What changed in this filing

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Item 9A. Controls and Procedures

2023-02-16 compared with 2022-02-23 · 287 added, 511 removed, 1288 unchanged (38% of the section changed)

14 unchanged sentences

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

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

GAAP, and includes those policies and procedures that:

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

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

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

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

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

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In making this assessment, management used the 2013 framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework .

As permitted by guidelines established by the Securities and Exchange Commission for newly acquired businesses, we excluded several of our recently acquired businesses in 2021, comprised of 38 dealerships and four collision centers (the “Excluded Acquisitions”), from the scope of our annual report on internal controls over financial reporting for the year ended December 31, 2021.

As permitted by guidelines established by the SEC for newly acquired businesses, we excluded several of our recently acquired businesses in 2022, comprised of five dealerships and two collision centers (the “Excluded Acquisitions”), from the scope of our annual report on internal controls over financial reporting for the year ended December 31, 2022.

The Excluded Acquisitions comprised approximately $210.7 million of our consolidated total assets as of December 31, 2022, and $92.4 million of our consolidated revenues for the year then ended.

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 16, 2023, expressed an unqualified opinion on those financial statements.

As described in Management's Annual Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at 38 dealerships and four collision centers (the “Excluded Acquisitions”).

As described in Management's Annual Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at five dealerships and two collision centers (the “Excluded Acquisitions”).

These Excluded Acquisitions constitute $210.7 million of consolidated total assets as of December 31, 2022, and $92.4 million of consolidated revenues for the year then ended.

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Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Directors, Executive Officers and Corporate Governance

Executive Officers of Group 1

The following sets forth certain information regarding our executive officers as of February 23, 2022.

Name Age Position Years with Group 1 Years of Automotive Experience

Hesterberg 68 President and Chief Executive Officer 16.5 47

Kenningham 57 President, U.S.

and Brazilian Operations 10.5 34

McHenry 47 Senior Vice President and Chief Financial Officer 14 17

Frank Grese Jr.

70 Senior Vice President of Training, Operations Support and Employee Communications 17 47

DeLongchamps 61 Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs 17.5 39

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

Prior to joining us, Mr.

Hesterberg served as Group Vice President, North America Marketing, Sales and Service for Ford Motor Company, a global manufacturer and distributor of cars, trucks and automotive parts, since October 2004.

From July 1999 to September 2004, he served as Vice President, Marketing, Sales and Service for Ford of Europe, and from 1999 until 2005, he served on the supervisory board of Ford Werke AG.

Hesterberg has also served as President and Chief Executive Officer of Gulf States Toyota, an independent regional distributor of new Toyota vehicles, parts and accessories.

He has also held various senior sales, marketing, general management, and parts and service positions with Nissan Motor Corporation in U.S.A.

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

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

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

Hesterberg also serves on the Board of Directors of the Greater Houston Partnership, where he serves on the Executive Committee and is Chairman of the Business Issues Committee.

Hesterberg received his B.A.

in Psychology at Davidson College and his M.B.A.

from Xavier University in 1978.

Kenningham has served as President, U.S.

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

Operations since May 2017.

Previously, he served as Regional Vice President of the West Region from February 2016 through April 2017 and as Regional Vice President of the East Region from April 2011 through January 2016.

Prior to joining Group 1, Mr.

Kenningham served as the Chief Operating Officer of Ascent Automotive in Houston.

In addition to a variety of sales, marketing, finance and automotive-logistics positions with Gulf States Toyota, from 2005 through 2008, Mr.

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

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

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

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

From 2007 until his appointment as CFO, Mr.

McHenry served as Group 1’s U.K.

Finance Director.

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

He joined Chandlers BMW in December 2004.

Prior to entering the auto retail business, Mr.

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

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

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

Frank Grese Jr.

was appointed Senior Vice President of Training, Operations Support and Employee Communications effective January 1, 2022.

From February 1, 2016 through December 31, 2021, he served as Senior Vice President of Human Resources, Training and Operations Support.

Prior to that appointment, Mr.

Grese served as Regional Vice President of the West Region from January 2006 to January 2016, and served as the Platform President of Group 1 Atlanta from December 2004 to December 2005.

Grese began his automotive career in the Ford Management Training Program in 1974 where he progressed through various assignments in district offices as well as Ford headquarters in Detroit.

He joined Nissan in 1982 where he ultimately held the position of National Dealer Advertising Manager.

Grese left the manufacturer side of the business and began working in various executive positions, including chief operating officer and district president, with large public and private dealer groups.

He last served as Director of Dealership Operations, working extensively with underperforming stores, for a large private dealer group.

Grese graduated from the University of Georgia with a degree in journalism.

DeLongchamps has served as Group 1’s Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs since January 2018.

He previously served as Group 1’s Vice President, Manufacturer Relations, Financial Services and Public Affairs from January 2012 through December 2017, and as Vice President, Manufacturer Relations and Public Affairs from January 2006 through December 2011.

DeLongchamps served as Vice President, Manufacturer Relations from July 2004 through December 2005.

DeLongchamps began his automotive retailing career in 1980, having served as District Manager for General Motors Corporation and Regional Operations Manager for BMW of North America, as well as various other management positions in the automotive industry.

Immediately prior to joining Group 1 in 2004, he was President of Advantage BMW, a Houston-based automotive retailer.

DeLongchamps also serves on the Board of Directors of Junior Achievement of Southeast Texas, Houston Christian High School and the Texas Bowl.

DeLongchamps received his B.B.A.

from Baylor University.

Code of Ethics

We have adopted a Code of Ethics for Specified Officers, which is applicable to our principal executive officer and other senior financial officers, who include our principal financial officer, principal accounting officer or controller, and persons performing similar functions.

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

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

Pursuant to Instruction G to Form 10-K, we incorporate by reference into this Item 10 the information to be disclosed in our definitive proxy statement prepared in connection with the 2023 Annual Meeting of Stockholders, which will be filed with the SEC within 120 days of December 31, 2022.

30 unchanged sentences

— Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of Group 1 Automotive, Inc.’s Registration Statement on Form S-1 (Registration No.

— Indenture, dated as of June 2, 2014, by and among Group 1 Automotive, Inc., the subsidiary guarantors party hereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed June 2, 2014)

— Registration Rights Agreement, dated as of June 2, 2014, by and among Group 1 Automotive, Inc., the guarantors party thereto and J.P.

Morgan Securities LLC, as representative of the initial purchasers named therein (incorporated by reference to Exhibit 4.3 to Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed June 2, 2014)

— Registration Rights Agreement, dated as of September 9, 2014, by and among Group 1 Automotive, Inc., the guarantors party thereto and J.P.

Morgan Securities LLC, as representative of the initial purchasers named therein (incorporated by reference to Exhibit 4.1 to Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed September 11, 2014)

— Indenture, dated as of December 8, 2015, by and among Group 1 Automotive, Inc., the subsidiary guarantors party hereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed December 9, 2015)

— Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.8 to Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No.

12 unchanged sentences

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

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

and former shareholders of UAB Motors Participações S.A.

named therein (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed March 5, 2013)

Number Description

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

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(incorporated by reference to Exhibit 10.16 of Group 1 Automotive, Inc.’s Registration Statement on Form S-1 Registration No.

— Form of Agreement between Toyota Motor Sales, U.S.A., Inc.

and Group 1 Automotive, Inc.

(incorporated by reference to Exhibit 10.12 of Group 1 Automotive, Inc.’s Registration Statement on Form S-1 Registration No.

— Toyota Dealer Agreement effective April 5, 1993 between Gulf States Toyota, Inc.

and Southwest Toyota, Inc.

(incorporated by reference to Exhibit 10.17 of Group 1 Automotive, Inc.’s Registration Statement on Form S-1 Registration No.

— Lexus Dealer Agreement effective August 21, 1995 between Lexus, a division of Toyota Motor Sales, U.S.A., Inc.

and SMC Luxury Cars, Inc.

(incorporated by reference to Exhibit 10.18 of Group 1 Automotive, Inc.’s Registration Statement on Form S-1 Registration No.

— Form of General Motors Corporation U.S.A.

Sales and Service Agreement (incorporated by reference to Exhibit 10.25 of Group 1 Automotive, Inc.’s Registration Statement on Form S-1 Registration No.

— Form of Ford Motor Company Sales and Service Agreement (incorporated by reference to Exhibit 10.38 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No.

001-13461) for the year ended December 31, 1998)

— Form of Supplemental Agreement to General Motors Corporation Dealer Sales and Service Agreement (Incorporated by reference to Exhibit 10.13 of Group 1 Automotive, Inc.’s Registration Statement on Form S-1 Registration No.

— Form of Chrysler Corporation Sales and Service Agreement (incorporated by reference to Exhibit 10.39 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No.

001-13461) for the year ended December 31, 1998)

— Form of Nissan Division of Nissan North America, Inc.

Dealer Sales and Service Agreement (incorporated by reference to Exhibit 10.25 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No.

001-13461) for the year ended December 31, 2003)

— Policy on Payment or Recoupment of Performance-Based Cash Bonuses and Performance-Based Stock Bonuses in the Event of Certain Restatement (incorporated by reference to the section titled “Policy on Payment or Recoupment of Performance-Based Cash Bonuses and Performance-Based Stock Bonuses in the Event of Certain Restatement” in Item 5.02 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

3 unchanged sentences

001-13461) filed November 13, 2007)

— Officer’s Terms of Engagement and Guarantees between UAB Motors Participações S.A.

and Lincoln da Cunha Pereira Filho dated as of February 28, 2013 (incorporated by reference to Exhibit 10.3 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No.

001-13461) for the quarter ended March 31, 2013)

— Purchase Agreement, dated October 6, 2021, by and among Group 1 Automotive, Inc., BofA Securities, Inc., as representative of the Initial Purchasers listed in Schedule 1 thereto, and the guarantors listed in Schedule 2 thereto (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

3 unchanged sentences

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

Number Description

Group 1 Automotive, Inc.

7 unchanged sentences

001-13461) filed March 16, 2005)

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

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

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

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

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

2 unchanged sentences

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

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

001-13461) filed May 22, 2018)

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

10 unchanged sentences

001-13461) filed May 22, 2018)

— Second Amendment to Employment Agreement, effective as of August 24, 2022, between Group 1 Automotive, Inc.

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

001-13461) for the quarter ended September 30, 2022).

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

4 unchanged sentences

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

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

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

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

— First Amendment to Incentive, Compensation, Confidentiality, Non-Disclosure and Non-Compete Agreement, effective as of August 24, 2022, between Group 1 Automotive, Inc.

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

001-13461) for the quarter ended September 30, 2022).

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

6 unchanged sentences

001-13461) filed December 1, 2006)

Number Description

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

4 unchanged sentences

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

— Transition and Separation Agreement, effective as of November 1, 2022, between Group 1 Automotive, Inc.

and Frank Grese

— Group 1 Automotive, Inc.

1 unchanged sentence

001-13461) for the year ended December 31, 2020)

— Commitment Letter, dated as of September 12, 2021, by and among Group 1 Automotive, Inc.

and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.1 of Group 1 Automotive Inc.’s Quarterly Report on Form 10-Q (File No.

001-13461) for the quarter ended September 30, 2021)

— Third Amendment to Eleventh Amended and Restated Revolving Credit Agreement dated as of December 30, 2021 among Group 1 Automotive, Inc., the Subsidiary Borrowers listed therein, the Lenders listed therein and U.S.

Bank National Association, N.A., as Administrative Agent

Bank National Association, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.45 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No.

001-13461) for the year ended December 31, 2021)

— Twelfth Amended and Restated Revolving Credit Agreement dated as of March 9, 2022, among Group 1 Automotive, Inc., the Subsidiary Borrowers listed therein, the Lenders listed therein and U.S.

Bank National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed on March 10, 2022).

— First Amendment to the Twelfth Amended and Restated Revolving Credit Agreement dated effective as of August 18, 2022 (incorporated by reference to Exhibit 10.1 of Group 1 Automotive Inc.’s Current Report on Form 8-K (File No.

001-13461) filed August 23, 2022).

— Group 1 Automotive, Inc.

1 unchanged sentence

— Consent of Deloitte & Touche LLP

— Consent of Ernst & Young LLP

— Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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Signature Title

Hesterberg President and Chief Executive Officer and Director

Hesterberg (Principal Executive Officer)

Kenningham President and Chief Executive Officer and Director

Kenningham (Principal Executive Officer)

/s/ Daniel J.

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Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

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

and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report date d February 16, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

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Critical Audit Matter Description

During the fourth quarter 2021, the Company completed an acquisition of 28 dealerships for a total purchase price of $934.2 million (“the acquisition”).

The acquisition was accounted for as a business combination.

During the year ended December 31, 2022, the Company acquired seven dealerships and two collision centers for a total of $541.6 million, net of cash acquired (“the acquisitions”).

The acquisitions were accounted for as business combinations.

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including indefinite-lived intangible assets of $127.4 million, related to rights under franchise agreements with manufacturers.

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If it is concluded that it is more-likely-than-not that an impairment exists, a quantitative test is performed.

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

The Company’s impairment analyses performed in fiscal year 2021 resulted in no impairment.

We identified the fair value of acquired intangible franchise rights for the acquisition, as well as the fair value estimates used in the impairment analyses as a critical audit matter because of the significant estimates and assumptions management makes related to forecasts of revenue growth rates, future EBITDA margins, weighted average cost of capital, and terminal growth rates.

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

The Company’s impairment analyses performed in fiscal year 2022 resulted in an impairment of $1.3 million of intangible franchise rights.

We identified the fair value of acquired intangible franchise rights for the acquisitions, as well as the fair value estimates used in the impairment analyses as a critical audit matter because of the significant estimates and assumptions management makes related to forecasts of revenue growth rates, future EBITDA margins, weighted average cost of capital, and terminal growth rates.

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

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures for the acquisition and the impairment analyses related to the forecasts of revenue growth rates, future EBITDA margins, weighted average cost of capital and terminal growth rates included the following, among others:

Our audit procedures for the acquisitions and the impairment analyses related to the forecasts of revenue growth rates, future EBITDA margins, weighted average cost of capital and terminal growth rates included the following, among others:

• We tested the effectiveness of internal controls over the intangible franchise rights fair value estimates, including those over the inputs, assumptions, and calculations.

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

Report of Independent Registered Public Accounting Firm

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

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows of Group 1 Automotive, Inc.

(the Company) for the year ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended December 31, 2019, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

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

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

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

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

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

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

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

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

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

We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

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

Houston, Texas

February 13, 2020 (except for Note 1, Note 4 and Note 20, as to which the date is February 23, 2022)

GROUP 1 AUTOMOTIVE, INC.

16 unchanged sentences

Other long-term assets 176.8 45.0

Long-term assets classified as held for sale — 35.2

TOTAL ASSETS $ 6,717.5 $ 5,749.4

14 unchanged sentences

Other long-term liabilities 129.8 127.7

Long-term liabilities classified as held for sale — 15.7

Commitments and Contingencies (Note 17)

39 unchanged sentences

Loss on extinguishment of debt — — 13.7

Other expense 1.2 — —

INCOME BEFORE INCOME TAXES 985.3 800.9 380.8

1 unchanged sentence

Net income from continuing operations 754.2 625.4 296.7

Net (loss) income from discontinued operations ( 73.3 ) ( 10.2 ) 5.0

Net loss from discontinued operations ( 2.7 ) ( 73.3 ) ( 10.2 )

NET INCOME $ 751.5 $ 552.1 $ 286.5

18 unchanged sentences

Other comprehensive income (loss), net of taxes:

Foreign currency translation adjustment ( 6.7 ) ( 8.7 ) 3.9

Net foreign currency translation adjustments:

Unrealized foreign currency translation adjustments ( 27.2 ) ( 6.7 ) ( 8.7 )

Reclassification of cumulative foreign currency translation adjustments associated with the Brazil Disposal 122.8 — —

Reclassification of other cumulative foreign currency translation adjustments 1.5 — —

Foreign currency translation adjustments, net of reclassifications 97.1 ( 6.7 ) ( 8.7 )

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

Unrealized gain (loss) arising during the period, net of tax (provision) benefit of ($ 6.9 ), $ 11.4 and $ 4.1 , r espectively

Unrealized gain (loss) arising during the period, net of tax (provision) benefit of $( 25.8 ), $( 6.9 ) and $ 11.4 , respectively

84.1 22.6 ( 36.7 )

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

Reclassification adjustment for loss included in interest expense, net of tax benefit of $ 1.8 , $ 2.6 and $ 0.1 , respectively

Recl assification adjustment for (gain) loss included in interest expense, net of tax (provision) benefit of $( 0.8 ), $ 1.8 and $ 2.6 , respectively

( 2.5 ) 5.8 8.2

Reclassification related to de-designated interest rate swaps, net of tax benefit of $ — , $ 1.9 and $ — , respectively

14 unchanged sentences

Purchases of treasury stock — — — — — ( 80.2 ) ( 80.2 )

Net issuance of treasury shares to stock compensation plans ( 7,617 ) — ( 16.3 ) — — 20.5 4.2

Net issuance of treasury shares to stock compensation plans and other ( 53,663 ) — ( 19.4 ) — — 22.7 3.3

Stock-based compensation — — 32.3 — — — 32.3

1 unchanged sentence

— — — ( 11.0 ) — — ( 11.0 )

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

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

Net income — — — 552.1 — — 552.1

Other comprehensive loss, net of taxes — — — — ( 37.1 ) — ( 37.1 )

Other comprehensive income, net of taxes — — — — 27.8 — 27.8

Purchases of treasury stock — — — — — ( 210.6 ) ( 210.6 )

Net issuance of treasury shares to stock compensation plans ( 53,663 ) — ( 19.4 ) — — 22.7 3.3

Net issuance of treasury shares to stock compensation plans and other ( 96,994 ) — ( 10.8 ) — — 13.0 2.2

Stock-based compensation — — 28.3 — — — 28.3

5 unchanged sentences

Purchases of treasury stock — — — — — ( 521.2 ) ( 521.2 )

Net issuance of treasury shares to stock compensation plans ( 96,994 ) — ( 10.8 ) — — 13.0 2.2

Net issuance of treasury shares to stock compensation plans and other ( 103,434 ) — ( 14.1 ) — — 14.2 0.1

Stock-based compensation — — 27.0 — — — 27.0

10 unchanged sentences

Net income $ 751.5 $ 552.1 $ 286.5

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

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

Depreciation and amortization 89.3 78.9 75.8

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Purchases of property and equipment ( 155.5 ) ( 143.6 ) ( 103.2 )

Proceeds from sale of discontinued operations, net 59.4 — —

Other ( 1.3 ) ( 33.3 ) —

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Repayments on credit facility — acquisition line ( 429.6 ) ( 66.6 ) ( 309.5 )

Debt issue costs ( 2.8 ) ( 9.0 ) ( 5.4 )

Debt issuance costs ( 4.6 ) ( 2.8 ) ( 9.0 )

Borrowings of senior notes — 200.0 550.0

3 unchanged sentences

Proceeds from employee stock purchase plan 19.5 15.2 9.6

Payments of tax withholding for stock-based awards ( 13.0 ) ( 6.2 ) ( 4.4 )

Payments of tax withholding for stock-based compensation ( 11.8 ) ( 13.0 ) ( 6.2 )

Repurchases of common stock, amounts based on settlement date ( 521.2 ) ( 210.6 ) ( 80.2 )

Dividends paid ( 23.7 ) ( 23.9 ) ( 11.0 )

Other ( 1.2 ) — —

Net cash used in financing activities ( 67.3 ) ( 74.0 ) ( 668.1 )

Effect of exchange rate changes on cash ( 4.8 ) ( 2.5 ) ( 3.4 )

Net (decrease) increase in cash and cash equivalents ( 68.6 ) 59.2 9.3

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period 87.3 28.1 18.7

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period $ 18.7 $ 87.3 $ 28.1

Net increase (decrease) in cash and cash equivalents 29.2 ( 68.6 ) 59.2

CASH AND CASH EQUIVALENTS, beginning of period 18.7 87.3 28.1

CASH AND CASH EQUIVALENTS, end of period $ 47.9 $ 18.7 $ 87.3

The accompanying notes are an integral part of these consolidated financial statements.

9 unchanged sentences

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 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”).

Pursuant to the terms and conditions set forth in the Brazil Agreement, Buyer agreed to 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”).

On July 1, 2022, the Company completed the Brazil Disposal.

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

14 unchanged sentences

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

There has continued to be widespread impact from the COVID-19 pandemic.

Beginning in the first quarter of 2021, there has been a trend in many parts of the world of increasing availability and administration of vaccines against COVID-19, as well as an easing of restrictions on social, business, travel and government activities and functions.

On the other hand, infection rates and regulations continue to fluctuate in various regions and there are ongoing global impacts resulting from the pandemic, including challenges and increases in costs for logistics and supply chains, such as increased port congestion, intermittent supplier delays and a shortfall of semiconductor supply, all of which impact the Company’s business either directly or indirectly.

Use of Estimates

The preparation of the Company’s financial statements in conformity with GAAP requires management to make certain estimates and assumptions.

The preparation of the Company’s financial statements in conformity with U.S.

GAAP requires management to make certain estimates and assumptions.

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

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

The significant estimates and assumptions affect, among other things, certain amounts in the accompanying Consolidated Financial Statements including, but 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 Consolidated Financial Statements including, 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.

Revenue Recognition

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

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash and Cash Equivalents

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

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Refer to Note 8.

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The Company will record any material adjustments to the initial estimates based on new information obtained that would have existed as of the date of the acquisition within a year of the acquisition date.

On November 17, 2021, the Company completed the acquisition of Prime Automotive Group (“Prime”), including 27 dealerships, certain real estate and three collision centers in the Northeastern U.S.

On November 18, 2021, the Company completed the purchase of a 28th Prime dealership (together, with the previously identified acquisitions, collectively referred to as the “Prime Acquisition”).

The aggregate consideration for the Prime Acquisition was approximately $ 934.2 million.

Refer to Note 3.

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

No goodwill impairments were recorded during the years ended December 31, 2021 , 2020 and 2019.

No impairments of intangible franchise rights were recorded during year ended December 31, 2021.

During the years ended December 31, 2020 and 2019, the Company recorded impairment of $ 20.7 million and $ 19.0 million , re spectively, of intangible franchise rights.

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

Refer to Note 12.

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

The Company is subject to income taxes at the federal level and in 17 states in the U.S., as well as in the U.K., each of which has unique tax rates and payment calculations.

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

The Company is subject to income taxes at the federal level and in 17 states in the U.S., as well as in the U.K., each of which has unique tax calculations.

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

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

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The Company has recognized deferred tax assets, net of valuation allowances, that it believes will be realized, based primarily on the assumption of future taxable income.

As it relates to U.S.

state NOLs, a corresponding valuation allowance has been established to the extent that the Company has determined that net income attributable to certain jurisdictions may not be sufficient to realize the benefit.

Refer to Note 15.

Income Taxes for further discussion.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Derivative Financial Instruments

2 unchanged sentences

Financial Instruments and Fair Value Measurements.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company expenses the costs of advertising as incurred.

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The gains and losses resulting from translation adjustments are recorded in accumulated other comprehensive income (loss) in stockholders’ equity.

Recent Accounting Pronouncements

Reference Rate Reform

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

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

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

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

In January 2021, the FASB issued ASU 2021-01 which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

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 mortgages, other debt and lease contracts.

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

The Company applied the relief described for the modification of its Revolving Credit Facility to SOFR as further described in Note 13.

Floorplan Notes Payable.

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 consolidated financial statements .

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company derives its revenues primarily from the sale of new and used vehicles;

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Revenue recognition for each of these streams is discussed below.

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

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

Taxes collected from customers and remitted to governmental authorities are reported on a net basis in the Company’s Consolidated Financial Statements, thus excluded from revenues.

10 unchanged sentences

Total revenues $ 13,427.1 $ 2,795.1 $ 16,222.1

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Year Ended December 31, 2021

18 unchanged sentences

Total revenues $ 8,503.4 $ 2,096.8 $ 10,600.2

(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.

(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 $ 30.8 million , $ 22.3 million and $ 27.6 million during the years ended December 31, 2022, 2021 and 2020, respectively, relating to performance obligations satisfied in previous periods on the Company’s retrospective commission income contracts.

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

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

7 unchanged sentences

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

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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

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

The reserve is estimated based on the Company’s historical charge back results and the termination provisions of the applicable contracts, and was $ 65.1 million and $ 58.3 million at December 31, 2022 and 2021, respectively.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Retrospective Commissions and Associated Contract Assets

10 unchanged sentences

Contract Assets, December 31, 2022

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Prime Acquisition

In November 2021, the Company completed the Prime Acquisition, for aggregate consideration of approximately $ 934.2 million.

The purchase price was financed through a combination of cash, available lines of credit and debt financing.

The accounting for the Prime Acquisition is considered to be preliminary.

The Company is continuing to analyze and assess relevant information related to certain property and equipment and property lease contracts.

Due to the recent timing and complexity of the Acquisition, these amounts are provisional and subject to change as the Company’s fair value assessments are finalized.

The Company will reflect any such adjustments in subsequent filings.

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.

The Company analyzed and assessed all available information related to property and equipment and property lease contracts, determining the preliminary fair values established in 2021 were appropriate and no material adjustments were recorded to these fair values in the year ended December 31, 2022.

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

P ursuant to the 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.

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

The goodwil l is deductible for i ncome tax purposes.

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

The goodwill is deductible for income tax purposes.

The following table summarizes the consideration paid and aggregate amounts of the assets acquired and liabilities assumed as of December 31, 2022 (in millions):

Total consideration $ 967.6

15 unchanged sentences

See the table below for additional details.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Prime assets classified as held for sale (in millions)

Prime assets classified as held for sale as of the acquisition date (in millions)

Inventories $ 10.4

3 unchanged sentences

Total other assets classified as held for sale $ 55.3

Prime liabilities classified as held for sale (in millions)

Prime liabilities classified as held for sale as of the acquisition date (in millions)

Operating lease liabilities $ 1.7

The Company recorded $ 12.9 million of acquisition related costs during the year ended December 31, 2021.

The Company recorded $ 12.9 million of acquisition related costs attributable to the Prime Acquisition during the year ended December 31, 2021.

These costs are included in Selling, general and administrative expenses in the Consolidated Statements of Operations.

The Company’s Consolidated Statements of Operations included revenues and net income attributable to Prime from the acquisition date through December 31, 2021, of $ 199.9 million and $ 14.3 million, res pectively.

The following unaudited pro forma financial information presents consolidated information of the Company as if the Prime Acquisition had occurred January 1, 2020 (in millions):

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s Consolidated Statements of Operations included revenues and net income attributable to Prime for the year ended December 31, 2022, of $ 1.7 billion and $ 110.2 million, res pectively.

These revenue and net income amounts attributable to Prime include amounts up to the date of disposal, from certain stores which have been disposed of since the date of the Prime Acquisition.

The following unaudited pro forma financial information presents consolidated information of the Company as if the Prime Acquisition had occurred on January 1, 2020 (in millions):

Years Ended December 31,

3 unchanged sentences

Other Acquisitions

During the year ended December 31, 2021, the Company also acquired five dealerships, representing eight franchises, in the U.S.

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

During the year ended December 31, 2022, the Company acquired six dealerships and a collision center in the U.S.

Aggregate consideration paid for these dealerships, which were accounted for as business combinations, was $ 507.5 million, net of cash acquired.

Goodwill and intangible franchise rights associated with these acquisitions totaled $ 236.1 million and $ 127.4 million, respectively .

During the year ended December 31, 2022, the Company acquired a dealership and related collision center in the U.K.

C onsideration paid, which was accounted for as a business combination, was $ 34.1 million, consisting of cash paid of $ 32.9 million and a payable of $ 1.2 million, net of cash acquired.

Goodwill associated with the acquisition totaled $ 10.2 million.

During the year ended December 31, 2021, the Company acquired five dealerships in the U.S.

and seven dealerships in the U.K.

Aggregate consideration paid for these dealerships, which were accounted for as business combinations, totaled $ 166.8 million, net of cash acquired.

Goodwill associated with these acquisitions totaled $ 70.1 million.

Goodwill and intangible franchise rights associated with these acquisitions totaled $ 70.1 million and $ 27.2 million, respectively.

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

Aggregate consideration paid was $ 1.3 million.

Goodwill associated with this acquisition was not material.

Aggregate consideration paid, which was accounted for as a business combination, was $ 1.3 million.

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 $ 20.7 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.

On November 12, 2021, the Company entered into an agreement to effect the Brazil Disposal.

The sale price of approximately BRL 510.0 million included a holdback amount as of the Brazil Disposition Date (as defined herein), for general representations and warranties, of BRL 115.0 million, to be held in escrow for a period of five years from the close of the transaction (the “Brazil Disposal Escrow”).

At the conclusion of the five-year period, the remaining funds held in the Brazil Disposal Escrow will be released to the Company.

This amount has been included in the proceeds received.

On July 1, 2022 (the “Brazil Disposition Date”), the Company closed on the Brazil Disposal.

The Company recorded a total net loss of $ 87.5 million on the Brazil Disposal, of which $ 10.0 million was recognized during the year ended December 31, 2022 and $ 77.5 million was recognized during the year ended December 31, 2021 .

The loss on sale is presented as part of the results within Discontinued Operations .

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Estimated fair value of proceeds from disposition $ 91.6

Estimated net assets disposed 42.3

Estimated gain before currency translation adjustments 49.2

Estimated amount of currency translation loss recorded in AOCI ( 125.7 )

Estimated incremental costs to sell 1.1

Net loss on disposal of the Brazil Discontinued Operations $ ( 77.5 )

Upon sale of a foreign entity, amounts recorded within Accumulated Other Comprehensive Income (“AOCI”) on the 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 $ 125.7 million attributable to the Brazil Disposal Group.

The loss on sale indicates impairment of assets to be necessary, however, the loss was entirely the result of the non-cash amount reclassified from AOCI.

The Company has presented in 2021, 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.

Upon sale of a foreign entity, amounts recorded within Accumulated Other Comprehensive Income (loss) (“AOCI”) on the 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, the Company included the currency translation adjustments recorded in AOCI as a loss of $ 122.8 million attributable to the Brazil Disposal Group.

The loss on sale indicated an impairment of assets, however, the loss was entirely the result of the reclassification of the translation adjustment from AOCI .

Prior to the Brazil Disposition Date, the Company recorded a valuation allowance against the assets held for sale for the Brazil Disposal to reflect the expected loss not attributable to a particular asset within the Brazil Disposal Group.

On and following the Brazil Disposition Date, the Company reclassified into earnings the currency translation loss attributable to the Brazil Disposal Group.

The currency translation loss was offset by the reversal of the previously recorded valuation allowance.

In addition, the purchase price of the Brazil Disposal 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.

The assets, liabilities and operating results of the Brazil Disposal Group are reported as discontinued operations for all periods presented as the disposition reflects a strategic shift by the Company.

The Company classified assets and liabilities of the Brazil Disposal Group as held for sale in the Consolidated Balance Sheets at the lower of its carrying amount or fair value less costs to sell.

Losses associated with the foreign currency derivative are presented as incremental costs to sell in the table below and are fully offset by corresponding foreign currency impacts to the fair value of proceeds from the disposition.

On June 30, 2022, the Company settled the foreign currency derivative for a loss of $ 8.4 million.

Subsequent to the Brazil Disposition Date, the Company received additional proceeds for working capital adjustments related to the Brazil Disposal of $ 4.1 million.

The resulting gain was recognized within Discontinued Operations and included within the net loss recorded for the year ended December 31, 2022 as described above.

Additionally, the Buyer, with the Company’s approval, entered into a tax settlement associated with the Brazil Disposal with the Brazilian tax authority for BRL 23.0 million or approximately $ 4.5 million.

The settlement was accrued within Accrued expenses and other current liabilities on the Consolidated Balance Sheet and recorded as Provision for income taxes within Discontinued Operations and included within the net loss recorded for the year ended December 31, 2022 .

The settlement will be paid out of the existing Brazil Disposal Escrow balance within one year.

As of December 31, 2022 , the Company had a remaining receivable balance of $ 22.8 million associated with the Brazil Disposal Escrow recorded in Other long-term assets on the Consolidated Balance Sheet, of which $ 7.8 million is expected to be paid to settle the Company’s portion of accrued liabilities retained subsequent to the Brazil Disposition Date, including the tax settlement described above.

The following table summarizes the fair value of the proceeds received from the disposition and net carrying value of the assets disposed as of December 31, 2022 (in millions):

Fair value of proceeds from disposition $ 92.5

Net assets disposed 48.8

Gain before currency translation adjustments 43.7

Amount of currency translation loss recorded in AOCI ( 122.8 )

Incremental costs to sell 8.4

Net loss on the Brazil Disposal $ ( 87.5 )

GROUP 1 AUTOMOTIVE, INC.

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Asset impairments 6.3 77.5 11.1

(LOSS) INCOME FROM DISCONTINUED OPERATIONS ( 64.1 ) ( 9.6 ) 5.4

INTEREST EXPENSE:

INCOME (LOSS) FROM DISCONTINUED OPERATIONS 3.7 ( 64.1 ) ( 9.6 )

Floorplan interest expense 1.4 1.1 0.3

Other interest expense, net 0.9 0.7 0.1

Other interest (income) expense, net ( 1.8 ) 0.9 0.7

Loss on extinguishment of debt — 3.8 —

(LOSS) INCOME BEFORE INCOME TAXES — DISCONTINUED OPERATIONS ( 69.9 ) ( 10.5 ) 4.6

Other expenses 1.5 — —

INCOME (LOSS) BEFORE INCOME TAXES — DISCONTINUED OPERATIONS 2.6 ( 69.9 ) ( 10.5 )

Provision (benefit) for income taxes 5.3 3.4 ( 0.3 )

NET (LOSS) INCOME — DISCONTINUED OPERATIONS $ ( 73.3 ) $ ( 10.2 ) $ 5.0

NET LOSS — DISCONTINUED OPERATIONS $ ( 2.7 ) $ ( 73.3 ) $ ( 10.2 )

GROUP 1 AUTOMOTIVE, INC.

4 unchanged sentences

Net cash provided by operating activities — discontinued operations $ 26.6 $ 5.2 $ 13.1

Net cash used in investing activities — discontinued operations $ ( 1.5 ) $ ( 6.8 ) $ ( 3.0 )

Net cash provided by (used in) investing activities — discontinued operations $ 59.1 $ ( 1.5 ) $ ( 6.8 )

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

5 unchanged sentences

Prepaid expenses — 1.9

Assets of discontinued operations — current 56.9 52.3

Other current assets 1.3 —

Current assets of discontinued operations 1.3 56.9

Property and equipment, net — 22.3

1 unchanged sentence

Other long-term assets 22.8 7.8

Assets of discontinued operations — non-current (1)

Non-current assets of discontinued operations 22.8 32.5

Total assets, before valuation allowance 24.1 89.5

1 unchanged sentence

Total assets, net of valuation allowance $ 24.1 $ 13.0

$ 13.0 $ 87.5

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

Floorplan notes payable — manufacturer affiliates — 20.1

Current maturities of long-term debt — 0.7

Current operating lease liabilities — 2.5

1 unchanged sentence

Accrued expenses and other current liabilities 7.8 8.7

Liabilities of discontinued operations — current 48.3 31.3

Long-term debt — 14.1

Long-term operating lease liabilities — 1.5

Liabilities of discontinued operations — non-current (1)

Total liabilities (1)

$ 48.3 $ 47.0

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

The assets and liabilities of the Brazil Discontinued Operations are classified in their respective current or long-term classifications in the Consolidated Balance Sheet as of December 31, 2020, in accordance with the nature and underlying classification of such assets and liabilities, as the Brazil Disposal did not occur within one-year of that date.

Current liabilities of discontinued operations $ 7.8 $ 48.3

GROUP 1 AUTOMOTIVE, INC.

7 unchanged sentences

Total current assets classified as held for sale $ 53.6 $ 100.3

Long-term assets classified as held for sale

Brazil Discontinued Operations $ — $ 35.2

Total long-term assets classified as held for sale $ — $ 35.2

Current liabilities classified as held for sale

2 unchanged sentences

Total current liabilities classified as held for sale $ 4.8 $ 49.9

Long-term liabilities classified as held for sale

Brazil Discontinued Operations $ — $ 15.7

Total long-term liabilities classified as held for sale $ — $ 15.7

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

Acquisitions.

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

(2) Includes $ 13.4 million and $ 9.9 million of goodwill reclassified to assets held for sale as of December 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 Consolidated Statements of Operations.

During the year ended December 31, 2022, the Company recorded a net pre-tax gain totaling $ 30.8 million related to the disposition of five dealerships representing five franchises, as well as a collision center in the U.S.

The dispositions reduced goodwill by $ 37.3 million.

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

During the year ended December 31, 2021 , the Company recorded a net pre-tax gain totaling $ 4.4 million related to the disposition of three dealerships representing three franchises and one franchise within an existing dealership in the U.S.

4 unchanged sentences

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

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

and three dealerships representing four terminated franchises in the U.K.

The Company recorded a net pre-tax gain totaling $ 4.8 million related to these dispositions.

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

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

STOCK-BASED COMPENSATION PLANS

Under the Company’s 2014 Long Term Incentive Plan (the “Incentive Plan”), the Company currently grants RSAs, RSUs (also referred to as “Phantom Stock”) and performance share units (“PSUs”) to Company employees and non-employee directors.

Under the Company’s 2014 Long Term Incentive Plan (the “Incentive Plan”), the Company currently grants RSAs, RSUs (also referred to as “Phantom Stock”) and PSUs to Company employees and non-employee directors.

The aggregate maximum number of shares that may be issued or transferred under the Incentive Plan is 2.2 million.

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Restricted Stock Awards

The Company grants RSAs to employees and non-employee directors, at no cost to the recipient.

The Company grants RSAs to employees and non-employee directors.

RSAs qualify as participating securities as each award contains non-forfeitable rights to dividends.

As such, the two-class method is required for the computation of EPS.

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

RSAs contain voting rights and are considered outstanding at the date of grant.

Refer to Note 6.

Earnings (Loss) Per Share for further details.

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

Compensation expense for RSAs is calculated based on the market price of the Company’s common stock at the date of grant and recognized over the requisite vesting period on a straight-line basis.

Earnings Per Share for further details.

RSAs are subject to vesting periods of up to five years .

Compensation expense for RSAs is calculated based on the average market price of the Company’s common stock at the date of grant and recognized over the requisite vesting period on a straight-line basis.

Forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period.

13 unchanged sentences

Restricted Stock Units

The Company grants to non-employee directors, at their election, RSUs, at no cost to the recipient.

The Company grants RSUs to non-employee directors.

RSUs are vested 100 % at the time of grant, and settled on the date of the directors “separation of service”, as such term is defined in IRS code §1.409A-1(h), and generally includes departure due to either death, disability, or retirement.

2 unchanged sentences

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

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

Effective January 1, 2019, RSUs will settle in a cash payment equal to the average of the Company’s high and low stock price on the separation of service date and constitute liability instruments, which require remeasurements to fair value each reporting period.

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

RSUs settle in a cash payment equal to the average of the Company’s high and low stock price on the separation of service date and therefore constitute liability instruments, which require remeasurements to fair value each reporting period.

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

As of December 31, 2022, the total liability for unsettled cash-settled RSUs, recorded at fair value, was $ 4.8 million.

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The Company grants PSUs to certain key employees.

During the years ended December 31, 2021 and 2020, the Company granted 14,104 and 20,992 , PSUs respectively.

The fair value of each PSU granted is based on the Company’s stock price on the date of grant.

The PSUs are evaluated over a two-year performance period based on actual performance targets achieved, as well as the market-based return of the Company’s common stock relative to that of their peer group and subject to vesting over a three-year service period, which at the end of year three, will convert into shares of the Company’s common stock.

The weighted average grant-date fair value per performance share unit granted during the years ended December 31, 2021 and 2020 was $ 145.40 and $ 103.29 , respectively.

PSUs are evaluated over a two-year performance period based on actual performance targets achieved, as well as the market-based return of the Company’s common stock relative to that of their peer group.

PSU payout percentages can range between 0% and 200 % and are subject to vesting over a three-year service period, which at the end of year three, will convert into shares of the Company’s common stock.

Compensation cost for PSUs is based on the Company’s closing stock price on the date of grant, forecasted achievement of performance targets and the estimated grant date per share value of market-based performance utilizing a Monte Carlo simulation model.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes PSU activity and related information for 2022:

Awards Weighted Average

Nonvested at January 1, 2022

32,551 $ 121.55

Granted 29,432 $ 169.75

Vested ( 26,322 ) $ 179.42

Performance adjustment 7,875 $ 179.42

Nonvested at December 31, 2022

43,536 $ 161.87

The total fair value of PSUs that vested during the years ended December 31, 2022 and 2021 was $ 4.7 million, and $ 9.3 million, respectively.

There were no PSUs that vested during the year ended December 31, 2020.

The weighted average grant date fair value of PSUs granted during the years ended December 31, 2022, 2021 and 2020 , was $ 5.0 million, $ 2.1 million and $ 1.9 million, respectively.

Employee Stock Purchase Plan

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At the end of each fiscal quarter (the “Option Period”) during the term of the Purchase Plan, employees can acquire shares of common stock from the Company at 85 % of the fair market value of the common stock on the first or the last day of the Option Period, whichever is lower.

As of December 31, 2021, there were 1,529,438 shares available for issuance under the Purchase Plan.

During the years ended December 31, 2021, 2020 and 2019, the Company issued 116,680 , 202,393 and 142,576 shares, respectively, of common stock to employees participating in the Purchase Plan.

As of December 31, 2022, there were 383,022 sha res available for issuance under the Purchase Plan.

During the years ended December 31, 2022, 2021 and 2020, the Company iss ued 146,416 , 116,680 and 202,393 shares, respectively, of common stock to employees participating in the Purchase Plan.

With respect to shares issued under the Purchase Plan, the Company’s Board of Directors has authorized specific share repurchases to fund the shares issuable under the Purchase Plan.

The weighted average per share fair value of employee stock purchase rights issued pursuant to the Purchase Plan was $ 43.57 , $ 19.51 and $ 16.00 during the years ended December 31, 2021, 2020 and 2019, respectively.

The weighted average per share fair value of employee stock purchase rights issued pursuant to the Purchase Plan was $ 39.45 , $ 43.57 an d $ 19.51 during the years ended December 31, 2022, 2021 and 2020, respectively.

The fair value of stock purchase rights is calculated using the grant date stock price, the value of the embed ded call option and the value of the embedded put option.

Cash received from Purchase Plan purchases was $ 15.2 million, $ 9.6 million and $ 8.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Employees can contribute a maximum of 10 % of their compensation, up to a maximum of $ 25,000 annually under the Purchase Plan.

Cash received from Purchase Plan purchase s was $ 19.5 million, $ 15.2 million and $ 9.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Stock-Based Compensation

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

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

Stock-based compensation related to equity-settled awards was $ 27.0 million, $ 28.3 million and $ 32.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Stock-based compensation related to cash-settled awards were $ 2.2 million, $ 1.1 million and $ 1.1 million for the years ended December 31, 2021, 2020 and 2019.

Stock-based compensation related to cash-settled awar ds was $ 0.5 million, $ 2.2 million and $ 1.1 million for the years ended December 31, 2022, 2021 and 2020.

Tax benefits related to total stock-based compensation were $ 5.2 million, $ 4.3 million and $ 5.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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Earnings allocated to participating securities from continuing operations 21.3 21.1 10.7

(Loss) earnings allocated to participating securities from discontinued operations ( 2.5 ) ( 0.4 ) 0.2

Loss allocated to participating securities from discontinued operations ( 0.1 ) ( 2.5 ) ( 0.4 )

Net income available to basic common shares $ 730.3 $ 533.5 $ 276.2

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Earnings allocated to participating securities from continuing operations 21.3 21.0 10.6

(Loss) earnings allocated to participating securities from discontinued operations ( 2.5 ) ( 0.4 ) 0.2

Loss allocated to participating securities from discontinued operations ( 0.1 ) ( 2.5 ) ( 0.4 )

Net income available to diluted common shares $ 730.3 $ 533.6 $ 276.2

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

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

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

As of December 31, 2021 and 2020, the carrying value of these instruments was $ 0.6 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.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fixed Rate Long-Term Debt

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

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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(1) Carrying value excludes unamortized debt issuance costs.

On October 21, 2021, the Company issued an additional $ 200.0 million aggregate principal amount of its 4.00 % Senior Notes due 2028.

Refer to Note 14.

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

Derivative Financial Instruments

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.

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

The Company’s interest rate swaps are measured at fair value utilizing a 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 or SOFR yield curve and the relevant interest rate according to rating agencies.

The credit risk is calculated using the spread between the 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.

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Total liabilities $ — $ 11.2

Interest Rate Swaps De-designated as Cash Flow Hedges

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

During the year ended December 31, 2021, the Company de-designated eight interest rate swaps, with aggregate notional value of $ 425.0 million and a weighted average interest rate of 1.7 %, due to the continued decline in the net floorplan liability balance as a result of decreased vehicle inventory levels.

Of the eight swaps de-designated during the year, five expired and three were terminated as of December 31, 2021.

The realized and unrealized gains or losses on the de-designated swaps for each period after de-designation were 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 interest rate swaps of $ 6.1 million, net of tax of $ 1.9 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 reduced inventory levels described above.

The Company recorded mark-to-market gains of $ 3.1 million and realized losses of $ 6.5 million associated with these interest rates swaps within Floorplan interest expense for the year ended December 31, 2021.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (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 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 year ended December 31, 2021.

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

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 December 31, 2022, the Company held 39 interest rate swaps designated as cash flow hedges with a total notional value of $ 931.1 million that fixed its underlying SOFR at a weighted average rate of 1.22 %.

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 December 31, 2022.

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

As of December 31, 2021, the company held 37 interest rate swaps designated as cash flow hedges with a total notional value of $ 774.0 million that fixed its underlying one-month LIBOR or SOFR at a weighted average rate of 1.3 %.

The Company also held 4 interest rate swaps designated as cash flow hedges with forward start dates beginning January 2022, that had an aggregate notional value of $ 200.0 million and a weighted average interest rate of 1.2 % as of December 31, 2021.

The maturity dates of the Company’s designated interest rate swaps dates range between January 2024 and December 2031.

The Company completed the transition of interest rate swaps from LIBOR to SOFR during 2022.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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Interest rate swaps $ 84.1 $ 22.6 $ ( 36.7 )

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

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

Statement of Operations Classification Years Ended December 31,

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Other interest expense, net $ 2.4 $ ( 4.1 ) $ ( 2.9 )

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 $ 7.9 million.

The amount of gain 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 $ 21.5 million.

RECEIVABLES, NET AND CONTRACT ASSETS

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

Contracts-in-transit and vehicle receivables, net:

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Financial Instruments and Fair Value Measurements.

No impairments of ROU assets were recorded during the year ended December 31, 2021.

D uring the years ended December 31, 2020 and 2019, the Company recorded $ 1.8 million and $ 1.4 million, respectively, of impairments of ROU assets, all related to the U.K.

No impairments of ROU assets were recorded during the years ended December 31, 2022 and 2021.

D uring the year ended December 31, 2020, the Company recorded $ 1.8 million of impairments of ROU assets related to the U.K.

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

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

Leases Balance Sheet Classification December 31, 2021 December 31, 2020

Leases Balance Sheet Classification 2022 2021

Operating Operating lease assets $ 249.1 $ 267.8

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Total $ 480.6 $ 455.2

Lease Expense Income Statement Classification Year Ended December 31, 2021 Year Ended December 31, 2020

Years Ended December 31,

Lease Expense Income Statement Classification 2022 2021 2020

Operating Selling, general and administrative expenses $ 42.4 $ 35.1 $ 32.5

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Present value of lease liabilities $ 260.2 $ 220.4

Weighted-Average Lease Term and Discount Rate December 31, 2021 December 31, 2020

Years Ended December 31,

Weighted-Average Lease Term and Discount Rate 2022 2021 2020

Weighted-average remaining lease terms:

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Finance 5.1 % 4.9 % 6.2 %

Other Information December 31, 2021 December 31, 2020

Years Ended December 31,

Other Information 2022 2021 2020

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

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The qualitative assessment included a review of changes, since the last quantitative assessment was performed, in those assumptions having the most significant impact on the current year fair value.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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For the October 31, 2022 annual intangible franchise rights assessment, the Company elected to perform a qualitative assessment.

Based on the results of the qualitative assessment, certain dealerships required a quantitative test based on their actual results through October 31, 2021, and an update of the annual budget in the fourth quarter of 2021.

To perform the intangible franchise rights quantitative assessment, the Company estimated the fair values of the respective franchise rights using a discounted cash flow, or income approach, following the income approach as described for goodwill.

However, this resulted in no franchise rights impairment charges for the year ended December 31, 2021.

No impairment was recorded for intangible franchise rights during the year ended December 31, 2021.

Based on the results of the qualitative assessment, no dealerships required a further quantitative test.

Subsequent to the annual assessment, the Company decided to voluntarily terminate a portion of its franchise rights at two dealerships in the U.S.

beginning in the first quarter of 2023.

As a result, the Company recorded an impairment charge on its intangible franchise rights of $ 1.3 million in the U.S.

during the year ended December 31, 2022.

When an intangible franchise rights quantitative assessment is required, the Company estimates the fair values of the respective franchise rights using a discounted cash flow, or income approach, following the income approach as described for goodwill.

During the year ended December 31, 2022, the Company recorded impairment charges of $ 1.3 million in the U.S.

segment and $ 11.1 million in the U.K.

segment and none in the U.K.

segment on intangible franchise rights.

No impairment was recorded for intangible franchise rights during the year ended December 31, 2021.

During the year ended December 31, 2020, the Company recorded impairment charges of $ 9.7 million in the U.S.

1 unchanged sentence

segment on intangible franchise rights.

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

Duri ng the year ended December 31, 2022, the Company recorded additional intangible franchise rights acquired through business combinations of $ 127.4 million in the U.S.

segment and no ne in the U.K.

During the year ended December 31, 2021 , the Company recorded additional indefinite-lived intangible franchise rights acquired through business combinations of $ 161.2 million in the U.S.

segment and $ 1.2 million in the U.K.

Duri ng the year ended December 31, 2020, no additional intangible franchise rights were acquired through business combinations.

Refer to Note 3.

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Balance, December 31, 2022 $ 498.0 $ 18.3 $ 516.3

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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Disposals ( 4.1 ) — ( 4.1 )

Reclassified from (to) assets held for sale, net ( 25.0 ) — ( 25.0 )

Currency translation — ( 1.3 ) ( 1.3 )

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Additions through acquisitions 236.1 10.2 246.3

Purchase price allocation adjustments 35.0 — 35.0

Disposals ( 37.3 ) — ( 37.3 )

Reclassified to assets held for sale ( 25.0 ) — ( 25.0 )

Reclassified from (to) assets held for sale, net 8.8 — 8.8

Currency translation — ( 11.2 ) ( 11.2 )

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reporting unit.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

FLOORPLAN NOTES PAYABLE

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Revolving Credit Facility

In the U.S., the Company has a $ 1.75 billion revolving syndicated credit arrangement with 21 participating financial institutions that matures on June 27, 2024 (“Revolving Credit Facility”).

The Revolving Credit Facility consists of two tranches:

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”).

On August 18, 2022, the Company entered into a first amendment on the twelfth amended 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 currently consists of two tranches:

(i) a $ 1.2 billion maximum capacity tranche for U.S.

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

and (ii) a $ 349.0 million maximum capacity and $ 50.0 million minimum capacity tranche (“Acquisition Line”), which is not due until maturity of the Revolving Credit Facility and is therefore classified in Long-term debt on the Consolidated Balance Sheets — refer to Note 14.

and (ii) an $ 800.0 million maximum capacity tranche (“Acquisition Line”), which is not due until maturity of the Revolving Credit Facility and is therefore classified in Long-term debt on the Consolidated Balance Sheets — refer to Note 14.

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 million sub-limit for letters of credit.

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

The Acquisition Line includes a $ 100 million sub-limit for letters of credit and a $ 50.0 million minimum capacity tranche .

As of December 31, 2022 and 2021, the Company had $ 12.2 million and $ 12.6 million, respectively, in outstanding letters of credit.

On December 30, 2021, the Revolving Credit Facility was amended to replace LIBOR with SOFR.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

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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 $ 2.6 million and $ 3.6 million of related unamortized debt issuance costs as of December 31, 2021 and 2020, respectively, which are included in Prepaid expenses and Other long-term assets in the Company’s Consolidated Balance Sheets and amortized over the term of the facility.

In conjunction with the amendment to the Revolving Credit Facility described above, the Company incurred $ 3.7 million in additional debt issuance costs.

The Company had $ 5.0 million and $ 2.6 million of related unamortized debt issuance costs as of December 31, 2022 and 2021, respectively, which are included in Prepaid expenses and Other long-term assets in the Company’s Consolidated Balance Sheets and amortized over the term of the facility.

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

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

After giving effect to the applicable restrictions on share repurchases and certain other transactions under the debt agreements, the Company was limited to $ 279.2 million of such restrictions as of December 31, 2021.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Floorplan Notes Payable — Manufacturer Affiliates

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(the “FMCC Facility”).

This facility bears interest at the higher of the actual U.S.

Prime rate or a Prime floor of 4.00 %, plus 150 basis points minus certain incentives.

The interest rate on the FMCC Facility was 5.50 % before considering the applicable incentives as of December 31, 2021.

This facility bears interest at the U.S.

Prime rate which was 7.50 % as of December 31, 2022.

Other Manufacturer Facilities

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

As of December 31, 2021, borrowings outstanding under these facilities totaled $ 216.5 million, comprised of $ 91.5 million in the U.S., with annual interest rates ranging from approximately 1 % to 5 %, and $ 125.0 million in the U.K., with annual interest rates ranging from less than 1 % to approximately 4 %.

As of December 31, 2022, borrowings outstanding under these facilities totaled $ 201.3 million, comprised of $ 121.2 million in the U.S., with annual interest rates ranging from less than 1 % to approximately 8 %, and $ 80.1 million in the U.K., with annual interest rates ranging from approximately 4 % to approximately 7 %.

Offset Accounts

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The offset accounts are the Company’s primary options for the short-term investment of excess cash.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

14 unchanged sentences

Total $ 2,092.7

Additional 4.00 % Senior Notes Issuance

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.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Acquisition Line

The proceeds of the Acquisition Line are used for working capital, general corporate and acquisition purposes.

As of December 31, 2021, borrowings under the Acquisition Line, a component of the Revolving Credit Facility (as described in Note 13.

The proceeds of the Acquisition Line (as defined in Note 13.

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

As of December 31, 2022, borrowings under the Acquisition Line, a component of the Revolving Credit Facility (as defined in Note 13.

Floorplan Notes Payable), totaled $ 303.2 million.

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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 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.

Once drawn upon, 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.

As of December 31, 2021, borrowings outstanding under the Bridge Facility totaled $ 140.0 million, and the average interest rate was 2.65 %.

The aggregate principal will be due on the 364-day anniversary of the closing date of the Prime Acquisition (the “Maturity Date”).

Due to the short-term nature of the Bridge Facility, it has been reported within Current maturities of long-term debt on the Consolidated Balance Sheets.

The Company is subject to U.S.

federal income taxes and income taxes in numerous U.S.

In addition, the Company is subject to income tax in the U.K.

relative to its foreign subsidiaries.

Income before income taxes by geographic area was as follows (in millions):

In connection with the Prime Acquisition, the Company entered into a commitment letter with Wells Fargo Bank (the “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, and is reflected within Other, under Other Debt in the table above, and reflected within current maturities.

During 2022, the Company paid off the total outstanding borrowings under the Bridge Facility of $ 140.0 million.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Income from continuing operations before income taxes by geographic area was as follows (in millions):

Years Ended December 31,

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Total income before income taxes $ 985.3 $ 800.9 $ 380.8

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Federal, state and foreign income tax provisions from continuing operations were as follows (in millions):

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Provision for income taxes $ 231.1 $ 175.5 $ 84.2

Actual income tax expense differed from income tax expense computed by applying the applicable U.S.

federal statutory corporate tax rate of 21.0 % to income before income taxes from continuing operations, as follows (in millions):

A reconciliation of the statutory federal rate to the effective tax rate on income before income taxes from continuing operations, was as follows (in millions):

Years Ended December 31,

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Uncertain tax benefits — — ( 0.3 )

Deferred state tax effect 4.3 — —

Other 4.0 0.9 0.6

Provision for income taxes $ 231.1 $ 175.5 $ 84.2

For the year ended December 31, 2021, the Company recorded a tax provision of $ 175.5 million from continuing operations.

The Company recognizes the tax on global intangible low-taxed income (“GILTI”) as a period expense in the period the tax is incurred.

Under this policy, the Company has not provided deferred taxes related to temporary differences that upon their reversal will affect the amount of income subject to GILTI in the period.

For the year ended December 31, 2021, the Company estimated $ 0.3 million of GILTI tax liability.

The Company’s 2021 effective income tax rate was more than the U.S.

federal statutory rate of 21.0% from continued operations, due primarily to:

the taxes provided for in U.S.

state jurisdictions;

partially offset by:

(1) foreign income taxed at a different tax rate than the U.S.

statutory rate, (2) reduced valuation allowances provided for NOLs in certain U.S.

states, and (3) excess tax deductions for stock based compensation.

As a result of these items recorded in 2021 compared to the 2020 items discussed below, the effective tax rate for the year ended December 31, 2021 decreased to 21.9 %, as compared to 22.1 % for the year ended December 31, 2020.

The Company's 2020 effective income tax rate was more than the U.S.

federal statutor y rate of 21.0%, due primarily to:

the taxes provided for in U.S.

state jurisdictions;

partially offset by:

(1) reduced valuation allowances provided for NOLs in certain U.S.

states, and (2) excess tax deductions for stock-based compensation.

As a result of these items recorded in 2020, compared to the 2019 items discussed below, the effective tax rate for the year ended December 31, 2020, decreas ed to 22.1 %, as compared to 24.1 % fo r the year ended December 31, 2019.

The Company's 2019 effective income tax rate was more than the U.S.

federal statutor y rate of 21.0%, due primarily to:

(1) the taxes provided for in U.S.

state jurisdictions;

and (2) increases in uncertain tax benefits , partially offset by tax credits.

As a result of these items recorded in 2019, the effective tax rate for the year ended December 31, 2019, was 24.1 % .

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred income tax provisions resulted from temporary differences in the recognition of income and expenses for financial reporting purposes and for tax purposes.

The tax effects of these temporary differences representing deferred tax assets/liabilities resulted principally from the following (in millions):

The components of deferred tax assets and liabilities were as follows (in millions):

Deferred tax assets:

Loss reserves and accruals $ 53.5 $ 50.4

Interest rate swaps — 10.0

Accrued liabilities $ 56.4 $ 53.5

state NOL carryforwards 18.9 30.8

17 unchanged sentences

As of December 31, 2022, the Company had state pre-tax NOL carryforwards in the U.S.

of $ 500.6 million that will expire between 2022 and 2041, and U.K.

pre-tax NOL carryforwards of $ 9.9 million that may be carried forward indefinitely.

of $ 368.6 million that will expire between 2023 and 2042 in certain states while some may be carried forward indefinitely.

To the extent that the Company expects that net income will not be sufficient to realize these NOLs in certain jurisdictions, a valuation allowance has been established.

The Company believes it is more-likely-than-not that its deferred tax assets, net of valuation allowances provided, will be realized, based primarily on its expectation of future taxable income, considering future reversals of existing taxable temporary differences.

As of December 31, 2021, the continued operations of the Company had one controlled foreign corporation that owns its foreign operations in the U.K.

(the “Foreign Subsidiary”).

The Company has not provided for U.S.

deferred taxes on the outside basis differences of its Foreign Subsidiary, as the Company has taken the position that its investment in the Foreign Subsidiary will be permanently reinvested outside the U.S.

The book basis for the Company’s Foreign Subsidiary exceeded the tax basis by approximate ly $ 26.3 million, as of December 31, 2021.

If a taxable event resulting in the recognition of these outside basis differences occurred, the resulting tax would not be material.

Based on the statutes of limitations in the applicable jurisdiction in which the Company operates, the Company is generally no longer subject to examinations by U.S.

tax authorities in years prior to 2017 and by U.K.

tax authorities in years prior to 2018.

As of December 31, 2022, subsequent to the Brazil disposition and the resulting company structure, we maintain a permanent reinvestment assertion on our foreign subsidiaries.

An immaterial amount of tax would be payable upon any distribution of unremitted earnings or a recognition of any outside basis difference.

Based on the statutes of limitations in the applicable jurisdiction in which the Company operates, the Company is generally no longer subject to examinations by tax authorities in years prior to 2017.

GROUP 1 AUTOMOTIVE, INC.

10 unchanged sentences

Included in the balance of unrecognized tax benefits as of December 31, 2022, 2021 and 2020, are $ 1.7 million, $ 1.6 million and $ 1.7 million, respectively, of tax benefits that would affect the effective tax rate if recognized.

For the years ended December 31, 2021, 2020 and 2019 the Company recorded approximately $ 0.3 million, $ 0.3 million, $ 0.3 million, respectively, of interest and penalty related to its uncertain tax positions.

For the years ended December 31, 2022, 2021 and 2020 the Company recorded approximately $ 0.3 million, $ 0.3 million and $ 0.3 million, respectively, of interest and penalty related to its uncertain tax positions.

Consistent with prior practice, the Company recognizes interest and penalties related to uncertain tax positions in income tax expense in the Consolidated Statements of Operations.

EMPLOYEE SAVINGS PLANS

The Company has a deferred compensation plan to provide select employees and non-employee members of the Company’s Board of Directors with the opportunity to accumulate additional savings for retirement on a tax-deferred basis (“Deferred Compensation Plan”).

Participants in the Deferred Compensation Plan are allowed to defer receipt of a portion of their salary, compensation or bonus, or in the case of the Company’s non-employee directors, annual retainer and meeting fees earned.

The participants receive a rate of return as determined by management and approved by the Board of Directors, however, the Company has complete discretion over how the funds are utilized.

Participants in the Deferred Compensation Plan are unsecured creditors of the Company.

The Company has a deferred compensation plan to provide select employees with the opportunity to accumulate additional savings for retirement on a tax-deferred basis (the “Deferred Compensation Plan”).

Participants in the Deferred Compensation Plan are allowed to defer receipt of a portion of their salary, compensation or bonus.

Participants receive a rate of return as determined by management and approved by the Board of Directors.

The balances due to participants of the Deferred Compensation Plan as of December 31, 2022 and 2021, were $ 100.4 million and $ 90.2 million, resp ectively, with $ 3.9 million and $ 6.1 million c lassified as current for each respective period.

4 unchanged sentences

COMMITMENTS AND CONTINGENCIES

From time to time, the Company’s dealerships are named in various types of litigation involving customer claims, employment matters, class action claims, purported class action claims, claims involving the manufacturers of automobiles, contractual disputes and other matters arising in the ordinary course of business.

The Company may be involved in legal proceedings or suffer losses that could have a material adverse effect on the Company’s business.

From time to time, the Company’s dealerships are named in various types of litigation involving customer claims, employment matters, class action claims, purported class action claims, claims involving the manufacturers of automobiles, contractual disputes, vehicle related incidents and other matters arising in the ordinary course of business.

The Company may be involved in legal proceedings or suffer losses that could have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

In the normal course of business, the Company is required to respond to customer, employee and other third-party complaints.

1 unchanged sentence

Legal Proceedings

As of December 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.

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.

As of December 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;

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.

1 unchanged sentence

Other Matters

From time to time, the Company sells its dealerships to third parties.

In those instances where the Company did not own the real estate and was a tenant, it assigned the lease to the purchaser but remained liable as a guarantor for the remaining lease payments in the event of non-payment by the purchaser.

In connection with dealership dispositions 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 $ 36.9 million as of December 31, 2022.

12 unchanged sentences

Amounts reclassified from accumulated other comprehensive income (loss):

Floorplan interest expense (pre-tax)

Other interest expense, net (pre-tax)

Reclassification related to de-designated interest rate swaps (pre-tax) — 7.9 7.9

Benefit for income taxes — ( 3.7 ) ( 3.7 )

Net current period other comprehensive (loss) income ( 6.7 ) 34.5 27.8

Floorplan interest income (pre-tax)

— ( 0.8 ) ( 0.8 )

Other interest income, net (pre-tax)

— ( 2.4 ) ( 2.4 )

Cumulative foreign currency translation adjustments associated with the Brazil Disposal 122.8 — 122.8

Other cumulative foreign currency translation adjustments 1.5 — 1.5

Provision for income taxes — 0.8 0.8

Net current period other comprehensive income 97.1 81.6 178.7

Balance, December 31, 2022

1 unchanged sentence

Year Ended December 31, 2021

Accumulated income (loss) on foreign currency translation Accumulated income (loss) on interest rate swaps Total

Accumulated Income (Loss) on Foreign Currency Translation

Accumulated Income (Loss) on Interest Rate Swaps

Balance, December 31, 2020

3 unchanged sentences

Tax effect — ( 6.9 ) ( 6.9 )

Amounts reclassified from accumulated other comprehensive income (loss) to:

Amounts reclassified from accumulated other comprehensive income (loss):

Floorplan interest expense (pre-tax) — 3.7 3.7

Other interest expense (pre-tax) — 4.1 4.1

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

Reclassification related to de-designated interest rate swaps (pre-tax) — 7.9 7.9

Benefit for income taxes — ( 3.7 ) ( 3.7 )

Net current period other comprehensive loss ( 8.7 ) ( 28.4 ) ( 37.1 )

Net current period other comprehensive (loss) income ( 6.7 ) 34.5 27.8

Balance, December 31, 2021

3 unchanged sentences

Year Ended December 31, 2020

Accumulated income (loss) on foreign currency translation Accumulated income (loss) on interest rate swaps Total

Accumulated Income (Loss) on Foreign Currency Translation

Accumulated Income (Loss) on Interest Rate Swaps

Balance, December 31, 2019

3 unchanged sentences

Tax effect — 8.8 8.8

Amounts reclassified from accumulated other comprehensive income (loss) to:

Amounts reclassified from accumulated other comprehensive income (loss):

Floorplan interest expense (pre-tax) — 7.9 7.9

Other interest expense (pre-tax) — 2.8 2.8

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

Benefit for income taxes — ( 2.6 ) ( 2.6 )

Net current period other comprehensive income (loss) 3.9 ( 13.0 ) ( 9.2 )

Net current period other comprehensive loss ( 8.7 ) ( 28.4 ) ( 37.1 )

Balance, December 31, 2020

2 unchanged sentences

Non-cash Activities

The accrual for capital expenditures increased $ 2.9 million, decreased $ 1.7 million and $ 4.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The accrual for capital expenditures decreased $ 1.6 million, increased $ 2.9 million , and decreased $ 1.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Interest and Income Taxes Paid

22 unchanged sentences

Income before income taxes $ 897.4 $ 87.9 $ 985.3

$ 721.8 $ 79.2 $ 800.9

Capital expenditures:

1 unchanged sentence

Non-real estate related capital expenditures 100.2 15.3 115.5

82.3 13.9 96.2

Total capital expenditures $ 117.8 $ 37.3 $ 155.1

10 unchanged sentences

Income before income taxes $ 721.8 $ 79.2 $ 800.9

$ 366.6 $ 14.2 $ 380.8

Capital expenditures:

1 unchanged sentence

Non-real estate related capital expenditures 82.3 13.9 96.2

60.9 10.6 71.5

Total capital expenditures $ 101.2 $ 40.9 $ 142.1

7 unchanged sentences

Other interest expense, net $ 55.0 $ 6.9 $ 61.9

Income (loss) before income taxes (7)

$ 227.9 $ ( 5.3 ) $ 222.7

Income before income taxes $ 366.6 $ 14.2 $ 380.8

Capital expenditures:

1 unchanged sentence

Non-real estate related capital expenditures 60.9 10.6 71.5

70.7 25.9 96.6

Total capital expenditures $ 73.8 $ 21.8 $ 95.5

(1) SG&A expenses for the year ended December 31, 2021 includes $ 12.9 million in acquisition costs in the U.S.

(2) Income before income taxes for the year ended December 31, 2021 includes the SG&A expenses described in note 1 above.

(3) Non-real estate related capital expenditures exclude the net decrease (increase) in the accrual for capital expenditures from year-end of $( 2.9 ) million , $ 1.7 million and $ 4.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

(4) SG&A expenses for the year ended December 31, 2020 includes $ 10.6 million in stock-based compensation expense related to an out-of-period adjustment in the U.S.

(5) Income before income taxes for the year ended December 31, 2020 includes the SG&A expenses described in note 4 above and additionally includes the following:

segment, $ 13.8 million in asset impairments and a $ 13.7 million loss on debt extinguishment;

segment $ 12.8 million in asset impairments.

(6) SG&A expenses for the year ended December 31, 2019 includes the following:

segment, $ 17.8 million in expenses related to flood damage from Tropical Storm Imelda and hailstorm damages primarily in Texas.

(7) Income (loss) before income taxes for the year ended December 31, 2019 includes the SG&A expenses described in note 6 above and additionally includes $ 14.7 million in asset impairments in the U.S.

December 31, 2022

1 unchanged sentence

Total assets $ 5,710.8 $ 983.8 $ 6,694.7

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2021

3 unchanged sentences

Intangible Franchise Rights and Goodwill for further discussion of the Company’s intangible franchise rights and goodwill by segment.

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables set forth the Company’s unaudited quarterly financial data (in millions, except per share amounts) incorporating the impact of the discontinued operation described in Note 4.

Discontinued Operations and Other Divestitures:

First Second Third Fourth

Years Ended December 31,

Total revenues $ 2,953.9 $ 3,625.6 $ 3,412.8 $ 3,489.6

Gross profit $ 481.3 $ 649.5 $ 638.7 $ 671.2

Net income from continuing operations $ 100.9 $ 188.8 $ 172.5 $ 163.2

Net income (loss) from discontinued operations (1)

1.0 2.2 ( 0.4 ) ( 76.1 )

Net income $ 101.9 $ 191.0 $ 172.1 $ 87.1

Basic Earnings Per Share (2) :

Continuing operations $ 5.49 $ 10.28 $ 9.40 $ 9.08

Discontinued operations 0.06 0.12 ( 0.02 ) ( 4.23 )

Total $ 5.54 $ 10.40 $ 9.37 $ 4.85

Diluted Earnings Per Share (2) :

Continuing operations $ 5.47 $ 10.23 $ 9.35 $ 9.06

Discontinued operations 0.06 0.12 ( 0.02 ) ( 4.23 )

Total $ 5.52 $ 10.35 $ 9.33 $ 4.84

Total revenues $ 2,598.2 $ 2,094.6 $ 2,985.4 $ 2,922.0

Gross profit $ 405.8 $ 353.9 $ 503.3 $ 471.1

Net income from continuing operations $ 30.5 $ 41.6 $ 125.7 $ 98.8

Net (loss) income from discontinued operations ( 0.7 ) ( 11.5 ) 0.7 1.3

Net income $ 29.8 $ 30.2 $ 126.4 $ 100.1

Basic Earnings Per Share (2) :

Continuing operations $ 1.66 $ 2.26 $ 6.82 $ 5.38

Discontinued operations ( 0.04 ) ( 0.62 ) 0.04 0.07

Total $ 1.62 $ 1.64 $ 6.86 $ 5.45

Diluted Earnings Per Share (2) :

Continuing operations $ 1.65 $ 2.25 $ 6.80 $ 5.36

Discontinued operations ( 0.04 ) ( 0.62 ) 0.04 0.07

Total $ 1.61 $ 1.63 $ 6.83 $ 5.43

(1) During the fourth quarter of 2021, the Company recorded $ 77.5 million in asset impairments related to the Brazil Discontinued Operations.

(2) The sum of quarterly basic and diluted earnings per share from continuing and discontinued operations may not equal full year amounts as reported in the Consolidated Statements of Operations due to the calculation of weighted average common share equivalents on a quarterly basis.

Form 10-K Summary

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures