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Item 9A. Controls and Procedures

2021-02-24 compared with 2020-02-13 · 826 added, 820 removed, 955 unchanged (63% of the section changed)

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Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-K.

Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2019 at the reasonable assurance level.

Our management, including the principal executive officer and the principal financial officer, does not expect that our disclosure controls and procedures can prevent all possible errors or fraud.

As required by Rule 13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-K.

Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2020 at the reasonable assurance level.

In light of the COVID-19 pandemic, a significant portion of our back office employees remain working remotely due to social distancing requirements or other restrictions.

Established business continuity plans were activated in order to mitigate the impact to our control environment, operating procedures, data and internal controls.

The design of our processes and controls allow for remote execution with accessibility to secure data.

Our management, including our principal executive officer and our principal financial officer, does not expect that our disclosure controls and procedures can prevent all possible errors or fraud.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that objectives of the control system are met.

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Changes in Internal Control over Financial Reporting

During the three months ended December 31, 2019 , there was no change in our system of internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

During the three months ended December 31, 2020, there were no changes in our system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act).

Our internal control over financial reporting is a process designed by management, under the supervision of our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies and procedures that:

GAAP, and includes those policies and procedures that:

(i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of management and our directors;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.

GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of management and our directors;

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our Consolidated Financial Statements.

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Based on our evaluation under the framework in Internal Control-Integrated Framework , our management concluded that, as of December 31, 2020, our internal control over financial reporting was effective.

Ernst & Young LLP, the independent registered accounting firm who audited the Consolidated Financial Statements included in this Form 10-K, has issued an attestation report on our internal control over financial reporting.

Deloitte & Touche LLP, the independent registered accounting firm who audited the Consolidated Financial Statements included in this Form 10-K, has issued an attestation report on our internal control over financial reporting.

This report, dated February 24, 2021, appears on the following page.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Group 1 Automotive, Inc.

To the Stockholders and the Board of Directors of Group 1 Automotive, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Group 1 Automotive, Inc.

and subsidiaries’ internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Group 1 Automotive, Inc.

and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and our report dated February 13, 2020 expressed an unqualified opinion thereon.

We have audited the internal control over financial reporting of Group 1 Automotive, Inc.

and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for the year ended December 31, 2020, and the related notes, and our report dated February 24, 2021, expressed an unqualified opinion on those financial statements.

Basis for Opinion

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ ERNST & YOUNG LLP

/s/ Deloitte & Touche LLP

Houston, Texas

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The following sets forth certain information regarding our executive officers as of February 24, 2021.

Years with Group 1

Years of Automotive Experience

President and Chief Executive Officer

President, U.S.

Name Age Position Years with Group 1 Years of Automotive Experience

Hesterberg 67 President and Chief Executive Officer 15.5 46

Kenningham 56 President, U.S.

and Brazilian Operations 9.5 33

Senior Vice President and Chief Financial Officer

McHenry 46 Senior Vice President and Chief Financial Officer 13 16

Frank Grese Jr.

68 Senior Vice President of Human Resources, Training, and Operations Support 16 46

Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs

DeLongchamps 60 Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs 16.5 38

Hesterberg has served as our President and Chief Executive Officer and as a director since April 2005.

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and Nissan Europe, both of which are wholly owned by Nissan Motor Co., Ltd., a global provider of automotive products and services.

Hesterberg serves on the Board of Directors of Stage Stores, Inc., a national retail clothing chain with 775 stores located in 42 states where he is a member of the Corporate Governance and Nominating Committee and Chairman of the Compensation Committee.

Hesterberg previously served on the Board of Directors of Stage Stores, Inc., where he was a member of the Corporate Governance and Nominating Committee and Chairman of the Compensation Committee.

He is a past member of the Board of Trustees of Davidson College.

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Kenningham has served as President, U.S.

and Brazilian Operations since November 2019 and as President U.S.

& Brazilian Operations since November 2019, and as President, U.S.

Operations since May 2017.

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Kenningham served as President of Gulf States Financial Services Group, a leading provider of F&I products and reinsurance structures to the automotive industry, and from 2002 to 2005, as President of USA Logistics (previously known as Gulf States Transportation), a leader in the movement and management of automotive shipments nationwide.

He also held various sales, marketing and vehicle distribution positions in the U.S.

and Japan with Nissan Motor Corporation, where he began his career in 1988.

He also held various sales, marketing and vehicle distribution positions in the United States and Japan with Nissan Motor Corporation, where he began his career in 1988.

Kenningham earned his Bachelor of Arts degree from the University of Michigan and his Master of Business Administration from the University of Florida.

Rickel was appointed Senior Vice President and Chief Financial Officer in December 2005.

From 1984 until joining Group 1, Mr.

Rickel held a number of executive and managerial positions of increasing responsibility with Ford Motor Company, a global manufacturer and distributor of cars, trucks and automotive parts.

He most recently served as Controller, Ford Americas, where he was responsible for the financial management of Ford’s western hemisphere automotive operations.

Immediately prior to that, he was Chief Financial Officer of Ford Europe, where he oversaw all accounting, financial planning, information services, tax and investor relations activities.

Rickel serves on the Board of Directors, on the Audit Committee, Compensation Committee, and as Chair of the Governance Committee, and is the lead independent Director of U.S.

Xpress, a large truckload carrier providing services primarily throughout the U.S.

From 2002 to 2004, Mr.

Rickel was Chairman of the Board of Directors of Ford Russia, and a member of the Board of Directors and the Audit Committee of Ford Otosan, a publicly traded automotive company located in Turkey and owned 41% by Ford.

Rickel received his B.S.B.A.

from The Ohio State University.

McHenry was appointed Senior Vice President and Chief Financial Officer in August 2020.

From 2007 until his appointment as CFO, Mr.

McHenry served as Group 1’s U.K.

Finance Director.

McHenry joined Group 1 in 2007 as part of the acquisition of Chandlers BMW in southern England, Group 1’s first venture in the U.K.

He joined Chandlers BMW in December 2004.

Prior to entering the auto retail business, Mr.

McHenry had five years of experience with KPMG in the U.K.

McHenry is a member of the Association of Chartered and Certified Accountants in the U.K.

He holds a Bachelors degree in Economics from Queens University Belfast and a Masters degree in Accounting and Management Science from Southampton University.

Frank Grese Jr.

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The code, which we refer to as our Financial Code of Ethics, is available on our internet website at www.group1auto.com .

To the extent required by SEC rules, we intend to disclose any amendments to this code and any waiver of a provision of the code for the benefit of our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, on our website within four business days following any such amendment of waiver, or within any other period that may be required under SEC rules from time to time.

To the extent required by SEC rules, we intend to disclose any amendments to this code and any waiver of a provision of the code for the benefit of our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, on our website within four business days following any such amendment or waiver, or within any other period that may be required under SEC rules from time to time.

Pursuant to Instruction G to Form 10-K, we incorporate by reference into this Item 10 the information to be disclosed in our definitive proxy statement prepared in connection with the 2021 Annual Meeting of Stockholders, which will be filed with the SEC within 120 days of December 31, 2020.

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EXHIBIT INDEX

Number Description

— Amended and Restated Certificate of Incorporation of Group 1 Automotive, Inc.

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001-13461) filed December 9, 2015)

Form of 5.250% Senior Notes due 2023 (incorporated by reference to Exhibit 4.2 to Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

— Form of 5.250% Senior Notes due 2023 (incorporated by reference to Exhibit 4.1, Exhibit A of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed December 9, 2015)

— Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

— Indenture, dated as of August 17, 2020, by and among Group 1 Automotive, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed August 17, 2020)

— Form of 4.000% Senior Notes due 2028 (incorporated by reference to Exhibit 4.1, Exhibit A, of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed August 17, 2020)

— Eleventh Amended and Restated Revolving Credit Agreement, dated effective as of June 27, 2019 (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed July 1, 2019)

— Waiver and First Amendment to Eleventh Amended and Restated Revolving Credit Agreement dated as of March 3, 2020 among Group 1 Automotive, Inc., the Subsidiary Borrowers listed therein, the Lenders listed therein, U.S.

Bank National Association, N.A., as Administrative Agent, and Comerica Bank, as Floor Plan Agent (incorporated by reference to Exhibit 10.2 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (file No.

001-13461) for the quarter ended September 30, 2020)

— Second Amendment to Eleventh Amended and Restated Revolving Credit Agreement dated as of October 30, 2020 among Group 1 Automotive, Inc., the Subsidiary Borrowers listed therein, the Lenders listed therein, U.S.

Bank National Association, N.A., as Administrative Agent, and Comerica Bank, as Floor Plan Agent (incorporated by reference to Exhibit 10.5 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (file No.

001-13461) for the quarter ended September 30, 2020)

— Stockholders Agreement dated as of February 28, 2013, by and among Group 1 Automotive, Inc.

2 unchanged sentences

001-13461) filed March 5, 2013)

Number Description

— Master Assignment and Acceptance Agreement, dated effective December 11, 2012, between JPMorgan Chase Bank, N.A., Comerica Bank, and Bank of America, N.A., each, an Assignor, and VW Credit, Inc., as Assignee, pursuant to the terms of the Eighth Amended and Restated Revolving Credit Agreement, dated effective as of July 1, 2011, as amended (incorporated by reference to Exhibit 10.3 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No.

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001-13461) for the year ended December 31, 2008)

Number Description

— Second Amendment to Group 1 Automotive, Inc.

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— Group 1 Automotive, Inc.

2007 Long Term Incentive Plan (As Amended and Restated Effective as of March 11, 2010) (incorporated by reference to Exhibit A to Group 1 Automotive, Inc.’s definitive proxy statement on Schedule 14A filed on April 8, 2010)

Deferred Compensation Plan, as Amended and Restated, effective January 1, 2021 (incorporated by reference to Exhibit 10.3 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No.

001-13461) for the quarter ended September 30, 2020)

— Group 1 Automotive, Inc.

2014 Long Term Incentive Plan (incorporated by reference to Appendix A to Group 1 Automotive, Inc.’s definitive proxy statement on Schedule 14A filed April 10, 2014)

Form of Restricted Stock Agreement for Employees (incorporated by reference to Exhibit 10.2 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed March 16, 2005)

Form of Senior Executive Officer Restricted Stock Agreement (incorporated by reference to Exhibit 10.3 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed September 9, 2010)

— First Amendment to the Group 1 Automotive, Inc.

2014 Long Term Incentive Plan, effective May 13, 2020 (incorporated by reference to Exhibit 10.4 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No.

001-13461) for the quarter ended September 30, 2020)

— Form of Phantom Stock Agreement for Employees (incorporated by reference to Exhibit 10.3 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed March 16, 2005)

Form of Phantom Stock Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.36 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No.

001-13461) for the year ended December 31, 2009)

— Form of Phantom Stock Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.5 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed March 16, 2005)

Form of Restricted Stock Agreement with Qualified Retirement Provisions (incorporated by reference to Exhibit 10.1 to Group 1 Automotive, Inc.’s Current Report on Form 8K (File No.

001-13461) filed May 22, 2018)

Form of Phantom Stock Agreement (Cash Settlement) for Non-Employee Directors (incorporated by reference to Exhibit 10.33 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No.

001-13461 for the year ended December 31, 2018)

Form of Restricted Stock Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.34 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No.

— Form of Phantom Stock Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.36 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No.

001-13461) for the year ended December 31, 2009)

Form of Performance Share Unit Agreement (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No.

001-13461) for the quarter ended March 31, 2019)

— Form of Senior Executive Restricted Stock Agreement (incorporated by reference to Exhibit 10.3 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No.

001-13461) for the quarter ended September 30, 2014)

Form of Restricted Stock Agreement with Qualified Retirement Provisions (incorporated by reference to Exhibit 10.4 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No.

— Form of Phantom Stock Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.7 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No.

001-13461) for the quarter ended September 30, 2014)

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001-13461) for the quarter ended September 30, 2014)

Form of Phantom Stock Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.7 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No.

001-13461) for the quarter ended September 30, 2014)

Amendment to Employment Agreement dated effective as of May 17, 2018 between Group 1 Automotive, Inc.

Hesterberg (incorporated by reference to Exhibit 10.2 to Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

— Form of Restricted Stock Agreement with Qualified Retirement Provisions (incorporated by reference to Exhibit 10.1 to Group 1 Automotive, Inc.’s Current Report on Form 8K (File No.

001-13461) filed May 22, 2018)

— Form of Restricted Stock Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.34 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No.

001-13461) for the year ended December 31, 2018)

— Form of Phantom Stock Agreement (Cash Settlement) for Non-Employee Directors (incorporated by reference to Exhibit 10.33 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No.

001-13461 for the year ended December 31, 2018)

— Form of Performance Share Unit Agreement (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No.

001-13461) for the quarter ended March 31, 2019)

— Employment Agreement dated effective May 19, 2015 between Group 1 Automotive, Inc.

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001-13461) filed May 22, 2015)

— Amendment to Employment Agreement dated effective as of May 17, 2018 between Group 1 Automotive, Inc.

Hesterberg (incorporated by reference to Exhibit 10.2 to Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed May 22, 2018)

Number Description

— Non-Compete Agreement dated effective May 19, 2015 between Group 1 Automotive, Inc.

1 unchanged sentence

001-13461) filed May 22, 2015)

— Incentive Compensation, Confidentiality, Non-Disclosure and Non-Compete Agreement dated June 6, 2011, between Group 1 Automotive, Inc.

and Daryl Kenningham (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No.

001-13461) for the quarter ended June 30, 2020)

— Employment Agreement dated January 1, 2009 between Group 1 Automotive, Inc.

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001-13461) filed June 7, 2006)

— Transition and Separation Agreement, effective June 1, 2020, between Group 1 Automotive, Inc.

Rickel (incorporated by reference to Exhibit 10.2 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No.

001-13461) for the quarter ended June 30, 2020)

— Employment Agreement dated effective as of December 1, 2009 between Group 1 Automotive, Inc.

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001-13461) filed December 1, 2006)

— Offer Letter, dated June 1, 2020, between Group 1 Automotive, Inc.

and Daniel McHenry (incorporated by reference to Exhibit 10.3 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No.

001-13461) for the quarter ended June 30, 2020)

— Retention, Confidentiality and Non-Compete Agreement dated August 20, 2020 between Group 1 Automotive, Inc.

and Daniel McHenry (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No.

001-13461) for the quarter ended September 30, 2020)

— Group 1 Automotive, Inc.

Aircraft Usage Policy (incorporated by reference to Exhibit 10.41 to Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No.

001-13461) for the year ended December 31, 2017.)

Aircraft Usage Policy

— Group 1 Automotive, Inc.

Subsidiary List

— Consent of Deloitte & Touche LLP

— Consent of Ernst & Young LLP

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— Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

101.INS — XBRL Instance Document

101.SCH — XBRL Taxonomy Extension Schema Document

101.CAL — XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF — XBRL Taxonomy Extension Definition Linkbase Document

101.LAB — XBRL Taxonomy Extension Label Linkbase Document

101.PRE — XBRL Taxonomy Extension Presentation Linkbase Document

104 — Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibits 101)

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated on February 24, 2021.

President and Chief Executive Officer and Director

(Principal Executive Officer)

Senior Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

Signature Title

Hesterberg President and Chief Executive Officer and Director

Hesterberg (Principal Executive Officer)

/s/ Daniel J.

McHenry Senior Vice President and Chief Financial Officer

McHenry (Principal Financial and Accounting Officer)

/s/ Stephen D.

Chairman and Director

/s/ Lincoln da Cunha Pereira Filho

Quinn Chairman and Director

Barth Director

/s/ Lincoln da Cunha Pereira Filho Director

Lincoln da Cunha Pereira Filho

/s/ Steven P.

Stanbrook Director

/s/ Charles L.

/s/ Anne Taylor

/s/ MaryAnn Wright

Szews Director

/s/ Anne Taylor Director

/s/ MaryAnn Wright Director

MaryAnn Wright

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Group 1 Automotive, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Group 1 Automotive, Inc.

and subsidiaries (the “Company”) as of December 31, 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, for the year ended December 31, 2020, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report date d February 24, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Intangible Franchise Rights — Refer to Notes 1 and 11 to the consolidated financial statements

Critical Audit Matter Description

The Company's financial statements include indefinite-lived intangible assets related to rights under franchise agreements with manufacturers.

These intangible assets have an indefinite useful life and are measured for impairment on an annual basis, or more frequently if events or circumstances indicate possible impairment.

The carrying value of these intangible assets is $232.8 million as of December 31, 2020.

The Company’s annual impairment assessment for these intangible assets is performed in the fourth quarter, or more frequently if events or circumstances indicate possible impairment.

The fair value is estimated using the discounted cash flow, or income approach.

We identified intangible franchise rights as a critical audit matter because of the significant estimates and assumptions management makes related to forecasts of revenue growth rates, future gross margins, future selling, general and administrative expenses, weighted average cost of capital, and terminal growth rates.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s assumptions.

The Company's impairment analyses performed in fiscal year 2020 resulted in an impairment charge of $20.8 million for certain franchise agreements.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of revenue growth rates, future gross margins, future selling, general and administrative expenses, weighted average cost of capital, and terminal growth rates included the following, among others:

• We tested the effectiveness of internal controls over the intangible franchise rights asset impairment analysis, including those over the inputs, assumptions, and calculations.

• We evaluated the reasonableness of management’s forecasts of revenue growth rates, future gross margins, and future selling, general and administrative expenses by comparing the forecasts to:

◦ Historical revenue, gross margins, and selling, general and administrative expenses.

◦ Internal communications to management and the Board of Directors.

◦ Analyst and industry reports for the Company and certain of its peer companies.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the weighted average cost of capital and terminal growth rates by:

◦ Testing the source information underlying the determination of the weighted average cost of capital and terminal growth rates, and testing the mathematical accuracy of the calculations.

◦ Developing a range of independent estimates and comparing those to the weighted average cost of capital and terminal growth rates selected by management.

/s/ Deloitte & Touche LLP

Houston, Texas

February 24, 2021

We have served as the Company’s auditor since 2020.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Group 1 Automotive, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Group 1 Automotive, Inc.

and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S.

We have audited the accompanying consolidated balance sheet of Group 1 Automotive, Inc.

and subsidiaries (the Company) as of December 31, 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 13, 2020 expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for revenue and related costs effective January 1, 2018 due to the adoption of Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers , and the related amendments.

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases effective January 1, 2019 due to the adoption of ASC Topic 842, Leases, and the related amendments .

Basis for Opinion

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Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Valuation of Indefinite-Lived Intangible Assets

Description of the Matter

At December 31, 2019, the Company's indefinite-lived intangible assets consisted of rights under franchise agreements with manufacturers with an aggregate carrying value of approximately $253.5 million.

As explained in Note 1 of the consolidated financial statements, these assets are recorded at an individual dealership level and are assessed for impairment at least annually.

In evaluating indefinite-lived intangible assets for impairment, an optional qualitative assessment may be initially performed to determine whether it is more likely than not that the intangible asset was impaired.

If it is concluded that it is more likely than not that the fair value of the intangible asset is less than its carrying amount, a quantitative test comparing the fair value of the intangible asset to its carrying amount is required to measure the amount of impairment.

If the estimated fair value of any intangible franchise rights asset is less than its carrying amount, an impairment loss is recognized in an amount equal to the difference.

Based on the results of the qualitative assessment, the Company identified circumstances indicating possible impairment of certain of its franchise rights, requiring a quantitative assessment.

Auditing the Company's quantitative impairment assessment was complex and highly judgmental due to the significant estimation required to determine the fair values of the franchise rights assets.

In particular, the fair value estimates were sensitive to significant assumptions, such as changes in revenue growth rates, future gross margins, future selling, general and administrative expenses, the weighted average cost of capital and terminal growth rates , which are affected by expectations about future market or economic conditions .

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s intangible franchise rights impairment testing process, including controls over management’s review of the significant data and assumptions described above .

To test the estimated fair values of the franchise rights, our audit procedures included, among others, assessing the Company's valuation methodology, testing the significant assumptions for certain dealerships in the valuation model discussed above, and testing the completeness and accuracy of the underlying data used by the Company in its analysis.

We compared the significant assumptions to current industry, market and economic trends, and the Company's historical results.

as well as assessed the accuracy of the Company's historical estimates.

We involved a valuation specialist to assist in our evaluation of the valuation methodology used by the Company, the weighted average cost of capital assumptions and the calculation of the fair value of franchise rights.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2002.

We served as the Company’s auditor from 2002 to 2020.

Houston, Texas

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Accounts and notes receivable, net 200.0 225.1

Inventories, net

Inventories 1,468.0 1,901.7

Prepaid expenses 19.4 96.4

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Operating lease assets 209.9 220.1

Goodwill 997.1 1,008.3

Intangible franchise rights 232.8 253.5

Other long-term assets 37.2 24.8

TOTAL ASSETS $ 5,089.4 $ 5,570.2

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Floorplan notes payable — credit facility and other, net of offset account of $ 160.4 and $ 106.8 , respectively

$ 767.6 $ 1,144.4

Floorplan notes payable — manufacturer affiliates, net of offset account of $ 16.0 and $ 4.1 , respectively

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TOTAL CURRENT LIABILITIES 1,842.7 2,422.3

Long-term debt, net of current maturities

Operating lease liabilities, net of current portion

Long-term debt 1,294.7 1,432.1

Long-term operating lease liabilities 207.6 210.7

Deferred income taxes 141.0 145.7

Long-term interest rate swap liabilities 40.6 4.4

Other long-term liabilities 113.2 99.2

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Preferred stock, $ 0.01 par value, 1,000,000 shares authorized;

none issued or outstanding

no ne issued or outstanding

Common stock, $ 0.01 par value, 50,000,000 shares authorized;

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7,342,546 and 6,858,503 shares, respectively

( 492.8 ) ( 435.3 )

TOTAL STOCKHOLDERS’ EQUITY 1,449.6 1,255.7

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Years Ended December 31,

2020 2019 2018

New vehicle retail sales $ 5,580.8 $ 6,314.1 $ 6,181.4

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Total cost of sales 9,082.9 10,227.8 9,876.3

GROSS PROFIT 1,769.0 1,816.0 1,725.1

Selling, general and administrative expenses 1,169.3 1,358.4 1,273.1

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Other interest expense, net 62.6 74.9 75.8

(Gain) loss on extinguishment of debt 13.7 — —

INCOME (LOSS) BEFORE INCOME TAXES 370.3 227.3 205.4

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Years Ended December 31,

2020 2019 2018

NET INCOME (LOSS) $ 286.5 $ 174.0 $ 157.8

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Net unrealized gain (loss) on interest rate risk management activities, net of tax:

Unrealized gain (loss) arising during the period, net of tax benefit (provision) of $4.1, ($2.1) and ($0.6), respectively

Reclassification adjustment for realized (gain) loss on interest rate swap termination included in SG&A expenses, net of tax benefit (provision) of $-, ($0.2) and $-, respectively

Unrealized gain (loss) arising during the period, net of tax benefit (provision) of $ 11.4 , $ 4.1 and ($ 2.1 ), r espectively

( 36.7 ) ( 13.3 ) 6.5

Reclassification adjustment for realized (gain) loss on interest rate swap termination included in SG&A, net of tax benefit (provision) of $—, $— and $( 0.2 ), r espectively

0.1 — ( 0.7 )

Reclassification adjustment for (gain) loss included in interest expense, net of tax benefit (provision) of $ 2.6 , $ 0.1 and $ 1.2 , respectively

Unrealized gain (loss) on interest rate risk management activities, net of tax ( 28.4 ) ( 13.0 ) 9.8

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX ( 37.1 ) ( 9.2 ) ( 14.4 )

COMPREHENSIVE INCOME (LOSS) $ 249.4 $ 164.8 $ 143.4

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except share and per share data)

Accumulated Other Comprehensive Income (Loss)

(In millions, except share data)

Common Stock Additional

Capital Retained

Earnings Accumulated Other Comprehensive Income (Loss) Treasury

Shares Amount

BALANCE, DECEMBER 31, 2017 25,515,374 $ 0.3 $ 291.5 $ 1,246.3 $ ( 123.2 ) $ ( 290.5 ) $ 1,124.3

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Other comprehensive income (loss), net of taxes — — — — ( 14.4 ) — ( 14.4 )

Tax effects reclassified from accumulated other comprehensive income — — — 0.2 ( 0.2 ) — —

Purchases of treasury stock — — — — — ( 183.9 ) ( 183.9 )

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Stock-based compensation — — 18.7 — — — 18.7

Cash dividends, net of estimated forfeitures related to participating securities ($0.97 per share)

Dividends declared ($ 1.04 per share)

— — — ( 20.8 ) — — ( 20.8 )

ASC 606 cumulative adjustment — — — 11.4 — — 11.4

BALANCE, DECEMBER 31, 2018 25,494,328 $ 0.3 $ 292.8 $ 1,394.8 $ ( 137.8 ) $ ( 454.4 ) $ 1,095.7

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Other comprehensive income (loss), net of taxes — — — — ( 9.2 ) — ( 9.2 )

Tax effects reclassified from accumulated other comprehensive income

Purchases of treasury stock — — — — — ( 1.4 ) ( 1.4 )

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Stock-based compensation — — 18.8 — — — 18.8

Cash dividends, net of estimated forfeitures related to participating securities ($1.04 per share)

Dividends declared ($ 1.09 per share)

— — — ( 20.3 ) — — ( 20.3 )

ASC 842 cumulative adjustment — — — ( 6.1 ) — — ( 6.1 )

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Stock-based compensation — — 32.3 — — — 32.3

Cash dividends, net of estimated forfeitures related to participating securities ($1.09 per share)

ASC 842 cumulative adjustment

Dividends declared ($ 0.60 per share)

— — — ( 11.0 ) — — ( 11.0 )

BALANCE, DECEMBER 31, 2020 25,433,048 $ 0.3 $ 308.3 $ 1,817.9 $ ( 184.0 ) $ ( 492.8 ) $ 1,449.6

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Years Ended December 31,

2020 2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES:

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(Gain) loss on disposition of assets ( 5.8 ) ( 5.9 ) ( 26.8 )

Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:

(Gain) loss on extinguishment of debt 13.7 — —

Other 2.2 1.1 0.9

Changes in assets and liabilities, net of acquisitions and dispositions:

Accounts payable and accrued expenses ( 45.9 ) 123.1 18.4

Accounts and notes receivable 21.2 ( 32.5 ) 2.9

Inventories 416.1 ( 28.8 ) ( 80.6 )

Contracts-in-transit and vehicle receivables 43.5 12.7 39.5

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Purchases of property and equipment ( 103.2 ) ( 191.8 ) ( 141.0 )

Other — — 0.5

Net cash provided by (used in) investing activities ( 74.7 ) ( 291.6 ) ( 168.0 )

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Debt issue costs ( 9.0 ) ( 5.4 ) —

Borrowings of senior notes 550.0 — —

Repayments of senior notes ( 857.9 ) — —

Borrowings on other debt 271.9 350.9 210.7

Principal payments on other debt ( 134.0 ) ( 314.0 ) ( 210.3 )

Borrowings on debt related to real estate

Principal payments on debt related to real estate

Proceeds from employee stock purchase plan 9.6 8.6 7.6

Payment of tax withholding for stock-based awards

Payments of tax withholding for stock-based awards ( 6.2 ) ( 4.4 ) ( 4.9 )

Proceeds from termination of mortgage swap — — 0.9

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BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Organization

Group 1 Automotive, Inc., a Delaware corporation, is a leading operator in the automotive retailing industry with business activities in 15 states in the U.S., 33 towns in the U.K., and three states in Brazil.

Group 1 Automotive, Inc., a Delaware corporation, is a leading operator in the automotive retailing industry with business activities in 15 states in the U.S., 33 towns in the U.K.

and three states in Brazil.

Group 1 Automotive, Inc.

and its subsidiaries are collectively referred to as the “Company” in these Notes to Consolidated Financial Statements.

The Company, through its regions, sells new and used cars and light trucks;

Through its dealerships, the Company sells new and used cars and light trucks;

arranges related vehicle financing;

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and Brazil are led by the President, U.S.

and Brazilian Operations, and the U.K is led by a Managing Director, each reporting directly to the Company's Chief Executive Officer and responsible for the overall performance of their respective regions, as well as for overseeing field level management.

and Brazilian Operations , and the U.K is led by an Operations Director, each reporting directly to the Company's 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.

COVID-19 Pandemic

Since emerging in December 2019 , the COVID-19 pandemic has spread globally, including to all of the Company's markets in the U.S., U.K.

and Brazil, significantly impacting the Company’s operating results starting in mid-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 the operating capacity of all of the Company’s dealerships in the U.S., U.K.

Beginning in December 2020 and January 2021, vaccines deemed highly effective started rolling out to the general population in the U.S., U.K.

The rollout of the vaccine is expected to help control the spread of the virus.

However, the timeline and effectiveness of vaccinating the critical mass of the population in our markets are uncertain.

As such, the extent to which the impact of the COVID-19 pandemic may negatively affect the Company’s business, financial condition and results of operations will depend on future developments and new information that may emerge regarding the severity and duration of the COVID-19 pandemic.

If the current U.K.

lockdown is extended for a significant period of time, or if additional lockdowns, other travel and business restrictions or additional restrictions are imposed in the Company’s markets, the adverse impact on the Company’s business, results of operations and cash flows could be material.

The associated risks are further described in Item 1A.

Risk Factors of this Form 10-K.

Basis of Presentation

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GAAP and reflect the consolidated accounts of the parent company, Group 1 Automotive, Inc., and its subsidiaries, all of which are wholly owned.

The results of operations of all business combinations completed during the period are included from the effective dates of the closings of the acquisitions.

All intercompany balances and transactions have been eliminated in consolidation.

Certain reclassifications have been made to prior periods to conform with current period presentation with no effect on the Company’s previously reported consolidated financial position, results of operations or cash flows.

Certain disclosures are reported as zero balances, or may not compute, due to rounding.

During the year ended December 31, 2020, the Company recorded an out-of-period adjustment of $ 10.6 million resulting in an increase to Selling, general and administrative expenses and Additional paid-in capital to correct stock-based compensation for awards granted in prior years to retirement eligible employees not recognized timely due to the incorrect treatment of a non-substantive service condition.

The impact to the year ended December 31, 2020 was a decrease to net income of $ 9.7 million resulting in a decrease to diluted earnings per common share of $ 0.53 .

The effect of this adjustment on any previously reported period was not material based on a quantitative and qualitative evaluation.

Certain prior-period amounts have been reclassified to conform to current-period presentation.

Specifically, the long-term liabilities associated with the Company’s interest rate swaps have been reclassified from the caption Other long-term liabilities to the caption Long-term interest rate swap liabilities in the Consolidated Balance Sheets.

This reclassification had no effect on any subtotal in the Consolidated Balance Sheets.

Additionally, repayments and borrowings on the Company’s real estate related and other debt have been combined within the captions Repayments on other debt and Borrowings on other debt , respectively, in the Consolidated Statements of Cash Flows.

The aforementioned reclassifications within the Consolidated Statements of Cash Flows had no effect on any subtotal in the statements.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Certain amounts in the Consolidated Financial Statements and the accompanying notes may not compute due to rounding.

All computations have been calculated using unrounded amounts for all periods presented.

These Consolidated Financial Statements reflect, in the opinion of management, all normal recurring adjustments necessary to fairly state, in all material respects, the Company’s financial position and results of operations for the periods presented.

Use of Estimates

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These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date and the amounts of revenues and expenses recognized during the reporting period.

Management analyzes the Company’s estimates based on historical experience and other assumptions that are believed to be reasonable under the circumstances;

however, actual results could differ materially from such estimates.

The significant estimates made by management in the accompanying Consolidated Financial Statements relate to inventory valuation adjustments, reserves for future chargebacks on finance, insurance and vehicle service contract fees, self-insured property and casualty insurance exposure, the fair value of assets acquired and liabilities assumed in business combinations, the valuation of goodwill and intangible franchise rights, and reserves for potential litigation.

Management analyzes the Company’s estimates based on historical experience and other assumptions that are believed to be reasonable under the circumstances, however, actual results could differ materially from such estimates.

The significant estimates made by management in the accompanying Consolidated Financial Statements include, but are not limited to, inventory valuation adjustments, reserves for future chargebacks on finance, insurance and vehicle service contract fees, self-insured property and casualty insurance exposure, the fair value of assets acquired and liabilities assumed in business combinations, the valuation of goodwill and intangible franchise rights, and reserves for potential litigation.

Additionally, while the full impact of the COVID-19 pandemic is unknown and cannot be reasonably estimated, the Company has made accounting estimates based on the facts and circumstances available as of the reporting date .

Segment Reporting

See discussion of the Company’s reportable segments in Note 19 “Segment Information.”

See discussion of the Company’s reportable segments in Note 19.

Segment Information.

Revenue Recognition

See discussion of the Company’s revenue streams and accounting policies related to revenue recognition in Note 2 “Revenues.”

Refer to the discussion of the Company’s revenue streams and accounting policies related to revenue recognition in Note 2.

Cash and Cash Equivalents

Cash and cash equivalents include demand deposits and various other short-term investments with original maturities of three months or less at the date of purchase.

Contracts-in-Transit and Vehicle Receivables

Contracts-in-transit and vehicle receivables consist primarily of amounts due from financing institutions on retail finance contracts from vehicle sales, and also includes receivables related to vehicle wholesale sales.

Accounts and Notes Receivable

Accounts and notes receivable consist primarily of amounts due from manufacturers related to dealer incentives, and also includes receivables related to parts and service sales.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts based on the age of the receivable, the creditworthiness of the customer, and it’s historical experience with the customer.

See Note 7 “Receivables, Net” for details of the Company’s receivable accounts and related allowance for doubtful accounts.

Refer to Note 7.

Receivables, Net and Contract Assets for further discussion of the Company’s receivable accounts and related accounting policies.

New and used retail vehicles are initially valued in inventory at cost, which consists of the amount paid to acquire the inventory, plus the cost of reconditioning, cost of equipment added and transportation cost.

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In determining the lower of specific cost or net realizable value of new and used vehicles, the Company considers historical loss experience and current market trends.

Valuation risk is partially mitigated by the speed at which the Company turns this inventory.

Parts and accessories inventories are valued at lower of cost or net realizable value and determined on a first-in, first-out basis in the Consolidated Balance Sheets.

The Company incurs shipping costs in connection with selling parts to customers which is included in Cost of Sales in the Consolidated Statements of Operations.

Impairments of inventory, net of insurance proceeds, related to catastrophic events are included in Selling, general and administrative expenses in the Consolidated Statements of Operations.

During the year ended December 31, 2019, the Company recorded $ 16.0 million in impairment charges as a result of hail storms and flood damage from Tropical Storm Imelda.

During the year ended December 31, 2020, the Company recorded $ 0.9 million of impairment charges as a result of hail storms and flood damage from Hurricane Sally and Hurricane Zeta.

During the years ended December 31, 2019 and 2018, impairments of inventory were $ 16.1 million and $ 6.1 million, respectively.

The Company receives interest assistance from certain automobile manufacturers that is reflected as a vehicle purchase price discount.

The Company also receives dealer rebates and incentive payments, typically on parts purchases from the automobile manufacturers and on new vehicle retail sales.

The interest assistance and dealer incentives are reflected as a reduction to cost of sales in the Statements of Operations as the vehicles are sold.

Interest assistance reduces inventory cost in the Consolidated Balance Sheets.

Certain manufacturers offer rebates that result in purchase discounts once the incentives are met, providing the Company with volume incentives to order and/or sell certain models and/or volumes of inventory over designated periods of time.

Under the terms of the Company’s dealership franchise agreements, the respective manufacturers are able to perform warranty, incentive, and rebate audits and charge the Company back for unsupported or non-qualifying warranty repairs, rebates or incentives.

Parts and accessories inventories are valued at lower of cost or net realizable value and determined on a first-in, first-out basis in the Consolidated Balance Sheets.

The Company incurs shipping costs in connection with selling parts to customers which is included in Cost of Sales in the Consolidated Statements of Operations.

Property and Equipment

The Company also receives dealer rebates and incentive payments on parts purchases from the automobile manufacturers on new vehicle retail sales.

Additionally, the Company receives interest assistance from certain automobile manufacturers that is reflected as a vehicle purchase price discount.

The rebates, interest assistance and other dealer incentives reduce inventory costs in the Consolidated Balance Sheets and are reflected as a reduction to Cost of Sales in the Consolidated Statements of Operations as the vehicles are sold.

Refer to Note 8.

Inventories for further discussion of the Company’s inventory accounts.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Property and Equipment, Net

Property and equipment are recorded at cost and depreciation is provided using the straight-line method over the estimated useful lives of the assets.

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Property and equipment estimated useful lives are as follows:

Leasehold improvements

Machinery and dealership equipment

Office equipment, furniture and fixtures

Company vehicles

Buildings and leasehold improvements 25 to 50

Machinery and dealership equipment 7 to 20

Office equipment, furniture and fixtures 3 to 20

Company vehicles 3 to 5

Expenditures for major additions or improvements, which improve or extend the useful lives of the assets are capitalized.

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Disposals are removed at cost less accumulated depreciation, and any resulting gain or loss is reflected in Selling, general and administrative expenses in the Consolidated Statements of Operations.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company reviews long-lived assets that are held-for-use for impairment at the lowest level of identifiable cash flows whenever there is evidence that the carrying value of these assets may not be recoverable (i.e., triggering events).

This review consists of comparing the carrying amount of the asset with its expected future undiscounted cash flows without non-floorplan interest costs.

If the asset’s carrying amount is greater than such cash flow estimate, an impairment charge is recorded to write the asset down to its fair value.

The Company reviews property and equipment for impairment at the lowest level of identifiable cash flows whenever there is evidence that the carrying value of these assets may not be recoverable (i.e., triggering events).

This review consists of comparing the carrying amount of the asset group with its expected future undiscounted cash flows.

Estimates of expected future cash flows represent management’s best estimate based on currently available information and reasonable and supportable assumptions.

During the year ended December 31, 2019 , 2018 and 2017 , the Company recorded $ 1.8 million , $ 5.1 million and $ 0.2 million of impairment of property and equipment, respectively.

See Note 9 “Property and Equipment, Net” for additional details.

If the asset group’s carrying amount exceeds its future undiscounted cash flows, an impairment charge is measured as the amount by which its carrying amount exceeds its fair value.

The fair value of property is typically based on a third appraisal which requires adjustments to market-based valuation inputs to reflect the different characteristics between the property being measured and comparable properties, which are considered level 3 inputs within the fair value hierarchy described further in Note 6.

Financial Instruments and Fair Value Measurements.

During the years ended December 31, 2020, 2019 and 2018, the Company recorded $ 4.2 million, $ 1.8 million and $ 5.1 million of impairment of property and equipment, respectively.

Refer to Note 9.

Property and Equipment, Net for further discussion .

Business Combinations

Business acquisitions are accounted for under the acquisition method of accounting.

The allocations of purchase price to the assets acquired and liabilities assumed are assigned and recorded based on estimates of fair value and are subject to change within the purchase price allocation period (generally one year from the respective acquisition date).

The allocations of purchase price to the assets acquired and liabilities assumed are assigned and recorded based on estimates of fair value as of the acquisition date, and are subject to change within the one year purchase price allocation period.

The fair values of assets acquired and liabilities assumed in business combinations are estimated using various assumptions.

The most significant assumptions, and those requiring the most judgment, involve the estimated fair values of property and equipment and intangible franchise rights.

The Company generally utilizes third-party experts to determine the fair values of property and equipment purchased, including real estate, and utilizes its fair value model as discussed under “Intangible Franchise Rights” below, supplemented with assistance from third-party experts, to determine the fair value of intangible franchise rights acquired.

See Note 3 “Acquisitions and Dispositions” for additional discussion of the Company’s business combinations.

Goodwill represents the excess, at the date of acquisition, of the purchase price of the business acquired over the fair value of the net tangible and intangible assets acquired.

The most significant assumptions, and those requiring the most judgment, involve the estimated fair values of property and intangible franchise rights.

The Company typically utilizes third-party experts to determine the fair values of property acquired.

The Company utilizes the fair value model as discussed under the “Intangible Franchise Rights” section of this footnote to determine the fair value of intangible franchise rights acquired, supplemented with assistance from third-party experts as needed.

Refer to Note 3.

Acquisitions and Dispositions for further discussion of the Company’s business combinations.

Goodwill and Intangible Franchise Rights

Goodwill represents the excess, at the date of acquisition, of the purchase price of an acquired business over the fair value of the net tangible and intangible assets acquired.

The Company is organized into three geographic regions, the U.S.

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The Company has determined that each region represents a reporting unit for the purpose of assessing goodwill for impairment.

Annually in the fourth quarter, based on the carrying values of the Company’s regions as of October 31, the Company performs an impairment assessment of its goodwill.

An impairment analysis is done more frequently if certain events or circumstances arise that would indicate an adverse change in the fair value of the intangible asset has occurred (i.e., an impairment indicator).

In evaluating goodwill for impairment, an optional qualitative assessment may be initially performed to determine whether it is more likely than not (i.e., a likelihood of greater than 50%) that goodwill was impaired.

If it is concluded based on the qualitative assessment that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company does not have to quantitatively determine the asset’s fair value.

However if it is concluded that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative test comparing the fair value of the reporting unit to its carrying amount is required to measure the amount of impairment.

When a quantitative test is performed, the Company estimates the fair value of the respective reporting units using a combination of the discounted cash flow, or income approach, and the market approach.

Significant assumptions included in the model include changes in revenue growth rates, future gross margins, future SG&A expenses, and the WACC and terminal growth rates.

For the market approach, the Company utilizes recent market multiples of guideline companies for both revenue and pre-tax net income weighted as appropriate by reporting unit.

Each of these assumptions requires the Company to use its knowledge of (1) the industry, (2) recent transactions and (3) reasonable performance expectations for its operations.

The Company’s qualitative test includes a review of changes since the last quantitative test was performed in those assumptions having the most significant impact on the current year fair value, which are consistent with the significant assumptions identified in the quantitative test above.

See Note 11 “Intangible Franchise Rights and Goodwill” for details of the Company’s intangibles, including results of its impairment testing.

The Company’s only recognized identifiable intangible assets, other than goodwill, are rights under franchise agreements with manufacturers, which are recorded at the dealership level.

The franchise agreements consist of terms that are definite as well as terms that do not expire.

For the terms that are definite, the Company believes that these agreements can be renewed without substantial cost based on the history with the manufacturer.

As such, none of the Company’s franchise rights are amortized as the Company believes that its franchise arrangements will contribute to cash flows for an indefinite period of time.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Intangible Franchise Rights

The Company’s only significant identifiable intangible assets, other than goodwill, are rights under franchise agreements with manufacturers, which are recorded at an individual dealership level.

The Company expects these franchise agreements to continue for an indefinite period and, for agreements that do not have indefinite terms, the Company believes that renewal of these agreements can be obtained without substantial cost, based on the history with the manufacturer.

As such, the franchise rights are considered indefinite-lived intangible assets and not amortized, as the Company believes that its franchise agreements will contribute to cash flows for an indefinite period.

Franchise rights acquired in business acquisitions prior to July 1, 2001, were recorded and amortized as part of goodwill in the U.S.

reporting unit and remain recorded in goodwill in the U.S.

reporting unit at December 31, 2019 and 2018 in the Consolidated Balance Sheets.

Since July 1, 2001, intangible franchise rights acquired in business combinations have been recorded as distinctly separate intangible assets.

The Company evaluates franchise rights for impairment annually in the fourth quarter, based on the respective carrying values as of October 31, or more frequently if events or circumstances indicate possible impairment has occurred.

If it is concluded based on the qualitative assessment that it is not more likely than not that the fair value of the intangible asset is less than its carrying amount, the Company does not have to quantitatively determine the asset’s fair value.

However if it is concluded that it is more likely than not that the fair value of the intangible asset is less than its carrying amount, a quantitative test comparing the fair value of the intangible asset to its carrying amount is required to measure the amount of impairment.

When a quantitative test is performed, the Company estimates the fair value of the respective franchise right using a direct value method discounted cash flow model, or income approach, specifically the excess earnings method.

Significant assumptions included in the model include changes in revenue growth rates, future gross margins, future SG&A expenses, and the WACC and terminal growth rates.

During the year ended December 31, 2019 , 2018 and 2017 , the Company recorded $ 19.0 million , $ 38.7 million and $ 19.3 million , respectively, of impairment of intangible franchise rights.

See Note 11 “Intangible Franchise Rights and Goodwill” for details of the Company’s intangibles, including results of its impairment testing.

Currently, the Company operates in 15 different states in the U.S., in the U.K.

and in Brazil, each of which has unique tax rates and payment calculations.

The Company evaluates goodwill and intangible franchise rights for impairment annually in the fourth quarter as of October 31, or more frequently if events or circumstances indicate possible impairment has occurred.

In evaluating goodwill and intangibles for impairment, an optional qualitative assessment may be initially performed to determine whether it is more- likely-than-not (i.e., a likelihood of greater than 50%) that an impairment exists.

If it is concluded that it is more-likely-than-not that an impairment exists, a quantitative test is required to measure the amount of impairment which, for goodwill, consists of comparing the fair value of the reporting unit to its carrying amount and, for intangibles, consists of comparing the fair value of the intangible asset to its carrying amount.

When a quantitative impairment test is performed, the Company estimates fair value of goodwill using a combination of the discounted cash flow, or income approach, and the market approach.

The Company weights the income approach and market approach 80 % and 20 %, respectively, in the fair value model.

For intangible franchise rights, the fair value of the respective franchise right is estimated using a discounted cash flow, or income approach.

The income approach measures fair value by discounting expected future cash flows at a WACC that proportionately weights the cost of debt and equity.

Significant assumptions in the model include revenue growth rates, future gross margins, future SG&A expenses, the WACC and terminal growth rates.

The Company applies a five year projection period which aligns with the Company’s strategic plan.

Key considerations in the assumed growth rates include industry SAAR projections, macroeconomic conditions including consumer confidence levels, unemployment rates and gross domestic product growth, and internal measures such as historical financial performance, cost control and planned capital expenditures.

The revenue growth rates assume a significant increase in 2021 as the business recovers from the pandemic and limited increases in the next four years corresponding with the industry SAAR projections plus a return to more normal vehicle gross margins as inventories recover.

Beyond the five forecasted years, the terminal value is determined using a perpetuity growth rate based on long-term inflation projections for each reporting unit.

Significant inputs to the WACC include the risk free rate, an adjustment for stock market risk, an adjustment for company size risk and country risk adjustments for U.K.

In 2020, the WACC applied in the impairment tests for the U.S., the U.K.

and Brazil was 11 %, 13 % and 16 %, respectively.

For the market approach, the Company utilizes recent market multiples of guideline companies for both revenue and pre-tax net income weighted as appropriate by reporting unit.

Each of the significant assumptions to the fair value model are considered level 3 inputs within the fair value hierarchy described further in Note 6.

Financial Instruments and Fair Value Measurements.

Developing these assumptions requires applying management’s knowledge of the industry, recent transactions and reasonable performance expectations for its operations.

The qualitative test includes a review of changes, since the last quantitative test was performed, in those assumptions having the most significant impact on the current year fair value, which are consistent with the significant assumptions identified in the quantitative test above.

During the year ended December 31, 2020, the Company recorded goodwill impairment charges of $ 10.7 million within the Brazil reporting unit.

No impairments were recorded during the years ended December 31, 2019 and 2018.

During the years ended December 31, 2020, 2019 and 2018, the Company recorded $ 20.8 million, $ 19.0 million and $ 38.7 million, re spectively, of impairment of intangible franchise rights.

The impairment charges were recognized within Asset impairments in the Company’s Consolidated Statements of Operations.

Refer to Note 11.

Intangible Franchise Rights and Goodwill for further discussion of the Company’s goodwill and intangibles, including results of its impairment testing.

The Company is subject to income taxes at the federal level and in 15 states in the U.S., as well as in the U.K.

and Brazil, each of which has unique tax rates and payment calculations.

As the amount of income generated in each jurisdiction varies from period to period, the Company’s estimated effective tax rate can vary based on the proportion of taxable income generated in each jurisdiction.

The Company follows the liability method of accounting for income taxes in accordance with ASC 740, Income Taxes .

The Company follows the liability method of accounting for income taxes.

Under this method, deferred income taxes are recorded based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the underlying assets are realized or liabilities are settled.

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state net operating losses, as well as deferred tax assets primarily relating to net operating losses and goodwill for certain Brazil subsidiaries, a corresponding valuation allowance has been established to the extent that the Company has determined that net income attributable to certain jurisdictions may not be sufficient to realize the benefit.

See Note 14 “Income Taxes” for additional details.

Derivative Financial Instruments

The Company holds derivative financial instruments consisting of interest rate swaps which are designated as cash flow hedges.

See discussion of the Company’s accounting policies relating to its derivative financial instruments, including fair value measurements, in Note 6 “Financial Instruments and Fair Value Measurements.”

Refer to Note 14.

Income Taxes for further discussion.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Derivative Financial Instruments

The Company holds derivative financial instruments consisting of interest rate swaps that are designated as cash flow hedges.

Refer to the discussion of the Company’s accounting policies relating to its derivative financial instruments, including fair value measurements, in Note 6.

Financial Instruments and Fair Value Measurements.

Foreign Currency Translation

The functional currency for the Company’s U.K.

subsidiaries is GBP (£) and for the Brazil subsidiaries is BRL (R$).

subsidiaries is GBP and for the Brazil subsidiaries is BRL.

All assets and liabilities of foreign subsidiaries are translated into USD using period-end exchange rates and all revenues and expenses are translated at average rates during the respective period.

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Earnings Per Share

See discussion of the Company’s earnings per share calculation in Note 5 “Earnings Per Share.”

Refer to the discussion of the Company’s earnings per share calculation in Note 5.

Earnings Per Share.

The Company expenses the costs of advertising as incurred.

Advertising expense is included in Selling, general and administrative expenses in the Consolidated Statements of Operations and totaled $ 75.2 million for both years ended December 31, 2019 and 2018 , respectively and $ 74.1 million for the year ended 2017 .

Advertising expense is included in Selling, general and administrative expenses in the Consolidated Statements of Operations and totaled $ 49.9 million for the year ended December 31, 2020, and $ 75.2 million for both years ended December 31, 2019 and 2018, respectively.

The Company receives advertising assistance from certain automobile manufacturers, which the Company is required to spend on qualified advertising and which is subject to audit and chargeback by the manufacturer.

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Business and Credit Risk Concentrations

The Company owns and operates franchised automotive dealerships in the U.S., the U.K.

The Company owns and operates franchised automotive dealerships in the U.S., U.K.

Automotive dealerships operate pursuant to franchise agreements with vehicle manufacturers.

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The Company’s sales volume could be adversely impacted by the manufacturers’ or distributors’ inability to supply the dealerships with an adequate supply of vehicles.

The following table sets forth manufacturers with greater than 10% of the Company’s total new vehicle unit sales during the year ended December 31, 2019 :

Percentage of New Vehicle Retail Units Sold

The following table sets forth sales of manufacturers that comprised 10% or greater of the Company’s total new vehicle unit sales during the year ended December 31, 2020:

Manufacturer Percentage of New Vehicle Retail Units Sold

Toyota/Lexus 23.9 %

Volkswagen/Audi/Porsche/SEAT/SKODA 14.9 %

The Company receives reimbursement for rebates, incentives and other earned credits from manufacturers.

As of December 31, 2019 , the Company was due $ 124.0 million from various manufacturers (see Note 7 “Receivables, Net” ).

BMW/MINI 11.4 %

Ford/Lincoln 10.5 %

Concentrations of credit risk related to the Company’s customer base is primarily limited to financial institutions, vehicle manufacturers and other large institutions that have a national presence.

The remaining customer base is mostly comprised of a large number of local customers widely dispersed across the various markets and regions in which the Company operates, and therefore does not result in concentration of credit risk.

Refer to Note 7.

Receivables, Net and Contract Assets for further discussion of the Company’s receivables.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Statements of Cash Flows

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and Brazil, the Company chooses which used vehicles to finance and the borrowings flow directly to the Company from the lender.

All borrowings from, and repayments to, lenders affiliated with the vehicle manufacturers (excluding the cash flows from or to manufacturer affiliated lenders participating in the Company’s syndicated lending group under the Revolving Credit Facility as defined in Note 12 “Floorplan Notes Payable” ) are presented within Cash Flows from Operating Activities on the Consolidated Statements of Cash Flows.

Excluding the cash flows from or to manufacturer affiliated lenders participating in the Company’s syndicated lending group under the Revolving Credit Facility as defined in Note 12.

Floorplan Notes Payable, all borrowings from, and repayments to, lenders affiliated with the vehicle manufacturers are presented within Cash Flows from Operating Activities on the Consolidated Statements of Cash Flows.

All borrowings from, and repayments to, the Company’s credit facilities (including the cash flows from or to manufacturer affiliated lenders participating in the Revolving Credit Facility) are presented within Cash Flows from Financing Activities.

See Note 18 “Cash Flow Information” for additional details.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Refer to Note 18.

Cash Flow Information for further discussion.

Stock-Based Compensation

See discussion of the Company’s share-based payment awards and related accounting policies in Note 4 “Stock-Based Compensation Plans.”

Refer to the discussion of the Company’s share-based payment awards and related accounting policies in Note 4.

Stock-Based Compensation Plans.

Self-Insured Medical, Property and Casualty Reserves

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With the assistance of a third-party actuary, the Company estimates these reserves using historical claims experience adjusted for loss trending and loss development factors, which are compiled at least on an annual basis.

In the interim, the Company reviews the estimates within the study and monitors actual experience for unusual variances.

As of December 31, 2019 and 2018, the Company had accrued $ 24.4 million and $ 24.0 million for its estimated reserves related to self-insured liabilities, respectively.

In the interim, the Company monitors actual experience for unusual variances that would impact the estimates.

As of December 31, 2020 and 2019, the Company reserved $ 24.0 million and $ 24.4 million re lated to self-insured liabilities, respectively.

Refer to the discussion of the Company’s leases and related accounting policies in Note 10.

The Company reviews ROU assets for impairment at the lowest level of identifiable cash flows whenever evidence exists that the carrying value of an asset may not be recoverable (i.e., triggering events).

This review consists of comparing the carrying amount of the asset group with its expected future undiscounted cash flows.

Estimates of expected future cash flows represent management’s best estimate based on currently available information and reasonable and supportable assumptions.

If the asset group’s carrying amount exceeds its future undiscounted cash flows, an impairment charge is measured as the amount by which its carrying amount exceeds its fair value.

The fair value of the ROU asset is calculated based on the discounted market rent over the remaining lease period.

The market rent reflects current lease rates on comparable properties and requires adjustments to reflect the different characteristics between the property being measured and the comparable property, which are considered level 3 inputs within the fair value hierarchy described further in Note 6.

Financial Instruments and Fair Value Measurements.

During the years ended December 31, 2020 and 2019, the Company recorded $ 2.0 million and $ 1.4 million , re spectively, of impairment of ROU assets.

The impairment charges were recognized within Asset impairments in the Company’s Condensed Consolidated Statements of Operations.

Refer to Note 10.

Leases for further discussion of lease impairments .

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Recent Accounting Pronouncements

Accounting for Leases

In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”), that amends the accounting guidance on leases.

The standard establishes a ROU model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.

The Company adopted this ASU and all subsequent amendments on January 1, 2019, using the optional transition method applied to leases existing at January 1, 2019, with no restatement of comparative periods.

Results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with the Company’s historical accounting policies under ASC Topic 840, Leases (“ASC 840”).

The Company elected the package of practical expedients available under the transition guidance within Topic 842, which among other things, permits the Company to carry forward its historical lease classification.

The Company also elected other practical expedients under the transition guidance to (i) not record leases with an initial term of 12 months or less on the balance sheet for all asset classes;

(ii) not apply hindsight when determining its lease terms or assessing impairment of its ROU assets during transition;

and (iii) combine and account for both lease and non-lease components as a single component for all asset classes, except dealership operating assets.

For the Company’s dealership operating leases, the Company elected to separate lease and non-lease components and have allocated the consideration between the lease and non-lease components based on the estimated fair value of the leased component.

Upon adoption of Topic 842, the Company recognized ROU assets and lease liabilities based on the present value of its remaining minimum rental payments for existing operating leases as of the adoption date, utilizing the Company’s applicable incremental borrowing rate also as of the adoption date.

The adoption of Topic 842 resulted in the Company recognizing $ 222.6 million of operating ROU assets and $ 236.7 million of operating lease liabilities as of January 1, 2019.

The difference between ROU assets and lease liabilities is primarily due to the recognition of a $ 6.1 million cumulative-effect adjustment, net of deferred tax impact, to retained earnings as of January 1, 2019 resulting from the impairment of certain operating ROU assets upon the adoption of Topic 842.

The remaining difference between the ROU assets and lease liabilities is primarily the result of prepaid rent.

The Company’s accounting for its finance leases, previously termed as capital leases under ASC 840, remained substantially unchanged.

The adoption of Topic 842 had no material impact on the Company’s Consolidated Statements of Operations or Consolidated Statements of Cash Flows.

During the year ended December 31, 2019 , the Company recognized a ROU asset impairment charge of $ 1.4 million .

For further details, see Note 10 “Leases.”

Credit Losses

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Measurement of Credit Losses on Financial Instruments .

The amendment in this update replaces the current incurred loss impairment methodology of recognizing credit losses when a loss is probable, with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to assess credit loss estimates.

The standard will be effective for fiscal years beginning after December 15, 2019.

Upon adoption of the standard on January 1, 2020, the Company expects that, based on current expectations, its allowance for credit losses will be less than $ 1.5 million , and will be calculated primarily based on a loss-rate method.

Under the existing standard, the Company’s reserve is primarily based on an aging schedule and is within the range above.

The ultimate impact upon adoption will depend on the characteristics of the Company’s portfolios, economic conditions and forecasts, and the finalized validation of models and methodologies, as well as other management judgments.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company adopted this ASU on January 1, 2020.

Refer to the discussion of the adoption in Note 7.

Receivables, Net and Contract Assets.

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

The ASU provides optional expedients and exceptions for companies that have contracts, hedging relationships and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform.

The optional expedients and exceptions apply during the transition period and are intended to ease the financial reporting burdens mainly related to contract modification accounting, hedge accounting and lease accounting.

The transition period is effective as of March 12, 2020 and will apply through December 31, 2022.

LIBOR is used as an interest rate “benchmark” in the majority of the Company’s floorplan notes payable, as well as its mortgages, other debt and lease contracts.

Additionally, the Company’s derivative instruments are benchmarked to LIBOR.

The Company will apply the relief described as its arrangements are modified and does not expect the adoption will have an impact on the Company’s consolidated financial statements due to the relief provided.

The Company’s material revenue streams are the sale of new and used vehicles;

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Revenue recognition for each of these streams is discussed below.

With respect to the cost of freight and shipping from the Company’s dealerships to its customers, its policy is to recognize such cost within cost of sales in the Consolidated Statements of Operations.

Also, with respect to taxes assessed by governmental authorities that are imposed upon new and used vehicle sales transactions and collected by the Company from its customers, the Company’s policy is to exclude such amounts from revenues.

With respect to the cost of freight and shipping from the Company’s dealerships to its customers, the Company’s policy is to recognize such cost within cost of sales in the Consolidated Statements of Operations.

Also, with respect to taxes imposed by governmental authorities on new and used vehicle sales transactions that are collected by the Company and remitted on behalf of its customers to the government, the Company’s policy is to exclude such taxes from revenues.

On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”) using the modified retrospective method applied to those contracts that were not completed as of January 1, 2018.

The Company recognized an after-tax cumulative-effect adjustment to retained earnings of $ 4.8 million for maintenance and repair services and $ 6.6 million for the arrangement of associated vehicle financing and the sale of service and insurance contracts as of the date of adoption.

Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with historical accounting policies under Topic 605, Revenue Recognition .

The following tables present the Company's revenues disaggregated by its geographical segments (in millions):

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Parts and service sales (1)

1,162.6 194.8 31.9 1,389.3

Finance, insurance and other, net (2)

416.3 46.6 5.0 467.9

Total revenues $ 8,503.4 $ 2,096.8 $ 251.6 $ 10,851.8

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Parts and service sales (1)

1,234.4 227.9 47.6 1,510.0

Finance, insurance and other, net (2)

433.2 57.0 7.6 497.9

Total revenues $ 9,184.2 $ 2,413.7 $ 445.9 $ 12,043.8

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Year Ended December 31, 2018

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Parts and service sales (1)

1,153.3 217.6 46.0 1,416.9

Finance, insurance and other, net (2)

401.3 57.2 9.0 467.5

Total revenues $ 8,723.3 $ 2,437.4 $ 440.7 $ 11,601.4

(1) The Company has applied the optional exemption not to disclose revenue related to remaining performance obligations on its maintenance and repair services as the duration of these contracts is less than one year.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(2) Includes variable consideration recognized of $ 19.5 million and $ 18.7 million during the years ended December 31, 2019 and 2018, respectively, relating to performance obligations satisfied in previous periods on the Company’s retrospective commission income contracts.

Refer to Arrangement of Vehicle Financing and the Sale of Service and Other Insurance Contracts for further discussion of these arrangements.

New and Used Vehicle Sales

Revenue from the sale of new and used vehicles is recognized upon delivery of the vehicle to the customer, which is the point at which transfer of control occurs and when the performance obligation is satisfied.

In some cases, the Company uses a third-party auction as an agent to facilitate delivery of used vehicles to the customer.

(1) The Company has applied the optional exemption not to disclose revenues related to remaining performance obligations on its maintenance and repair services as the duration of these contracts is less than one year.

(2) Includes variable consideration recognized of $ 27.6 million , $ 19.5 million and $ 18.7 million during the years ended December 31, 2020, 2019 and 2018, respectively, relating to performance obligations satisfied in previous periods on the Company’s retrospective commission income contracts.

Refer to Arrangement of Vehicle Financing and the Sale of Service and Other Insurance Contracts section within this Note for further discussion of these arrangements.

New and Used Retail Vehicle Sales

Revenues from the sale of new and used vehicles is recognized upon delivery of the vehicle to the customer, which is the point at which transfer of control occurs and when the performance obligation is satisfied.

In some cases, the Company uses a third-party transport company to facilitate delivery of used vehicles to the customer.

The transaction price for new and used vehicle sales is the stand-alone sales price of each individual vehicle and is generally settled within 30 days of the satisfaction of the performance obligation.

Revenue from the sale of vehicle parts is recognized upon delivery of the parts to the customer, which is the point at which transfer of control occurs and when the performance obligation is satisfied.

Used Vehicle Wholesale Sales

When the Company uses a third-party auction to facilitate the delivery of used vehicles to the customer, the Company has determined that the auction acts as an agent under the arrangement.

Therefore, the Company recognizes revenues and cost of sales on a gross basis upon delivery of the vehicle by the auction to the customer, which is the point at which transfer of control occurs and when the performance obligation is satisfied.

The transaction price for wholesale vehicle sales is established by the winning bid under the auction process and is generally settled within 30 days of the satisfaction of the performance obligation.

Revenues from the sale of vehicle parts is recognized upon delivery of the parts to the customer, which is the point at which transfer of control occurs and when the performance obligation is satisfied.

The transaction price for vehicle parts sales is the stand-alone sales price of each individual part and is generally settled within 30 days of the satisfaction of the performance obligation.

Maintenance and Repair Services

The Company performs maintenance and repair services, including collision restoration, and revenue is recognized upon completion of the services, which occurs over time.

The Company has an enforceable right to payment in certain jurisdictions, and as such, the transfer of control of vehicle maintenance and repair services and satisfaction of the performance obligation to its customer occurs over time.

The Company uses the input method for the measurement of progress and recognition of revenue, utilizing labor hours and parts applied to the customer vehicle to estimate the services performed for which the Company has an enforceable right to payment.

Service Sales

The Company performs maintenance and repair services, including collision restoration.

In certain jurisdictions, the Company has an enforceable right to payment for performance completed to date on open work orders and as such, the transfer of control of vehicle maintenance and repair services and satisfaction of the performance obligation to its customer occurs over time.

For these contracts that qualify for revenue recognition over time, the Company uses the input method for the measurement of progress and recognition of revenues, utilizing labor cost incurred to estimate the services performed for which the Company has an enforceable right to payment.

The Company believes this method is the most objective measure of progress and provides a faithful depiction of the Company’s transfer of services to the customer.

The transaction price for maintenance and repair services is the total of the labor and, if applicable, vehicle parts used in the performance of the service, as well as the margin above cost charged to the customer.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Arrangement of Vehicle Financing and the Sale of Service and Other Insurance Contracts

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The Company has a single performance obligation associated with the F&I contracts, which is the facilitation of the financing of the vehicle or sale of the insurance product.

Revenue from these contracts is recognized when the finance or insurance contract is executed with the purchaser and when the performance obligation is satisfied.

With regards to the upfront commission for these contracts, the transaction price is the amount earned for each individual contract executed and is generally collected within 30 days of the satisfaction of the performance obligation.

The Company may be charged back in the future for unearned financing, insurance contract or vehicle service contract fees in the event of early termination of the contracts by customers.

A reserve for future amounts estimated to be charged back, representing variable consideration, is recorded as a reduction of Finance, insurance and other, net in the Consolidated Statements of Operations.

The reserve is estimated based on the Company’s historical charge back results and the termination provisions of the applicable contracts, and was $ 49.7 million and $ 46.4 million at December 31, 2019 and 2018 , respectively.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenues from these contracts is recognized when the facilitated contract between the F&I provider and the customer is executed, which is when the performance obligation is satisfied.

The Company may be charged back in the future for commissions received on F&I contract or vehicle service contract fees in the event of early termination of the contracts by customers.

A reserve for future amounts estimated to be charged back, representing variable consideration, is recorded as a reduction to Finance, insurance and other, net in the Consolidated Statements of Operations.

The reserve is estimated based on the Company’s historical charge back results and the termination provisions of the applicable contracts, and was $ 47.1 million a nd $ 49.7 million at December 31, 2020 and 2019, respectively.

Retrospective Commissions and Associated Contract Assets

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The Company utilizes the “expected value” method to predict the amount of consideration to which the Company will be entitled, subject to constraint in the estimate.

The estimated amount under the expected value method is accrued upfront when the product contract is executed with the end user, which is when the performance obligation is satisfied.

The estimated amount under the expected value method is accrued upfront when the facilitated contract between the F&I provider and the customer is executed, which is when the performance obligation is satisfied.

The estimated amount is reflected as a contract asset within Other current assets and Other long-term assets in the Consolidated Balance Sheets until the right to such consideration becomes unconditional, at which time amounts due are reclassified to accounts receivable.

Changes in the estimated amount of variable consideration to be ultimately realized are adjusted through revenue.

Changes in the estimated amount of variable consideration are adjusted through revenues.

The change in contract assets during the year ended December 31, 2020 is reflected in the table below (in millions):

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Changes related to revenue recognition during the period 27.6

Invoiced during the period

Amounts invoiced during the period ( 13.9 )

Contract Assets, December 31, 2020 $ 35.3

ACQUISITIONS AND DISPOSITIONS

As described in Note 1 “Business and Summary of Significant Accounting Policies,” the Company accounts for business combinations under the acquisition method of accounting, under which the Company allocates the purchase price to the assets and liabilities assumed based on an estimate of fair value.

As described in Note 1.

Business and Summary of Significant Accounting Policies, the Company accounts for business combinations under the acquisition method of accounting, under which the Company allocates the purchase price to the assets and liabilities assumed based on an estimate of fair value.

During the year ended December 31, 2020, the Company acquired a collision center in the U.S., which was integrated into an existing dealership.

Aggregate consideration paid was $ 1.3 million.

During the year ended December 31, 2019, the Company acquired four dealerships representing six franchises in the U.S.

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Aggregate consideration paid for these dealerships, which were accounted for as business combinations, totaled $ 140.4 million, including $ 5.1 million of cash received.

The Company also opened one dealership representing one franchise in the U.S., added one franchise and opened one additional dealership representing one franchise in the U.K.

and opened one dealership representing one franchise in Brazil.

During the year ended December 31, 2017 , the Company acquired three dealerships representing four franchises in the U.S.

and 12 dealerships representing 14 franchises in the U.K.

Aggregate consideration paid for these dealerships, which were accounted for as business combinations, totaled $ 120.3 million , including $ 11.2 million of cash received.

The Company also opened one dealership representing one franchise in the U.S.

and one dealership representing one franchise in the U.K.

The Company also opened one dealership representing one franchise in the U.S., added one franchise and opened one additional dealership representing one franchise in the U.K., and opened one dealership representing one franchise in Brazil.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the year ended December 31, 2020, the Company’s dispositions included two dealerships representing three franchises in the U.S.

The Company recorded a net pre-tax gain totaling $ 3.1 million related to these dispositions.

During the year ended December 31, 2019, the Company’s dispositions included four dealerships representing seven franchises and two terminated franchises in the U.S., three dealerships representing four terminated franchises in the U.K.

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The Company recorded a net pre-tax gain totaling $ 24.4 million related to these dispositions.

During the year ended December 31, 2017 , the Company’s dispositions included one dealership representing one franchise in the U.K.

and two dealerships representing two franchises in Brazil.

The Company’s dispositions generally consist of dealership assets and related real estate.

Gains and losses on dispositions are recorded in Selling, general and administrative expenses in the Consolidated Statements of Operations.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

STOCK-BASED COMPENSATION PLANS

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RSAs contain voting rights and are accounted for as outstanding when granted.

See Note 5 “Earnings Per Share” for further details.

Refer to Note 5.

Earnings (Loss) Per Share for further details.

RSAs are subject to vesting periods of up to five years and are considered outstanding at the date of grant.

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This estimate is adjusted annually based on the extent to which actual or expected forfeitures differ from the previous estimate.

The Company issues new shares of common stock or treasury shares, if available, when RSAs vest.

The following table summarizes information about RSAs for 2019:

Weighted Average

The Company issues new shares of common stock or treasury shares, if available, to settle vested RSAs.

The following table summarizes RSA activity and related information for 2020:

Awards Weighted Average

Nonvested at January 1, 2020

674,206 $ 70.19

Granted 180,925 $ 95.10

Vested ( 214,635 ) $ 73.65

Forfeited ( 19,953 ) $ 68.86

Nonvested at December 31, 2020

The total fair value of RSAs which vested during the years ended December 31, 2019 , 2018 and 2017 , was $ 15.8 million , $ 15.2 million and $ 19.2 million , respectively.

620,543 $ 76.22

The total fair value of RSAs that vested during the years ended December 31, 2020, 2019 and 2018 , was $ 15.8 million, $ 15.8 million and $ 15.2 million, respectively.

As of December 31, 2020, there was $ 23.1 million of total unrecognized compensation cost related to RSAs which is expected to be recognized over a weighted-average period of 3.2 years.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Restricted Stock Units

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RSUs convey no voting rights, and therefore are not considered outstanding when granted.

Granted RSUs participate in dividends, however the dividends are not payable until the directors separation of service with the Company.

Granted RSUs participate in dividends, however the dividends are not payable until a directors separation of service with the Company.

In the event a director terminates his or her directorship with the Company for reasons other than defined above, the RSUs granted and any accrued dividends will be forfeited.

Prior to January 1, 2019, RSUs settled in shares of the Company’s common stock.

Effective January 1, 2019, RSUs will settle in a lump sum cash payment equal to the to the average of the Company’s high and low stock price on the separation of service date (no stock is issued) and constitute liability instruments, which require remeasurements to fair value each reporting period.

On January 2, 2019, 10,689 cash-settled RSUs were granted with a weighted average grant-date fair value of $ 53.33 per share.

At December 31, 2019, the vested and unpaid cash-settled RSUs were measured at $ 100.25 per share.

The changes in fair value as a result of the changes in the Company’s stock price is recognized though stock-based compensation expense.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Effective January 1, 2019, RSUs will settle in a lump sum cash payment equal to the average of the Company’s high and low stock price on the separation of service date (no stock is issued) and constitute liability instruments, which require remeasurements to fair value each reporting period.

The changes in fair value as a result of the changes in the Company’s stock price is recognized in Selling, general and administrative expenses in the Consolidated Statements of Operations.

The following table summarizes cash-settled RSU activity and related information for 2020:

Awards Weighted Average

Unsettled at January 1, 2020

10,689 $ 53.33

Granted 5,982 $ 100.26

Unsettled at December 31, 2020

16,671 $ 130.30

As of December 31, 2020, the total liability for unsettled cash-settled RSUs, recorded at fair value, was $ 2.2 million.

Performance Awards

During the year ended December 31, 2019 under the Incentive Plan, the Company granted 30,555 performance awards to certain employees at no cost to the recipient.

The weighted average grant date fair value of these awards was $ 65.83 per share.

The performance awards do not qualify as participating securities.

Under the Incentive Plan, the Company grants to certain employees shares of the Company’s common stock in the form of performance awards.

The performance awards contain both performance and market conditions to be evaluated over a two -year performance period and are subject to vesting over a three -year service period.

Based on the performance criteria, up to 200 % of the granted shares may be earned.

The performance awards do not qualify as participating securities.

Compensation expense for the awards with performance conditions is calculated based on the market price of the Company’s common stock at the date of grant and the forecasted achievement of such performance conditions and is recognized over the requisite service period.

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All performance awards remained unvested as of December 31, 2020.

The following table summarizes performance awards activity and related information for 2020:

Awards Weighted Average

Nonvested at January 1, 2020

30,555 $ 65.83

Granted 20,992 $ 103.29

Forfeited ( 6,444 ) $ 80.62

Nonvested at December 31, 2020

45,103 $ 81.15

As of December 31, 2020, there was $ 1.0 million of total unrecognized compensation cost related to performance awards which is expected to be recognized over a weighted-average period of 1.6 years.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Employee Stock Purchase Plan

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Stock-Based Compensation

Total stock-based compensation cost was $ 19.9 million , $ 18.7 million , and $ 18.9 million with an associated tax benefit recognized of $ 3.5 million , $ 3.4 million , and $ 5.4 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

Stock-based compensation for the year ended December 31, 2019 included $ 1.1 million related to cash-settled RSUs.

As of December 31, 2019 , there was $ 33.4 million of total unrecognized compensation cost related to stock-based compensation plans which is expected to be recognized over a weighted-average period of 3.3 years.

Total stock-based compensation includes expenses for both equity and cash-settled awards and is recognized in Selling, general and administrative expenses in the Consolidated Statements of Operations.

Stock-based compensation related to equity-settled awards was $ 32.3 million, $ 18.8 million and $ 18.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Stock-based compensation related to cash-settled awards was $ 1.1 million for both the years ended December 31, 2020 and 2019.

The Company did not grant cash-settled awards prior to January 1, 2019, and therefore did not incur any such expense for the year ended December 31, 2018.

Tax benefits related to total stock-based compensation were $ 5.0 million, $ 3.5 million and $ 3.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.

EARNINGS (LOSS) PER SHARE

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Years Ended December 31,

2020 2019 2018

Weighted average basic common shares outstanding 17,754,666 17,917,195 19,452,560

Dilutive effect of stock awards and employee stock purchases, net of assumed repurchase of treasury stock

Weighted average dilutive common shares

Dilutive effect of stock-based awards and employee stock purchases 51,912 18,879 8,492

Weighted average dilutive common shares outstanding 17,806,578 17,936,074 19,461,052

Net income (loss) $ 286.5 $ 174.0 $ 157.8

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• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

The Company’s financial instruments consist of cash and cash equivalents, contracts-in-transit and vehicle receivables, accounts and notes receivable, investments in debt and equity securities, accounts payable, credit facilities, long-term debt and interest rate derivative instruments.

Other than the Company’s fixed rate long-term debt, the carrying amount of all significant financial instruments approximates fair value due to either the length of maturity, the existence of variable interest rates that approximate prevailing market rates or as a result of mark to market accounting.

Cash and Cash Equivalents, Contracts-In-Transit and Vehicle Receivables, Accounts and Notes Receivable, Accounts Payable and Credit Facilities

Cash and Cash Equivalents, Contracts-In-Transit and Vehicle Receivables, Accounts and Notes Receivables, Accounts Payable, Variable Rate Long-Term Debt and Floorplan Notes Payable

The fair values of these financial instruments approximate their carrying values due to the short-term nature of these instruments and/or the existence of variable interest rates.

Fixed Rate Long-Term Debt

The Company’s fixed rate long-term debt primarily consists of amounts outstanding under its senior unsecured notes and mortgage facilities.

The Company estimates the fair value of its senior unsecured notes using quoted prices for the identical liability (Level 1) and estimates the fair value of its mortgage facilities using a present value technique based on current market interest rates for similar type of financial instruments (Level 2).

The Company periodically invests in demand notes with manufacturer-affiliated finance companies that bear interest at a variable rate determined by the manufacturer and represent unsecured, unsubordinated and unguaranteed debt obligations of the manufacturer.

The instruments are redeemable on demand by the Company and therefore these instruments are recorded in Cash and cash equivalents in the accompanying Consolidated Balance Sheets.

As of December 31, 2020, the carrying value of these instruments was $ 60.0 million, and there was no material carrying value as of December 31, 2019.

The Company determined that the valuation measurement inputs of these instruments include inputs other than quoted market prices, that are observable or that can be corroborated by observable data by correlation.

Accordingly, the Company has classified these instruments within Level 2 of the hierarchy framework.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The carrying value and fair value of the Company’s fixed rate long-term debt were as follows at the dates indicated (in millions):

December 31, 2019

December 31, 2018

Carrying Value (1)

Fixed Rate Long-Term Debt

The Company’s fixed rate long-term debt primarily consists of amounts outstanding under its senior unsecured notes and certain mortgage facilities.

Debt for further discussion of the Company’s long-term debt arrangements.

On August 17, 2020, the Company issued $ 550.0 million in aggregate principal of 4.00 % Senior Notes due August 2028 (“ 4.00 % Senior Notes”).

Refer to Note 13.

Debt for further discussion of the issuance.

The Company estimates the fair value of its 4.00 % Senior Notes using quoted prices for the identical liability (Level 1) and estimates the fair value of its fixed-rate mortgage facilities using a present value technique based on current market interest rates for similar types of financial instruments (Level 2).

The carrying value and fair value of the Company’s 4.00 % Senior Notes and fixed-rate mortgages were as follows (in millions):

December 31, 2020 December 31, 2019

Carrying Value (1)

5.00% Senior Notes

Fair Value Carrying Value (1)

4.00% Senior Notes $ 550.0 $ 567.0 $ — $ —

Real estate related 84.3 77.0 40.7 41.1

(1) Carrying value includes unamortized discount and excludes debt issuance costs

The Company maintains investment balances with certain financial institutions in Brazil that provide credit facilities for the financing of new, used and rental vehicle inventories.

The investment balances bear interest at a variable rate and are redeemable by the Company in the future under certain conditions.

The investment balances totaled $ 4.3 million and $ 2.8 million as of December 31, 2019 and December 31, 2018, respectively, which the Company has classified as restricted cash within Other long-term assets in its Consolidated Balance Sheets.

The Company determined that the valuation measurement inputs of these instruments include inputs other than quoted market prices that are observable or that can be corroborated by observable data by correlation (Level 2).

See Note 18 “Cash Flow Information” for further details regarding the Company’s investment balances.

Total $ 634.3 $ 644.0 $ 40.7 $ 41.1

(1) Carrying value excludes unamortized debt issuance costs.

On April 2, 2020, the Company fully redeemed $ 300.0 million in aggregate principal amount of its outstanding 5.25 % Senior Notes due June 2023.

Refer to Note 13.

Debt for further discussion of the redemption.

On September 2, 2020, the Company fully redeemed $ 550.0 million in aggregate principal amount of its outstanding 5.00 % Senior Notes due June 2022.

Refer to Note 13.

Debt for further discussion of the redemption.

Asset Impairments

When an asset impairment is required, the Company impairs any carrying value of the asset in excess of the estimated fair value of the asset, which includes goodwill, intangible franchise rights, property and equipment and ROU assets.

Refer to Note 1.

Business and Summary of Significant Accounting Policies for further discussion of the significant inputs to the respective fair value models and their levels within the fair value hierarchy.

Derivative Financial Instruments

The Company holds derivative financial instruments consisting of interest rate swaps which are designated as cash flow hedges.

The related gains or losses on these interest rate swaps are deferred in stockholders’ equity as a component of accumulated other comprehensive income (loss).

The Company holds interest rate swaps to hedge against variability of interest payments indexed to LIBOR.

The interest rate swaps are designated as cash flow hedges and the related gains or losses are deferred in stockholders’ equity as a component of Accumulated other comprehensive income (loss) .

The deferred gains or losses are recognized in income in the period in which the related items being hedged are recognized in expense.

Monthly contractual settlements of the positions are recognized as Floorplan interest expense or Other interest expense, net, in the Consolidated Statements of Operations.

Monthly contractual settlements of the positions are recognized as Floorplan interest expense or Other interest expense, net, in the Company’s Consolidated Statements of Operations.

The Company had no gains or losses related to ineffectiveness recognized in the Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018.

As of December 31, 2020, the Company held 36 interest rate swaps in effect with a total notional value of $ 798.7 million that fixed its underlying one-month LIBOR at a weighted average rate of 1.4 %.

The Company also held eight interest rate swaps with forward start dates beginning December 2020 , that had an aggregate notional value of $ 450.0 million with a weighted average interest rate of 1.7 % as of December 31, 2019 .

The maturity dates of the Company’s interest rate swaps range between December 2020 and December 2030.

The Company also held 10 interest rate swaps with forward start dates beginning January 2021, that had an aggregate notional value of $ 575.0 million with a weighted average interest rate of 1.4 % as of December 31, 2020.

The maturity dates of the Company’s interest rate swaps range between August 2021 and December 2031.

The Company’s interest rate swaps are measured at fair value utilizing the option-pricing Black-Scholes present value technique.

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The fair value of the interest rate swaps also considers the credit risk of the Company for instruments in a liability position or the counterparty for instruments in an asset position.

The credit risk is calculated using the spread between the one-month LIBOR yield curve and the relevant interest rate according to Standard and Poor’s.

The credit risk is calculated using the spread between the one-month LIBOR yield curve and the relevant interest rate according to rating agencies.

The inputs to the fair value measurements reflect Level 2 inputs.

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Assets and liabilities associated with the Company’s interest rate swaps as reflected in the Consolidated Balance Sheets were as follows (in millions):

Assets from interest rate risk management activities:

Other current assets $ 1.9 $ —

Other long-term assets 0.3 1.9

Liabilities from interest rate risk management activities:

Total assets $ 2.3 $ 1.9

Accrued expenses and other current liabilities $ 4.2 $ 2.8

Other liabilities

Included in Accumulated other comprehensive income (loss) as of December 31, 2019 and 2018 , were unrealized gains (losses), net of income taxes, totaling $( 4.1 ) million and $ 8.9 million , respectively, related to the Company’s interest rate swaps.

Long-term interest rate swap liabilities 40.6 4.4

Total liabilities $ 44.8 $ 7.2

The following tables present the impact of the Company’s interest rate swaps (in millions):

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Amount of Income (Loss) Reclassified from Other Comprehensive Income (Loss) into Statements of Operations

Location of Income (Loss) Reclassified from Other Comprehensive Income (Loss) into Statements of Operations

Years Ended December 31,

Income Statement Classification Years Ended December 31,

2020 2019 2018

Floorplan interest expense, net $ ( 7.9 ) $ ( 0.4 ) $ ( 4.7 )

Other interest expense, net $ ( 2.9 ) $ 0.1 $ ( 0.5 )

The net amount of loss expected to be reclassified out of other comprehensive income (loss) into earnings as an offset to Floorplan interest expense or Other interest expense, net in the next twelve months is $ 2.8 million .

RECEIVABLES, NET

The Company’s accounts and notes receivable consisted of the following (in millions):

Amounts due from manufacturers

Parts and service receivables

Finance and insurance receivables

Total accounts and notes receivable

allowance for doubtful accounts

Accounts and notes receivable, net

The Contracts-in-transit and vehicle receivables, net balance of $ 253.8 million and $ 265.7 million as of December 31, 2019 and December 31, 2018, respectively, within the Consolidated Balance Sheets, included an allowance for doubtful accounts of $ 0.3 million and $ 0.3 million as of December 31, 2019 and December 31, 2018, respectively.

The net amount of loss expected to be reclassified out of Accumulated other comprehensive income (loss) into earnings as an offset to Floorplan interest expense or Other interest expense, net in the next twelve months is $ 2.3 million.

RECEIVABLES, NET AND CONTRACT ASSETS

Contracts-in-Transit and Vehicle Receivables

Accounts and Notes Receivable

Accounts and notes receivable consist primarily of amounts due from manufacturers related to dealer incentives, and also includes receivables related to parts and service sales.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

INVENTORIES, NET

The Company’s inventories, net, consisted of the following (in millions):

The Company’s receivables and contract assets consisted of the following (in millions):

Contracts-in-transit and vehicle receivables, net:

Contracts-in-transit $ 147.1 $ 169.9

Vehicle receivables 64.5 84.3

Total contracts-in-transit and vehicle receivables 211.5 254.1

allowance for doubtful accounts (1)

Total contracts-in-transit and vehicle receivables, net $ 211.2 $ 253.8

Accounts and notes receivables, net:

Manufacturer receivables $ 108.7 $ 123.9

Parts and service receivables 53.2 57.0

F&I receivables 27.4 28.3

Other 13.8 18.7

Total accounts and notes receivables 203.1 227.9

allowance for doubtful accounts (1)

Total accounts and notes receivables, net $ 200.0 $ 225.1

Within Other current assets and Other long-term assets:

Total contract assets (1), (2)

$ 35.3 $ 21.6

(1) The allowance for doubtful accounts as of December 31, 2020 is calculated under the current expected credit loss (“CECL”) model described below, which was introduced under ASU 2016-13, Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASC 326”), that became effective for the Company on January 1, 2020.

The adoption of ASC 326 did not materially change the calculation of the allowance for doubtful accounts.

(2) See further discussion of the Company’s Contract Assets balance at Note 2.

No allowance for doubtful accounts was recorded as of December 31, 2020 or December 31, 2019.

The CECL model applies to financial assets measured at amortized cost, as shown in the table above, and requires the Company to reflect expected credit losses over the remaining contractual term of the asset.

As the large majority of the Company’s receivables settle within 30 days, the forecast period under the CECL model is a relatively short horizon.

The Company uses an aging method to estimate allowances for doubtful accounts under the CECL model as the Company has determined that the aging method adequately reflects expected credit losses, as corroborated by historical loss-rates.

However, the Company will apply adjustments for asset-specific factors and current economic conditions as needed at each reporting date.

There were no adjustments for expected losses as of December 31, 2020.

The Company’s inventories consisted of the following (in millions):

New vehicles $ 902.5 $ 1,328.6

2 unchanged sentences

Parts, accessories and other 80.1 85.5

Total inventories, net

(1) The lower of specific cost or net realizable value reserves reduced total inventory cost by $ 9.7 million and $ 8.5 million at December 31, 2019 and 2018 , respectively.

(2) Interest assistance from certain manufacturers reduced inventory costs by $ 10.7 million and $ 9.7 million at December 31, 2019 and 2018 , respectively, and reduced cost of sales by $ 49.1 million , $ 47.3 million and $ 48.9 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

Refer to Note 1 “Business and Summary of Significant Accounting Policies” for further discussion of the Company’s accounting policy for inventories.

Total inventories $ 1,468.0 $ 1,901.7

As described in Note 1.

Business and Summary of Significant Accounting Policies, inventories are valued at lower of cost or net realizable value.

The lower of specific cost or net realizable value adjustments reduced total inventory cost by $ 8.8 million a nd $ 9.7 m illion at December 31, 2020 and 2019, respectively.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Interest assistance reduced inventory costs by $ 7.4 million a nd $ 10.7 million at December 31, 2020 and 2019, respectively, and reduced cost of sales by $ 47.3 million, $ 49.1 million and $ 47.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Refer to Note 1.

Business and Summary of Significant Accounting Policies for further discussion of the Company’s accounting policies for inventories.

PROPERTY AND EQUIPMENT, NET

The Company’s property and equipment consisted of the following (in millions):

Leasehold improvements

Land $ 619.8 $ 571.3

Buildings and leasehold improvements 1,107.1 1,067.6

Machinery and dealership equipment 145.8 138.2

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Construction in progress 56.6 36.5

Total 2,068.4 1,947.3

accumulated depreciation and amortization 460.2 400.2

Property and equipment, net $ 1,608.2 $ 1,547.1

For the year ended December 31, 2019, the Company recognized $ 1.3 million and $ 0.5 million in asset impairment charges related to property and equipment in the Company’s U.S.

and Brazil segments, respectively.

For the years ended December 31, 2018 and 2017, the Company recognized $ 5.1 million and $ 0.2 million, respectively, in asset impairment charges related to property and equipment in the Company’s U.S.

For the years ended December 31, 2020, 2019 and 2018 the Company recognized $ 4.2 million, $ 1.3 million and $ 5.1 millio n, respectively, in asset impairment charges related to property and equipment in the Company’s U.S.

For the year ended December 31, 2019, the Company recognized $ 0.5 million in asset impairment charges related to property and equipment in the Company’s Brazil segment.

Property and equipment impairment charges are reflected in Asset impairments in the Consolidated Statements of Operations.

Depreciation and amortization expense, including amortization of finance leases, totaled $ 71.6 million , $ 67.1 million and $ 57.9 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

See Note 10 “Leases” for discussion of finance leases.

The Company capitalized $ 1.3 million , $ 1.3 million , and $ 1.6 million of interest on construction projects in 2019 , 2018 and 2017 , respectively.

Depreciation and amortization expense totaled $ 75.8 million, $ 71.6 million and $ 67.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company capitalized $ 1.1 million, $ 1.3 million and $ 1.3 million of interest on construction projects for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company leases real estate, office equipment and dealership operating assets under long-term lease agreements and subleases certain real estate to third parties.

On January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) (“Topic 842”) and all subsequent amendments using the optional transition method applied to leases existing at January 1, 2019.

The adoption of Topic 842 resulted in the Company recognizing $ 222.6 million of operating ROU assets and $ 236.7 million of operating lease liabilities as of January 1, 2019.

The difference between ROU assets and lease liabilities was primarily due to the recognition of a $ 6.1 million cumulative-effect adjustment, net of deferred tax impact, to retained earnings as of January 1, 2019 resulting from the impairment of certain operating ROU assets upon the adoption of Topic 842.

The remaining difference between the ROU assets and lease liabilities is primarily the result of prepaid rent.

The Company’s accounting for its finance leases, previously termed capital leases under ASC 840, remained substantially unchanged.

The adoption of Topic 842 had no material net impact on the Company’s Consolidated Statements of Operations or Consolidated Statements of Cash Flows.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company leases real estate, office equipment, dealership operating assets under long-term lease agreements and subleases certain real estate to third parties.

For leases effective on or after January 1, 2019, the Company determines if an arrangement is a lease at inception and recognizes ROU assets and lease liabilities at commencement date based on the present value of lease payments over the lease term.

For such leases, the aggregate present value of the Company’s lease payments may include options to purchase the leased property or lease terms with options to renew or terminate the lease, when it is reasonably certain that the Company will exercise such an option.

The exercise of lease renewals, terminations, or purchase options is generally at the Company’s discretion.

The Company recognizes ROU assets and lease liabilities at commencement based on the present value of lease payments over the lease term.

For such leases, the aggregate present value of the Company’s lease payments may include options to purchase the leased property or lease terms with options to renew or terminate the lease, when the option is at the Company’s sole discretion and it is reasonably certain that the Company will exercise such an option.

The Company’s leases may also include rental payments adjusted periodically for inflation.

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None of the Company’s lease agreements contain material residual value guarantees or material restrictive covenants.

For the Company’s dealership operating leases, the Company has elected to separate lease and non-lease components and has allocated the consideration between the lease and non-lease components based on the estimated fair value of the leased component.

For all other asset classes, the Company has elected to combine and account for both lease and non-lease components as a single component.

The Company has elected not to record leases with an initial term of 12 months or less on the balance sheet for all asset classes.

The Company performs interim reviews of its ROU assets for impairment when evidence exists that the carrying value of an asset may not be recoverable.

During the year ended December 31, 2019, the Company recognized a ROU asset impairment charge of $ 1.4 million relating to certain operating leases within the U.K.

The impairment charge was recognized within Asset impairments in the Company's Consolidated Statements of Operations.

During the year ended December 31, 2020, the Company recognized ROU asset impairment charges of $ 1.8 million within the U.K.

segment and $ 0.2 million within the Brazil segment.

During the year ended December 31, 2019, the Company recognized $ 1.4 million within the U.K.

All of the aforementioned impairment charges were related to operating leases and were recognized within Asset impairments in the Company's Consolidated Statements of Operations.

Additional information regarding the Company’s operating and finance leases is as follows (in millions, except for lease term and discount rate information):

Balance Sheet Classification

December 31, 2019

Operating lease assets

Property and equipment, net

Current operating lease liabilities

Current maturities of long-term debt

Operating lease liabilities, net of current portion

Long-term debt, net of current maturities

Lease Expense

Income Statement Classification

Year Ended December 31, 2019

Selling, general and administrative expenses

Asset impairments

Selling, general and administrative expenses

Sublease income

Selling, general and administrative expenses

Amortization of lease assets

Depreciation and amortization expense

Interest on lease liabilities

Other interest expense, net

Leases Balance Sheet Classification December 31, 2020 December 31, 2019

Operating Operating lease assets $ 209.9 $ 220.1

Finance Property and equipment, net 117.8 75.5

Total $ 327.7 $ 295.5

Operating Current operating lease liabilities $ 21.5 $ 24.6

Finance Current maturities of long-term debt 9.4 6.6

Operating Operating lease liabilities, net of current portion 207.6 210.7

Finance Long-term debt, net of current maturities 115.5 76.3

Total $ 353.9 $ 318.3

Lease Expense Income Statement Classification Year Ended December 31, 2020 Year Ended December 31, 2019

Operating Selling, general and administrative expenses $ 35.3 $ 40.1

Operating Asset impairments 2.0 1.4

Variable Selling, general and administrative expenses 2.8 2.3

Sublease income Selling, general and administrative expenses ( 1.3 ) ( 1.5 )

Amortization of lease assets Depreciation and amortization expense 6.3 5.5

Interest on lease liabilities Other interest expense, net 7.0 4.8

Net lease expense $ 52.1 $ 52.6

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December 31, 2020

Maturities of Lease Liabilities

Operating Leases

Finance Leases

Maturities of Lease Liabilities Operating Leases Finance Leases

2021 $ 33.4 $ 16.2

2022 33.3 12.8

2023 31.0 11.5

2024 26.6 25.2

2025 24.1 33.9

Thereafter 182.0 71.2

Total lease payments 330.3 170.8

lease payments representing interest

( 101.2 ) ( 45.9 )

Present value of lease liabilities $ 229.1 $ 124.9

Weighted-Average Lease Term and Discount Rate

December 31, 2019

Weighted-Average Lease Term and Discount Rate December 31, 2020 December 31, 2019

Weighted-average remaining lease terms:

Operating 12.8

Weighted-average discount rates:

Other Information

December 31, 2019

Operating 5.6 % 6.1 %

Finance 6.2 % 7.2 %

Other Information December 31, 2020 December 31, 2019

Cash paid for amounts included in the measurement of lease liabilities:

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Finance leases, modifications and remeasurements $ 31.8 $ 8.2

INTANGIBLE FRANCHISE RIGHTS AND GOODWILL

As discussed in Note 1 “Business and Summary of Significant Accounting Policies,” the Company evaluates its intangible assets, consisting entirely of indefinite-lived franchise rights and goodwill assets, for impairment annually, or more frequently if events or circumstances indicate possible impairment.

In the third quarter of 2019, the ongoing uncertainty related to the ultimate resolution of the Referendum of the U.K.’s Membership of the EU advising for Brexit, continued to generate much uncertainty in the U.K., as well as in global markets.

During the three months ended September 30, 2019, as a result of increased uncertainty in the U.K.

regarding the outcome and timing of Brexit and the related impact on the Company’s U.K.

new vehicle business and certain U.S.

dealerships identified in its third quarter review, the Company identified circumstances indicating possible impairment of certain franchise rights, requiring a quantitative assessment as of August 31, 2019.

In estimating fair value, the Company used a discounted cash flow model, or income approach, specifically the excess earnings method.

Significant inputs to the model included changes in revenue growth rates, future gross margins, future SG&A expenses, terminal growth rates and the WACC.

Based on the results of the Company's assessment, the Company determined that the fair value of the franchise rights on seven of its U.K.

dealerships and one of its U.S.

dealerships were below their respective carrying values.

This resulted in franchise rights impairment charges of $ 5.6 million in the U.K segment and $ 3.0 million in the U.S.

The impairment charges were recognized within Asset impairments in the Company's Consolidated Statements of Operations.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

INTANGIBLE FRANCHISE RIGHTS AND GOODWILL

The Company evaluates its intangible assets, consisting entirely of indefinite-lived franchise rights and goodwill assets, for impairment annually, or more frequently if events or circumstances indicate possible impairment.

Refer to Note 1.

Business and Summary of Significant Accounting Policies for further discussion of the Company’s accounting policies relating to impairment testing, including the fair value models and significant inputs and assumptions to the models.

As described in Note 1.

Business and Summary of Significant Accounting Policies, since emerging in December 2019, the COVID-19 pandemic has spread globally, including to all of the Company’s markets in the U.S., U.K.

While the U.S.

began to show signs of recovery in the second quarter of 2020, the Company’s showrooms in Brazil did not fully reopen until May 2020 and then operated at reduced hours.

Despite operations resuming in Brazil, the impact of the virus continued to worsen in the second quarter and had not yet reached its peak in some of the Company’s Brazilian markets.

The slower than expected recovery from the COVID-19 pandemic in Brazil during the second quarter of 2020 constituted a triggering event indicating that goodwill may be impaired.

Therefore the Company performed a quantitative goodwill impairment test for the Brazil reporting unit as of May 31, 2020 and as a result, the Company recorded a goodwill impairment charge of $ 10.7 million within the Brazil reporting unit.

There was no remaining goodwill balance in the Brazil segment following the impairment charges recorded in the second quarter of 2020.

The impact of the COVID-19 pandemic on the economy and unemployment during the second quarter of 2020 also adversely impacted the Company’s long-term outlook projections compared to the projections in first quarter of 2020.

As a result, it was concluded that it was more-likely-than-not that the intangible franchise rights of some dealerships were impaired, requiring a quantitative test as of May 31, 2020.

As a result of the quantitative impairment test, the Company determined that the fair value of the franchise rights on certain dealerships in the U.K.

and Brazil were below their respective carrying values, which resulted in franchise rights impairment charges of $ 11.1 million in the U.K.

segment and $ 0.1 million in the Brazil segment.

There was no remaining intangible franchise rights balance in the Brazil segment following the impairment charges recorded in the second quarter of 2020.

The Company performed its annual impairment assessment of the carrying value of its goodwill and intangible franchise rights as of October 31, 2020.

For the goodwill test, the Company elected to perform a qualitative assessment of each of its reporting units and determined that it was not more-likely-than-not that the fair value of the reporting unit was less than its respective carrying amount.

Thus, no goodwill impairment was recorded for the year ended December 31, 2019.

The Company elected to perform a qualitative assessment as of October 31, 2019 to determine whether it was more likely than not that the carrying value of the franchise rights were more than their respective fair values.

Based on the results of the qualitative assessment, the Company identified circumstances indicating possible impairment of certain of its franchise rights, requiring a quantitative assessment as of October 31, 2019, which was performed using the same methodology discussed above as of August 31, 2019.

Thus, no additional goodwill impairment was recorded for the year ended December 31, 2020.

For the intangible franchise rights test, the Company elected to perform a qualitative assessment to determine whether it was more-likely-than-not that the carrying value of the franchise rights were more than their respective fair values.

Based on the results of the qualitative assessment, certain dealerships required a quantitative test based on their actual results through October 31, 2020 and an update of the annual budget in the fourth quarter of 2020.

This resulted in additional franchise rights impairment charges of $ 9.7 million in the U.S.

segment during the fourth quarter of 2020.

During the years ended December 31, 2019 and 2018, the Company recorded additional indefinite-lived intangible franchise rights associated with acquisitions of $ 12.1 million and $ 11.5 million , respectively, in the U.S segment.

During the year ended December 31, 2018, the Company recorded additional indefinite-lived intangibles associated with acquisitions of $ 8.4 million , in the U.K.

See Note 3 “Acquisitions and Dispositions” for additional discussion.

During the year ended December 31, 2019, the Company recorded $ 13.4 million in the U.S.

segment and $ 5.6 million in the U.K.

segment of impairments on intangible franchise rights.

During the year ended December 31, 2018, the company recorded $ 38.3 million in the U.S.

segment and $ 0.5 million in the U.K.

segment of impairments on intangible franchise rights.

During the year ended December 31, 2020, no additional intangible franchise rights were purchased or acquired through business combinations.

During the year ended December 31, 2019, the Company recorded additional indefinite-lived intangible franchise rights acquired through business combinations of $ 12.1 million in the U.S segment.

Refer to Note 3.

Acquisitions and Dispositions for further discussion of the Company’s acquisitions.

The following table presents the Company’s intangible franchise rights balances by reportable segment as of December 31, 2020 and 2019 (in millions):

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Balance, December 31, 2020 $ 213.4 $ 19.4 $ — $ 232.8

The following is a roll-forward of the Company’s goodwill accounts by reportable segment (in millions):

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a roll-forward of the Company’s goodwill accounts by reporting unit (in millions):

Balance, December 31, 2018 (1)

$ 861.6 $ 87.6 $ 14.7 $ 963.9

Additions through acquisitions 42.0 1.3 — 43.3

Disposals ( 1.3 ) — ( 0.3 ) ( 1.6 )

Currency translation — 3.2 ( 0.5 ) 2.7

Balance, December 31, 2019 (1)

$ 902.3 $ 92.1 $ 13.9 $ 1,008.3

Additions through acquisitions 1.4 — — 1.4

Disposals ( 2.0 ) — — ( 2.0 )

Impairments — — ( 10.7 ) ( 10.7 )

Currency translation — 3.2 ( 3.1 ) 0.1

Balance, December 31, 2020 $ 901.7 $ 95.4 $ — $ 997.1

(1) Net of accumulated impairments of $ 97.8 million

(1) Net of accumulated impairments of $ 97.8 million, comprised of $ 40.6 million in the U.S.

reporting unit and $ 57.2 million in the Brazil reporting unit.

Despite the Company’s improved results in the third quarter of 2020, COVID-19 cases in certain markets in the U.S., and more pervasively throughout the U.K., have continued to rise in the fourth quarter of 2020.

On October 31, 2020, the U.K.

government announced a national lockdown of non-essential businesses, which includes the Company’s dealership vehicle showrooms, beginning November 5, 2020 through December 2, 2020.

Regional lockdowns occurred in late December and on January 4, 2021, the U.K.

government announced another national lockdown of non-essential businesses beginning immediately, and are not expected to be lifted until April 2021 at the earliest.

The lockdown impacts the Company’s new and used vehicle sales as showrooms are required to close, but has a lesser impact on the Company’s service operations which are allowed to remain open.

Due to the temporary nature of the U.K.

lockdown announced in January 2021, no impairment indicators of goodwill or intangible franchise rights were identified subsequent to December 31, 2020 and through the date of issuance of this Form 10-K.

GROUP 1 AUTOMOTIVE, INC.

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Revolving Credit Facility

In the U.S., the Company has a $ 1.8 billion revolving syndicated credit arrangement that matures on June 27, 2024 (“Revolving Credit Facility”).

In the U.S., the Company has a $ 1.75 billion revolving syndicated credit arrangement with 22 participating financial institutions that matures on June 27, 2024 (“Revolving Credit Facility”).

The Revolving Credit Facility consists of two tranches:

(i) a $ 1.70 billion maximum capacity tranche for U.S.

vehicle inventory floorplan financing (“Floorplan Line”), which had an outstanding balance, net of offset account discussed below, of $ 1.1 billion , as of December 31, 2019 reported in Floorplan notes payable - credit facility and other, net ;

and (ii) a $ 360.0 million maximum capacity and $ 50.0 million minimum capacity tranche (“Acquisition Line”), which is not due until maturity of the Revolving Credit Facility and is therefore classified as long-term debt in Long-term debt, net of current maturities - see Note 13 “Debt” for additional discussion.

vehicle inventory floorplan financing (“U.S.

Floorplan Line”) which had the outstanding balance, net of offset account discussed below, is reported in Floorplan notes payable — credit facility and other, net ;

and (ii) a $ 349.0 million maximum capacity and $ 50.0 million minimum capacity tranche (“Acquisition Line”), which is not due until maturity of the Revolving Credit Facility and is therefore classified in Long-term debt — see Note 13.

Debt for additional discussion.

The capacity under these two tranches can be re-designated within the overall $ 1.75 billion commitment, subject to the aforementioned limits.

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As of December 31, 2020 and 2019, the Company had $ 17.8 million and $ 23.6 million, respectively, in outstanding letters of credit.

In June, 2019, the Company amended the Revolving Credit Facility to extend the maturity date to June 27, 2024 and reduce the number of participating financial institutions to 23 .

Additionally, following the amendment, the Floorplan Line bears interest at rates equal to the LIBOR plus 110 basis points for new vehicle inventory and the LIBOR plus 140 basis points for used vehicle inventory.

Floorplan Line bears interest at rates equal to LIBOR plus 110 basis points for new vehicle inventory and LIBOR plus 140 basis points for used vehicle inventory.

The weighted average interest rate on the U.S.

Floorplan line was 1.20 % as December 31, 2020, excluding the impact of the Company’s interest rate derivative instruments.

The Acquisition Line bears interest at LIBOR or a LIBOR equivalent plus 100 to 200 basis points, depending on the Company’s total adjusted leverage ratio, on borrowings in USD, Euros or GBP.

The Floorplan Line requires a commitment fee of 0.15 % per annum on the unused portion.

Amounts borrowed by the Company under the Floorplan Line for specific vehicle inventory are to be repaid upon the sale of the vehicle financed and in no case is a borrowing for a vehicle to remain outstanding for greater than one year.

Floorplan Line requires a commitment fee of 0.15 % per annum on the unused portion.

Amounts borrowed by the Company under the U.S.

Floorplan Line for specific vehicle inventory are to be repaid upon the sale of the vehicle financed and in no case is a borrowing for a vehicle to remain outstanding for greater than one year.

The Acquisition Line requires a commitment fee ranging from 0.15 % to 0.40 % per annum, depending on the Company’s total adjusted leverage ratio, based on a minimum commitment of $ 50.0 million less outstanding borrowings.

The weighted average interest rate on the Floorplan Line was 2.7 % as of December 31, 2019 , excluding the impact of the Company’s interest rate derivative instruments.

In conjunction with the Revolving Credit Facility, the Company has $ 4.7 million of related unamortized debt issuance costs as of December 31, 2019, which are included in Prepaid expenses and Other long-term assets in the Company’s Consolidated Balance Sheets and amortized over the term of the facility.

In conjunction with the Revolving Credit Facility, the Company has $ 3.6 million and $ 4.7 million of related unamortized debt issuance costs as of December 31, 2020 and 2019, respectively, which are included in Prepaid expenses and Other long-term assets in the Company’s Consolidated Balance Sheets and amortized over the term of the facility.

Under the Revolving Credit Facility, dividends are permitted to the extent that no event of default exists and the Company is in compliance with the financial covenants contained therein.

The indentures governing the 5.00 % and the 5.25 % senior notes and certain mortgage term loans also contain restrictions on the Company’s ability to pay dividends and to repurchase shares of outstanding common stock.

The indentures governing the 4.00 % Senior Note and certain mortgage term loans also contain restrictions on the Company’s ability to pay dividends and to repurchase shares of outstanding common stock.

After giving effect to the applicable restrictions on share repurchases and certain other transactions under the debt agreements, the Company was limited to $ 235.3 million of such restrictions as of December 31, 2020.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Offset Accounts

Offset accounts consist of immediately available cash used to pay down the Floorplan Line and the FMCC Facility, and therefore offset the respective outstanding balances in the Company’s Consolidated Balance Sheets.

Offset accounts consist of immediately available cash used to pay down the U.S.

Floorplan Line and FMCC Facility, and therefore offset the respective outstanding balances in the Company’s Consolidated Balance Sheets.

The offset accounts are the Company’s primary options for the short-term investment of excess cash.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Floorplan Notes Payable — Manufacturer Affiliates

Ford Motor Credit Company Facility

The Company has a $ 300.0 million floorplan arrangement with Ford Motor Credit Company for financing of new Ford vehicles in the U.S.

FMCC Facility

This facility bears interest at a rate of Prime plus 150 basis points minus certain incentives.

The Company has a $ 300.0 million floorplan arrangement with FMCC for financing of new Ford vehicles in the U.S.

This facility bears interest at the higher of the actual U.S.

Prime rate or a Prime floor of 4.00 %, plus 150 basis points minus certain incentives.

The interest rate on the FMCC Facility was 5.50 % before considering the applicable incentives as of December 31, 2020.

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and Brazil with financial institutions affiliated with manufacturers for financing of new, used and rental vehicle inventories.

As of December 31, 2019 , borrowings outstanding under these facilities totaled $ 255.4 million , comprised of $ 113.9 million in the U.S.

with annual interest rates ranging from 2.7 % to 6.3 % , $ 125.8 million in the U.K.

with annual interest rates ranging from 1.4 % to 4.3 % , and $ 15.6 million in Brazil with annual interest rates ranging from 4.9 % to 14.0 % .

Long-term debt, net of current maturities consisted of the following (in millions):

5.00% Senior Notes aggregate principal (1)

5.25% Senior Notes aggregate principal (1)

As of December 31, 2020, borrowings outstanding under these facilities totaled $ 232.3 million, comprised of $ 94.4 million in the U.S., with annual interest rates ranging from approximately 1 % to 6 %, $ 131.2 million in the U.K., with annual interest rates ranging from less than 1 % to approximately 4 %, and $ 6.7 million in Brazil with annual interest rates ranging from approximately 2 % to 10 %.

Long-term debt consisted of the following (in millions):

4.00 % Senior Notes due August 15, 2028

5.00 % Senior Notes aggregate principal redeemed September 2, 2020

5.25 % Senior Notes aggregate principal redeemed April 2, 2020

Acquisition Line 47.8 72.5

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Finance leases 124.8 83.0

unamortized discount on 5.00% notes & 5.25% notes

Other 20.0 42.8

Total other debt 764.6 579.1

Total debt 1,362.4 1,501.6

unamortized discount — 5.6

unamortized debt issuance costs 11.0 4.8

current maturities of long-term debt and short-term financing

Long-term debt, net of current maturities

(1) See Note 6 “Financial Instruments and Fair Value Measurements” for further discussion of the fair value.

(2) Balances as of December 31, 2018 were unchanged under the optional transition method applied as part of the implementation of Topic 842.

See Note 1 “Business and Summary of Significant Accounting Policies” and Note 10 “Leases” for further information.

The aggregate annual maturities of long-term debt for the next five years, excluding unamortized discount and debt issuance costs, are as follows (in millions):

current maturities 56.7 59.1

Total long-term debt $ 1,294.7 $ 1,432.1

The aggregate annual maturities of debt for the next five years, excluding debt issuance costs, are as follows (in millions):

Years Ended December 31,

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company has the following Senior Notes issued as of December 31, 2019 (amount in millions):

Principal Amount

Maturity Date

Interest Payment Date

Thereafter 902.2

Total $ 1,362.4

4.00% Senior Notes

June 1, December 1

The Company has the following Senior Notes outstanding as of December 31, 2020:

Description Principal Amount

(in millions) Maturity Date Effective Interest Rate (1)

Interest Payment Dates

4.00 % Senior Notes

December 15, 2023

June 15, December 15

$ 550.0 August 15, 2028 4.21 % February 15 th , August 15 th

(1) The effective interest rate is after the impact of associated debt issuance costs.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company, at its option, may redeem some or all of the Senior Notes at the redemption prices (expressed as percentages of principal amount of the notes) set forth below, plus accrued and unpaid interest.

5.00% Senior Notes

Redemption Period

Redemption Price

June 1, 2019 - May 31, 2020

June 1, 2020 and thereafter

5.25% Senior Notes

Redemption Period

Redemption Price

December 15, 2019 - December 14, 2020

December 15, 2020 - December 14, 2021

December 15, 2021 and thereafter

The Company may be required to purchase the Senior Notes if it sells certain assets or triggers the change in control provisions defined in the senior notes indenture.

The notes are senior unsecured obligations and rank equal in right of payment to all of the Company’s existing and future senior unsecured debt and senior in right of payment to all of its future subordinated debt.

Redemption Period Redemption Price

August 15, 2023 102.000 %

August 15, 2024 101.333 %

August 15, 2025 100.667 %

August 15, 2026 and thereafter 100.000 %

The 4.00 % Senior Notes are unsecured obligations and rank equal in right of payment to all of the Company’s existing and future senior unsecured debt and senior in right of payment to all of the Company’s future subordinated debt.

The 4.00 % Senior Notes are guaranteed by substantially all of the Company’s U.S.

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subsidiary guarantees rank equally in the right of payment to all of the Company’s U.S.

subsidiary guarantor’s existing and future subordinated debt.

The 5.00 % Senior Notes were registered with the SEC in June 2015, which require the disclosure of condensed consolidated financial information as required by Rule 3-10 of Regulation S-X.

See Note 20 “Condensed Consolidated Financial Information.”

subsidiary guarantor’s existing and future senior unsecured debt.

The Company may be required to purchase the 4.00 % Senior Notes if it sells certain assets or triggers the change in control provisions defined in the senior notes indenture.

The 4.00 % Senior Notes contain customary restrictions on the Company, including the ability to pay dividends, incur additional indebtedness, create liens, sell or otherwise dispose of assets and repurchase shares of outstanding common stock.

Such restrictions are similar to those contained in the Company’s 5.00 % and 5.25 % Senior Notes that were redeemed in the current year, as described further below.

5.00 % Senior Notes Redemption

On September 2, 2020, the Company fully redeemed $ 550.0 million in aggregate principal amount of its outstanding 5.00 % Senior Notes due June 2022, at par value.

The Company recognized a loss on extinguishmen t of $ 3.3 million whi ch included write offs of unamortized discount in the amount of $ 2.6 million and unamortized debt issuance costs in the amount of $ 0.7 million.

Additionally, the Company paid accrued interest of $ 6.9 million up to the date of redemption.

5.25 % Senior Notes Redemption

On April 2, 2020, the Company fully redeemed $ 300.0 million in aggregate principal amount of its 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.

The Company recognized a loss on extinguishment of $ 10.4 million which included write offs of unamortized discount in the amount of $ 1.9 million and unamortized debt issuance costs in the amount of $ 0.6 million.

Additionally, the Company paid accrued interest of $ 4.6 million up to the date of redemption.

Acquisition Line

The proceeds of the Acquisition Line are used for working capital, general corporate and acquisition purposes.

As of December 31, 2019 , borrowings under the Acquisition Line, a component of the Revolving Credit Facility (as described in Note 12 “Floorplan Notes Payable” ), totaled $ 72.5 million .

The interest rate on this facility was 1.95 % as of December 31, 2019 , representing the applicable rate for borrowings in GBP.

As of December 31, 2020, borrowings under the Acquisition Line, a component of the Revolving Credit Facility (as described in Note 12.

Floorplan Notes Payable), totaled $ 47.8 million.

The average interest rate on this facility was 1.29 % as of December 31, 2020.

Real Estate Related

The Company has mortgage loans in the U.S., U.K.

and Brazil that are paid in monthly installments.

and Brazil that are paid in installments.

As of December 31, 2020, borrowings outstanding under these facilities totaled $ 619.8 million, gross of debt issuance costs, comprised of $ 514.9 million in the U.S., $ 92.9 million in the U.K.

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The Company’s mortgage loans are secured by real property owned by the Company.

The carrying values of the related collateralized real estate as of December 31, 2019 and 2018 was $ 436.2 million and $ 390.3 , respectively.

The carrying values of the related collateralized real estate as of December 31, 2020 and 2019 was $ 893.6 million and $ 436.2 million, respectively.

The Brazilian mortgages are additionally secured by a guarantee from the Company.

Finance Leases

Refer to Note 10.Leases for further information regarding the Company’s finance leases.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company is subject to U.S.

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Years Ended December 31,

2020 2019 2018

Domestic $ 366.6 $ 227.9 $ 192.1

Foreign 3.7 ( 0.6 ) 13.3

Total income (loss) before income taxes $ 370.3 $ 227.3 $ 205.4

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On December 22, 2017, the U.S.

government enacted comprehensive tax legislation commonly referred to as the Tax Act.

Generally effective January 1, 2018, the Tax Act made broad and complex changes to the U.S.

tax code, including, but not limited to, reducing the U.S.

federal corporate tax rate from 35 percent to 21 percent, and creating a territorial tax system that generally eliminates U.S.

federal income taxes on dividends from foreign subsidiaries.

Federal, state and foreign income tax (benefits) provisions were as follows (in millions):

Years Ended December 31,

2020 2019 2018

Current $ 70.8 $ 30.9 $ 35.9

Deferred 5.4 16.5 2.6

Current 7.0 3.8 4.3

Deferred ( 1.3 ) 4.0 0.9

Current 7.0 2.3 3.9

Deferred ( 5.1 ) ( 4.3 ) —

(Benefit) provision for income taxes $ 83.8 $ 53.3 $ 47.6

Actual income tax expense differed from income tax expense computed by applying the applicable U.S.

federal statutory corporate tax rate of 21.0 % in 2019 and 2018 and 35 % in 2017 to income before income taxes, as follows (in millions):

federal statutory corporate tax rate of 21.0 % to income before income taxes, as follows (in millions):

Years Ended December 31,

2020 2019 2018

Provision at the U.S.

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Foreign income tax rate differential ( 1.4 ) 0.9 ( 0.3 )

Tax Credits ( 0.3 ) ( 1.1 ) ( 1.3 )

Changes in valuation allowances 2.3 ( 1.7 ) 3.4

2 unchanged sentences

Uncertain tax benefits ( 0.3 ) 0.7 0.4

Other 0.8 1.6 ( 0.7 )

(Benefit) provision for income taxes $ 83.8 $ 53.3 $ 47.6

For the year ended December 31, 2020, the Company recorded a tax provision of $ 83.8 million .

The Company recognizes the tax on GILTI as a period expense in the period the tax is incurred.

The Company recognizes the tax on global intangible low-taxed income (“GILTI”) as a period expense in the period the tax is incurred.

Under this policy, the Company has not provided deferred taxes related to temporary differences that upon their reversal will affect the amount of income subject to GILTI in the period.

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state jurisdictions;

and (2) valuation allowances provided for net operating losses and other deferred tax assets in certain U.S.

and (2) increased valuation allowances provided for goodwill in Brazil;

partially offset by:

(1) Brazil losses benefited at a higher tax rate than the U.S.

rate, and (2) excess tax deductions for stock based compensation.

As a result of these items recorded in 2020 compared to the 2019 items discussed below, the effective tax rate for the year ended December 31, 2020 decreased to 22.6 %, as compared to 23.4 % for the year ended December 31, 2019.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company's 2019 effective income tax rate was more than the U.S.

federal statutor y rate of 21.0%, due primarily to:

(1) the taxes provided for in U.S.

state jurisdictions;

and (2) valuation allowances provided for net operating losses a nd other deferred tax assets in certain U.S.

states, partially offset by:

1 unchanged sentence

and (2) tax credits.

As a result of these items recorded in 2019 compared to the 2018 items discussed below, the effective tax rate for the year ended December 31, 2019 increased to 23.4 % , as compared to 23.2 % for the year ended December 31, 2018.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As a result of these items recorded in 2019 compared to the 2018 items discussed below, the effective tax rate for the year ended December 31, 2019 increas ed to 23.4 %, as compared to 23.2 % fo r the year ended December 31, 2018.

The Company's 2018 effective income tax rate was more than the U.S.

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and (3) the enactment date adjustments from the Tax Act.

As a result of these items recorded in 2018 compared to the 2017 items discussed below, the effective tax rate for the year ended December 31, 2018 increased to 23.2 % , as compared to 2.5 % for the year ended December 31, 2017.

During 2017, the Company recorded a tax provision of $ 5.6 million .

This included the tax benefit for the deferred tax impact of the Tax Act noted above, as well as excess tax deductions for restricted stock resulting from the adoption of ASU 2016-09, which were partially offset by certain expenses for stock-based compensation recorded in 2017 that were non-deductible for income tax purposes.

For the year ended December 31, 2017, the Company also provided valuation allowances with respect to deferred tax assets primarily relating to goodwill and net operating losses of certain Brazil subsidiaries, as well as state net operating losses in the U.S., based on expectations concerning their realizability.

As a result of these items, the effective tax rate for the year ended December 31, 2017 was 2.5 % .

As a result of these items recorded in 2018 compared to the 2017 items discussed below, the effective tax rate for the year ended December 31, 2018 was 23.2 %.

Deferred income tax provisions resulted from temporary differences in the recognition of income and expenses for financial reporting purposes and for tax purposes.

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state net operating loss (“NOL”) carryforwards 34.5 38.2

Depreciation expense

Foreign NOL carryforwards 28.9 37.6

Operating lease liabilities 56.9 55.5

Goodwill and intangible franchise rights 2.6 —

Other 2.2 1.5

Deferred tax assets 188.0 176.9

4 unchanged sentences

Depreciation expense 71.1 68.0

Interest rate swaps

Operating lease ROU assets 45.0 45.4

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To the extent that the Company expects that net income will not be sufficient to realize these NOLs in certain jurisdictions, a valuation allowance has been established.

The Company believes it is more-likely-than-not that its deferred tax assets, net of valuation allowances provided, will be realized, based primarily on its expectation of future taxable income, considering future reversals of existing taxable temporary differences.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company believes it is more likely than not that its deferred tax assets, net of valuation allowances provided, will be realized, based primarily on its expectation of future taxable income, considering future reversals of existing taxable temporary differences.

As of December 31, 2020, the Company had two controlled foreign corporations that own its foreign operations (the “Foreign Subsidiaries”).

8 unchanged sentences

A reconciliation of the Company’s unrecognized tax benefits is as follows (in millions):

2020 2019 2018

Balance at January 1 $ 2.4 $ 1.6 $ 1.2

8 unchanged sentences

Consistent with prior practice, the Company recognizes interest and penalties related to uncertain tax positions in income tax expense in the Consolidated Statements of Operations.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

EMPLOYEE SAVINGS PLANS

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Participants in the Deferred Compensation Plan are allowed to defer receipt of a portion of their salary, compensation or bonus, or in the case of the Company’s non-employee directors, annual retainer and meeting fees earned.

The participants can choose from various defined investment options to determine their earnings crediting rate.

However, the Company has complete discretion over how the funds are utilized.

The participants receive a rate of return as determined by management and approved by the Board of Directors, however, the Company has complete discretion over how the funds are utilized.

Participants in the Deferred Compensation Plan are unsecured creditors of the Company.

The balances due to participants of the Deferred Compensation Plan as of December 31, 2019 and 2018 were $ 72.3 million and $ 61.9 million , respectively, with $ 3.3 million and $ 0.8 million classified as current for each respective period.

The Company offers a 401(k) plan to eligible employees and provides a matching contribution to employees that participate in the plan.

For the years ended December 31, 2019 and 2018 , the matching contributions paid by the Company totaled $ 6.6 million and $ 6.2 million , respectively.

The balances due to participants of the Deferred Compensation Plan as of December 31, 2020 and 2019 were $ 78.4 million and $ 72.3 million, resp ectively, with $ 5.3 million and $ 3.3 million c lassified as current for each respective period.

In the U.S., the Company offers a 401(k) plan to eligible employees and provides matching contribution to employees that participate in the plan.

For the years ended December 31, 2020, 2019 and 2018, the matching contributions paid by the Company totaled $ 3.6 million, $ 6.6 million and $ 6.2 million, respectively.

In the U.K., the Company offers private personal pension plans and provides matching contributions to eligible employees that participate in the plan.

For the years ended December 31, 2020, 2019 and 2018, the matching contributions paid by the Company totaled $ 2.9 million, $ 3.7 million and $ 2.5 million, respectively.

COMMITMENTS AND CONTINGENCIES

From time to time, the Company’s dealerships are named in various types of litigation involving customer claims, employment matters, class action claims, purported class action claims, as well as claims involving the manufacturers of automobiles, contractual disputes and other matters arising in the ordinary course of business.

From time to time, the Company’s dealerships are named in various types of litigation involving customer claims, employment matters, class action claims, purported class action claims, claims involving the manufacturers of automobiles, contractual disputes and other matters arising in the ordinary course of business.

The Company may be involved in legal proceedings or suffer losses that could have a material adverse effect on the Company’s business.

1 unchanged sentence

In addition, the manufacturers of the vehicles that the Company sells and services have audit rights allowing them to review the validity of amounts claimed for incentive, rebate, or warranty-related items and charge the Company back for amounts determined to be invalid payments under the manufacturers’ programs, subject to the Company’s right to appeal any such decision.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Legal Proceedings

2 unchanged sentences

Other Matters

The Company sold a number of dealerships to third parties and as a condition to certain of those dispositions, remains liable for the remaining lease payments of such dealerships in the event of non-payment by the purchaser.

From time to time, the Company sells its dealerships to third parties.

In those instances where the Company did not own the real estate and was a tenant, it assigned the lease to the purchaser but remained liable as a guarantor for the remaining lease payments in the event of non-payment by the purchaser.

Although the Company has no reason to believe that it will be called upon to perform under any such assigned leases, the Company estimates that lessee remaining rental obligations were $ 28.5 million as of December 31, 2020.

From time-to-time, in certain instances, the Company obtains collateral support for the rental obligations that the Company remains obligated upon sale of a dealership to a lessee.

In certain instances, the Company obtains collateral support for the rental obligations that the Company remains obligated for upon sale of a dealership to a lessee.

Total associated letters of credit issued on behalf of the lessee where the Company is the beneficiary, was $ 5.7 million as of December 31, 2020.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

4 unchanged sentences

Balance, December 31, 2019

$ ( 142.9 ) $ ( 4.1 ) $ ( 147.0 )

Other comprehensive income (loss) before reclassifications:

( 8.7 ) ( 45.5 ) ( 54.2 )

Amounts reclassified from accumulated other comprehensive income (loss):

1 unchanged sentence

Other interest expense, net (pre-tax)

Realized (gain) loss on interest rate swap termination (pre-tax) — 0.1 0.1

Provision (benefit) for income taxes

— ( 2.6 ) ( 2.6 )

Net current period other comprehensive income (loss)

( 8.7 ) ( 28.4 ) ( 37.1 )

Balance, December 31, 2020

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$ ( 151.6 ) $ ( 32.5 ) $ ( 184.0 )

Year Ended December 31, 2019

Accumulated income (loss) on foreign currency translation

Accumulated income (loss) on interest rate swaps

Accumulated income (loss) on foreign currency translation Accumulated income (loss) on interest rate swaps Total

Balance, December 31, 2018

$ ( 146.7 ) $ 8.9 $ ( 137.8 )

Other comprehensive income (loss) before reclassifications:

Pre-tax 3.9 ( 17.4 ) ( 13.5 )

Tax effect — 4.1 4.1

Amounts reclassified from accumulated other comprehensive income (loss) to:

1 unchanged sentence

Other interest expense (pre-tax) — ( 0.2 ) ( 0.2 )

Realized (gain) loss on interest rate swap termination (pre-tax)

Provision (benefit) for income taxes

— ( 0.1 ) ( 0.1 )

Net current period other comprehensive income (loss) 3.9 ( 13.0 ) ( 9.2 )

Tax effects reclassified from accumulated other comprehensive income (loss)

Balance, December 31, 2019

$ ( 142.9 ) $ ( 4.1 ) $ ( 147.0 )

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Year Ended December 31, 2018

Accumulated income (loss) on foreign currency translation

Accumulated income (loss) on interest rate swaps

Accumulated income (loss) on foreign currency translation Accumulated income (loss) on interest rate swaps Total

Balance, December 31, 2017

$ ( 122.6 ) $ ( 0.7 ) $ ( 123.2 )

Other comprehensive income (loss) before reclassifications:

Pre-tax ( 24.2 ) 8.6 ( 15.5 )

Tax effect — ( 2.1 ) ( 2.1 )

Amounts reclassified from accumulated other comprehensive income (loss) to:

1 unchanged sentence

Other interest expense (pre-tax) — 0.5 0.5

Realized (gain) loss on interest rate swap termination (pre-tax) — ( 0.7 ) ( 0.7 )

Provision (benefit) for income taxes

— ( 1.2 ) ( 1.2 )

Net current period other comprehensive income (loss) ( 24.2 ) 9.8 ( 14.4 )

Tax effects reclassified from accumulated other comprehensive income (loss) — ( 0.2 ) ( 0.2 )

Balance, December 31, 2018

$ ( 146.7 ) $ 8.9 $ ( 137.8 )

GROUP 1 AUTOMOTIVE, INC.

2 unchanged sentences

Cash, Cash Equivalents and Restricted Cash

The total amounts presented on the Company’s Consolidated Statements of Cash Flows include cash, cash equivalents and restricted cash.

Restricted cash includes certain unsecured investment obligations with manufacturer-affiliated finance companies, which bear interest at a variable rate and are redeemable on demand by the Company.

The following table reconciles cash and cash equivalents reported in the Company’s Consolidated Balance Sheets to the total amounts reported in the Company’s Consolidated Statements of Cash Flows (in millions):

Cash and cash equivalents

Restricted cash, included in Other long-term assets

Total cash, cash equivalents and restricted cash

Non-cash Investing and Financing Activities

The Company accrued for purchases of property and equipment of $ 5.2 million and $ 9.2 million at December 31, 2019 and 2018 , respectively.

Additionally, the Company obtained ROU assets in exchange for lease obligations during the year ended December 31, 2019 .

See Note 10 “Leases” for supplemental information on lease liabilities.

The cash flows presented within the Consolidated Statements of Cash Flows reflect cash and cash equivalents of $ 87.3 million as of December 31, 2020, and cash and cash equivalents of $ 23.8 million and restricted cash of $ 4.3 million included in Other long-term assets in the Consolidated Balance Sheets as of December 31, 2019.

Non-cash Activities

The accrual for capital expenditures decreased $ 1.7 million and $ 4.1 million from year-end for the years ended December 31, 2020 and 2019, respectively.

Additionally, the Company obtained ROU assets in exchange for lease obligations during the years ended December 31, 2020 and 2019.

Refer to Note 10.

Leases for further discussion on lease liabilities.

Interest and Income Taxes Paid

Cash paid for interest, including the monthly settlement of the Company’s interest rate derivatives, was $ 92.5 million , $ 125.3 million and $ 128.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Cash paid for taxes, net of refunds, was $ 48.3 million , $ 40.8 million and $ 61.0 million for the years ended December 31, 2019, 2018 and 2017 , respectively.

Cash paid for income taxes, net of refunds, was $ 64.0 million , $ 48.3 million and $ 40.8 million fo r the years ended December 31, 2020, 2019 and 2018, respectively.

SEGMENT INFORMATION

As of December 31, 2020, the Company had three reportable segments:

(1) U.S., (2) U.K., and (3) Brazil.

the U.S., U.K.

and Brazil segments are led by the President, U.S.

and Brazilian Operations, and the U.K segment is led by a Managing Director, each reporting directly to the Company's Chief Executive Officer, who is the Chief Operating Decision Maker.

and Brazilian Operations, and the U.K.

segment is led by an Operations Director, each reporting directly to the Company's Chief Executive Officer, who is the CODM.

The President, U.S.

and Brazilian Operations, and the U.K Managing Director are responsible for the overall performance of their respective regions, as well as for overseeing field level management.

Each of the segments is comprised of retail automotive franchises that sell new and used cars and light trucks;

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.

Each region engages in business activities and their respective operating results are regularly reviewed by the CODM to make decisions about resources to be allocated to the region and to assess performance.

Each segment is comprised of retail automotive franchises that sell new and used cars and light trucks;

arrange related vehicle financing;

sell service insurance contracts;

sell service and insurance contracts;

provide automotive maintenance and repair services;

and sell vehicle parts.

The vast majority of the Company’s corporate activities are associated with the operations of the U.S.

segment and therefore the corporate financial results are included within the U.S.

Reportable segment revenues, depreciation and amortization expenses, floorplan interest expense, net, other interest expense, net, income (loss) before income taxes, capital expenditures and assets are as follows (in millions):

Selected reportable segment data is as follows (in millions):

Year Ended December 31, 2020

Total revenues $ 8,503.4

Selling, general and administrative expenses (1)

$ 2,096.8 $ 251.6 $ 10,851.8

Gross profit $ 1,486.0 $ 248.1 $ 34.8 $ 1,769.0

SG&A expenses (1)

$ 191.2 $ 31.1 $ 1,169.3

Depreciation and amortization expense $ 57.7 $ 15.8 $ 2.3 $ 75.8

2 unchanged sentences

Income (loss) before income taxes (2)

$ 366.6 $ 14.2 $ ( 10.5 ) $ 370.3

Capital expenditures:

1 unchanged sentence

Non-real estate related capital expenditures (3)

60.9 10.6 7.6 79.1

Total capital expenditures $ 73.8 $ 21.8 $ 7.6 $ 103.2

3 unchanged sentences

Total revenues $ 9,184.2 $ 2,413.7 $ 445.9 $ 12,043.8

Selling, general and administrative expenses (4)

Gross profit $ 1,494.8 $ 267.7 $ 53.5 $ 1,816.0

SG&A expenses (4)

$ 236.9 $ 46.0

Depreciation and amortization expense $ 55.4 $ 14.6 $ 1.6 $ 71.6

2 unchanged sentences

Income (loss) before income taxes (5)

$ 227.9 $ ( 5.3 ) $ 4.6 $ 227.3

Capital expenditures:

1 unchanged sentence

Non-real estate related capital expenditures (3)

70.7 25.9 2.6 99.3

Total capital expenditures $ 134.5 $ 51.6 $ 5.7 $ 191.8

1 unchanged sentence

Total revenues $ 8,723.3 $ 2,437.4 $ 440.7 $ 11,601.4

Selling, general and administrative expenses

Gross profit $ 1,391.3 $ 279.9 $ 53.9 $ 1,725.1

SG&A expenses (6)

$ 240.4 $ 50.6 $ 1,273.1

Depreciation and amortization expense $ 52.9 $ 12.6 $ 1.6 $ 67.1

2 unchanged sentences

Income (loss) before income taxes (7)

$ 192.1 $ 13.3 $ — $ 205.4

Capital expenditures:

1 unchanged sentence

Non-real estate related capital expenditures (3)

80.2 27.5 2.0 109.6

Total capital expenditures $ 100.7 $ 32.5 $ 7.8 $ 141.0

(1) SG&A expenses for the year ended December 31, 2019 includes $ 17.8 million of expense in the U.S.

segment related to flood damage from Tropical Storm Imelda and hail storm damages primarily in Texas.

(2) Income (loss) before taxes for the year ended December 31, 2019 includes the SG&A expenses described in note 1 above and additionally includes asset impairment charges of $ 14.7 million in the U.S.

segment, $ 7.0 million in the U.K.

segment and $ 0.5 million in the Brazil segment.

(3) Non-real estate related capital expenditures exclude the net decrease (increase) in the accrual for capital expenditures of $ 4.1 million , ( $ 0.5 million ) and $ 7.1 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

(4) SG&A expenses for the year ended December 31, 2018 includes a $ 25.2 million net gain on disposition on real estate and dealership transactions and $ 6.4 million of expense related to catastrophic events mainly as a result of hail storms in the U.S.

segment and a $ 3.7 million gain on legal settlements in the Brazil segment.

(5) Income (loss) before taxes for the year ended December 31, 2018 includes the SG&A expenses described in note 4 above and additionally includes asset impairment charges of $ 43.4 million in in the U.S.

segment and $ 0.5 million in the U.K.

(6) SG&A expenses for the year ended December 31, 2017 includes $ 15.3 million of expense related to catastrophic events mainly as a result of Hurricane Harvey in the U.S.

(7) Income (loss) before taxes for the year ended December 31, 2017 the SG&A expenses described in note 6 above and additionally includes asset impairment charges of $ 12.8 million of in the U.S.

segment and $ 6.7 million in the Brazil segment.

(1) SG&A expenses for the year ended December 31, 2020 includes the following:

segment, $ 10.6 million in stock-based compensation expense related to an out-of-period adjustment, $ 3.1 million net gain on disposition of real estate and dealership transactions and $ 2.7 million net gain on legal matters;

segment, $ 2.2 million net gain on disposition of real estate and dealership transactions and $ 1.2 million in severance expense;

and in the Brazil segment, $ 0.9 million in severance expense.

(2) Income (loss) before taxes for the year ended December 31, 2020 includes the SG&A expenses described in note 1 above and additionally includes the following:

segment, $ 13.8 million in asset impairments and $ 13.7 million loss on debt extinguishment;

segment, $ 12.8 million in asset impairments;

and in the Brazil segment, $ 11.1 million in asset impairments.

(3) Non-real estate related capital expenditures exclude the net decrease (increase) in the accrual for capital expenditures from year-end of $ 1.7 million , $ 4.1 million and ($ 0.5 million) for the years ended December 31, 2020, 2019 and 2018, respectively.

(4) SG&A expenses for the year ended December 31, 2019 includes the following:

segment, $ 17.8 million in expenses related to flood damage from Tropical Storm Imelda and hail storm damages primarily in Texas.

(5) Income (loss) before taxes for the year ended December 31, 2019 includes the SG&A expenses described in note 4 above and additionally includes the following:

segment, $ 14.7 million in asset impairments;

segment, $ 7.0 million in asset impairments;

and in the Brazil segment, $ 0.5 million in asset impairments.

(6) SG&A expenses for the year ended December 31, 2018 includes the following:

segment, $ 25.2 million net gain on disposition of real estate and dealership transactions and $ 6.4 million of expenses related to catastrophic events mainly as a result of hail storms.

(7) Income (loss) before taxes for the year ended December 31, 2018 includes the SG&A expenses described in note 6 above and additionally includes the following:

segment, $ 43.4 million in asset impairments;

segment, $ 0.5 million in asset impairments.

GROUP 1 AUTOMOTIVE, INC.

3 unchanged sentences

Operating lease assets $ 117.4 $ 89.6 $ 2.8 $ 209.9

Total assets $ 3,942.8 $ 1,116.8 $ 29.9 $ 5,089.4

December 31, 2019

Property and equipment, net $ 1,251.4 $ 271.0 $ 24.7 $ 1,547.1

See Note 11 “Intangible Franchise Rights and Goodwill” for details of the Company’s intangible franchise rights and goodwill by segment.

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The following tables include condensed consolidating financial information as of December 31, 2019 and 2018 , and for each of the years in the three-year period ended December 31, 2019 , for Group 1 Automotive, Inc.’s (as issuer of the 5.00% Notes), guarantor subsidiaries and non-guarantor subsidiaries (representing foreign entities).

The condensed consolidating financial information includes certain allocations of balance sheet, statement of operations and cash flows items that are not necessarily indicative of the financial position, results of operations or cash flows of these entities had they operated on a stand-alone basis.

In accordance with Rule 3-10 of Regulation S-X, condensed consolidated financial statements of non-guarantors are not required.

The Company has no assets or operations independent of its subsidiaries.

Obligations under the 5.00% Notes are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by the Company’s current 100%-owned domestic subsidiaries and certain of the Company’s future domestic subsidiaries, with the exception of the Company’s “minor” subsidiaries (as defined by Rule 3-10 of Regulation S-X).

There are no significant restrictions on the ability of the Company or subsidiary guarantors for the Company to obtain funds from its subsidiary guarantors by dividend or loan.

None of the subsidiary guarantors’ assets represent restricted assets pursuant to SEC Rule 4-08(e)(3) of Regulation S-X.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATED BALANCE SHEETS

As of December 31, 2019

(In millions)

Group 1 Automotive, Inc.

Guarantor Subsidiaries

Non-Guarantor Subsidiaries

Total Company

CURRENT ASSETS:

Cash and cash equivalents

Contracts-in-transit and vehicle receivables, net

Accounts and notes receivable, net

Intercompany accounts receivable

Inventories, net

Prepaid and other current assets

TOTAL CURRENT ASSETS

Property and equipment, net

Operating lease assets $ 114.8 $ 100.1 $ 5.2 $ 220.1

Intangible franchise rights

Investment in subsidiaries

Other long-term assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Floorplan notes payable — credit facility and other, net of offset account of $106.8

Floorplan notes payable — manufacturer affiliates, net of offset account of $4.1

Current maturities of long-term debt

Current operating lease liabilities

Accounts payable

Intercompany accounts payable

Accrued expenses and other current liabilities

TOTAL CURRENT LIABILITIES

Long-term debt, net of current maturities

Operating lease liabilities, net of current portion

Deferred income taxes and other long-term liabilities

STOCKHOLDERS’ EQUITY:

Group 1 stockholders’ equity

Intercompany note receivable

TOTAL STOCKHOLDERS’ EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATED BALANCE SHEETS

As of December 31, 2018

(In millions)

Group 1 Automotive, Inc.

Guarantor Subsidiaries

Non-Guarantor Subsidiaries

Total Company

CURRENT ASSETS:

Cash and cash equivalents

Contracts-in-transit and vehicle receivables, net

Accounts and notes receivable, net

Intercompany accounts receivable

Inventories, net

Prepaid expenses and other current assets

TOTAL CURRENT ASSETS

Property and equipment, net

Intangible franchise rights

Investment in subsidiaries

Other long-term assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Floorplan notes payable — credit facility and other, net of offset account of $33.6

Floorplan notes payable — manufacturer affiliates, net of offset account of $0.1

Current maturities of long-term debt

Accounts payable

Intercompany accounts payable

Accrued expenses and other current liabilities

TOTAL CURRENT LIABILITIES

Long-term debt, net of current maturities

Deferred income taxes and other long-term liabilities

STOCKHOLDERS’ EQUITY:

Group 1 stockholders’ equity

Intercompany note receivable

TOTAL STOCKHOLDERS’ EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31, 2019

(In millions)

Group 1 Automotive, Inc.

Guarantor Subsidiaries

Non-Guarantor Subsidiaries

Total Company

Cost of sales

Selling, general and administrative expenses

Depreciation and amortization expense

Asset impairments

Income (loss) from operations

Interest expense:

Floorplan interest expense

Other interest expense, net

Income (loss) before income taxes and equity in earnings of subsidiaries

(Benefit) provision for income taxes

Equity in earnings (loss) of subsidiaries

Net income (loss)

Other comprehensive income (loss)

Comprehensive income (loss)

Year Ended December 31, 2018

(In millions)

Group 1 Automotive, Inc.

Guarantor Subsidiaries

Non-Guarantor Subsidiaries

Total Company

Cost of sales

Selling, general and administrative expenses

Depreciation and amortization expense

Asset impairments

Income (loss) from operations

Interest expense:

Floorplan interest expense

Other interest expense, net

Income (loss) before income taxes and equity in earnings of subsidiaries

(Benefit) provision for income taxes

Equity in earnings (loss) of subsidiaries

Net income (loss)

Other comprehensive income (loss)

Comprehensive income (loss)

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31, 2017

(In millions)

Group 1 Automotive, Inc.

Guarantor Subsidiaries

Non-Guarantor Subsidiaries

Total Company

Cost of sales

Selling, general and administrative expenses

Depreciation and amortization expense

Asset impairments

Income (loss) from operations

Interest expense:

Floorplan interest expense

Other interest expense, net

Income (loss) before income taxes and equity in earnings of subsidiaries

(Benefit) provision for income taxes

Equity in earnings (loss) of subsidiaries

Net income (loss)

Other comprehensive income (loss)

Comprehensive income (loss)

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31, 2019

(In millions)

Group 1 Automotive, Inc.

Guarantor Subsidiaries

Non-Guarantor Subsidiaries

Total Company

CASH FLOWS FROM OPERATING ACTIVITIES:

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Cash paid for acquisitions, net of cash received

Proceeds from disposition of franchises, property and equipment

Purchases of property and equipment

Net cash used in (provided by) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings on credit facility — floorplan line and other

Repayments on credit facility — floorplan line and other

Borrowings on credit facility — acquisition line

Repayments on credit facility — acquisition line

Debt issue costs

Borrowings on other debt

Principal payments on other debt

Borrowings on debt related to real estate

Principal payments on debt related to real estate

Proceeds from employee stock purchase plan

Payment of tax withholding for stock-based awards

Repurchases of common stock, amounts based on settlement date

Dividends paid

Borrowings (repayments) with subsidiaries

Investment in subsidiaries

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash

Net increase (decrease) in cash, cash equivalents and restricted cash

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31, 2018

(In millions)

Group 1 Automotive, Inc.

Guarantor Subsidiaries

Non-Guarantor Subsidiaries

Total Company

CASH FLOWS FROM OPERATING ACTIVITIES:

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Cash paid for acquisitions, net of cash received

Proceeds from disposition of franchises, property and equipment

Purchases of property and equipment

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings on credit facility — floorplan line and other

Repayments on credit facility — floorplan line and other

Borrowings on credit facility — acquisition line

Repayments on credit facility — acquisition line

Borrowings on other debt

Principal payments on other debt

Borrowings on debt related to real estate

Principal payments on debt related to real estate

Proceeds from employee stock purchase plan

Payment of tax withholding for stock-based awards

Proceeds from termination of mortgage swap

Repurchases of common stock, amounts based on settlement date

Dividends paid

Borrowings (repayments) with subsidiaries

Investment in subsidiaries

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash

Net increase (decrease) in cash, cash equivalents and restricted cash

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31, 2017

(In millions)

Group 1 Automotive, Inc.

Guarantor Subsidiaries

Non-Guarantor Subsidiaries

Total Company

CASH FLOWS FROM OPERATING ACTIVITIES:

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Cash paid for acquisitions, net of cash received

Proceeds from disposition of franchises, property and equipment

Purchases of property and equipment

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings on credit facility — floorplan line and other

Repayments on credit facility — floorplan line and other

Borrowings on credit facility — acquisition line

Repayments on credit facility — acquisition line

Borrowings on other debt

Principal payments on other debt

Borrowings on debt related to real estate

Principal payments on debt related to real estate

Proceeds from employee stock purchase plan

Payment of tax withholding for stock-based awards

Repurchases of common stock, amounts based on settlement date

Dividends paid

Borrowings (repayments) with subsidiaries

Investment in subsidiaries

Net cash provided by (used in) financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables set forth the Company’s unaudited quarterly financial data (in millions, except per share amounts):

Years Ended December 31,

Total revenues

Gross profit (1)

Income (loss) from operations (1)

Net income (loss) (1)

Basic earnings (loss) per share

Diluted earnings (loss) per share

Total revenues

Gross profit (2)

Income (loss) from operations (2)

Net income (loss) (2)

Basic and diluted earnings (loss) per share

(1) Includes $ 2.0 million , $ 4.0 million and $ 11.9 million of expense in the first, second and third quarters of 2019, respectively, related to catastrophic events mainly as a result of flood damage from Tropical Storm Imelda and hail storm damages primarily in Texas and $ 0.5 million , $ 10.3 million and $ 11.5 million in the second, third, and fourth quarter, respectively, related to asset impairment charges.

(2) Includes $ 20.1 million , $ 5.4 million and ($ 0.3 ) million of net gains / (losses) in the second, third and fourth quarters of 2018, respectively, related to disposition on real estate and dealership transactions;

$ 5.8 million and $ 0.6 million of expenses in the second and fourth quarters of 2018, respectively, related to catastrophic events mainly as a result of hail storms;

$ 0.5 million and $ 3.1 million of gains in the second and third quarters of 2018, respectively, related to legal settlements and $ 4.3 million , $ 23.2 million and $ 16.5 million in the second, third and fourth quarters of 2018, respectively, related to asset impairments.

Total assets $ 4,256.1 $ 1,225.6 $ 88.6 $ 5,570.2

Refer to Note 11.

Intangible Franchise Rights and Goodwill for further discussion of the Company’s intangible franchise rights and goodwill by segment.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures