin: New vehicle retail sales 6.3 % 4.6 % 1.7 % Used vehicle retail sales 8.2 % 6.2 % 2.0 % Used vehicle wholesale sales 6.9 % 0.4 % 6.5 % Total used 8.1 % 5.7 % 2.4 % Parts and service sales 54.7 % 54.4 % 0.3 % F&I, net 100.0 % 100.0 % — % Total gross margin 16.8 % 14.9 % 1.9 % Units sold: Retail new vehicles sold 39,152 44,389 (5,237 ) (11.8 )% Retail used vehicles sold 37,486 40,990 (3,504 ) (8.5 )% Wholesale used vehicles sold 11,312 12,751 (1,439 ) (11.3 )% Total used 48,798 53,741 (4,943 ) (9.2 )% Average sales price per unit sold: New vehicle retail $ 39,584 $ 37,046 $ 2,538 6.9 % $ 104 6.6 % Used vehicle retail $ 22,509 $ 21,079 $ 1,430 6.8 % $ 185 5.9 % Gross profit per unit sold: New vehicle retail sales $ 2,475 $ 1,687 $ 788 46.7 % $ (5 ) 47.0 % Used vehicle retail sales $ 1,848 $ 1,317 $ 531 40.3 % $ 12 39.4 % Used vehicle wholesale sales $ 516 $ 26 $ 490 1,855.7 % $ — 1,854.8 % Total used $ 1,539 $ 1,011 $ 528 52.3 % $ 9 51.4 % F&I PRU $ 1,668 $ 1,488 $ 180 12.1 % $ 3 11.9 % Other: SG&A expenses $ 298.9 $ 348.6 $ (49.7 ) (14.3 )% $ (0.1 ) (14.2 )% SG&A as % gross profit 59.7 % 75.6 % (15.9 )% 32 Table of Contents Reported Operating Data - Consolidated (In millions, except unit data) Nine Months Ended September 30, 2020 2019 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change Revenues: New vehicle retail sales $ 3,985.5 $ 4,632.2 $ (646.7 ) (14.0 )% $ (28.3 ) (13.4 )% Used vehicle retail sales 2,287.4 2,527.8 (240.4 ) (9.5 )% (6.5 ) (9.3 )% Used vehicle wholesale sales 221.9 273.4 (51.5 ) (18.8 )% (2.2 ) (18.0 )% Total used 2,509.3 2,801.2 (291.9 ) (10.4 )% (8.7 ) (10.1 )% Parts and service sales 1,028.2 1,130.8 (102.6 ) (9.1 )% (5.8 ) (8.6 )% F&I, net 338.7 368.2 (29.5 ) (8.0 )% (0.9 ) (7.8 )% Total revenues $ 7,861.7 $ 8,932.4 $ (1,070.7 ) (12.0 )% $ (43.7 ) (11.5 )% Gross profit: New vehicle retail sales $ 225.8 $ 216.5 $ 9.3 4.3 % $ (2.2 ) 5.3 % Used vehicle retail sales 159.5 155.4 4.2 2.7 % (0.4 ) 3.0 % Used vehicle wholesale sales 9.0 0.7 8.3 1,220.0 % (0.1 ) 1,238.3 % Total used 168.5 156.0 12.5 8.0 % (0.6 ) 8.3 % Parts and service sales 554.2 610.7 (56.4 ) (9.2 )% (2.5 ) (8.8 )% F&I, net 338.7 368.2 (29.5 ) (8.0 )% (0.9 ) (7.8 )% Total gross profit $ 1,287.2 $ 1,351.4 $ (64.1 ) (4.7 )% $ (6.0 ) (4.3 )% Gross margin: New vehicle retail sales 5.7 % 4.7 % 1.0 % Used vehicle retail sales 7.0 % 6.1 % 0.8 % Used vehicle wholesale sales 4.0 % 0.2 % 3.8 % Total used 6.7 % 5.6 % 1.1 % Parts and service sales 53.9 % 54.0 % (0.1 )% F&I, net 100.0 % 100.0 % — % Total gross margin 16.4 % 15.1 % 1.2 % Units sold: Retail new vehicles sold 101,701 125,599 (23,898 ) (19.0 )% Retail used vehicles sold 105,665 119,878 (14,213 ) (11.9 )% Wholesale used vehicles sold 30,970 38,962 (7,992 ) (20.5 )% Total used 136,635 158,840 (22,205 ) (14.0 )% Average sales price per unit sold: New vehicle retail $ 39,189 $ 36,881 $ 2,308 6.3 % $ (278 ) 7.0 % Used vehicle retail $ 21,648 $ 21,087 $ 562 2.7 % $ (61 ) 3.0 % Gross profit per unit sold: New vehicle retail sales $ 2,220 $ 1,724 $ 497 28.8 % $ (21 ) 30.1 % Used vehicle retail sales $ 1,510 $ 1,296 $ 214 16.5 % $ (4 ) 16.8 % Used vehicle wholesale sales $ 290 $ 17 $ 272 1,560.6 % $ (4 ) 1,583.7 % Total used $ 1,233 $ 982 $ 251 25.5 % $ (4 ) 26.0 % F&I PRU $ 1,633 $ 1,500 $ 133 8.9 % $ (4 ) 9.2 % Other: SG&A expenses $ 870.9 $ 1,020.3 $ (149.4 ) (14.6 )% $ (6.0 ) (14.1 )% SG&A as % gross profit 67.7 % 75.5 % (7.8 )% Floorplan expense: Floorplan interest expense $ 31.1 $ 47.0 $ (15.9 ) (33.8 )% $ (0.1 ) (33.6 )% Less: floorplan assistance (1) 33.0 35.6 (2.6 ) (7.2 )% — (7.2 )% Net floorplan expense $ (1.9 ) $ 11.4 $ (13.3 ) (117.1 )% $ (0.1 ) (116.2 )% (1) Floorplan assistance is included within New vehicle retail sales Gross profit above and New vehicle retail sales Cost of sales in our Condensed Consolidated Statements of Operations. 33 Table of Contents Same Store Operating Data - Consolidated (In millions, except unit data) Nine Months Ended September 30, 2020 2019 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change Revenues: New vehicle retail sales $ 3,882.7 $ 4,587.8 $ (705.1 ) (15.4 )% $ (27.7 ) (14.8 )% Used vehicle retail sales 2,216.8 2,495.1 (278.2 ) (11.2 )% (6.4 ) (10.9 )% Used vehicle wholesale sales 214.4 265.0 (50.6 ) (19.1 )% (2.2 ) (18.3 )% Total used 2,431.2 2,760.1 (328.8 ) (11.9 )% (8.6 ) (11.6 )% Parts and service sales 1,000.2 1,109.3 (109.1 ) (9.8 )% (5.9 ) (9.3 )% F&I, net 333.5 365.4 (31.9 ) (8.7 )% (0.8 ) (8.5 )% Total revenues $ 7,647.6 $ 8,822.6 $ (1,175.0 ) (13.3 )% $ (43.0 ) (12.8 )% Gross profit: New vehicle retail sales $ 218.0 $ 214.7 $ 3.3 1.5 % $ (2.1 ) 2.5 % Used vehicle retail sales 154.8 154.2 0.7 0.4 % (0.4 ) 0.7 % Used vehicle wholesale sales 8.9 0.9 8.0 883.8 % (0.1 ) 897.4 % Total used 163.7 155.1 8.6 5.6 % (0.6 ) 5.9 % Parts and service sales 538.4 600.3 (61.9 ) (10.3 )% (2.5 ) (9.9 )% F&I, net 333.5 365.4 (31.9 ) (8.7 )% (0.8 ) (8.5 )% Total gross profit $ 1,253.6 $ 1,335.5 $ (81.9 ) (6.1 )% $ (6.0 ) (5.7 )% Gross margin: New vehicle retail sales 5.6 % 4.7 % 0.9 % Used vehicle retail sales 7.0 % 6.2 % 0.8 % Used vehicle wholesale sales 4.1 % 0.3 % 3.8 % Total used 6.7 % 5.6 % 1.1 % Parts and service sales 53.8 % 54.1 % (0.3 )% F&I, net 100.0 % 100.0 % — % Total gross margin 16.4 % 15.1 % 1.3 % Units sold: Retail new vehicles sold 99,073 123,927 (24,854 ) (20.1 )% Retail used vehicles sold 102,802 118,142 (15,340 ) (13.0 )% Wholesale used vehicles sold 30,030 38,135 (8,105 ) (21.3 )% Total used 132,832 156,277 (23,445 ) (15.0 )% Average sales price per unit sold: New vehicle retail $ 39,190 $ 37,020 $ 2,170 5.9 % $ (280 ) 6.6 % Used vehicle retail $ 21,564 $ 21,119 $ 445 2.1 % $ (62 ) 2.4 % Gross profit per unit sold: New vehicle retail sales $ 2,200 $ 1,733 $ 468 27.0 % $ (22 ) 28.2 % Used vehicle retail sales $ 1,506 $ 1,305 $ 201 15.4 % $ (4 ) 15.7 % Used vehicle wholesale sales $ 296 $ 24 $ 272 1,149.3 % $ (4 ) 1,166.6 % Total used $ 1,232 $ 992 $ 240 24.2 % $ (4 ) 24.6 % F&I PRU $ 1,652 $ 1,510 $ 143 9.4 % $ (4 ) 9.7 % Other: SG&A expenses $ 843.4 $ 1,005.9 $ (162.5 ) (16.2 )% $ (5.9 ) (15.6 )% SG&A as % gross profit 67.3 % 75.3 % (8.0 )% 34 Table of Contents Reported Operating Data - U.S. (In millions, except unit data) Three Months Ended September 30, 2020 2019 Increase/(Decrease) % Change Revenues: New vehicle retail sales $ 1,172.2 $ 1,291.8 $ (119.5 ) (9.3 )% Used vehicle retail sales 608.2 657.7 (49.5 ) (7.5 )% Used vehicle wholesale sales 44.8 45.8 (1.1 ) (2.3 )% Total used 653.0 703.5 (50.6 ) (7.2 )% Parts and service sales 306.4 314.9 (8.5 ) (2.7 )% F&I, net 113.0 112.7 0.4 0.3 % Total revenues $ 2,244.6 $ 2,422.8 $ (178.2 ) (7.4 )% Gross profit: New vehicle retail sales $ 79.8 $ 58.7 $ 21.1 36.0 % Used vehicle retail sales 52.8 43.6 9.3 21.3 % Used vehicle wholesale sales 3.7 0.3 3.4 1,003.9 % Total used 56.6 43.9 12.7 28.8 % Parts and service sales 166.3 171.7 (5.4 ) (3.1 )% F&I, net 113.0 112.7 0.4 0.3 % Total gross profit $ 415.7 $ 386.9 $ 28.8 7.4 % Gross margin: New vehicle retail sales 6.8 % 4.5 % 2.3 % Used vehicle retail sales 8.7 % 6.6 % 2.1 % Used vehicle wholesale sales 8.3 % 0.7 % 7.6 % Total used 8.7 % 6.2 % 2.4 % Parts and service sales 54.3 % 54.5 % (0.2 )% F&I, net 100.0 % 100.0 % — % Total gross margin 18.5 % 16.0 % 2.6 % Units sold: Retail new vehicles sold 27,980 33,041 (5,061 ) (15.3 )% Retail used vehicles sold 27,694 31,505 (3,811 ) (12.1 )% Wholesale used vehicles sold 6,195 7,565 (1,370 ) (18.1 )% Total used 33,889 39,070 (5,181 ) (13.3 )% Average sales price per unit sold: New vehicle retail $ 41,895 $ 39,096 $ 2,800 7.2 % Used vehicle retail $ 21,961 $ 20,875 $ 1,086 5.2 % Gross profit per unit sold: New vehicle retail sales $ 2,852 $ 1,775 $ 1,077 60.6 % Used vehicle retail sales $ 1,908 $ 1,383 $ 525 37.9 % Used vehicle wholesale sales $ 603 $ 45 $ 559 1,248.0 % Total used $ 1,669 $ 1,124 $ 545 48.5 % F&I PRU $ 2,030 $ 1,746 $ 285 16.3 % Other: SG&A expenses $ 245.2 $ 285.3 $ (40.0 ) (14.0 )% SG&A as % gross profit 59.0 % 73.7 % (14.7 )% 35 Table of Contents Same Store Operating Data - U.S. (In millions, except unit data) Three Months Ended September 30, 2020 2019 Increase/(Decrease) % Change Revenues: New vehicle retail sales $ 1,157.7 $ 1,285.3 $ (127.6 ) (9.9 )% Used vehicle retail sales 595.3 653.8 (58.5 ) (8.9 )% Used vehicle wholesale sales 44.2 45.3 (1.1 ) (2.3 )% Total used 639.5 699.1 (59.5 ) (8.5 )% Parts and service sales 302.5 312.9 (10.4 ) (3.3 )% F&I, net 112.1 112.3 (0.2 ) (0.2 )% Total revenues $ 2,211.9 $ 2,409.6 $ (197.7 ) (8.2 )% Gross profit: New vehicle retail sales $ 78.2 $ 58.2 $ 20.0 34.3 % Used vehicle retail sales 51.7 43.4 8.3 19.1 % Used vehicle wholesale sales 3.7 0.3 3.4 987.9 % Total used 55.4 43.8 11.6 26.6 % Parts and service sales 163.8 170.6 (6.8 ) (4.0 )% F&I, net 112.1 112.3 (0.2 ) (0.2 )% Total gross profit $ 409.5 $ 384.8 $ 24.6 6.4 % Gross margin: New vehicle retail sales 6.8 % 4.5 % 2.2 % Used vehicle retail sales 8.7 % 6.6 % 2.0 % Used vehicle wholesale sales 8.4 % 0.8 % 7.6 % Total used 8.7 % 6.3 % 2.4 % Parts and service sales 54.1 % 54.5 % (0.4 )% F&I, net 100.0 % 100.0 % — % Total gross margin 18.5 % 16.0 % 2.5 % Units sold: Retail new vehicles sold 27,696 32,854 (5,158 ) (15.7 )% Retail used vehicles sold 27,229 31,267 (4,038 ) (12.9 )% Wholesale used vehicles sold 6,122 7,474 (1,352 ) (18.1 )% Total used 33,351 38,741 (5,390 ) (13.9 )% Average sales price per unit sold: New vehicle retail $ 41,801 $ 39,121 $ 2,679 6.8 % Used vehicle retail $ 21,864 $ 20,911 $ 953 4.6 % Gross profit per unit sold: New vehicle retail sales $ 2,824 $ 1,772 $ 1,052 59.3 % Used vehicle retail sales $ 1,898 $ 1,388 $ 510 36.7 % Used vehicle wholesale sales $ 604 $ 45 $ 559 1,228.1 % Total used $ 1,661 $ 1,129 $ 531 47.0 % F&I PRU $ 2,041 $ 1,751 $ 290 16.6 % Other: SG&A expenses $ 241.9 $ 282.9 $ (41.0 ) (14.5 )% SG&A as % gross profit 59.1 % 73.5 % (14.4 )% 36 Table of Contents The following discussion of our U.S. operating results is on a same store basis. The difference between reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings. During the third quarter of 2020, our U.S. dealership operations have been steadily recovering from the impact on business caused by the COVID-19 pandemic. Revenues Total revenues in the U.S. during the three months ended September 30, 2020 decreased $178.2 million , or 7.4% , as compared to the same period in 2019 . Total same store revenues in the U.S. during the three months ended September 30, 2020 decreased $197.7 million , or 8.2% , as compared to the same period in 2019 , driven by declines in all of our revenue streams. The declines of 9.9% in new vehicle retail same store sales, 8.9% in used vehicle retail same store sales and 2.3% in used vehicle wholesale same store sales were driven by decreases of 15.7% , 12.9% and 18.1% in new vehicle, used vehicle retail and used vehicle wholesale unit sales, respectively. The declines in new vehicle retail, used vehicle retail and used vehicle wholesale unit sales were driven by inventory supply constraints, in part due to reduced OEM production rates, as our dealerships experienced increasing demand for new and used vehicles during the quarter. Our online new and used vehicle sales platform, AcceleRide® was instrumental in allowing us to connect with and serve our customers throughout the restricted social distancing environment due to the COVID-19 pandemic. During the third quarter of 2020, AcceleRide® sales were up 73.1% from a year ago. Parts and service same store revenues, dampened by the impact of the COVID-19 pandemic, decreased 3.3% during the third quarter as compared to the same period last year, driven by a 23.4% decline in collision revenues and a 1.6% decline in both customer pay and warranty revenues which were partially offset by a 4.4% increase in wholesale parts revenues. F&I same store revenues were relatively flat as a 14.3% decline in same store total retail unit sales was offset by improvements in income per contract, higher penetration rates, and a decline in our overall chargeback experience. Gross Profit Total gross profit in the U.S. during the three months ended September 30, 2020 increased $28.8 million , or 7.4% , as compared to the same period in 2019 . Total same store gross profit in the U.S. during the three months ended September 30, 2020 increased $24.6 million , or 6.4% , as compared to the same period in 2019 . The increase in same store gross profit was driven by increases in new vehicle retail, used vehicle retail, and used vehicle wholesale, partially offset by a decline in parts and service gross profit compared to the same period last year. New vehicle same store gross profit increased 34.3% driven by a 59.3% i ncrease in new vehicle same store gross profit per unit sold, which more than offset the 15.7% decline in new units sold. The increase in new vehicle retail same store gross profit per unit sold reflects inventory supply constraints as many manufacturers put a hold on production due to the COVID-19 pandemic earlier in the year and have not returned to normal levels. Used vehicle retail same store gross profit increased 19.1% reflecting an increase of 36.7% in used vehicle retail same store gross profit per unit sold partially offset by a 12.9% decrease in used vehicle retail same store unit sales over the same period in 2019. The increase in used vehicle retail same store gross profit per unit sold reflects supply constraints combined with a strong demand leading to higher margins on used vehicle retail sales. Used vehicle wholesale gross profit increased as industry supply constraints drove up auction prices. Parts and service same store gross profit declined 4.0% driven by the decrease in revenue discussed above. F&I same store gross profit was relatively flat as discussed above. Total same store gross margin increased 250 basis points driven by higher vehicle prices as a result of supply shortages of new and used vehicle inventory. SG&A Expenses Our SG&A expenses consist primarily of personnel costs, including salaries, commissions and incentive-based compensation, as well as rent and facility costs, advertising and other expenses, which include legal, professional fees and general corporate expenses. Total SG&A expenses in the U.S. during the three months ended September 30, 2020 decreased $40.0 million , or 14.0% , as compared to the same period in 2019 . Total same store SG&A expenses in the U.S. during the three months ended September 30, 2020 decreased $41.0 million , or 14.5% , as compared to the same period in 2019 driven by the implementation and continual execution of cost reduction strategies as a reaction to the COVID-19 pandemic. As market conditions have improved, we have strived to retain our lower operating cost structure as a result of the pandemic and we continued to benefit from these cost cutting measures in the third quarter. Total same store SG&A expenses in the U.S. in the third quarter of 2019 included $11.9 million in insurance deductible expense associated with Tropical Storm Imelda in Texas and $0.5 million in costs related to dealership and real estate transactions. Total same store SG&A as a percent of gross profit decreased from 73.5% in the third quarter of 2019 to 59.1% for the same period of 2020 driven by the expense reductions taken to offset the negative impact of the COVID-19 pandemic. 37 Table of Contents Reported Operating Data - U.S. (In millions, except unit data) Nine Months Ended September 30, 2020 2019 Increase/(Decrease) % Change Revenues: New vehicle retail sales $ 3,076.3 $ 3,512.3 $ (436.0 ) (12.4 )% Used vehicle retail sales 1,719.4 1,877.5 (158.1 ) (8.4 )% Used vehicle wholesale sales 122.1 132.9 (10.8 ) (8.1 )% Total used 1,841.5 2,010.5 (169.0 ) (8.4 )% Parts and service sales 865.2 922.1 (56.9 ) (6.2 )% F&I, net 300.2 319.4 (19.2 ) (6.0 )% Total revenues $ 6,083.3 $ 6,764.3 $ (681.0 ) (10.1 )% Gross profit: New vehicle retail sales $ 183.6 $ 164.2 $ 19.4 11.8 % Used vehicle retail sales 125.7 125.2 0.6 0.4 % Used vehicle wholesale sales 6.2 2.4 3.7 154.3 % Total used 131.9 127.6 4.3 3.4 % Parts and service sales 465.4 499.3 (33.9 ) (6.8 )% F&I, net 300.2 319.4 (19.2 ) (6.0 )% Total gross profit $ 1,081.1 $ 1,110.5 $ (29.4 ) (2.6 )% Gross margin: New vehicle retail sales 6.0 % 4.7 % 1.3 % Used vehicle retail sales 7.3 % 6.7 % 0.6 % Used vehicle wholesale sales 5.0 % 1.8 % 3.2 % Total used 7.2 % 6.3 % 0.8 % Parts and service sales 53.8 % 54.1 % (0.4 )% F&I, net 100.0 % 100.0 % — % Total gross margin 17.8 % 16.4 % 1.4 % Units sold: Retail new vehicles sold 74,412 89,749 (15,337 ) (17.1 )% Retail used vehicles sold 81,494 91,299 (9,805 ) (10.7 )% Wholesale used vehicles sold 18,372 21,543 (3,171 ) (14.7 )% Total used 99,866 112,842 (12,976 ) (11.5 )% Average sales price per unit sold: New vehicle retail $ 41,342 $ 39,135 $ 2,207 5.6 % Used vehicle retail $ 21,099 $ 20,565 $ 534 2.6 % Gross profit per unit sold: New vehicle retail sales $ 2,467 $ 1,830 $ 637 34.8 % Used vehicle retail sales $ 1,543 $ 1,371 $ 172 12.5 % Used vehicle wholesale sales $ 336 $ 113 $ 223 198.2 % Total used $ 1,321 $ 1,131 $ 190 16.8 % F&I PRU $ 1,926 $ 1,764 $ 162 9.2 % Other: SG&A expenses $ 706.0 $ 809.5 $ (103.5 ) (12.8 )% SG&A as % gross profit 65.3 % 72.9 % (7.6 )% 38 Table of Contents Same Store Operating Data - U.S. (In millions, except unit data) Nine Months Ended September 30, 2020 2019 Increase/(Decrease) % Change Revenues: New vehicle retail sales $ 3,026.1 $ 3,494.0 $ (467.9 ) (13.4 )% Used vehicle retail sales 1,680.6 1,861.4 (180.8 ) (9.7 )% Used vehicle wholesale sales 120.4 130.2 (9.8 ) (7.5 )% Total used 1,801.0 1,991.6 (190.6 ) (9.6 )% Parts and service sales 850.3 914.6 (64.3 ) (7.0 )% F&I, net 297.5 317.6 (20.1 ) (6.3 )% Total revenues $ 5,974.9 $ 6,717.8 $ (742.9 ) (11.1 )% Gross profit: New vehicle retail sales $ 178.0 $ 163.2 $ 14.7 9.0 % Used vehicle retail sales 122.7 124.3 (1.7 ) (1.3 )% Used vehicle wholesale sales 6.1 2.5 3.7 150.6 % Total used 128.8 126.8 2.0 1.6 % Parts and service sales 456.7 495.5 (38.8 ) (7.8 )% F&I, net 297.5 317.6 (20.1 ) (6.3 )% Total gross profit $ 1,061.0 $ 1,103.2 $ (42.1 ) (3.8 )% Gross margin: New vehicle retail sales 5.9 % 4.7 % 1.2 % Used vehicle retail sales 7.3 % 6.7 % 0.6 % Used vehicle wholesale sales 5.1 % 1.9 % 3.2 % Total used 7.2 % 6.4 % 0.8 % Parts and service sales 53.7 % 54.2 % (0.5 )% F&I, net 100.0 % 100.0 % — % Total gross margin 17.8 % 16.4 % 1.3 % Units sold: Retail new vehicles sold 73,433 89,170 (15,737 ) (17.6 )% Retail used vehicles sold 80,055 90,190 (10,135 ) (11.2 )% Wholesale used vehicles sold 18,169 21,159 (2,990 ) (14.1 )% Total used 98,224 111,349 (13,125 ) (11.8 )% Average sales price per unit sold: New vehicle retail $ 41,209 $ 39,183 $ 2,026 5.2 % Used vehicle retail $ 20,993 $ 20,639 $ 354 1.7 % Gross profit per unit sold: New vehicle retail sales $ 2,424 $ 1,831 $ 593 32.4 % Used vehicle retail sales $ 1,532 $ 1,378 $ 154 11.2 % Used vehicle wholesale sales $ 338 $ 116 $ 222 191.8 % Total used $ 1,311 $ 1,138 $ 173 15.2 % F&I PRU $ 1,938 $ 1,771 $ 167 9.4 % Other: SG&A expenses $ 693.1 $ 805.5 $ (112.4 ) (14.0 )% SG&A as % gross profit 65.3 % 73.0 % (7.7 )% 39 Table of Contents The following discussion of our U.S. operating results is on a same store basis. The difference between reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings. Our U.S. dealership operations have been impacted by the reduced demand caused by the COVID-19 pandemic and the restrictions put in place by local governments to contain the virus. Revenues Total revenues in the U.S. during the nine months ended September 30, 2020 decreased $681.0 million , or 10.1% , as compared to the same period in 2019 . Total same store revenues in the U.S. during the nine months ended September 30, 2020 decreased $742.9 million , or 11.1% , as compared to the same period in 2019 . The decrease in U.S. same store revenues was driven by declines in all of our revenue streams. The declines of 13.4% in new vehicle retail same store sales, 9.7% in used vehicle retail same store sales and 7.5% in used vehicle wholesale same store sales were driven by declines of 17.6% , 11.2% and 14.1% in new vehicle, used vehicle retail and used vehicle wholesale unit sales, respectively, reflecting reduced demand at our dealerships caused by the COVID-19 pandemic and inventory supply shortages. Partially offsetting these declines, our online new and used vehicle sales platform, AcceleRide® was instrumental in allowing us to connect with and serve our customers throughout the restricted social distancing environment. Parts and service same store revenues decreased 7.0% driven by an 18.1% decrease in collision revenues, 10.6% decrease in warranty revenues, 4.5% decrease in customer-pay revenues and a 1.8% decrease in wholesale parts revenues. F&I same store revenues decreased 6.3% driven by a 14.4% decrease in same store retail unit sales as discussed above, which was partially offset by higher penetration rates and income per contract on many of our finance and insurance product offerings and a decline in our overall chargeback experience. Gross Profit Total gross profit in the U.S. during the nine months ended September 30, 2020 decreased $29.4 million , or 2.6% , as compared to the same period in 2019 . Total same store gross profit in the U.S. during the nine months ended September 30, 2020 decreased $42.1 million , or 3.8% , as compared to the same period in 2019 .The decrease in total gross profit was driven by decreases in all of our operations except for new vehicle retail and used vehicle wholesale. New vehicle retail same store gross profit increased 9.0% driven by a 32.4% increase in new vehicle retail same store gross profit per unit sold which was partially offset by a 17.6% decrease in new vehicle retail unit sales. The increase in new vehicle retail same store gross profit per unit sold reflects supply constraints as many manufacturers had put a hold on production due to the COVID-19 pandemic earlier in the year and have not returned to normal production levels. The 1.3% decrease in used vehicle retail same store gross profit was related to an 11.2% decline in used vehicle retail unit sales which was mostly offset by an 11.2% increase in used vehicle retail same store average gross profit per unit sold. The decline in used vehicle retail same store gross profit was related to inventory supply constraints and the reduced demand during the first half of the year caused by the COVID-19 pandemic. Parts and service same store gross profit and F&I same store gross profit decreased 7.8% and 6.3% , respectively, driven by decreases described above. Total same store gross margin increased 130 basis points primarily as a result of higher new vehicle and used vehicle retail and wholesale margins related to the supply constraints of inventory in the industry. SG&A Expenses Our SG&A expenses consist primarily of personnel costs, including salaries, commissions and incentive-based compensation, as well as rent and facility costs, advertising and other expenses, which include legal, professional fees and general corporate expenses. Total SG&A expenses in the U.S. during the nine months ended September 30, 2020 decreased $103.5 million , or 12.8% , as compared to the same period in 2019 . Total same store SG&A expenses in the U.S. during the nine months ended September 30, 2020 , decreased $112.4 million , or 14.0% , as compared to the same period in 2019 . The U.S. dealership operations were directly impacted by reduced demand caused by the COVID-19 pandemic. In an effort to reduce costs, beginning in March, we furloughed and terminated employees and significantly reduced advertising and other SG&A expenses. As market conditions have improved, we have strived to retain our lower operating cost structure as a result of the pandemic. Total same store SG&A expenses in the U.S. for the first nine months of 2019 included $17.8 million in net costs associated with hailstorms and flooding from Tropical Storm Imelda in Texas; $1.8 million in non-core legal expenses; and $0.5 million in net gains on real estate and dealership transactions. Total same store SG&A expenses in the U.S. during the first nine months of 2020 included $10.6 million in expense for an out-of-period adjustment related to stock-based compensation. Total same store SG&A as a percent of gross profit decreased from 73.0% for the nine months ended 2019 to 65.3% for the same period of 2020 driven by cost cutting measures taken due to the impact of the COVID-19 pandemic. 40 Table of Contents Reported Operating Data - U.K. (In millions, except unit data) Three Months Ended September 30, 2020 2019 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change Revenues: New vehicle retail sales $ 376.6 $ 290.7 $ 85.8 29.5 % $ 15.8 24.1 % Used vehicle retail sales 248.1 189.3 58.8 31.1 % 11.2 25.2 % Used vehicle wholesale sales 39.5 35.0 4.5 12.9 % 1.7 8.0 % Total used 287.6 224.3 63.3 28.2 % 12.9 22.5 % Parts and service sales 61.3 56.6 4.7 8.2 % 2.7 3.4 % F&I, net 15.4 13.0 2.4 18.2 % 0.7 13.1 % Total revenues $ 740.8 $ 584.6 $ 156.2 26.7 % $ 32.1 21.2 % Gross profit: New vehicle retail sales $ 16.8 $ 12.2 $ 4.5 37.1 % $ 0.7 31.1 % Used vehicle retail sales 17.2 8.9 8.3 93.4 % 0.8 84.2 % Used vehicle wholesale sales 2.0 (0.3 ) 2.3 713.0 % 0.1 690.0 % Total used 19.2 8.6 10.7 124.3 % 0.9 113.8 % Parts and service sales 36.2 31.3 4.9 15.7 % 1.6 10.6 % F&I, net 15.4 13.0 2.4 18.2 % 0.7 13.1 % Total gross profit $ 87.6 $ 65.1 $ 22.5 34.6 % $ 3.9 28.6 % Gross margin: New vehicle retail sales 4.5 % 4.2 % 0.2 % Used vehicle retail sales 6.9 % 4.7 % 2.2 % Used vehicle wholesale sales 5.1 % (0.9 )% 6.0 % Total used 6.7 % 3.8 % 2.9 % Parts and service sales 59.1 % 55.3 % 3.8 % F&I, net 100.0 % 100.0 % — % Total gross margin 11.8 % 11.1 % 0.7 % Units sold: Retail new vehicles sold 10,689 9,329 1,360 14.6 % Retail used vehicles sold 10,101 8,573 1,528 17.8 % Wholesale used vehicles sold 5,104 4,894 210 4.3 % Total used 15,205 13,467 1,738 12.9 % Average sales price per unit sold: New vehicle retail $ 35,230 $ 31,164 $ 4,066 13.0 % $ 1,479 8.3 % Used vehicle retail $ 24,561 $ 22,077 $ 2,484 11.2 % $ 1,105 6.2 % Gross profit per unit sold: New vehicle retail sales $ 1,571 $ 1,313 $ 258 19.7 % $ 69 14.4 % Used vehicle retail sales $ 1,706 $ 1,039 $ 667 64.2 % $ 81 56.4 % Used vehicle wholesale sales $ 394 $ (67 ) $ 462 687.8 % $ 15 665.7 % Total used $ 1,266 $ 637 $ 629 98.7 % $ 59 89.4 % F&I PRU $ 739 $ 726 $ 13 1.8 % $ 32 (2.6 )% Other: SG&A expenses $ 53.7 $ 57.6 $ (3.9 ) (6.8 )% $ 2.4 (11.0 )% SG&A as % gross profit 61.2 % 88.4 % (27.2 )% 41 Table of Contents Same Store Operating Data - U.K. (In millions, except unit data) Three Months Ended September 30, 2020 2019 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change Revenues: New vehicle retail sales $ 360.2 $ 289.3 $ 70.9 24.5 % $ 15.3 19.2 % Used vehicle retail sales 237.5 187.6 50.0 26.6 % 10.8 20.9 % Used vehicle wholesale sales 37.9 34.5 3.4 9.8 % 1.7 4.9 % Total used 275.4 222.1 53.3 24.0 % 12.5 18.4 % Parts and service sales 56.8 52.3 4.5 8.6 % 2.5 3.8 % F&I, net 14.6 12.9 1.7 13.3 % 0.6 8.3 % Total revenues $ 707.0 $ 576.5 $ 130.5 22.6 % $ 30.9 17.3 % Gross profit: New vehicle retail sales $ 16.1 $ 12.2 $ 3.9 32.0 % $ 0.7 26.1 % Used vehicle retail sales 16.6 8.8 7.8 87.9 % 0.8 78.9 % Used vehicle wholesale sales 1.9 (0.3 ) 2.3 717.3 % 0.1 694.3 % Total used 18.5 8.5 10.0 117.8 % 0.9 107.6 % Parts and service sales 33.6 29.3 4.3 14.6 % 1.5 9.5 % F&I, net 14.6 12.9 1.7 13.3 % 0.6 8.3 % Total gross profit $ 82.8 $ 62.9 $ 19.9 31.6 % $ 3.7 25.7 % Gross margin: New vehicle retail sales 4.5 % 4.2 % 0.3 % Used vehicle retail sales 7.0 % 4.7 % 2.3 % Used vehicle wholesale sales 5.1 % (0.9 )% 6.1 % Total used 6.7 % 3.8 % 2.9 % Parts and service sales 59.1 % 56.1 % 3.1 % F&I, net 100.0 % 100.0 % — % Total gross margin 11.7 % 10.9 % 0.8 % Units sold: Retail new vehicles sold 10,256 9,273 983 10.6 % Retail used vehicles sold 9,705 8,507 1,198 14.1 % Wholesale used vehicles sold 4,908 4,847 61 1.3 % Total used 14,613 13,354 1,259 9.4 % Average sales price per unit sold: New vehicle retail $ 35,123 $ 31,195 $ 3,927 12.6 % $ 1,490 7.8 % Used vehicle retail $ 24,474 $ 22,049 $ 2,425 11.0 % $ 1,114 5.9 % Gross profit per unit sold: New vehicle retail sales $ 1,565 $ 1,312 $ 253 19.3 % $ 69 14.0 % Used vehicle retail sales $ 1,708 $ 1,037 $ 671 64.7 % $ 82 56.8 % Used vehicle wholesale sales $ 397 $ (65 ) $ 462 709.7 % $ 15 686.9 % Total used $ 1,268 $ 637 $ 631 99.0 % $ 60 89.7 % F&I PRU $ 732 $ 725 $ 7 0.9 % $ 32 (3.5 )% Other: SG&A expenses $ 50.1 $ 54.4 $ (4.3 ) (7.9 )% $ 2.3 (12.1 )% SG&A as % gross profit 60.6 % 86.5 % (26.0 )% 42 Table of Contents The following discussion of our U.K. operating results is on a same store basis. The difference between reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings. During the third quarter of 2020, our U.K. dealership operations have been steadily recovering from the impact on business caused by the COVID-19 pandemic. Revenues Total revenues in the U.K. during the three months ended September 30, 2020 increased $156.2 million , or 26.7% , as compared to the same period in 2019 . Total same store revenues in the U.K. during the three months ended September 30, 2020 increased $130.5 million , or 22.6% , as compared to the same period in 2019 . On a constant currency basis, total same store revenues increased 17.3% driven by improvements in all of our dealership operations. In response to the COVID-19 pandemic, during March the government mandated the closure of all U.K. dealerships in an effort to stop the spread of the virus with the exception of emergency vehicle repairs. U.K. showrooms were allowed to reopen June 1, 2020. Since reopening, dealership operations have continued to improve throughout the third quarter. On a constant currency basis, new vehicle retail same store revenues grew 19.2% driven by a 10.6% increase in new vehicle retail same store unit sales, coupled with a 7.8% increase in average new vehicle retail same store sales price. While industry sales declined slightly, our new vehicle retail same store unit sales were up reflecting 2019 inventory shortages experienced in our Audi and VW brands as a result of the stricter emissions standards imposed by the Worldwide Harmonised Light Vehicle Test Procedure. Used vehicle retail same store revenues on a constant currency basis increased 20.9% as used vehicle retail same store unit sales improved 14.1%, coupled with a 5.9% increase in average used retail same store sales price reflecting higher demand. Parts and service same store revenues increased 3.8% on a constant currency basis, driven by a 12.3% increase in customer-pay business, partially offset by declines in our other parts and service businesses. F&I same store revenues on a constant currency basis increased 8.3% as an increase in retail unit sales volumes was partially offset by lower penetration rates. Gross Profit Total gross profit in the U.K. during the three months ended September 30, 2020 increased $22.5 million , or 34.6% , as compared to the same period in 2019 . Total same store gross profit in the U.K. during the three months ended September 30, 2020 increased $19.9 million , or 31.6% , as compared to the same period in 2019 . On a constant currency basis, total same store gross profit increased 25.7% , driven by increases in all of our operations. New vehicle retail same store gross profit increased 26.1% on a constant currency basis, driven by a 10.6% growth in new vehicle retail same store unit sales, coupled with a 14.0% increase in new vehicle retail same store gross profit per unit. The increase in new vehicle gross profit per unit primarily reflects increased demand coupled with our current supply constraints. On a constant currency basis, used vehicle retail same store gross profit improved 78.9% , reflecting a 14.1% increase in used vehicle retail same store unit sales, coupled with a 56.8% increase in used vehicle retail same store gross profit per unit sold. The increase in used vehicle retail same store gross profit per unit sold reflects supply constraints similar to new vehicles. Used vehicle wholesale same store gross profit increased 694.3% on a constant currency basis, driven by an increase in auction prices and improved processes. Parts and service same store gross profit on a constant currency basis increased 9.5% driven by the 12.3% increase in our higher margin customer-pay business discussed above. F&I same store revenues on a constant currency basis increased 8.3% as previously discussed. SG&A Expenses Our SG&A expenses consist primarily of personnel costs, including salaries, commissions and incentive-based compensation, as well as rent and facility costs, advertising and other expenses, which include legal, professional fees and general corporate expenses. Total SG&A expenses in the U.K. during the three months ended September 30, 2020 decreased $3.9 million , or 6.8% , as compared to the same period in 2019 . Total same store SG&A expenses in the U.K. during the three months ended September 30, 2020 , decreased $4.3 million , or 7.9% , as compared to the same period in 2019 . On a constant currency basis, total same store SG&A expenses decreased 12.1% , driven by the implementation and continual execution of cost reduction strategies as a reaction to the COVID-19 pandemic. As market conditions have improved, we have strived to retain our lower operating cost structure as a result of the pandemic and we continued to benefit from these cost cutting measures in the third quarter. Total same store SG&A expenses in 2019 included $0.2 million in losses on dealership and real estate transactions. As a percentage of gross profit, total same store SG&A expenses decreased from 86.5% for the third quarter of 2019 to 60.6% for the same period of 2020. 43 Table of Contents Reported Operating Data - U.K. (In millions, except unit data) Nine Months Ended September 30, 2020 2019 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change Revenues: New vehicle retail sales $ 800.1 $ 911.5 $ (111.4 ) (12.2 )% $ (0.8 ) (12.1 )% Used vehicle retail sales 529.7 586.8 (57.1 ) (9.7 )% 3.1 (10.3 )% Used vehicle wholesale sales 90.6 127.1 (36.6 ) (28.8 )% 0.3 (29.0 )% Total used 620.3 714.0 (93.7 ) (13.1 )% 3.4 (13.6 )% Parts and service sales 139.5 172.5 (33.0 ) (19.1 )% 0.8 (19.6 )% F&I, net 35.1 43.2 (8.1 ) (18.8 )% — (18.8 )% Total revenues $ 1,595.0 $ 1,841.2 $ (246.2 ) (13.4 )% $ 3.3 (13.6 )% Gross profit: New vehicle retail sales $ 34.7 $ 39.6 $ (4.9 ) (12.4 )% $ (0.2 ) (12.0 )% Used vehicle retail sales 31.3 25.5 5.8 22.7 % 0.3 21.7 % Used vehicle wholesale sales 2.3 (2.6 ) 5.0 188.8 % — 188.4 % Total used 33.6 22.9 10.8 47.0 % 0.3 45.9 % Parts and service sales 78.5 95.5 (17.0 ) (17.8 )% 0.4 (18.3 )% F&I, net 35.1 43.2 (8.1 ) (18.8 )% — (18.8 )% Total gross profit $ 181.9 $ 201.2 $ (19.3 ) (9.6 )% $ 0.6 (9.9 )% Gross margin: New vehicle retail sales 4.3 % 4.3 % — % Used vehicle retail sales 5.9 % 4.3 % 1.6 % Used vehicle wholesale sales 2.6 % (2.1 )% 4.6 % Total used 5.4 % 3.2 % 2.2 % Parts and service sales 56.3 % 55.4 % 0.9 % F&I, net 100.0 % 100.0 % — % Total gross margin 11.4 % 10.9 % 0.5 % Units sold: Retail new vehicles sold 23,424 28,939 (5,515 ) (19.1 )% Retail used vehicles sold 22,165 25,284 (3,119 ) (12.3 )% Wholesale used vehicles sold 11,517 16,033 (4,516 ) (28.2 )% Total used 33,682 41,317 (7,635 ) (18.5 )% Average sales price per unit sold: New vehicle retail $ 34,157 $ 31,498 $ 2,658 8.4 % $ (36 ) 8.6 % Used vehicle retail $ 23,899 $ 23,210 $ 689 3.0 % $ 141 2.4 % Gross profit per unit sold: New vehicle retail sales $ 1,482 $ 1,370 $ 112 8.2 % $ (8 ) 8.8 % Used vehicle retail sales $ 1,411 $ 1,008 $ 403 40.0 % $ 12 38.9 % Used vehicle wholesale sales $ 203 $ (164 ) $ 366 223.7 % $ 1 223.1 % Total used $ 998 $ 553 $ 445 80.4 % $ 8 78.9 % F&I PRU $ 769 $ 796 $ (27 ) (3.4 )% $ 1 (3.5 )% Other: SG&A expenses $ 141.8 $ 175.8 $ (34.0 ) (19.3 )% $ 0.4 (19.6 )% SG&A as % gross profit 78.0 % 87.4 % (9.4 )% 44 Table of Contents Same Store Operating Data - U.K. (In millions, except unit data) Nine Months Ended September 30, 2020 2019 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change Revenues: New vehicle retail sales $ 747.4 $ 888.3 $ (140.9 ) (15.9 )% $ (0.3 ) (15.8 )% Used vehicle retail sales 498.0 573.0 (75.0 ) (13.1 )% 3.2 (13.7 )% Used vehicle wholesale sales 84.8 123.6 (38.8 ) (31.4 )% 0.3 (31.6 )% Total used 582.8 696.6 (113.8 ) (16.3 )% 3.5 (16.8 )% Parts and service sales 126.5 159.4 (32.8 ) (20.6 )% 0.7 (21.1 )% F&I, net 32.6 42.2 (9.6 ) (22.7 )% — (22.8 )% Total revenues $ 1,489.3 $ 1,786.4 $ (297.1 ) (16.6 )% $ 3.9 (16.8 )% Gross profit: New vehicle retail sales $ 32.5 $ 38.8 $ (6.4 ) (16.4 )% $ (0.2 ) (16.0 )% Used vehicle retail sales 29.7 25.2 4.5 17.9 % 0.3 16.9 % Used vehicle wholesale sales 2.2 (2.4 ) 4.7 193.0 % — 192.5 % Total used 31.9 22.7 9.2 40.3 % 0.3 39.1 % Parts and service sales 71.3 89.3 (18.0 ) (20.1 )% 0.4 (20.6 )% F&I, net 32.6 42.2 (9.6 ) (22.7 )% — (22.8 )% Total gross profit $ 168.4 $ 193.1 $ (24.7 ) (12.8 )% $ 0.6 (13.1 )% Gross margin: New vehicle retail sales 4.3 % 4.4 % — % Used vehicle retail sales 6.0 % 4.4 % 1.6 % Used vehicle wholesale sales 2.7 % (2.0 )% 4.6 % Total used 5.5 % 3.3 % 2.2 % Parts and service sales 56.4 % 56.0 % 0.4 % F&I, net 100.0 % 100.0 % — % Total gross margin 11.3 % 10.8 % 0.5 % Units sold: Retail new vehicles sold 21,775 27,891 (6,116 ) (21.9 )% Retail used vehicles sold 20,741 24,735 (3,994 ) (16.1 )% Wholesale used vehicles sold 10,780 15,657 (4,877 ) (31.1 )% Total used 31,521 40,392 (8,871 ) (22.0 )% Average sales price per unit sold: New vehicle retail $ 34,324 $ 31,848 $ 2,476 7.8 % $ (15 ) 7.8 % Used vehicle retail $ 24,008 $ 23,165 $ 843 3.6 % $ 155 3.0 % Gross profit per unit sold: New vehicle retail sales $ 1,491 $ 1,393 $ 98 7.1 % $ (7 ) 7.6 % Used vehicle retail sales $ 1,430 $ 1,017 $ 413 40.6 % $ 12 39.4 % Used vehicle wholesale sales $ 209 $ (154 ) $ 363 235.1 % $ 1 234.3 % Total used $ 1,012 $ 563 $ 449 79.8 % $ 8 78.3 % F&I PRU $ 767 $ 802 $ (35 ) (4.3 )% $ 1 (4.4 )% Other: SG&A expenses $ 127.3 $ 166.0 $ (38.7 ) (23.3 )% $ 0.4 (23.6 )% SG&A as % gross profit 75.6 % 86.0 % (10.4 )% 45 Table of Contents The following discussion of our U.K. operating results is on a same store basis. The difference between reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings. Our U.K. dealership operations have been impacted by the restrictions put in place by the national government in efforts to contain the spread of COVID-19. Revenues Total revenues in the U.K. during the nine months ended September 30, 2020 decreased $246.2 million , or 13.4% , as compared to the same period in 2019 . Total same store revenues in the U.K. during the nine months ended September 30, 2020 decreased $297.1 million , or 16.6% , as compared to the same period in 2019 . On a constant currency basis, total same store revenues decreased 16.8% , driven by decreases in all of our operations due to the COVID-19 pandemic. Beginning March 21, 2020, the government mandated the closure of all U.K. dealerships in efforts to stop the spread of the virus. The government shutdown remained in effect through May 18, 2020 for service, with the exception of emergency vehicle repairs, and June 1, 2020 for showrooms. Since June, business has recovered but not enough to offset the declines caused by the shutdown. New vehicle retail same store revenues on a constant currency basis decreased 15.8% , as a 21.9% decrease in new vehicle retail same store unit sales was partially offset by a 7.8% increase in new vehicle retail same store average sales price per unit sold. On a constant currency basis, used vehicle retail same store revenues decreased 13.7% , as a 16.1% decrease in used vehicle retail same store unit sales was partially offset by a 3.0% increase in used vehicle retail same store average sales price per unit sold. Parts and service same store revenues decreased 21.1% on a constant currency basis driven by declines of 13.1% in customer-pay, 32.4% in warranty, 35.5% in collision, and 27.0% in wholesale parts revenues. The decreases in all parts and service businesses are a result of the limitations on the business due to COVID-19. F&I same store revenues on a constant currency basis decreased 22.8% driven by the decline in retail unit sales and lower penetration rates. Gross Profit Total gross profit in the U.K. during the nine months ended September 30, 2020 decreased $19.3 million , or 9.6% , as compared to the same period in 2019 . Total same store gross profit in the U.K. during the nine months ended September 30, 2020 decreased $24.7 million , or 12.8% , as compared to the same period in 2019 . On a constant currency basis, total same store gross profit decreased 13.1% , driven by decreases in all of our operations, except for used vehicle, as result of the COVID-19 pandemic. New vehicle retail same store gross profit on a constant currency basis decreased 16.0% , driven by a 21.9% decline in new vehicle retail same store unit sales, partially offset by a 7.6% increase in new vehicle retail same store average gross profit per unit sold. The increase in new vehicle retail same store gross profit per unit sold reflects supply constraints related to the COVID-19 pandemic as many manufacturers had put a hold on production earlier in the year and have not returned to normal production levels. Used vehicle retail same store gross profit on a constant currency basis increased 16.9% on a 39.4% increase in used vehicle retail same store average gross profit per unit sold, partially offset by a 16.1% decrease in used vehicle retail same store unit sales. The increase in used vehicle retail same store average gross profit per unit sold reflects supply constraints similar to new vehicles. Used vehicle wholesale same store gross profit improved 192.5% on a constant currency basis driven by an increase in auction prices due to supply constraints and improved processes. Parts and service same store gross profit on a constant currency basis decreased 20.6% as a result of a 21.1% decline in revenues discussed above. F&I same store gross profit on a constant currency basis decreased 22.8% as discussed above. SG&A Expenses Our SG&A expenses consist primarily of personnel costs, including salaries, commissions and incentive-based compensation, as well as rent and facility costs, advertising and other expenses, which include legal, professional fees and general corporate expenses. Total SG&A expenses in the U.K. during the nine months ended September 30, 2020 decreased $34.0 million , or 19.3% , as compared to the same period in 2019 . Total same store SG&A expenses in the U.K. during the nine months ended September 30, 2020 , decreased $38.7 million , or 23.3% , as compared to the same period in 2019 . On a constant currency basis, total same store SG&A expenses decreased 23.6% . This decline was driven by the implementation and execution of cost reduction strategies as a reaction to the COVID-19 pandemic, which enabled us to partially offset the negative impact of lower gross profit. Total same store SG&A expenses in 2020 included $1.2 million in severance costs for redundancy due to the COVID-19 pandemic. Total same store SG&A expenses in 2019 included $0.2 million in losses on dealership and real estate transactions. As a percentage of gross profit, total same store SG&A expenses decreased from 86.0% for the nine months ended 2019 to 75.6% for the same period of 2020. 46 Table of Contents Reported Operating Data - Brazil (In millions, except unit data) Three Months Ended September 30, 2020 2019 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change Revenues: New vehicle retail sales $ 31.9 $ 69.9 $ (38.0 ) (54.4 )% $ (11.2 ) (38.3 )% Used vehicle retail sales 10.9 22.8 (11.9 ) (52.1 )% (3.9 ) (35.1 )% Used vehicle wholesale sales 2.4 4.4 (2.0 ) (44.8 )% (0.9 ) (24.8 )% Total used 13.4 27.2 (13.8 ) (50.9 )% (4.7 ) (33.5 )% Parts and service sales 8.0 12.0 (4.0 ) (33.6 )% (2.9 ) (9.7 )% F&I, net 1.1 1.9 (0.8 ) (41.4 )% (0.4 ) (20.2 )% Total revenues $ 54.3 $ 110.9 $ (56.6 ) (51.1 )% $ (19.2 ) (33.8 )% Gross profit: New vehicle retail sales $ 2.6 $ 4.5 $ (1.8 ) (41.2 )% $ (0.9 ) (20.5 )% Used vehicle retail sales 1.0 1.8 (0.8 ) (42.6 )% (0.4 ) (22.0 )% Used vehicle wholesale sales 0.2 0.3 (0.1 ) (37.1 )% (0.1 ) (14.7 )% Total used 1.2 2.1 (0.9 ) (41.8 )% (0.4 ) (20.9 )% Parts and service sales 3.7 5.1 (1.5 ) (28.8 )% (1.3 ) (3.4 )% F&I, net 1.1 1.9 (0.8 ) (41.4 )% (0.4 ) (20.2 )% Total gross profit $ 8.6 $ 13.6 $ (5.0 ) (36.6 )% $ (3.1 ) (14.0 )% Gross margin: New vehicle retail sales 8.3 % 6.4 % 1.9 % Used vehicle retail sales 9.3 % 7.8 % 1.5 % Used vehicle wholesale sales 8.0 % 7.1 % 1.0 % Total used 9.1 % 7.7 % 1.4 % Parts and service sales 46.1 % 43.0 % 3.1 % F&I, net 100.0 % 100.0 % — % Total gross margin 15.8 % 12.2 % 3.6 % Units sold: Retail new vehicles sold 1,200 2,262 (1,062 ) (46.9 )% Retail used vehicles sold 552 1,219 (667 ) (54.7 )% Wholesale used vehicles sold 282 430 (148 ) (34.4 )% Total used 834 1,649 (815 ) (49.4 )% Average sales price per unit sold: New vehicle retail $ 26,558 $ 30,883 $ (4,325 ) (14.0 )% $ (9,343 ) 16.2 % Used vehicle retail $ 19,766 $ 18,681 $ 1,085 5.8 % $ (6,995 ) 43.3 % Gross profit per unit sold: New vehicle retail sales $ 2,196 $ 1,980 $ 216 10.9 % $ (772 ) 49.9 % Used vehicle retail sales $ 1,840 $ 1,453 $ 387 26.7 % $ (661 ) 72.2 % Used vehicle wholesale sales $ 696 $ 726 $ (30 ) (4.1 )% $ (247 ) 30.0 % Total used $ 1,453 $ 1,263 $ 190 15.1 % $ (521 ) 56.3 % F&I PRU $ 621 $ 533 $ 88 16.5 % $ (224 ) 58.5 % Other: SG&A expenses $ 6.9 $ 11.0 $ (4.2 ) (37.8 )% $ (2.5 ) (15.5 )% SG&A as % gross profit 79.9 % 81.4 % (1.5 )% 47 Table of Contents Same Store Operating Data - Brazil (In millions, except unit data) Three Months Ended September 30, 2020 2019 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change Revenues: New vehicle retail sales $ 31.9 $ 69.9 $ (38.0 ) (54.4 )% $ (11.2 ) (38.3 )% Used vehicle retail sales 10.9 22.6 (11.7 ) (51.8 )% (3.9 ) (34.7 )% Used vehicle wholesale sales 2.4 4.4 (2.0 ) (44.8 )% (0.9 ) (24.8 )% Total used 13.4 27.1 (13.7 ) (50.6 )% (4.7 ) (33.1 )% Parts and service sales 7.9 11.8 (3.8 ) (32.5 )% (2.8 ) (8.4 )% F&I, net 1.1 1.9 (0.8 ) (41.4 )% (0.4 ) (20.3 )% Total revenues $ 54.3 $ 110.5 $ (56.3 ) (50.9 )% $ (19.2 ) (33.6 )% Gross profit: New vehicle retail sales $ 2.6 $ 4.5 $ (1.9 ) (41.3 )% $ (0.9 ) (20.7 )% Used vehicle retail sales 1.0 1.8 (0.7 ) (42.3 )% (0.4 ) (21.5 )% Used vehicle wholesale sales 0.2 0.3 (0.1 ) (37.1 )% (0.1 ) (14.7 )% Total used 1.2 2.1 (0.9 ) (41.5 )% (0.4 ) (20.5 )% Parts and service sales 3.7 5.2 (1.5 ) (29.0 )% (1.3 ) (3.6 )% F&I, net 1.1 1.9 (0.8 ) (41.4 )% (0.4 ) (20.3 )% Total gross profit $ 8.6 $ 13.6 $ (5.0 ) (36.7 )% $ (3.1 ) (14.1 )% Gross margin: New vehicle retail sales 8.3 % 6.4 % 1.8 % Used vehicle retail sales 9.3 % 7.8 % 1.5 % Used vehicle wholesale sales 8.0 % 7.1 % 1.0 % Total used 9.1 % 7.7 % 1.4 % Parts and service sales 46.1 % 43.8 % 2.3 % F&I, net 100.0 % 100.0 % — % Total gross margin 15.8 % 12.3 % 3.6 % Units sold: Retail new vehicles sold 1,200 2,262 (1,062 ) (46.9 )% Retail used vehicles sold 552 1,216 (664 ) (54.6 )% Wholesale used vehicles sold 282 430 (148 ) (34.4 )% Total used 834 1,646 (812 ) (49.3 )% Average sales price per unit sold: New vehicle retail $ 26,558 $ 30,883 $ (4,325 ) (14.0 )% $ (9,343 ) 16.2 % Used vehicle retail $ 19,766 $ 18,613 $ 1,152 6.2 % $ (7,001 ) 43.8 % Gross profit per unit sold: New vehicle retail sales $ 2,196 $ 1,985 $ 211 10.6 % $ (772 ) 49.5 % Used vehicle retail sales $ 1,840 $ 1,447 $ 393 27.2 % $ (662 ) 72.9 % Used vehicle wholesale sales $ 696 $ 726 $ (30 ) (4.1 )% $ (247 ) 30.0 % Total used $ 1,453 $ 1,258 $ 195 15.5 % $ (522 ) 56.9 % F&I PRU $ 621 $ 533 $ 87 16.3 % $ (224 ) 58.3 % Other: SG&A expenses $ 6.9 $ 11.2 $ (4.4 ) (38.9 )% $ (2.5 ) (17.0 )% SG&A as % gross profit 79.8 % 82.6 % (2.9 )% 48 Table of Contents The following discussion of our Brazil operating results is on a same store basis. The difference between reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings. Our Brazil dealership operations have been significantly impacted by the reduced demand caused by the COVID-19 pandemic and the restrictions put in place by local governments to contain the virus. Revenues Total revenues in Brazil during the three months ended September 30, 2020 decreased $56.6 million , or 51.1% , as compared to the same period in 2019 . Total same store revenues in Brazil during the three months ended September 30, 2020 decreased $56.3 million , or 50.9% , as compared to the same period in 2019 . On a constant currency basis, total same store revenues decreased 33.6% driven by declines in all business lines caused by the continued negative impacts of the COVID-19 pandemic. New vehicle retail same store revenues on a constant currency basis decreased 38.3% , as a 46.9% decrease in new vehicle retail same store unit sales was partially offset by a 16.2% increase in new vehicle retail same store average sales price per unit sold. Used vehicle retail same store revenues on a constant currency basis decreased 34.7% , reflecting a 54.6% decrease in used vehicle same store unit sales partially offset by a 43.8% increase in used vehicle retail same store average sales price per unit sold. Used vehicle wholesale same store revenues decreased 24.8% on a constant currency basis reflecting a 34.4% decline in wholesale used vehicle same store unit sales. Reduced demand and a limited availability of inventory drove the reduction in new and used vehicle same store unit sales. The increases in new and used vehicle retail same store average sales price per unit reflect the supply constraints and a change in brand mix, which has shifted towards our higher priced luxury brands. Parts and service same store revenues on a constant currency basis decreased 8.4% primarily driven by declines in collision and customer-pay revenues. F&I same store revenues on a constant currency basis decreased 20.3% primarily due to the decline in retail unit sales partially offset by an increase in the penetration rate and income per contract for our retail finance fees. Gross Profit Total gross profit in Brazil during the three months ended September 30, 2020 decreased $5.0 million , or 36.6% , as compared to the same period in 2019 . Total same store gross profit in Brazil during the three months ended September 30, 2020 decreased $5.0 million , or 36.7% , as compared to the same period in 2019 . On a constant currency basis, total same store gross profit decreased 14.1% driven by declines in all business lines. New vehicle retail same store gross profit on a constant currency basis decreased 20.7% driven by the 46.9% decline in new vehicle retail same store units sold partially offset by a 49.5% increase in new vehicle retail same store average gross profit per unit sold. Used vehicle retail same store gross profit on a constant currency basis decreased 21.5% reflecting the 54.6% decline in used vehicle retail same store unit sales partially offset by a 72.9% increase in used vehicle retail same store average gross profit per unit sold. Used vehicle wholesale same store gross profit on a constant currency basis decreased 14.7% driven by the 34.4% decline in wholesale used vehicles same store unit sales partially offset by a 30.0% increase in used vehicle wholesale same store average gross profit per unit sold. The improvement in new and used same store gross profit PRU was a direct result of supply constraints and a mix shift towards our luxury brands. Parts and service same store gross profit on a constant currency basis decreased 3.6% as a result of the 8.4% decrease in revenues described above. F&I same store gross profit on a constant currency basis decreased 20.3% as discussed above. SG&A Expenses Our SG&A expenses consist primarily of personnel costs, including salaries, commissions and incentive-based compensation, as well as rent and facility costs, advertising and other expenses, which include legal, professional fees and general corporate expenses. Total SG&A expenses in Brazil during the three months ended September 30, 2020 decreased $4.2 million , or 37.8% , as compared to the same period in 2019 . Total same store SG&A expenses in Brazil during the three months ended September 30, 2020 decreased $4.4 million , or 38.9% , as compared to the same period in 2019 . On a constant currency basis, total same store SG&A expenses decreased 17.0% while total same store gross profit decreased 14.1%, resulting in a 290 basis points decrease in total same store SG&A as a percentage of gross profit. The decrease in same store SG&A is explained by expense control measures taken by management due to COVID-19, primarily driven by a decrease in personnel expense. 49 Table of Contents Reported Operating Data - Brazil (In millions, except unit data) Nine Months Ended September 30, 2020 2019 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change Revenues: New vehicle retail sales $ 109.1 $ 208.4 $ (99.2 ) (47.6 )% $ (27.4 ) (34.5 )% Used vehicle retail sales 38.3 63.4 (25.1 ) (39.6 )% (9.6 ) (24.4 )% Used vehicle wholesale sales 9.2 13.3 (4.1 ) (31.1 )% (2.5 ) (12.2 )% Total used 47.5 76.7 (29.3 ) (38.1 )% (12.1 ) (22.3 )% Parts and service sales 23.4 36.1 (12.7 ) (35.2 )% (6.6 ) (17.0 )% F&I, net 3.4 5.6 (2.2 ) (39.9 )% (0.9 ) (24.2 )% Total revenues $ 183.4 $ 326.9 $ (143.5 ) (43.9 )% $ (47.0 ) (29.5 )% Gross profit: New vehicle retail sales $ 7.5 $ 12.6 $ (5.1 ) (40.3 )% $ (2.0 ) (24.6 )% Used vehicle retail sales 2.5 4.7 (2.2 ) (46.6 )% (0.7 ) (31.9 )% Used vehicle wholesale sales 0.5 0.9 (0.4 ) (45.6 )% (0.1 ) (30.1 )% Total used 3.0 5.6 (2.6 ) (46.5 )% (0.8 ) (31.6 )% Parts and service sales 10.3 15.8 (5.5 ) (34.7 )% (2.9 ) (16.4 )% F&I, net 3.4 5.6 (2.2 ) (39.9 )% (0.9 ) (24.2 )% Total gross profit $ 24.2 $ 39.6 $ (15.4 ) (38.9 )% $ (6.6 ) (22.2 )% Gross margin: New vehicle retail sales 6.9 % 6.1 % 0.8 % Used vehicle retail sales 6.5 % 7.4 % (0.9 )% Used vehicle wholesale sales 5.2 % 6.6 % (1.4 )% Total used 6.3 % 7.3 % (1.0 )% Parts and service sales 44.1 % 43.8 % 0.3 % F&I, net 100.0 % 100.0 % — % Total gross margin 13.2 % 12.1 % 1.1 % Units sold: Retail new vehicles sold 3,865 6,911 (3,046 ) (44.1 )% Retail used vehicles sold 2,006 3,295 (1,289 ) (39.1 )% Wholesale used vehicles sold 1,081 1,386 (305 ) (22.0 )% Total used 3,087 4,681 (1,594 ) (34.1 )% Average sales price per unit sold: New vehicle retail $ 28,238 $ 30,153 $ (1,915 ) (6.4 )% $ (7,093 ) 17.2 % Used vehicle retail $ 19,100 $ 19,251 $ (151 ) (0.8 )% $ (4,794 ) 24.1 % Gross profit per unit sold: New vehicle retail sales $ 1,950 $ 1,826 $ 123 6.7 % $ (514 ) 34.9 % Used vehicle retail sales $ 1,245 $ 1,421 $ (175 ) (12.3 )% $ (343 ) 11.8 % Used vehicle wholesale sales $ 444 $ 637 $ (192 ) (30.2 )% $ (126 ) (10.4 )% Total used $ 965 $ 1,189 $ (224 ) (18.8 )% $ (267 ) 3.7 % F&I PRU $ 576 $ 551 $ 25 4.5 % $ (150 ) 31.8 % Other: SG&A expenses $ 23.1 $ 35.0 $ (11.9 ) (34.0 )% $ (6.4 ) (15.8 )% SG&A as % gross profit 95.3 % 88.3 % 7.0 % 50 Table of Contents Same Store Operating Data - Brazil (In millions, except unit data) Nine Months Ended September 30, 2020 2019 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change Revenues: New vehicle retail sales $ 109.1 $ 205.6 $ (96.4 ) (46.9 )% $ (27.4 ) (33.6 )% Used vehicle retail sales 38.3 60.7 (22.4 ) (36.9 )% (9.6 ) (21.1 )% Used vehicle wholesale sales 9.2 11.2 (2.0 ) (18.1 )% (2.5 ) 4.4 % Total used 47.4 71.9 (24.4 ) (34.0 )% (12.1 ) (17.1 )% Parts and service sales 23.4 35.4 (12.0 ) (33.9 )% (6.6 ) (15.2 )% F&I, net 3.4 5.6 (2.2 ) (39.1 )% (0.9 ) (23.2 )% Total revenues $ 183.4 $ 318.3 $ (135.0 ) (42.4 )% $ (47.0 ) (27.7 )% Gross profit: New vehicle retail sales $ 7.5 $ 12.6 $ (5.1 ) (40.3 )% $ (2.0 ) (24.6 )% Used vehicle retail sales 2.5 4.7 (2.2 ) (46.6 )% (0.7 ) (31.8 )% Used vehicle wholesale sales 0.5 0.9 (0.4 ) (44.5 )% (0.1 ) (28.8 )% Total used 3.0 5.5 (2.6 ) (46.3 )% (0.8 ) (31.4 )% Parts and service sales 10.3 15.5 (5.2 ) (33.4 )% (2.9 ) (14.7 )% F&I, net 3.4 5.6 (2.2 ) (39.1 )% (0.9 ) (23.2 )% Total gross profit $ 24.2 $ 39.2 $ (15.0 ) (38.3 )% $ (6.6 ) (21.4 )% Gross margin: New vehicle retail sales 6.9 % 6.1 % 0.8 % Used vehicle retail sales 6.5 % 7.7 % (1.2 )% Used vehicle wholesale sales 5.2 % 7.7 % (2.5 )% Total used 6.3 % 7.7 % (1.4 )% Parts and service sales 44.1 % 43.8 % 0.3 % F&I, net 100.0 % 100.0 % — % Total gross margin 13.2 % 12.3 % 0.9 % Units sold: Retail new vehicles sold 3,865 6,866 (3,001 ) (43.7 )% Retail used vehicles sold 2,006 3,217 (1,211 ) (37.6 )% Wholesale used vehicles sold 1,081 1,319 (238 ) (18.0 )% Total used 3,087 4,536 (1,449 ) (31.9 )% Average sales price per unit sold: New vehicle retail $ 28,238 $ 29,938 $ (1,701 ) (5.7 )% $ (7,089 ) 18.0 % Used vehicle retail $ 19,086 $ 18,861 $ 225 1.2 % $ (4,781 ) 26.5 % Gross profit per unit sold: New vehicle retail sales $ 1,950 $ 1,839 $ 110 6.0 % $ (514 ) 33.9 % Used vehicle retail sales $ 1,244 $ 1,453 $ (210 ) (14.4 )% $ (345 ) 9.3 % Used vehicle wholesale sales $ 444 $ 656 $ (212 ) (32.3 )% $ (126 ) (13.1 )% Total used $ 964 $ 1,222 $ (258 ) (21.1 )% $ (268 ) 0.9 % F&I PRU $ 576 $ 551 $ 25 4.6 % $ (150 ) 31.9 % Other: SG&A expenses $ 23.0 $ 34.4 $ (11.4 ) (33.1 )% $ (6.4 ) (14.7 )% SG&A as % gross profit 95.1 % 87.8 % 7.3 % 51 Table of Contents The following discussion of our Brazil operating results is on a same store basis. The difference between reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings. Our Brazil dealership operations have been significantly impacted by the reduced demand caused by the COVID-19 pandemic and the restrictions put in place by local governments to contain the virus. Revenues Total revenues in Brazil during the nine months ended September 30, 2020 decreased $143.5 million , or 43.9% , as compared to the same period in 2019 . Total same store revenues in Brazil during the nine months ended September 30, 2020 decreased $135.0 million , or 42.4% , as compared to the same period in 2019 . On a constant currency basis, total same store revenues decreased 27.7% with declines in all revenue lines except for used vehicle wholesale. Beginning March 20, 2020, all our dealerships were required to close in efforts to stop the spread of the virus and while our service centers reopened and operated throughout the second quarter, our showrooms did not reopen until May 2020 with reduced hours. New vehicle retail same store revenues on a constant currency basis decreased 33.6% , as a 43.7% decrease in new vehicle retail same store unit sales was partially offset by an 18.0% increase in new vehicle retail same store average sales price per unit sold. Used vehicle retail same store revenues on a constant currency basis decreased 21.1% , as a 37.6% decrease in used vehicle retail same store unit sales more than offset a 26.5% increase in used vehicle retail same store average sales price per unit sold. Used vehicle wholesale same store revenues increased 4.4% on a constant currency basis. The improvement in used vehicle wholesale same store revenues and the increases in new and used vehicle retail same store average sales price per unit sold reflect supply constraints and a shift in brand mix to higher priced luxury brands. The decline in total units sold reflects the shutdowns and subsequent lower demand and inventory shortages caused by the COVID-19 pandemic. Parts and service same store revenues on a constant currency basis decreased 15.2% driven by declines in customer-pay, warranty and collision revenues partially offset by an increase in wholesale revenues. F&I same store revenues on a constant currency basis decreased 23.2% primarily as a result of a decline in our retail unit sales partially offset by an improvement in income per contract on our retail finance fees. Gross Profit Total gross profit in Brazil during the nine months ended September 30, 2020 decreased $15.4 million , or 38.9% , as compared to the same period in 2019 . Total same store gross profit in Brazil during the nine months ended September 30, 2020 decreased $15.0 million , or 38.3% , as compared to the same period in 2019 . On a constant currency basis total same store gross profit decreased 21.4% driven by declines in all business lines. New vehicle retail same store gross profit on a constant currency basis decreased 24.6% , driven by a 43.7% decrease in new vehicle retail same store units sold partially offset by a 33.9% increase in new vehicle retail same store average gross profit per unit sold. Used vehicle retail same store gross profit on a constant currency basis decreased 31.8%, reflecting a 37.6% decrease in used vehicle retail same store unit sales partially offset by a 9.3% increase in used vehicle retail same store average gross profit per unit sold. The improvement in new and used vehicle retail same store gross profit per unit reflects the shift towards our higher priced luxury brands and supply constraints experienced during the COVID-19 pandemic as many manufacturers had put a hold on production earlier in the year and have not returned to normal production levels. Parts and service same store gross profit decreased 14.7% on a constant currency basis, driven by the 15.2% decrease in parts and service revenues described above. F&I same store gross profit on a constant currency basis decreased 23.2% as discussed above. SG&A Expenses Our SG&A expenses consist primarily of personnel costs, including salaries, commissions and incentive-based compensation, as well as rent and facility costs, advertising and other expenses, which include legal, professional fees and general corporate expenses. Total SG&A expenses in Brazil during the nine months ended September 30, 2020 decreased $11.9 million , or 34.0% , as compared to the same period in 2019 . Total same store SG&A expenses in Brazil during the nine months ended September 30, 2020 , decreased $11.4 million , or 33.1% , as compared to the same period in 2019 . On a constant currency basis, total same store SG&A expenses decreased 14.7% while total same store gross profit decreased 21.4% , resulting in a 730 basis points increase in total same store SG&A as a percentage of gross profit. The decrease in SG&A expenses was a result of cost control initiatives implemented by the management team centered around reducing personnel expense. Total same store SG&A expenses in 2020 included $0.9 million of severance costs associated with the termination of employees as a result of the COVID-19 pandemic. 52 Table of Contents The following discussion of our results of operations is on a consolidated basis, unless otherwise noted. Depreciation and Amortization Expense Our total depreciation and amortization expense increased from $18.2 million to $19.1 million and from $53.0 million to $56.5 million for the three and nine months ended September 30, 2020 , respectively, when compared to the same period in 2019 . The slight increase is attributed to an increase in property and equipment in our U.S. segment. Impairment of Assets We evaluate intangible assets, consisting entirely of indefinite-lived franchise rights and goodwill, for impairment annually, or more frequently if events or circumstances indicate possible impairment. During the three months ended June 30, 2020 we recorded goodwill impairment charges of $10.7 million within the Brazil reporting unit and franchise rights impairment charges of $11.1 million within the U.K. segment and $0.1 million within the Brazil segment. During the three months ended September 30, 2019 we recorded franchise rights impairment charges of $5.6 million in the U.K. segment and $3.0 million in the U.S. segment. See Part I, “Item 1. Financial Statements,” Note 8 “Intangibles” for additional discussion of our interim impairment assessment. We also review long-lived assets that are held-for-use, including our property and equipment and ROU assets, for impairment at the lowest level of identifiable cash flows whenever there are indicators that the carrying value of these assets may not be recoverable. During the three months ended June 30, 2020, we recognized ROU asset impairment charges of $1.7 million relating to seven dealerships within the U.K. segment and $0.2 million relating to one dealership within the Brazil segment. During the three months ended September 30, 2019 we recognized a ROU asset impairment charge of $1.4 million in the U.K. segment and asset impairment charges of $0.2 million in the U.S. segment. During the three months ended June 30, 2019 we recognized asset impairment charges of $0.5 million within the Brazil segment. See Part I, “Item 1. Financial Statements,” Note 1 “Interim Financial Information” for additional discussion of our interim impairment assessment. The impairment charges were recognized within Asset impairments in our Condensed Consolidated Statements of Operations. Floorplan Interest Expense Our floorplan interest expense fluctuates with changes in our borrowings outstanding and interest rates, which are based on LIBOR, Prime rate or a benchmark rate. To mitigate the impact of interest rate fluctuations, we employ an interest rate hedging strategy, whereby we swap variable interest rate exposure for a fixed interest rate over the term of the variable interest rate borrowing. For the three months ended September 30, 2020 , total floorplan interest expense decreased 47.1% as compared to the same period in 2019 . For the nine months ended September 30, 2020 , total floorplan interest expense decreased 33.8% as compared to the same period in 2019 . The decrease in both comparative periods is primarily due to lower inventory levels and lower weighted average interest rates mainly due to a decline in LIBOR, partially offset by higher expense on our interest rate swaps. Other Interest Expense, Net Other interest expense, net consists of interest charges primarily on our real estate related debt, working capital lines of credit and other long-term debt, partially offset by interest income. For the three months ended September 30, 2020 , other interest expense, net decreased from $18.9 million to $14.6 million as compared to the same period in 2019 . For the nine months ended September 30, 2020 , other interest expense, net decreased from $55.8 million to $49.0 million as compared to the same period in 2019 . The decrease in both comparable periods was primarily attributable to lower interest rates achieved through debt refinancings in the current year, including the redemption of $300.0 million in aggregate principal of our 5.25% Senior Notes on April 2, 2020, which was funded at lower interest rates through increased borrowings on our real estate related debt and Acquisition Line, and the redemption of $550.0 million aggregate principal of our 5.00% Senior Notes on September 2, 2020, which was funded through the issuance of $550.0 million aggregate principal amount of our 4.00% Senior Notes on August 17, 2020. See “Sources and Uses of Liquidity from Financing Activities” within “Liquidity and Capital Resources” below for further discussion of our debt refinancings in the current year. Loss on Extinguishment of Debt On April 2, 2020, we fully redeemed $300.0 million in aggregate principal amount of our outstanding 5.25% Senior Notes due June 2023, at a premium of 102.625% . The total redemption price, consisting of the principal amount of the notes redeemed plus associated premium, amounted to $307.9 million . We recognized a loss on extinguishment of $10.4 million which included write offs of an unamortized discount in the amount of $1.9 million and unamortized debt issuance costs in the amount of $0.6 million . 53 Table of Contents On September 2, 2020, we fully redeemed $550.0 million in aggregate principal amount of our outstanding 5.00% Senior Notes due June 2022, at par value. We recognized a loss on extinguishment of $3.3 million which included write offs of an unamortized discount in the amount of $2.6 million and unamortized debt issuance costs in the amount of $0.7 million . Provision for Income Taxes Our provision for income taxes increased $23.6 million to $34.6 million for the three months ended September 30, 2020 as compared to the same period in 2019. For the nine months ended September 30, 2020 , our provision for income taxes increased $17.4 million to $55.8 million , as compared to the same period in 2019. The increases were primarily due to increases in pretax book income. For the three months ended September 30, 2020 , our effective tax rate decreased to 21.5% from 22.3% as compared to the same period in 2019. This decrease was primarily due to changes to valuation allowances provided for net operating losses in certain U.S. states and in Brazil. For the nine months ended September 30, 2020 , our effective tax rate decreased to 23.1% from 23.4% as compared to the same period in 2019. This decrease was primarily due to increased tax deductions in excess of book expense with respect to RSAs that vested in 2020, partially offset by higher disallowed excess compensation expense in 2020 and reductions to valuation allowances provided for net operating losses in certain U.S. states and in Brazil that were higher in 2019. We expect our effective tax rate for the remainder of 2020 will be between 23.0% and 24.0%. We believe that it is more-likely-than-not that our deferred tax assets, net of valuation allowances provided, will be realized, based primarily on assumptions of our future taxable income, considering future reversals of existing taxable temporary differences. The anticipated effects of the COVID-19 pandemic should not materially impact our estimated effective tax rate for the full-year of 2020. Liquidity and Capital Resources Our liquidity and capital resources are primarily derived from cash on hand, cash temporarily invested as a pay down of our Floorplan Line and FMCC Facility levels (see Part I, “Item 1. Financial Statements,” Note 10 “Floorplan Notes Payable” in the Notes to Condensed Consolidated Financial Statements for additional information), cash from operations, borrowings under our credit facilities, which provide vehicle floorplan financing, working capital, dealership and real estate acquisition financing and proceeds from debt and equity offerings. Based on current facts and circumstances, we believe we will have adequate cash flow, coupled with available borrowing capacity, to fund our current operations, capital expenditures and acquisitions for the next 12 months. If economic and business conditions deteriorate or if our capital expenditures or acquisition plans for 2020 change, we may need to access the private or public capital markets to obtain additional funding. See “Sources and Uses of Liquidity from Investing Activities” below for further discussion of expectations regarding future capital expenditures. Cash on Hand As of September 30, 2020 , our total cash on hand was $66.2 million . The balance of cash on hand excludes $126.7 million of immediately available funds used to pay down our Floorplan Line and FMCC Facility as of September 30, 2020 . We use the pay down of our Floorplan Line and FMCC Facility as a channel for the short-term investment of excess cash. Cash Flows We utilize various credit facilities to finance the purchase of our new and used vehicle inventory. With respect to all new vehicle floorplan borrowings in the normal course of business, the manufacturers of the vehicles draft our credit facilities directly with no cash flows to or from us. With respect to borrowings for used vehicle financing, we finance up to 85% of the value of our used vehicle inventory in the U.S. and the funds flow directly between us and the lender. 54 Table of Contents We categorize the cash flows associated with borrowings and repayments on these various credit facilities as Cash Flows from Operating Activities or Cash Flows from Financing Activities in our Condensed Consolidated Statements of Cash Flows. All borrowings from, and repayments to, lenders affiliated with our vehicle manufacturers (excluding the cash flows from or to manufacturer-affiliated lenders participating in our syndicated lending group) are presented within Cash Flows from Operating Activities in the Condensed Consolidated Statements of Cash Flows in conformity with U.S. GAAP. All borrowings from, and repayments to, the Revolving Credit Facility (see Part I, “Item 1. Financial Statements,” Note 10 “Floorplan Notes Payable” in the Notes to Condensed Consolidated Financial Statements for additional information) (including the cash flows from or to manufacturer-affiliated lenders participating in the facility) and other credit facilities in the U.K. and Brazil unaffiliated with our manufacturer partners (collectively, “Non-OEM Floorplan Credit Facilities”), are presented within Cash Flows from Financing Activities in conformity with U.S. GAAP. However, the incurrence of all floorplan notes payable represents an activity necessary to acquire inventory for resale, resulting in a trade payable. Our decision to utilize our Revolving Credit Facility does not substantially alter the process by which our vehicle inventory is financed, nor does it significantly impact the economics of our vehicle procurement activities. Therefore, we believe that all floorplan financing of inventory purchases in the normal course of business should correspond with the related inventory activity and be classified as an operating activity. As a result, we use the non-GAAP measure “Adjusted net cash provided by/used in operating activities” and “Adjusted net cash provided by/used in financing activities” to further evaluate our cash flows. We believe that this classification eliminates excess volatility in our operating cash flows prepared in accordance with U.S. GAAP and avoids the potential to mislead the users of our financial statements. In addition, for dealership acquisitions and dispositions that are negotiated as asset purchases, we do not assume transfer of liabilities for floorplan financing in the execution of the transactions. Therefore, borrowings and repayments of all floorplan financing associated with dealership acquisitions and dispositions are characterized as either Cash Flow from Operating Activities or Cash Flow from Financing Activities in our Condensed Consolidated Statements of Cash Flows presented in conformity with U.S. GAAP, depending on the relationship described above. However, the floorplan financing activity is so closely related to the inventory acquisition process that we believe the presentation of all acquisition and disposition related floorplan financing activities should be classified as investing activity to correspond with the associated inventory activity, which more closely reflects the cash flows associated with our acquisition and disposition strategy and eliminates excess volatility in our operating cash flows prepared in accordance with U.S. GAAP. We have made such adjustments in our adjusted operating cash flow presentations. The following table reconciles cash flows provided by (used in) operating, investing and financing activities on a U.S. GAAP basis to the corresponding adjusted amounts (in millions): Nine Months Ended September 30, 2020 2019 % Change CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided by (used in) operating activities: $ 712.7 $ 310.8 129.3 % Change in Floorplan notes payable — credit facilities and other, excluding floorplan offset and net acquisition and disposition (368.9 ) (68.9 ) Change in Floorplan notes payable — manufacturer affiliates associated with net acquisition and disposition and floorplan offset activity 14.5 0.1 Adjusted net cash provided by (used in) operating activities $ 358.3 $ 242.0 48.1 % CASH FLOWS FROM INVESTING ACTIVITIES: Net cash provided by (used in) investing activities: $ (78.8 ) $ (193.5 ) 59.3 % Change in cash paid for acquisitions, associated with Floorplan notes payable — 14.3 Change in proceeds from disposition of franchises, property and equipment, associated with Floorplan notes payable — (19.5 ) Adjusted net cash provided by (used in) investing activities $ (78.8 ) $ (198.7 ) 60.4 % CASH FLOWS FROM FINANCING ACTIVITIES: Net cash provided by (used in) financing activities: $ (590.4 ) $ (90.1 ) (555.1 )% Change in Floorplan notes payable, excluding floorplan offset 354.4 74.0 Adjusted net cash provided by (used in) financing activities $ (236.0 ) $ (16.1 ) (1,368.5 )% 55 Table of Contents Sources and Uses of Liquidity from Operating Activities For the nine months ended September 30, 2020 , we generated $712.7 million of net cash flows from operating activities. On an adjusted basis for the same period, we generated $358.3 million in net cash flows from operating activities, primarily consisting of $186.4 million in net income, coupled with non-cash adjustments related to depreciation and amortization of $56.5 million , stock-based compensation of $27.0 million , asset impairments of $23.8 million , operating lease assets of $18.1 million and a loss on extinguishment of $13.7 million related to the 5.00% Senior Notes and 5.25% Senior Notes. Adjusted net cash flows from operating activities also included a $31.1 million adjusted net change in operating assets and liabilities, including cash inflows of $499.6 million from decreases in inventory levels, $41.1 million from net decreases in prepaid expenses and other assets, $33.0 million from net decreases in contracts-in-transit and vehicle receivables and $25.2 million from net decreases in accounts and notes receivables. These cash inflows were partially offset by cash outflows of $492.3 million from adjusted net floorplan repayments and $58.8 million from decreases in accounts payable and accrued expenses. For the nine months ended September 30, 2019 , we generated $310.8 million of net cash flows from operating activities. On an adjusted basis for the same period, we generated $242.0 million in net cash flows from operating activities, primarily consisting of $125.9 million in net income, coupled with non-cash adjustments related to depreciation and amortization of $53.0 million, operating lease assets of $21.2 million, stock-based compensation of $14.5 million, asset impairments of $10.8 million and deferred income taxes of $3.6 million, partially offset by a $5.9 million gain on the disposition of assets. Adjusted net cash flows from operating activities also includes a $15.0 million adjusted net change in operating assets and liabilities, including cash inflows of $99.0 million from increases in accounts payable and accrued expenses and $41.7 million from decreases in inventory levels. These cash inflows were partially offset by cash outflows of $70.0 million from adjusted net floorplan repayments, $31.7 million from net increases in accounts and notes receivables and $21.3 million from decreases in operating lease liabilities. Working Capital At September 30, 2020 , we had a $104.6 million surplus of working capital. This represents an increase of $10.5 million from December 31, 2019 , when we had a $94.0 million surplus of working capital. Changes in our working capital are typically explained by changes in floorplan notes payable outstanding. Borrowings on our new vehicle floorplan notes payable, subject to agreed-upon pay-off terms, are equal to 100% of the factory invoice of the vehicles. Borrowings on our used vehicle floorplan notes payable, subject to agreed-upon pay-off terms, are limited to 85% of the aggregate book value of our used vehicle inventory, except in the U.K. and Brazil. At times, we have made payments on our floorplan notes payable using excess cash flows from operations and the proceeds of debt and equity offerings. As needed, we re-borrow the amounts later, up to the limits on the floorplan notes payable discussed above, for working capital, acquisitions, capital expenditures or general corporate purposes. Sources and Uses of Liquidity from Investing Activities During the nine months ended September 30, 2020 , we used $78.8 million in net cash flows from investing activities on both an unadjusted and adjusted basis, which represented $78.8 million used for purchases of property and equipment and to construct new and improve existing facilities, $1.3 million used for acquisition activity, partially offset by cash inflows of $1.3 million related to the disposition of property and equipment. Of the $78.8 million in property and equipment purchases, $55.4 million was used for non-real estate related capital expenditures, $22.4 million was used for the purchase of real estate associated with existing dealership operations and $1.0 million represented the net decrease in the accrual for capital expenditures from year-end. During the nine months ended September 30, 2019 , we used $193.5 million in net cash flows from investing activities. On an adjusted basis for the same period, we used $198.7 million in net cash flows from investing activities, representing $139.6 million used for purchases of property and equipment and to construct new and improve existing facilities and $82.7 million used for dealership acquisition activity, partially offset by cash inflows of $23.6 million related to the disposition of franchises and property and equipment. Of the $139.6 million in property and equipment purchases, $70.8 million was used for non-real estate related capital expenditures, $65.1 million was used for the purchase of real estate associated with existing dealership operations and $3.6 million represented the net decrease in the accrual for capital expenditures from year-end. 56 Table of Contents Capital Expenditures Our capital expenditures include costs to extend the useful lives of current facilities, as well as to start or expand operations. In general, expenditures relating to the construction or expansion of dealership facilities are driven by dealership acquisition activity, new franchises being granted to us by a manufacturer, significant growth in sales at an existing facility, relocation opportunities or manufacturer imaging programs. We critically evaluate all planned future capital spending, working closely with our manufacturer partners to maximize the return on our investments. We forecast our capital expenditures for the full year of 2020 will be approximately $80 million excluding expenditures related to real estate purchases and future acquisitions, which could generally be funded from excess cash. Acquisitions We evaluate the expected return on investment in our consideration of potential business purchases. Cash needed to complete our acquisitions generally comes from excess working capital, operating cash flows of our dealerships and borrowings under our floorplan facilities, term loans and our Acquisition Line. Sources and Uses of Liquidity from Financing Activities For the nine months ended September 30, 2020 , we used $590.4 million in net cash flows from financing activities. On an adjusted basis for the same period, we used $236.0 million in net cash flows from financing activities, primarily related to cash outflows of $857.9 million related to the extinguishment of our 5.00% and 5.25% Senior Notes, $48.9 million related to the repurchase of our common stock and $5.5 million in dividend payments. These cash outflows were partially offset by $550.0 million from the issuance of our 4.00% Senior Notes. The $162.1 million net borrowings on other debt primarily reflected increased mortgage borrowings in the U.S. to partially fund the redemption of the 5.25% Senior Notes. For the nine months ended September 30, 2019 , we used $90.1 million in net cash flows from financing activities. On an adjusted basis for the same period, we used $16.1 million in net cash flows from financing activities, primarily related to cash outflows of $35.8 million in net repayments on other debt and $14.9 million in dividend payments, partially offset by $19.1 million in net borrowings on our Acquisition Line and $15.8 million in net borrowings on our Floorplan Lines (representing the net cash activity in our floorplan offset accounts). Credit Facilities, Debt Instruments and Other Financing Arrangements Our various credit facilities, debt instruments and other financing arrangements are used to finance the purchase of inventory and real estate, provide acquisition funding and provide working capital for general corporate purposes. The following table summarizes the position of our U.S. credit facilities as of September 30, 2020 (in millions): Total Commitment Outstanding Available Floorplan line (1) $ 1,396.0 $ 732.3 $ 663.7 Acquisition line (2) 349.0 75.9 273.1 Total Revolving Credit Facility 1,745.0 808.1 936.9 FMCC facility (3) 300.0 114.7 185.3 Total U.S. credit facilities (4) $ 2,045.0 $ 922.8 $ 1,122.2 (1) The available balance at September 30, 2020 includes $108.2 million of immediately available funds. The remaining available balance can be used for inventory financing. (2) The outstanding balance of $75.9 million is related to outstanding letters of credit of $17.8 million and $ 58.1 million in borrowings as of September 30, 2020 . The borrowings outstanding under the Acquisition Line included no U.S dollar borrowings and £ 45 million of British pound sterling borrowings translated at the spot rate on the day borrowed, solely for the purpose of calculating the outstanding and available borrowings under the Acquisition Line. The available borrowings may be limited from time to time, based on certain debt covenants. (3) The available balance at September 30, 2020 includes $ 18.5 million of immediately available funds. The remaining available balance can be used for Ford new vehicle inventory financing. (4) The outstanding balance excludes $239.1 million of borrowings with manufacturer-affiliates and third-party financial institutions for foreign and rental vehicle financing not associated with any of our U.S. credit facilities. We have other credit facilities in the U.S., U.K. and Brazil with third-party financial institutions, most of which are affiliated with the automobile manufacturers that provide financing for portions of our new, used and rental vehicle inventories. In addition, we have outstanding debt instruments, including our 4.00% Senior Notes, as well as real estate related and other long-term debt instruments. 57 Table of Contents 4.00% Senior Notes Issuance On August 17, 2020, we issued Senior Notes maturing on August 15, 2028 in aggregate principal amount of $550.0 million. Interest on the notes is payable semi-annually on February 15 th and August 15 th at a coupon rate of 4.00%. The notes were issued at par and carry an effective interest rate of 4.21% after consideration of associated debt issuance costs. At our option, we may redeem some or all of the Senior Notes at varying redemption prices (expressed as percentages of principal amount of the notes) and redemption periods throughout the term. Refer to Part I, “Item 1. Financial Statements,” Note 9 “Debt” within our Notes to Condensed Consolidated Financial Statements for further information regarding our 4.00% Senior Notes. 5.00% Senior Notes Redemption and Debt Refinancing On September 2, 2020, we fully redeemed $550.0 million in aggregate principal amount of our outstanding 5.00% Senior Notes due June 2022, at par value. We recognized a loss on extinguishment of $3.3 million which included write offs of an unamortized discount in the amount of $2.6 million and unamortized debt issuance costs in the amount of $0.7 million . Additionally, we paid accrued interest of $6.9 million . The redemption was funded with $550.0 million of our newly issued 4.00% Senior Notes due 2028. See 4.00% Senior Notes Issuance . These refinancings are expected to lower our annual interest expense by approximately $5.5 million. 5.25% Senior Notes Redemption and Debt Refinancing On April 2, 2020, we fully redeemed $300.0 million in aggregate principal amount of our outstanding 5.25% Senior Notes due 2023, at a premium of 102.625%. The total redemption price, consisting of the principal amount of the notes redeemed plus associated premium, amounted to $307.9 million. We recognized a loss on extinguishment of $10.4 million which included write offs of an unamortized discount in the amount of $1.9 million and unamortized debt issuance costs in the amount of $0.6 million . Additionally, we paid $4.6 million of accrued interest up to the date of redemption. The redemption was funded through a combination of Acquisition Line borrowings, mortgage borrowings, and excess cash. Additional mortgage debt was funded during the second quarter of 2020 to provide supplemental liquidity. These refinancings are expected to lower our annual interest expense by approximately $10.8 million. Covenants Our Revolving Credit Facility, indentures governing our senior notes and certain mortgage term loans contain customary financial and operating covenants that place restrictions on us, including our ability to incur additional indebtedness, create liens or to sell or otherwise dispose of assets, and to merge or consolidate with other entities. Certain of our mortgage agreements contain cross-default provisions that in the event of a default of certain mortgage agreements and of our Revolving Credit Facility, could trigger an uncured default. As of September 30, 2020 , we were in compliance with the requirements of the financial covenants under our debt agreements. We are required to maintain the ratios detailed in the following table: As of September 30, 2020 Required Actual Total adjusted leverage ratio < 5.50 2.54 Fixed charge coverage ratio > 1.20 3.91 As of September 30, 2020 , we had $66.2 million of cash on hand and an additional $126.7 million invested in our floorplan offset accounts, bringing total cash liquidity to $192.9 million. In addition, we had $273.1 million of additional borrowing capacity on our Acquisition Line, bringing total immediate liquidity to $466.0 million as of September 30, 2020 . Based on our position as of September 30, 2020 and our outlook as discussed within “Management's Discussion and Analysis of Financial Condition and Results of Operations,” we have sufficient liquidity currently and do not anticipate any material liquidity constraints or issues with our ability to remain in compliance with our debt covenants. See Part I, “Item 1. Financial Statements,” Note 9 “Debt” and Note 10 “Floorplan Notes Payable” in our Notes to Condensed Consolidated Financial Statements for further discussion of our debt instruments, credit facilities, and other financing arrangements existing as of September 30, 2020 . Stock Repurchases and Dividends Our Board of Directors from time to time, authorizes the repurchase of shares of our common stock up to a certain monetary limit. On April 7, 2020, we canceled our most recently authorized share repurchase program in light of the COVID-19 pandemic. During the first quarter 2020 and through the cancellation date, 597,764 shares were repurchased at an average price of $81.83 per share, for a total of $48.9 million. 58 Table of Contents During the first quarter of 2020, our Board of Directors approved a quarterly cash dividend of $0.30 per share on all shares of our common stock, which resulted in $5.3 million paid to common shareholders and $0.2 million to unvested RSA holders. On April 7, 2020, we temporarily suspended quarterly dividends in light of the COVID-19 pandemic. On October 5, 2020, our Board of Directors approved a new $200.0 million share repurchase program. Future share repurchases and the payment of any future dividends are subject to the business judgment of our Board of Directors, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements, covenant compliance, current economic environment and other factors considered relevant. Recent Regulatory Developments In Brazil, Law No. 13,709/2018, the General Data Protection Act (Lei Geral de Proteção de Dados, or “GDPA”) will come into force in May 2021 and will change personal data protection in Brazil. The GDPA establishes a new legal framework covering personal data processing, including client, supplier and employee data. The GDPA establishes, among others, personal data owners’ rights, the legal basis for personal data protection, requirements for obtaining consent from personal data owners, obligations and requirements related to security incidents, data leaks and data transfers, as well as the creation of a National Data Protection Authority. We have begun initial preparations to comply with the GDPA ahead of its May 2021 effective date; however, we may have difficulty adapting our systems and processes to the new legislation due to the legislation’s complexity. In the event of non-compliance with the GDPA, we may be subject to penalties, beginning in August 2021, including making certain disclosures to authorities, the required deletion of personal data and fines, per infraction, of up to 2% (subject to an upper limit of R$50,000,000) of our revenues in Brazil during our last fiscal year, excluding taxes. See the risk factor titled “We are subject to substantial governmental laws and regulations, which if we are found to be in violation of, or subject to liabilities under, may adversely affect our business and results of operations” in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019. On March 31, 2020, the U.S. Environmental Protection Agency and National Highway Traffic Safety Administration under the Trump Administration issued a final rule re-setting corporate average fuel economy (“CAFE”) and greenhouse gas (“GHG”) emissions standards for model years 2021-2026 passenger cars and light trucks. The March 31, 2020 final rule will increase stringency of CAFE and GHG emissions standards by 1.5% each year through model year 2026, as compared with the standards issued in 2012, which would have required annual increases of about 5%. Legal challenges to the March 31, 2020 final rule are expected. See the risk factor titled “Our operations are subject to environmental laws and regulations that may expose us to significant costs and liabilities” in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019.