What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-02-14 compared with 2023-02-16 · 210 added, 204 removed, 1371 unchanged (23% of the section changed)

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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, 2023.

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.

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

As permitted by guidelines established by the SEC for newly acquired businesses, we excluded one of our recently acquired businesses in 2023, (the “Excluded Acquisition”), from the scope of our annual report on internal controls over financial reporting for the year ended December 31, 2023.

The Excluded Acquisition comprised approximately $51.3 million of our consolidated total assets as of December 31, 2023, and $15.8 million of our consolidated revenues for the year then ended.

We are in the process of integrating this business into our overall internal controls over financial reporting and plan to include it in our scope for the year ended December 31, 2024.

Based on our evaluation under the framework in Internal Control — Integrated Framework , our management concluded that, as of December 31, 2023, our internal control over financial reporting was effective.

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 14, 2024, 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.

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 one dealership (the “Excluded Acquisition”).

The Excluded Acquisition constitutes $51.3 million of consolidated total assets as of December 31, 2023, and $15.8 million of consolidated revenues for the year then ended.

Accordingly, our audit did not include the internal control over financial reporting at the Excluded Acquisition.

Basis for Opinion

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Other Information

Trading Plans

During the year ended December 31, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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001-13461) filed November 15, 2021)

— 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)

— Third Amended and Restated Certificate of Incorporation of Group 1 Automotive, Inc.

effective May 18, 2023 (incorporated by reference to Exhibit 3.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No.

001-13461) for the quarter ended June 30, 2023)

— 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)

— 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)

001-13461) for the quarter ended March 31, 2007)

— Fourth Amended and Restated Bylaws of Group 1 Automotive, Inc.

effective February 15, 2023 (incorporated by reference to Exhibit 3.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No.

001-13461) filed July 28, 2023)

— 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.

5 unchanged sentences

001-13461) filed August 17, 2020)

— 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)

— 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)

— 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)

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

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

— 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)

— Form of Indemnification Agreement of Group 1 Automotive, Inc.

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

— 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)

— 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.

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001-13461) for the quarter ended March 31, 2019)

— Employment Agreement dated effective May 19, 2015 between Group 1 Automotive, Inc.

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)

— Amendment to Employment Agreement dated effective as of May 17, 2018 between Group 1 Automotive, Inc.

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)

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

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

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

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

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)

— Incentive Compensation, Confidentiality, Non-Disclosure and Non-Compete Agreement dated June 6, 2011, between Group 1 Automotive, Inc.

18 unchanged sentences

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

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

and Frank Grese

— Group 1 Automotive, Inc.

1 unchanged sentence

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

— 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)

— 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.

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001-13461) filed August 23, 2022).

— Transition and Separation Agreement, effective as of March 31, 2023, between Group 1 Automotive, Inc.

and Darryl Burman (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, 2023)

— Master Loan Agreement dated effective December 8, 2023 (incorporated by reference to Exhibit 10.1 of Group 1 Automotive Inc.’s Current Report on Form 8-K (File No.

001-13461) filed December 11, 2023)

— Form of Restricted Stock Agreement (2024 Form).

— Form of Performance Share Unit Agreement (2024 Form).

— Master Credit Agreement, dated February 12, 2024, by and among Group 1 Realty, Inc., AMR Real Estate Holdings, LLC, Group 1 Realty NE, LLC, G1R Clear Lake, LLC and LHM ATO, LLC, as Borrowers, and Wells Fargo Bank, National Association (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 February 14, 2024).

— Group 1 Automotive, Inc.

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— Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Group 1 Automotive Inc.

Incentive-Based Compensation Recoupment Policy

101.INS — XBRL Instance Document

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A copy of any of the omitted schedules and exhibits will be furnished to the Securities and Exchange Commission upon request.

Form 10-K Summary

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 14, 2024 .

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McHenry (Principal Financial and Accounting Officer)

/s/ Stephen D.

Quinn Chairman and Director

/s/ Charles L.

Chairman and Director

Barth Director

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Mizell Director

/s/ Stephen D.

/s/ Steven Stanbrook Director

Steven Stanbrook

/s/ Charles L.

Szews Director

/s/ Anne Taylor Director

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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.

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, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 14, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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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 Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Intangible Franchise Rights in Acquisitions and Impairment Assessments — 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”).

During the year ended December 31, 2023, the Company acquired six dealerships for a total of $365.8 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.

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including indefinite-lived intangible assets, 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.

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The Company’s impairment analyses performed in fiscal year 2023 resulted in an impairment of $25.1 million of intangible franchise rights.

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

We identified the fair value of acquired intangible franchise rights for the acquisitions, as well as the fair value estimates used in the quantitative impairment test of intangible franchise rights 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.

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• With the assistance of our fair value specialists, we evaluated the reasonableness of the weighted average cost of capital and terminal growth rates by:

◦ Developing a range of independent estimates and comparing those to the weighted average cost of capital selected by management.

◦ Testing the source information underlying the determination of the terminal growth rates and testing the mathematical accuracy of the calculations.

Goodwill Impairment Assessments — Refer to Notes 1 and 12 to the consolidated financial statements

Critical Audit Matter Description

The Company’s annual impairment assessment for goodwill is performed in the fourth quarter, or more frequently if events or circumstances indicate possible impairment.

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

The fair value is estimated using the income approach and market approach, weighted equally.

The goodwill balance was $1,651.9 million as of December 31, 2023, of which $1,532.1 million and $119.8 million was allocated to the US and UK reporting units, respectively.

The fair values of the US and UK reporting units exceeded their carrying values as of the measurement date and, therefore, no impairment was recognized.

We identified the fair value estimates used in the goodwill 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.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures for 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 goodwill 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:

◦ Developing a range of independent estimates and comparing those to the weighted average cost of capital selected by management.

◦ Testing the source information underlying the determination of the terminal growth rates and testing the mathematical accuracy of the calculations.

/s/ Deloitte & Touche LLP

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Other interest expense, net 99.8 77.5 55.8

Loss on extinguishment of debt — — 13.7

Other expense 4.5 1.2 —

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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

Unrealized gain arising during the period, net of tax provision of $( 3.3 ), $( 25.8 ) and $( 6.9 ), respectively

10.4 84.1 22.6

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

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

Reclassification adjustment for (gain) loss included in interest expense, net of tax (provision) benefit of $( 7.9 ), $( 0.8 ) and $ 1.8 , respectively

( 25.4 ) ( 2.5 ) 5.8

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

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 )

Reclassification related to de-designated interest rate swaps, net of tax (provision) benefit of $( 1.0 ), $ — and $ 1.9 , respectively

( 3.1 ) — 6.1

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

( 18.0 ) 81.6 34.5

OTHER COMPREHENSIVE INCOME, NET OF TAX

5.7 178.7 27.8

COMPREHENSIVE INCOME $ 607.3 $ 930.2 $ 579.9

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Net income — — — 552.1 — — 552.1

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

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

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

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

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

Stock-based compensation — — 28.3 — — — 28.3

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

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

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

Stock-based compensation — — 27.0 — — — 27.0

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Other comprehensive income, net of taxes — — — — 5.7 — 5.7

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

Purchases of treasury stock, including excise tax — — — — — ( 174.2 ) ( 174.2 )

Net issuance of treasury shares to stock compensation plans ( 101,160 ) — ( 9.7 ) — — 18.9 9.2

Stock-based compensation — — 20.1 — — — 20.1

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Loss on extinguishment of debt — — 3.8

Unrealized gain on derivative instruments

Other ( 2.7 ) 0.5 2.6

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Borrowings of senior notes — — 200.0

Repayments of senior notes — — ( 857.9 )

Borrowings on other debt 150.2 315.5 334.3

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Other — ( 1.2 ) —

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

Net cash provided by (used in) financing activities 185.2 ( 67.3 ) ( 74.0 )

Effect of exchange rate changes on cash 0.1 ( 4.8 ) ( 2.5 )

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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 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.

Certain prior-period amounts 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.

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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

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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.

The significant estimates made by management in the accompanying Consolidated Financial Statements include, but are 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

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

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Refer to Note 8.

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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.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Parts and accessories inventories are valued at the 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.

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Financial Instruments and Fair Value Measurements.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Business Combinations

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Acquisitions for further discussion of the Company’s business combinations.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Goodwill and Intangible Franchise Rights

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Financial Instruments and Fair Value Measurements.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company expenses the costs of advertising as incurred.

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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.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Refer to the discussion of the Company’s leases and related accounting policies in Note 11.

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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.

All assets and liabilities of foreign subsidiaries are translated into USD using period-end foreign currency exchange rates and all revenues and expenses are translated at average foreign currency exchange rates during the respective period.

The gains and losses resulting from translation adjustments are recorded in Accumulated Other Comprehensive Income (loss) in the Consolidated Statements of Stockholders’ Equity.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 820):

Improvements to Reportable Segment Disclosures .

The amendments require the disclosure of significant segment expenses as well as expanded interim disclosures, along with other changes to segment disclosure requirements.

The standard will be effective for fiscal years beginning after December 15, 2023, and in terim periods beginning on or after January 1, 2025.

The Company is currently evaluating the impact that the adoption of the provisions of the ASU will have on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The amendments require the disclosure of a reconciliation between income tax expense from continuing operations and the amount computed by multiplying income from continuing operations before income taxes by the applicable statutory rate as well as an annual disaggregation of the income tax rate reconciliation between certain specified categories by both percentage and reported amounts, along with other changes to income tax disclosure requirements.

The standard will be effective for fiscal years beginning after December 15, 2024, and interim periods for fiscal years beginning after December 15, 2025.

The Company is currently evaluating the impact that the adoption of the provisions of the ASU will have on its consolidated financial statements.

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

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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.

Therefore, the Company recognizes revenues and cost of sales on a gross basis upon delivery of the vehicle at 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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(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.

In October 2023, the Company closed on the acquisition of the remaining Prime dealership after settlement of legal action with the distributor which had opposed the acquisition.

The previously recorded goodwill of $ 33.4 million was allocated to the identifiable assets and liabilities of the acquired dealership.

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 equipment and intangible assets.

The Company will reflect any required fair value adjustments in subsequent periods.

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

13 unchanged sentences

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.

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See the table below for additional details.

(3) Goodwill as of December 31, 2022 has not been adjusted for the impact of the remaining Prime dealership acquired in October 2023 as described above.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

8 unchanged sentences

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

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.

1 unchanged sentence

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,

The following represents the unaudited pro forma financial information as if Prime had been included in the Company’s consolidated results since January 1, 2021 (in millions):

Year Ended December 31,

Revenues $ 15,243.5

2 unchanged sentences

Other Acquisitions

During the year ended December 31, 2023 , the Company acquired six dealerships in the U.S., including the remaining Prime dealership described above.

Aggregate consideration paid for these dealerships, which were accounted for as business combinations, was $ 365.8 million , net of cash acquired.

Goodwill associated with these acquisitions totaled $ 49.7 million.

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 .

Goodwill associated with these acquisitions totaled $ 236.1 million .

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

1 unchanged sentence

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.

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

Goodwill associated with these acquisitions totaled $ 70.1 million.

In February 2024, the Company announced the acquisition of five dealerships and three collision centers in the U.S.

Aggregate consideration paid for these dealerships, which will be accounted for as business combinations, was approximately $ 273.3 million.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

DISCONTINUED OPERATIONS AND OTHER DIVESTITURES

1 unchanged sentence

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”).

The sale price of approximately BRL 510.0 million included a holdback amount as of July 1, 2022 (the “Brazil Disposition Date”), 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.

On the Brazil Disposition Date, the Company closed on the Brazil Disposal.

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

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

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

42 unchanged sentences

Asset impairments — 6.3 77.5

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

(LOSS) INCOME FROM DISCONTINUED OPERATIONS ( 2.0 ) 3.7 ( 64.1 )

Floorplan interest expense — 1.4 1.1

3 unchanged sentences

INCOME (LOSS) BEFORE INCOME TAXES — DISCONTINUED OPERATIONS 0.6 2.6 ( 69.9 )

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

Provision for income taxes 1.0 5.3 3.4

NET LOSS — DISCONTINUED OPERATIONS $ ( 0.4 ) $ ( 2.7 ) $ ( 73.3 )

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Cash flows from operating and investing activities for the Brazil Discontinued Operations were immaterial for the year ended December 31, 2023.

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

Years Ended December 31,

2022 2021 2020

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

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

$ 59.1 $ ( 1.5 )

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

As of December 31,

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 $ 0.7 $ —

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 21.1 22.8

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

Total assets of discontinued operations $ 21.8 $ 24.1

Accrued expenses and other current liabilities $ 4.3 $ 7.8

Current liabilities of discontinued operations $ 7.8 $ 48.3

Total liabilities of discontinued operations $ 4.3 $ 7.8

GROUP 1 AUTOMOTIVE, INC.

4 unchanged sentences

Current assets classified as held for sale

Brazil Discontinued Operations $ — $ 13.0

Prime Acquisition (1)

1 unchanged sentence

Current liabilities classified as held for sale

Brazil Discontinued Operations $ — $ 48.3

Prime Acquisition (1)

Other 7.2 3.7

Total current liabilities classified as held for sale $ 7.2 $ 4.8

1 unchanged sentence

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.

(2) Includes $ 39.8 million and $ 13.4 million of goodwill reclassified to assets held for sale as of December 31, 2023 and December 31, 2022, respectively.

Other Divestitures

1 unchanged sentence

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, 2023, the Company recorded a net pre-tax gain totaling $ 16.3 million related to the disposition of eleven dealerships representing fifteen franchises in the U.S.

The dispositions reduced goodwill by $ 52.9 million.

The Company also terminated two franchises in the U.S.

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.

5 unchanged sentences

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.

In February 2024, the Company disposed of six dealerships, representing ten franchises, as well as a collision center in the U.S.

Assets and liabilities associated with this disposition were recorded within Current a ssets and current liabilities classified as held for sale in the Consolidated Balance Sheets as of December 31, 2023 and are included in the table above.

The disposition will reduce goodwill by approximately $ 39.8 million .

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.

Under the Company’s 2014 Long Term Incentive Plan (the “Incentive Plan”), the Company currently grants RSAs, RSUs 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 .

29 unchanged sentences

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 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 internal revenue service 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.

Granted RSUs participate in dividends, however the dividends are not payable until a director’s 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.

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

As of December 31, 2023, the total liability for unsettled cash-settled RSUs, recorded at fair value, was $ 9.5 million .

15 unchanged sentences

55,674 $ 188.82

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 total fair value of PSUs that vested during the years ended December 31, 2023, 2022 and 2021, was $ 3.3 million , $ 4.7 million and $ 9.3 million, respectively.

The weighted average grant date fair value of PSUs granted during the years ended December 31, 2023, 2022 and 2021 , was $ 3.1 million , $ 5.0 million and $ 2.1 million, respectively.

13 unchanged sentences

Stock-based compensation related to equity-settled awards was $ 20.1 million , $ 27.0 million and $ 28.3 million for the years ended December 31, 2023, 2022 and 2021, 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.

Stock-based compensation related to cash-settled awar ds was $ 4.8 million, $ 0.5 million and $ 2.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Tax benefits related to total stock-based compensation were $ 8.5 million, $ 5.2 million and $ 4.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

63 unchanged sentences

Total liabilities $ — $ —

(1) As of December 31, 2023, the balance included gross fair value of $ 3.7 million related to the de-designated swap as described below.

Interest Rate Swaps De-designated as Cash Flow Hedges

During the year ended December 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 December 31, 2023, the de-designated swap had an aggregate notional value of $ 29.7 million that fixed its underlying one-month SOFR at an annual interest rate of 0.60 % and will mature on March 1, 203 0.

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.

As of December 31, 2023, the Company recorded unrealized mark-to-mark et losses of $ 0.3 million and realized gains of $ 1.0 million a ssociated with the de-designated interest rate swap within Other interest expense, net.

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 Consolidated Balance Sheets.

1 unchanged sentence

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.

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 or Other interest expense, net.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of December 31, 2023, the Company held 36 interest rate swaps designated as cash flow hedges with a total notional value of $ 909.6 million that fixed its underlying SOFR at a weighted average rate of 1.25 %.

The Company also held one additional interest rate swap designated as cash flow hedges with forward start dates beginning in January 2024, that had a notional value of $ 50.0 million and a weighted average interest rate of 0.72 % as of December 31, 2023.

The Company’s designated interest rate swap with a forward start date has a maturity date of December 2028.

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 one-month SOFR at a weighted average rate of 1.22 %.

The Company completed the transition of interest rate swaps from London Interbank Offered Rate to SOFR during 2022.

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

91 unchanged sentences

Financial Instruments and Fair Value Measurements.

D uring the year ended December 31, 2023, the Company recorded $ 1.8 million of impairments of ROU assets related to the U.S.

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

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

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

54 unchanged sentences

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.

For the October 31, 2023 annual goodwill impairment testing, the Company elected to perfor m a quantitative assessment to determine whether the fair values of the Company’s reporting units were less than their carrying values.

Based on the results of the quantitative assessment, the Company did not record a goodwill impairment charge.

GROUP 1 AUTOMOTIVE, INC.

6 unchanged sentences

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.

Key considerations in the assumed growth rates include industry seasonally adjusted annual rate of vehicle sales (“SAAR”) projections, macroeconomic conditions including consumer confidence levels, unemployment rates and gross domestic product “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.

5 unchanged sentences

For the October 31, 2023 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.

Based on the results of the qualitative assessment, certain dealerships required a quantitative assessment based on their actual results through October 31, 2023 and an update of the annual budget in the fourth quarter of 2023.

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

This resulted in franchise rights impairment charges of $ 25.1 million in the U.S.

segment and none in the U.K.

segment for the year ended December 31, 2023.

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

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.

segment on inta ngible 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.

During the year ended December 31, 2023, the Company recorded additional indefinite-lived intangible franchise rights acquired through business combinations of $ 215.1 million in the U.S.

segment and $ 1.2 million in the U.K.

segment and none in the U.K.

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

segment and none in the U.K.

Refer to Note 3.

10 unchanged sentences

Additions through acquisitions 236.1 10.2 246.3

Purchase price allocation adjustments 35.0 — 35.0

Disposals ( 37.3 ) — ( 37.3 )

22 unchanged sentences

FMCC facility, net 118.1 41.8

GM Financial Facility 37.9 —

Other manufacturer affiliate facilities 256.4 201.3

2 unchanged sentences

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 20 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, under certain conditions.

T he Revolving Credit Facility currently consists of two tranches:

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

4 unchanged sentences

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.

The Acquisition Line includes a $ 100 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 December 31, 2023 and 2022.

GROUP 1 AUTOMOTIVE, INC.

8 unchanged sentences

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.

In conjunction with the Revolving Credit Facility, the Company had $ 3.8 million and $ 5.0 million of unamortized debt issuance costs as of December 31, 2023 and 2022, 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.

3 unchanged sentences

(the “FMCC Facility”).

This facility bears interest at the U.S.

The FMCC Facility bears interest at the U.S.

Prime rate which was 8.50 % as of December 31, 2023.

GM Financial Facility

During December 2023, the Company entered into a master loan agreement with General Motors Financial (the “GM Financial Facility”).

As of December 31, 2023, the GM Financial Facility had a total capacity of $ 84.5 million.

The GM Financial Facility bears interest at the U.S.

Prime rate less 100 basis points.

Other Manufacturer Facilities

1 unchanged sentence

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 %.

As of December 31, 2023, borrowings outstanding under these facilities totaled $ 256.4 million , comprised of $ 142.6 million in the U.S., with annual interest rates ranging from 1 % to approximately 9 % , and $ 113.8 million in the U.K., with annual interest rates ranging from approximat ely 5 % to 9 % .

Offset Accounts

21 unchanged sentences

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

As of December 31, 2023, borrowings under the Acquisition Line, a component of the Revolving Credit Facility, totaled $ 325.0 million .

The average interest rate on this facility was 5.66 % as of December 31, 2023.

5 unchanged sentences

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.

The carrying values of the related collateralized real estate as of December 31, 2023 and 2022 were $ 1,153.2 million and $ 1,215.7 million, respectively.

In February 2024, the Company entered into a master credit agreement with Wells Fargo Bank, National Association (the “Wells Fargo Credit Agreement”) with a maximum capacity of $ 250.0 million.

The Wells Fargo Credit Agreement accrues interest at SOFR plus 175 basis points and matures on March 1, 2031.

Finance Leases

1 unchanged sentence

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.

GROUP 1 AUTOMOTIVE, INC.

26 unchanged sentences

Tax credits ( 0.5 ) ( 0.4 ) ( 0.8 )

Changes in valuation allowances ( 2.1 ) ( 2.9 ) ( 0.7 )

Change in valuation allowance ( 2.6 ) ( 2.1 ) ( 2.9 )

Stock-based compensation ( 3.6 ) ( 1.6 ) ( 2.2 )

Uncertain tax benefits — — ( 0.3 )

Deferred state tax effect ( 1.1 ) 4.3 —

Gain on dispositions 5.5 — —

Other 6.7 4.0 0.9

5 unchanged sentences

Accrued liabilities $ 62.6 $ 56.4

state NOL carryforwards 18.9 30.8

Net operating losses 13.0 18.9

Operating lease liabilities 65.5 71.1

Other 2.5 2.8

Deferred tax assets 141.1 148.9

3 unchanged sentences

Goodwill and intangible franchise rights $ 195.9 $ 171.2

Depreciation expense 110.0 99.4

Fixed asset basis differences 114.7 110.0

Interest rate swaps 21.3 26.1

10 unchanged sentences

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.

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 and considering future reversals of existing taxable temporary differences.

As of December 31, 2023, the Company maintains a permanent reinvestment assertion on the Company’s 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.

Based on the statutes of limitations in the applicable jurisdictions in which the Company operates, the Company is generally no longer subject to examinations by tax authorities in years prior to 2018.

GROUP 1 AUTOMOTIVE, INC.

8 unchanged sentences

Reductions due to lapse of statutes of limitations

( 0.4 ) ( 0.5 ) ( 0.5 )

Balance at December 31 $ 2.2 $ 2.0 $ 2.0

12 unchanged sentences

COMMITMENTS AND CONTINGENCIES

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

From time to time, the Company or its 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.

5 unchanged sentences

an unfavorable resolution of one or more of such matters could have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other Matters

1 unchanged sentence

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 $ 35.0 million as of December 31, 2023.

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.

GROUP 1 AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

13 unchanged sentences

— ( 17.9 ) ( 17.9 )

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

Other cumulative foreign currency translation adjustments 1.5 — 1.5

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

Provision for income taxes — 8.9 8.9

Net current period other comprehensive income 97.1 81.6 178.7

Net current period other comprehensive income (loss) 23.7 ( 18.0 ) 5.7

Balance, December 31, 2023

11 unchanged sentences

Other interest expense (pre-tax) — ( 2.4 ) ( 2.4 )

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

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

Other cumulative foreign currency translation adjustments

Provision for income taxes — 0.8 0.8

Net current period other comprehensive income 97.1 81.6 178.7

Balance, December 31, 2022

13 unchanged sentences

Other interest expense (pre-tax) — 4.1 4.1

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

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

Benefit for income taxes — ( 3.7 ) ( 3.7 )

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

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

Balance, December 31, 2021

2 unchanged sentences

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.

The accrual for capital expenditures increased $ 2.0 million, decreased $ 1.6 million , and increased $ 2.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Interest and Income Taxes Paid

5 unchanged sentences

As of December 31, 2023, 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 CODM, regularly reviews to analyze performance and allocate resources.

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;

54 unchanged sentences

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

Form 10-K Summary

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

What changed 10-K

Item 9A. Controls and Procedures