GROUP 1 AUTOMOTIVE INC 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-K. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2022, at the reasonable assurance level. 39 Our management, including our principal executive officer and our principal financial officer, does not expect that our disclosure controls and procedures can prevent all possible errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that objectives of the control system are met. There are inherent limitations in all control systems, including the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the intentional acts of one or more persons. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and while our disclosure controls and procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control system, misstatements due to possible errors or fraud may occur and not be detected. Changes in Internal Control over Financial Reporting During the three months ended December 31, 2022, there were no changes in our system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except as otherwise described below. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed by management, under the supervision of our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. 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 U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of management and our directors; and (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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Accordingly, even effective internal control over financial reporting can only provide reasonable assurance of achieving their control objectives. Our management, under the supervision and with the participation of our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. 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 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. We are in the process of integrating these businesses into our overall internal controls over financial reporting and plan to include them in our scope for the year ended December 31, 2023. Based on our evaluation under the framework in Internal Control — Integrated Framework , our management concluded that, as of December 31, 2022, our internal control over financial reporting was effective. Deloitte & Touche LLP, the independent registered accounting firm who audited the Consolidated Financial Statements included in this Form 10-K, has issued an attestation report on our internal control over financial reporting. This report, dated February 16, 2023, appears on the following page. 40 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Group 1 Automotive, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Group 1 Automotive, Inc. and subsidiaries (the “Company”) 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 (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated 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 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. Accordingly, our audit did not include the internal control over financial reporting at the Excluded Acquisitions. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Houston, Texas February 16, 2023 41 Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections None. PART III Item 10. Directors, Executive Officers and Corporate Governance 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. Item 11. Executive Compensation Pursuant to Instruction G to Form 10-K, we incorporate by reference into this Item 11 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. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Pursuant to Instruction G to Form 10-K, we incorporate by reference into this Item 12 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. Item 13. Certain Relationships and Related Transactions, and Director Independence Pursuant to Instruction G to Form 10-K, we incorporate by reference into this Item 13 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. Item 14. Principal Accounting Fees and Services Pursuant to Instruction G to Form 10-K, we incorporate by reference into this Item 14 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. 42 PART IV Item 15. Exhibits, Financial Statement Schedules (a) List of documents filed as part of this Form 10-K: (1) Financial Statements The financial statements listed in the accompanying Index to Financial Statements are filed as part of this Form 10-K. (2) Financial Statement Schedules All schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements and notes thereto. (3) Index to Exhibits Those exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index immediately preceding the exhibits filed herewith and such listing is incorporated herein by reference. 43 EXHIBIT INDEX Exhibit Number Description 2.1# — Purchase Agreement, dated as of September 12, 2021, by and among Group 1 Automotive, Inc., GPB Portfolio Automotive, LLC, Capstone Automotive Group, LLC, Capstone Automotive Group II, LLC, Automile Parent Holdings, LLC, Automile TY Holdings, LLC and Prime Real Estate Holdings, LLC (incorporated by reference to Exhibit 2.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended September 30, 2021) 2.2+ — Share Purchase Agreement, dated November 12, 2021, by and between Group 1 Automotive, Inc., Buyer and UAB as intervening party (English translation) (incorporated by reference to Exhibit 2.1 of Group 1 Automotive Inc.’s Current Report on Form 8-K (File No. 001-13461) filed November 15, 2021) 3.1 — Amended and Restated Certificate of Incorporation of Group 1 Automotive, Inc. (incorporated by reference to Exhibit 3.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed May 22, 2015) 3.2 — Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.2 of Group 1’s Quarterly Report on Form 10-Q (File No. 001-13461) for the period ended March 31, 2007) 3.3 — Third Amended and Restated Bylaws of Group 1 Automotive, Inc. (incorporated by reference to Exhibit 3.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed April 6, 2017) 4.1 — 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. 333-29893)) 4.2 — 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. 001-13461) for the year ended December 31, 2020) 4.3 — Indenture, dated as of August 17, 2020, by and among Group 1 Automotive, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed August 17, 2020) 4.4 — Form of 4.000% Senior Notes due 2028 (incorporated by reference to Exhibit 4.1, Exhibit A, of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed August 17, 2020) 10.1 — Eleventh Amended and Restated Revolving Credit Agreement, dated effective as of June 27, 2019 (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed July 1, 2019) 10.2 — Waiver and First Amendment to Eleventh Amended and Restated Revolving Credit Agreement dated as of March 3, 2020 among Group 1 Automotive, Inc., the Subsidiary Borrowers listed therein, the Lenders listed therein, U.S. Bank National Association, N.A., as Administrative Agent, and Comerica Bank, as Floor Plan Agent (incorporated by reference to Exhibit 10.2 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (file No. 001-13461) for the quarter ended September 30, 2020) 10.3 — Second Amendment to Eleventh Amended and Restated Revolving Credit Agreement dated as of October 30, 2020 among Group 1 Automotive, Inc., the Subsidiary Borrowers listed therein, the Lenders listed therein, U.S. Bank National Association, N.A., as Administrative Agent, and Comerica Bank, as Floor Plan Agent (incorporated by reference to Exhibit 10.5 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (file No. 001-13461) for the quarter ended September 30, 2020) 10.5 — 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. 001-13461) for the year ended December 31, 2012) 10.6 — Loan Facility dated as of October 3, 2008 by and between Chandlers Garage Holdings Limited and BMW Financial Services (GB) Limited. (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, 2008) 10.7 — Form of Ford Motor Credit Company Automotive Wholesale Plan Application for Wholesale Financing and Security Agreement (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, 2003) 10.8 — Supplemental Terms and Conditions dated September 4, 1997 between Ford Motor Company and Group 1 Automotive, Inc. (incorporated by reference to Exhibit 10.16 of Group 1 Automotive, Inc.’s Registration Statement on Form S-1 Registration No. 333-29893) 44 10.9* — 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. 13461) filed November 16, 2009) 10.10* — Form of Indemnification Agreement of Group 1 Automotive, Inc. (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed November 13, 2007) 10.11 — 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. 001-13461) filed October 7, 2021) 10.12* — Group 1 Automotive, Inc. Deferred Compensation Plan, as Amended and Restated, effective January 1, 2021 (incorporated by reference to Exhibit 10.3 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended September 30, 2020) 10.13* Group 1 Automotive, Inc. 2014 Long Term Incentive Plan (incorporated by reference to Appendix A to Group 1 Automotive, Inc.’s definitive proxy statement on Schedule 14A filed April 10, 2014) 10.14* — First Amendment to the Group 1 Automotive, Inc. 2014 Long Term Incentive Plan, effective May 13, 2020 (incorporated by reference to Exhibit 10.4 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended September 30, 2020) 10.15* — Form of Restricted Stock Agreement with Qualified Retirement Provisions (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended June 30, 2021) 10.16* — Form of Phantom Stock Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.5 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed March 16, 2005) 10.17* — Form of Phantom Stock Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.7 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended September 30, 2014) 10.18* — Form of Restricted Stock Agreement for Employees (incorporated by reference to Exhibit 10.5 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended September 30, 2014) 10.19* — Form of Restricted Stock Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.34 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No. 001-13461) for the year ended December 31, 2018) 10.20* — Form of Phantom Stock Agreement (Cash Settlement) for Non-Employee Directors (incorporated by reference to Exhibit 10.33 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No. 001-13461 for the year ended December 31, 2018) 10.21* — Form of Performance Share Unit Agreement (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended March 31, 2019) 10.22* — Employment Agreement dated effective May 19, 2015 between Group 1 Automotive, Inc. and Earl J. Hesterberg (incorporated by reference to Exhibit 10.1 to Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed May 22, 2015) 10.23* — Amendment to Employment Agreement dated effective as of May 17, 2018 between Group 1 Automotive, Inc. and Earl J. Hesterberg (incorporated by reference to Exhibit 10.2 to Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed May 22, 2018) 10.24* — Second Amendment to Employment Agreement, effective as of August 24, 2022, between Group 1 Automotive, Inc. and Earl J. 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). 10.25* — Non-Compete Agreement dated effective May 19, 2015 between Group 1 Automotive, Inc. and Earl J. Hesterberg (incorporated by reference to Exhibit 10.2 to Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed May 22, 2015) 10.26* — Incentive Compensation, Confidentiality, Non-Disclosure and Non-Compete Agreement dated June 6, 2011, between Group 1 Automotive, Inc. and Daryl Kenningham (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended June 30, 2020) 45 1 0.27* — First Amendment to Incentive, Compensation, Confidentiality, Non-Disclosure and Non-Compete Agreement, effective as of August 24, 2022, between Group 1 Automotive, Inc. and Daryl A. 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). 10.28* — Employment Agreement dated effective as of December 1, 2009 between Group 1 Automotive, Inc. and Darryl M. Burman (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed November 16, 2009) 10.29* — Incentive Compensation and Non-Compete Agreement dated December 1, 2006 between Group 1 Automotive, Inc. and Darryl M. Burman (incorporated by reference to Exhibit 10.2 of Group 1 Automotive, Inc.’s Current Report on Form 8-K/A (File No. 001-13461) filed December 1, 2006) 10.30* — Offer Letter, dated June 1, 2020, between Group 1 Automotive, Inc. and Daniel McHenry (incorporated by reference to Exhibit 10.3 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended June 30, 2020) 10.31* — Retention, Confidentiality and Non-Compete Agreement dated August 20, 2020 between Group 1 Automotive, Inc. and Daniel McHenry (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended September 30, 2020) 10.32*† — Transition and Separation Agreement, effective as of November 1, 2022, between Group 1 Automotive, Inc. and Frank Grese 10.33* — Group 1 Automotive, Inc. Aircraft Usage Policy (incorporated by reference to Exhibit 10.49 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No. 001-13461) for the year ended December 31, 2020) 10.34 — 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 (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) 10.35 — 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). 10.36 — 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). 21.1† — Group 1 Automotive, Inc. Subsidiary List 23.1† — Consent of Deloitte & Touche LLP 31.1† — Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2† — Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1** — Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2** — Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS — XBRL Instance Document 101.SCH — XBRL Taxonomy Extension Schema Document 101.CAL — XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF — XBRL Taxonomy Extension Definition Linkbase Document 101.LAB — XBRL Taxonomy Extension Label Linkbase Document 101.PRE — XBRL Taxonomy Extension Presentation Linkbase Document 104 — Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibits 101) † Filed herewith * Management contract or compensatory plan or arrangement ** Furnished herewith # The exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided to the Securities and Exchange Commission upon request. + Exhibits marked with a (+) exclude certain immaterial schedules and exhibits pursuant to the provisions of Regulation S-K, Item 601(a)(5). A copy of any of the omitted schedules and exhibits will be furnished to the Securities and Exchange Commission upon request. 46 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 16, 2023. Group 1 Automotive, Inc. By: /s/ Daryl A. Kenningham Daryl A. Kenningham President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated on February 16, 2023. Signature Title /s/ Daryl A. Kenningham President and Chief Executive Officer and Director Daryl A. Kenningham (Principal Executive Officer) /s/ Daniel J. McHenry Senior Vice President and Chief Financial Officer Daniel J. McHenry (Principal Financial and Accounting Officer) /s/ Stephen D. Quinn Chairman and Director Stephen D. Quinn /s/ Carin M. Barth Director Carin M. Barth /s/ Lincoln da Cunha Pereira Filho Director Lincoln da Cunha Pereira Filho /s/ Steven C. Mizell Director Steven C. Mizell /s/ Steven Stanbrook Director Steven Stanbrook /s/ Charles L. Szews Director Charles L. Szews /s/ Anne Taylor Director Anne Taylor /s/ MaryAnn Wright Director MaryAnn Wright 47 INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID: 34 ) F- 2 Consolidated Balance Sheets F- 4 Consolidated Statements of Operations F- 5 Consolidated Statements of Comprehensive Income F- 6 Consolidated Statements of Stockholders’ Equity F- 7 Consolidated Statements of Cash Flows F- 8 Notes to Consolidated Financial Statements F- 9 F- 1 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Group 1 Automotive, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Group 1 Automotive, Inc. 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. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Intangible Franchise Rights — Refer to Notes 1, 3 and 12 to the consolidated financial statements Critical Audit Matter Description 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. The fair value of acquired intangible franchise rights is estimated using the income approach. As of December 31, 2022, the Company’s intangible franchise rights for these and prior acquisitions had an aggregate carrying value of $516.3 million. The Company’s annual impairment assessment for intangible franchise rights is performed in the fourth quarter, or more frequently if events or circumstances indicate possible impairment. In evaluating intangible franchise rights for impairment, a qualitative assessment is initially performed to determine whether it is more-likely-than-not that an impairment exists. 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 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. F-2 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 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. • We evaluated the reasonableness of management’s forecasts of revenue growth rates and future EBITDA margins by comparing the forecasts to: ◦ The Company’s historical revenue and EBITDA margins. ◦ Internal communications to management and the Board of Directors. ◦ Current industry, market and economic trends. • We performed a sensitivity analysis of certain assumptions such as revenue growth rates, future EBITDA margins, weighted average cost of capital, and terminal growth rates to evaluate the potential change in the fair value resulting from changes in underlying assumptions. • With the assistance of our fair value specialists, we evaluated the reasonableness of the weighted average cost of capital and terminal growth rates by: ◦ Testing the source information underlying the determination of the terminal growth rates and testing the mathematical accuracy of the calculations. ◦ Developing a range of independent estimates and comparing those to the weighted average cost of capital selected by management. /s/ Deloitte & Touche LLP Houston, Texas February 16, 2023 We have served as the Company’s auditor since 2020. F-3 GROUP 1 AUTOMOTIVE, INC. CONSOLIDATED BALANCE SHEETS (In millions, except share data) As of December 31, 2022 2021 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 47.9 $ 14.9 Contracts-in-transit and vehicle receivables, net 278.5 218.9 Accounts and notes receivables, net 199.2 177.9 Inventories 1,356.6 1,073.1 Prepaid expenses 30.5 30.6 Other current assets 19.1 50.4 Current assets classified as held for sale 53.6 100.3 TOTAL CURRENT ASSETS 1,985.3 1,666.2 Property and equipment, net 2,128.2 1,957.8 Operating lease assets 249.1 267.8 Goodwill 1,661.8 1,420.2 Intangible franchise rights 516.3 392.3 Other long-term assets 176.8 45.0 TOTAL ASSETS $ 6,717.5 $ 5,749.4 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Floorplan notes payable — credit facility and other, net of offset account of $ 140.2 and $ 268.6 , respectively $ 762.1 $ 295.0 Floorplan notes payable — manufacturer affiliates, net of offset account of $ 13.4 and $ 3.3 , respectively 243.1 236.0 Current maturities of long-term debt 130.3 220.4 Current operating lease liabilities 21.8 25.9 Accounts payable 488.0 457.8 Accrued expenses and other current liabilities 271.5 258.6 Current liabilities classified as held for sale 4.8 49.9 TOTAL CURRENT LIABILITIES 1,921.4 1,543.6 Long-term debt 1,952.2 1,815.3 Long-term operating lease liabilities 238.4 256.6 Deferred income taxes 238.1 180.9 Other long-term liabilities 129.8 127.7 Commitments and Contingencies (Note 17) STOCKHOLDERS’ EQUITY: Preferred stock, $ 0.01 par value, 1,000,000 shares authorized; no ne issued or outstanding — — Common stock, $ 0.01 par value, 50,000,000 shares authorized; 25,232,620 and 25,336,054 issued, respectively 0.3 0.3 Additional paid-in capital 338.7 325.8 Retained earnings 3,073.6 2,345.9 Accumulated other comprehensive income (loss) 22.5 ( 156.2 ) Treasury stock, at cost; 10,940,298 and 8,160,228 shares, respectively ( 1,197.5 ) ( 690.4 ) TOTAL STOCKHOLDERS’ EQUITY 2,237.5 1,825.2 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 6,717.5 $ 5,749.4 The accompanying notes are an integral part of these consolidated financial statements. F-4 GROUP 1 AUTOMOTIVE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) Years Ended December 31, 2022 2021 2020 REVENUES: New vehicle retail sales $ 7,452.5 $ 6,504.8 $ 5,428.4 Used vehicle retail sales 5,673.3 4,438.8 3,055.6 Used vehicle wholesale sales 364.6 365.7 295.8 Parts and service sales 2,009.5 1,591.2 1,357.4 Finance, insurance and other, net 722.2 581.4 463.0 Total revenues 16,222.1 13,481.9 10,600.2 COST OF SALES: New vehicle retail sales 6,627.0 5,894.0 5,109.1 Used vehicle retail sales 5,359.6 4,084.6 2,850.7 Used vehicle wholesale sales 364.6 340.9 285.6 Parts and service sales 905.8 721.8 620.8 Total cost of sales 13,256.9 11,041.2 8,866.1 GROSS PROFIT 2,965.2 2,440.7 1,734.1 Selling, general and administrative expenses 1,783.3 1,477.2 1,138.2 Depreciation and amortization expense 88.4 77.4 73.5 Asset impairments 2.1 1.7 26.7 INCOME FROM OPERATIONS 1,091.4 884.4 495.7 INTEREST EXPENSE: Floorplan interest expense 27.3 27.6 39.2 Other interest expense, net 77.5 55.8 61.9 Loss on extinguishment of debt — — 13.7 Other expense 1.2 — — INCOME BEFORE INCOME TAXES 985.3 800.9 380.8 Provision for income taxes 231.1 175.5 84.2 Net income from continuing operations 754.2 625.4 296.7 Net loss from discontinued operations ( 2.7 ) ( 73.3 ) ( 10.2 ) NET INCOME $ 751.5 $ 552.1 $ 286.5 BASIC EARNINGS PER SHARE: Continuing operations $ 47.46 $ 34.23 $ 16.11 Discontinued operations ( 0.17 ) ( 4.01 ) ( 0.55 ) Total $ 47.29 $ 30.22 $ 15.55 DILUTED EARNINGS PER SHARE: Continuing operations $ 47.31 $ 34.11 $ 16.06 Discontinued operations ( 0.17 ) ( 4.00 ) ( 0.55 ) Total $ 47.14 $ 30.11 $ 15.51 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 15.4 17.7 17.8 Diluted 15.5 17.7 17.8 The accompanying notes are an integral part of these consolidated financial statements. F-5 GROUP 1 AUTOMOTIVE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Years Ended December 31, 2022 2021 2020 NET INCOME $ 751.5 $ 552.1 $ 286.5 Other comprehensive income (loss), net of taxes: 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 $( 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 — — 0.1 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 — 6.1 — Unrealized gain (loss) on interest rate risk management activities, net of tax 81.6 34.5 ( 28.4 ) OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX 178.7 27.8 ( 37.1 ) COMPREHENSIVE INCOME $ 930.2 $ 579.9 $ 249.4 The accompanying notes are an integral part of these consolidated financial statements. F-6 GROUP 1 AUTOMOTIVE, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In millions, except share data) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Shares Amount BALANCE, DECEMBER 31, 2019 25,486,711 $ 0.3 $ 295.3 $ 1,542.4 $ ( 147.0 ) $ ( 435.3 ) $ 1,255.7 Net income — — — 286.5 — — 286.5 Other comprehensive loss, net of taxes — — — — ( 37.1 ) — ( 37.1 ) Purchases of treasury stock — — — — — ( 80.2 ) ( 80.2 ) 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 Dividends declared ($ 0.60 per share) — — — ( 11.0 ) — — ( 11.0 ) BALANCE, DECEMBER 31, 2020 25,433,048 $ 0.3 $ 308.3 $ 1,817.9 $ ( 184.0 ) $ ( 492.8 ) $ 1,449.6 Net income — — — 552.1 — — 552.1 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 and other ( 96,994 ) — ( 10.8 ) — — 13.0 2.2 Stock-based compensation — — 28.3 — — — 28.3 Dividends declared ($ 1.33 per share) — — — ( 24.1 ) — — ( 24.1 ) BALANCE, DECEMBER 31, 2021 25,336,054 $ 0.3 $ 325.8 $ 2,345.9 $ ( 156.2 ) $ ( 690.4 ) $ 1,825.2 Net income — — — 751.5 — — 751.5 Other comprehensive income, net of taxes — — — — 178.7 — 178.7 Purchases of treasury stock — — — — — ( 521.2 ) ( 521.2 ) 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 Dividends declared ($ 1.50 per share) — — — ( 23.9 ) — — ( 23.9 ) BALANCE, DECEMBER 31, 2022 25,232,620 $ 0.3 $ 338.7 $ 3,073.6 $ 22.5 $ ( 1,197.5 ) $ 2,237.5 The accompanying notes are an integral part of these consolidated financial statements. F-7 GROUP 1 AUTOMOTIVE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Years Ended December 31, 2022 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 751.5 $ 552.1 $ 286.5 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 89.3 78.9 75.8 Change in operating lease assets 29.5 25.0 24.0 Deferred income taxes 28.0 31.0 ( 0.9 ) Asset impairments 8.5 79.2 37.7 Stock-based compensation 27.0 28.3 32.3 Amortization of debt discount and issue costs 3.0 2.5 3.2 Gain on disposition of assets ( 41.1 ) ( 6.0 ) ( 5.8 ) Loss on extinguishment of debt — 3.8 13.7 Other 0.5 2.6 2.2 Changes in assets and liabilities, net of acquisitions and dispositions: Accounts payable and accrued expenses 66.5 48.1 ( 45.9 ) Accounts and notes receivable ( 17.4 ) 11.2 21.2 Inventories ( 282.1 ) 529.8 416.1 Contracts-in-transit and vehicle receivables ( 55.4 ) ( 6.4 ) 43.5 Prepaid expenses and other assets 0.4 ( 2.1 ) 56.9 Floorplan notes payable — manufacturer affiliates 7.5 ( 90.7 ) ( 132.2 ) Deferred revenues ( 0.4 ) ( 1.5 ) ( 0.5 ) Operating lease liabilities ( 29.4 ) ( 25.9 ) ( 22.3 ) Net cash provided by operating activities 585.9 1,259.6 805.4 CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for acquisitions, net, including repayment of sellers’ floorplan notes payable of $ 25.3 , $ 65.2 and $ — , respectively ( 528.7 ) ( 1,099.6 ) ( 1.3 ) Proceeds from disposition of franchises, property and equipment 141.4 24.8 29.8 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 ) — Net cash used in investing activities ( 484.6 ) ( 1,251.7 ) ( 74.7 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings on credit facility — floorplan line and other 10,236.1 8,333.2 9,998.1 Repayments on credit facility — floorplan line and other ( 9,766.5 ) ( 8,801.8 ) ( 10,374.0 ) Borrowings on credit facility — acquisition line 406.6 349.3 284.0 Repayments on credit facility — acquisition line ( 429.6 ) ( 66.6 ) ( 309.5 ) Debt issuance costs ( 4.6 ) ( 2.8 ) ( 9.0 ) Borrowings of senior notes — 200.0 550.0 Repayments of senior notes — — ( 857.9 ) Borrowings on other debt 315.5 334.3 271.9 Principal payments on other debt ( 286.4 ) ( 187.3 ) ( 134.0 ) Proceeds from employee stock purchase plan 19.5 15.2 9.6 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 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. F-8 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION, CONSOLIDATION AND SUMMARY OF ACCOUNTING POLICIES Basis of Presentation and Consolidation The accompanying Consolidated Financial Statements and notes thereto, have been prepared in accordance with U.S. GAAP and reflect the consolidated accounts of the parent company, Group 1 Automotive, Inc., and its subsidiaries, all of which are wholly owned. All intercompany balances and transactions have been eliminated in consolidation. Group 1 Automotive, Inc. and its subsidiaries are collectively referred to as the “Company” in these Notes to Consolidated Financial Statements. On November 12, 2021, the Company entered into a Share Purchase Agreement (the “Brazil Agreement”) with Original Holdings S.A. (“Buyer”). 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. Therefore, the related assets, liabilities and operating results of the Brazil Disposal Group are reported as discontinued operations (the “Brazil Discontinued Operations”) for all periods presented. The Brazil Disposal Group was previously included in the Brazil segment. Effective as of the fourth quarter of 2021, the Company is aligned into two reportable segments: U.S. and U.K. Refer to Note 20. Segment Information for additional information on the Company’s segments. Unless otherwise specified, disclosures in these Consolidated Financial Statements reflect continuing operations only. Certain prior-period amounts, primarily related to the Brazil Discontinued Operations, have been reclassified in the Consolidated Financial Statements and accompanying notes to conform to current-period presentation. Refer to Note 4. Discontinued Operations and Other Divestitures for additional information on the Brazil Discontinued Operations. Certain amounts in the Consolidated Financial Statements and the accompanying notes may not compute due to rounding. All computations have been calculated using unrounded amounts for all periods presented. These Consolidated Financial Statements reflect, in the opinion of management, all normal recurring adjustments necessary to fairly state, in all material respects, the Company’s financial position and results of operations for the periods presented. During the year ended December 31, 2020, the Company recorded an out-of-period adjustment of $ 10.6 million resulting in an increase to Selling, general and administrative expenses and Additional paid-in capital to correct stock-based compensation for awards granted in prior years to retirement eligible employees not recognized timely due to the incorrect treatment of a non-substantive service condition. The impact to the year ended December 31, 2020, was a decrease to net income of $ 9.7 million resulting in a decrease to diluted earnings per common share of $ 0.53 . The effect of this adjustment on any previously reported period was not material based on a quantitative and qualitative evaluation. Use of Estimates 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 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. Revenues. 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. F-9 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Receivables Refer to Note 8. Receivables, Net and Contract Assets for further discussion of the Company’s receivable accounts and related accounting policies. Inventories New and used retail vehicles are carried at the lower of specific cost or net realizable value. Specific cost consists of the amount paid to acquire the vehicle, plus the cost of reconditioning, equipment addition and transportation. In determining the lower of specific cost or net realizable value of new and used vehicles, the Company considers historical loss experience and current market trends. Parts and accessories inventories are valued at lower of cost or net realizable value and determined on a first-in, first-out basis. The Company incurs shipping costs in connection with selling parts to customers which is included in Cost of Sales in the Consolidated Statements of Operations. Certain manufacturers offer vehicle rebates, in the form of purchase discounts, once applicable incentive targets are met. Incentive targets typically consist of volume incentives to order and/or sell certain models and/or volumes of inventory over designated periods of time. The Company also receives dealer rebates and incentive payments on parts purchases from the automobile manufacturers on new vehicle retail sales. Additionally, the Company receives interest assistance from certain automobile manufacturers that is reflected as a vehicle purchase price discount. The rebates, interest assistance and other dealer incentives reduce inventory costs in the Consolidated Balance Sheets and are reflected as a reduction to Cost of Sales in the Consolidated Statements of Operations as the vehicles are sold. Refer to Note 9. Inventories for further discussion of the Company’s inventory accounts. Property and Equipment, Net Property and equipment, recorded at cost, is depreciated using the straight-line method over the estimated useful lives of the assets to estimated salvage values. Leasehold improvements are capitalized and amortized over the lesser of the estimated term of the lease or the estimated useful life of the asset. Property and equipment estimated useful lives are as follows: Estimated Useful Lives in Years Buildings and leasehold improvements 25 to 50 Machinery and dealership equipment 7 to 20 Office equipment, furniture and fixtures 3 to 20 Company vehicles 3 to 5 Expenditures for major additions or improvements, which improve or extend the useful lives of the assets are capitalized. Minor replacements and routine maintenance and repairs, which do not improve or extend the lives of the assets, are expensed as incurred. Disposals are removed at cost less accumulated depreciation, and any resulting gain or loss is reflected in Selling, general and administrative expenses in the Consolidated Statements of Operations. The Company performs an impairment analysis on long-lived assets used in operations when events or circumstances indicate that the carrying value of such assets may not be recoverable. This review consists of comparing the carrying amount of the asset group with its expected future undiscounted cash flows. Estimates of expected future cash flows represent management’s best estimate based on currently available information and reasonable and supportable assumptions. If the asset group’s carrying amount exceeds its future undiscounted cash flows, an impairment charge is measured as the amount by which its carrying amount exceeds its fair value. Refer to Note 10. Property and Equipment, Net for further discussion . The fair value of property is typically based on a third-party appraisal which requires adjustments to market-based valuation inputs to reflect the different characteristics between the property being measured and comparable properties, which are considered level 3 inputs within the fair value hierarchy described further in Note 7. Financial Instruments and Fair Value Measurements. F-10 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Business Combinations Business acquisitions are accounted for under the acquisition method of accounting, whereby the Company measures and recognizes the fair value of assets acquired and liabilities assumed at the date of acquisition. The operating results of entities acquired are included in the accompanying Consolidated Statements of Operations from the date of acquisition. For material acquisitions, the Company typically utilizes third-party experts to determine the fair values of property acquired. The fair values of assets acquired and liabilities assumed in business combinations are estimated using various assumptions. The most significant assumptions, and those requiring the most judgment, involve the estimated fair values of property and intangible franchise rights. If the initial accounting for a business combination has not been concluded by the end of the reporting period in which the acquisition occurs, an estimate will be recorded and disclosure of those open areas will be provided. 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. Refer to Note 3. Acquisitions for further discussion of the Company’s business combinations. Goodwill and Intangible Franchise Rights Goodwill represents the excess, at the date of acquisition, of the purchase price of an acquired business over the fair value of the net tangible and intangible assets acquired. The Company is organized into two geographic regions, the U.S. region and the U.K. region. The Company has determined that each region represents a reporting unit for the purpose of assessing goodwill for impairment. In addition to goodwill, the Company recognizes, at the dealership level, separately identifiable intangible assets for rights under franchise agreements with manufacturers. Most of the Company’s franchise agreements continue indefinitely. The Company believes that these agreements can be renewed without substantial cost based on the history with the manufacturer. As such, the Company’s intangible assets for rights under franchise agreements are considered non-amortizing indefinite lived intangible assets, expected to contribute to cash flows of the Company for an indefinite period of time. 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. 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. Income Taxes 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. Under this method, deferred income taxes are recorded based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the underlying assets are realized or liabilities are settled. A valuation allowance reduces deferred tax assets when it is more-likely-than-not that some or all of the deferred tax assets will not be realized. 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. Refer to Note 15. Income Taxes for further discussion. Derivative Financial Instruments The Company holds derivative financial instruments consisting of interest rate swaps that are designated as cash flow hedges. Refer to the discussion of the Company’s accounting policies relating to its derivative financial instruments, including fair value measurements, in Note 7. Financial Instruments and Fair Value Measurements. F-11 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Advertising The Company expenses the costs of advertising as incurred. Advertising expense is included in Selling, general and administrative expenses in the Consolidated Statements of Operations and totaled $ 76.5 million, $ 65.8 million and $ 49.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. The Company receives advertising assistance from certain automobile manufacturers, which the Company is required to spend on qualified advertising and which is subject to audit and chargeback by the manufacturer. The assistance is accounted for as a reduction to SG&A expenses as earned and amounted t o $ 17.4 million , $ 14.9 million and $ 13.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. Statements of Cash Flows With respect to all new vehicle floorplan borrowings, the vehicle manufacturers draft the funds directly from the Company’s credit facilities with no cash flow to or from the Company. With respect to borrowings for used vehicle financing in the U.S., the Company finances up to 85 % of the value of the used vehicle inventory and the borrowed funds flow from the lender directly to the Company. In the U.K., the Company chooses which used vehicles to finance and the borrowings flow directly to the Company from the lender. Excluding the cash flows from or to manufacturer affiliated lenders participating in the Company’s syndicated lending group under the Revolving Credit Facility as defined in Note 13. Floorplan Notes Payable, all borrowings from, and repayments to, lenders affiliated with the vehicle manufacturers are presented within Cash Flows from Operating Activities on the Consolidated Statements of Cash Flows. All borrowings from, and repayments to, the Company’s credit facilities (including the cash flows from or to manufacturer affiliated lenders participating in the Revolving Credit Facility) are presented within Cash Flows from Financing Activities. Leases Refer to the discussion of the Company’s leases and related accounting policies in Note 11. Leases. Foreign Currency Translation The functional currency for the Company’s U.K. subsidiaries is GBP. All assets and liabilities of foreign subsidiaries are translated into USD using period-end exchange rates and all revenues and expenses are translated at average rates during the respective period. The gains and losses resulting from translation adjustments are recorded in accumulated other comprehensive income (loss) in stockholders’ equity. 2. REVENUES The Company derives its revenues primarily from the sale of new and used vehicles; sale of vehicle parts; performance of maintenance and repair services; and arrangement of vehicle financing and sale of service and other insurance contracts. 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 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. The following tables present the Company's revenues disaggregated by its geographical segments (in millions): Year Ended December 31, 2022 U.S. U.K. Total New vehicle retail sales $ 6,238.5 $ 1,214.0 $ 7,452.5 Used vehicle retail sales 4,531.5 1,141.8 5,673.3 Used vehicle wholesale sales 238.8 125.8 364.6 Total new and used vehicle sales 11,008.8 2,481.6 13,490.4 Parts and service sales (1) 1,761.4 248.2 2,009.5 Finance, insurance and other, net (2) 656.9 65.2 722.2 Total revenues $ 13,427.1 $ 2,795.1 $ 16,222.1 F-12 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Year Ended December 31, 2021 U.S. U.K. Total New vehicle retail sales $ 5,371.4 $ 1,133.3 $ 6,504.8 Used vehicle retail sales 3,356.3 1,082.5 4,438.8 Used vehicle wholesale sales 232.2 133.6 365.7 Total new and used vehicle sales 8,959.9 2,349.4 11,309.3 Parts and service sales (1) 1,361.4 229.8 1,591.2 Finance, insurance and other, net (2) 525.0 56.4 581.4 Total revenues $ 10,846.3 $ 2,635.6 $ 13,481.9 Year Ended December 31, 2020 U.S. U.K. Total New vehicle retail sales $ 4,406.6 $ 1,021.8 $ 5,428.4 Used vehicle retail sales 2,348.5 707.2 3,055.6 Used vehicle wholesale sales 169.4 126.4 295.8 Total new and used vehicle sales 6,924.5 1,855.3 8,779.8 Parts and service sales (1) 1,162.6 194.8 1,357.4 Finance, insurance and other, net (2) 416.3 46.6 463.0 Total revenues $ 8,503.4 $ 2,096.8 $ 10,600.2 (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. Refer to Arrangement of Vehicle Financing and the Sale of Service and Other Insurance Contracts section within this Note for further discussion of these arrangements. Refer to Note 8. Receivables, Net and Contract Assets for the balance of the Company’s contract assets associated with revenues from the arrangement of financing and sale of service and insurance contracts. New and Used Retail Vehicle Sales Revenues from the sale of new and used vehicles is recognized upon delivery of the vehicle to the customer, which is the point at which transfer of control occurs and when the performance obligation is satisfied. In some cases, the Company uses a third-party transport company to facilitate delivery of used vehicles to the customer. The transaction price for new and used vehicle sales is the stand-alone sales price of each individual vehicle and is generally settled within 30 days of the satisfaction of the performance obligation. Used Vehicle Wholesale Sales When the Company uses a third-party auction to facilitate the delivery of used vehicles to the customer, the Company has determined that the auction acts as an agent under the arrangement. Therefore, the Company recognizes revenues and cost of sales on a gross basis upon delivery of the vehicle by the auction to the customer, which is the point at which transfer of control occurs and when the performance obligation is satisfied. The transaction price for wholesale vehicle sales is established by the winning bid under the auction process and is generally settled within 30 days of the satisfaction of the performance obligation. Parts Sales Revenues from the sale of vehicle parts is recognized upon delivery of the parts to the customer, which is the point at which transfer of control occurs and when the performance obligation is satisfied. The transaction price for vehicle parts sales is the stand-alone sales price of each individual part and is generally settled within 30 days of the satisfaction of the performance obligation. Service Sales The Company performs maintenance and repair services, including collision restoration. F-13 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. For these contracts that qualify for revenue recognition over time, the Company uses the input method for the measurement of progress and recognition of revenues, utilizing labor cost incurred to estimate the services performed for which the Company has an enforceable right to payment. The Company believes this method is the most objective measure of progress and provides a faithful depiction of the Company’s transfer of services to the customer. The transaction price for maintenance and repair services is the total of the labor and, if applicable, vehicle parts used in the performance of the service, as well as the margin above cost charged to the customer. Arrangement of Vehicle Financing and the Sale of Service and Other Insurance Contracts The Company receives commissions from F&I providers for the arrangement of vehicle financing and the sale of service and other insurance products. Within the context of these contracts with the F&I providers, the Company has determined that it is an agent for the F&I providers. The Company has a single performance obligation associated with the F&I contracts, which is the facilitation of the financing of the vehicle or sale of the insurance product. Revenues from these contracts is recognized when the facilitated contract between the F&I provider and the customer is executed, which is when the performance obligation is satisfied. 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. Charge Backs 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. Retrospective Commissions and Associated Contract Assets In some cases, the Company also earns retrospective commission income by participating in the future profitability of the portfolio of product contracts sold by the Company. This contingent consideration is variable and is generally settled over five to seven years from the satisfaction of the performance obligation. The Company utilizes the “expected value” method to predict the amount of consideration to which the Company will be entitled, subject to constraint in the estimate. The estimated amount under the expected value method is accrued upfront when the facilitated contract between the F&I provider and the customer is executed, which is when the performance obligation is satisfied. The estimated amount is reflected as a contract asset within Other current assets and Other long-term assets in the Consolidated Balance Sheets until the right to such consideration becomes unconditional, at which time amounts due are reclassified to accounts receivable. Changes in the estimated amount of variable consideration are adjusted through revenues. The change in contract assets during the year ended December 31, 2022, is reflected in the table below (in millions): F&I, Net Contract Assets, January 1, 2022 $ 37.5 Changes related to revenue recognition during the period 30.8 Amounts invoiced during the period ( 20.5 ) Contract Assets, December 31, 2022 $ 47.9 F-14 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 3. ACQUISITIONS Prime Acquisition In November 2021, the Company completed the acquisition of the Prime Automotive Group (“Prime”), including 28 dealerships, certain real estate and three collision centers in the Northeastern U.S. (collectively referred to as the “Prime Acquisition”), for aggregate consideration of $ 934.2 million. 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. segment. 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 Identifiable assets acquired and liabilities assumed Inventories $ 136.7 Property and equipment 266.8 Intangible franchise rights 135.3 Operating lease assets 58.3 Other assets (1) 62.2 Total assets acquired 659.3 Operating lease liabilities 56.6 Other liabilities (2) 38.3 Total liabilities assumed 94.9 Total identifiable net assets 564.4 Goodwill $ 403.2 (1) Other assets acquired in connection with the Prime Acquisition include $ 55.3 million of assets classified as held for sale as of the acquisition date. See the table below for additional details. (2) Other liabilities assumed in connection with the Prime Acquisition include $ 1.7 million of liabilities classified as held for sale as of the acquisition date. See the table below for additional details. Prime assets classified as held for sale as of the acquisition date (in millions) Inventories $ 10.4 Property and equipment 28.1 Operating lease assets 1.7 Goodwill 15.1 Total other assets classified as held for sale $ 55.3 Prime liabilities classified as held for sale as of the acquisition date (in millions) Operating lease liabilities $ 1.7 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. F-15 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 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, respectively. 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, 2021 2020 Revenues $ 15,243.5 $ 12,469.8 Net income $ 594.7 $ 290.0 Pro forma data may not be indicative of the results that would have been obtained had these events actually occurred at the beginning of the period presented and is not intended to be a projection of future results. Other Acquisitions 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 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, which was accounted for as a business combination, was $ 1.3 million. 4. DISCONTINUED OPERATIONS AND OTHER DIVESTITURES Brazil Discontinued Operations 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 . F-16 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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. 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 ) F-17 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Results of the Brazil Discontinued Operations were as follows (in millions): Years Ended December 31, 2022 2021 2020 REVENUES: New vehicle retail sales $ 109.0 $ 205.6 $ 152.4 Used vehicle retail sales 44.0 58.1 50.0 Used vehicle wholesale sales 10.1 11.3 12.3 Parts and service sales 23.8 38.7 31.9 Finance, insurance and other, net 3.3 6.1 5.0 Total revenues 190.2 319.8 251.6 COST OF SALES: New vehicle retail sales 98.5 184.9 141.3 Used vehicle retail sales 41.2 53.1 46.3 Used vehicle wholesale sales 10.0 10.5 11.5 Parts and service sales 14.5 22.0 17.7 Total cost of sales 164.2 270.6 216.7 GROSS PROFIT 26.1 49.2 34.8 Selling, general and administrative expenses 15.1 34.3 31.1 Depreciation and amortization expense 0.9 1.5 2.3 Asset impairments 6.3 77.5 11.1 INCOME (LOSS) FROM DISCONTINUED OPERATIONS 3.7 ( 64.1 ) ( 9.6 ) Floorplan interest expense 1.4 1.1 0.3 Other interest (income) expense, net ( 1.8 ) 0.9 0.7 Loss on extinguishment of debt — 3.8 — 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 — DISCONTINUED OPERATIONS $ ( 2.7 ) $ ( 73.3 ) $ ( 10.2 ) F-18 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table presents cash flows from operating and investing activities for the Brazil Discontinued Operations (in millions): Years Ended December 31, 2022 2021 2020 Net cash provided by operating activities — discontinued operations $ 26.6 $ 5.2 $ 13.1 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): As of December 31, 2022 2021 Cash and cash equivalents $ — $ 3.7 Contracts-in-transit and vehicle receivables, net — 2.3 Accounts and notes receivable, net — 11.8 Inventories — 37.2 Prepaid expenses — 1.9 Other current assets 1.3 — Current assets of discontinued operations 1.3 56.9 Property and equipment, net — 22.3 Operating lease assets — 2.4 Other long-term assets 22.8 7.8 Non-current assets of discontinued operations 22.8 32.5 Total assets, before valuation allowance 24.1 89.5 Valuation allowance — ( 76.4 ) Total assets, net of valuation allowance $ 24.1 $ 13.0 Floorplan notes payable — credit facility and other $ — $ 3.3 Floorplan notes payable — manufacturer affiliates — 20.1 Current operating lease liabilities — 2.5 Accounts payable — 13.7 Accrued expenses and other current liabilities 7.8 8.7 Current liabilities of discontinued operations $ 7.8 $ 48.3 F-19 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Assets and Liabilities Held for Sale Assets and liabilities classified as held for sale consisted of the following (in millions): As of December 31, 2022 2021 Current assets classified as held for sale Brazil Discontinued Operations $ — $ 13.0 Prime Acquisition (1) 9.8 52.3 Other (2) 43.8 34.9 Total current assets classified as held for sale $ 53.6 $ 100.3 Current liabilities classified as held for sale Brazil Discontinued Operations $ — $ 48.3 Prime Acquisition (1) 1.1 1.6 Other 3.7 — Total current liabilities classified as held for sale $ 4.8 $ 49.9 (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 $ 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. The dispositions reduced goodwill by $ 4.0 million. The Company terminated one franchise within an existing dealership in the U.S. The Company also terminated one dealership representing one franchise in the U.K. During the year ended December 31, 2020, the Company’s dispositions included two dealerships representing three franchises in the U.S. The Company recorded a net pre-tax gain totaling $ 3.1 million related to these dispositions. 5. 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 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. The Incentive Plan expires on May 21, 2024. The terms of the awards (including vesting schedules) are established by the Compensation Committee of the Company’s Board of Directors. As of December 31, 2022, there were 1.1 million shares available for issuance under the Incentive Plan. F-20 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Restricted Stock Awards 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 considered outstanding at the date of grant. Refer to Note 6. 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. This estimate is adjusted annually based on the extent to which actual or expected forfeitures differ from the previous estimate. The Company issues new shares of common stock or treasury shares, if available, to settle vested RSAs. The following table summarizes RSA activity and related information for 2022: Awards Weighted Average Grant Date Fair Value Nonvested at January 1, 2022 523,549 $ 94.37 Granted 87,437 $ 179.38 Vested ( 176,338 ) $ 83.16 Forfeited ( 14,533 ) $ 115.02 Nonvested at December 31, 2022 420,115 $ 116.05 The total fair value of RSAs that vested during the years ended December 31, 2022, 2021 and 2020, was $ 14.7 million , $ 13.6 million and $ 15.8 million, respectively. As of December 31, 2022, there was $ 21.6 million of total unrecognized compensation cost related to RSAs which is expected to be recognized over a weighted-average period of 3.1 years. Restricted Stock Units 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. RSUs convey no voting rights, and therefore are not considered outstanding when granted. Granted RSUs participate in dividends, however the dividends are not payable until a directors separation of service with the Company. In the event a director terminates his or her directorship with the Company for reasons other than defined above, the RSUs granted and any accrued dividends will be forfeited. 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. Performance Share Units The Company grants PSUs to certain key employees. 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. F-21 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table summarizes PSU activity and related information for 2022: Awards Weighted Average Grant Date Fair Value 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 The Employee Stock Purchase Plan (the “Purchase Plan”) authorizes the issuance of up to 4.5 million shares of common stock and provides that no options to purchase shares may be granted under the Purchase Plan after May 19, 2025. The Purchase Plan is available to all employees of the Company and its participating subsidiaries and is a qualified plan as defined by Section 423 of the Internal Revenue Code. 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, 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 $ 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. 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 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 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. 6. EARNINGS PER SHARE The two-class method is utilized for the computation of the Company’s EPS. The two-class method requires a portion of net income to be allocated to participating securities, which are unvested awards of share-based payments with non-forfeitable rights to receive dividends that are paid in cash. The Company’s RSAs are participating securities. Income allocated to these participating securities is excluded from net earnings available to common shares, as shown in the table below. Basic EPS is computed by dividing net income available to basic common shares by the weighted average number of basic common shares outstanding during the period. Diluted EPS is computed by dividing net income available to diluted common shares by the weighted average number of dilutive common shares outstanding during the period. F-22 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table sets forth the calculation of EPS on total net income for the years ended December 31, 2022, 2021 and 2020 (in millions, except share and per share data): Years Ended December 31, 2022 2021 2020 Weighted average basic common shares outstanding 15,441,292 17,655,365 17,754,666 Dilutive effect of stock-based awards and employee stock purchases 52,324 66,847 51,912 Weighted average dilutive common shares outstanding 15,493,616 17,722,212 17,806,578 Basic: Net income $ 751.5 $ 552.1 $ 286.5 Less: Earnings allocated to participating securities from continuing operations 21.3 21.1 10.7 Less: 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 Basic earnings per common share $ 47.29 $ 30.22 $ 15.55 Diluted: Net income $ 751.5 $ 552.1 $ 286.5 Less: Earnings allocated to participating securities from continuing operations 21.3 21.0 10.6 Less: 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 Diluted earnings per common share $ 47.14 $ 30.11 $ 15.51 7. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS Accounting standards define fair value as the price that would be received from selling an asset or paid to transfer a liability in the most advantageous market in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and also establishes the following three levels of inputs that may be used to measure fair value: • Level 1 — Quoted prices for identical assets or liabilities in active markets. • Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or model-derived valuations or other inputs that are observable or that can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Cash and Cash Equivalents, Contracts-In-Transit and Vehicle Receivables, Accounts and Notes Receivable, Accounts Payable, Variable Rate Long-Term Debt and Floorplan Notes Payable The fair values of these financial instruments approximate their carrying values due to the short-term nature of these instruments and/or the existence of variable interest rates. Fixed Rate Long-Term Debt The Company estimates the fair value of its $ 750.0 million 4.00 % Senior Notes due August 2028 (“ 4.00 % Senior Notes”) using quoted prices for the identical liability (Level 1) and estimates the fair value of its fixed-rate mortgage facilities using a present value technique based on current market interest rates for similar types of financial instruments (Level 2). Refer to Note 14. Debt for further discussion of the Company’s long-term debt arrangements. F-23 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): December 31, 2022 December 31, 2021 Carrying Value (1) Fair Value Carrying Value (1) Fair Value 4.00 % Senior Notes $ 750.0 $ 633.9 $ 750.0 $ 748.4 Real estate related 99.2 90.5 81.3 78.7 Total $ 849.2 $ 724.4 $ 831.3 $ 827.1 (1) Carrying value excludes unamortized debt issuance costs. Derivative Financial Instruments 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 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. Assets and liabilities associated with the Company’s interest rate swaps, as reflected gross in the Consolidated Balance Sheets, were as follows (in millions): December 31, 2022 2021 Assets: Other current assets $ 0.1 $ — Other long-term assets 109.2 13.8 Total assets $ 109.3 $ 13.8 Liabilities: Accrued expenses and other current liabilities $ — $ 0.1 Long-term interest rate swap liabilities — 11.1 Total liabilities $ — $ 11.2 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 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 completed the transition of interest rate swaps from LIBOR to SOFR during 2022. F-24 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): Amount of Unrealized Income (Loss), Net of Tax, Recognized in Other Comprehensive Income (Loss) Years Ended December 31, Derivatives in Cash Flow Hedging Relationship 2022 2021 2020 Interest rate swaps $ 84.1 $ 22.6 $ ( 36.7 ) Amount Reclassified from Other Comprehensive Income (Loss) into Statements of Operations Statement of Operations Classification Years Ended December 31, 2022 2021 2020 Floorplan interest expense, net $ 0.8 $ ( 3.7 ) $ ( 7.9 ) Other interest expense, net $ 2.4 $ ( 4.1 ) $ ( 2.9 ) 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. 8. RECEIVABLES, NET AND CONTRACT ASSETS Contracts-in-Transit and Vehicle Receivables Contracts-in-transit and vehicle receivables consist primarily of amounts due from financing institutions on retail finance contracts from vehicle sales, and also includes receivables related to vehicle wholesale sales. Accounts and Notes Receivables Accounts and notes receivable consist primarily of amounts due from manufacturers related to dealer incentives, and also includes receivables related to parts and service sales. The Company maintains an allowance for doubtful accounts that is calculated under the current expected credit loss (“CECL”) model. The CECL model applies to financial assets measured at amortized cost, as shown in the following table, and requires the Company to reflect expected credit losses over the remaining contractual term of the asset. As the large majority of the Company’s receivables settle within 30 days, the forecast period under the CECL model is a relatively short horizon. The Company uses an aging method to estimate allowances for doubtful accounts under the CECL model as the Company has determined that the aging method adequately reflects expected credit losses, as corroborated by historical loss-rates. F-25 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company’s receivables, net and contract assets consisted of the following (in millions): December 31, 2022 2021 Contracts-in-transit and vehicle receivables, net: Contracts-in-transit $ 188.2 $ 143.8 Vehicle receivables 90.9 75.6 Total contracts-in-transit and vehicle receivables 279.0 219.4 Less: allowance for doubtful accounts 0.6 0.5 Total contracts-in-transit and vehicle receivables, net $ 278.5 $ 218.9 Accounts and notes receivables, net: Manufacturer receivables $ 94.6 $ 76.9 Parts and service receivables 68.0 58.6 F&I receivables 30.0 29.8 Other 12.1 17.0 Total accounts and notes receivables 204.7 182.2 Less: allowance for doubtful accounts 5.5 4.3 Total accounts and notes receivables, net $ 199.2 $ 177.9 Within Other current assets and Other long-term assets: Total contract assets (1) $ 47.9 $ 37.5 (1) See further discussion of the Company’s Contract Assets balance at Note 2. Revenues. No allowance for doubtful accounts was recorded for contract assets as of December 31, 2022, or December 31, 2021. 9. INVENTORIES The Company’s inventories consisted of the following (in millions): December 31, 2022 2021 New vehicles $ 536.2 $ 254.8 Used vehicles 537.3 596.6 Rental vehicles 155.0 114.7 Parts, accessories and other 128.0 107.1 Total inventories $ 1,356.6 $ 1,073.1 As described in Note 1. Basis of Presentation, Consolidation and Summary of Accounting Policies, inventories are valued at lower of cost or net realizable value. The lower of specific cost or net realizable value adjustments reduced total inventory cost by $ 5.4 million a nd $ 4.1 m illion at December 31, 2022 and 2021, respectively. Interest assistance reduced inventory costs by $ 2.8 million a nd $ 1.3 million at December 31, 2022 and 2021, respectively, and reduced cost of sal es by $ 56.0 million, $ 54.2 million and $ 47.3 million for the years ended December 31, 2022, 2021 and 2020, respectively. Impairments of inventory, net of insurance proceeds, related to catastrophic events are included in Selling, general and administrative expenses in the Consolidated Statements of Operations. During the years ended December 31, 2022, 2021 and 2020, the Company recorded $ 0.3 million, $ 0.1 million and $ 0.9 million of impairment charges, respectively. Refer to Note 1. Basis of Presentation, Consolidation and Summary of Accounting Policies for further discussion of the Company’s accounting policies for inventories. F-26 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 10. PROPERTY AND EQUIPMENT, NET The Company’s property and equipment consisted of the following (in millions): December 31, 2022 2021 Land $ 838.8 $ 758.5 Buildings and leasehold improvements 1,459.8 1,358.1 Machinery and dealership equipment 173.0 163.1 Office equipment, furniture and fixtures 141.7 128.7 Company vehicles 17.3 16.4 Construction in progress 52.0 46.6 Total 2,682.6 2,471.4 Less: accumulated depreciation and amortization 554.4 513.5 Property and equipment, net $ 2,128.2 $ 1,957.8 For the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 0.8 million, $ 1.7 million and $ 4.2 millio n, respectively, in asset impairment charges related to property and equipment in the Company’s U.S. segment. Property and equipment impairment charges are reflected in Asset impairments in the Consolidated Statements of Operations. Depreciation and amortization expense totaled $ 88.4 million, $ 77.4 million and $ 73.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. The Company capitalized $ 1.1 million, $ 1.0 million and $ 1.1 million of i nterest on construction projects for the years ended December 31, 2022, 2021 and 2020, respectively. 11. LEASES The Company leases real estate, office equipment and dealership operating assets under long-term lease agreements and subleases certain real estate to third parties. The Company recognizes ROU assets and lease liabilities at commencement based on the present value of lease payments over the lease term. For such leases, the aggregate present value of the Company’s lease payments may include options to purchase the leased property or lease terms with options to renew or terminate the lease, when the option is at the Company’s sole discretion and it is reasonably certain that the Company will exercise such an option. The Company’s leases may also include rental payments adjusted periodically for inflation. Payments based on a change in an index or rates are not considered in the determination of lease payments for purposes of measuring the related lease liability. The Company discounts lease payments using its incremental borrowing rate based on information available as of the measurement date. Subsequent to the recognition of its ROU assets and lease liabilities, the Company recognizes lease expense related to its operating lease payments on a straight-line basis over the lease term. None of the Company’s lease agreements contain material residual value guarantees or material restrictive covenants. For the Company’s dealership operating leases, the Company has elected to separate lease and non-lease components and has allocated the consideration between the lease and non-lease components based on the estimated fair value of the leased component. For all other asset classes, the Company has elected to combine and account for both lease and non-lease components as a single component. The Company has elected not to record leases with an initial term of 12 months or less on the balance sheet for all asset classes. F-27 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company reviews ROU assets for impairment at the lowest level of identifiable cash flows whenever evidence exists that the carrying value of an asset may not be recoverable (i.e., triggering events). This review consists of comparing the carrying amount of the asset group with its expected future undiscounted cash flows. Estimates of expected future cash flows represent management’s best estimate based on currently available information and reasonable and supportable assumptions. If the asset group’s carrying amount exceeds its future undiscounted cash flows, an impairment charge is measured as the amount by which its carrying amount exceeds its fair value. The fair value of the ROU asset is calculated based on the discounted market rent over the remaining lease period. The market rent reflects current lease rates on comparable properties and requires adjustments to reflect the different characteristics between the property being measured and the comparable property, which are considered level 3 inputs within the fair value hierarchy described further in Note 7. Financial Instruments and Fair Value Measurements. 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. segment. 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): December 31, Leases Balance Sheet Classification 2022 2021 Assets: Operating Operating lease assets $ 249.1 $ 267.8 Finance Property and equipment, net 221.4 169.1 Total $ 470.5 $ 436.9 Liabilities: Current: Operating Current operating lease liabilities $ 21.8 $ 25.9 Finance Current maturities of long-term debt 18.8 8.4 Noncurrent: Operating Operating lease liabilities, net of current portion 238.4 256.6 Finance Long-term debt, net of current maturities 201.6 164.3 Total $ 480.6 $ 455.2 Years Ended December 31, Lease Expense Income Statement Classification 2022 2021 2020 Operating Selling, general and administrative expenses $ 42.4 $ 35.1 $ 32.5 Operating Asset impairments — — 1.8 Variable Selling, general and administrative expenses 4.5 3.3 2.7 Sublease income Selling, general and administrative expenses ( 2.3 ) ( 1.9 ) ( 1.3 ) Finance: Amortization of lease assets Depreciation and amortization expense 9.1 7.3 6.3 Interest on lease liabilities Other interest expense, net 8.2 7.2 7.0 Net lease expense $ 61.9 $ 50.9 $ 48.9 F-28 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) December 31, 2022 Maturities of Lease Liabilities Operating Leases Finance Leases 2023 $ 33.7 $ 28.6 2024 35.0 30.8 2025 33.0 40.2 2026 30.3 43.6 2027 28.8 47.8 Thereafter 218.8 93.0 Total lease payments 379.5 284.0 Less: lease payments representing interest ( 119.3 ) ( 63.6 ) Present value of lease liabilities $ 260.2 $ 220.4 Years Ended December 31, Weighted-Average Lease Term and Discount Rate 2022 2021 2020 Weighted-average remaining lease terms: Operating 13.6 12.0 11.7 Finance 17.2 17.1 15.6 Weighted-average discount rates: Operating 5.1 % 4.8 % 5.6 % Finance 5.1 % 4.9 % 6.2 % Years Ended December 31, Other Information 2022 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used in operating leases $ 42.2 $ 36.2 $ 33.8 Operating cash flows used in finance leases $ 8.2 $ 7.2 $ 7.0 Financing cash flows used in finance leases $ 9.1 $ 10.9 $ 5.5 ROU assets obtained in exchange for lease obligations: Operating leases, initial recognition $ 12.9 $ 77.8 $ 3.4 Operating leases, modifications and remeasurements $ 25.0 $ 9.4 $ 9.6 Finance leases, initial recognition $ 39.3 $ 63.8 $ 15.6 Finance leases, modifications and remeasurements $ 23.1 $ ( 4.5 ) $ 31.8 12. INTANGIBLE FRANCHISE RIGHTS AND GOODWILL The Company evaluates its intangible assets, including goodwill, for impairment annually, or more frequently if events or circumstances indicate possible impairment. Refer to Note 1. Basis of Presentation, Consolidation and Summary of Accounting Policies for further discussion of the Company’s accounting policies relating to impairment testing. For the October 31, 2022 annual goodwill impairment assessment, the Company elected to perform a qualitative assessment and determined that it was not more-likely-than-not that the fair values of the Company’s reporting units were less than their carrying values. 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. F-29 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. The Company weights the income approach and market approach 80 % and 20 %, respe ctively, in the fair value model. For intangible franchise rights, the fair value of the respective franchise right is estimated using a discounted cash flow, or income approach. The income approach measures fair value by discounting expected future cash flows at a WACC that proportionately weights the cost of debt and equity. Significant assumptions in the model include revenue growth rates, future EBITDA margins, the WACC and terminal growth rates. The Company applies a five-year projection period which aligns with the Company’s strategic plan. Key considerations in the assumed growth rates include industry SAAR projections, macroeconomic conditions including consumer confidence levels, unemployment rates and 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. Significant inputs to the WACC include the risk-free rate, an adjustment for stock market risk, an adjustment for company size risk and country risk adjustments for the U.K. For the market approach, the Company utilizes recent market multiples of guideline companies for both revenue and pre-tax net income weighted as appropriate by reporting unit. Each of the significant assumptions to the fair value model are considered level 3 inputs within the fair value hierarchy described further in Note 7. Financial Instruments and Fair Value Measurements. Developing these assumptions requires applying management’s knowledge of the industry, recent transactions and reasonable performance expectations for its operations. 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, 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 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. segment and $ 11.1 million in the U.K. 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. segment. 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. segment. Refer to Note 3. Acquisitions for further discussion of the Company’s acquisitions. The following table presents the Company’s intangible franchise rights balances by segment as of December 31, 2022 and 2021 (in millions): Intangible Franchise Rights U.S. U.K. Total Balance, December 31, 2021 $ 372.0 $ 20.4 $ 392.3 Balance, December 31, 2022 $ 498.0 $ 18.3 $ 516.3 F-30 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): Goodwill U.S. U.K. Total Balance, December 31, 2020 (1) $ 901.7 $ 95.4 $ 997.1 Additions through acquisitions 434.6 18.9 453.5 Disposals ( 4.1 ) — ( 4.1 ) Reclassified from (to) assets held for sale, net ( 25.0 ) — ( 25.0 ) Currency translation — ( 1.3 ) ( 1.3 ) Balance, December 31, 2021 (1) $ 1,307.3 $ 112.9 $ 1,420.2 Additions through acquisitions 236.1 10.2 246.3 Purchase price allocation adjustments 35.0 — 35.0 Disposals ( 37.3 ) — ( 37.3 ) Reclassified from (to) assets held for sale, net 8.8 — 8.8 Currency translation — ( 11.2 ) ( 11.2 ) Balance, December 31, 2022 (1) $ 1,549.9 $ 111.9 $ 1,661.8 (1) Net of accumulated impairments of $ 40.6 million in the U.S. reporting unit. 13. FLOORPLAN NOTES PAYABLE The Company’s floorplan notes payable consisted of the following (in millions): December 31, 2022 2021 Revolving Credit Facility — floorplan notes payable $ 833.5 $ 511.7 Revolving Credit Facility — floorplan notes payable offset account ( 140.2 ) ( 268.6 ) Revolving Credit Facility — floorplan notes payable, net 693.3 243.1 Other non-manufacturer facilities 68.8 51.9 Floorplan notes payable — credit facility and other, net $ 762.1 $ 295.0 FMCC facility $ 55.1 $ 22.8 FMCC facility offset account ( 13.4 ) ( 3.3 ) FMCC facility, net 41.8 19.5 Other manufacturer affiliate facilities 201.3 216.5 Floorplan notes payable — manufacturer affiliates, net $ 243.1 $ 236.0 Floorplan Notes Payable — Credit Facility Revolving Credit Facility On March 9, 2022, in the U.S., the Company entered into an amended revolving syndicated credit arrangement with 21 participating financial institutions that matures on March 9, 2027 (“Revolving Credit Facility”). 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. vehicle inventory floorplan financing (“U.S. 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) 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 $ 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. F-31 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The U.S. Floorplan Line bears interest at rates equal to SOFR plus 120 basis points for new vehicle inventory and SOFR plus 150 basis points for used vehicle inventory. The weighted average interest rate on the U.S. Floorplan Line was 5.56 % as of December 31, 2022, excluding the impact of the Company’s interest rate swap derivative instruments. The Acquisition Line bears interest at SOFR or a SOFR equivalent plus 110 to 210 basis points, depending on the Company’s total adjusted leverage ratio, on borrowings in USD, Euros or GBP. The U.S. Floorplan Line requires a commitment fee of 0.15 % per annum on the unused portion. Amounts borrowed by the Company under the U.S. Floorplan Line for specific vehicle inventory are to be repaid upon the sale of the vehicle financed and in no case is a borrowing for a vehicle to remain outstanding for greater than one year. The Acquisition Line requires a commitment fee ranging from 0.15 % to 0.40 % per annum, depending on the Company’s total adjusted leverage ratio, based on a minimum commitment of $ 50.0 million less outstanding borrowings. 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. Floorplan Notes Payable — Manufacturer Affiliates FMCC Facility The Company has a $ 300.0 million floorplan arrangement with FMCC for financing of new Ford vehicles in the U.S. (the “FMCC Facility”). This facility bears interest at the U.S. Prime rate which was 7.50 % as of December 31, 2022. Other Manufacturer Facilities The Company has other credit facilities in the U.S. and the U.K. with financial institutions affiliated with manufacturers for financing of new, used and rental vehicle inventories. 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 Offset accounts consist of immediately available cash used to pay down the U.S. Floorplan Line and FMCC Facility, and therefore offset the respective outstanding balances in the Company’s Consolidated Balance Sheets. The offset accounts are the Company’s primary options for the short-term investment of excess cash. F-32 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 14. DEBT Long-term debt consisted of the following (in millions): December 31, 2022 2021 4.00 % Senior Notes due August 15, 2028 $ 750.0 $ 750.0 Acquisition Line 303.2 329.3 Other debt: Real estate related 796.9 627.7 Finance leases 220.4 172.7 Other 22.3 166.9 Total other debt 1,039.6 967.4 Total debt 2,092.7 2,046.7 Less: unamortized debt issuance costs 10.2 11.0 Less: current maturities 130.3 220.4 Total long-term debt $ 1,952.2 $ 1,815.3 The aggregate annual maturities of debt for the next five years, excluding debt issuance costs, are as follows (in millions): Total Years Ended December 31, 2023 $ 130.8 2024 113.9 2025 110.6 2026 193.7 2027 490.7 Thereafter 1,053.2 Total $ 2,092.7 Acquisition Line 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. The average interest rate on this facility was 4.03 % as of December 31, 2022. Real Estate Related The Company has mortgage loans in the U.S. and the U.K. that are paid in installments. As of December 31, 2022, borrowings outstanding under these facilities totaled $ 796.9 million, gross of debt issuance costs, comprised of $ 695.4 million in the U.S. and $ 101.5 million in the U.K. The Company’s mortgage loans are secured by real property owned by the Company. The carrying values of the related collateralized real estate as of December 31, 2022 and 2021 was $ 1,215.7 million and $ 983.1 million, respectively. Finance Leases Refer to Note 11. Leases for further information regarding the Company’s finance leases. Bridge Facility 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. F-33 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 15. INCOME TAXES Income from continuing operations before income taxes by geographic area was as follows (in millions): Years Ended December 31, 2022 2021 2020 Domestic $ 897.4 $ 721.8 $ 366.6 Foreign 87.9 79.2 14.2 Total income before income taxes $ 985.3 $ 800.9 $ 380.8 Federal, state and foreign income tax provisions from continuing operations were as follows (in millions): Years Ended December 31, 2022 2021 2020 Federal: Current $ 160.7 $ 116.4 $ 70.8 Deferred 24.6 30.7 5.5 State: Current 24.5 13.8 7.0 Deferred 5.9 1.6 ( 1.3 ) Foreign: Current 18.0 14.8 6.3 Deferred ( 2.6 ) ( 1.8 ) ( 4.1 ) Provision for income taxes $ 231.1 $ 175.5 $ 84.2 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, 2022 2021 2020 Provision at the U.S. federal statutory rate $ 206.9 $ 168.1 $ 79.9 Increase (decrease) resulting from: State income tax, net of benefit for federal deduction 22.3 15.3 5.8 Foreign income tax rate differential ( 2.3 ) ( 1.0 ) — Change in enacted tax rate — U.K. — ( 1.9 ) — Tax Credits ( 0.4 ) ( 0.8 ) ( 0.3 ) Changes in valuation allowances ( 2.1 ) ( 2.9 ) ( 0.7 ) Stock-based compensation ( 1.6 ) ( 2.2 ) ( 0.8 ) 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 F-34 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The components of deferred tax assets and liabilities were as follows (in millions): December 31, 2022 2021 Deferred tax assets: Accrued liabilities $ 56.4 $ 53.5 U.S. state NOL carryforwards 18.9 30.8 Operating lease liabilities 71.1 79.5 Other 2.5 2.8 Deferred tax assets 148.9 166.6 Less: valuation allowance on deferred tax assets 10.2 24.2 Net deferred tax assets $ 138.7 $ 142.4 Deferred tax liabilities: Goodwill and intangible franchise rights $ 171.2 $ 152.2 Depreciation expense 110.0 99.4 Interest rate swaps 26.1 0.6 Operating lease ROU assets 59.6 63.5 Other 1.7 1.7 Deferred tax liabilities 368.6 317.4 Net deferred tax liability $ 229.9 $ 175.0 The classification of the continued operations of the Company’s net deferred tax liability within the Consolidated Balance Sheets is as follows (in millions): December 31, 2022 2021 Deferred tax asset, included in Other long-term assets $ 8.2 $ 5.9 Deferred tax liability, included in Deferred income taxes 238.1 180.9 Net deferred tax liability $ 229.9 $ 175.0 As of December 31, 2022, the Company had state pre-tax NOL carryforwards in the U.S. 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, 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. F-35 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) A reconciliation of the Company’s unrecognized tax benefits is as follows (in millions): 2022 2021 2020 Balance at January 1 $ 2.0 $ 2.0 $ 2.4 Additions for current tax 0.5 0.5 0.5 Additions based on tax positions in prior years — — — Reductions for tax positions — — ( 0.4 ) Settlements with tax authorities — — — Reductions due to lapse of statutes of limitations ( 0.5 ) ( 0.5 ) ( 0.5 ) Balance at December 31 $ 2.0 $ 2.0 $ 2.0 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, 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. 16. EMPLOYEE SAVINGS PLANS 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. In the U.S., the Company offers a 401(k) plan to eligible employees and provides matching contribution to employees that participate in the plan. For the years ended December 31, 2022, 2021 and 2020, the matching contributions paid by the Company totaled $ 10.9 million, $ 8.4 million and $ 3.6 million, respectively. In the U.K., the Company offers private personal pension plans and provides matching contributions to eligible employees that participate in the plan. For the years ended December 31, 2022, 2021 and 2020, the matching contributions paid by the Company totaled $ 4.5 million , $ 3.8 million and $ 2.9 million, respectively. 17. 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, 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. In addition, the manufacturers of the vehicles that the Company sells and services have audit rights allowing them to review the validity of amounts claimed for incentive, rebate or warranty-related items and charge the Company back for amounts determined to be invalid payments under the manufacturers’ programs, subject to the Company’s right to appeal any such decision. Legal Proceedings 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. F-36 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Other Matters 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. In certain instances, the Company obtains collateral support for the rental obligations that the Company remains obligated for upon sale of a dealership to a lessee. Total associated letters of credit issued on behalf of the lessee where the Company is the beneficiary was $ 2.9 million as of December 31, 2022. 18. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Changes in the balances of each component of Accumulated other comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020 were as follows (in millions): Year Ended December 31, 2022 Accumulated Income (Loss) on Foreign Currency Translation Accumulated Income (Loss) on Interest Rate Swaps Total Balance, December 31, 2021 $ ( 158.2 ) $ 2.0 $ ( 156.2 ) Other comprehensive income (loss) before reclassifications: Pre-tax ( 27.2 ) 110.0 82.7 Tax effect — ( 25.8 ) ( 25.8 ) Amounts reclassified from accumulated other comprehensive income (loss): 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 $ ( 61.1 ) $ 83.6 $ 22.5 Year Ended December 31, 2021 Accumulated Income (Loss) on Foreign Currency Translation Accumulated Income (Loss) on Interest Rate Swaps Total Balance, December 31, 2020 $ ( 151.6 ) $ ( 32.5 ) $ ( 184.0 ) Other comprehensive income (loss) before reclassifications: Pre-tax ( 6.7 ) 29.5 22.8 Tax effect — ( 6.9 ) ( 6.9 ) 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 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 Balance, December 31, 2021 $ ( 158.2 ) $ 2.0 $ ( 156.2 ) F-37 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Year Ended December 31, 2020 Accumulated Income (Loss) on Foreign Currency Translation Accumulated Income (Loss) on Interest Rate Swaps Total Balance, December 31, 2019 $ ( 142.9 ) $ ( 4.1 ) $ ( 147.0 ) Other comprehensive income (loss) before reclassifications: Pre-tax ( 8.7 ) ( 45.5 ) ( 54.2 ) Tax effect — 8.8 8.8 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 loss ( 8.7 ) ( 28.4 ) ( 37.1 ) Balance, December 31, 2020 $ ( 151.6 ) $ ( 32.5 ) $ ( 184.0 ) 19. CASH FLOW INFORMATION Non-cash Activities 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 Cash paid for interest, including the monthly settlement of the Company’s interest rate swaps, was $ 92.9 million , $ 72.8 million and $ 91.3 million for the years ended December 31, 2022, 2021 and 2020, respectively. Refer to Note 7. Financial Instruments and Fair Value Measurements for further discussion of the Company’s interest rate swaps. Cash paid for income taxes, net of refunds, was $ 202.2 million , $ 163.0 million and $ 63.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. 20. SEGMENT INFORMATION As of December 31, 2022, the Company had two reportable segments: the U.S. and the U.K. The Company defines its segments as those operations whose results the Company’s Chief Executive Officer, who is the CODM, regularly reviews to analyze performance and allocate resources. Each segment is comprised of retail automotive franchises that sell new and used cars and light trucks; arrange related vehicle financing; sell service and insurance contracts; provide automotive maintenance and repair services; and sell vehicle parts. Selected reportable segment data for continuing operations as follows (in millions): Year Ended December 31, 2022 U.S. U.K. Total Total revenues $ 13,427.1 $ 2,795.1 $ 16,222.1 Gross profit $ 2,582.3 $ 382.9 $ 2,965.2 SG&A expenses $ 1,516.9 $ 266.5 $ 1,783.3 Depreciation and amortization expense $ 73.1 $ 15.2 $ 88.4 Floorplan interest expense $ 21.4 $ 5.9 $ 27.3 Other interest expense, net $ 71.0 $ 6.6 $ 77.5 Income before income taxes $ 897.4 $ 87.9 $ 985.3 Capital expenditures: Real estate related capital expenditures $ 17.7 $ 22.0 $ 39.6 Non-real estate related capital expenditures 100.2 15.3 115.5 Total capital expenditures $ 117.8 $ 37.3 $ 155.1 F-38 GROUP 1 AUTOMOTIVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Year Ended December 31, 2021 U.S. U.K. Total Total revenues $ 10,846.3 $ 2,635.6 $ 13,481.9 Gross profit $ 2,089.5 $ 351.2 $ 2,440.7 SG&A expenses $ 1,234.9 $ 242.2 $ 1,477.2 Depreciation and amortization expense $ 60.4 $ 17.0 $ 77.4 Floorplan interest expense $ 22.2 $ 5.4 $ 27.6 Other interest expense, net $ 48.5 $ 7.3 $ 55.8 Income before income taxes $ 721.8 $ 79.2 $ 800.9 Capital expenditures: Real estate related capital expenditures $ 18.9 $ 27.0 $ 45.9 Non-real estate related capital expenditures 82.3 13.9 96.2 Total capital expenditures $ 101.2 $ 40.9 $ 142.1 Year Ended December 31, 2020 U.S. U.K. Total Total revenues $ 8,503.4 $ 2,096.8 $ 10,600.2 Gross profit $ 1,486.0 $ 248.1 $ 1,734.1 SG&A expenses $ 947.0 $ 191.2 $ 1,138.2 Depreciation and amortization expense $ 57.7 $ 15.8 $ 73.5 Floorplan interest expense $ 32.2 $ 7.1 $ 39.2 Other interest expense, net $ 55.0 $ 6.9 $ 61.9 Income before income taxes $ 366.6 $ 14.2 $ 380.8 Capital expenditures: Real estate related capital expenditures $ 12.9 $ 11.2 $ 24.1 Non-real estate related capital expenditures 60.9 10.6 71.5 Total capital expenditures $ 73.8 $ 21.8 $ 95.5 December 31, 2022 U.S. U.K. Total Property and equipment, net $ 1,824.1 $ 304.1 $ 2,128.2 Total assets $ 5,710.8 $ 983.8 $ 6,694.7 December 31, 2021 U.S. U.K. Total Property and equipment, net $ 1,649.9 $ 308.0 $ 1,957.8 Total assets $ 4,773.1 $ 963.3 $ 5,736.4 Refer to Note 12. Intangible Franchise Rights and Goodwill for further discussion of the Company’s intangible franchise rights and goodwill by segment. Item 16. Form 10-K Summary None. F-39