What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-05-06 · 188 added, 133 removed, 496 unchanged (39% of the section changed)

3 unchanged sentences

(In millions, except share data)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

CURRENT ASSETS:

43 unchanged sentences

(In millions, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

New vehicle retail sales $ 1,855.3 $ 1,062.7 $ 3,398.7 $ 2,404.8

13 unchanged sentences

Depreciation and amortization expense 18.8 18.8 38.3 37.4

INCOME (LOSS) FROM OPERATIONS 152.7 69.9

INTEREST EXPENSE:

Asset impairments — 23.8 — 23.8

INCOME FROM OPERATIONS 265.8 79.0 418.5 148.9

Floorplan interest expense 8.8 10.1 16.4 23.0

Other interest expense, net 13.7 16.2 27.5 34.3

INCOME (LOSS) BEFORE INCOME TAXES 131.4 38.9

(Benefit) provision for income taxes 29.4 9.1

NET INCOME (LOSS) $ 101.9 $ 29.8

BASIC EARNINGS (LOSS) PER SHARE $ 5.54 $ 1.62

Loss on extinguishment of debt — 10.4 — 10.4

INCOME BEFORE INCOME TAXES 243.2 42.3 374.6 81.2

Provision for income taxes 52.3 12.2 81.7 21.3

NET INCOME $ 191.0 $ 30.2 $ 292.9 $ 60.0

BASIC EARNINGS PER SHARE $ 10.40 $ 1.64 $ 15.94 $ 3.25

Weighted average common shares outstanding 17.7 17.8 17.8 17.8

DILUTED EARNINGS (LOSS) PER SHARE $ 5.52 $ 1.61

DILUTED EARNINGS PER SHARE $ 10.35 $ 1.63 $ 15.88 $ 3.25

Weighted average dilutive common shares outstanding 17.8 17.8 17.8 17.8

3 unchanged sentences

(In millions)

Three Months Ended March 31,

NET INCOME (LOSS) $ 101.9 $ 29.8

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

NET INCOME $ 191.0 $ 30.2 $ 292.9 $ 60.0

Other comprehensive income (loss), net of taxes:

3 unchanged sentences

( 11.1 ) ( 7.0 ) 16.7 ( 38.6 )

Reclassification adjustment for (gain) loss included in interest expense, net of tax benefit (provision) of $ 0.7 and $ 0.2 , respectively

Reclassification adjustment for loss included in interest expense, net of tax benefit of $ 0.6 , $ 0.7 , $ 1.3 and $ 0.9 , respectively

1.9 2.1 4.2 2.7

Reclassification related to de-designated interest rate swaps net of tax benefit of $ 0.7 , $ — , $ 0.7 and $ — , respectively

Unrealized gain (loss) on interest rate risk management activities, net of tax ( 6.9 ) ( 4.9 ) 23.3 ( 36.0 )

9 unchanged sentences

Shares Amount

BALANCE, MARCH 31, 2021 25,367,736 $ 0.3 $ 305.7 $ 1,914.2 $ ( 156.2 ) $ ( 487.3 ) $ 1,576.6

Net income — — — 191.0 — — 191.0

Other comprehensive income, net of taxes — — — — 0.3 — 0.3

Purchases of treasury stock — — — — — ( 18.6 ) ( 18.6 )

Net issuance of treasury shares to stock compensation plans ( 10,059 ) — 1.1 — — 2.9 4.0

Stock-based compensation — — 6.8 — — — 6.8

Dividends declared ($ 0.33 per share)

— — — ( 6.0 ) — — ( 6.0 )

BALANCE, JUNE 30, 2021 25,357,677 $ 0.3 $ 313.6 $ 2,099.1 $ ( 155.9 ) $ ( 503.1 ) $ 1,754.0

Common Stock Additional

Paid-in Capital Retained Earnings Accumulated

Comprehensive Income (Loss) Treasury Stock Total

Shares Amount

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

Net income (loss) — — — 101.9 — — 101.9

Other comprehensive income (loss), net of taxes — — — — 27.9 — 27.9

Net income — — — 292.9 — — 292.9

Other comprehensive income, net of taxes — — — — 28.1 — 28.1

Purchases of treasury stock — — — — — ( 18.6 ) ( 18.6 )

Net issuance of treasury shares to stock compensation plans ( 75,371 ) — ( 7.9 ) — — 8.4 0.5

2 unchanged sentences

— — — ( 11.7 ) — — ( 11.7 )

BALANCE, JUNE 30, 2021 25,357,677 $ 0.3 $ 313.6 $ 2,099.1 $ ( 155.9 ) $ ( 503.1 ) $ 1,754.0

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

GROUP 1 AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except share data)

Common Stock Additional

Paid-in Capital Retained Earnings Accumulated

Comprehensive Income (Loss) Treasury Stock Total

Shares Amount

BALANCE, MARCH 31, 2020 25,448,275 $ 0.3 $ 287.8 $ 1,566.7 $ ( 206.0 ) $ ( 474.1 ) $ 1,174.6

Net income — — — 30.2 — — 30.2

Other comprehensive loss, net of taxes — — — — ( 7.3 ) — ( 7.3 )

Net issuance of treasury shares to stock compensation plans ( 8,693 ) — ( 4.4 ) — — 6.2 1.8

Stock-based compensation — — 16.6 — — — 16.6

BALANCE, JUNE 30, 2020 25,439,581 $ 0.3 $ 300.0 $ 1,596.9 $ ( 213.3 ) $ ( 467.9 ) $ 1,215.9

Common Stock Additional

3 unchanged sentences

BALANCE, DECEMBER 31, 2019 25,486,711 $ 0.3 $ 295.3 $ 1,542.4 $ ( 147.0 ) $ ( 435.3 ) $ 1,255.7

Net income (loss) — — — 29.8 — — 29.8

Other comprehensive income (loss), net of taxes — — — — ( 59.0 ) — ( 59.0 )

Net income — — — 60.0 — — 60.0

Other comprehensive loss, net of taxes — — — — ( 66.4 ) — ( 66.4 )

Purchases of treasury stock — — — — — ( 48.9 ) ( 48.9 )

3 unchanged sentences

— — — ( 5.5 ) — — ( 5.5 )

BALANCE, MARCH 31, 2020 25,448,275 $ 0.3 $ 287.8 $ 1,566.7 $ ( 206.0 ) $ ( 474.1 ) $ 1,174.6

BALANCE, JUNE 30, 2020 25,439,581 $ 0.3 $ 300.0 $ 1,596.9 $ ( 213.3 ) $ ( 467.9 ) $ 1,215.9

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

2 unchanged sentences

(In millions)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) $ 101.9 $ 29.8

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Net income $ 292.9 $ 60.0

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 38.3 37.4

1 unchanged sentence

Deferred income taxes 4.4 ( 3.0 )

Asset impairments — 23.8

Stock-based compensation 13.2 21.7

Amortization of debt discount and issue costs 0.6 1.0

(Gain) loss on disposition of assets ( 1.1 ) —

Amortization of debt discount and issuance costs 1.2 1.9

Gain on disposition of assets ( 2.1 ) —

Loss on extinguishment of debt — 10.4

Unrealized loss on derivative instruments 2.3 —

Other 0.3 1.7

6 unchanged sentences

Floorplan notes payable — manufacturer affiliates

( 56.6 ) ( 90.3 )

Deferred revenues ( 1.0 ) ( 0.3 )

Operating lease liabilities ( 11.8 ) ( 13.8 )

Net cash provided by (used in) operating activities 239.3 44.1

Net cash provided by operating activities 752.1 688.2

CASH FLOWS FROM INVESTING ACTIVITIES:

2 unchanged sentences

Purchases of property and equipment ( 63.8 ) ( 60.5 )

Net cash provided by (used in) investing activities ( 76.7 ) ( 31.1 )

Net cash used in investing activities ( 93.8 ) ( 61.2 )

CASH FLOWS FROM FINANCING ACTIVITIES:

5 unchanged sentences

Repayments on credit facility — acquisition line

( 32.2 ) ( 215.2 )

Debt issuance costs — ( 1.2 )

Repayments of senior notes — ( 307.9 )

Borrowings on other debt 89.9 229.8

4 unchanged sentences

Dividends paid ( 11.7 ) ( 5.5 )

Net cash provided by (used in) financing activities ( 165.6 ) ( 18.5 )

Net cash used in financing activities ( 547.1 ) ( 579.0 )

Effect of exchange rate changes on cash 0.2 ( 3.4 )

Net increase (decrease) in cash, cash equivalents and restricted cash ( 4.3 ) ( 8.9 )

Net increase in cash and cash equivalents 111.4 44.6

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period 87.3 28.1

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period $ 82.9 $ 19.2

CASH AND CASH EQUIVALENTS, end of period $ 198.7 $ 72.7

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

11 unchanged sentences

and sells vehicle parts.

As of March 31, 2021, the Company’s retail network consisted of 118 dealerships in the U.S., 49 dealerships in the U.K.

As of June 30, 2021, the Company’s retail network consisted of 117 dealerships i n the U.S., 48 deale rships in the U.K.

and 16 dealerships in Brazil.

16 unchanged sentences

GAAP for complete financial statements.

Results for interim periods are not necessarily indicative of the results that can be expected for a full year and therefore should be read in conjunction with the Company’s audited Financial Statements and notes thereto included within the Company’s most recent Annual Report on Form 10-K.

The accompanying Condensed Consolidated Financial Statements reflect the consolidated accounts of the parent company, Group 1 Automotive, Inc., and its subsidiaries, all of which are wholly owned.

All intercompany balances and transactions have been eliminated in consolidation.

During the three months ended June 30, 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 three months ended June 30, 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 periods was not material based on a quantitative and qualitative evaluation.

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

26 unchanged sentences

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

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Brazil Total U.S.

New vehicle retail sales $ 1,504.4 $ 301.2 $ 49.8 $ 1,855.3 $ 2,750.4 $ 564.3 $ 83.9 $ 3,398.7

7 unchanged sentences

Total revenues $ 2,924.9 $ 700.7 $ 74.8 $ 3,700.4 $ 5,329.3 $ 1,250.3 $ 130.9 $ 6,710.5

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020 Six Months Ended June 30, 2020

Brazil Total U.S.

New vehicle retail sales $ 915.7 $ 127.2 $ 19.8 $ 1,062.7 $ 1,904.1 $ 423.5 $ 77.3 $ 2,404.8

8 unchanged sentences

(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 recogn ized of $ 6.0 million a nd $ 4.0 million during the three months ended March 31, 2021 and 2020, respectively, relating to performance obligations satisfied in previous periods on the Company’s retrospective commission income contracts.

(2) Includes variable consideration recognized of $ 7.7 million and $ 5.4 million during the three months ended June 30, 2021 and 2020, respectively, and $ 13.7 million and $ 9.3 million during the six months ended June 30, 2021 and 2020, respectively, relating to performance obligations satisfied in previous periods on the Compa ny’s retrospective commission income contracts.

Refer to Note 7.

4 unchanged sentences

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 three months ended March 31, 2021, the Company acquired two dealerships representing two franchises in the U.S.

During the six months ended June 30, 2021, the Company acquired two dealerships representing two franchises in the U.S.

Aggregate consideration paid for these dealerships, which were accounted for as business combinations, totaled $ 49.9 million.

During the three months ended March 31, 2020, the Company had no activity related to acquisitions.

During the three months ended March 31, 2021, the Company’s dispositions include one dealership representing one franchise and one franchise disposition within an existing dealership in the U.S.

The Company recorded a net pre-tax gain totaling $ 1.0 million related to these dispositions.

The Company also terminated one franchise representing one dealership in the U.K.

During the three months ended March 31, 2020, the Company had no activity related to dispositions.

Goodwill associated with these acquisitions totaled $ 22.6 million and is deductible for U.S.

income tax purposes.

During the six months ended June 30, 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.

Goodwill associated with this acquisition was not material.

In July 2021, the Company announced the acquisition of seven dealerships representing nine franchises in the U.K.

Aggregate consideration paid was approximately $ 36 million.

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 Condensed Consolidated Statements of Operations.

During the six months ended June 30, 2021, the Company’s dispositions included two dealerships representing two franchises and one franchise disposition within an existing dealership in the U.S.

The Company recorded a net pre-tax gain totaling $ 1.8 million related to these dispositions.

The dispositions reduced goodwill by $ 2.2 million.

The Company also terminated one franchise representing one dealership in the U.K.

During the six months ended June 30, 2020, the Company had no activity related to dispositions.

SEGMENT INFORMATION

As of March 31, 2021 and 2020, the Company had three reportable segments:

As of June 30, 2021 and 2020, the Company had three reportable segments:

the U.S., U.K.

11 unchanged sentences

and sell vehicle parts.

Selected reportable segment data is as follows for the three months ended March 31, 2021 and 2020 (in millions):

Three Months Ended March 31, 2021

Selected reportable segment data is as follows for the three and six months ended June 30, 2021 and 2020 (in millions):

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Brazil Total U.S.

Total revenues $ 2,924.9 $ 700.7 $ 74.8 $ 3,700.4 $ 5,329.3 $ 1,250.3 $ 130.9 $ 6,710.5

Income (loss) before income taxes (1)

Income before income taxes (1)

$ 215.1 $ 25.2 $ 3.0 $ 243.2 $ 336.6 $ 33.6 $ 4.3 $ 374.6

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020 Six Months Ended June 30, 2020

Brazil Total U.S.

Total revenues $ 1,831.1 $ 263.5 $ 36.6 $ 2,131.2 $ 3,838.7 $ 854.2 $ 129.1 $ 4,822.0

1 unchanged sentence

$ 74.8 $ ( 19.7 ) $ ( 12.8 ) $ 42.3 $ 117.0 $ ( 22.3 ) $ ( 13.4 ) $ 81.2

(1) Fo r the three months ended March 31, 2021, income (loss) before income taxes includes the following:

segment, $ 2.2 million in expenses related to a winter storm, $ 1.0 million net gain on legal matters and $ 0.9 million net gain on dealership and real estate transactions;

(1) For the three months ended June 30, 2021, income before income taxes includes the following:

segment, $ 2.3 million non-cash loss associated with certain interest rate swaps and $ 0.8 million net gain on dealership and real estate transactions.

For the six months ended June 30, 2021, income before income taxes includes the following:

segment, $ 2.3 million non-cash loss associated with certain interest rate swaps, $ 2.2 million in expenses related to a winter storm, $ 1.7 million net gain on dealership and real estate transactions and $ 1.0 million net gain on legal matters;

and in the U.K.

segment, $ 0.6 million net loss on dealership and real estate transactions.

(2) For the three months ended March 31, 2020, income (loss) before income taxes includes a $ 0.9 million severance expense in the Brazil segment.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

EARNINGS (LOSS) PER SHARE

(2) For the three months ended June 30, 2020, income (loss) before income taxes includes the following:

segment, $ 10.6 million in stock-based compensation expense related to an out-of-period adjustment and a $ 10.4 million loss on debt extinguishment;

segment, $ 12.8 million in asset impairments and $ 1.2 million in severance expense;

and in the Brazil segment, $ 11.1 million in asset impairments.

For the six months ended June 30, 2020, income (loss) before income taxes includes the following:

segment, $ 10.6 million in stock-based compensation expense related to an out-of-period adjustment and a $ 10.4 million loss on debt extinguishment;

segment, $ 12.8 million in asset impairments and $ 1.2 million in severance expense;

and in the Brazil segment, $ 11.1 million in asset impairments and $ 0.9 million in severance expense.

EARNINGS PER SHARE

The two-class method is utilized for the computation of the Company’s EPS.

4 unchanged sentences

Diluted EPS is computed by dividing net income available to diluted common shares by the weighted average number of dilutive common shares outstanding during the period.

The following table sets forth the calculation of EPS for the three months ended March 31, 2021 and 2020 (in millions, except share and per share data):

Three Months Ended March 31,

The following table sets forth the calculation of EPS for the three and six months ended June 30, 2021 and 2020 (in millions, except share and per share data):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Weighted average basic common shares outstanding 17,747,518 17,771,447 17,752,577 17,767,449

1 unchanged sentence

Weighted average dilutive common shares outstanding 17,829,470 17,811,613 17,826,794 17,809,937

Net income (loss) $ 101.9 $ 29.8

Earnings (loss) allocated to participating securities 3.5 1.1

Net income (loss) available to basic common shares $ 98.5 $ 28.7

Basic earnings (loss) per common share $ 5.54 $ 1.62

Net income (loss) $ 101.9 $ 29.8

Earnings (loss) allocated to participating securities 3.5 1.1

Net income (loss) available to diluted common shares $ 98.5 $ 28.7

Diluted earnings (loss) per common share $ 5.52 $ 1.61

Net income $ 191.0 $ 30.2 $ 292.9 $ 60.0

Earnings allocated to participating securities 6.4 1.1 9.9 2.2

Net income available to basic common shares $ 184.5 $ 29.1 $ 283.0 $ 57.8

Basic earnings per common share $ 10.40 $ 1.64 $ 15.94 $ 3.25

Net income $ 191.0 $ 30.2 $ 292.9 $ 60.0

Earnings allocated to participating securities 6.4 1.1 9.9 2.1

Net income available to diluted common shares $ 184.5 $ 29.1 $ 283.0 $ 57.8

Diluted earnings per common share $ 10.35 $ 1.63 $ 15.88 $ 3.25

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

8 unchanged sentences

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

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

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

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

As of March 31, 2021 and December 31, 2020, the carrying value of these instruments was $ 59.9 million and $ 60.0 million, respectively.

As of June 30, 2021 and December 31, 2020, the carrying value of these instruments was $ 100.1 million and $ 60.0 million, respectively.

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.

7 unchanged sentences

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Carrying Value (1)

5 unchanged sentences

(1) Carrying value excludes unamortized debt issuance costs.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

Derivative Financial Instruments

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 Company’s Condensed Consolidated Statements of Operations.

The Company had no gains or losses related to ineffectiveness recognized in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020.

As of March 31, 2021, the Company held 38 interest rate swaps in effect with a total notional value of $ 943.0 million that fixed its underlying one-month LIBOR at a weighted average rate of 1.48 %.

The Company also held 8 additional interest rate swaps with forward start dates beginning December 2021, that had an aggregate notional value of $ 425.0 million and a weighted average interest rate of 1.20 % as of March 31, 2021.

The maturity dates of the Company’s interest rate swaps with forward start dates range between January 2025 and December 2031.

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

This technique utilizes a one-month LIBOR forward yield curve matched to the identical maturity term of the instrument being measured.

The Company’s interest rate swaps are measured at fair value utilizing a one-month LIBOR forward yield curve matched to the identical maturity term of the instrument being measured.

Observable inputs utilized in the income approach valuation technique incorporate identical contractual notional amounts, fixed coupon rates, periodic terms for interest payments and contract maturity.

2 unchanged sentences

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

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

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

March 31, 2021 December 31, 2020

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

June 30, 2021 December 31, 2020

Other current assets $ — $ 1.9

4 unchanged sentences

Total liabilities $ 25.1 $ 44.8

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

(1) As of June 30, 2021, the entire balance consisted of the gross fair value of the de-designated swaps as described below.

Interest Rate Swaps De-designated as Cash Flow Hedges

All interest rate swaps had previously been designated as cash flow hedges.

During the three months ended June 30, 2021, the Company de-designated five interest rate swaps due to the continued decline in the net floorplan liability balance as a result of decreased vehicle inventory levels as the Company’s manufacturers’ production is currently at reduced levels as a result of a global semiconductor chip shortage.

The realized and unrealized gains or losses on the de-designated swaps for each period after de-designation are recognized within income as Floorplan interest expense in the Company’s Condensed Consolidated Statements of Operations.

The Company reclassified the entire previously deferred loss associated with the de-designated swaps of $ 2.4 million, net of tax of $ 0.7 million, from Accumulated other comprehensive income (loss) into income as an adjustment to Floorplan interest expense as the remaining forecasted hedged transactions associated with these swaps were probable of not occurring due to the reduced inventory levels described above.

Additionally, the Company recorded an unrealized mark-to-market gain of $ 1.0 million and a realized $ 1.0 million loss associated with these swaps within Floorplan interest expense during the three months ended June 30, 2021.

As of June 30, 2021, the aggregate notional amount of these de-designated interest rate swaps was $ 250.0 million that fixed the underlying one-month LIBOR at a weighted average rate of 1.76 %.

These interest rate swaps will mature on December 31, 2021.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

Interest Rate Swaps Designated as Cash Flow Hedges

Interest rate swaps 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 Company’s Condensed Consolidated Statements of Operations.

Gains or losses for periods where future forecasted hedged transactions are deemed probable of not occurring are reclassified from Accumulated other comprehensive income (loss) into income.

Amounts reclassified related to the portion of forecasted transactions deemed probable of not occurring were immaterial for the three and six months ended June 30, 2021.

As of June 30, 2021, the Company held 34 interest rate swaps designated as cash flow hedges with a total notional value of $ 700.4 million that fixed the underlying one-month LIBOR at a weighted average rate of 1.38 %.

The Company also held 8 additional interest rate swaps designated as cash flow hedges with forward start dates beginning December 2021, that had an aggregate notional value of $ 425.0 million and a weighted average interest rate of 1.20 % as of June 30, 2021.

The maturity dates of the Company’s designated interest rate swaps with forward start dates range between January 2025 and December 2031.

The following tables present the impact of the Company’s interest rate swaps designated as cash flow hedges (in millions):

Amount of Unrealized Income (Loss), Net of Tax, Recognized in Other Comprehensive Income (Loss)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Derivatives in Cash Flow Hedging Relationship 2021 2020 2021 2020

Interest rate swaps $ ( 11.1 ) $ ( 7.0 ) $ 16.7 $ ( 38.6 )

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

Income Statement Classification Three Months Ended March 31,

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

Income Statement Classification Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Floorplan interest expense $ ( 1.4 ) $ ( 2.1 ) $ ( 3.7 ) $ ( 2.7 )

Other interest expense, net $ ( 1.0 ) $ ( 0.7 ) $ ( 1.9 ) $ ( 0.8 )

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 $ 3.2 million.

The 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 $ 9.8 million.

GROUP 1 AUTOMOTIVE, INC.

2 unchanged sentences

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Contracts-in-transit and vehicle receivables, net:

17 unchanged sentences

Revenues for further discussion of the Company’s contract asset balance.

No allowance for doubtful accounts was recorded for Contract assets as of March 31, 2021 or December 31, 2020.

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

Balance, December 31, 2020 (1)

$ 901.7 $ 95.4 $ — $ 997.1

Additions and adjustments 22.6 — — 22.6

Disposals ( 1.4 ) — — ( 1.4 )

Currency translation — 0.8 — 0.8

Balance, March 31, 2021 (1)

$ 922.9 $ 96.2 $ — $ 1,019.1

(1) Net of accumulated impairments of $ 108.5 million, comprised of $ 40.6 million in the U.S.

reporting unit and $ 67.9 million in the Brazil reporting unit.

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

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

No allowance for doubtful accounts was recorded for Contract assets as of June 30, 2021 or December 31, 2020.

Long-term debt consisted of the following (in millions):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

4.00 % Senior Notes due August 15, 2028

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Floorplan Notes Payable) are used for working capital, general corporate and acquisition purposes.

As of March 31, 2021, borrowings under the Acquisition Line, a component of the Revolving Credit Facility (as defined in Note 10.

As of June 30, 2021, borrowings under the Acquisition Line, a component of the Revolving Credit Facility (as defined in Note 9.

Floorplan Notes Payable), totaled $ 76.1 million.

The average interest rate on this facility was 1.16 % during the three months ended March 31, 2021.

The average interest rate on this facility was 1.05 % during the three months ended June 30, 2021.

Real Estate Related

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and Brazil that are paid in installments.

As of March 31, 2021, borrowings outstanding under these facilities totaled $ 609.4 million, gross of debt issuance costs, comprised of $ 507.4 million in the U.S., $ 91.0 million in the U.K.

As of June 30, 2021, borrowings outstanding under these facilities totaled $ 623.9 million, gross of debt issuance costs, comprised of $ 513.0 million in the U.S., $ 98.4 million in the U.K.

and $ 12.6 million in Brazil.

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The Company’s floorplan notes payable consisted of the following (in millions):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Revolving credit facility — floorplan notes payable $ 511.5 $ 901.6

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The Acquisition Line includes a $ 100 million sub-limit for letters of credit.

As of March 31, 2021 and December 31, 2020, the Company had $ 17.8 million in outstanding letters of credit.

As of June 30, 2021 and December 31, 2020, the Company had $ 17.8 million in outstanding letters of credit.

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 1.18 % as of March 31, 2021, excluding the impact of the Company’s interest rate derivative instruments.

Floorplan Line was 1.18 % as of June 30, 2021, 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.

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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.

In conjunction with the Revolving Credit Facility, the Company had $ 3.3 million and $ 3.6 million of related unamortized debt issuance costs as of March 31, 2021 and December 31, 2020, respectively, which are included in Prepaid expenses and Other long-term assets in the Company’s Condensed Consolidated Balance Sheets and amortized over the term of the facility.

In conjunction with the Revolving Credit Facility, the Company had $ 3.1 million and $ 3.6 million of related unamortized debt issuance costs as of June 30, 2021 and December 31, 2020, respectively, which are included in Prepaid expenses and Other long-term assets in the Company’s Condensed Consolidated Balance Sheets and amortized over the term of the facility.

Floorplan Notes Payable — Manufacturer Affiliates

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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 March 31, 2021.

The interest rate on the FMCC Facility was 5.50 % before considering the applicable incentives as of June 30, 2021.

GROUP 1 AUTOMOTIVE, INC.

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and Brazil with financial institutions affiliated with manufacturers for financing of new, used and rental vehicle inventories.

As of March 31, 2021, borrowings outstanding under these facilities totaled $ 258.1 million, comprised of $ 97.0 million in the U.S., with annual interest rates ranging from less than 1 % to approximately 6 %, $ 156.8 million in the U.K., with annual interest rates ranging from approximately 1 % to 4 %, and $ 4.3 million in Brazil, with annual interest rates ranging from approximately 2 % to 10 %.

As of June 30, 2021, borrowings outstanding under these facilities totaled $ 247.2 million, comprised of $ 91.7 million in the U.S., with annual interest rates ranging from less than 1 % to approximately 5 %, $ 131.2 million in the U.K., with annual interest rates ranging from approximately 1 % to 4 %, and $ 24.3 million in Brazil, with annual interest rates ranging from approximately 4 % to 12 %.

Offset Accounts

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CASH FLOW INFORMATION

Cash and Cash Equivalents

The cash flows presented within the Company’s Condensed Consolidated Statements of Cash Flows reflect cash and cash equivalents of $ 82.9 million and $ 87.3 million as of March 31, 2021 and December 31, 2020, respectively.

Non-Cash Activities

The accrual for capital expenditures increased $ 2.4 million and $ 0.7 million from fiscal year-end for the three months ended March 31, 2021 and 2020, respectively.

The following table presents ROU assets obtained in exchange for lease obligations (in millions):

Three Months Ended March 31,

ROU assets obtained in exchange for lease obligations:

Operating leases, initial recognition $ — $ 0.1

Operating leases, modifications and remeasurements $ 0.3 $ 11.9

Finance leases, initial recognition $ 0.2 $ 10.0

Finance leases, modifications and remeasurements $ — $ ( 1.5 )

The accrual for capital expenditures increased $ 1.4 million and decreased $ 2.7 million from fiscal year-end for the six months ended June 30, 2021 and 2020, respectively.

Interest and Income Taxes Paid

Cash paid for interest, including the monthly settlement of the Company’s interest rate derivatives, was $ 25.3 million and $ 19.9 million for the three months ended March 31, 2021 and 2020, respectively.

Cash paid for income taxes, net of refunds, was $ 1.0 million for the three months ended March 31, 2021.

The Company received a net tax refund of $ 6.2 million for the three months ended March 31, 2020.

Cash paid for interest, including the monthly settlement of the Company’s interest rate derivatives, was $ 38.6 million and $ 57.0 million for the six months ended June 30, 2021 and 2020, respectively.

Cash paid for income taxes, net of refunds, was $ 53.5 million for the six months ended June 30, 2021.

Cash received for income taxes, net of tax payments, was $ 6.8 million for the six months ended June 30, 2020.

COMMITMENTS AND CONTINGENCIES

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Legal Proceedings

As of March 31, 2021, the Company was not party to any legal proceedings that, individually or in the aggregate, are reasonably expected to have a material adverse effect on the Company’s results of operations, financial condition or cash flows, including class action lawsuits.

As of June 30, 2021, the Company was not party to any legal proceedings that, individually or in the aggregate, are reasonably expected to have a material adverse effect on the Company’s results of operations, financial condition or cash flows, including class action lawsuits.

However, the results of current or future matters cannot be predicted with certainty and an unfavorable resolution of one or more of such matters could have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

Other Matters

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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 $ 27.3 million as of March 31, 2021.

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 $ 4.7 million as of March 31, 2021.

Total associated letters of credit issued on behalf of the lessee where the Company is the beneficiary was $ 4.7 million as of June 30, 2021.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in the balances of each component of Accumulated other comprehensive income (loss) were as follows (in millions):

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

Accumulated Income (Loss) On Foreign Currency Translation Accumulated Income (Loss) On Interest Rate Swaps Total

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Other interest expense, net (pre-tax) — 1.9 1.9

Provision (benefit) for income taxes — ( 0.7 ) ( 0.7 )

Net current period other comprehensive income (loss) ( 2.3 ) 30.2 27.9

Balance, March 31, 2021 $ ( 153.9 ) $ ( 2.3 ) $ ( 156.2 )

Three Months Ended March 31, 2020

Reclassification related to de-designated interest rate swaps (pre-tax) — 3.1 3.1

Benefit for income taxes — ( 2.0 ) ( 2.0 )

Net current period other comprehensive income 4.9 23.3 28.1

Balance, June 30, 2021 $ ( 146.7 ) $ ( 9.2 ) $ ( 155.9 )

Six Months Ended June 30, 2020

Accumulated Income (Loss) On Foreign Currency Translation Accumulated Income (Loss) On Interest Rate Swaps Total

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Other interest expense (pre-tax) — 0.8 0.8

Provision (benefit) for income taxes — ( 0.2 ) ( 0.2 )

Net current period other comprehensive income (loss) ( 27.9 ) ( 31.1 ) ( 59.0 )

Balance, March 31, 2020 $ ( 170.8 ) $ ( 35.2 ) $ ( 206.0 )

Benefit for income taxes — ( 0.8 ) ( 0.8 )

Net current period other comprehensive loss ( 30.4 ) ( 36.0 ) ( 66.4 )

Balance, June 30, 2020 $ ( 173.2 ) $ ( 40.1 ) $ ( 213.3 )

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

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• uncertainty regarding the length of time it will take for the U.S.

and the rest of the world to slow the spread of the COVID-19 pandemic, the actions to be taken by governments to contain and combat the pandemic and the timing, pace and extent of an economic recovery in the U.S.

and the rest of the world to slow the spread of the COVID-19 virus, the actions to be taken by governments to contain and combat the pandemic and the timing, pace and extent of an economic recovery in the U.S.

and elsewhere, which in turn will likely affect demand for our vehicles, parts and services;

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federal, U.S.

or Brazil tax rates and regulations and unexpected litigation or adverse legislation, including changes in U.S.

or Brazil tax laws, rates and regulations and unexpected litigation or adverse legislation, including changes in U.S.

state franchise laws, may impose additional costs on us or otherwise adversely affect us;

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For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see Item 1A.

Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”) and this Form 10-Q, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk.

Risk Factors in our 2020 Form 10-K and this Form 10-Q, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof.

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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-Q

Item 1. Financial Statements