What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-05 compared with 2021-11-04 · 270 added, 226 removed, 399 unchanged (55% of the section changed)

3 unchanged sentences

(In millions, except share data)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

CURRENT ASSETS:

5 unchanged sentences

Other current assets 19.9 50.4

Current assets classified as held for sale 81.8 100.3

TOTAL CURRENT ASSETS 1,647.5 1,666.2

15 unchanged sentences

Accrued expenses and other current liabilities 289.4 258.6

Current liabilities classified as held for sale 74.6 49.9

TOTAL CURRENT LIABILITIES 1,618.9 1,543.6

19 unchanged sentences

(In millions, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

New vehicle retail sales $ 1,745.1 $ 1,509.2

13 unchanged sentences

Depreciation and amortization expense 21.2 19.2

Asset impairments 1.7 — 1.7 23.8

INCOME FROM OPERATIONS 285.0 150.7

1 unchanged sentence

Other interest expense, net 17.4 13.2

Loss on extinguishment of debt 3.8 3.3 3.8 13.7

INCOME BEFORE INCOME TAXES 262.3 130.0

Provision for income taxes 61.2 29.1

Net income from continuing operations 201.1 100.9

Net income from discontinued operations 1.8 1.0

NET INCOME $ 202.9 $ 101.9

BASIC EARNINGS PER SHARE:

Weighted average common shares outstanding 17.8 17.8 17.8 17.8

Continuing operations $ 11.81 $ 5.49

Discontinued operations 0.11 0.06

Total $ 11.92 $ 5.54

DILUTED EARNINGS PER SHARE:

Weighted average dilutive common shares outstanding 17.8 17.8 17.8 17.8

Continuing operations $ 11.78 $ 5.47

Discontinued operations 0.11 0.06

Total $ 11.88 $ 5.52

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic 16.5 17.8

Diluted 16.6 17.8

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

2 unchanged sentences

(In millions)

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

NET INCOME $ 202.9 $ 101.9

2 unchanged sentences

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 $ 0.2 , $ 0.6 , $( 4.9 ) and $ 12.6 , respectively

( 0.6 ) ( 1.8 ) 16.1 ( 40.4 )

Reclassification adjustment for realized (gain) loss on interest rate swap termination included in SG&A, net of tax benefit (provision) of $ — for all periods presented

Unrealized gain arising during the period, net of tax provision of $( 10.5 ) and $( 9.4 ), respectively

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

1.8 2.7 6.1 5.4

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

Unrealized gain (loss) on interest rate risk management activities, net of tax 1.3 1.0 24.5 ( 35.0 )

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX ( 10.2 ) 7.0 17.9 ( 59.3 )

Unrealized gain on interest rate risk management activities, net of tax 35.9 30.2

OTHER COMPREHENSIVE INCOME, NET OF TAX 35.7 27.9

COMPREHENSIVE INCOME $ 238.6 $ 129.8

7 unchanged sentences

Shares Amount

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

Net income — — — 172.1 — — 172.1

Other comprehensive loss, net of taxes — — — — ( 10.2 ) — ( 10.2 )

Net issuance of treasury shares to stock compensation plans ( 14,621 ) — 0.8 — — 2.3 3.2

Stock-based compensation — — 5.7 — — — 5.7

Dividends declared ($ 0.34 per share)

— — — ( 6.3 ) — — ( 6.3 )

BALANCE, SEPTEMBER 30, 2021 25,343,056 $ 0.3 $ 320.2 $ 2,265.0 $ ( 166.1 ) $ ( 500.8 ) $ 1,918.6

Common Stock Additional

Paid-in Capital Retained Earnings Accumulated

Comprehensive Income (Loss) Treasury Stock Total

Shares Amount

BALANCE, DECEMBER 31, 2021

25,336,054 $ 0.3 $ 325.8 $ 2,345.9 $ ( 156.2 ) $ ( 690.4 ) $ 1,825.2

Net income — — — 202.9 — — 202.9

5 unchanged sentences

— — — ( 6.2 ) — — ( 6.2 )

BALANCE, SEPTEMBER 30, 2021 25,343,056 $ 0.3 $ 320.2 $ 2,265.0 $ ( 166.1 ) $ ( 500.8 ) $ 1,918.6

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

Net income — — — 126.4 — — 126.4

Other comprehensive income, net of taxes — — — — 7.0 — 7.0

Net issuance of treasury shares to stock compensation plans 165 — ( 1.4 ) — — 3.6 2.2

Stock-based compensation — — 5.3 — — — 5.3

BALANCE, SEPTEMBER 30, 2020 25,439,746 $ 0.3 $ 304.0 $ 1,723.3 $ ( 206.3 ) $ ( 464.3 ) $ 1,356.9

BALANCE, MARCH 31, 2022

25,266,915 $ 0.3 $ 324.2 $ 2,542.7 $ ( 120.6 ) $ ( 797.3 ) $ 1,949.2

Common Stock Additional

3 unchanged sentences

BALANCE, DECEMBER 31, 2020

25,433,048 $ 0.3 $ 308.3 $ 1,817.9 $ ( 184.0 ) $ ( 492.8 ) $ 1,449.6

Net income — — — 101.9 — — 101.9

Other comprehensive loss, net of taxes — — — — ( 59.3 ) — ( 59.3 )

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

Other comprehensive income, net of taxes — — — — 27.9 — 27.9

Net issuance of treasury shares to stock compensation plans ( 65,312 ) — ( 9.0 ) — — 5.5 ( 3.5 )

2 unchanged sentences

— — — ( 5.6 ) — — ( 5.6 )

BALANCE, SEPTEMBER 30, 2020 25,439,746 $ 0.3 $ 304.0 $ 1,723.3 $ ( 206.3 ) $ ( 464.3 ) $ 1,356.9

BALANCE, MARCH 31, 2021

25,367,736 $ 0.3 $ 305.7 $ 1,914.2 $ ( 156.2 ) $ ( 487.3 ) $ 1,576.6

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

2 unchanged sentences

(In millions)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

4 unchanged sentences

Deferred income taxes 7.2 5.9

Asset impairments 1.7 23.8

Stock-based compensation 8.0 6.4

1 unchanged sentence

Gain on disposition of assets ( 21.4 ) ( 1.1 )

Loss on extinguishment of debt 3.8 13.7

Unrealized loss on derivative instruments 1.4 —

Other 0.1 ( 0.5 )

6 unchanged sentences

Floorplan notes payable — manufacturer affiliates

( 112.5 ) ( 137.9 )

Deferred revenues ( 0.1 ) ( 0.1 )

15 unchanged sentences

Repayments on credit facility — acquisition line

( 59.9 ) ( 296.5 )

Debt issuance costs ( 3.7 ) —

Borrowings of senior notes — 550.0

Repayments of senior notes — ( 857.9 )

Borrowings on other debt 171.1 40.1

6 unchanged sentences

Effect of exchange rate changes on cash 0.4 ( 1.3 )

Net increase in cash and cash equivalents 209.7 38.1

Net increase (decrease) in cash and cash equivalents 13.1 ( 4.3 )

CASH AND CASH EQUIVALENTS, beginning of period 18.7 87.3

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

INTERIM FINANCIAL INFORMATION

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., 35 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 Condensed Consolidated Financial Statements.

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

arranges related vehicle financing;

sells service and insurance contracts;

provides automotive maintenance and repair services;

and sells vehicle parts.

As of September 30, 2021, the Company’s retail network consisted of 117 dealerships i n the U.S., 55 deale rships in the U.K.

and 16 dealerships in Brazil.

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

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.

The Company’s operating results are generally subject to seasonal variations, as well as changes in the economic environment.

In the U.S., the Company generally experiences higher volumes of vehicle sales and service in the second and third quarters of each year.

In addition, in some regions of the U.S., vehicle purchases decline during the winter months due to inclement weather.

In the U.K., the first and third quarters tend to be stronger, driven by the vehicle license plate change months of March and September.

In Brazil, the first quarter is generally the weakest, driven by more consumer vacations and activities associated with Carnival, while the third and fourth quarters tend to be stronger.

Other factors unrelated to seasonality, such as the COVID-19 pandemic, changes in economic conditions, manufacturer incentive programs, supply issues, seasonal weather events and changes in foreign currency exchange rates may exaggerate seasonal or cause counter-seasonal fluctuations in the Company’s revenues and operating income.

Basis of Presentation

BASIS OF PRESENTATION AND CONSOLIDATION AND ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The accompanying Condensed Consolidated Financial Statements and notes thereto, have been prepared in accordance with U.S.

2 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 Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 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.

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 combined into the caption Other long-term liabilities in the Condensed Consolidated Balance Sheets.

The reclassification within the Condensed Consolidated Balance Sheets had no effect on any subtotal in the statements.

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.

On November 12, 2021, the Company entered into a Share Purchase Agreement (the “Brazil Agreement”) with Original Holdings S.A.

Pursuant to the terms and conditions set forth in the Brazil Agreement, Buyer will acquire 100 % of the issued and outstanding equity interests of the Company’s Brazilian operations (the “Brazil Disposal Group”) for approximately BRL 510.0 million in cash (the “Brazil Disposal”).

The Brazil Disposal is expected to close before the end of the second quarter of 2022.

The Brazil Disposal Group met the criteria to be reported as held for sale and discontinued operations.

Therefore, the related assets, liabilities and operating results of the Brazil Disposal Group are reported as discontinued operations (the “Brazil Discontinued Operations”) for all periods presented.

The Brazil Disposal Group was previously included in the Brazil segment.

Effective as of the fourth quarter of 2021, the Company is aligned into two reportable segments:

Refer to Note 5 .

Segment Information for additional information on the Company’s segments.

Unless otherwise specified, disclosures in these Condensed Consolidated Financial Statements reflect continuing operations only.

Certain prior-period amounts, primarily related to the Brazil Discontinued Operations, have been reclassified in the Condensed Consolidated Financial Statements and accompanying notes to conform to current-period presentation.

Refer to Note 4.

Discontinued Operations and Other Divestitures for additional information on the Brazil Discontinued Operations.

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

1 unchanged sentence

These Condensed 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.

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 and 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.

GROUP 1 AUTOMOTIVE, INC.

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

Use of Estimates

4 unchanged sentences

however, actual results could differ materially from such estimates.

The significant estimates made by management in the accompanying Condensed 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.

The significant estimates made by management in the accompanying Condensed Consolidated Financial Statements include, but not limited to, inventory valuation adjustments, reserves for future chargebacks on finance, insurance and VSC 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.

GROUP 1 AUTOMOTIVE, INC.

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

Recent Accounting Pronouncements

1 unchanged sentence

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.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“Topic 848”).

Topic 848 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 are intended to ease the financial reporting burdens mainly related to contract modification accounting, hedge accounting and lease accounting.

1 unchanged sentence

The guidance is effective for all entities 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 a material impact on the Company’s consolidated financial statements.

LIBOR is used as an interest rate “benchmark” for certain of the Company’s mortgages, other debt and lease contracts.

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

The Company applied the relief described for the modification of its Revolving Credit Facility (as defined in Note 10.

Floorplan Notes Payable) to SOFR in 2021.

The Company will continue to apply the relief as its arrangements are modified and does not expect the adoption will have a material impact on the Company’s condensed consolidated financial statements.

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

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

Brazil Total U.S.

Three Months Ended March 31, 2022

New vehicle retail sales $ 1,433.1 $ 312.0 $ 1,745.1

7 unchanged sentences

Total revenues $ 3,091.3 $ 753.0 $ 3,844.4

Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020

Brazil Total U.S.

Three Months Ended March 31, 2021

New vehicle retail sales $ 1,246.0 $ 263.2 $ 1,509.2

8 unchanged sentences

(1) The Company has elected 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 $ 5.1 million and $ 7.6 million during the three months ended September 30, 2021 and 2020, respectively, and $ 18.7 million and $ 16.9 million during the nine months ended September 30, 2021 and 2020, respectively, relating to performance obligations satisfied in previous periods on the Compa ny’s retrospective commission income contracts.

(2) Includes variable consideration recognized of $ 10.1 million and $ 6.0 million during the three months ended March 31, 2022 and 2021, respectively, relating to performance obligations satisfied in previous periods on the Compa ny’s retrospective commission income contracts.

Refer to Note 8.

Receivables, Net and Contract Assets for the balance of the Company’s contract assets associated with revenues from the arrangement of financing and sale of service and insurance contracts.

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.

Prime Acquisition

In November 2021, the Company completed the acquisition of the Prime Automotive Group (“Prime”), including 28 dealerships, certain real estate and three collision centers in the Northeastern U.S.

(collectively referred to as the “Prime Acquisition”), for aggregate consideration of $ 934.2 million.

GROUP 1 AUTOMOTIVE, INC.

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

ACQUISITIONS AND DISPOSITIONS

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

and seven dealerships, representing nine franchises, in the U.K.

Aggregate consideration paid for these dealerships, which were accounted for as business combinations, totaled $ 74.6 million, net of cash acquired.

The Company analyzed and assessed all available information related to property and equipment and property lease contracts, determining the preliminary fair values were appropriate and no material adjustments were recorded.

The Company previously recorded a $ 33.4 million deposit for the purchase of an additional dealership as part of the Prime Acquisition, which had not closed as of December 31, 2021.

As of March 31, 2022, the Company is still waiting for distributor approval to obtain ownership of the additional dealership.

Pursuant to purchase agreement with the seller, the seller initiated legal action against the distributor to compel the approval of the sale of the dealership.

In March 2022, upon the contractual release of funds from escrow to the seller related to the dealership, the deposit was recognized as additional consideration paid and reflected as additional goodwill, resulting in total consideration associated with the Prime Acquisition of $ 967.6 million.

If such legal action is resolved within the 12-month measurement period following the acquisition date, the Company will make an adjustment to reflect the fair value of the acquisition of this dealership.

The results of the Prime Acquisition are included in the U.S.

The goodwill is deductible for income tax purposes.

The following table summarizes the consideration paid and aggregate amounts of assets acquired and liabilities assumed (in millions):

Total consideration $ 967.6

Identifiable assets acquired and liabilities assumed

Inventories $ 136.7

Property and equipment 267.4

Intangible franchise rights 135.3

Operating lease assets 58.3

Other assets (1)

Total assets acquired 660.8

Operating lease liabilities 56.6

Other liabilities (2)

Total liabilities assumed 94.9

Total identifiable net assets 565.9

Goodwill $ 401.7

(1) Other assets acquired in connection with the Prime Acquisition include $ 55.3 million of assets classified as held for sale as of the acquisition date.

See the table below for additional details.

(2) Other liabilities assumed in connection with the Prime Acquisition include $ 1.7 million of liabilities classified as held for sale as of the acquisition date.

See the table below for additional details.

Prime assets classified as held for sale (in millions)

Inventories $ 10.4

Property and equipment 28.1

Operating lease assets 1.7

Goodwill 15.1

Total other assets classified as held for sale $ 55.3

Prime liabilities classified as held for sale (in millions)

Operating lease liabilities $ 1.7

The Company’s Condensed Consolidated Statement of Operations included revenues and net income attributable to Prime for the three months ended March 31, 2022, of $ 414.1 million and $ 27.5 million, respectively.

Other Acquisitions

During the three months ended March 31, 2022, the Company acquired one Toyota dealership in the U.S.

Total consideration paid for this dealership, which was accounted for as a business combination, was $ 250.4 million, consisting of cash paid of $ 247.7 million and a payable of $ 2.7 million.

Goodwill and franchise rights intangibles associated with this acquisition totaled $ 136.0 million and $ 70.5 million, respectively.

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

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

Goodwill associated with these acquisitions totaled $ 22.6 million.

During the nine months ended September 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.

On September 13, 2021, the Company entered into a Purchase Agreement (the “Purchase Agreement”) to purchase substantially all the assets, including real estate, of Prime Automotive Group (the “Seller”), headquartered in Westwood, Massachusetts (the “Prime Acquisition”).

The Company expects to pay a purchase price of approximately $ 880 million, excluding repayment of sellers’ floorplan notes payable, subject to customary adjustments described in the Purchase Agreement (the “Purchase Price”) and appropriate reductions for any exercise of customary manufacturer rights of first refusal.

The Purchase Price is expected to be financed through a combination of cash, available lines of credit and debt financing.

The operating assets expected to be acquired include 30 dealerships, representing 43 franchises, and three collision centers in the Northeastern U.S.

In connection with the execution of the Purchase Agreement, the Company made a deposit of $ 20.0 million into an escrow account.

The deposit is recorded in Other Current Assets on the Condensed Consolidated Balance Sheets and reflected in Othe r within Cash Flows from Investing Activities on the Condensed Consolidated Statements of Cash Flows.

The Prime Acquisition is expected to close in November 2021.

In October 2021, the Company acquired three dealerships representing six franchises in the U.S.

for approximately $ 66.8 million, excluding repayment of sellers’ floorplan notes payable.

GROUP 1 AUTOMOTIVE, INC.

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

DISCONTINUED OPERATIONS AND OTHER DIVESTITURES

Brazil Discontinued Operations

On November 12, 2021, the Company entered into the Brazil Disposal.

The Brazil Disposal is expected to close before the end of the second quarter of 2022.

The sale price of BRL 510.0 million includes a holdback amount, for general representations and warranties, of BRL 115.0 million or approximately $ 24.2 million, to be held in escrow for a period of five years from the close of the transaction.

At the conclusion of the five-year period, the remaining funds held in escrow would be released to the Company.

This amount has been included in the estimated proceeds.

During the fourth quarter of 2021, the Company recognized a net loss of $ 77.5 million on the Brazil Disposal.

During the three months ended March 31, 2022, the Company did not recognize any additional net loss on the disposal of the Brazil Disposal Group.

The following table summarizes the estimated fair value of proceeds expected and net carrying value of the assets disposed as of March 31, 2022 (in millions):

Estimated fair value of proceeds from disposition $ 106.0

Estimated net assets disposed 51.2

Estimated gain before currency translation adjustments 54.8

Estimated amount of currency translation loss recorded in AOCI ( 118.3 )

Estimated incremental costs to sell 14.0

Net loss on disposal of the Brazil Disposal Group $ ( 77.5 )

Upon sale of a foreign entity, amounts recorded within Accumulated Other Comprehensive Income (loss) (“AOCI”) on the Condensed Consolidated Balance Sheets, are required to be reclassified into earnings on the date of disposition.

For purposes of determining the net gain or loss on the Brazil Disposal Group, the Company included the non-cash currency translation adjustment recorded in AOCI of a loss of $ 118.3 million attributable to the Brazil Disposal Group.

The loss on sale indicates an impairment of assets, however, the loss was entirely the result of the reclassification of the non-cash currency translation adjustment from AOCI .

For the three months ended March 31, 2022, the Company has presented a valuation allowance against assets held for sale of the Brazil Disposal Group to reflect the expected loss not attributable to a particular asset within the Brazil Disposal Group.

In addition, the purchase price is denominated in BRL, which is subject to foreign currency exchange risk.

In order to partially mitigate this risk, the Company entered into a foreign currency derivative for the conversion of BRL to USD in the form of a costless collar which protects the Company from significant downside exposure on $ 70.0 million of the expected purchase consideration.

Any gains or losses associated with the foreign currency derivative are presented as estimated incremental costs to sell in the table above and are fully offset by corresponding foreign currency impacts to the estimated fair value of proceeds from the disposition.

GROUP 1 AUTOMOTIVE, INC.

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

Results of the Brazil Discontinued Operations were as follows (in millions):

Three Months Ended March 31,

New vehicle retail sales $ 48.6 $ 34.1

Used vehicle retail sales 22.2 10.7

Used vehicle wholesale sales 5.3 2.0

Parts and service sales 10.7 7.9

Finance, insurance and other, net 1.5 1.4

Total revenues 88.3 56.1

COST OF SALES:

New vehicle retail sales 43.8 30.8

Used vehicle retail sales 20.6 9.6

Used vehicle wholesale sales 5.3 1.8

Parts and service sales 6.3 4.5

Total cost of sales 76.1 46.7

GROSS PROFIT 12.3 9.4

Selling, general and administrative expenses 8.7 7.1

Depreciation and amortization expense 0.4 0.3

INCOME FROM DISCONTINUED OPERATIONS 3.1 2.1

Floorplan interest expense 0.7 —

Other interest (income) expense, net ( 0.1 ) 0.6

INCOME BEFORE INCOME TAXES — DISCONTINUED OPERATIONS 2.5 1.4

Provision for income taxes 0.7 0.4

NET INCOME — DISCONTINUED OPERATIONS $ 1.8 $ 1.0

The following table presents cash flows from operating and investing activities for the Brazil Discontinued Operations (in millions):

Three Months Ended March 31,

Net cash provided by (used in) operating activities — discontinued operations $ 11.8 $ ( 6.6 )

Net cash used in investing activities — discontinued operations $ ( 0.3 ) $ ( 0.5 )

GROUP 1 AUTOMOTIVE, INC.

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

Assets and liabilities of the Brazil Discontinued Operations were as follows (in millions):

March 31, 2022 December 31, 2021

Cash and cash equivalents $ 15.2 $ 3.7

Contracts-in-transit and vehicle receivables, net 5.7 2.3

Accounts and notes receivable, net 11.6 11.8

Inventories 37.0 37.2

Prepaid expenses 2.3 1.9

Assets of Brazil Discontinued Operations — current 71.8 56.9

Property and equipment, net 26.0 22.3

Operating lease assets 2.5 2.4

Other long-term assets 9.6 7.8

Assets of Brazil Discontinued Operations — non-current (1)

Total assets, before valuation allowance 109.9 89.5

Valuation allowance ( 63.5 ) ( 76.4 )

Total assets, net of valuation allowance (1)

$ 46.3 $ 13.0

Floorplan notes payable — credit facility and other $ 1.7 $ 3.3

Floorplan notes payable — manufacturer affiliates 23.0 20.1

Current operating lease liabilities 2.6 2.5

Accounts payable 22.6 13.7

Accrued expenses and other current liabilities 22.5 8.7

Liabilities of Brazil Discontinued Operations — current $ 72.5 $ 48.3

(1) The assets of the Brazil Discontinued Operations are classified in current assets in the Condensed Consolidated Balance Sheet as of March 31, 2022 and December 31, 2021, as the Brazil Disposal is expected to close before the end of the second quarter of 2022.

Assets and Liabilities Held for Sale

Assets and liabilities classified as held for sale consisted of the following (in millions):

March 31, 2022 December 31, 2021

Current assets classified as held for sale

Brazil Discontinued Operations $ 46.3 $ 13.0

Prime Acquisition (1)

Total current assets classified as held for sale $ 81.8 $ 100.3

Current liabilities classified as held for sale

Brazil Discontinued Operations $ 72.5 $ 48.3

Prime Acquisition (1)

Total current liabilities classified as held for sale $ 74.6 $ 49.9

(1) For additional details on current assets and current liabilities classified as held for sale in connection with the Prime Acquisition as of the acquisition date, refer to Note 3.

Acquisitions.

(2) Includes $ 7.5 million and $ 9.9 million of goodwill reclassified to assets held for sale as of March 31, 2022 and December 31, 2021.

Other Divestitures

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 nine months ended September 30, 2021, the Company recorded a net pre-tax gain totaling $ 1.8 million related to the disposition of two dealerships representing two franchises and one franchise within an existing dealership in the U.S.

During the three months ended March 31, 2022, the Company recorded a net pre-tax gain totaling $ 18.7 million related to the disposition of two dealerships representing two franchises in the U.S.

The dispositions reduced goodwill by $ 17.0 million.

During the three months ended March 31, 2021, the Company recorded a net pre-tax gain totaling $ 1.0 million related to the disposition of one dealership representing one franchise and one franchise within an existing dealership in the U.S.

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

During the nine months ended September 30, 2020, the Company had no activity related to dispositions.

GROUP 1 AUTOMOTIVE, INC.

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

SEGMENT INFORMATION

The Company conducts business in three reportable segments:

the U.S., the U.K.

As of March 31, 2022, the Company had two reportable segments:

The Company defines its segments as those operations whose results the Company’s Chief Executive Officer, who is the chief operating decision maker, regularly reviews to analyze performance and allocate resources.

4 unchanged sentences

and sell vehicle parts.

GROUP 1 AUTOMOTIVE, INC.

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

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

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

Brazil Total U.S.

Selected reportable segment data is as follows for the three months ended March 31, 2022 and 2021 (in millions):

Three Months Ended March 31, 2022

Total revenues $ 3,091.3 $ 753.0 $ 3,844.4

1 unchanged sentence

$ 230.6 $ 31.7 $ 262.3

Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020

Brazil Total U.S.

Three Months Ended March 31, 2021

Total revenues $ 2,404.3 $ 549.6 $ 2,953.9

Income (loss) before income taxes (2)

$ 132.9 $ 27.1 $ 1.0 $ 161.0 $ 249.8 $ 4.7 $ ( 12.4 ) $ 242.2

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

segment, $ 3.8 million in acquisition costs, a $ 3.7 million gain from favorable legal settlements, $ 1.7 million in asset impairments, a $ 0.9 million non-cash gain associated with certain interest rate swaps and $ 0.6 million in expenses related to Hurricane Ida;

segment, $ 0.6 million in acquisition costs;

and in the Brazil segment, a $ 3.8 million loss on debt extinguishment.

For the nine months ended September 30, 2021, income before income taxes includes the following:

segment, a $ 4.7 million gain from favorable legal settlements, $ 3.8 million in acquisition costs, $ 2.8 million in expenses related to a winter storm and Hurricane Ida, $ 1.7 million in asset impairments, a $ 1.7 million net gain on dealership and real estate transactions and a $ 1.4 million non-cash loss associated with certain interest rate swaps;

segment, a $ 0.6 million net loss on dealership and real estate transactions and $ 0.6 million in acquisitions costs;

and in the Brazil segment, a $ 3.8 million loss on debt extinguishment.

(2) For the three months ended September 30, 2020, income (loss) before income taxes includes a $ 3.3 million loss on debt extinguishment in the U.S.

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

segment, a $ 13.7 million lo ss on debt extinguishment an d $ 10.6 million i n stock-based compensation expense related to an out-of-period adjustment;

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.

Income before income taxes $ 121.6 $ 8.4 $ 130.0

(1) For the three months ended March 31, 2022, income before income taxes includes net gains of $ 18.7 million and $ 2.7 million on dealership and real estate dispositions in the U.S.

segments, respectively.

Refer to Note 4.

Discontinued Operations and Other Divestitures for additional information .

EARNINGS PER SHARE

5 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 and nine months ended September 30, 2021 and 2020 (in millions, except share and per share data):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

The following table sets forth the calculation of EPS on total net income for the three months ended March 31, 2022 and 2021 (in millions, except share and per share data):

Three Months Ended March 31,

Weighted average basic common shares outstanding 16,529,351 17,757,693

Dilutive effect of stock-based compensation and employee stock purchases 82,298 58,661 76,940 47,919

Dilutive effect of stock-based awards and employee stock purchases 56,264 66,396

Weighted average dilutive common shares outstanding 16,585,614 17,824,088

Net income $ 202.9 $ 101.9

Earnings allocated to participating securities 5.7 4.6 15.7 6.7

Earnings allocated to participating securities from continued operations 5.8 3.4

Earnings allocated to participating securities from discontinued operations 0.1 —

Net income available to basic common shares $ 197.0 $ 98.5

1 unchanged sentence

Net income $ 202.9 $ 101.9

Earnings allocated to participating securities 5.7 4.5 15.6 6.7

Earnings allocated to participating securities from continued operations 5.8 3.4

Earnings allocated to participating securities from discontinued operations 0.1 —

Net income available to diluted common shares $ 197.1 $ 98.5

12 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.

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 September 30, 2021 and December 31, 2020, the carrying value of these instruments was $ 271.6 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.

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

Fixed Rate Long-Term Debt

3 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):

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

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 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.

The Company holds the majority of its interest rate swaps to hedge against variability of interest payments indexed to LIBOR and SOFR.

The Company’s interest rate swaps are measured at fair value utilizing a one-month LIBOR or SOFR 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.

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 rating agencies.

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

The inputs to the fair value measurements reflect Level 2 of the hierarchy framework.

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 gross in the Condensed Consolidated Balance Sheets, were as follows (in millions):

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Other current assets $ — $ —

4 unchanged sentences

Total liabilities $ — $ 11.2

(1) As of September 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, with aggregate notional value of $ 250.0 million and a weighted average interest rate of 1.76 % that will mature on December 31, 2021, due to the continued decline in the net floorplan liability balance as a result of decreased vehicle inventory levels.

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.

No interest rate swaps were de-designated by the Company during the three months ended September 30, 2021.

The Company reclassified the entire previously deferred loss associated with the de-designated interest rate 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 interest rate swaps were probable of not occurring due to the reduced inventory levels described above.

Additionally, the Company recorded unrealized mark-to-market gains of $ 1.0 million and $ 2.0 million and realized losses of $ 1.1 million and $ 2.1 million associated with these interest rate swaps within Floorplan interest expense for the three months and nine months ended September 30, 2021, respectively.

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) in the Company’s Condensed Consolidated Balance Sheets.

Interest rate swaps designated as cash flow hedges and the related gains or losses are deferred in stockholders’ equity as a component of AOCI in the Company’s Condensed Consolidated Balance Sheets.

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 as Floorplan interest expense .

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

As of September 30, 2021, the Company held 33 interest rate swaps designated as cash flow hedges with a total notional value of $ 686.1 million that fixed the underlying one-month LIBOR at a weighted average rate of 1.37 %.

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

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

Gains or losses for periods where future forecasted hedged transactions are deemed probable of not occurring are reclassified from AOCI into income as Floorplan interest expense .

As of March 31, 2022, the Company held 41 interest rate swaps designated as cash flow hedges with a total notional value of $ 962.1 million that fixed its underlying one-month LIBOR or SOFR at a weighted average rate of 1.26 % .

The Company also held 2 additional interest rate swaps designated as cash flow hedges with forward start dates beginning in December 2023, that had an aggregate notional value of $ 100.0 million and a weighted average interest rate of 0.94 % as of March 31, 2022.

The maturity dates of the Company’s designated interest rate swaps with forward start dates range between December 2027 and December 2028.

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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Derivatives in Cash Flow Hedging Relationship 2022 2021

1 unchanged sentence

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

Statement of Operations Classification Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Statement of Operations Classification Three Months Ended March 31,

Floorplan interest expense $ ( 1.3 ) $ ( 2.2 )

Other interest expense, net $ ( 1.2 ) $ ( 0.9 )

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 $ 10.6 million.

The amount of gain expected to be reclassified out of AOCI into earnings as an offset to Floorplan interest expense or Other interest expense, net in the next twelve months is $ 10.2 million .

GROUP 1 AUTOMOTIVE, INC.

2 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Contracts-in-transit and vehicle receivables, net:

15 unchanged sentences

$ 41.9 $ 37.5

(1) No allowance for doubtful accounts was recorded for contract assets as of September 30, 2021 or December 31, 2020.

(1) No allowance for doubtful accounts was recorded for contract assets as of March 31, 2022 or December 31, 2021.

Debt consisted of the following (in millions):

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

4.00 % Senior Notes due August 15, 2028

12 unchanged sentences

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

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

As of March 31, 2022, borrowings under the Acquisition Line, a component of the Revolving Credit Facility (as defined in Note 10.

Floorplan Notes Payable), totaled $ 299.7 million .

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

The average interest rate on this facility was 1.39 % during the three months ended March 31, 2022.

Real Estate Related

1 unchanged sentence

that are paid in installments.

As of September 30, 2021, borrowings outstanding under these facilities totaled $ 598.1 million, gross of debt issuance costs, comprised of $ 505.2 million in the U.S.

As of March 31, 2022, borrowings ou tstanding under these facilities totaled $ 760.9 million, gross of debt issuance costs, comprised of $ 649.0 million in the U.S.

and $ 111.9 million in the U.K.

1 unchanged sentence

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

New 4.00 % Senior Notes

On October 21, 2021, the Company issued an additional $ 200.0 million aggregate principal amount of its 4.00 % Senior Notes due 2028 (the “New Notes”) for net proceeds of approximately $ 199.7 million.

The New Notes will have identical terms as the initial 4.00 % Senior Notes issued on August 17, 2020, and will be treated as a single class of securities.

Bridge Facility

In connection with entering into the Purchase Agreement, the Company entered into a commitment letter, dated September 12, 2021 (the “Commitment Letter”), with Wells Fargo Bank, National Association (“Wells Fargo”), pursuant to which, among other things, Wells Fargo has committed to provide a portion of the debt financing for the Prime Acquisition, consisting of a $ 250.0 million unsecured bridge loan (the “Bridge Facility”), on the terms and subject to the conditions set forth in the Commitment Letter.

Although Wells Fargo has committed to fund up to $ 250.0 million under the Bridge Facility, the Company anticipates utilizing only a portion of such commitment to finance the Prime Acquisition.

The Bridge Facility is subject to mandatory prepayment at 100 % of the outstanding principal amount thereof with the net proceeds from the issuance of any debt securities of the Company and upon other specified events.

The obligation of Wells Fargo to provide this debt financing is subject to a number of customary conditions, including, without limitation, execution and delivery of certain definitive documentation.

In connection with the Prime Acquisition, the Company entered into a commitment letter with Wells Fargo Bank (“Bridge Facility”) to provide a portion of the debt financing.

As of December 31, 2021, borrowings outstanding under the Bridge Facility totaled $ 140.0 million.

During the three months ended March 31, 2022, the Company paid off the total outstanding borrowings under the Bridge Facility of $ 140.0 million.

FLOORPLAN NOTES PAYABLE

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Revolving Credit Facility — floorplan notes payable $ 599.2 $ 511.7

10 unchanged sentences

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”).

On March 9, 2022, in the U.S., the Company entered into an amended revolving syndicated credit arrangement with 21 participating financial institutions that matures on March 9, 2027 (“Revolving Credit Facility”).

In addition to extending the term, the amendment increases the availability to $ 2.0 billion, with the ability to increase to $ 2.4 billion, as further described below.

The Revolving Credit Facility consists of two tranches:

4 unchanged sentences

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.

The Acquisition Line includes a $ 100.0 million sub-limit for letters of credit.

As of September 30, 2021 and December 31, 2020, the Company had $ 12.6 million and $ 17.8 million, respectively, in outstanding letters of credit.

GROUP 1 AUTOMOTIVE, INC.

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

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 capacity under these two tranches can be re-designated within the overall $ 2.0 billion commitment.

Th e Acquisition Line includes a $ 100.0 million sub-limit for letters of credit.

The Company had $ 12.6 million in letters of credit outstanding as of both March 31, 2022 and December 31, 2021.

Floorplan Line bears interest at rates equal to SOFR plus 120 basis points for new vehicle inventory and SOFR plus 150 basis points for used vehicle inventory.

The weighted average interest rate on the U.S.

Floorplan Line was 1.17 % as of September 30, 2021, excluding the impact of the Company’s interest rate swap 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.

Floorplan Line was 1.57 % as of March 31, 2022, excluding the impact of the Company’s interest rate swap derivative instruments.

The Acquisition Line bears interest at SOFR or a SOFR equivalent plus 110 to 210 basis points , depending on the Company’s total adjusted leverage ratio, on borrowings in USD, Euros or GBP.

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

1 unchanged sentence

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.

In conjunction with the Revolving Credit Facility, the Company had $ 2.8 million and $ 3.6 million of related unamortized debt issuance costs as of September 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.

The Acquisition Line requires a commitment fee ranging fr om 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 amended Revolving Credit Facility described above, the Company incurred $ 3.4 million in additional debt issuance costs.

The Company had $ 5.5 million and $ 2.6 million of related unamortized debt issuance costs as of March 31, 2022 and December 31, 2021, 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.

GROUP 1 AUTOMOTIVE, INC.

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

Floorplan Notes Payable — Manufacturer Affiliates

4 unchanged sentences

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 September 30, 2021.

The interest rate on the FMCC Facility was 5.50 % before considering the applicable incentives as of March 31, 2022.

Other Manufacturer Facilities

The Company has other credit facilities in the U.S., the U.K.

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

As of September 30, 2021, borrowings outstanding under these facilities totaled $ 208.1 million, comprised of $ 77.6 million in the U.S., with annual interest rates ranging from less than 1 % to approximately 5 %, $ 114.5 million in the U.K., with annual interest rates ranging from approximately 1 % to 4 %, and $ 16.0 million in Brazil, with annual interest rates ranging from approximately 6 % to 12 %.

The Company has other credit facilities in the U.S.

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

As of March 31, 2022, borrowings outstanding under these facilities totaled $ 227.5 million , comprised of $ 92.4 million in the U.S., with annual interest rates ranging from less than 1 % to approximately 5 % , and $ 135.1 million in the U.K., with annual interest rates ranging from approximately 1 % to 4 % .

Offset Accounts

4 unchanged sentences

Non-Cash Activities

The accrual for capital expenditures increased $ 2.1 million an d decreased $ 1.0 million during the nine months ended September 30, 2021 and 2020, respectively.

The accrual for capital expenditures decreased $ 0.4 million an d increased $ 2.4 million during the three months ended March 31, 2022 and 2021, respectively.

Interest and Income Taxes Paid

Cash paid for interest, including the monthly settlement of the Company’s interest rate swaps, was $ 61.5 million and $ 77.7 million for the nine months ended September 30, 2021 and 2020, respectively.

Cash paid for interest, including the monthly settlement of the Company’s interest rate swaps, was $ 28.6 million and $ 24.6 million for the three months ended March 31, 2022 and 2021, respectively.

Refer to Note 7.

Financial Instruments and Fair Value Measurements for further discussion of the Company’s interest rate swaps.

Cash paid for income taxes, net of refunds, was $ 102.6 million and $ 26.2 million for the nine months ended September 30, 2021 and 2020, respectively.

Cash paid for income taxes, net of refunds, was $ 7.8 million and $ 0.7 million for the three months ended March 31, 2022 and 2021, respectively.

COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

Legal Proceedings

As of September 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.

As of March 31, 2022, 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.

However, the results of current or future matters cannot be predicted with certainty;

3 unchanged sentences

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 $ 25.4 million as of September 30, 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 $ 4.3 million as of September 30, 2021.

Total associated letters of credit issued on behalf of the lessee where the Company is the beneficiary was $ 3.3 million as of March 31, 2022.

GROUP 1 AUTOMOTIVE, INC.

2 unchanged sentences

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

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

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

6 unchanged sentences

Other interest expense, net (pre-tax) — 1.2 1.2

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

Benefit for income taxes — ( 0.6 ) ( 0.6 )

Net current period other comprehensive income (loss) ( 0.2 ) 35.9 35.7

Balance, September 30, 2021 $ ( 158.2 ) $ ( 7.9 ) $ ( 166.1 )

Nine Months Ended September 30, 2020

Balance, March 31, 2022 $ ( 158.4 ) $ 37.9 $ ( 120.6 )

Three Months Ended March 31, 2021

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

6 unchanged sentences

Other interest expense (pre-tax) — 0.9 0.9

Realized loss on interest rate swap termination (pre-tax) — 0.1 0.1

Benefit for income taxes — ( 0.7 ) ( 0.7 )

Net current period other comprehensive loss ( 24.4 ) ( 35.0 ) ( 59.3 )

Balance, September 30, 2020 $ ( 167.2 ) $ ( 39.1 ) $ ( 206.3 )

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

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

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