What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-04-28 compared with 2022-10-28 · 125 added, 277 removed, 451 unchanged (47% of the section changed)

3 unchanged sentences

(In millions, except share data)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

CURRENT ASSETS:

35 unchanged sentences

Retained earnings 3,225.5 3,073.6

Accumulated other comprehensive income (loss) ( 4.7 ) ( 156.2 )

Accumulated other comprehensive income 16.7 22.5

Treasury stock, at cost;

7 unchanged sentences

(In millions, except per share data)

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

2022 2021 2022 2021

Three Months Ended March 31,

New vehicle retail sales $ 1,955.7 $ 1,745.1

17 unchanged sentences

Other interest expense, net 19.7 17.4

Other income ( 3.4 ) — ( 3.4 ) —

Other expense 2.8 —

INCOME BEFORE INCOME TAXES 206.4 262.3

18 unchanged sentences

(In millions)

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

2022 2021 2022 2021

Three Months Ended March 31,

NET INCOME $ 158.4 $ 202.9

Other comprehensive income (loss), net of taxes:

Net foreign currency translation adjustments:

Unrealized foreign currency translation adjustments ( 31.2 ) ( 11.5 ) ( 59.3 ) ( 6.7 )

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

Reclassification of other cumulative foreign currency translation adjustments 1.5 — 1.5 —

Foreign currency translation adjustments, net of reclassifications 93.1 ( 11.5 ) 65.1 ( 6.7 )

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 $( 9.8 ), $ 0.2 , $( 26.1 ) and $( 4.9 ), respectively

31.9 ( 0.6 ) 84.8 16.1

Reclassification adjustment for (gain) loss included in interest expense, net of tax (provision) benefit of $( 0.4 ), $ 0.6 , $ 0.5 and $ 1.9 , respectively

( 1.4 ) 1.8 1.6 6.1

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

Unrealized gain on interest rate risk management activities, net of tax 30.4 1.3 86.4 24.5

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX 123.5 ( 10.2 ) 151.5 17.9

Foreign currency translation adjustments 9.8 ( 0.2 )

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

Unrealized (loss) gain arising during the period, net of tax benefit (provision) of $ 2.1 and $( 10.5 ), respectively

Reclassification adjustment for (gain) loss included in interest expense, net of tax (provision) benefit of $( 1.8 ) and $ 0.6 , re spectively

Reclassification related to de-designated interest rate swaps, net of tax provision of $( 1.0 ) and $ — , respectively

Unrealized (loss) gain on interest rate risk management activities, net of tax ( 15.5 ) 35.9

OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX ( 5.7 ) 35.7

COMPREHENSIVE INCOME $ 152.7 $ 238.6

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except share and per share data)

Common Stock Additional

Paid-in Capital Retained Earnings Accumulated

Comprehensive Income (Loss) Treasury Stock Total

Shares Amount

BALANCE, JUNE 30, 2022 25,258,744 $ 0.3 $ 331.8 $ 2,732.5 $ ( 128.3 ) $ ( 931.8 ) $ 2,004.5

Net income — — — 195.7 — — 195.7

Other comprehensive income, net of taxes — — — — 123.5 — 123.5

Purchases of treasury stock — — — — — ( 105.4 ) ( 105.4 )

Net issuance of treasury shares to stock compensation plans and other ( 19,237 ) — ( 1.2 ) — — ( 3.3 ) ( 4.5 )

Stock-based compensation — — 6.2 — — — 6.2

Dividends declared ($ 0.38 per share)

— — — ( 6.0 ) — — ( 6.0 )

BALANCE, SEPTEMBER 30, 2022 25,239,507 $ 0.3 $ 336.8 $ 2,922.3 $ ( 4.7 ) $ ( 1,040.5 ) $ 2,214.1

(In millions, except share data)

Common Stock Additional

3 unchanged sentences

BALANCE, DECEMBER 31, 2022

Net income — — — 594.6 — — 594.6

Other comprehensive income, net of taxes — — — — 151.5 — 151.5

Purchases of treasury stock — — — — — ( 359.5 ) ( 359.5 )

Net issuance of treasury shares to stock compensation plans and other ( 96,547 ) — ( 10.2 ) — — 9.4 ( 0.8 )

Stock-based compensation — — 21.2 — — — 21.2

Dividends declared ($ 1.11 per share)

25,232,620 $ 0.3 $ 338.7 $ 3,073.6 $ 22.5 $ ( 1,197.5 ) $ 2,237.5

BALANCE, SEPTEMBER 30, 2022 25,239,507 $ 0.3 $ 336.8 $ 2,922.3 $ ( 4.7 ) $ ( 1,040.5 ) $ 2,214.1

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

GROUP 1 AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except share and per share data)

Common Stock Additional

Paid-in Capital Retained Earnings Accumulated

Comprehensive Income (Loss) Treasury Stock Total

Shares Amount

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

Net income — — — 158.4 — — 158.4

Other comprehensive loss, net of taxes — — — — ( 5.7 ) — ( 5.7 )

Purchases of treasury stock, including excise tax — — — — — ( 34.9 ) ( 34.9 )

Net issuance of treasury shares to stock compensation plans ( 82,455 ) — ( 10.9 ) — — 8.7 ( 2.2 )

2 unchanged sentences

— — — ( 6.5 ) — — ( 6.5 )

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

BALANCE, MARCH 31, 2023

25,150,165 $ 0.3 $ 333.6 $ 3,225.5 $ 16.7 $ ( 1,223.7 ) $ 2,352.5

Common Stock Additional

3 unchanged sentences

BALANCE, DECEMBER 31, 2021

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

Net income — — — 202.9 — — 202.9

5 unchanged sentences

— — — ( 6.2 ) — — ( 6.2 )

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

BALANCE, MARCH 31, 2022

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

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

2 unchanged sentences

(In millions)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

8 unchanged sentences

Gain on disposition of assets ( 1.5 ) ( 21.4 )

Loss on extinguishment of debt — 3.8

Unrealized loss on derivative instruments — 1.4

Unrealized gain on derivative instruments ( 4.0 ) —

Other ( 1.9 ) 0.1

6 unchanged sentences

Floorplan notes payable — manufacturer affiliates

( 23.9 ) ( 112.5 )

Deferred revenues ( 0.1 ) ( 0.1 )

6 unchanged sentences

Purchases of property and equipment ( 35.8 ) ( 33.9 )

Proceeds from sale of discontinued operations, net 59.4 —

Other ( 1.2 ) ( 2.4 )

15 unchanged sentences

Dividends paid ( 6.4 ) ( 6.1 )

Other ( 1.2 ) —

Net cash used in financing activities ( 67.0 ) ( 9.7 )

Effect of exchange rate changes on cash 1.6 0.4

Net increase in cash and cash equivalents 1.9 209.7

Net (decrease) increase in cash and cash equivalents ( 26.6 ) 13.1

CASH AND CASH EQUIVALENTS, beginning of period 47.9 18.7

12 unchanged sentences

The accompanying Condensed Consolidated Financial Statements reflect the consolidated accounts of the parent company, Group 1 Automotive, Inc.

(the “Company”), and its subsidiaries, all of which are wholly owned.

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

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

and its subsidiaries, all of which are wholly owned.

On July 1, 2022, the Company completed the disposal of 100 % of the issued and outstanding equity interests of the Company’s Brazilian operations (the “Brazil Disposal Group”).

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

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

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

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

Refer to Note 4.

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

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

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

Refer to Note 4.

Discontinued Operations and Other Divestitures for additional information.

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

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

5 unchanged sentences

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 Condensed Consolidated Financial Statements include, but not limited to, inventory valuation adjustments, reserves for future chargebacks on finance, insurance and VSC fees, self-insured property and casualty insurance exposure, the fair value of assets acquired and liabilities assumed in business combinations, the valuation of goodwill and intangible franchise rights and reserves for potential litigation.

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 Condensed 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.

GROUP 1 AUTOMOTIVE, INC.

1 unchanged sentence

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

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

New vehicle retail sales $ 1,608.6 $ 347.1 $ 1,955.7

7 unchanged sentences

Total revenues $ 3,342.4 $ 787.7 $ 4,130.0

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

Three Months Ended March 31, 2022

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

8 unchanged sentences

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

(2) Includes variable consideration recognized of $ 5.3 million and $ 5.1 million during the three months ended September 30, 2022 and 2021, respectively, and $ 22.2 million and $ 18.7 million during the nine months ended September 30, 2022 and 2021, respectively, relating to performance obligations satisfied in previous periods on the Compa ny’s retrospective commission income contracts.

(2) Includes variable consideration recognized of $ 4.9 million and $ 10.1 million during the three months ended March 31, 2023 and 2022, respectively, relating to performance obligations satisfied in previous periods on the Compa ny’s retrospective commission income contracts.

Refer to Note 8.

1 unchanged sentence

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

Prime Acquisition

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

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

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 nine months ended September 30, 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 September 30, 2022, the Company is still waiting for distributor approval to obtain ownership of the additional dealership.

Pursuant 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.

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

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

The goodwill is deductible for income tax purposes.

GROUP 1 AUTOMOTIVE, INC.

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

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

Total consideration $ 967.6

Identifiable assets acquired and liabilities assumed

Inventories 136.7

Property and equipment 266.8

Intangible franchise rights 135.3

Operating lease assets 58.3

Other assets (1)

Total assets acquired 659.3

Operating lease liabilities 56.6

Other liabilities (2)

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’s Condensed Consolidated Statement of Operations included revenues attributable to Prime for the three and nine months ended September 30, 2022, of $ 448.0 million and $ 1.3 billion, respectively, and net income attributable to Prime for the three and nine months ended September 30, 2022 of $ 34.2 million and $ 89.0 million, respectively.

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.

Other Acquisitions

During the nine months ended September 30, 2022, the Company acquired five dealerships and a collision center in the U.S.

Aggregate consideration paid for these dealerships, which were accounted for as business combinations, was $ 393.0 million, net of cash acquired.

Goodwill and franchise rights intangibles associated with these acquisitions totaled $ 194.0 million and $ 93.4 million, respectively .

During the nine months ended September 30, 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 $ 32.8 million, net of cash acquired.

During the three months ended March 31, 2023, the Company acquired one Chevrolet dealership in the U.S.

Aggregate consideration paid for the dealership, which was accounted for as a business combination, was $ 76.9 million .

Goodwill associated with the acquisition totaled $ 36.5 million .

The accounting for the U.K.

acquisition is considered to be preliminary, as the acquisition was announced on September 6, 2022.

The acquisition closed on March 27, 2023, and the accounting for the acquisition is considered to be preliminary and subject to change as the Company’s fair value assessments are finalized.

The Company is continuing to analyze and assess relevant information related to the valuation of property, equipment and intangible assets.

Due to the recent timing of the U.K.

acquisition, the related amounts are provisional and subject to change as the Company’s fair value assessments are finalized.

The Company will reflect any such adjustments in subsequent filings with the SEC.

During the nine months ended September 30, 2021 , the Company acquired two 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, was $ 74.6 million, net of cash acquired.

Goodwill associated with these acquisitions totaled $ 41.4 million.

GROUP 1 AUTOMOTIVE, INC.

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

The Company will reflect any required fair value adjustments in subsequent filings with the SEC.

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

Total consideration paid for this dealership, which was accounted for as a business combination, was $ 250.4 million.

Goodwill associated with this acquisition totaled $ 136.0 million.

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”).

On July 1, 2022, the Company closed on the disposition of the Brazil Disposal Group.

The sale price of approximately BRL 510.0 million included a holdback amount of BRL 115.0 million, for general representations and warranties, 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 (“Brazil Disposition Date”), the Company closed on the Brazil Disposal.

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

During the three and nine months ended September 30, 2022, the Company recognized additional net losses of $ 3.7 million and $ 10.0 million on the disposal of the Brazil Disposal Group.

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

For purposes of determining the net gain or loss on the Brazil Disposal, 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 estimated incremental costs to sell in the table above and are fully offset by corresponding foreign currency impacts to the estimated fair value of proceeds from the disposition.

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

During the three months ended September 30, 2022, the Company received additional proceeds for final 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 during the three months ended September 30, 2022, as described above.

Additionally, during the three months ended September 30, 2022, the Buyer, with approval by the Company, 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 Condensed Consolidated Balance Sheet and recorded as Provision for income taxes within Discontinued Operations and included within the net loss recorded during the three months ended September 30, 2022, as described above.

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

As of September 30, 2022, the Company had a remaining receivable balance of $ 21.8 million associated with the Brazil Disposal Escrow recorded in Other long-term assets on the Condensed Consolidated Balance Sheet, of which $ 7.5 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 September 30, 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 )

As of March 31, 2023 , the Company had a remaining receivable balance of $ 22.0 million associated with the Brazil Disposal Escrow recorded in Other long-term assets on the Condensed Consolidated Balance Sheet, of which $ 6.5 million is expected to be paid to settle the Company’s portion of accrued liabilities retained subsequent to the date of disposal.

GROUP 1 AUTOMOTIVE, INC.

1 unchanged sentence

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

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

2022 2021 2022 2021

Three Months Ended March 31,

New vehicle retail sales $ — $ 48.6

13 unchanged sentences

Depreciation and amortization expense — 0.4

Asset impairments 0.1 — 6.3 —

INCOME FROM OPERATIONS — DISCONTINUED OPERATIONS 4.5 5.3 4.0 10.6

(LOSS) INCOME FROM OPERATIONS — DISCONTINUED OPERATIONS ( 0.8 ) 3.1

Floorplan interest expense — 0.7

Other interest (income) expense, net ( 0.7 ) 0.1 ( 1.1 ) 0.8

Loss on extinguishment of debt — 3.8 — 3.8

Other expenses 1.5 — 1.5 —

INCOME BEFORE INCOME TAXES — DISCONTINUED OPERATIONS 3.7 0.9 2.2 5.2

Other interest income, net ( 0.7 ) ( 0.1 )

(LOSS) INCOME BEFORE INCOME TAXES — DISCONTINUED OPERATIONS ( 0.1 ) 2.5

Provision for income taxes 0.2 0.7

NET (LOSS) INCOME — DISCONTINUED OPERATIONS $ ( 0.3 ) $ 1.8

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

Nine Months Ended September 30,

Net cash provided by operating activities — discontinued operations $ 26.6 $ 8.1

Net cash provided by (used in) investing activities — discontinued operations $ 59.1 $ ( 1.4 )

GROUP 1 AUTOMOTIVE, INC.

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

Cash flows from operating and investing activities for the Brazil Discontinued Operations were immaterial for the three months ended March 31, 2023.

Cash flows from operating and investing activities for the Brazil Discontinued Operations in the prior period were as follows (in millions):

Three Months Ended March 31,

Net cash used in operating activities — discontinued operations $ 11.8

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

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

September 30, 2022 December 31, 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

March 31, 2023 December 31, 2022

Prepaid expenses $ 1.2 $ —

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 22.0 22.8

Non-current assets of discontinued operations 21.8 32.5

Total assets, before valuation allowance 23.2 89.5

Valuation allowance — ( 76.4 )

Total assets, net of valuation allowance $ 23.2 $ 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

Total assets of discontinued operations $ 23.2 $ 24.1

Accrued expenses and other current liabilities $ 6.5 $ 7.8

Current liabilities of discontinued operations $ 7.5 $ 48.3

Assets and Liabilities Held for Sale

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

September 30, 2022 December 31, 2021

Current assets classified as held for sale

Brazil Discontinued Operations $ — $ 13.0

Prime Acquisition (1)

Total current assets classified as held for sale $ 38.6 $ 100.3

Current liabilities classified as held for sale

Brazil Discontinued Operations $ — $ 48.3

Prime Acquisition (1)

Total current liabilities classified as held for sale $ 5.2 $ 49.9

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

Acquisitions.

(2) Includes $ 11.3 million and $ 9.9 million of goodwill reclassified to assets held for sale as of September 30, 2022 and December 31, 2021, respectively.

Total liabilities of discontinued operations $ 6.5 $ 7.8

Other Divestitures

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

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

During the nine months ended September 30, 2022, the Company recorded a net pre-tax gain totaling $ 31.3 million related to the disposition of five dealerships representing five franchises in the U.S.

The dispositions reduced goodwill by $ 36.9 million.

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

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

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

During the three months ended March 31, 2023, the Company recorded a net pre-tax gain totaling $ 1.9 million related to the disposition of one dealership in the U.S.

The disposition reduced goodwill by $ 2.1 million.

The Company also terminated one franchise in the U.S.

GROUP 1 AUTOMOTIVE, INC.

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

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

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

The dispositions reduced goodwill by $ 17.0 million.

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

Assets held for sale in the Condensed Consolidated Balance Sheets includes $ 11.3 million and $ 13.4 million of goodwill that has been reclassified to assets held for sale as of March 31, 2023 and December 31, 2022, respectively.

SEGMENT INFORMATION

As of September 30, 2022, the Company had two reportable segments:

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

Each segment is comprised of retail automotive franchises that sell new and used cars and light trucks;

As of March 31, 2023, the Company had two reportable segments:

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

Each reportable segment is comprised of retail automotive franchises that sell new and used cars and light trucks;

arrange related vehicle financing;

2 unchanged sentences

and sell vehicle parts.

Selected reportable segment data is as follows for the three and nine months ended September 30, 2022 and 2021 (in millions):

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

Selected reportable segment data is as follows (in millions):

Three Months Ended March 31, 2023

Total revenues $ 3,342.4 $ 787.7 $ 4,130.0

Income before income taxes $ 180.7 $ 25.7 $ 206.4

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

Three Months Ended March 31, 2022

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

7 unchanged sentences

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

GROUP 1 AUTOMOTIVE, INC.

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

The following table sets forth the calculation of EPS on total net income for the three and nine months ended September 30, 2022 and 2021 (in millions, except share and per share data):

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

2022 2021 2022 2021

The following table sets forth the calculation of EPS (in millions, except share and per share data):

Three Months Ended March 31,

Weighted average basic common shares outstanding 13,861,289 16,529,351

11 unchanged sentences

Diluted earnings per common share $ 11.10 $ 11.88

GROUP 1 AUTOMOTIVE, INC.

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

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:

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 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.

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

GROUP 1 AUTOMOTIVE, INC.

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

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Carrying Value (1)

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

GROUP 1 AUTOMOTIVE, INC.

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

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Other current assets $ 0.1 $ 0.1

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Total liabilities $ — $ —

(1) As of March 31, 2023, the balance included gross fair value of $ 4.0 million of the de-designated swaps as described below.

Interest Rate Swaps De-designated as Cash Flow Hedges

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

During the three months ended March 31, 2023 , the Company de-designated one mortgage interest rate swap due to the Company settling the underlying mortgages associated with the swap during the same period.

As of March 31, 2023, the de-designated swap had an aggregate notional value of $ 31.5 million that fixed its underlying one-month SOFR at an annual interest rate of 0.60 % and will mature on March 1, 2030.

The Company reclassified the entire previously deferred gain associated with the de-designated interest rate swap of $ 3.1 million, net of tax of $ 1.0 million, from AOCI into income as an adjustment to Other interest expense, net as the remaining forecasted hedged transactions associated with the interest rate swap were probable of not occurring due to the settlement of the mortgages described above.

The realized and unrealized gains or losses on the de-designated swap for each period after de-designation will be recognized within income as Other interest expense, net in the Company’s Condensed Consolidated Statements of Operations.

Interest Rate Swaps Designated as Cash Flow Hedges

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

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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 September 30, 2022, the Company held 41 interest rate swaps designated as cash flow hedges with a total notional value of $ 949.1 million that fixed its underlying SOFR at a weighted average rate of 1.23 %.

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 September 30, 2022.

As of March 31, 2023, the Company held 35 interest rate swaps designated as cash flow hedges with a total notional value of $ 879.2 million that fixed its underlying SOFR at a weighted average rate of 1.25 %.

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

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

The Company transitioned from the use of LIBOR to SOFR subsequent to September 30, 2021.

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

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

GROUP 1 AUTOMOTIVE, INC.

1 unchanged sentence

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

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

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

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

Three Months Ended March 31,

Derivatives in Cash Flow Hedging Relationship 2023 2022

1 unchanged sentence

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

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

2022 2021 2022 2021

Statement of Operations Classification Three Months Ended March 31,

Floorplan interest expense $ 3.3 $ ( 1.3 )

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Contracts-in-transit and vehicle receivables, net:

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$ 47.7 $ 47.9

(1) No allowance for doubtful accounts was recorded for contract assets as of September 30, 2022 or December 31, 2021.

(1) No allowance for doubtful accounts was recorded for contract assets as of March 31, 2023 or December 31, 2022.

GROUP 1 AUTOMOTIVE, INC.

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

Debt consisted of the following (in millions):

September 30, 2022 December 31, 2021

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

March 31, 2023 December 31, 2022

4.00 % Senior Notes due August 15, 2028

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

As of September 30, 2022, borrowings under the Acquisition Line, a component of the Revolvin g Credit Facility (as defined in Note 10.

As of March 31, 2023, borrowings under the Acquisition Line, a component of the Revolvin g Credit Facility (as defined in Note 10.

Floorplan Notes Payable), totaled $ 250.0 million.

The average interest rate on this facility was 2.90 % during the three months ended September 30, 2022.

The average interest rate on this facility was 4.87 % during the three months ended March 31, 2023.

Real Estate Related

1 unchanged sentence

that are paid in installments.

As of September 30, 2022, borrowings outstanding under these facilities totaled $ 807.7 million, gross of debt issuance costs, comprised of $ 718.7 million in the U.S.

and $ 89.0 million in the U.K.

Bridge Facility

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

As of December 31, 2021, borrowings outstanding under the Bridge Facility totaled $ 140.0 million, and is reflected within Other, under Other Debt in the table above, and reflected within current maturities.

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

As of March 31, 2023, borrowings outstanding under these facilities totaled $ 758.5 million, gross of debt issuance costs, comprised of $ 660.5 million in the U.S.

and $ 98.0 million in the U.K, respectively.

GROUP 1 AUTOMOTIVE, INC.

2 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Revolving Credit Facility — floorplan notes payable $ 879.1 $ 833.5

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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:

In the U.S., the Company has a $ 2.0 billion revolving syndicated credit arrangement with 21 participating financial institutions that matures on March 9, 2027 (“Revolving Credit Facility”).

The Company has the option to increase the availability to $ 2.4 billion.

The Revolving Credit Facility consists of two tranches:

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

5 unchanged sentences

Th e Acquisition Line includes a $ 100.0 million sub-limit for letters of credit and $ 50.0 million minimum capacity tranche.

The Company had $ 12.2 million in letters of credit outstanding as of both September 30, 2022 and December 31, 2021.

The Company had $ 12.2 million in letters of credit outstanding as of March 31, 2023 and December 31, 2022.

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 4.25 % as of September 30, 2022, excluding the impact of the Company’s interest rate swap derivative instruments.

Floorplan Line was 6.12 % as of March 31, 2023, 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.

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

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

The Company had $ 5.3 million and $ 2.6 million of related unamortized debt issuance costs as of September 30, 2022 and December 31, 2021, respectively, which are included in Prepaid expenses and Other long-term assets in the Company’s Condensed Consolidated Balance Sheets and amortized over the term of the facility.

In conjunction with the Revolving Credit Facility, the Company had $ 4.7 million and $ 5.0 million of unamortized debt issuance costs as of March 31, 2023 and December 31, 2022, respectively, which are included in Prepaid expenses and Other long-term assets in the Company’s Condensed Consolidated Balance Sheets and amortized over the term of the facility.

Floorplan Notes Payable — Manufacturer Affiliates

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(the “FMCC Facility”).

This facility bears interest at the U.S.

prime rate which was 6.25 % as of September 30, 2022.

The FMCC Facility bears interest at the U.S.

prime rate which was 8.00 % as of March 31, 2023.

GROUP 1 AUTOMOTIVE, INC.

3 unchanged sentences

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

As of September 30, 2022, borrowings outstanding under these facilities totaled $ 184.9 million, comprised of $ 104.4 million in the U.S., with annual interest rates ranging from less than 1 % to approximately 7 %, and $ 80.5 million in the U.K., with annual interest rates ranging from approximately 2 % to 6 %.

As of March 31, 2023, borrowings outstanding under these facilities totaled $ 231.8 million, comprised of $ 139.0 million in the U.S., with annual interest rates ranging from less than 1 % to approximately 9 %, and $ 92.9 million in the U.K., with annual interest rates ranging from approximately 4 % to 7 %.

Offset Accounts

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Non-Cash Activities

The accrual for capital expenditures increased $ 0.4 million an d $ 2.1 million during the nine months ended September 30, 2022 and 2021, respectively.

The accrual for capital expenditures increased $ 4.6 million an d decreased $ 0.4 million during the three months ended March 31, 2023 and 2022, respectively.

Interest and Income Taxes Paid

Cash paid for interest, including the monthly settlement of the Company’s interest rate swaps, was $ 73.8 million and $ 59.9 million for the nine months ended September 30, 2022 and 2021, respectively.

Cash paid for interest, including the monthly settlement of the Company’s interest rate swaps, was $ 40.9 million and $ 28.6 million for the three months ended March 31, 2023 and 2022, 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 $ 155.9 million and $ 100.7 million for the nine months ended September 30, 2022 and 2021, respectively.

Cash paid for income taxes, net of refunds, was $ 5.7 million and $ 7.8 million for the three months ended March 31, 2023 and 2022, respectively.

COMMITMENTS AND CONTINGENCIES

4 unchanged sentences

Legal Proceedings

As of September 30, 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.

As of March 31, 2023, 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.

The Company previously recorded a $ 33.4 million payment for the purchase of an additional dealership as part of the acquisition of the Prime Automotive Group in 2021.

As of March 31, 2023, the purchase of the additional dealership had not yet closed and t he Company is still waiting for distributor approval to obtain ownership of the additional dealership.

The amount previously paid has been classified as goodwill on the Condensed Consolidated Balance Sheets.

Pursuant 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 to the Company.

The result of this legal action cannot be predicted with certainty.

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 $ 38.0 million as of September 30, 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 September 30, 2022.

Total associated letters of credit issued on behalf of the lessee where the Company is the beneficiary was $ 1.9 million as of March 31, 2023.

GROUP 1 AUTOMOTIVE, INC.

2 unchanged sentences

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

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

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

6 unchanged sentences

Other interest expense, net (pre-tax) — ( 4.2 ) ( 4.2 )

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

Other cumulative foreign currency translation adjustments 1.5 — 1.5

Benefit for income taxes — ( 0.5 ) ( 0.5 )

Net current period other comprehensive income 65.1 86.4 151.5

Balance, September 30, 2022 $ ( 93.1 ) $ 88.4 $ ( 4.7 )

Nine Months Ended September 30, 2021

Reclassification related to de-designated interest rate swaps (pre-tax) — ( 4.0 ) ( 4.0 )

Provision for income taxes — 2.7 2.7

Net current period other comprehensive income (loss) 9.8 ( 15.5 ) ( 5.7 )

Balance, March 31, 2023 $ ( 51.3 ) $ 68.1 $ 16.7

Three Months Ended March 31, 2022

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

6 unchanged sentences

Other interest expense (pre-tax) — 1.2 1.2

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

Benefit for income taxes — ( 0.6 ) ( 0.6 )

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

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

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

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

What changed 10-Q

Item 1. Financial Statements