EDGAR 10-K Filing

Company CIK: 1031203
Filing Year: 2024
Filename: 1031203_10-K_2024_0001031203-24-000013.json

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ITEM 1. BUSINESS
Item 1. Business
General
Group 1 Automotive, Inc. is a leading operator in the automotive retail industry. Through our omnichannel platform, we sell and/or lease 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 retail and wholesale. We have operations in geographically diverse markets that extend across 17 states in the U.S. and 34 towns and cities in the U.K. As of December 31, 2023, our retail network consisted of 144 dealerships and 28 collision centers in the U.S. and 55 dealerships and 13 collision centers in the U.K.
Discontinued Operations
On November 12, 2021, we entered into a Share Purchase Agreement (the “Brazil Agreement”) with Original Holdings S.A. (“Buyer”) to dispose of our Brazilian operations. Pursuant to the terms and conditions set forth in the Brazil Agreement, Buyer agreed to acquire 100% of the issued and outstanding equity interests of our Brazilian operations (the “Brazil Disposal Group”) for approximately BRL 510 million in cash (the “Brazil Disposal”). On July 1, 2022, we completed the Brazil Disposal. The Brazil Disposal Group met the criteria to be reported as discontinued operations. Therefore, the related assets, liabilities and operating results of the Brazil Disposal Group are reported as discontinued operations (the “Brazil Discontinued Operations”) for all periods presented. Effective as of the fourth quarter of 2021, we have two reportable segments: the U.S. and the U.K. Refer to Note 20. Segment Information within our Notes to Consolidated Financial Statements within this Form 10-K, for further information on our reportable segments. Refer to Note 4. Discontinued Operations and Other Divestitures within the Notes to Consolidated Financial Statements within this Form 10-K, for additional information regarding business dispositions. Unless otherwise specified, disclosures in this Form 10-K reflect continuing operations only.
Dealership Operations
Our new vehicle revenues include new vehicle sales and lease transactions, completed at our dealerships or via our digital platform, AcceleRide®. We sell retail used vehicles directly to our customers at our dealerships and via AcceleRide® and wholesale our used vehicles at third party auctions. We sell replacement parts and provide both warranty and non-warranty maintenance and repair services at each of our franchised dealerships, as well as provide collision repair services at the 41 collision centers that we operate. We also sell parts to wholesale customers. Revenues from our F&I operations consist primarily of fees for arranging financing and selling vehicle service and insurance contracts in connection with the retail sale of a new or used vehicle. We offer a wide variety of third-party finance, vehicle service and insurance products in a convenient manner at competitive prices.
The following chart presents total revenues and gross profit contribution from our operations by new vehicles, used vehicles, parts and service and F&I for the year ended December 31, 2023 (“Current Year”):
The following chart presents our diversity of new vehicle unit sales by manufacturer for the Current Year:
The following table shows our new vehicle unit sales geographic mix for the Current Year and our franchise count as of December 31, 2023:
New vehicle unit sales geographic mix (%) Franchises
Region Geographic Market
U.S. Texas 38.4 % 81
Massachusetts 9.0 % 22
Oklahoma 5.6 % 19
California 5.9 % 7
Georgia 3.6 % 9
New Mexico 2.9 % 8
Maine 1.8 % 6
New Jersey 2.2 % 8
New Hampshire 2.1 % 6
Florida 3.0 % 5
South Carolina 1.6 % 3
Louisiana 1.7 % 6
Kansas 1.2 % 3
New York 1.0 % 2
Alabama 0.4 % 1
Maryland 0.5 % 2
Mississippi 0.4 % 1
81.3 % 189
U.K. United Kingdom 18.7 % 78
100.0 % 267
Business Strategy
Our business strategy is built on our commitment to maximize the return on investment for our stockholders sustainably. We intend to execute our business strategy, underpinned by the following four key components:
•Business growth through portfolio and operations optimization;
•Leading customer experience;
•Employer of choice; and
•OEM Partner of choice.
Business Growth Through Portfolio and Operations Optimization
At Group 1, growing and improving our operations is fundamental to future success, driven by the following key activities:
•Mergers and Acquisitions
•Dispositions
•Operations optimization
In 2021 to 2023, the retail automotive industry experienced multiple merger and acquisition transactions. Despite this increase in merger and acquisition activity, the industry remains fragmented to a significant degree. We believe there will continue to be opportunity for consolidation within the industry. Consistent with our acquisition activity completed in 2021, 2022 and 2023, we intend to pursue opportunities in growth-positioned or economically stable markets, or that are economically accretive to our existing markets in 2024 and beyond, specifically focusing on brands, large dealership operations and/or dealership clusters that will provide attractive returns to our portfolio. Acquisitions completed within our existing markets allow us to better capitalize on economies of scale and provide for cost saving opportunities in key expense areas such as used vehicle sourcing, advertising, purchasing, data processing and personnel utilization. In addition to cost savings opportunities, scale enables us to make the EV, facility, compliance, real estate, and technology investments necessary to thrive in today’s retail automotive industry.
In addition to expanding our portfolio through acquisitions, from time to time, we make decisions to optimize our portfolio by disposing of certain assets or operations. In some instances, we dispose of underperforming dealerships which do not meet our return objectives. We may also dispose of certain dealerships in order to complete strategic acquisition opportunities. Specifically, we may dispose of a less significant dealership to allow us to acquire a more substantial dealership within the same or another geographic area based on the ownership limitations imposed in the various franchise agreements.
Refer to Note 3. Acquisitions and Note 4. Discontinued Operations and Other Divestitures within the Notes to Consolidated Financial Statements within this Form 10-K, for additional information regarding our acquisitions and dispositions.
Operations optimization includes leveraging our dealership’s full potential and local scale advantage to improve operational efficiency. This includes focusing on operational excellence at each dealership and other facilities, including, but not limited to, standardization of key common processes and taking advantage of shareable business resources. We believe our operations optimization efforts will provide a strategic advantage by structurally lowering our operating costs.
Leading Customer Experience
Our customers drive what we do each day, and we seek to provide them with an industry-leading customer experience, both physically in our stores and digitally. With our expansive portfolio of brands and service capabilities across significant geographical areas, we believe we can service the needs of each and every member of our customers’ families. To drive the leading customer experience we endeavor to:
•Adopt new technology
•Drive process improvement
•Improve the customer aftersales journey
As new and innovative tools become available, we seek to quickly adopt those that provide a mutual benefit to our customers and Group 1. Our digital platform, AcceleRide®, allows customers to shop for and purchase and/or lease new and used vehicles, including a full selection of finance and insurance options; receive instant cash offers or trade-in of vehicles; and schedule service appointments at the customers’ convenience. A customer can step in and out of the buying process using AcceleRide®, while also working with a sales agent in one of our stores. The digital and in-store experiences do not have to be mutually exclusive. We continuously evaluate our processes to identify opportunities for automation, enabling us to facilitate our customers’ vehicle inventory selection on a more expedited basis, process parts inventory and F&I products transactions quicker and price cars more competitively for our customers using the latest and most accurate information available.
With a focus on the aftersales impact on the customer journey, we have and will continue to increase customer retention through more convenient service hours, training of our service advisors, selling service contracts with vehicle sales and customer relationship management software that allows us to provide targeted marketing to our customers.
Employer of Choice Within Automotive Industry
At Group 1, our employees are the cornerstone to our operations and business success. We seek to be the employer of choice within the automotive industry, by focusing on:
•Talent Management and Employee Engagement;
•Providing Training and Development;
•Promoting Employee Safety and Well-Being; and
•Market Competitive Compensation and Benefits.
To help our workforce feel heard and supported, we solicit employee feedback through multiple channels. We leverage our intracompany communication platform, the Meta-based Workplace app, to bring our teams together digitally and provide our leadership team the ability to engage in more frequent, direct communication with our employees. Our management team routinely visits our stores, meeting with and soliciting feedback from employees at all levels. The results of the annual engagement survey and employee discussions inform our overall human capital management methods and other growth strategies.
We routinely create and offer department or job-specific training and professional development opportunities to meet employees’ needs. In addition to providing career growth pathways for employees, annually our Board of Directors reviews management’s succession planning for key positions throughout the organization. We believe that embracing DEI (“Diversity, Equity, and Inclusion”) allows us to attract and develop high-performing employees, which leads to a more engaged workforce and lower turnover.
We maintain policies and procedures to mitigate personnel health and safety risks and to help prevent accidents. Partnering with health and safety expert, KPA, we take measures to ensure our working environments are safe and all employees receive department-specific training on how to avoid injury, report potential hazards and respond to emergencies. In 2023, we hired a Health and Safety Manager for our U.S. operations, to lead our health and safety initiatives.
We recognize the importance of providing support for our employees’ physical, mental and financial wellness. Our market competitive pay and benefits packages include paid family leave, flexible work schedules and a comprehensive health and wellness program. We offer medical, dental and vision insurance plans for employees and dependents, 401(k) matching and an employee stock purchase plan. In select locations, Group 1 also offers commuter benefits that save employees commuting costs through subsidized public transportation and parking fees. We continue to modify our benefits to maintain competitiveness and to better suit the needs of our diverse employees.
OEM Partner of Choice
We regard our OEMs as strategic partners and rely on them to deliver high-quality products and services for our customers. Key to the success of our business is the determination to be great partners to our OEMs. We work closely with our OEMs and regularly communicate with them regarding material sourcing, marketing, recalls, safety and other factors that influence our business relationship and the customer experience.
Competition
The automotive retail industry is highly competitive across all our service lines. Consumers have a number of choices when deciding where and how to (i) purchase and/or lease a new or used vehicle as well as select related vehicle financing and insurance products; (ii) purchase related parts and accessories; and (iii) procure vehicle maintenance and repair services. We believe the principal competitive factors in the automotive retailing industry are location, service, price, selection, online capabilities, established customer relationships, and reputation.
New Vehicles Sales
In the new vehicle market, our dealerships compete with other franchised dealerships in their market areas, as well as auto brokers, leasing companies and internet companies that provide referrals to, or broker vehicle sales with, other dealerships or customers. Our principal new vehicle dealer competitors also have franchise agreements with the various vehicle manufacturers and, as such, generally have access to new vehicles on the same terms as we do. We do not have any cost advantage in purchasing new vehicles from vehicle manufacturers, and our current franchise agreements do not grant us the exclusive right to sell a manufacturer’s product within a given geographic area. Several companies are currently manufacturing EVs for sale primarily through the internet, under a direct-to-consumer model, without using the traditional dealer-network or are considering such a strategy, including some of our OEM partners. Certain of our vehicle manufacturers in the U.K. recently transitioned or have announced plans to explore an agency model for selling new vehicles. Under an agency model, our franchised dealerships receive a fee for facilitating the sale of a new vehicle to a customer but no longer record the vehicle sales price as revenue, record vehicles in inventory or incur floorplan interest expense, as has been historical practice. The agency model, if adopted by other manufacturers, would reduce revenues.
Used Vehicle Sales
In the used vehicle market, our dealerships compete both in their local market and nationally with other franchised dealers, large multi-location used vehicle retailers, local independent used vehicle dealers, automobile rental agencies and private parties for the supply and resale of used vehicles.
Parts and Service
We believe the principal competitive factors in the parts and service business are the quality of customer service, timeliness of service, the use of factory-approved replacement parts, familiarity with a manufacturer’s brands and models, location, price, the availability and competence of technicians, and the availability of training programs to enhance such expertise. In the parts and service market, our dealerships compete with other franchised dealers to perform warranty maintenance and repairs, conduct manufacturer recall services and sell factory replacement parts. Our dealerships also compete with other automobile dealers, franchised and independent service center chains and independent repair shops for non-warranty repair and maintenance business. In addition, our dealerships sell replacement and aftermarket parts both locally and nationally in competition with franchised and independent retail and wholesale parts outlets. A number of regional or national chains offer selected parts and services at prices that may be lower than ours. Our collision centers compete with other large, multi-location companies, as well as local, independent, collision service operations.
F&I
We believe the principal competitive factors in the F&I business are convenience, interest rates, product availability and affordability, product knowledge, flexibility in contract length and ease of consumer understanding. We face competition in arranging financing for our customers’ vehicle purchases from a broad range of unaffiliated third-party financial institutions. Many financial institutions now offer their own menu of F&I products, providing an alternative to our product offering, which may reduce our profits from the sale of these products through reduced penetration.
Manufacturers’ Relationships and Agreements
Each of our U.S. dealerships operates under one or more franchise agreements with vehicle manufacturers or authorized distributors. The franchise agreements grant the franchised automobile dealership a non-exclusive right to sell the manufacturer’s or distributor’s brand of vehicles and offer related parts and service within a specified market area. These franchise agreements also grant franchised dealerships the right to use the manufacturer’s or distributor’s trademarks in connection with their operations, and impose numerous operational requirements and restrictions relating to, among other things, inventory levels, working capital levels, the sales process, sales performance requirements, customer satisfaction standards, marketing and branding, facility standards and signage, personnel, changes in management, change in control and monthly financial reporting.
Most of our dealerships’ franchise agreements continue indefinitely and those with definite terms are renewed or superseded by a new agreement. Each of our franchise agreements may be terminated or not renewed by the manufacturer for a variety of reasons, including unapproved changes of ownership or management and performance deficiencies in such areas as sales volume, sales effectiveness and customer satisfaction. In most cases, manufacturers have renewed the franchises upon expiration so long as the dealership is in compliance with the terms of the agreement. We diligently work with our manufacturers to address any performance issues.
Our dealership service departments perform vehicle repairs and service for customers under manufacturer warranties. We are reimbursed for those repairs and service by the manufacturer. Some manufacturers offer rebates to new vehicle customers, which we are required, under specific program rules, to adequately document, support and collect. In addition, some manufacturers provide us with incentives to order and/or sell certain models and/or volumes of inventory over designated periods of time. Under the terms of our dealership franchise agreements, the respective manufacturers are able to perform warranty, incentive and rebate audits and charge us back for unsupported or non-qualifying warranty repairs, rebates or incentives.
In addition to the individual dealership franchise agreements discussed above, we have entered into framework agreements in the U.S. with most major vehicle manufacturers and distributors. These agreements impose a number of restrictions on our operations, including our ability to make acquisitions and obtain financing, and on our management. These agreements also contain change of control provisions related to the ownership of our common stock. For a discussion of these restrictions and the risks related to our relationships with vehicle manufacturers, please refer to Item 1A. Risk Factors.
Governmental Regulations
Automotive and Other Laws and Regulations
We operate in a highly regulated industry. A number of laws and regulations applicable to automotive companies affect our business and conduct, including, but not limited to our sales, operations, financing, insurance, advertising and employment practices. These laws and regulations include state franchise laws and regulations, consumer protection laws and other extensive laws and regulations applicable to new and used motor vehicle dealers. Additionally, in every jurisdiction in which we operate, we must obtain various permits and licenses in order to conduct our business.
In general, the U.S. jurisdictions in which we operate have automotive dealership franchise laws, which generally provide that it is unlawful for a manufacturer or distributor to terminate or not renew a franchise unless “good cause” exists. As a result, it generally is difficult, outside of bankruptcy, for a manufacturer or distributor to terminate, or not renew, a franchise under these laws, which were designed to protect dealers.
The U.K. generally does not have automotive dealership franchise laws and, as a result, our U.K. dealerships operate without these types of specific protections. However, similar protections may be available as a matter of general U.K. contractual law. In addition, our U.K. dealerships are subject to U.K. antitrust rules prohibiting certain restrictions on the sale of new vehicles and spare parts and on the provision of repairs and maintenance. For instance, authorized dealers are generally able to, subject to manufacturer facility requirements, relocate or add additional facilities, offer multiple brands in the same facility, allow the operation of service facilities independent of new car sales facilities and ease restrictions on cross supplies (including on transfers of dealerships) between existing authorized dealers within the EU. However, under the EU Motor Vehicle Block Exemption Regulation, which was retained in U.K. law following U.K.’s exit from the EU on January 31, 2020, certain restrictions on dealerships are permissible in franchise agreements provided certain conditions are met. In October 2022, the Competition and Markets Authority of the U.K. published recommendations to introduce an updated U.K. equivalent broadly similar to the EU Motor Vehicle Block Exemption Regulations. The U.K. Motor Vehicle Block Exemption Regulation is applicable until May 31, 2029.
Data Privacy
We are subject to numerous laws and regulations designed to protect the information of clients, customers, employees and other third parties that we collect and maintain. Some of the more significant regulations that we are required to comply with include the U.K.’s General Data Protection Regulation (“U.K. GDPR”) and, the California Consumer Privacy Act, as amended and enhanced effective January 1, 2023 by the California Privacy Rights Act (as so amended, the “CCPA”), and the Federal Trade Commission (“FTC”) Safeguards Rule. These regulations provide for various data protection requirements related to protection of customer’s personally identifiable information, notice requirements related to data breaches and obligations to inform a consumer, at or before collection, of the purpose and intended use of the collection, and to delete a consumer’s personal information upon request. If an organization violates the U.K. GDPR, the organization can be fined up to 4% of annual global turnover or 20 million euros, whichever is greater. The CCPA allows the California Attorney General to bring actions against non-compliant businesses with fines of $2,500 per violation or, if intentional, up to $7,500 per violation and permits a private right of action for certain violations of laws. The FTC Safeguards Rule contains procedural, technical and personnel requirements that financial institutions, including dealers, must satisfy to meet their information security obligations.
Environmental and Occupational Health and Safety Laws and Regulations
Our business activities in the U.S. and the U.K. are subject to stringent federal, regional, state and local laws, regulations and other controls governing specific health and safety criteria to address worker protection, the release of materials into the environment or otherwise relating to environmental protection. Our operations involve the use, handling and storage of materials such as motor oil and filters, transmission fluids, antifreeze, refrigerants, paints, thinners, batteries, cleaning products, lubricants, degreasing agents, tires and fuel. We contract for recycling and/or disposal of used fluids, filters and other waste materials generated by our operations.
These laws, regulations and controls may impose numerous obligations on our operations including the acquisition of permits to conduct regulated activities, the imposition of restrictions on where or how to manage or dispose of used products and wastes, the incurring of capital expenditures to limit or prevent releases of such material, and the imposition of substantial liabilities for pollution resulting from our operations or attributable to former operations. For example, in the U.S., most of our dealerships utilize storage tanks that are subject to testing, containment, upgrading and removal regulations under the federal Resource Conservation and Recovery Act, analogous state statutes and their implementing regulations. Failure to comply with these laws, regulations and permits may result in the assessment of sanctions, including administrative, civil and criminal penalties, the imposition of investigatory remedial and corrective action obligations or increase of capital expenditures, restrictions, delays and cancellations in permitting or in the performance or expansion of projects and the issuance of injunctions limiting or preventing some or all of our operations in affected areas. Additionally, certain environmental laws may result in imposition of joint and several strict liability, which could cause us to become liable as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third parties. For instance, an accidental release from one of our storage tanks could subject us to substantial liabilities arising from environmental cleanup and restoration costs, claims made by neighboring landowners and other third parties for personal injury and property damage and fines or penalties for related violations of environmental laws or regulations.
Properties that we now or have in the past owned or leased in the U.S. are subject to the federal Comprehensive Environmental Response, Compensation and Liability Act and similar state statutes. These statutes can impose strict and joint and several liability for cleanup costs on those that are considered to have contributed to the release of a hazardous substance, including for historic spills that occurred prior to our ownership of our properties even if we did not know of, or did not cause the release of such hazardous substances. We also are subject to the Clean Water Act, analogous state statutes, and their implementing regulations which, among other things, prohibit discharges of pollutants into regulated waters without permits, require containment of potential discharges of oil or hazardous substances, and require preparation of spill contingency plans. Air emissions from some of our operations, such as vehicle painting, may be subject to the federal Clean Air Act and analogous laws. Laws and regulations protecting the environment are complex and generally become more stringent over time, which may result in increased costs for future environmental compliance and remediation. Comparable laws and regulations have been enacted in the U.K. Certain health and safety standards promulgated by the Occupational Safety and Health Administration of the U.S. Department of Labor and related state agencies also apply to our operations.
The threat of climate change continues to attract considerable attention in the U.S., U.K. and elsewhere globally. As a result, numerous proposals have been made and could continue to be made at the international, national, regional and state levels of government, in locations affecting our business, to monitor and limit existing emissions of greenhouse gas (“GHG”), as well as to restrict or eliminate such future emissions. Gas and diesel-powered automobiles are one source of GHG emissions and in the recent past, the U.S. Environmental Protection Agency (“EPA”), together with the National Highway Traffic Safety Administration (“NHTSA”), implemented GHG emissions limits on vehicles manufactured for operation in the U.S. On January 20, 2021, President Joe Biden issued an executive order recommitting the United States to participation in the Paris Agreement, which is a United Nations-sponsored, non-binding agreement for nations to limit their GHG emissions through individually determined reduction goals every five years after 2020. The U.K. is similarly committed to the Paris Agreement, and the U.K. announced that it plans to ban sales of new gasoline and diesel-powered vehicles after 2035. Similar planned bans have been announced in California, New Mexico, Massachusetts and New York. Additional regulation of GHG emissions from the vehicles could increase the cost of the vehicles sold to us. Government bans or restrictions on certain vehicle types could impact the mix of vehicles that we offer for sale. Consumer concerns regarding climate change could also alter consumer preferences and adversely affect our ability to market and sell vehicles. These developments could increase our costs of operation as well as reduce our volume of business.
Vehicle manufacturers in the U.S. are also subject to regulations by the EPA and the NHTSA that establish corporate average fuel economy (“CAFE”) standards applicable to light-duty vehicles. These agencies have finalized more stringent standards for both heavy-duty and light-duty vehicles and for increased fuel economy for vehicles in upcoming model years. California and other states have indicated they would pursue more stringent CAFE and GHG standards than required by current EPA and NHTSA standards. Comparable laws and regulations have been enacted in the U.K, including updated standards for cars, vans and heavy-duty trucks for upcoming model years. Our OEMs require lead time to prepare new vehicle models and more stringent regulations could result in increased costs and time constraints or result in our OEMs deciding to increase production targets of EVs in anticipation of such regulations. These developments could also significantly increase our costs of operation as well as reduce our volume of business. For additional information, see Item 1A. Risk Factors within this Form 10-K.
The EPA proposes higher emissions standards each year and beginning with model year 2027, there is expected to be new battery durability requirements and changes to certain existing air emissions credit programs. These regulations could increase or accelerate the adoption of certain emissions reducing technologies, and further market penetration for hybrid, plug-in and battery-electric vehicles. For example, should the proposed regulations be enacted, the EPA projects that at least 60% of new light-duty passenger vehicles sold in the U.S. would be battery-electric by 2030. The EPA also estimates that the regulations, if finalized, would increase costs for auto manufacturers and reduce consumer repair costs for covered vehicles. The EPA projects the regulations to become final during 2024.
Insurance and Bonding
Our operations expose us to the risk of various liabilities, including:
•claims by employees, customers or other third parties for personal injury or property damage;
•weather events, such as hail, flood, tornadoes and hurricanes; and
•potential fines and civil and criminal penalties resulting from alleged violations of federal and state laws, regulatory requirements and other local laws in the jurisdictions in which we operate.
The automotive retailing business is also subject to substantial risk of real and personal property loss as a result of significant concentration of real and personal property values at dealership locations. Under self-insurance programs, we retain various levels of risk associated with aggregate loss limits and per claim deductibles. In certain cases, we insure costs in excess of our retained risk under various contracts with third-party insurance carriers. Although we believe our insurance coverage is adequate, we cannot be assured that we will not be exposed to uninsured losses that could have a material adverse effect on our business, results of operations and financial condition. We are also subject to potential premium cost fluctuations and changes in loss retention limits with the annual renewal of these programs.
For further discussion, refer to Item 1A. Risk Factors, within this Form 10-K.
Human Capital
People make up the foundation of everything we do at the Company. Our core values - Integrity, Transparency, Professionalism, Teamwork and Respect - define our culture and help us attract and retain talented employees. As of December 31, 2023, we had 16,011 employees (full-time, part-time and temporary), of which 12,493 were employed in the U.S. and 3,518 in the U.K.
Employee Engagement
We engage in activities aimed at listening to our employees and addressing their concerns. In turn, our employees deliver superior service to our customers, and ultimately achieve exceptional results for our investors. We solicit employee feedback through multiple channels such as employee surveys and town halls. Our annual employee survey provides our management team with valuable insight into employees’ perception of workplace culture and progress on our corporate mission. The results inform our overall human capital management methods and other growth strategies.
In 2022, we launched the Meta-based Workplace app, an all-in-one communication platform that keeps our employees across the U.S. and U.K. up to date on the latest company news and brings our teams together digitally. The platform offers our executive team the ability to engage in direct and more frequent, real-time communication with our employees. The features of the platform include targeted announcement capabilities, company documents like policies, guidelines and benefits plans, and quick access to employee and department directories. We believe that working together is critical to prepare for coming opportunities and changes affecting us internally and externally.
Training and Development
We routinely create and offer department or job-specific training and professional development opportunities to meet employees’ needs. In addition to job specific courses, we also offer leadership training. Employees have opportunities for various certification levels based on training completed and tenure. We have also developed a management training program and a technician training program to attract talent to the automotive industry. In addition to providing career growth pathways for employees, annually our Board of Directors reviews management’s succession planning for key positions throughout the organization.
DEI
We maintain a DEI council that is chaired by our Chief Diversity Officer. The council’s mission is to foster a diverse and inclusive culture where employees of all backgrounds are respected, valued and developed. We enhance employee engagement in DEI by offering training, recruitment and career path development where a sense of belonging is apparent throughout the organization. The council has four primary areas of focus: Talent Acquisition, Talent Development, Community Building and Women in the Workplace. The council consists of a diverse group of employees, providing representation across the organization. Each area has an employee chairperson, as well as an executive sponsor. In addition, employees participate in various diversity and inclusion training programs which were specifically developed for the Company.
Environmental, Social and Governance (“ESG”)
We are committed towards a more sustainable future by working to improve various aspects of our business in the ESG areas most relevant to us, our stakeholders and our industry. Beginning in 2021 we performed a thorough review of our business operations pertaining to: hiring practices, equal pay, promotional practices, health and safety, health insurance, community impact and environmental impact. Building off this analysis, we performed a second assessment in 2022. This effort included a detailed desktop study reviewing key material topics relevant to the automotive industry, an analysis of survey responses from our internal and external stakeholders, and interviews with executive leaders across our business and our Board members. With oversight from our Board of Directors, management annually reviews the Company’s ESG priorities and designates resources for their management and disclosure.
Environmental
Our commitment to sustainability centers on seeking to reduce waste and our collective environmental impact. We look for opportunities to reduce our energy consumption, eliminate waste and accommodate the growing EV market and continue to invest in numerous initiatives to improve our carbon and broader environmental footprint. These opportunities include technological solutions such as: climate control thermostats and LED lighting to improve energy efficiency, solar panels to increase our use of renewable energy and updated waste management systems to improve handling of chemicals and other byproducts from our dealerships’ operations. To prevent any adverse impact on the environment and to protect local water supplies, all of our U.S. service centers utilize oil water separators to properly manage wastewater. In addition, all U.S. dealerships that feature car wash services have processes in place to maximize water recycling between uses. At all U.S. and U.K. locations, we manage recycling of waste materials. We also recycle IT hardware, tires, oil, paint and damaged automotive parts.
The widespread adoption of EVs has accelerated in recent years. We are certified in EV service and repair. We have equipped our facilities with EV charging equipment, specialized lifts, EV-specific shop equipment and battery storage to sufficiently cater to the emerging EV market.
Social
We maintain a human capital strategy that supports a talented, diverse and inclusive workforce with equal opportunity. The Company offers programs for training and career advancement, strong benefits, incentives, and health, safety and wellness initiatives as described above within Human Capital. In addition, the Company has a history of philanthropy and volunteerism. We actively contribute to our local communities in different and meaningful ways. Our efforts include employee volunteering, donations to local causes, support to educational programs and hosting community gatherings at our dealerships. In 2023, the role of Corporate Communication and Community Engagement Manager was created to align our efforts across the Company. Our focus is centered around helping children, fostering education and addressing the needs of first responders and the homeless.
Governance
Our Board of Directors has four standing committees to assist in fulfilling its responsibilities: the Audit Committee, the Compensation and Human Resources Committee, the Governance and Corporate Responsibility Committee and the Finance/Risk Management Committee.
Our Governance & Corporate Responsibility Committee advises the Board on appropriate corporate governance guidelines and has direct oversight of our ESG policies and practices. Other Board committees also play a role in ESG: our Finance/Risk Management Committee oversees our Enterprise Risk Management processes and cybersecurity matters, our Compensation & Human Resources Committee oversees human capital management and health and safety matters and our Audit Committee oversees financial reporting, legal and regulatory compliance risks. Additionally, our management team and cross-functional subject matter experts are responsible for the implementation of our ESG strategy, initiatives and communications.
To improve business performance, better serve our customers and communities and enhance our competitive advantage, Group 1 is focused on hiring and developing a talented, diverse workforce. This starts with our Board. As Group 1 continues to evolve, so do the perspectives, skills and experiences the Board seeks in its director nominees. We believe the composition of our Board is critical to our success. As such, one-third of our directors are women, all of whom serve as committee chairs.
Much of our Board of Directors’ oversight work is delegated to various committees, which meet regularly and report back to the full Board. All committees have significant roles in carrying out the risk oversight function. Each committee is comprised entirely of independent directors (except the Finance/Risk Management Committee) and oversees risks associated with its respective area of responsibility.
At the corporate level, we established a Safety and Risk Steering Committee, which reviews the effectiveness of the Company’s risk management system, including a review of policies and profiles of financial and non-financial risks.
We track and identify new and emerging risks, and to the extent they affect or could potentially affect our business, we develop action plans with assigned sponsors to address and mitigate that risk. We use an internal process to help identify if we have enough controls in place to properly manage each risk.
Seasonality
Our operating results are generally subject to seasonal variations, as well as changes in the economic environment. In the U.S., we generally experience higher volumes of vehicle sales and service in the second and third calendar quarters of each year. In addition, in some regions of the U.S., vehicle purchases decline during the winter months due to inclement weather. In the U.K., the first and third quarters tend to be stronger, driven by the vehicle license plate change months of March and September. Other factors unrelated to seasonality, such as changes in economic conditions, manufacturer incentive programs, supply issues, seasonal weather events and/or changes in foreign currency exchange rates may exaggerate seasonal or cause counter-seasonal fluctuations in our revenues and operating income.
A shortage of new vehicle supply in 2022 and much of 2023, led by a global semiconductor and other parts shortage, as well as high inflation and high interest rates led to a deviation from historical seasonal variations. As a result, historical seasonal variation patterns may not be an appropriate indicator of current and future trends in seasonal variations.
Internet Website and Availability of Public Filings
Our internet address is www.group1auto.com. We make the following information available free of charge on our website:
•Annual Report on Form 10-K;
•Quarterly Reports on Form 10-Q;
•Current Reports on Form 8-K;
•Amendments to the reports filed or furnished electronically with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act;
•Our Corporate Governance Guidelines;
•The charters for our Audit, Compensation & Human Resources, Finance/Risk Management and Governance & Corporate Responsibility Committees;
•Our Code of Conduct for Directors, Officers and Employees (“Code of Conduct”);
•Our Code of Ethics for our Chief Executive Officer, Chief Financial Officer and Controller (“Code of Ethics”); and
•Our Sustainability Report.
Within the time period required by the SEC and the NYSE, as applicable, we will post on our website any modifications to the Code of Conduct and Code of Ethics and any waivers applicable to senior officers as defined in the Code of Conduct or Code of Ethics, as applicable, as required by the Sarbanes-Oxley Act of 2002. We make our filings with the SEC available on our website as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC. The SEC also maintains a website at http://sec.gov that contains reports, proxy and information statements, and other information regarding our company that we file and furnish electronically with the SEC.
References to the Company’s website in this Form 10-K are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained on, or available through, the website, and such information should not be considered part of this Form 10-K.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
The following risks have had or in the future could have a material adverse effect on our business and results of operations.
Market and Industry Risks
Availability and demand for and pricing of our products and services may be adversely impacted by economic conditions, financial developments including rising inflation, high energy prices, increasing interest rates, a potential recessionary environment, and other factors.
The automotive retail industry, and especially new vehicle unit sales, is influenced by general economic conditions, particularly consumer confidence, the level of personal discretionary spending, interest rates, exchange rates, fuel prices, technology and business model changes, supply conditions, consumer transportation preferences, unemployment rates and credit availability. Consumer spending can be materially and adversely impacted by periods of economic uncertainty or by consumer concern about manufacturer viability.
During the Current Year, the global economy experienced elevated inflation and increased volatility in gasoline and energy prices. In response to inflationary pressures and macroeconomic conditions, the U.S. Federal Reserve, along with other central banks, including in the U.K., maintained interest rates at heightened levels throughout 2023, which could lower demand for new and used vehicles in future periods. In Europe, rising energy costs as a result of supply disruptions and increased winter demand for heating could place additional strain on our suppliers’ ability to maintain current production levels of vehicles and vehicle parts. Across the EU, these energy constraints could result in nations or regions enacting emergency energy related policies, limiting energy availability for manufacturers. Any such production constraints could further exacerbate an already ailing supply chain. The impact of these macroeconomic developments on our operations cannot be predicted with certainty.
Sustained inflation, increased energy costs and a prolonged recession could adversely impact our operations, the operations of our suppliers and customer demand for our vehicles and services. Continued interest rate increases or the maintenance of interest rates at current levels could have a material adverse impact on our interest expense and ability to obtain financing through the debt markets, as well as consumers’ ability to obtain financing for the purchase of new and used vehicles. Refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk for additional analysis regarding our interest rate sensitivity.
Increased demand for personal electronics, coupled with the impact of the COVID-19 pandemic on manufacturers, created a shortfall of semiconductor chips. This adversely impacted production of new vehicles, parts and other supplies in 2022 and much of 2023, thereby reducing new vehicle inventories, increasing new vehicle prices and limiting the availability of replacement parts. Under these conditions, automotive dealer profits have increased sharply as new vehicle prices and margins have more than offset the effects of lower new vehicle volume. While semi-conductor chip and other parts shortages were substantially resolved by the end of 2023 and vehicle production has increased, inventory levels remain below pre-COVID-19 pandemic levels for certain OEMs. If vehicle inventory is restored to pre-COVID-19 pandemic levels, new vehicle prices could decrease thereby resulting in reduced profitability at our dealerships.
A significant portion of our vehicles purchased by customers are financed. Tightening of the credit markets, increases in interest rates and credit conditions have and may continue to decrease the availability or increase the costs of automotive loans and leases and adversely impact our new and used vehicle sales and margins. In particular, if sub-prime finance companies apply further higher credit standards or if there is a further decline in the overall availability of credit in the sub-prime lending market, the ability of selected consumers to purchase vehicles could be even more limited, which could have a material adverse effect on our business and results of operations.
In addition, local economic, competitive and other conditions affect the performance of our dealerships. Our results of operations depend substantially on general economic conditions and spending habits in those regions of the U.S. and U.K. where we maintain our operations.
EV inventory has been building in 2023 for certain brands, outpacing the buildup of non-EV inventory, as EV sales volume has lagged OEM deliveries in recent quarters. While EV sales continued to increase in 2023, the growth trend has not continued at the pace experienced in the two years prior. Challenges with EV technologies continue to make headlines within the U.S. media market, raising concerns around consumer demand and interest in the products. Should EV demand decline at the same time as more OEMs transition to EV models, this could have a material adverse effect on our business and results of operations.
Recent negative developments affecting the financial services industry, such as insolvency, defaults, or non-performance by financial institutions, could adversely affect our access to capital, liquidity, financial condition and results of operations.
During the Current Year, closures of Silicon Valley Bank, Signature Bank and First Republic Bank and their placement into receivership with the FDIC created bank-specific and broader financial institution liquidity risk concerns. The FDIC, the U.S. Federal Reserve and the U.S. Department of the Treasury jointly announced that depositors at Silicon Valley Bank, Signature Bank and First Republic Bank would have access to their funds, even those in excess of the standard FDIC insurance limits.
Although we are not a party to any transactions with Silicon Valley Bank, Signature Bank, First Republic Bank or any other financial institution currently in receivership, we maintain cash and floorplan offset balances at banks and third-party financial institutions in excess of FDIC insurance limits. If any of our lenders or counterparties to any of our financial instruments were to be placed into receivership or become insolvent, our ability to access our capital and liquidity and process transactions could be impaired and could have a material adverse effect on our business, operations and financial condition. In addition, if any of our suppliers, customers or other parties with whom we conduct business are unable to access funds or lending arrangements with relevant financial institutions, such parties’ ability to pay their obligations to us or to enter into new arrangements with us could be adversely affected. In the event of any future closure of other banks or financial institutions, there is no guarantee that the FDIC, the U.S. Federal Reserve and the U.S. Department of the Treasury will provide access, on a timely basis or at all, to uninsured funds. We cannot predict the effects of future disruptions in the financial services industry on our financial condition and operations, nor that of our suppliers, vendors or customers.
Deterioration in market conditions or changes in our credit profile could adversely affect our operations and financial condition.
We rely on the positive cash flow we generate from our operations and our access to the credit and capital markets to fund our operations, growth strategy, and return of cash to our shareholders through share repurchases and dividends. Changes in the credit and capital markets, including market disruptions, limited liquidity and interest rate fluctuations, may increase the cost of financing or restrict our access to these potential sources of future liquidity. Our continued access to liquidity sources on favorable terms depends on multiple factors, including our operating performance and credit ratings. Our debt securities currently are rated just below investment-grade and a downgrade of this rating likely would negatively impact our access to the debt markets and increase our cost of borrowing. Disruptions in the debt markets or any downgrade of our credit ratings could adversely affect our operations and financial condition and our ability to finance acquisitions or return cash to our shareholders. We can make no assurances that our ability to obtain additional financing through the debt markets will not be adversely affected by economic conditions or that we will be able to maintain or improve our current credit ratings.
Our floorplan notes payable, mortgages and other debt are benchmarked to SOFR, which can be highly volatile as a result of changing economic conditions. Although we utilize derivative instruments to partially mitigate our exposure to interest rate fluctuations, significant increases in SOFR or other variable interest rates could have a material adverse impact on our interest expense due to the significance of our debt and floorplan balances. Refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk for additional analysis regarding our interest rate sensitivity.
We may fail to meet analyst and investor expectations, which could cause the price of our stock to decline.
Our common stock is traded publicly, and various securities analysts follow our financial results and frequently issue reports on the Company which include information about our historical financial results as well as their estimates of our future performance. These estimates are based on their own opinions and are often different from management’s estimates or expectations of our business. If our operating results are below the estimates or expectations of public market analysts and the expectations of our investors, our stock price could decline, adversely affecting, among other things, our access to capital and investor confidence in management and those charged with governance.
We are subject to risks associated with our dependence on manufacturer business relationships and agreements.
The success of our dealerships is dependent on vehicle manufacturers whom we rely exclusively on for our new vehicle inventory. Our ability to sell new vehicles is dependent on a vehicle manufacturer’s ability to produce and allocate to our dealerships an attractive, high quality and desirable product mix at the right time in order to satisfy customer demand.
Manufacturers generally support their franchisees by providing direct financial assistance in various areas, including, among others, incentives, floorplan assistance and advertising assistance. A discontinuation or change in our manufacturers’ warranty and incentive programs could adversely affect our business. Manufacturers also provide product warranties and, in some cases, service contracts to customers. Our dealerships perform warranty and service contract work for vehicles under manufacturer product warranties and service contracts and we bill the manufacturer directly as opposed to invoicing the customer. In addition, we rely on manufacturers for various financing programs, OEM replacement parts, training, up-to-date product design, development of advertising materials and programs and other items necessary for the success of our dealerships.
Vehicle manufacturers may be adversely impacted by economic downturns or recessions, significant declines in the sales of their new vehicles, increases in interest rates, adverse fluctuations in currency exchange rates, declines in their credit ratings, reductions in access to capital or credit, labor strikes or similar disruptions (including within their major suppliers), supply shortages, rising raw material costs, rising employee benefit costs, adverse publicity that may reduce consumer demand for their products, including due to bankruptcy, product defects, litigation, ability to keep up with technology and business model changes, poor product mix or unappealing vehicle design, governmental laws and regulations, natural disasters or other adverse events. In particular, all of our OEMs are investing material amounts to develop electric and autonomous vehicles. These investments could cause financial strain on our OEMs or fail to deliver attractive vehicles for customers which could lead to adverse impacts on our business. The OEMs have been and could continue to be impacted by disruptions to the economy, lower than anticipated EV adoption, delays in increasing factory production, labor negotiations, parts shortages, including semiconductor chips, and other disruptions. These and other risks could materially adversely affect the financial condition of any manufacturer and impact its ability to profitably design, market, produce or distribute new vehicles, which in turn could have a material adverse effect on our business, results of operations and financial condition.
During the Current Year, the majority of our manufacturers’ production continued at reduced levels as a result of global semiconductor and other parts shortages. Despite recent improvements in production by certain manufacturers driving an improvement in vehicles days’ supply, our new vehicle inventory continues to be impacted compared to historical levels. Our new vehicle days’ supply of inventory was approximately 37 days as of December 31, 2023, as compared to 24 days and 12 days for the years ended December 31, 2022 and 2021, respectively. It is impossible to predict with certainty the duration of the production issues or when normalized production will resume at these manufacturers. If our manufacturers’ production remains at current reduced levels or in some cases continues to decline, diminishing our ability to meet the immediate needs of our customers, the production shortage could have a material adverse impact on our financial and operating results.
Additionally, many U.S. manufacturers of vehicles, parts and supplies are dependent on imported products and raw materials in their production. Any significant increase in existing tariffs on such goods and raw materials, or implementation of new tariffs, could adversely affect our profits on the vehicles we sell.
If we are unable to enter into new franchise agreements with manufacturers in connection with dealership acquisitions or maintain or renew our existing franchise agreements on favorable terms, our operations may be significantly impaired.
We are dependent on our relationships with manufacturers, which exercise a great degree of influence over our operations through the franchise agreements. Our franchise agreements may be terminated or not renewed by the manufacturer for a variety of reasons, including any unapproved changes of ownership or management, sales and customer satisfaction performance deficiencies and other material breaches of the franchise agreements. Manufacturers may also have a right of first refusal if we seek to sell dealerships. Additionally, we cannot guarantee that the terms of any renewals will be as favorable to us as our current agreements. Although we are generally protected by automotive dealership franchise laws requiring “good cause” be shown for such termination, if such an instance occurs, we cannot guarantee that the termination of the franchise will not be successful.
A manufacturer may also limit the number of its dealerships that we may own overall or in a particular geographic area. From time to time, we have not met all of the manufacturers’ requirements to make acquisitions and have received requests from manufacturers to dispose of certain of our dealerships. In the event one or more of our manufacturers sought to prohibit future acquisitions or imposed requirements to dispose of one or more of our dealerships, our acquisition and growth strategy could be adversely affected. Furthermore, if current manufacturers or future manufacturers are not required to conduct their business in accordance with state franchise laws and thereby circumvent the current dealer-network to sell directly to the customer, our results of operations may be materially and adversely affected.
Substantial competition in automotive sales, F&I and services could adversely impact our sales and our margins.
The automotive retail industry is highly competitive. Within our markets we are subject to competition from franchised automotive dealerships and other businesses as it relates to new and used vehicles, F&I, and parts and service. The internet has become a significant part of the advertising and sales process in our industry. Customers are using the internet to compare prices for new and used vehicles, automotive repair and maintenance services, finance and insurance products and other automotive products. If we are unable to effectively use the internet to attract customers to our own online channels, such as our AcceleRide® platform, and mobile applications, and, in turn, to our stores, our business, financial condition, results of operations and cash flows could be materially adversely affected. The use of social media by consumers increases the speed and extent that information and opinions can be shared, and negative posts or comments on social media about the Company or any of our dealerships could damage our reputation and brand names, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We also face competition in arranging financing for our customers’ vehicle purchases from a broad range of financial institutions. Additionally, we do not have any cost advantage in purchasing new vehicles from vehicle manufacturers, and our franchise agreements do not grant us the exclusive right to sell a manufacturer’s product within a given geographic area. Subject to state laws in the U.S. that are generally designed to protect dealers, a manufacturer may grant another dealer a franchise to start a new dealership near one of our locations, or an existing dealership may move its dealership to a location that would more directly compete against us. The location of new dealerships near our existing dealerships could have a material and adverse effect on our operations and reduce the profitability of our existing dealerships. Increased competition can adversely impact our sales volumes and margins as well as our ability to acquire dealerships.
Please see Item 1. Business - Competition for further discussion of competition in our industry.
Regulatory requirements to reduce emissions in response to climate change, as well as changes in consumer demand towards fuel-efficient vehicles, and shifts in product offerings by manufacturers to meet such demand, could adversely affect our new and used vehicle sales volumes, parts and service revenues and our results of operations.
Volatile fuel prices have affected and may continue to affect consumer preferences in connection with the purchase of our vehicles. Rising fuel prices result in consumers being less likely to purchase larger, more expensive vehicles, such as sports utility vehicles or luxury automobiles, and more likely to purchase smaller, less expensive and more fuel-efficient vehicles. Conversely, lower fuel prices could have the opposite effect. Sudden changes in customer preferences make maintenance of an optimal mix of large and small vehicle inventory a challenge. Further increases or sharp declines in fuel prices could have a material adverse effect on our business and results of operations.
Changes in fuel prices, changes in customer preferences, government support, improvements in EVs and more EV options have increased the customer demand for more fuel-efficient vehicles and EVs. Significant increases in fuel economy requirements, new federal or state restrictions on emissions of carbon dioxide or new federal or state incentive programs that have or may be imposed on vehicles and automobile fuels could adversely affect demand for certain vehicles, annual miles driven or the products we sell. For example, on April 12, 2023, the EPA proposed regulations establishing more stringent air emissions limits for light and medium-duty vehicles, which include passenger cars, vans, pickups, sedans and SUVs for model years 2027 through 2032. Representatives of the U.K. government have proposed a ban on the sale of gasoline engines in new cars and new vans that would take effect as early as 2035. These and similar proposals may have a significant impact on the future mix of vehicles provided by our manufacturers. Any future impact of these regulations on our operations cannot be predicted with certainty.
With a potential increase in demand by consumers for EVs, and government support for such actions, certain manufacturers have also announced plans to increase production of fuel-efficient vehicles and EVs. As more EVs potentially enter the market, and internal combustion or diesel engine vehicle production is reduced, it will be necessary to adapt to such changes by selling and servicing these units effectively in order to meet consumer demands and support the profitability of our dealerships. We may not be able to accurately predict, prepare for and respond to new kinds of technological innovations with respect to EV and other technologies that minimize emissions. If maintenance costs of EVs were to substantially decrease, this could have a material adverse effect on our parts and service revenues. If consumer demand increases for fuel efficient vehicles or EVs and our manufacturers are not able to adapt and produce vehicles that meet the customer demands or we are unable to align with the manufacturers of these vehicles, such events could adversely affect our new and used vehicle sales volumes, parts and service revenues and our results of operations.
Additionally, in October 2023, the Governor of California signed the Climate Corporate Data Accountability Act (“CCDAA”) and Climate-Related Financial Risk Act (“CRFRA”) into law. The CCDAA requires both public and private U.S. companies that are “doing business in California” and that have a total annual revenue of $1 billion to publicly disclose and verify, on an annual basis, Scope 1, 2 and 3 GHG emissions. The CRFRA requires the disclosure of a climate-related financial risk report (in line with the Task Force on the Climate-related Financial Disclosures (“TCFD”) recommendations or equivalent disclosure requirements under the International Sustainability Standards Board’s (“ISSB”) climate-relate disclosure standards) every other year for public and private companies that are “doing business in California” and have total annual revenue of $500 million. Reporting under both laws would begin in 2026. Currently, the ultimate impact of these laws on our business is uncertain-the Governor of California has directed further consideration of the implementation deadlines for each of the laws, and there is potential for legal challenges to be filed with respect to the scope of the law-but, absent clarification or revisions to the law, alongside the SEC proposed rule, finalization and implementation may result in additional costs to comply with these disclosure requirements as well as increased costs of and restrictions on access to capital for us or our customers. Separately, these and other enhanced climate related disclosure requirements could lead to reputational or other harm with customers, regulators, investors or other stakeholders and could also increase our litigation risks relating to alleged climate-related damages resulting from our operations, statements alleged to have been made by us or others in our industry regarding climate change risks, or in connection with any future disclosures we may make regarding reported emissions.
If we are unable to acquire and successfully integrate new dealerships into our business, the growth of our revenues and earnings could be adversely affected.
Growth in our revenues and earnings partially depends on our ability to acquire new dealerships and successfully integrate those dealerships into our existing operations. We cannot guarantee that we will be able to identify and acquire dealerships in the future. In addition, we cannot guarantee that any acquisitions will be successful or on terms and conditions consistent with past acquisitions. Restrictions imposed by our manufacturers, as well as covenants contained in our debt instruments, may directly or indirectly limit our ability to acquire additional dealerships. As competition for acquisitions increases that may result in fewer acquisition opportunities available to us and/or higher acquisition prices, and some of our competitors may have greater financial resources than us.
In addition, acquisitions involve a number of special risks, including, among other things:
•incurring significantly higher capital expenditures and operating expenses;
•failing to integrate the operations and personnel of the acquired dealerships;
•entering new markets with which we are not familiar;
•incurring undiscovered liabilities at acquired dealerships, generally, in the case of stock acquisitions;
•disrupting our ongoing business;
•failing to retain key personnel of the acquired dealerships;
•impairing relationships with employees, manufacturers and customers; and
•incorrectly valuing acquired entities.
The integration process for acquisitions requires us to expand the scope of our operations and financial and other systems. Our management devotes a substantial amount of time and attention to the process of integrating the operations of acquired dealerships into our business.
If any of these factors limits our ability to integrate acquired dealerships into our operations successfully or on a timely basis, our expectations regarding future results of operations, including certain run-rate revenue and expense synergies expected to result from acquisitions, might not be met. As a result, we may not be able to realize the expected benefits that we seek to achieve from the acquisitions. In addition, we may be required to spend additional time or money on integration that otherwise would be spent on the development and expansion of our business, including efforts to further expand our product portfolio.
Vehicle manufacturers may alter their distribution models.
On January 1, 2023, Mercedes Benz transitioned to an agency model for distribution of vehicles in the U.K. after collaborating with various automotive retailers and conducting pilot programs. In addition to the transition by Mercedes Benz in the U.K., certain of our other vehicle manufacturers serving the U.K. and U.S. markets recently announced plans to explore an agency model for selling new vehicles. These announcements include, among others, a transition to agency model in the U.K. for Mini and Jaguar Land Rover in 2025 and BMW in 2026. Under an agency model, our franchised dealerships receive a fee for facilitating the sale of a new vehicle to a customer but no longer record the vehicle sales price as revenue, record vehicles in inventory or incur floorplan interest expense, as has been historical practice. The agency model, as adopted by Mercedes Benz, resulted in reduced revenues, as we act as an agent of Mercedes Benz, receiving a commission for each sale and other expense fee support. We did not experience a material negative or positive impact to the U.K. region gross margin and consolidated results of operations as a result of the change to the Mercedes Benz agency model. Notwithstanding this fact, we cannot predict the actions of other manufacturers and whether the agency models proposed by them will have the same terms and conditions as those contracted by Mercedes Benz. The agency model, if adopted by other manufacturers, would reduce revenues. The other impacts to our U.K. and the U.S. regions and consolidated results of operations remain uncertain until such time as the other vehicle manufacturers provide additional details regarding their specific agency model plans. We are uncertain if agency models will be widely adopted in the U.K. or U.S.
Vehicle technology advancements and changes in consumer vehicle ownership preferences could adversely affect our new and used vehicle sales volumes, parts and service revenues and results of operations.
Vehicle technology advancements are occurring at an accelerating pace. These include driver assist functionality, autonomous vehicle development and rideshare and vehicle co-ownership business models. Many in the automotive industry believe that in the near future vehicles will be available to the automotive consumer at low usage costs, which may entice many vehicle owners, particularly in larger, highly populated areas, to abandon individual car ownership in favor of multiple co-ownership ride-sharing opportunities. Increased popularity in the ride-sharing subscription business model could adversely affect our new and used vehicle sales volumes, parts and service revenues and results of operations.
Operational Risks
A cybersecurity breach, including loss of confidential information or a breach of personally identifiable information (“PII”) about our customers or employees, could negatively affect operations and result in high costs.
In the ordinary course of business, we receive significant PII about our customers and our employees. A security incident to obtain such information could be caused by malicious insiders and third parties using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking, fraud, trickery, or other forms of deception. Although many companies across many industries are affected by malicious efforts to obtain access to PII, the automotive dealership industry has been a particular target of identity thieves. The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time. We have implemented security measures that are designed to detect and protect against cyberattacks.
Despite these measures and any additional measures we may implement or adopt in the future, our facilities and systems, and those of our third-party service providers, have been and are vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, scams, ransomware, burglary, human errors, acts of vandalism, misdirected wire transfers or other events. If an unauthorized party is successful in obtaining trade secrets, PII, confidential, or otherwise protected information of our dealerships or our customers or in disrupting our operations through a cyberattack, the attack could result in loss of revenue, increase costs of doing business, negatively affect customer satisfaction and loyalty, and expose us to negative publicity. In addition, security breaches and other security incidents could expose us to a risk of loss or exposure of this information, which could result in potential liability, investigations, regulatory fines, penalties for violation of applicable laws or regulations, costs related to remediation or the payment of ransom, and litigation including individual claims or consumer class actions, administrative, and civil or criminal investigations or actions, any of which could have a material adverse effect on our business, results of operations or financial condition.
Further, advances in computer capabilities, new discoveries in the field of cryptography, inadequate facility security or other developments may result in a compromise or breach of the technology we use to safeguard confidential, personal, or otherwise protected information. As the breadth and complexity of the technologies we use continue to grow, including as a result of the use of mobile devices, cloud services, open-source software, social media and the increased reliance on devices connected to the internet, the potential risk of security breaches and cybersecurity attacks also increases. Despite ongoing efforts to improve our ability to protect data from compromise, we may not be able to protect all of our data across our diverse systems and third-party vendors. Our efforts to improve security and protect data result in increased capital and operating costs.
In addition, we are subject to numerous laws and regulations designed to protect the information of clients, customers, employees and other third parties that we collect and maintain. See Item 1. Business - Governmental Regulations for information on our risks related to compliance with such laws and regulations.
Our insurance does not fully cover all of our operational risks, and changes in the cost of insurance or the availability of insurance could materially increase our insurance costs or result in a decrease in our insurance coverage.
The operation of automobile dealerships is subject to a broad variety of risks. While we have insurance on our real property, comprehensive coverage for our vehicle inventory, general liability insurance, workers’ compensation insurance, employee dishonesty coverage, cybersecurity breach insurance, employment practices liability insurance, pollution coverage and errors and omissions insurance in connection with vehicle sales and financing activities, we are self-insured for a portion of our potential liabilities. We purchase insurance policies for worker’s compensation, liability, auto physical damage, property, pollution, employee medical benefits and other risks consisting of large deductibles and/or self-insured retentions.
In certain instances, our insurance may not fully cover an insured loss depending on the magnitude and nature of the claim. Additionally, changes in the cost of insurance or the availability of insurance in the future could substantially increase our costs to maintain our current level of coverage or could cause us to reduce our insurance coverage and increase the portion of our risks that we self-insure.
The insurance companies that underwrite our insurance require that we secure certain of our obligations for self-insured exposures with collateral. Our collateral requirements are set by the insurance companies and, to date, have been satisfied by posting surety bonds, letters of credit and/or cash deposits. Our collateral requirements may change from time to time based on, among other things, our total insured exposure and the related self-insured retention assumed under the policies. We are subject to potential premium cost fluctuations with the annual renewal of these programs.
Natural disasters and adverse weather events can disrupt our business and may adversely impact our results of operations, financial condition and cash flows.
Some of our dealerships are concentrated in states and regions in the U.S. and U.K., in which actual or threatened natural disasters and severe weather events (such as hurricanes, earthquakes, snowstorms, flooding, tornados, and hailstorms) have in the past, and may in the future, disrupt our dealership operations. A disruption in our operations can adversely impact our business, results of operations, financial condition and cash flows. In addition to business interruption, the automotive retailing business is subject to substantial risk of property loss due to the significant concentration of property value at dealership locations. Natural disasters and severe weather events have in the past, and may in the future, impair the value of our dealership property and other assets. Although we have, subject to certain limitations and exclusions, substantial insurance, including business interruption insurance, we may be exposed to uninsured losses that could have a material adverse effect on our business, results of operations and financial condition. Additionally, should we suffer significant losses in a short period of time, we run the risk that our premiums and/or deductibles could increase, which could adversely affect our business.
Risks associated with our international operations could have a material adverse effect on our business, results of operations and financial condition.
We have operations in the U.K. and as a result, we face political and economic risks and uncertainties with respect to our international operations. These risks may include, but are not limited to:
•legal uncertainties, timing delays and expenses associated with tariffs, labor matters, import or export licenses and other trade barriers;
•transparency issues in general and, more specifically, the U.S. Foreign Corrupt Practices Act of 1974, as amended, the U.K. Bribery Act and other anti-corruption compliance laws and issues;
•inability to obtain or preserve franchise rights in the foreign countries in which we operate; and
•fluctuations in foreign currency translations within our financial statements driven by exchange rate volatility.
Legal, Regulatory and Compliance Risks
Changes to laws and regulations could adversely impact our operations and financial condition.
New laws and regulations at the state and federal level may be enacted which could materially adversely impact our business. For example, in December 2023, the FTC adopted new regulations for automotive dealers that would prohibit a wide range of current industry-accepted sales practices with regard to sales and advertising of our vehicles and products, require an extensive series of both oral and written disclosures to be made at the initial contact in regard to the sale price of vehicles, financial terms and voluntary protection products, mandate the posting of certain pricing and other information on dealer websites, and impose burdensome recordkeeping requirements (the “CARS Rule”). While litigation has stayed the implementation of the CARS Rule, if implemented our failure to adhere to these new policies could subject the Company to significant monetary and other penalties or require us to make adjustments to our products and services, any or all of which could result in lost revenues, increased expenses and substantial adverse publicity. These changes, if adopted as proposed, may lead to additional transaction times for the sale of vehicles, complicate the transaction process, decrease customer satisfaction, and impose recordkeeping burdens on our employees, among other effects. If these regulations were to be enacted, it could have an adverse effect on our business and profitability. Future legislation and regulations and changes in existing legislation and regulations, or interpretations thereof, could cause additional expenditures, tax liabilities, restrictions and delays in connection with our current business as well as future projects, the extent of which cannot be predicted.
We are subject to automotive and other laws and regulations, which, if we are found to have violated, may adversely affect our business and results of operations.
A number of laws and regulations applicable to automotive companies affect our business and conduct, including, but not limited to, our sales, operations, financing, insurance, advertising and employment practices. Other rules such as franchise laws and regulations, consumer protection laws and other extensive laws and regulations apply to new and used motor vehicle dealers. Additionally, in every jurisdiction in which we operate, we must obtain various permits and licenses in order to conduct our business. From time to time, various regulatory agencies conduct reviews of business practices that impact our industry, like the Financial Conduct Authority’s ongoing industry investigation into customer complaints related to financing transactions, which was extended on January 11, 2024. Any failure to comply with these laws and regulations may result in the assessment of administrative, civil or criminal penalties, the imposition of investigatory remedial obligations or the issuance of injunctions limiting or prohibiting our operations.
Refer to Item 1. Business - Governmental Regulations for further discussion of automotive and other laws and regulations impacting our business.
Operational risks associated with environmental laws and regulations may expose us to significant costs and liabilities.
Our business activities in the U.S. and U.K. are subject to stringent federal, regional, state and local laws, regulations and other controls governing specific health and safety criteria to address worker protection, the release of materials into the environment or otherwise relating to environmental protection. These laws, regulations and controls may impose numerous obligations upon our operations including the acquisition of permits to conduct regulated activities, the imposition of restrictions on where or how to manage or dispose of used products and wastes, the occurrence of capital expenditures to limit or prevent releases of such material and the imposition of substantial liabilities for pollution resulting from our operations or attributable to former operations. Our compliance with these regulations may expose us to significant costs and liabilities.
With a potential increase in demand by consumers for EVs, and government support for such actions, we will incur costs and liabilities to sell and service EVs, including, but not limited to, personal protective equipment for employees, capital expenditures for specialized tools and equipment, service shop space and battery storage costs.
Additionally, vehicle manufacturers in the U.S. and U.K. are subject to varying guidelines, laws and regulations adopted by their applicable governmental and administrative agencies, which include GHG emissions and CAFE standards in the U.S. Such standards may affect our manufacturers’ ability to produce cost effective vehicles, which may have a material adverse effect on our sales.
Refer to Item 1. Business - Governmental Regulations for further discussion of environmental and regulations impacting our business.
Risks Related to Accounting Matters
The impairment of our goodwill and/or indefinite-lived intangibles could have a material adverse effect on our results of operations.
We assess goodwill and other indefinite-lived intangibles for impairment on an annual basis, or more frequently when events or circumstances indicate that an impairment may have occurred. Performance issues at individual dealerships, as well as adverse retail automotive industry and economic trends, increase the risk of an impairment charge, which could have a material adverse impact on our results of operations. No goodwill impairments were recorded during the years ended December 31, 2023, 2022 and 2021. During the years ended December 31, 2023 and 2022, we recognized $25.1 million and $1.3 million, respectively, of intangible franchise rights impairment. We did not recognize any intangible franchise rights impairment during the year ended December 31, 2021. We may be required to record impairment charges if market and industry conditions deteriorate to such a level whereby the fair value of our reporting units, individually, is less than the carrying value of the corresponding reporting unit. We are subject to several market and industry risks as outlined elsewhere herein this Item 1A. Risk Factors, which could have a material adverse impact on our cash flows. We cannot accurately predict the amount and timing of any additional impairment charge at this time; however, any such impairment charge could have an adverse effect on our results of operations. Refer to Note 12. Intangible Franchise Rights and Goodwill within our Notes to Consolidated Financial Statements for further discussion of impairment.
New accounting guidance or changes in the interpretation or application of existing accounting guidance could adversely affect our financial performance.
The implementation of new SEC rules and regulations and accounting standards could require certain systems, internal processes and controls and other changes that could increase our operating costs, and result in changes to our financial statements.
U.S. GAAP and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business involve many subjective assumptions, estimates and judgments by our management. Changes in these rules or their interpretation or in underlying management assumptions, estimates or judgments could significantly change our reported or expected financial performance. The outcome of such changes could include litigation or regulatory actions which could adversely affect our financial condition and results of operations.
Our internal controls and procedures may fail or be circumvented.
Management has designed and implemented, and periodically reviews and updates, our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. While we have not experienced a material failure of our internal controls, any system of controls, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Any failure or circumvention of our controls and procedures, or failure to comply with regulations related to controls and procedures, could have a material adverse effect on our business, results of operations and financial condition.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
Item 2. Properties
We lease our corporate headquarters, located at 800 Gessner, Suite 500, Houston, Texas. We own our regional headquarters in the U.K. As of December 31, 2023, we had 199 dealerships as shown below by region and by whether the associated real estate is leased or owned:
Dealerships
Region Owned Leased
United States 108 36
United Kingdom 26 29
Total 134 65

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
For discussion of our legal proceedings, refer to Note 17. Commitments and Contingencies within our Notes to Consolidated Financial Statements.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not Applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is listed on the NYSE under the symbol “GPI.” There were 34 holders of record of our common stock as of February 5, 2024. A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.
Issuer Purchases of Equity Securities
The following table sets forth information with respect to shares of common stock repurchased by us during the three months ended December 31, 2023:
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (1)
October 1, 2023 - October 31, 2023 87,043 $ 249.12 87,043 $ 163.9
November 1, 2023 - November 30, 2023 57,262 $ 276.35 57,262 $ 148.0
December 1, 2023 - December 31, 2023 16,663 $ 282.42 16,663 $ 143.3
Total 160,968 160,968
(1) Our Board of Directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary limit. On August 2, 2023, our Board of Directors increased the Company’s share repurchase authorization to $250.0 million. Our share repurchase authorization does not have an expiration date.
Future share repurchases are subject to the business judgment of our Board of Directors, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements, covenant compliance, changes in laws and regulations, current economic environment and other factors considered relevant. As of December 31, 2023, we had $143.3 million available under our current stock repurchase authorization. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations within this Form 10-K for additional information on share repurchases and authorization.
Performance Graph
The following graph and table compares the performance of our common stock to the S&P 500 Index and to an industry peer group for our last five fiscal years. The members of the peer group are Asbury Automotive Group, Inc., AutoNation, Inc., Lithia Motors, Inc., Penske Automotive Group, Inc. and Sonic Automotive, Inc. The information contained in the table below was provided by Zack’s Investment Research, Inc.
The returns of each member of the peer group are weighted according to each member’s stock market capitalization. The graph assumes that the value of the investment in our common stock, the S&P 500 Index and the peer group was $100 on the last trading day of December 2018, and that all dividends were reinvested.
Base Period Indexed Returns for the Years Ended
Company /Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023
Group 1 Automotive, Inc. $ 100.00 $ 192.39 $ 253.80 $ 380.78 $ 354.66 $ 603.54
S&P 500 Index - Total Return $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21
Peer Group $ 100.00 $ 153.07 $ 224.48 $ 314.05 $ 290.01 $ 411.17

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ITEM 6. SELECTED FINANCIAL DATA

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with Part I, including the matters set forth in Item 1A. Risk Factors, and our Consolidated Financial Statements and notes thereto included elsewhere in this Form 10-K. Refer to Item 1. Business - General for an overview of our operations. Additionally, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the fiscal year 2022 compared to fiscal year 2021.
Overview
Our operating results reflect the combined performance of each of our interrelated business activities. Historically, various facets of our business have been directly or indirectly impacted by a variety of supply/demand factors, including vehicle inventories, consumer confidence, consumer transportation preferences, discretionary spending levels, availability and affordability of consumer credit, new vehicle introductions and innovations, manufacturer incentives, the COVID-19 pandemic, weather patterns, fuel prices, inflation and interest rates. For example, during periods of sustained economic downturn or significant supply/demand imbalances, new vehicle sales may be negatively impacted as consumers tend to shift their purchases to used vehicles. Some consumers may delay their purchasing decisions altogether, electing instead to continue to maintain and repair their existing vehicles. In such cases, however, we believe the new vehicle sales impact on our overall business is mitigated by our ability to offer other products and services, such as used vehicles and parts, as well as maintenance, repair and collision services. In addition, our ability to expediently adjust our cost structure in response to changes in new vehicle sales volumes also tempers any negative impact of such sales volume changes.
Recent Events
On October 7, 2023, Hamas, an internationally designated terrorist organization and ruling party of the Gaza strip in Palestine, launched an attack on Israel. On October 8, 2023, Israel declared war on Hamas with the armed conflict ongoing as of the date of this filing. In tandem with such conflict, the Houthi movement, which controls parts of Yemen, has targeted and launched numerous attacks on Israeli, American and international commercial marine vessels in the Red Sea as the ships approach the Suez Canal, resulting in many shipping companies re-routing to avoid the region altogether and worsening existing supply chain issues, including delays in supplier deliveries, extended lead times and increased cost of freight and materials, including certain parts required for EU vehicle production. It is not known at this time what impact, if any, this war and regional instability will have on the global economy, our operations or the operations of our suppliers.
On September 15, 2023, the United Auto Workers (“UAW”) announced a labor strike at certain facilities of Ford Motor Company, General Motors Company and Stellantis N.V. (collectively the “Big 3” domestic automakers). The strike ended at different dates for each of the Big 3 however all ended prior to December 31, 2023. The strike was limited in its scope and we did not experience a significant impact on our domestic vehicle and parts inventory.
Our manufacturers’ production continued at historically reduced levels in the Current Year, despite recent production improvements over that same period for some of those manufacturers. Prior to the UAW labor strike, production and related inventory constraints were primarily a result of sustained global semiconductor and other parts shortages, as well as armed conflicts impacting the global supply chain, including the ongoing conflict in Ukraine. Increased deliveries from all manufacturers in the Current Year drove a higher volume of new units sold and lack of new vehicle availability in prior years also helped maintain elevated new vehicle retail sales prices and margins relative to pre-COVID-19 pandemic levels. EV inventory has been building over the Current Year for certain brands, outpacing the buildup of non-EV inventory, as EV sales volume has lagged OEM deliveries in recent quarters. While EV sales continued to increase in 2023, the growth trend has not continued at the pace experienced in the two years prior. Challenges with EV technologies continue to make headlines within the U.S. media market, raising concerns around consumer demand and interest in the products. Our new vehicle days’ supply of inventory was approximately 37 days at December 31, 2023, as compared to 24 and 12, at December 31, 2022 and 2021, respectively. In the Current Year, we noted increases of new vehicle days’ supply of inventory for most manufacturers. As new vehicle days’ supply of inventory normalizes, we expect further pressure on sales prices and margins.
On April 12, 2023, the EPA proposed regulations establishing more stringent air emissions limits for light and medium-duty vehicles, which include passenger cars, vans, pickups, sedans and SUVs for model years 2027 through 2032. The EPA proposes higher emissions stringency each year, beginning with model year 2027. These proposed standards include new battery durability requirements and changes to certain existing air emissions credit programs. These regulations could increase or accelerate the adoption of certain emissions reducing technologies, and further market penetration for hybrid, plug-in and battery-EVs. For example, should the proposed regulations be enacted, the EPA projects that at least 60% of new light-duty passenger vehicles sold in the U.S. would be battery-electric by 2030. The EPA also estimates that the regulations, if finalized, would increase costs for auto manufacturers and reduce consumer repair costs for covered vehicles. The EPA projects the regulations to become final in 2024. The regulations, as proposed in their current form, may have a significant impact on the future mix of vehicles provided by our manufacturers. Although the future impact of these regulations on our operations cannot be predicted with certainty, we will continue to monitor and evaluate any proposed or issued regulations.
The global economy continues to experience inflation. In response to higher than historical average inflationary pressures and challenging macroeconomic conditions, the U.S. Federal Reserve, along with other central banks, including in the U.K., increased interest rates throughout 2022 and maintained rates at elevated levels throughout 2023. As a consequence, the cost of financing vehicles for our consumers has increased and created affordability challenges in addition to higher vehicle prices over the past three years. Continued inflation reducing the disposable income of our customers, volatility in new vehicle availability and higher interest rates increasing the monthly cost of financing vehicles, contributed to used vehicle prices declining in the latter part of 2022 and during the Current Year.
Recent Accounting Pronouncements
Refer to Note 1. Basis of Presentation, Consolidation and Summary of Accounting Policies within our Notes to Consolidated Financial Statements.
Critical Accounting Policies and Accounting Estimates
The preparation of our 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. Below are the accounting policies and estimates that have been determined to be critical to our business operations and the understanding of our results of operations.
Goodwill and Intangible Franchise Rights
We are organized into two geographic regions, the U.S. region and the U.K. region; each region represents a reporting unit for the purpose of assessing goodwill for impairment. In addition to goodwill, we have identifiable intangibles in the form of rights under our franchise agreements with manufacturers, which are recorded at an individual dealership level.
We evaluate goodwill and intangible franchise rights for impairment annually as of October 31, or more frequently if events or circumstances indicate possible impairment has occurred. We have the option of performing a qualitative assessment of impairment to determine whether any further quantitative assessment for impairment is necessary. The option of whether or not to perform a qualitative assessment is made annually and may vary by reporting unit. If we elect to bypass the qualitative assessment or if we determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, a quantitative test would be required.
In 2023, we elected to perform a quantitative test. Based on the quantitative goodwill test performed for the U.S. and U.K. reporting units in the fourth quarter of 2023, no impairments of goodwill were recorded during the Current Year. No goodwill impairments were recorded on any reporting units during the year ended December 31, 2022 (the “Prior Year”). The quantitative goodwill impairment test is dependent on management estimates and assumptions used to determine the fair value of our reporting units. Refer to Note 12. Intangible Franchise Rights and Goodwill within our Notes to Consolidated Financial Statements for further discussion of goodwill, including management’s use of estimates and assumptions.
During the Current Year, $25.1 million of impairment was recorded for intangible franchise rights. In the Prior Year, impairment charges of $1.3 million were recorded for intangible franchise rights. As our intangible franchise rights are tested for impairment at the dealership level, any impairments are specific to the performance and outlook of the respective dealership.
Refer to Note 12. Intangible Franchise Rights and Goodwill within our Notes to Consolidated Financial Statements for further discussion of our intangibles, including fair value assumptions.
Results of Operations
The “same store” amounts presented below include the results of dealerships and corporate headquarters for the identical months in each comparative period, commencing with the first full month in which we owned the dealership. Amounts related to divestitures are excluded from each comparative period, ending with the last full month in which we owned the dealership. Same store results provide a measurement of our ability to grow revenues and profitability of our existing stores and also provide a metric for peer group comparisons. For these reasons, same store results allow management to manage and monitor the performance of the business and is also useful to investors.
We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our underlying business and results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our current period reported results for entities reporting in currencies other than USD using comparative period exchange rates rather than the actual exchange rates in effect during the respective periods. The constant currency performance measures should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with U.S. GAAP. Additionally, we caution investors not to place undue reliance on non-GAAP measures, but also to consider them with the most directly comparable U.S. GAAP measures. Our management also uses constant currency and adjusted cash flows from operating, investing and financing activities in conjunction with U.S. GAAP financial measures to assess our business, including communication with our Board of Directors, investors and industry analysts concerning financial performance. We disclose these non-GAAP measures and the related reconciliations because we believe investors use these metrics in evaluating longer-term period-over-period performance. These metrics also allow investors to better understand and evaluate the information used by management to assess operating performance.
Certain amounts in the financial statements may not compute due to rounding. All computations have been calculated using unrounded amounts for all periods presented.
Retail new vehicle units sold for 2023 include new vehicle agency units sold under agency arrangements with certain manufacturers in the U.K. The agency units and related revenues are excluded from the calculation of the average sales price per unit sold for new vehicles due to their net presentation within revenues as only the sales commission is reported in revenues for dealerships operating under an agency arrangement. The agency units and related net revenues are included in the calculation of gross profit per unit sold.
The following tables summarize our operating results on a reported basis and on a same store basis for the Current Year, as compared to the Prior Year.
Reported Operating Data - Consolidated
(In millions, except unit data)
For the Years Ended December 31,
2023 2022 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change
Revenues:
New vehicle retail sales $ 8,774.6 $ 7,452.5 $ 1,322.0 17.7 % $ 13.9 17.6 %
Used vehicle retail sales 5,693.5 5,673.3 20.2 0.4 % 3.7 0.3 %
Used vehicle wholesale sales 441.4 364.6 76.9 21.1 % 0.1 21.1 %
Total used 6,135.0 6,037.9 97.1 1.6 % 3.8 1.5 %
Parts and service sales 2,222.3 2,009.5 212.7 10.6 % 2.5 10.5 %
F&I, net 741.9 722.2 19.7 2.7 % 0.4 2.7 %
Total revenues $ 17,873.7 $ 16,222.1 $ 1,651.6 10.2 % $ 20.4 10.1 %
Gross profit:
New vehicle retail sales $ 767.0 $ 825.6 $ (58.6) (7.1) % $ 1.5 (7.3) %
Used vehicle retail sales 300.9 313.8 (12.8) (4.1) % 0.1 (4.1) %
Used vehicle wholesale sales (3.8) - (3.8) NM - NM
Total used 297.2 313.8 (16.6) (5.3) % - (5.3) %
Parts and service sales 1,214.2 1,103.7 110.5 10.0 % 1.3 9.9 %
F&I, net 741.9 722.2 19.7 2.7 % 0.4 2.7 %
Total gross profit $ 3,020.3 $ 2,965.2 $ 55.1 1.9 % $ 3.1 1.8 %
Gross margin:
New vehicle retail sales 8.7 % 11.1 % (2.3) %
Used vehicle retail sales 5.3 % 5.5 % (0.2) %
Used vehicle wholesale sales (0.9) % - % (0.9) %
Total used 4.8 % 5.2 % (0.4) %
Parts and service sales 54.6 % 54.9 % (0.3) %
Total gross margin 16.9 % 18.3 % (1.4) %
Units sold:
Retail new vehicles sold 175,566 154,714 20,852 13.5 %
Retail used vehicles sold 187,656 184,700 2,956 1.6 %
Wholesale used vehicles sold 43,763 37,072 6,691 18.0 %
Total used 231,419 221,772 9,647 4.3 %
Average sales price per unit sold:
New vehicle retail $ 50,325 $ 48,170 $ 2,156 4.5 % $ 426 3.6 %
Used vehicle retail $ 30,340 $ 30,716 $ (376) (1.2) % $ 20 (1.3) %
Gross profit per unit sold:
New vehicle retail sales $ 4,369 $ 5,336 $ (967) (18.1) % $ 9 (18.3) %
Used vehicle retail sales $ 1,604 $ 1,699 $ (95) (5.6) % $ - (5.6) %
Used vehicle wholesale sales $ (86) $ - $ (86) NM $ (1) NM
Total used $ 1,284 $ 1,415 $ (131) (9.2) % $ - (9.2) %
F&I PRU $ 2,043 $ 2,128 $ (85) (4.0) % $ 1 (4.1) %
Other:
SG&A expenses $ 1,926.8 $ 1,783.3 $ 143.4 8.0 % $ 2.7 7.9 %
SG&A as % gross profit 63.8 % 60.1 % 3.7 %
Floorplan expense:
Floorplan interest expense $ 64.1 $ 27.3 $ 36.8 134.9 % $ 0.1 134.5 %
Less: floorplan assistance (1)
71.2 56.0 15.2 27.2 % - 27.2 %
Net floorplan expense $ (7.1) $ (28.7) $ 21.6 $ 0.1
(1) Floorplan assistance is included within Gross profit - New vehicle retail sales above and Cost of sales - New vehicle retail sales in our Consolidated Statements of Operations.
NM - not meaningful
Same Store Operating Data - Consolidated
(In millions, except unit data)
For the Years Ended December 31,
2023 2022 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change
Revenues:
New vehicle retail sales $ 8,191.2 $ 7,277.5 $ 913.7 12.6 % $ 13.7 12.4 %
Used vehicle retail sales 5,378.4 5,553.7 (175.3) (3.2) % 3.7 (3.2) %
Used vehicle wholesale sales 411.9 355.5 56.5 15.9 % 0.1 15.9 %
Total used 5,790.3 5,909.1 (118.8) (2.0) % 3.8 (2.1) %
Parts and service sales 2,128.9 1,952.6 176.3 9.0 % 2.4 8.9 %
F&I, net 700.4 705.4 (5.1) (0.7) % 0.4 (0.8) %
Total revenues $ 16,810.8 $ 15,844.6 $ 966.2 6.1 % $ 20.1 6.0 %
Gross profit:
New vehicle retail sales $ 714.3 $ 806.1 $ (91.7) (11.4) % $ 1.5 (11.6) %
Used vehicle retail sales 285.4 307.6 (22.2) (7.2) % 0.1 (7.2) %
Used vehicle wholesale sales (3.7) 0.2 (4.0) NM - NM
Total used 281.7 307.8 (26.2) (8.5) % - (8.5) %
Parts and service sales 1,159.8 1,072.4 87.4 8.1 % 1.2 8.0 %
F&I, net 700.4 705.4 (5.1) (0.7) % 0.4 (0.8) %
Total gross profit $ 2,856.2 $ 2,891.7 $ (35.5) (1.2) % $ 3.0 (1.3) %
Gross margin:
New vehicle retail sales 8.7 % 11.1 % (2.4) %
Used vehicle retail sales 5.3 % 5.5 % (0.2) %
Used vehicle wholesale sales (0.9) % 0.1 % (1.0) %
Total used 4.9 % 5.2 % (0.3) %
Parts and service sales 54.5 % 54.9 % (0.4) %
Total gross margin 17.0 % 18.3 % (1.3) %
Units sold:
Retail new vehicles sold 165,659 150,652 15,007 10.0 %
Retail used vehicles sold 178,782 180,164 (1,382) (0.8) %
Wholesale used vehicles sold 41,458 35,934 5,524 15.4 %
Total used 220,240 216,098 4,142 1.9 %
Average sales price per unit sold:
New vehicle retail $ 49,810 $ 48,307 $ 1,503 3.1 % $ 446 2.2 %
Used vehicle retail $ 30,083 $ 30,826 $ (742) (2.4) % $ 21 (2.5) %
Gross profit per unit sold:
New vehicle retail sales $ 4,312 $ 5,350 $ (1,038) (19.4) % $ 9 (19.6) %
Used vehicle retail sales $ 1,596 $ 1,707 $ (111) (6.5) % $ - (6.5) %
Used vehicle wholesale sales $ (89) $ 7 $ (96) NM $ (1) NM
Total used $ 1,279 $ 1,424 $ (146) (10.2) % $ - (10.2) %
F&I PRU $ 2,033 $ 2,132 $ (99) (4.6) % $ 1 (4.7) %
Other:
SG&A expenses $ 1,845.4 $ 1,771.1 $ 74.3 4.2 % $ 2.5 4.1 %
SG&A as % gross profit 64.6 % 61.2 % 3.4 %
NM - not meaningful
Reported Operating Data - U.S.
(In millions, except unit data)
For the Years Ended December 31,
2023 2022 Increase/(Decrease) % Change
Revenues:
New vehicle retail sales $ 7,433.6 $ 6,238.5 $ 1,195.0 19.2 %
Used vehicle retail sales 4,458.7 4,531.5 (72.8) (1.6) %
Used vehicle wholesale sales 314.4 238.8 75.6 31.7 %
Total used 4,773.1 4,770.2 2.8 0.1 %
Parts and service sales 1,933.3 1,761.4 171.9 9.8 %
F&I, net 674.3 656.9 17.3 2.6 %
Total revenues $ 14,814.2 $ 13,427.1 $ 1,387.1 10.3 %
Gross profit:
New vehicle retail sales $ 646.1 $ 713.5 $ (67.4) (9.4) %
Used vehicle retail sales 240.8 250.3 (9.5) (3.8) %
Used vehicle wholesale sales 2.6 2.6 - (1.9) %
Total used 243.3 252.9 (9.6) (3.8) %
Parts and service sales 1,046.4 959.0 87.5 9.1 %
F&I, net 674.3 656.9 17.3 2.6 %
Total gross profit $ 2,610.1 $ 2,582.3 $ 27.8 1.1 %
Gross margin:
New vehicle retail sales 8.7 % 11.4 % (2.7) %
Used vehicle retail sales 5.4 % 5.5 % (0.1) %
Used vehicle wholesale sales 0.8 % 1.1 % (0.3) %
Total used 5.1 % 5.3 % (0.2) %
Parts and service sales 54.1 % 54.4 % (0.3) %
Total gross margin 17.6 % 19.2 % (1.6) %
Units sold:
Retail new vehicles sold 142,809 124,934 17,875 14.3 %
Retail used vehicles sold 145,617 145,632 (15) - %
Wholesale used vehicles sold 31,456 25,076 6,380 25.4 %
Total used 177,073 170,708 6,365 3.7 %
Average sales price per unit sold:
New vehicle retail $ 52,052 $ 49,934 $ 2,118 4.2 %
Used vehicle retail $ 30,619 $ 31,116 $ (497) (1.6) %
Gross profit per unit sold:
New vehicle retail sales $ 4,524 $ 5,711 $ (1,187) (20.8) %
Used vehicle retail sales $ 1,653 $ 1,719 $ (65) (3.8) %
Used vehicle wholesale sales $ 81 $ 104 $ (23) (21.8) %
Total used $ 1,374 $ 1,481 $ (107) (7.3) %
F&I PRU $ 2,338 $ 2,428 $ (90) (3.7) %
Other:
SG&A expenses $ 1,622.9 $ 1,516.9 $ 106.0 7.0 %
SG&A as % gross profit 62.2 % 58.7 % 3.4 %
Same Store Operating Data - U.S.
(In millions, except unit data)
For the Years Ended December 31,
2023 2022 Increase/(Decrease) % Change
Revenues:
New vehicle retail sales $ 6,869.4 $ 6,065.6 $ 803.8 13.3 %
Used vehicle retail sales 4,167.2 4,416.8 (249.5) (5.6) %
Used vehicle wholesale sales 287.0 230.1 56.8 24.7 %
Total used 4,454.2 4,646.9 (192.7) (4.1) %
Parts and service sales 1,858.5 1,715.4 143.1 8.3 %
F&I, net 633.8 640.5 (6.7) (1.0) %
Total revenues $ 13,815.9 $ 13,068.4 $ 747.5 5.7 %
Gross profit:
New vehicle retail sales $ 595.5 $ 694.2 $ (98.7) (14.2) %
Used vehicle retail sales 227.0 244.5 (17.5) (7.1) %
Used vehicle wholesale sales 2.7 2.8 (0.2) (5.6) %
Total used 229.7 247.3 (17.6) (7.1) %
Parts and service sales 1,000.4 932.9 67.5 7.2 %
F&I, net 633.8 640.5 (6.7) (1.0) %
Total gross profit $ 2,459.4 $ 2,514.9 $ (55.5) (2.2) %
Gross margin:
New vehicle retail sales 8.7 % 11.4 % (2.8) %
Used vehicle retail sales 5.4 % 5.5 % (0.1) %
Used vehicle wholesale sales 0.9 % 1.2 % (0.3) %
Total used 5.2 % 5.3 % (0.2) %
Parts and service sales 53.8 % 54.4 % (0.6) %
Total gross margin 17.8 % 19.2 % (1.4) %
Units sold:
Retail new vehicles sold 133,330 120,958 12,372 10.2 %
Retail used vehicles sold 137,605 141,355 (3,750) (2.7) %
Wholesale used vehicles sold 29,312 24,023 5,289 22.0 %
Total used 166,917 165,378 1,539 0.9 %
Average sales price per unit sold:
New vehicle retail $ 51,522 $ 50,146 $ 1,375 2.7 %
Used vehicle retail $ 30,284 $ 31,246 $ (962) (3.1) %
Gross profit per unit sold:
New vehicle retail sales $ 4,466 $ 5,739 $ (1,273) (22.2) %
Used vehicle retail sales $ 1,650 $ 1,729 $ (80) (4.6) %
Used vehicle wholesale sales $ 91 $ 118 $ (27) (22.6) %
Total used $ 1,376 $ 1,495 $ (119) (8.0) %
F&I PRU $ 2,339 $ 2,442 $ (102) (4.2) %
Other:
SG&A expenses $ 1,548.8 $ 1,507.6 $ 41.2 2.7 %
SG&A as % gross profit 63.0 % 59.9 % 3.0 %
U.S. Region - Year Ended December 31, 2023 compared to 2022
The following discussion of our U.S. operating results is on an as reported and same store basis. The difference between as reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings.
Revenues
Total revenues in the U.S. during the Current Year increased $1,387.1 million, or 10.3%, as compared to the Prior Year, driven by higher same store revenues and the acquisition of stores.
Total same store revenues in the U.S. during the Current Year increased $747.5 million, or 5.7%, as compared to the Prior Year. This increase was driven by higher revenues from new vehicle retail, parts and service and used vehicle wholesale, partially offset by lower used vehicle retail and F&I, net.
New and used vehicle retail revenues benefited from the sale of approximately 45,000 units from our online digital platform, AcceleRide®, during the Current Year, a 47.7% increase as compared to the Prior Year.
New vehicle retail same store revenues outperformed the Prior Year, driven by strong new vehicle retail pricing coupled with more units sold. The shortage of new vehicle inventory, compared to pre-COVID-19 pandemic levels, despite recent manufacturers’ production improvements, drove strong pricing. While new vehicle inventory levels remain depressed compared to pre-COVID-19 pandemic levels, manufacturer vehicle deliveries were higher in the Current Year and as a result, our inventory levels were higher than the Prior Year, providing for the increase in units sold. We ended the Current Year with a U.S. new vehicle inventory supply of 36 days, 15 days higher than the Prior Year, but below pre-COVID-19 pandemic levels.
Used vehicle retail same store revenues underperformed the Prior Year, driven by lower pricing, coupled with fewer units sold, due to the ongoing new vehicle supply shortage impacting the supply of used vehicles, as well as impacts from inflation reducing the disposable income of our customers and higher interest rates increasing the monthly cost of financing vehicles. Used vehicle wholesale same store revenues increased primarily due to more wholesale units sold coupled with higher wholesale pricing.
Parts and service same store revenues outperformed the Prior Year, driven by increases across all parts and service business lines, reflecting increased business activity and increased same store technician headcount through our technician recruiting and retention efforts, providing greater capacity to meet increased demand. In addition to technician recruitment efforts, we have invested in improving the operations of our U.S. customer contact center, online scheduling, one-to-one marketing initiatives and by using artificial intelligence. Customer pay saw the largest increase of the parts and service business lines.
F&I, net same store revenues underperformed the Prior Year, primarily driven by lower used vehicle finance penetration as a result of customers seeking alternative providers of financing in this higher interest rate environment and tighter lending requirements requiring larger down payments. In addition, used VSC penetration has also declined as a result of vehicle affordability challenges for consumers with higher interest rates. New vehicle finance and VSC penetration increased in the Current Year, partially offsetting the used vehicle impact.
Gross Profit
Total gross profit in the U.S. during the Current Year increased $27.8 million, or 1.1%, as compared to the Prior Year, driven by the acquisition of stores.
Total same store gross profit in the U.S. during the Current Year decreased $55.5 million, or 2.2%, as compared to the Prior Year, primarily driven by downward pressures on new vehicle margins and lower F&I PRU.
New vehicle retail same store gross profit underperformed the Prior Year, driven by a decrease in new vehicle retail same store gross profit per unit sold, partially offset by an increase in same store new vehicle retail units sold. The decrease in new vehicle retail same store gross profit per unit is due to modestly higher production and inventory levels of new vehicles as described above.
Used vehicle retail same store gross profit underperformed the Prior Year, driven by a decrease in used vehicle retail same store gross profit per unit sold, coupled with lower same store used vehicle retail units sold. These decreases were driven by the ongoing new vehicle supply shortage impacting the supply of used vehicles, as well as impacts from inflation reducing the disposable income of our customers and rising interest rates increasing the monthly cost of financing vehicles.
Our used vehicle wholesale same store gross profit underperformed the Prior Year, driven by a decrease in used vehicle wholesale same store gross profit per unit sold, partially offset by an increase in same store wholesale used vehicle units sold. The decrease in used vehicle wholesale same store gross profit per unit sold was driven by higher wholesale vehicle acquisition costs.
Parts and service same store gross profit outperformed the Prior Year, as described above for same store revenues.
F&I, net same store gross profit, underperformed the Prior Year, as described above for F&I, net same store revenues.
Total same store gross margin decreased 144 basis points, primarily driven by the reasons described above for same store gross profit per unit sold for new vehicle retail, used vehicle retail, used vehicle wholesale and F&I, net. In addition, same store parts and service gross margin declined slightly, largely due to increased labor costs.
SG&A Expenses
SG&A as a percentage of gross profit increased 344 basis points and 303 basis points on an as reported and same store basis, respectively, compared to the Prior Year.
Total SG&A expenses in the U.S. during the Current Year increased $106.0 million, or 7.0%, as compared to the Prior Year, primarily driven by the acquisition of stores and higher same store SG&A expenses. Total same store SG&A expenses in the U.S. during the Current Year increased $41.2 million or 2.7% as compared to the Prior Year, primarily driven by increased activity related to outside services and professional fees, loaner car and related expenses, insurance and taxes, advertising expenses, and rent and facilities expenses, including related taxes, insurance and utilities. In addition, higher than historical average inflation has contributed to the increase in these same store SG&A expense categories. These increases were partially offset by lower employee-related costs.
Reported Operating Data - U.K.
(In millions, except unit data)
For the Years Ended December 31,
2023 2022 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change
Revenues:
New vehicle retail sales $ 1,341.0 $ 1,214.0 $ 127.0 10.5 % $ 13.9 9.3 %
Used vehicle retail sales 1,234.8 1,141.8 93.0 8.1 % 3.7 7.8 %
Used vehicle wholesale sales 127.1 125.8 1.3 1.0 % 0.1 0.9 %
Total used 1,361.9 1,267.6 94.3 7.4 % 3.8 7.1 %
Parts and service sales 289.0 248.2 40.8 16.4 % 2.5 15.4 %
F&I, net 67.6 65.2 2.4 3.7 % 0.4 3.1 %
Total revenues $ 3,059.5 $ 2,795.1 $ 264.4 9.5 % $ 20.4 8.7 %
Gross profit:
New vehicle retail sales $ 120.8 $ 112.0 $ 8.8 7.9 % $ 1.5 6.5 %
Used vehicle retail sales 60.2 63.5 (3.3) (5.1) % 0.1 (5.2) %
Used vehicle wholesale sales (6.3) (2.6) (3.7) (142.5) % - (141.2) %
Total used 53.9 60.9 (7.0) (11.5) % - (11.5) %
Parts and service sales 167.8 144.7 23.1 15.9 % 1.3 15.1 %
F&I, net 67.6 65.2 2.4 3.7 % 0.4 3.1 %
Total gross profit $ 410.1 $ 382.9 $ 27.3 7.1 % $ 3.1 6.3 %
Gross margin:
New vehicle retail sales 9.0 % 9.2 % (0.2) %
Used vehicle retail sales 4.9 % 5.6 % (0.7) %
Used vehicle wholesale sales (5.0) % (2.1) % (2.9) %
Total used 4.0 % 4.8 % (0.8) %
Parts and service sales 58.1 % 58.3 % (0.2) %
Total gross margin 13.4 % 13.7 % (0.3) %
Units sold:
Retail new vehicles sold 32,757 29,780 2,977 10.0 %
Retail used vehicles sold 42,039 39,068 2,971 7.6 %
Wholesale used vehicles sold 12,307 11,996 311 2.6 %
Total used 54,346 51,064 3,282 6.4 %
Average sales price per unit sold:
New vehicle retail $ 42,488 $ 40,766 $ 1,722 4.2 % $ 439 3.1 %
Used vehicle retail $ 29,373 $ 29,227 $ 147 0.5 % $ 88 0.2 %
Gross profit per unit sold:
New vehicle retail sales $ 3,689 $ 3,762 $ (73) (1.9) % $ 47 (3.2) %
Used vehicle retail sales $ 1,432 $ 1,624 $ (193) (11.9) % $ 1 (11.9) %
Used vehicle wholesale sales $ (514) $ (217) $ (297) (136.4) % $ (3) (135.1) %
Total used $ 991 $ 1,192 $ (201) (16.8) % $ - (16.9) %
F&I PRU $ 904 $ 948 $ (44) (4.6) % $ 5 (5.1) %
Other:
SG&A expenses $ 303.9 $ 266.5 $ 37.4 14.0 % $ 2.7 13.0 %
SG&A as % gross profit 74.1 % 69.6 % 4.5 %
Same Store Operating Data - U.K.
(In millions, except unit data)
For the Years Ended December 31,
2023 2022 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change
Revenues:
New vehicle retail sales $ 1,321.9 $ 1,211.9 $ 109.9 9.1 % $ 13.7 7.9 %
Used vehicle retail sales 1,211.2 1,136.9 74.3 6.5 % 3.7 6.2 %
Used vehicle wholesale sales 125.0 125.3 (0.4) (0.3) % 0.1 (0.3) %
Total used 1,336.1 1,262.2 73.9 5.9 % 3.8 5.6 %
Parts and service sales 270.4 237.2 33.2 14.0 % 2.4 13.0 %
F&I, net 66.5 64.9 1.6 2.5 % 0.4 1.9 %
Total revenues $ 2,995.0 $ 2,776.3 $ 218.7 7.9 % $ 20.1 7.2 %
Gross profit:
New vehicle retail sales $ 118.9 $ 111.9 $ 7.0 6.2 % $ 1.5 4.9 %
Used vehicle retail sales 58.4 63.1 (4.7) (7.5) % 0.1 (7.6) %
Used vehicle wholesale sales (6.4) (2.6) (3.8) (147.2) % - (145.7) %
Total used 52.0 60.5 (8.5) (14.1) % - (14.1) %
Parts and service sales 159.4 139.5 19.9 14.3 % 1.2 13.4 %
F&I, net 66.5 64.9 1.6 2.5 % 0.4 1.9 %
Total gross profit $ 396.8 $ 376.8 $ 20.0 5.3 % $ 3.0 4.5 %
Gross margin:
New vehicle retail sales 9.0 % 9.2 % (0.2) %
Used vehicle retail sales 4.8 % 5.6 % (0.7) %
Used vehicle wholesale sales (5.1) % (2.1) % (3.0) %
Total used 3.9 % 4.8 % (0.9) %
Parts and service sales 59.0 % 58.8 % 0.1 %
Total gross margin 13.2 % 13.6 % (0.3) %
Units sold:
Retail new vehicles sold 32,329 29,694 2,635 8.9 %
Retail used vehicles sold 41,177 38,809 2,368 6.1 %
Wholesale used vehicles sold 12,146 11,911 235 2.0 %
Total used 53,323 50,720 2,603 5.1 %
Average sales price per unit sold:
New vehicle retail $ 42,458 $ 40,814 $ 1,644 4.0 % $ 440 3.0 %
Used vehicle retail $ 29,413 $ 29,294 $ 119 0.4 % $ 90 0.1 %
Gross profit per unit sold:
New vehicle retail sales $ 3,676 $ 3,767 $ (91) (2.4) % $ 47 (3.6) %
Used vehicle retail sales $ 1,418 $ 1,626 $ (209) (12.8) % $ 1 (12.9) %
Used vehicle wholesale sales $ (525) $ (216) $ (308) (142.4) % $ (3) (140.9) %
Total used $ 975 $ 1,194 $ (218) (18.3) % $ - (18.3) %
F&I PRU $ 905 $ 948 $ (42) (4.5) % $ 5 (5.0) %
Other:
SG&A expenses $ 296.6 $ 263.6 $ 33.0 12.5 % $ 2.5 11.6 %
SG&A as % gross profit 74.7 % 69.9 % 4.8 %
U.K. Region - Year Ended December 31, 2023 compared to 2022
The following discussion of our U.K. operating results is on an as reported and same store basis. The difference between the as reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings. Retail new vehicle units sold for 2023 include new vehicle agency units. The agency units and related revenues are excluded from the calculation of the average sales price per unit sold for new vehicles due to their net presentation within revenues. The agency units and related net revenues are included in the calculation of gross profit per unit sold. The GBP to USD foreign currency exchange rate has fluctuated from £1 to $1.21 at December 31, 2022, to £1 to $1.27 at December 31, 2023, or an increase in the value of the GBP of 5.2%.
Revenues
Total revenues in the U.K. during the Current Year increased $264.4 million, or 9.5%, as compared to the Prior Year, driven by higher same store results and the acquisition of stores.
Total same store revenues in the U.K. during the Current Year increased $218.7 million, or 7.9%, as compared to the Prior Year. On a constant currency basis, total same store revenues increased 7.2%, driven by outperformances across all of our business lines except used vehicle wholesale sales.
New vehicle retail same store revenues, on a constant currency basis, outperformed the Prior Year, driven by more units sold, coupled with higher new vehicle retail pricing. The shortage of new vehicle inventory, compared to pre-COVID-19 pandemic levels, despite recent manufacturers’ production improvements, drove strong pricing. Vehicle demand was and continues to be pent-up from past years due to the withdrawal of the U.K. from the EU (“Brexit”) and the COVID-19 pandemic. In addition, despite the increase in same store new vehicle units sold, we experienced vehicle delivery shortages at various times throughout the Current Year from certain OEMs, limiting our revenue potential. We ended the Current Year with a U.K. new vehicle inventory supply of 48 days, twelve days higher than the Prior Year, but below pre-COVID-19 pandemic levels.
Used vehicle retail same store revenues, on a constant currency basis, outperformed the Prior Year, primarily driven by more units sold, coupled with higher used vehicle retail pricing.
Parts and service same store revenues, on a constant currency basis, outperformed the Prior Year, driven by increases in all business lines, reflecting increased business activity. We have invested in improvements to our U.K. customer contact center, streamlining operations to make scheduling appointments easier for customers, resulting in an increase in parts and service activity driving an increase in revenues as compared to the Prior Year.
F&I, net same store revenues, on a constant currency basis, outperformed the Prior Year, driven by an increase in retail units sold, partially offset by decreases in income per contract for retail finance fees and service contracts.
Gross Profit
Total gross profit in the U.K. during the Current Year increased $27.3 million, or 7.1%, as compared to the Prior Year, driven by higher same store results and the acquisition of stores.
Total same store gross profit in the U.K. during the Current Year increased $20.0 million, or 5.3%, as compared to the Prior Year. On a constant currency basis, total same store gross profit increased 4.5% driven by improvements in new vehicle retail, parts and service and F&I, net gross profit, partially offset by a decline in total used vehicle gross profit.
New vehicle retail same store gross profit, on a constant currency basis, outperformed the Prior Year, due to an increase in new vehicle retail units sold, partially offset by a decrease in new vehicle retail gross profit per unit sold as a result of the increase in vehicle inventory supply as described above generating downward pressure on new vehicle margins.
Used vehicle retail same store gross profit, on a constant currency basis, underperformed the Prior Year, driven by a decrease in used vehicle retail same store gross profit per unit sold, partially offset by an increase in used vehicle retail units sold. This decrease in gross profit per unit sold was driven by increases in used vehicle acquisition costs, outpacing the increase in used vehicle retail average sales price per unit sold as a result of continued inflationary pressures.
Parts and service same store gross profit, on a constant currency basis, outperformed the Prior Year, driven by increases in parts and service same store revenues, as discussed above, while maintaining gross margin relatively flat compared to the prior year.
F&I, net same store gross profit, on a constant currency basis, outperformed the Prior Year, driven by increases in F&I, net same store revenues, as described above.
Total same store gross margin in the U.K. decreased 32 basis points, primarily driven by lower same store total used gross margin caused by inflationary impacts on our used vehicle customers and higher used vehicle acquisition prices.
SG&A Expenses
SG&A as a percentage of gross profit increased by 450 and 480 basis points on an as reported and same store basis, respectively, compared to the Prior Year.
Total SG&A expenses in the U.K. during the Current Year increased $37.4 million, or 14.0%, as compared to the Prior Year, primarily driven by increases in same store SG&A and the full year impact of prior period acquisitions. Total same store SG&A expenses in the U.K. during the Current Year increased $33.0 million, or 12.5%, as compared to the Prior Year. On a constant currency basis, total same store SG&A expenses increased 11.6%. These increases were primarily driven by increased employee-related expenses and facilities-related expenses as a result of higher activity and continued inflationary pressures, coupled with increased demonstration and loaner car expenses compared to the Prior Year. The vehicle delivery shortages from certain manufacturers, as discussed above, resulted in higher than anticipated SG&A as a percentage of gross profit given our staffing levels assumed the delivery and sale of these vehicles in the Current Year.
Consolidated Selected Comparisons - Year Ended December 31, 2023 compared to 2022
The following table (in millions) and discussion of our results of operations is on a consolidated basis, unless otherwise noted.
For the Years Ended December 31,
2023 2022 Increase/ (Decrease) % Change
Depreciation and amortization expense $ 92.0 $ 88.4 $ 3.7 4.1 %
Asset impairments $ 32.9 $ 2.1 $ 30.7 NM
Floorplan interest expense $ 64.1 $ 27.3 $ 36.8 134.9 %
Other interest expense, net $ 99.8 $ 77.5 $ 22.3 28.7 %
Provision for income taxes $ 198.2 $ 231.1 $ (32.9) (14.2) %
NM - not meaningful
Depreciation and Amortization Expense
Depreciation and amortization expense for the Current Year increased compared to the Prior Year, primarily driven by acquired property and equipment in our U.S. region, as we continue to strategically add dealership related real estate and facilities to our investment portfolio and make improvements to our existing facilities intended to enhance the profitability of our dealerships and improve the overall customer experience.
Impairment of Assets
No goodwill impairments were recorded during the Current Year and the Prior Year. During the Current Year and Prior Year we recorded impairment of franchise rights of $25.1 million and $1.3 million for franchise agreements in the U.S. region, respectively.
We review long-lived assets including property and equipment and ROU assets for impairment at the lowest level of identifiable cash flows whenever there is evidence that the carrying value of these assets may not be recoverable (i.e., triggering events). During the Current Year and Prior Year, we recorded total property and equipment and ROU asset impairment charges of $6.8 million and $0.8 million in the U.S. region, respectively.
See Note 12. Intangible Franchise Rights and Goodwill, Note 10. Property and Equipment, Net and Note 11. Leases within our Notes to Consolidated Financial Statements for further discussion of our assessment for impairments.
Floorplan Interest Expense
Our floorplan interest expense fluctuates with changes in our outstanding borrowings and associated interest rates, which are based on SOFR, the U.S. prime rate or other benchmark rates. Outstanding borrowings largely fluctuate based on our levels of new and used vehicle inventory. To mitigate the impact of interest rate fluctuations, we employ an interest rate hedging strategy, whereby we swap variable interest rate exposure on a portion of our borrowings for a fixed interest rate.
For the Current Year, floorplan interest expense increased $36.8 million, or 134.9%, as compared to the Prior Year, driven primarily by an increase in inventories due to improvements in manufacturer production as well as acquisitions, partially offset by realized gains on our interest rate swap portfolio due to increases in corresponding interest rates.
Refer to Note 7. Financial Instruments and Fair Value Measurements within our Notes to Consolidated Financial Statements for additional discussion of interest rate swaps.
Other Interest Expense, Net
Other interest expense, net consists of interest charges primarily on our $750.0 million 4.00% Senior Notes due August 2028 (“4.00% Senior Notes”), real estate related debt and other debt, partially offset by interest income.
For the Current Year, other interest expense, net, increased $22.3 million, or 28.7%, as compared to the Prior Year. The increase in other interest expense, net during the Current Year was primarily attributable to the additional borrowings used to acquire property in our U.S. region. The increase in the Current Year was partially offset by the gain on the de-designation of a mortgage interest rate swap of $4.0 million. Refer to Note 14. Debt within our Notes to Consolidated Financial Statements for additional discussion of our debt. Refer to Note 7. Financial Instruments and Fair Value Measurements within our Notes to the Consolidated Financial Statements for additional discussion of the de-designation of the mortgage interest rate swap.
Provision for Income Taxes
Provision for income taxes from continuing operations during the Current Year decreased $32.9 million, or 14.2%, as compared to the Prior Year. During the Current Year and Prior Year, we recorded a tax provision from continuing operations of $198.2 million and $231.1 million, respectively. The year-over-year tax expense decrease was primarily due to lower pre-tax book income.
The 2023 effective tax rate of 24.8% was higher than the 2022 effective tax rate of 23.5%. The tax rate increase was primarily due to taxable gains from asset dispositions and the higher U.K. statutory tax rate in the Current Year compared to the Prior Year.
We believe that it is more-likely-than-not that our deferred tax assets, net of valuation allowances provided, will be realized, based primarily on assumptions of our future taxable income, considering future reversals of existing taxable temporary differences.
For further discussion, please see Note 15. Income Taxes within our Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
Our liquidity and capital resources are primarily derived from cash on hand, cash temporarily invested as a pay down of our U.S. Floorplan Line and FMCC Facility levels (see Note 13. Floorplan Notes Payable in our Notes to the Consolidated Financial Statements for additional information), cash from operations, borrowings under our credit facilities, working capital, dealership and real estate acquisition financing and proceeds from debt and equity offerings. We anticipate we will generate sufficient cash flows from operations, coupled with cash on hand and available borrowing capacity under our credit facilities, to fund our working capital requirements, service our debt and meet any other recurring operating expenditures.
Available Liquidity Resources
We had the following sources of liquidity available (in millions):
December 31, 2023
Cash and cash equivalents $ 57.2
Floorplan offset accounts 275.2
Available capacity under Acquisition Line 462.8
Total liquidity $ 795.2
Cash Flows
We arrange our new and used vehicle inventory floorplan financing through lenders affiliated with our vehicle manufacturers and our Revolving Credit Facility. In accordance with U.S. GAAP, we report floorplan financed with lenders affiliated with our vehicle manufacturers (excluding the cash flows from or to manufacturer-affiliated lenders participating in our syndicated lending group) within Cash Flows from Operating Activities in the Consolidated Statements of Cash Flows. We report floorplan financed with the Revolving Credit Facility (including the cash flows from or to manufacturer-affiliated lenders participating in the facility) and other credit facilities in the U.K. unaffiliated with our manufacturer partners, within Cash Flows from Financing Activities in the Consolidated Statements of Cash Flows. Refer to Note 13. Floorplan Notes Payable within our Notes to the Consolidated Financial Statements for additional discussion of our Revolving Credit Facility.
However, we believe that all floorplan financing of inventory purchases in the normal course of business should correspond with the related inventory activity and be classified as an operating activity. As a result, we use the non-GAAP measure “Adjusted net cash provided by/used in operating activities” and “Adjusted net cash provided by/used in financing activities” to further evaluate our cash flows. We believe that this classification eliminates excess volatility in our operating cash flows prepared in accordance with U.S. GAAP. In addition, floorplan financing associated with dealership acquisitions and dispositions are classified as investing activities on an adjusted basis to eliminate excess volatility in our operating cash flows prepared in accordance with U.S. GAAP.
The following table reconciles cash flows on a U.S. GAAP basis to the corresponding adjusted amounts (in millions):
Years Ended December 31,
2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities: $ 190.2 $ 585.9
Change in Floorplan notes payable - credit facility and other, excluding floorplan offset and net acquisitions and dispositions 504.6 319.7
Change in Floorplan notes payable - manufacturer affiliates associated with net acquisitions and dispositions and floorplan offset activity 25.2 10.1
Adjusted net cash provided by operating activities $ 720.0 $ 915.7
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in investing activities: $ (366.1) $ (484.6)
Change in cash paid for acquisitions, associated with Floorplan notes payable 66.3 25.3
Change in proceeds from disposition of franchises, property and equipment, associated with Floorplan notes payable (48.8) (3.9)
Adjusted net cash used in investing activities $ (348.6) $ (463.2)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided by (used in) financing activities: $ 185.2 $ (67.3)
Change in Floorplan notes payable, excluding floorplan offset (547.3) (351.2)
Adjusted net cash used in financing activities $ (362.1) $ (418.6)
Sources and Uses of Liquidity from Operating Activities - Year Ended December 31, 2023 compared to 2022
For the Current Year, net cash provided by operating activities decreased by $395.8 million as compared to the Prior Year. On an adjusted basis for the same period, adjusted net cash provided by operating activities decreased by $195.8 million. The decrease on an adjusted basis was primarily driven by a $285.6 million increase in inventory levels, a $149.9 million decrease in net income, a $32.7 million increase in contracts-in-transit and vehicle receivables and a $27.3 million decrease in accounts payable and accrued expenses, partially offset by a $319.1 million increase in Floorplan notes payable - manufacturer affiliates.
Sources and Uses of Liquidity from Investing Activities - Year Ended December 31, 2023 compared to 2022
For the Current Year, net cash used in investing activities decreased by $118.5 million, as compared to the Prior Year. On an adjusted basis for the same period, adjusted net cash used in investing activities decreased by $114.7 million, driven by a $203.6 million decrease in acquisition activity, offset by a $59.4 million decrease in sales proceeds due to the sale of the Brazil Disposal Group in the Prior Year, which did not reoccur in the Current Year and a $30.0 million increase in purchases of property and equipment.
Capital Expenditures
Our capital expenditures include costs to extend the useful lives of current dealership facilities, as well as to start or expand operations. In general, expenditures relating to the construction or expansion of dealership facilities are driven by dealership acquisition activity, new franchises being granted to us by a manufacturer, significant growth in sales at an existing facility, relocation opportunities or manufacturer imaging programs. We critically evaluate all planned future capital spending, working closely with our manufacturer partners to maximize the return on our investments.
For the Current Year, $185.4 million was used to purchase property and equipment.
Sources and Uses of Liquidity from Financing Activities - Year Ended December 31, 2023 compared to 2022
For the Current Year, net cash provided by financing activities increased by $252.5 million, as compared to the Prior Year. On an adjusted basis for the same period, adjusted net cash used in financing activities decreased by $56.4 million. The decrease in net cash used in financing activities on an adjusted basis was primarily driven by a decrease of $348.5 million in cash paid for share repurchases from $521.2 million in the Prior Year to $172.8 million in the Current Year, an increase in acquisition line net borrowings of $44.8 million and a decrease in debt issuance costs paid of $4.3 million, offset by net repayments in credit facilities of $239.9 million and net repayments of other debt of $102.5 million.
Credit Facilities, Debt Instruments and Other Financing Arrangements
Our various credit facilities, debt instruments and other financing arrangements are used to finance the purchase of inventory and real estate, acquisitions and working capital for general corporate purposes.
The following table summarizes the commitment of our credit facilities as of December 31, 2023 (in millions):
As of December 31, 2023
Total
Commitment Outstanding Available
U.S. Floorplan Line (1)
$ 1,200.0 $ 1,121.6 $ 78.4
Acquisition Line (2)
800.0 337.2 462.8
Total Revolving Credit Facility 2,000.0 1,458.7 541.3
FMCC facility (3)
300.0 118.1 181.9
GM Financial Facility(4)
84.5 37.9 46.6
Total U.S. credit facilities (5)
$ 2,384.5 $ 1,614.8 $ 769.7
(1)The available balance at December 31, 2023, includes $236.7 million of immediately available funds. The remaining available balance can be used for vehicle inventory financing.
(2)The outstanding balance of $337.2 million is related to outstanding letters of credit of $12.2 million and $325.0 million in borrowings. The borrowings outstanding under the Acquisition Line included $325.0 million USD borrowings. The available borrowings may be limited from time to time, based on certain debt covenants.
(3)The available balance as of December 31, 2023, includes $38.5 million of immediately available funds. The remaining available balance can be used for Ford new vehicle inventory financing.
(4)The remaining available balance as of December 31, 2023, can be used for General Motors new and rental vehicle inventory financing.
(5)The outstanding balance excludes $287.8 million of borrowings with manufacturer-affiliates and third-party financial institutions for foreign and rental vehicle financing not associated with any of our U.S. credit facilities.
We have other credit facilities in the U.S. and the U.K. with third-party financial institutions, most of which are affiliated with the automobile manufacturers that provide financing for portions of our new, used and rental vehicle inventories. In addition, we have outstanding debt instruments, including our 4.00% Senior Notes, as well as real estate related and other debt instruments. Refer to Note 14. Debt in our Notes to Consolidated Financial Statements for further information.
Covenants
Our Revolving Credit Facility, indentures governing our 4.00% Senior Notes and certain mortgage term loans contain customary financial and operating covenants that place restrictions on us, including our ability to incur additional indebtedness, create liens or to sell or otherwise dispose of assets and to merge or consolidate with other entities. Certain of our mortgage agreements contain cross-default provisions that, in the event of a default of certain mortgage agreements and of our Revolving Credit Facility, could trigger an uncured default.
As of December 31, 2023, we were in compliance with the requirements of the financial covenants under our debt agreements. We are required to maintain the ratios detailed in the following table:
As of December 31, 2023
Required Actual
Total adjusted leverage ratio < 5.75 2.06
Fixed charge coverage ratio > 1.20 4.63
Based on our position as of December 31, 2023, and our outlook as discussed within Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations to this Form 10-K, we believe we have sufficient liquidity and do not anticipate any material liquidity constraints or issues with our ability to remain in compliance with our debt covenants.
Refer to Note 13. Floorplan Notes Payable and Note 14. Debt in our Notes to Consolidated Financial Statements for further discussion of our credit facilities, debt instruments and other financing arrangements existing as of December 31, 2023.
Stock Repurchases and Dividends
From time to time, our Board of Directors authorizes the repurchase of shares of our common stock up to a certain monetary limit. On August 2, 2023, our Board of Directors increased the share repurchase authorization to $250.0 million. During the Current Year, 729,582 shares were repurchased at an average price of $236.78 per share, for a total of $172.8 million. As of December 31, 2023, we had $143.3 million available under our current stock repurchase authorization.
During the Current Year, our Board of Directors approved quarterly cash dividends per share on all shares of our common stock totaling $1.80 per share, which resulted in $24.6 million paid to common shareholders and $0.6 million to unvested RSA holders.
Future share repurchases and the payment of any future dividends are subject to the business judgment of our Board of Directors, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements, covenant compliance, changes in laws and regulations, current and predicted economic environment and other factors considered relevant.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a variety of market risks, including interest rate risk and foreign currency exchange rate risk. We address interest rate risks primarily through the use of interest rate swaps. We do not currently hedge foreign currency exchange risk, as discussed further below. The following quantitative and qualitative information is provided regarding our foreign currency exchange rates and financial instruments to which we are a party at December 31, 2023, and from which we may incur future gains or losses from changes in market interest rates and/or foreign currency exchange rates. We do not enter into derivative or other financial instruments for speculative or trading purposes.
Interest Rates
We have interest rate risk on our variable-rate debt obligations. Based on variable-rate borrowings outstanding of $2.4 billion and $1.9 billion during the Current Year and Prior Year, respectively, a 100 basis-point change in interest rates would have resulted in an approximate $14.4 million and a $9.8 million change to our annual interest expense, respectively, after consideration of the average interest rate swaps in effect during the periods.
To mitigate the impact of interest rate fluctuations, we employ an interest rate hedging strategy, whereby we swap variable interest rate exposure on a portion of our borrowings for a fixed interest rate. In addition, our exposure to changes in interest rates with respect to our variable-rate floorplan borrowings is partially mitigated by manufacturers’ interest assistance, which in some cases is influenced by changes in market-based variable interest rates. We reflect interest assistance as a reduction of new vehicle inventory cost until the associated vehicle is sold. During the Current Year and Prior Year, we recognized $71.2 million and $56.0 million, respectively, of interest assistance as a reduction of new vehicle cost of sales.
Foreign Currency Exchange Rates
The functional currency of our U.K. subsidiaries is the GBP. Our exposure to fluctuating foreign currency exchange rates relates to the effects of translating financial statements of those subsidiaries into our reporting currency, which we do not hedge against based on our investment strategy in these foreign operations. A 10% devaluation in average foreign currency exchange rates for GBP to USD would have resulted in a $278.1 million and $254.1 million decrease to our revenues for the Current Year and Prior Year, respectively.
For additional information about our market sensitive financial instruments, see Note 7. Financial Instruments and Fair Value Measurements within our Notes to Consolidated Financial Statements.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
Refer to our Consolidated Financial Statements beginning on page for the information required by this Item and incorporated herein by reference.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-K. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2023, at the reasonable assurance level.
Our management, including our principal executive officer and our principal financial officer, does not expect that our disclosure controls and procedures can prevent all possible errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that objectives of the control system are met. There are inherent limitations in all control systems, including the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the intentional acts of one or more persons. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and while our disclosure controls and procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control system, misstatements due to possible errors or fraud may occur and not be detected.
Changes in Internal Control over Financial Reporting
During the three months ended December 31, 2023, there were no changes in our system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except as otherwise described below.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed by management, under the supervision of our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP, and includes those policies and procedures that:
(i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of management and our directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our Consolidated Financial Statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Accordingly, even effective internal control over financial reporting can only provide reasonable assurance of achieving their control objectives.
Our management, under the supervision and with the participation of our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 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.
Deloitte & Touche LLP, the independent registered accounting firm who audited the Consolidated Financial Statements included in this Form 10-K, has issued an attestation report on our internal control over financial reporting. This report, dated February 14, 2024, appears on the following page.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Group 1 Automotive, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Group 1 Automotive, Inc. and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 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 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
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Houston, Texas
February 14, 2024

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ITEM 9B. OTHER INFORMATION
Item 9B. 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.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Pursuant to Instruction G to Form 10-K, we incorporate by reference into this Item 10 the information to be disclosed in our definitive proxy statement prepared in connection with the 2024 Annual Meeting of Stockholders, which will be filed with the SEC within 120 days of December 31, 2023.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Pursuant to Instruction G to Form 10-K, we incorporate by reference into this Item 11 the information to be disclosed in our definitive proxy statement prepared in connection with the 2024 Annual Meeting of Stockholders, which will be filed with the SEC within 120 days of December 31, 2023.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Pursuant to Instruction G to Form 10-K, we incorporate by reference into this Item 12 the information to be disclosed in our definitive proxy statement prepared in connection with the 2024 Annual Meeting of Stockholders, which will be filed with the SEC within 120 days of December 31, 2023.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
Pursuant to Instruction G to Form 10-K, we incorporate by reference into this Item 13 the information to be disclosed in our definitive proxy statement prepared in connection with the 2024 Annual Meeting of Stockholders, which will be filed with the SEC within 120 days of December 31, 2023.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services
Pursuant to Instruction G to Form 10-K, we incorporate by reference into this Item 14 the information to be disclosed in our definitive proxy statement prepared in connection with the 2024 Annual Meeting of Stockholders, which will be filed with the SEC within 120 days of December 31, 2023.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules
(a) List of documents filed as part of this Form 10-K:
(1)Financial Statements
The financial statements listed in the accompanying Index to Financial Statements are filed as part of this Form 10-K.
(2)Financial Statement Schedules
All schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements and notes thereto.
(3) Index to Exhibits
Those exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index immediately preceding the exhibits filed herewith and such listing is incorporated herein by reference.
EXHIBIT INDEX
Exhibit
Number Description
2.1#
- Purchase Agreement, dated as of September 12, 2021, by and among Group 1 Automotive, Inc., GPB Portfolio Automotive, LLC, Capstone Automotive Group, LLC, Capstone Automotive Group II, LLC, Automile Parent Holdings, LLC, Automile TY Holdings, LLC and Prime Real Estate Holdings, LLC (incorporated by reference to Exhibit 2.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended September 30, 2021)
2.2+
- Share Purchase Agreement, dated November 12, 2021, by and between Group 1 Automotive, Inc., Buyer and UAB as intervening party (English translation) (incorporated by reference to Exhibit 2.1 of Group 1 Automotive Inc.’s Current Report on Form 8-K (File No. 001-13461) filed November 15, 2021)
3.1
- 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)
3.2
- Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.2 of Group 1’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended March 31, 2007)
3.3
- 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)
4.1
- Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of Group 1 Automotive, Inc.’s Registration Statement on Form S-1 (Registration No. 333-29893))
4.2
- Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.8 to Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No. 001-13461) for the year ended December 31, 2020)
4.3
- Indenture, dated as of August 17, 2020, by and among Group 1 Automotive, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed August 17, 2020)
4.4
- Form of 4.000% Senior Notes due 2028 (incorporated by reference to Exhibit 4.1, Exhibit A, of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed August 17, 2020)
10.1
- Master Assignment and Acceptance Agreement, dated effective December 11, 2012, between JPMorgan Chase Bank, N.A., Comerica Bank, and Bank of America, N.A., each, an Assignor, and VW Credit, Inc., as Assignee, pursuant to the terms of the Eighth Amended and Restated Revolving Credit Agreement, dated effective as of July 1, 2011, as amended (incorporated by reference to Exhibit 10.3 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No. 001-13461) for the year ended December 31, 2012)
10.2
- Loan Facility dated as of October 3, 2008 by and between Chandlers Garage Holdings Limited and BMW Financial Services (GB) Limited. (incorporated by reference to Exhibit 10.2 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended September 30, 2008)
10.3
- Form of Ford Motor Credit Company Automotive Wholesale Plan Application for Wholesale Financing and Security Agreement (incorporated by reference to Exhibit 10.2 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended June 30, 2003)
10.4
- Supplemental Terms and Conditions dated September 4, 1997 between Ford Motor Company and Group 1 Automotive, Inc. (incorporated by reference to Exhibit 10.16 of Group 1 Automotive, Inc.’s Registration Statement on Form S-1 Registration No. 333-29893)
10.5*
- Form of Indemnification Agreement of Group 1 Automotive, Inc. (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed November 13, 2007)
10.6
- Purchase Agreement, dated October 6, 2021, by and among Group 1 Automotive, Inc., BofA Securities, Inc., as representative of the Initial Purchasers listed in Schedule 1 thereto, and the guarantors listed in Schedule 2 thereto (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed October 7, 2021)
10.7*
- Group 1 Automotive, Inc. Deferred Compensation Plan, as Amended and Restated, effective January 1, 2021 (incorporated by reference to Exhibit 10.3 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended September 30, 2020)
10.8*
Group 1 Automotive, Inc. 2014 Long Term Incentive Plan (incorporated by reference to Appendix A to Group 1 Automotive, Inc.’s definitive proxy statement on Schedule 14A filed April 10, 2014)
10.9*
- First Amendment to the Group 1 Automotive, Inc. 2014 Long Term Incentive Plan, effective May 13, 2020 (incorporated by reference to Exhibit 10.4 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended September 30, 2020)
10.10*
- Form of Restricted Stock Agreement with Qualified Retirement Provisions (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended June 30, 2021)
10.11*
- Form of Phantom Stock Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.7 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended September 30, 2014)
10.12*
- Form of Restricted Stock Agreement for Employees (incorporated by reference to Exhibit 10.5 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended September 30, 2014)
10.13*
- Form of Restricted Stock Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.34 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No. 001-13461) for the year ended December 31, 2018)
10.14*
- Form of Phantom Stock Agreement (Cash Settlement) for Non-Employee Directors (incorporated by reference to Exhibit 10.33 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No. 001-13461 for the year ended December 31, 2018)
10.15*
- Form of Performance Share Unit Agreement (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended March 31, 2019)
10.16*
- Incentive Compensation, Confidentiality, Non-Disclosure and Non-Compete Agreement dated June 6, 2011, between Group 1 Automotive, Inc. and Daryl Kenningham (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended June 30, 2020)
10.17*
- First Amendment to Incentive, Compensation, Confidentiality, Non-Disclosure and Non-Compete Agreement, effective as of August 24, 2022, between Group 1 Automotive, Inc. and Daryl A. Kenningham (incorporated by reference to Exhibit 10.2 of Group 1 Automotive Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended September 30, 2022).
10.18*
- Employment Agreement dated effective as of December 1, 2009 between Group 1 Automotive, Inc. and Darryl M. Burman (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed November 16, 2009)
10.19*
- Incentive Compensation and Non-Compete Agreement dated December 1, 2006 between Group 1 Automotive, Inc. and Darryl M. Burman (incorporated by reference to Exhibit 10.2 of Group 1 Automotive, Inc.’s Current Report on Form 8-K/A (File No. 001-13461) filed December 1, 2006)
10.20*
- Offer Letter, dated June 1, 2020, between Group 1 Automotive, Inc. and Daniel McHenry (incorporated by reference to Exhibit 10.3 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended June 30, 2020)
10.21*
- Retention, Confidentiality and Non-Compete Agreement dated August 20, 2020 between Group 1 Automotive, Inc. and Daniel McHenry (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Quarterly Report on Form 10-Q (File No. 001-13461) for the quarter ended September 30, 2020)
10.22*
- Group 1 Automotive, Inc. Aircraft Usage Policy (incorporated by reference to Exhibit 10.49 of Group 1 Automotive, Inc.’s Annual Report on Form 10-K (File No. 001-13461) for the year ended December 31, 2020)
10.23
- Twelfth Amended and Restated Revolving Credit Agreement dated as of March 9, 2022, among Group 1 Automotive, Inc., the Subsidiary Borrowers listed therein, the Lenders listed therein and U.S. Bank National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed on March 10, 2022).
10.24
- First Amendment to the Twelfth Amended and Restated Revolving Credit Agreement dated effective as of August 18, 2022 (incorporated by reference to Exhibit 10.1 of Group 1 Automotive Inc.’s Current Report on Form 8-K (File No. 001-13461) filed August 23, 2022).
10.25*
- 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)
10.26
- 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)
10.27*†
- Form of Restricted Stock Agreement (2024 Form).
10.28*†
- Form of Performance Share Unit Agreement (2024 Form).
10.29
- 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).
21.1†
- Group 1 Automotive, Inc. Subsidiary List
23.1†
- Consent of Deloitte & Touche LLP
31.1†
- Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2†
- Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
- Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**
- Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1†
Group 1 Automotive Inc. Incentive-Based Compensation Recoupment Policy
101.INS - XBRL Instance Document
101.SCH - XBRL Taxonomy Extension Schema Document
101.CAL - XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF - XBRL Taxonomy Extension Definition Linkbase Document
101.LAB - XBRL Taxonomy Extension Label Linkbase Document
101.PRE - XBRL Taxonomy Extension Presentation Linkbase Document
104 - Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibits 101)
† Filed herewith
* Management contract or compensatory plan or arrangement
** Furnished herewith
# The exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided to the Securities and Exchange Commission upon request.
+ Exhibits marked with a (+) exclude certain immaterial schedules and exhibits pursuant to the provisions of Regulation S-K, Item 601(a)(5). A copy of any of the omitted schedules and exhibits will be furnished to the Securities and Exchange Commission upon request.