Item 1. Financial Statements
Item 1. Financial Statements
GROUP 1 AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except share data)
March 31, 2024 December 31, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 41.9 $ 57.2
Contracts-in-transit and vehicle receivables, net 341.7 369.2
Accounts and notes receivable, net 259.7 238.4
Inventories 2,101.4 1,963.4
Prepaid expenses 21.2 38.9
Other current assets 15.7 25.1
Current assets classified as held for sale 53.2 99.1
TOTAL CURRENT ASSETS 2,834.8 2,791.3
Property and equipment, net of accumulated depreciation of $ 602.2 and $ 587.7 , respectively
2,493.2 2,248.7
Operating lease assets 217.9 216.5
Goodwill 1,842.0 1,651.9
Intangible franchise rights 946.2 701.2
Other long-term assets 175.9 164.6
TOTAL ASSETS $ 8,509.9 $ 7,774.1
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Floorplan notes payable — credit facility and other, net of offset account of $ 210.2 and $ 236.7 , respectively
$ 1,044.1 $ 1,153.0
Floorplan notes payable — manufacturer affiliates, net of offset account of $ — and $ 38.5 , respectively
585.4 412.4
Current maturities of long-term debt 156.9 109.4
Current operating lease liabilities 20.0 20.9
Accounts payable 588.6 499.3
Accrued expenses and other current liabilities 326.9 303.4
Current liabilities classified as held for sale — 7.2
TOTAL CURRENT LIABILITIES 2,722.0 2,505.7
Long-term debt 2,416.1 1,989.4
Long-term operating lease liabilities 205.5 209.4
Deferred income taxes 259.8 256.6
Other long-term liabilities 134.3 138.6
Commitments and Contingencies (Note 11)
STOCKHOLDERS’ EQUITY:
Common stock, $ 0.01 par value, 50,000,000 shares authorized; 25,109,781 and 25,131,460 shares issued, respectively
0.3 0.3
Additional paid-in capital 351.7 349.1
Retained earnings 3,791.3 3,649.8
Accumulated other comprehensive income (loss)
30.3 28.1
Treasury stock, at cost; 11,575,624 and 11,447,422 shares, respectively
( 1,401.1 ) ( 1,352.8 )
TOTAL STOCKHOLDERS’ EQUITY 2,772.4 2,674.4
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 8,509.9 $ 7,774.1
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)
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GROUP 1 AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except per share data)
Three Months Ended March 31,
2024 2023
REVENUES:
New vehicle retail sales $ 2,182.6 $ 1,955.7
Used vehicle retail sales 1,416.8 1,348.9
Used vehicle wholesale sales 106.0 112.0
Parts and service sales 576.2 548.3
Finance, insurance and other, net 188.9 165.1
Total revenues 4,470.5 4,130.0
COST OF SALES:
New vehicle retail sales 2,023.1 1,769.0
Used vehicle retail sales 1,334.7 1,272.1
Used vehicle wholesale sales 106.9 110.0
Parts and service sales 263.2 251.0
Total cost of sales 3,727.9 3,402.1
GROSS PROFIT 742.6 727.9
Selling, general and administrative expenses 476.1 462.8
Depreciation and amortization expense 23.8 22.4
Asset impairments — 1.1
INCOME FROM OPERATIONS 242.6 241.5
Floorplan interest expense 20.5 12.6
Other interest expense, net 29.3 19.7
Other (income) expense, net ( 0.5 ) 2.8
INCOME BEFORE INCOME TAXES 193.3 206.4
Provision for income taxes 45.8 47.6
Net income from continuing operations 147.4 158.8
Net income (loss) from discontinued operations 0.5 ( 0.3 )
NET INCOME $ 147.9 $ 158.4
BASIC EARNINGS PER SHARE:
Continuing operations $ 10.81 $ 11.16
Discontinued operations 0.04 ( 0.02 )
Total $ 10.84 $ 11.14
DILUTED EARNINGS PER SHARE:
Continuing operations $ 10.76 $ 11.12
Discontinued operations 0.04 ( 0.02 )
Total $ 10.80 $ 11.10
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 13.3 13.9
Diluted 13.4 13.9
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)
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GROUP 1 AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In millions)
Three Months Ended March 31,
2024 2023
NET INCOME $ 147.9 $ 158.4
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments ( 4.5 ) 9.8
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 $( 4.5 ) and $ 2.1 , respectively
14.3 ( 6.7 )
Reclassification adjustment for gain included in interest expense, net of tax provision of $( 2.3 ) and $( 1.8 ), respectively
( 7.5 ) ( 5.7 )
Reclassification related to de-designated interest rate swaps, net of tax provision of $( 0.1 ) and $( 1.0 ), respectively
( 0.2 ) ( 3.1 )
Unrealized gain (loss) on interest rate risk management activities, net of tax
6.6 ( 15.5 )
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
2.1 ( 5.7 )
COMPREHENSIVE INCOME $ 150.0 $ 152.7
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)
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GROUP 1 AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In millions, except share data)
Common Stock Additional
Paid-in Capital Retained Earnings Accumulated
Other
Comprehensive Income
Treasury Stock Total
Shares Amount
BALANCE, DECEMBER 31, 2023
25,131,460 $ 0.3 $ 349.1 $ 3,649.8 $ 28.1 $ ( 1,352.8 ) $ 2,674.4
Net income — — — 147.9 — — 147.9
Other comprehensive income, net of taxes — — — — 2.1 — 2.1
Purchases of treasury stock, including excise tax — — — — — ( 54.2 ) ( 54.2 )
Net issuance of treasury shares to stock compensation plans ( 21,679 ) — ( 5.0 ) — — 5.9 0.9
Stock-based compensation — — 7.6 — — — 7.6
Dividends declared ($ 0.47 per share)
— — — ( 6.4 ) — — ( 6.4 )
BALANCE, MARCH 31, 2024
25,109,781 $ 0.3 $ 351.7 $ 3,791.3 $ 30.3 $ ( 1,401.1 ) $ 2,772.4
Common Stock Additional
Paid-in Capital Retained Earnings Accumulated
Other
Comprehensive Income (Loss) Treasury Stock Total
Shares Amount
BALANCE, DECEMBER 31, 2022 25,232,620 $ 0.3 $ 338.7 $ 3,073.6 $ 22.5 $ ( 1,197.5 ) $ 2,237.5
Net income — — — 158.4 — — 158.4
Other comprehensive loss, net of taxes — — — — ( 5.7 ) — ( 5.7 )
Purchases of treasury stock — — — — — ( 34.9 ) ( 34.9 )
Net issuance of treasury shares to stock compensation plans ( 82,455 ) — ( 10.9 ) — — 8.7 ( 2.2 )
Stock-based compensation — — 5.8 — — — 5.8
Dividends declared ($ 0.45 per share)
— — — ( 6.5 ) — — ( 6.5 )
BALANCE, MARCH 31, 2023
25,150,165 $ 0.3 $ 333.6 $ 3,225.5 $ 16.7 $ ( 1,223.7 ) $ 2,352.5
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)
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GROUP 1 AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three Months Ended March 31,
2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 147.9 $ 158.4
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 23.8 22.4
Change in operating lease assets 5.8 6.4
Deferred income taxes 0.6 7.0
Asset impairments — 1.1
Stock-based compensation 7.6 5.8
Amortization of debt discount and issuance costs 0.8 0.7
Gain on disposition of assets ( 34.3 ) ( 1.5 )
Unrealized gain on derivative instruments ( 0.5 ) ( 4.0 )
Other ( 0.5 ) ( 1.9 )
Changes in assets and liabilities, net of acquisitions and dispositions:
Accounts payable and accrued expenses 107.1 27.7
Accounts and notes receivable ( 21.7 ) ( 5.3 )
Inventories ( 74.8 ) ( 172.6 )
Contracts-in-transit and vehicle receivables 26.8 42.8
Prepaid expenses and other assets 16.4 10.2
Floorplan notes payable — manufacturer affiliates
55.9 52.4
Deferred revenues ( 0.3 ) ( 0.1 )
Operating lease liabilities ( 6.7 ) ( 6.1 )
Net cash provided by operating activities 253.9 143.4
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisitions, net, including repayment of sellers’ floorplan notes payable of $ 50.3 and $ 9.3 , respectively
( 689.7 ) ( 76.9 )
Proceeds from disposition of franchises, property and equipment 125.2 9.2
Purchases of property and equipment ( 63.2 ) ( 35.8 )
Other 9.5 ( 1.2 )
Net cash used in investing activities ( 618.2 ) ( 104.6 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on credit facility — floorplan line and other
3,313.7 2,376.0
Repayments on credit facility — floorplan line and other
( 3,304.1 ) ( 2,290.9 )
Borrowings on credit facility — acquisition line
320.0 —
Repayments on credit facility — acquisition line
( 98.0 ) ( 53.2 )
Debt issuance costs ( 1.6 ) ( 0.1 )
Borrowings on other debt 207.2 31.4
Principal payments on other debt ( 28.6 ) ( 86.9 )
Proceeds from employee stock purchase plan 6.5 5.7
Payments of tax withholding for stock-based compensation ( 5.6 ) ( 7.9 )
Repurchases of common stock, amounts based on settlement date ( 53.8 ) ( 34.7 )
Dividends paid ( 6.4 ) ( 6.4 )
Net cash provided by (used in) financing activities 349.4 ( 67.0 )
Effect of exchange rate changes on cash ( 0.3 ) 1.6
Net decrease in cash and cash equivalents ( 15.3 ) ( 26.6 )
CASH AND CASH EQUIVALENTS, beginning of period 57.2 47.9
CASH AND CASH EQUIVALENTS, end of period $ 41.9 $ 21.3
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)
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GROUP 1 AUTOMOTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION AND CONSOLIDATION AND ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The accompanying Condensed Consolidated Financial Statements and notes thereto, have been prepared in accordance with U.S. GAAP for interim financial information and in accordance with the rules and regulations of the SEC. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. Results for interim periods are not necessarily indicative of the results that can be expected for a full year and therefore should be read in conjunction with the Company’s audited Financial Statements and notes thereto included within the Company’s 2023 Form 10-K. All intercompany balances and transactions have been eliminated in consolidation. The accompanying Condensed Consolidated Financial Statements reflect the consolidated accounts of the parent company, Group 1 Automotive, Inc. and its subsidiaries, all of which are wholly owned.
On 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 for all periods presented. Results of operations, cash flows, assets and liabilities associated with the Brazil Disposal Group are immaterial for all periods presented. 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. All computations have been calculated using unrounded amounts for all periods presented. These Condensed Consolidated Financial Statements reflect, in the opinion of management, all normal recurring adjustments necessary to fairly state, in all material respects, the Company’s financial position and results of operations for the periods presented.
Use of Estimates
The preparation of the Company’s financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date and the amounts of revenues and expenses recognized during the reporting period. Management analyzes the Company’s estimates based on historical experience and other assumptions that are believed to be reasonable under the circumstances; however, actual results could differ materially from such estimates. Significant estimates were made by management in the accompanying Condensed Consolidated Financial Statements, related to, but not limited to, inventory valuation adjustments, reserves for future chargebacks on finance, insurance and vehicle service contract fees, self-insured property and casualty insurance exposure, the fair value of assets acquired and liabilities assumed in business combinations, the valuation of goodwill and intangible franchise rights and reserves for potential litigation.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 interim 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.
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GROUP 1 AUTOMOTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
2 . REVENUES
The following tables present the Company’s revenues disaggregated by its geographical segments (in millions):
Three Months Ended March 31, 2024
U.S. U.K. Total
New vehicle retail sales $ 1,799.8 $ 382.8 $ 2,182.6
Used vehicle retail sales 1,099.5 317.3 1,416.8
Used vehicle wholesale sales 79.9 26.2 106.0
Total new and used vehicle sales 2,979.2 726.2 3,705.4
Parts and service sales (1)
495.1 81.1 576.2
Finance, insurance and other, net (2)
171.4 17.5 188.9
Total revenues $ 3,645.7 $ 824.8 $ 4,470.5
Three Months Ended March 31, 2023
U.S. U.K. Total
New vehicle retail sales $ 1,608.6 $ 347.1 $ 1,955.7
Used vehicle retail sales 1,030.1 318.8 1,348.9
Used vehicle wholesale sales 82.4 29.6 112.0
Total new and used vehicle sales 2,721.0 695.6 3,416.6
Parts and service sales (1)
473.8 74.6 548.3
Finance, insurance and other, net (2)
147.6 17.5 165.1
Total revenues $ 3,342.4 $ 787.7 $ 4,130.0
(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 $ 12.4 million and $ 4.9 million during the three months ended March 31, 2024 and 2023, respectively, relating to performance obligations satisfied in previous periods on the Compa ny’s retrospective commission income contracts. Refer to Note 7. Receivables, Net and Contract Assets for the balance of the Company’s contract assets associated with revenues from the arrangement of financing and sale of service and insurance contracts.
3. ACQUISITIONS AND DISPOSITIONS
Acquisitions
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.
During the three months ended March 31, 2024, the Company acquired nine dealerships in the U.S., including three Honda dealerships, two Lexus dealerships, one Toyota dealership, one Kia dealership, one Hyundai dealership and one Mercedes-Benz dealership. The Company also acquired one Toyota Certified pre-owned center and three collision centers in the U.S. Aggregate consideration paid for these dealerships, which were accounted for as business combinations, was $ 690.4 million, consisting of cash paid of $ 689.7 million and a payable of $ 0.7 million. Goodwill associated with the acquisitions totaled $ 213.6 million. The accounting for these acquisitions 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. The Company will reflect any required fair value adjustments in subsequent periods.
During the three months ended March 31, 2023 , the Company acquired one Chevrolet dealership in the U.S. 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.
In April 2024, the Company announced it entered into a definitive agreement to acquire 54 dealerships in the U.K. from a subsidiary of Inchcape plc for approximately $ 439 million in an all-cash transaction, inclusive of $ 279 million of real estate. The transaction is expected to close in the third quarter of 2024.
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GROUP 1 AUTOMOTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
Dispositions
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, 2024, the Company recorded a net pre-tax gain totaling $ 30.9 million related to the disposition of six dealerships in the U.S. The dispositions reduced goodwill by $ 39.8 million.
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.
Assets held for sale in the Condensed Consolidated Balance Sheets includes $ 22.7 million and $ 39.8 million of goodwill that has been reclassified to assets held for sale as of March 31, 2024 and December 31, 2023, respectively.
4. SEGMENT INFORMATION
As of March 31, 2024, the Company had two reportable segments: the U.S. and the U.K. 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; sell service and insurance contracts; provide automotive maintenance and repair services; and sell vehicle parts.
Selected reportable segment data is as follows (in millions):
Three Months Ended March 31, 2024
U.S. U.K. Total
Total revenues $ 3,645.7 $ 824.8 $ 4,470.5
Income before income taxes $ 180.0 $ 13.3 $ 193.3
Three Months Ended March 31, 2023
U.S. U.K. Total
Total revenues $ 3,342.4 $ 787.7 $ 4,130.0
Income before income taxes $ 180.7 $ 25.7 $ 206.4
5. EARNINGS PER SHARE
The two-class method is utilized for the computation of the Company’s EPS. The two-class method requires a portion of net income to be allocated to participating securities, which are unvested awards of share-based payments with non-forfeitable rights to receive dividends that are paid in cash. The Company’s restricted stock awards are participating securities. Income allocated to these participating securities is excluded from net earnings available to common shares, as shown in the table below. Basic EPS is computed by dividing net income available to basic common shares by the weighted average number of basic common shares outstanding during the period. Diluted EPS is computed by dividing net income available to diluted common shares by the weighted average number of dilutive common shares outstanding during the period.
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GROUP 1 AUTOMOTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
The following table sets forth the calculation of EPS (in millions, except share and per share data):
Three Months Ended March 31,
2024 2023
Weighted average basic common shares outstanding 13,328,721 13,861,289
Dilutive effect of stock-based awards and employee stock purchases 60,048 53,438
Weighted average dilutive common shares outstanding 13,388,769 13,914,727
Basic:
Net income $ 147.9 $ 158.4
Less: Earnings allocated to participating securities from continuing operations 3.3 4.1
Less: Earnings (loss) allocated to participating securities from discontinued operations — —
Net income available to basic common shares $ 144.5 $ 154.4
Basic earnings per common share $ 10.84 $ 11.14
Diluted:
Net income $ 147.9 $ 158.4
Less: Earnings allocated to participating securities from continuing operations 3.3 4.1
Less: Earnings (loss) allocated to participating securities from discontinued operations — —
Net income available to diluted common shares $ 144.6 $ 154.4
Diluted earnings per common share $ 10.80 $ 11.10
6. 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 establishes the following three levels of inputs that may be used to measure fair value:
• Level 1 — Quoted prices for identical assets or liabilities in active markets.
• Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or model-derived valuations or other inputs that are observable or that can be corroborated by observable market data for substantially the full term of the assets or liabilities.
• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Cash and Cash Equivalents, Contracts-In-Transit and Vehicle Receivables, Accounts and Notes Receivable, Accounts Payable, Variable Rate Long-Term Debt and Floorplan Notes Payable
The fair values of these financial instruments approximate their carrying values due to the short-term nature of the instruments and/or the existence of variable interest rates.
Fixed Rate Long-Term Debt
The Company estimates the fair value of its $ 750.0 million 4.00 % Senior Notes due August 2028 (“ 4.00 % Senior Notes”) using quoted prices for the identical liability (Level 1) and estimates the fair value of its fixed-rate mortgage facilities using a present value technique based on current market interest rates for similar types of financial instruments (Level 2). Refer to Note 8. Debt for further discussion of the Company’s long-term debt arrangements.
The carrying value and fair value of the Company’s 4.00 % Senior Notes and fixed rate mortgages were as follows (in millions):
March 31, 2024 December 31, 2023
Carrying Value (1)
Fair Value Carrying Value (1)
Fair Value
4.00 % Senior Notes
$ 750.0 $ 691.7 $ 750.0 $ 697.5
Real estate related 129.2 116.6 90.9 83.1
Total $ 879.2 $ 808.3 $ 840.9 $ 780.6
(1) Carrying value excludes unamortized debt issuance costs.
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GROUP 1 AUTOMOTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
Derivative Financial Instruments
The Company holds interest rate swaps to hedge against variability of interest payments indexed to SOFR. The Company’s interest rate swaps are measured at fair value utilizing a SOFR forward yield curve matched to the identical maturity term of the instrument being measured. Observable inputs utilized in the income approach valuation technique incorporate identical contractual notional amounts, fixed coupon rates, periodic terms for interest payments and contract maturity. The fair value of the interest rate swaps also considers the credit risk of the Company for instruments in a liability position or the counterparty for instruments in an asset position. The credit risk is calculated using the spread between the SOFR yield curve and the relevant interest rate according to rating agencies. The inputs to the fair value measurements reflect Level 2 of the hierarchy framework.
Assets and liabilities associated with the Company’s interest rate swaps, as reflected gross in the Condensed Consolidated Balance Sheets, were as follows (in millions):
March 31, 2024 December 31, 2023
Assets:
Other current assets (1)
$ 1.8 $ 1.2
Other long-term assets (2)
96.7 88.1
Total assets $ 98.5 $ 89.3
Liabilities:
Accrued expenses and other current liabilities $ — $ —
Other long-term liabilities — —
Total liabilities $ — $ —
(1) As of March 31, 2024, the balance included gross fair value of $ 0.2 million related to the de-designated swap as described below.
(2) As of March 31, 2024 and December 31, 2023 , the balance included gross fair value of $ 4.0 million and $ 3.7 million, respectively, related to the de-designated swap as described below.
Interest Rate Swaps De-designated as Cash Flow Hedges
During the three months ended March 31, 2024 , 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, 2024 , the de-designated swap had an aggregate notional value of $ 7.1 million that fixed its underlying one-month SOFR at an annual interest rate of 0.62 % and will mature o n January 4, 2025.
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, 2024 , the de-designated swap had an aggregate notional value of $ 29.1 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 gains associated with the de-designated interest rate swaps of $ 0.2 million and $ 3.1 million , net of tax of $ 0.1 million and $ 1.0 million , for the three months ended March 31, 2024 and 2023, respectively, from AOCI into income as an adjustment to Other interest expense, net, as the remaining forecasted hedged transactions associated with the interest rate swaps were probable of not occurring due to the settlement of the mortgages described above.
The Company recorded unrealized mark-to-mark et gains of $ 0.3 million and realized gains of $ 0.4 million a ssociated with the de-designated interest rate swaps within Other interest expense, net, for the three months ended March 31, 2024. The Company had no unrealized mark-to-market gains or realized gains associated with the de-designated interest rate swaps for the three months ended March 31, 2023.
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. The deferred gains or losses are recognized in income in the period in which the related items being hedged are recognized in expense. Monthly contractual settlements of the positions are recognized as Floorplan interest expense or Other interest expense, net, in the Company’s Condensed Consolidated Statements of Operations. Gains or losses for periods where future forecasted hedged transactions are deemed probable of not occurring are reclassified from AOCI into income as Floorplan interest expense or Other interest expense, net.
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GROUP 1 AUTOMOTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
As of March 31, 2024, the Company held 35 interest rate swaps designated as cash flow hedges with a total notional value of $ 941.9 million that fixed its underlying SOFR at a weighted average rate of 1.22 %. 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 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 March 31,
Derivatives in Cash Flow Hedging Relationship 2024 2023
Interest rate swaps $ 14.3 $ ( 6.7 )
Amount Reclassified from Other Comprehensive Income (Loss) into Statements of Operations
Statement of Operations Classification Three Months Ended March 31,
2024 2023
Floorplan interest expense $ 5.3 $ 3.3
Other interest expense, net $ 4.6 $ 4.2
The amount of gain expected to be reclassified out of AOCI into earnings as an offset to Floorplan interest expense or Other interest expense, net in the next twelve months is $ 24.0 million .
7. RECEIVABLES, NET AND CONTRACT ASSETS
The Company’s receivables, net and contract assets consisted of the following (in millions):
March 31, 2024 December 31, 2023
Contracts-in-transit and vehicle receivables, net:
Contracts-in-transit $ 234.0 $ 259.2
Vehicle receivables 108.2 110.3
Total contracts-in-transit and vehicle receivables 342.2 369.5
Less: allowance for doubtful accounts 0.4 0.3
Total contracts-in-transit and vehicle receivables, net $ 341.7 $ 369.2
Accounts and notes receivable, net:
Manufacturer receivables $ 156.0 $ 128.3
Parts and service receivables 68.1 64.3
F&I receivables 29.9 35.6
Other 9.5 14.4
Total accounts and notes receivable 263.5 242.5
Less: allowance for doubtful accounts 3.8 4.2
Total accounts and notes receivable, net $ 259.7 $ 238.4
Within Other current assets and Other long-term assets:
Total contract assets (1)
$ 56.4 $ 55.0
(1) No allowance for doubtful accounts was recorded for contract assets as of March 31, 2024 or December 31, 2023.
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GROUP 1 AUTOMOTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
8. DEBT
Long-term debt consisted of the following (in millions):
March 31, 2024 December 31, 2023
4.00 % Senior Notes due August 15, 2028
$ 750.0 $ 750.0
Acquisition Line 547.0 325.0
Other Debt:
Real estate related 919.0 751.0
Finance leases 345.9 272.7
Other 20.8 8.8
Total other debt 1,285.7 1,032.5
Total debt 2,582.7 2,107.5
Less: unamortized debt issuance costs 9.8 8.7
Less: current maturities 156.9 109.4
Total long-term debt $ 2,416.1 $ 1,989.4
Acquisition Line
The proceeds of the Acquisition Line (as defined in Note 9. Floorplan Notes Payable) are used for working capital, general corporate and acquisition purposes. As of March 31, 2024, borrowings under the Acquisition Line, a component of the Revolvin g Credit Facility (as defined in Note 9. Floorplan Notes Payable), totaled $ 547.0 million. The average interest rate on this facility was 6.43 % during the three months ended March 31, 2024.
Real Estate Related
The Company has mortgage loans in the U.S. and the U.K. that are paid in installments. As of March 31, 2024, borrowings outstanding under these facilities totaled $ 919.0 million, gross of debt issuance costs, comprised of $ 793.6 million in the U.S. and $ 125.4 million in the U.K., respectively.
In February 2024, the Company entered into a master credit agreement with Wells Fargo Bank, National Association (the “Wells Fargo Credit Agreement”), which provides for delayed draw term loans with a maximum borrowing capacity of $ 250.0 million. The Wells Fargo Credit Agreement accrues interest at SOFR plus 175 basis points and matures on March 1, 2031. As of March 31, 2024, borrowings outstanding under the Wells Fargo Credit Agreement totaled $ 154.2 million and are included in the total U.S. mortgage loans described above.
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GROUP 1 AUTOMOTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
9. FLOORPLAN NOTES PAYABLE
The Company’s floorplan notes payable consisted of the following (in millions):
March 31, 2024 December 31, 2023
Revolving Credit Facility — floorplan notes payable $ 1,229.8 $ 1,358.2
Revolving Credit Facility — floorplan notes payable offset account ( 210.2 ) ( 236.7 )
Revolving Credit Facility — floorplan notes payable, net 1,019.6 1,121.6
Other non-manufacturer facilities 24.5 31.4
Floorplan notes payable — credit facility and other, net $ 1,044.1 $ 1,153.0
FMCC Facility $ 106.8 $ 156.6
FMCC Facility offset account — ( 38.5 )
FMCC Facility, net 106.8 118.1
GM Financial Facility 168.4 37.9
Other manufacturer affiliate facilities 310.3 256.4
Floorplan notes payable — manufacturer affiliates, net $ 585.4 $ 412.4
Floorplan Notes Payable — Credit Facility
Revolving Credit Facility
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. The Revolving Credit Facility consists of two tranches: (i ) a $ 1.2 billion maximum capacity tranche for U.S. vehicle inventory floorplan financing (“U.S. Floorplan Line”) which the outstanding balance, net of offset account discussed below, is reported in Floorplan notes payable — credit facility and other, net ; and (ii) an $ 800.0 million maximum capacit y tranche (“Acquisition Line”), which is not due until maturity of the Revolving Credit Facility and is therefore classified in Long-term debt on the Condensed Consolidated Balance Sheets — refer to Note 8. Debt for additional discussion. The capacity under these two tranches can be re-designated within the overall $ 2.0 billion commitment. Th e Acquisition Line includes a $ 100.0 million sub-limit for letters of credit and $ 50.0 million minimum capacity tranche. The Company had $ 12.2 million in letters of credit outstanding as of March 31, 2024 and December 31, 2023.
The U.S. Floorplan Line bears interest at rates equal to SOFR plus 120 basis points for new vehicle inventory and SOFR plus 150 basis points for used vehicle inventory. The weighted average interest rate on the U.S. Floorplan Line was 6.55 % as of March 31, 2024, excluding the impact of the Company’s interest rate swap derivative instruments. The Acquisition Line bears interest at SOFR or a SOFR equivalent plus 110 to 210 basis points , depending on the Company’s total adjusted leverage ratio, on borrowings in USD, Euros or GBP. The U.S. Floorplan Line requires a commitment fee of 0.15 % per annum on the unused portion. Amounts borrowed by the Company under the U.S. Floorplan Line for specific vehicle inventory are to be repaid upon the sale of the vehicle financed and in no case is a borrowing for a vehicle to remain outstanding for greater than one year. The Acquisition Line requires a commitment fee ranging fr om 0.15 % to 0.40 % per annum, depending on the Company’s total adjusted leverage ratio, based on a minimum commitment of $ 50.0 million less outstanding borrowings.
In conjunction with the Revolving Credit Facility, the Company had $ 3.5 million and $ 3.8 million of unamortized debt issuance costs as of March 31, 2024 and December 31, 2023, 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
FMCC Facility
The Company has a $ 300.0 million floorplan arrangement with FMCC for financing of new Ford vehicles in the U.S. (the “FMCC Facility”). The FMCC Facility bears interest at the U.S. prime rate which was 8.50 % as of March 31, 2024.
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GROUP 1 AUTOMOTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
GM Financial Facility
During 2023, the Company entered into a master loan agreement with General Motors Financial (the “GM Financial Facility”). During the three months ended March 31, 2024, additional subsidiaries of the Company entered into the GM Financial Facility as additional borrowers and the borrowing base thereunder was increased. As of March 31, 2024 and December 31, 2023 , the GM Financial Facility had a total capacity of $ 348.1 million and $ 84.5 million, respectively. The GM Financial Facility bears interest at the U.S. prime rate less 100 basis points.
Other M anufacturer Facilities
The Company has other credit facilities in the U.S. and the U.K., respectively, with financial institutions affiliated with manufacturers for financing of new, used and rental vehicle inventories. As of March 31, 2024, borrowings outstanding under these facilities totaled $ 310.3 million, comprised of $ 168.6 million in the U.S. and $ 141.7 million in the U.K., with annual interest rates ranging from less than 1 % to approximately 9 %. Interest rates on the Company’s manufacturer facilities vary across manufacturers.
Offset Accounts
Offset accounts consist of immediately available cash used to pay down the U.S. Floorplan Line and FMCC Facility, and therefore offset the respective outstanding balances in the Company’s Condensed Consolidated Balance Sheets. The offset accounts are the Company’s primary options for the short-term investment of excess cash.
10. CASH FLOW INFORMATION
Non-Cash Activities
The accrual for capital expenditures increased $ 1.1 million an d $ 4.6 million during the three months ended March 31, 2024 and 2023, respectively.
Interest and Income Taxes Paid
Cash paid for interest, including the monthly settlement of the Company’s interest rate swaps, was $ 52.5 million and $ 40.9 million for the three months ended March 31, 2024 and 2023, respectively. Refer to Note 6. 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 $ 6.2 million and $ 5.7 million for the three months ended March 31, 2024 and 2023, respectively.
11. COMMITMENTS AND CONTINGENCIES
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. In the normal course of business, the Company is required to respond to customer, employee and other third-party complaints. In addition, the manufacturers of the vehicles that the Company sells and services have audit rights allowing them to review the validity of amounts claimed for incentive, rebate or warranty-related items and charge the Company back for amounts determined to be invalid payments under the manufacturers’ programs, subject to the Company’s right to appeal any such decision.
Legal Proceedings
As of March 31, 2024, 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.
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 $ 42.5 million as of March 31, 2024.
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GROUP 1 AUTOMOTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
12. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Changes in the balances of each component of AOCI were as follows (in millions):
Three Months Ended March 31, 2024
Accumulated Income (Loss) On Foreign Currency Translation Accumulated Income (Loss) On Interest Rate Swaps Total
Balance, December 31, 2023 $ ( 37.4 ) $ 65.6 $ 28.1
Other comprehensive income (loss) before reclassifications:
Pre-tax ( 4.5 ) 18.8 14.3
Tax effect — ( 4.5 ) ( 4.5 )
Amount reclassified from accumulated other comprehensive income (loss):
Floorplan interest expense (pre-tax) — ( 5.3 ) ( 5.3 )
Other interest expense, net (pre-tax) — ( 4.6 ) ( 4.6 )
Reclassification related to de-designated interest rate swaps (pre-tax) — ( 0.2 ) ( 0.2 )
Provision for income taxes — 2.4 2.4
Net current period other comprehensive (loss) income
( 4.5 ) 6.6 2.1
Balance, March 31, 2024 $ ( 41.9 ) $ 72.2 $ 30.3
Three Months Ended March 31, 2023
Accumulated Income (Loss) On Foreign Currency Translation Accumulated Income (Loss) On Interest Rate Swaps Total
Balance, December 31, 2022 $ ( 61.1 ) $ 83.6 $ 22.5
Other comprehensive income (loss) before reclassifications:
Pre-tax 9.8 ( 8.8 ) 0.9
Tax effect — 2.1 2.1
Amount reclassified from accumulated other comprehensive income (loss):
Floorplan interest expense (pre-tax) — ( 3.3 ) ( 3.3 )
Other interest expense (pre-tax) — ( 4.2 ) ( 4.2 )
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
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