GROUP 1 AUTOMOTIVE, INC. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Actual results ofGroup 1 Automotive, Inc. may differ materially from those discussed in the forward-looking statements because of various factors. See "Cautionary Statement about Forward-Looking Statements." Unless the context requires otherwise, references to "we," "us" and "our" are intended to mean the business and operations ofGroup 1 Automotive, Inc. and its subsidiaries. Overview We are a leading operator in the automotive retail industry. Through our dealerships, we sell new and used cars and light trucks; arrange related vehicle financing; sell service and other insurance contracts; provide automotive maintenance and repair services; and sell vehicle parts. Our operations are aligned into three regions, which comprise our reportable segments: (1)U.S. , (2)U.K. and (3)Brazil . TheU.S. andBrazil segments are led by the President,U.S. and Brazilian Operations, and theU.K segment is led by a Managing Director, each reporting directly to our Chief Executive Officer. The President,U.S. and Brazilian Operations, and theU.K Managing Director are responsible for the overall performance of their respective regions, as well as for overseeing field level management. TheU.S. segment includes the activities of our corporate office. As ofJune 30, 2020 , our retail network consisted of 119 dealerships in theU.S. , 50 dealerships in theU.K. and 17 dealerships inBrazil . Our operations are primarily located in major metropolitan areas in 15 states in theU.S. , 33 towns in theU.K. and three states inBrazil . Long-Term Strategy Our business strategy primarily focuses on the performance of our existing dealerships to achieve growth, capture market share and maximize the investment return to our stockholders. We are also focused on enhancing our dealership portfolio through strategic acquisitions and dispositions. We constantly evaluate opportunities to improve the overall profitability of our dealerships. Our long-term strategic areas of emphasis include: Digital Initiatives to Enhance the Customer Experience Our digital initiatives focus on ensuring that we can do business with our customers where and when they want to do business. Our online new and used vehicle retail platform, AcceleRide®, which was deployed to all of ourU.S. dealerships in 2019, allows a customer to complete a vehicle transaction entirely online or start the sales process online and complete the transaction at our dealerships. In addition, our parts and service digital efforts focus on our online customer scheduling appointment system. We have seen continued growth in the percentage of appointments scheduled online over the past few years as we have continued to enhance this tool. These digital platforms were instrumental in allowing us to connect with and service our customers during the restricted social distancing environment as a result of the COVID-19 pandemic. During the second quarter of 2020, AcceleRide® sales were up 190% from a year ago. Used Vehicle Retail Growth • Gross profit from the sale of used vehicles depends primarily on a
dealership's ability to obtain a high-quality supply of used vehicles at
reasonable prices. Our new vehicle operations generally provide our used
vehicle operations with a large supply of high-quality trade-ins and
off-lease vehicles, which are our best source of used vehicle inventory.
Our dealerships supplement their used vehicle inventory with direct
purchases from customers, purchases at auctions, including
manufacturer-sponsored auctions available only to franchised dealers.
• Our data-driven pricing strategies ensure that our used vehicles are
priced at market to generate more traffic to our websites. We review our
market pricing on a regular basis and work to limit discounting from our
advertised prices.
• We will continue efforts to expand our "Val-U-Line®" sales program, a
strategic used vehicle initiative that targets a growing customer niche
and enables us to retail lower cost, higher mileage units that would
otherwise have been sent to auction. The Val-U-Line® initiative isexpected to increase used retail volume by leveraging our scale, internal
on-line buying center, internal auction capability and transportation
infrastructure.
Parts and Service Growth
We remain focused on sustained growth in our higher margin parts and service
operations which continue to hinge on the retention and hiring of service
technicians and advisors. Our four-day work week implemented in 2019 has allowed
us to extend our hours of operations and increase service technicians and
advisors retention, thereby expanding our service capacity without investing
additional capital in facilities. We seek to increase the retention of our
customers through more convenient service hours, training of our service
advisors, selling service contracts with vehicles sales and customer
relationship management software that allows us to provide target marketing to
our customers. The increasing complexity of vehicles, especially in the area of
electronics and technological advancements, is making it difficult for
independent repair shops to retain the expertise and technology to work on these
vehicles and provides us the opportunity to increase our market share.
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Cost Management We continue our efforts to fully leverage our scale and cost structure. As our business evolves, we will manage our costs carefully and look for additional opportunities to improve our processes and disseminate best practices. Additionally, see "COVID-19 Pandemic" section below for specific cost-cutting measures in response to the COVID-19 pandemic. We believe that our management structure supports more rapid decision making and facilitates an efficient and effective roll-out of new processes. Employee training and retention A key to the execution of our business strategy is the leverage of what we believe to be one of our key strengths - the talent of our people. We are focused on the retention and training of our talented dealership employees. We believe that we have developed a distinguished management team with substantial industry expertise. With our management structure and level of executive talent, we plan to continue empowering the operators of our dealerships to make appropriate decisions to grow their respective dealership operations and to control fixed and variable costs. We believe this approach allows us to provide the best possible service to our customers, as well as attract and retain talented employees. Strategic Acquisitions and Dispositions We will continue to focus on opportunities to enhance our current dealership portfolio through strategic acquisitions and improving or disposing of underperforming dealerships. We believe that substantial opportunities for growth through acquisitions remain in our industry in theU.S. , theU.K. andBrazil upon an economic recovery from the impacts of the COVID-19 pandemic. Further, we intend to continue to critically evaluate our return on invested capital in our current dealership portfolio for disposition opportunities. COVID-19 Pandemic Since emerging inDecember 2019 , the COVID-19 pandemic has spread globally, including to all of our markets in theU.S. ,U.K. andBrazil , significantly impacting our operating results starting inMarch 2020 . There have been extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 across the world, including mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. Beginning inmid-March 2020 , these measures significantly reduced operating capacity of all of our dealerships in theU.S. , theU.K. andBrazil . The primary COVID-19 impacts on our global business and our response to date include:U.S. Virtually all of ourU.S. dealerships are located in markets that operated in some form of restricted social distancing environments in accordance with applicable state and local orders during most ofMarch 2020 andApril 2020 . As the market shutdowns began,March 2020 U.S. sales dropped sharply fromFebruary 2020 , with new and used retail unit sales dropping approximately 50% and service repair orders also declining by approximately 50% for the last two weeks ofMarch 2020 compared to the last two weeks ofMarch 2019 and the first two weeks ofApril 2020 compared to the first two weeks ofApril 2019 . In earlyMay 2020 , as restricted social distancing environment policies began to be partially lifted, our used vehicle business returned to near normal levels and our new vehicle sales pace started improving. Near the end of the quarter, our new vehicle sales pace started improving, however the recovery of new vehicle sales was limited as a result of low inventory levels due to reduced OEM production rates. Beginning inmid-April 2020 , we saw continued improvement in our parts and service business as well. Our online selling platform AcceleRide® and our online service scheduling platforms continue to show increased utilization rates which are likely to continue in a restricted social distancing environment.U.K. U.K. vehicle sales levels were well above prior year levels in most of our brands throughFebruary 2020 . March, which is a plate change month, is one of the largest selling months of the year with many vehicles delivered from orders placed inJanuary 2020 andFebruary 2020 . Due to the closure of our facilities and various business restrictions put in place as a result of a shut-down order from the government, we were not able to deliver approximately 35% of our vehicles at the end ofMarch 2020 that we had contracted to sell prior to the shut-down restrictions, and most were delivered at the end ofJune 2020 . We closed all of ourU.K. dealerships from lateMarch 2020 throughMay 18, 2020 for service, with the exception of emergency vehicle repairs. Our vehicle showrooms were closed for more than two months and did not reopen untilJune 1, 2020 . Operations in theU.K. significantly improved inJune 2020 as vehicle sales and service operations reopened.Brazil EffectiveMarch 20, 2020 , all of our dealerships were required to close. While our service centers reopened and operated throughout the second quarter, our showrooms did not reopen untilMay 2020 and operated at reduced hours. Despite operations resuming inBrazil , the recovery has been limited as the impacts of COVID-19 are still impacting operations significantly. 26
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Cost-Cutting Actions In all regions we have taken aggressive actions to reduce costs and preserve liquidity, with approximately 8,000 employees furloughed or terminated in earlyApril 2020 . As sales have improved in theU.S. andU.K. , we have been able to return some of the furloughed employees to a point where ourU.S. andU.K. headcounts are approximately 70% of our pre-COVID levels. In addition, other measures have been implemented and have significantly reduced costs in all three regions including reductions of as much as 50% in management compensation, 100% of Board of Directors' cash compensation, over 75% reduction in advertising expense and cuts across all other cost categories. Additionally, as announced inApril 2020 , we suspended our dividend and canceled our share repurchase program, as well as implemented capital expenditure deferrals. As discussed in "Liquidity and Capital Resources," we have sufficient liquidity currently and do not anticipate any material liquidity constraints or issues with our ability to remain in compliance with debt covenants. While the potential long-term impact of the COVID-19 pandemic is difficult to predict, we expect our used vehicle and service operations in the third quarter to return to prior year levels. Reduced new vehicle inventory levels in theU.S. andU.K. will likely persist until the fourth quarter and will limit the recovery in new vehicle unit sales in the third quarter. The demand outlook remains uncertain and difficult to predict given the recent increases in cases in theU.S. andBrazil , however we will remain vigilant and are prepared to adjust our cost structure to adapt to the market conditions. While some of the cost reductions taken in the first and second quarters will be reinstated if market conditions continue to improve, we expect to be more cost efficient going forward. Any potential impact will depend on future developments and new information that may emerge regarding the severity and duration of the COVID-19 pandemic and the actions taken by authorities to contain it or treat its impact, all of which are beyond our control. Critical Accounting Policies and Accounting Estimates The preparation of our Condensed Consolidated Financial Statements in conformity withU.S. GAAP requires management to make certain estimates and assumptions. For additional discussion of our critical accounting policies and accounting estimates, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent Annual Report on Form 10-K. Results of Operations The "same store" amounts presented below include the results of dealerships and corporate headquarters for the identical months in each period presented in comparison, commencing with the first full month in which the dealership was owned by us and, in the case of dispositions, ending with the last full month it was owned by us. For example, for a dealership acquired onAugust 15, 2020 , the results from this dealership will appear in our same store comparison beginning in 2021 for the periodSeptember 2021 throughDecember 2021 , when comparing toSeptember 2020 throughDecember 2020 results. If we disposed of a store onAugust 15, 2020 , the results from this store would be excluded from same store results beginning inAugust 2020 asJuly 2020 was the last full month the dealership was owned by us. 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 withU.S. GAAP. Additionally, we caution investors not to place undue reliance on non-GAAP measures, but also to consider them with the most directly comparableU.S. GAAP measures. Our management also uses constant currency and adjusted cash flows from operating, investing and financing activities in conjunction withU.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, and to allow investors to better understand and evaluate the information used by management to assess operating performance. Certain disclosures are reported as zero balances, or may not compute, due to rounding. 27
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The following tables summarize our operating results on a reported basis and on
a same store basis:
Reported Operating Data - Consolidated
(In millions, except unit and per unit amounts)
Three
Months Ended
Currency Impact on Constant
Increase/ Current Period Currency %
2020 2019 (Decrease) % Change Results Change
Revenues:
New vehicle retail sales
(32.1 )%$ (11.0 ) (31.4 )% Used vehicle retail sales 641.2 838.9 (197.7 ) (23.6 )% (5.6 ) (22.9 )% Used vehicle wholesale sales 48.7 96.0 (47.3 ) (49.3 )% (1.6 ) (47.7 )% Total used 689.9 934.9 (245.0 ) (26.2 )% (7.2 ) (25.4 )% Parts and service sales 282.0 378.2 (96.2 ) (25.4 )% (2.9 ) (24.7 )% F&I, net 96.7 127.3 (30.5 ) (24.0 )% (0.4 ) (23.7 )% Total revenues$ 2,131.2 $ 3,005.7 $ (874.5 ) (29.1 )%$ (21.4 ) (28.4 )% Gross profit: New vehicle retail sales$ 63.8 $ 69.7 $ (5.9 ) (8.5 )%$ (0.7 ) (7.6 )% Used vehicle retail sales 46.3 53.3 (7.0 ) (13.2 )% (0.3 ) (12.6 )% Used vehicle wholesale sales 2.0 (0.1 ) 2.1 2,271.7 % - 2,312.8 % Total used 48.3 53.2 (4.9 ) (9.2 )% (0.4 ) (8.5 )% Parts and service sales 150.0 204.1 (54.1 ) (26.5 )% (1.3 ) (25.9 )% F&I, net 96.7 127.3 (30.5 ) (24.0 )% (0.4 ) (23.7 )% Total gross profit$ 358.8 $ 454.3 $ (95.4 ) (21.0 )%$ (2.7 ) (20.4 )% Gross margin: New vehicle retail sales 6.0 % 4.5 % 1.5 % Used vehicle retail sales 7.2 % 6.4 % 0.9 % Used vehicle wholesale sales 4.2 % (0.1 )% 4.3 % Total used 7.0 % 5.7 % 1.3 % Parts and service sales 53.2 % 54.0 % (0.8 )% F&I, net 100.0 % 100.0 % - % Total gross margin 16.8 % 15.1 % 1.7 % Units sold: Retail new vehicles sold 26,472 42,093 (15,621 ) (37.1 )% Retail used vehicles sold 30,528 39,745 (9,217 ) (23.2 )% Wholesale used vehicles sold 7,303 13,084 (5,781 ) (44.2 )% Total used 37,831 52,829 (14,998 ) (28.4 )% Average sales price per unit sold: New vehicle retail$ 40,143 $ 37,189 $ 2,955 7.9 %$ (414 ) 9.1 %
Used vehicle retail
(0.5 )%$ (184 ) 0.4 % Gross profit per unit sold: New vehicle retail sales$ 2,409 $ 1,656 $ 753 45.5 % $ (25 ) 47.0 %
Used vehicle retail sales
13.1 % $ (10 ) 13.8 % Used vehicle wholesale sales$ 278 $ (7 ) $ 285 3,990.7 % $ (5 ) 4,064.4 % Total used$ 1,277 $ 1,007 $ 270 26.8 % $ (9 ) 27.7 % F&I PRU$ 1,697 $ 1,555 $ 142 9.1 % $ (7 ) 9.6 % Other: SG&A expenses$ 237.2 $ 338.7 $ (101.5 ) (30.0 )%$ (3.0 ) (29.1 )% SG&A as % gross profit 66.1 % 74.6 % (8.5 )% Floorplan expense: Floorplan interest expense$ 10.1 $ 15.9 $ (5.8 ) (36.4 )%$ (0.1 ) (35.5 )% Less: floorplan assistance (1) 9.8 11.8 (2.0 ) (16.9 )% - (16.9 )% Net floorplan expense$ 0.3 $ 4.1 $ (3.8 ) (92.3 )%$ (0.1 ) (88.8 )%
(1) Floorplan assistance is included within New vehicle retail Gross Profit above and New vehicle retail Cost of sales in our Condensed Consolidated Statements of Operations.
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Same Store Operating Data - Consolidated
(In millions, except unit and per unit amounts)
Three
Months Ended
Currency Impact on Constant
Increase/ Current Period Currency %
2020 2019 (Decrease) % Change Results Change
Revenues:
New vehicle retail sales
(33.2 )%$ (10.6 ) (32.6 )% Used vehicle retail sales 620.3 827.1 (206.8 ) (25.0 )% (5.4 ) (24.4 )% Used vehicle wholesale sales 46.9 92.3 (45.3 ) (49.1 )% (1.5 ) (47.4 )% Total used 667.2 919.4 (252.1 ) (27.4 )% (6.9 ) (26.7 )% Parts and service sales 275.3 371.9 (96.6 ) (26.0 )% (2.8 ) (25.2 )% F&I, net 95.3 126.2 (30.9 ) (24.5 )% (0.4 ) (24.2 )% Total revenues$ 2,072.2 $ 2,966.9 $ (894.7 ) (30.2 )%$ (20.8 ) (29.5 )% Gross profit: New vehicle retail sales$ 61.4 $ 69.3 $ (7.9 ) (11.5 )%$ (0.7 ) (10.5 )% Used vehicle retail sales 44.9 52.8 (7.9 ) (15.0 )% (0.3 ) (14.4 )% Used vehicle wholesale sales 2.0 - 2.1 4,571.6 % - 4,656.5 % Total used 46.9 52.8 (5.8 ) (11.1 )% (0.3 ) (10.4 )% Parts and service sales 146.3 201.0 (54.7 ) (27.2 )% (1.2 ) (26.6 )% F&I, net 95.3 126.2 (30.9 ) (24.5 )% (0.4 ) (24.2 )% Total gross profit$ 349.9 $ 449.3 $ (99.3 ) (22.1 )%$ (2.6 ) (21.5 )% Gross margin: New vehicle retail sales 5.9 % 4.5 % 1.5 % Used vehicle retail sales 7.2 % 6.4 % 0.9 % Used vehicle wholesale sales 4.3 % - % 4.4 % Total used 7.0 % 5.7 % 1.3 % Parts and service sales 53.1 % 54.0 % (0.9 )% F&I, net 100.0 % 100.0 % - % Total gross margin 16.9 % 15.1 % 1.7 % Units sold: Retail new vehicles sold 25,767 41,632 (15,865 ) (38.1 )% Retail used vehicles sold 29,647 39,109 (9,462 ) (24.2 )% Wholesale used vehicles sold 7,103 12,792 (5,689 ) (44.5 )% Total used 36,750 51,901 (15,151 ) (29.2 )% Average sales price per unit sold: New vehicle retail$ 40,145 $ 37,220 $ 2,925 7.9 %$ (413 ) 9.0 %
Used vehicle retail
(1.1 )%$ (182 ) (0.2 )% Gross profit per unit sold: New vehicle retail sales$ 2,383 $ 1,666 $ 717 43.1 % $ (25 ) 44.6 %
Used vehicle retail sales
12.1 % $ (10 ) 12.9 % Used vehicle wholesale sales$ 286 $ (4 ) $ 290 8,153.1 % $ (5 ) 8,305.9 % Total used$ 1,277 $ 1,017 $ 260 25.6 % $ (9 ) 26.5 % F&I PRU$ 1,720 $ 1,563 $ 157 10.1 % $ (7 ) 10.5 % Other: SG&A expenses$ 229.5 $ 333.9 $ (104.4 ) (31.3 )%$ (2.9 ) (30.4 )% SG&A as % gross profit 65.6 % 74.3 % (8.7 )% 29
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Reported Operating Data - Consolidated
(In millions, except unit and per unit amounts)
Six Months
Ended
Currency Impact on Constant
Increase/ Current Period Currency %
2020 2019 (Decrease) % Change Results Change
Revenues:
New vehicle retail sales
(19.3 )%$ (27.7 ) (18.4 )% Used vehicle retail sales 1,420.3 1,658.1 (237.8 ) (14.3 )% (10.5 ) (13.7 )% Used vehicle wholesale sales 135.2 188.1 (53.0 ) (28.2 )% (2.5 ) (26.8 )% Total used 1,555.4 1,846.2 (290.8 ) (15.8 )% (13.0 ) (15.0 )%
Parts and service sales 652.6 747.3 (94.8 )
(12.7 )% (5.0 ) (12.0 )% F&I, net 209.2 240.6 (31.5 ) (13.1 )% (0.9 ) (12.7 )% Total revenues$ 4,822.0 $ 5,814.1 $ (992.1 ) (17.1 )%$ (46.6 ) (16.3 )% Gross profit: New vehicle retail sales$ 126.6 $ 141.1 $ (14.5 ) (10.3 )%$ (1.7 ) (9.1 )%
Used vehicle retail sales 88.4 101.1 (12.7 )
(12.5 )% (0.6 ) (11.9 )% Used vehicle wholesale sales 3.0 0.4 2.7 747.0 % (0.1 ) 766.1 % Total used 91.5 101.5 (10.0 ) (9.9 )% (0.7 ) (9.2 )%
Parts and service sales 348.0 402.6 (54.5 )
(13.5 )% (2.3 ) (13.0 )% F&I, net 209.2 240.6 (31.5 ) (13.1 )% (0.9 ) (12.7 )% Total gross profit$ 775.3 $ 885.8 $ (110.5 ) (12.5 )%$ (5.6 ) (11.8 )% Gross margin: New vehicle retail sales 5.3 % 4.7 % 0.5 % Used vehicle retail sales 6.2 % 6.1 % 0.1 % Used vehicle wholesale sales 2.2 % 0.2 % 2.1 % Total used 5.9 % 5.5 % 0.4 % Parts and service sales 53.3 % 53.9 % (0.5 )% F&I, net 100.0 % 100.0 % - % Total gross margin 16.1 % 15.2 % 0.8 % Units sold: Retail new vehicles sold 61,832 80,967 (19,135 ) (23.6 )% Retail used vehicles sold 67,318 78,581 (11,263 ) (14.3 )% Wholesale used vehicles sold 19,389 26,073 (6,684 ) (25.6 )% Total used 86,707 104,654 (17,947 ) (17.1 )% Average sales price per unit sold: New vehicle retail$ 38,893 $ 36,803 $ 2,090 5.7 %$ (449 ) 6.9 %
Used vehicle retail
- %$ (156 ) 0.7 % Gross profit per unit sold: New vehicle retail sales$ 2,047 $ 1,743 $ 305 17.5 % $ (27 ) 19.1 %
Used vehicle retail sales
2.1 % $ (9 ) 2.8 % Used vehicle wholesale sales$ 156 $ 14 $ 143 1,039.0 % $ (4 ) 1,064.6 % Total used$ 1,055 $ 969 $ 85 8.8 % $ (8 ) 9.6 % F&I PRU$ 1,620 $ 1,508 $ 111 7.4 % $ (7 ) 7.9 % Other: SG&A expenses$ 565.1 $ 666.4 $ (101.3 ) (15.2 )%$ (5.7 ) (14.3 )% SG&A as % gross profit 72.9 % 75.2 % (2.3 )% Floorplan expense: Floorplan interest expense$ 23.0 $ 31.6 $ (8.7 ) (27.3 )%$ (0.2 ) (26.7 )% Less: floorplan assistance (1) 20.4 22.3 (1.9 ) (8.6 )% - (8.6 )% Net floorplan expense$ 2.6 $ 9.4 $ (6.7 ) (72.0 )%$ (0.2 ) (70.0 )%
(1) Floorplan assistance is included within New vehicle retail Gross Profit above and New vehicle retail Cost of sales in our Condensed Consolidated Statements of Operations.
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Same Store Operating Data - Consolidated
(In millions, except unit and per unit amounts)
Six Months Ended June 30,
Currency Impact on Constant
Increase/ Current Period Currency %
2020 2019 (Decrease) % Change Results Change
Revenues:
New vehicle retail sales $ 2,332.9 $ 2,943.4 $ (610.5 ) (20.7 )% $ (26.9 ) (19.8 )%
Used vehicle retail sales 1,373.1 1,631.0 (258.0 ) (15.8 )% (10.2 ) (15.2 )%
Used vehicle wholesale sales 129.9 180.8 (50.9 ) (28.2 )% (2.4 ) (26.8 )%
Total used 1,502.9 1,811.9 (308.9 ) (17.0 )% (12.6 ) (16.4 )%
Parts and service sales 632.9 732.3 (99.4 ) (13.6 )% (4.9 ) (12.9 )%
F&I, net 205.7 238.4 (32.7 ) (13.7 )% (0.9 ) (13.3 )%
Total revenues $ 4,674.4 $ 5,725.9 $ (1,051.5 ) (18.4 )% $ (45.3 ) (17.6 )%
Gross profit:
New vehicle retail sales $ 121.1 $ 139.8 $ (18.7 ) (13.4 )% $ (1.6 ) (12.2 )%
Used vehicle retail sales 85.5 100.2 (14.6 ) (14.6 )% (0.6 ) (14.0 )%
Used vehicle wholesale sales 3.0 0.6 2.5 436.5 % (0.1 ) 448.6 %
Total used 88.6 100.7 (12.2 ) (12.1 )% (0.6 ) (11.4 )%
Parts and service sales 337.4 395.2 (57.9 ) (14.6 )% (2.2 ) (14.1 )%
F&I, net 205.7 238.4 (32.7 ) (13.7 )% (0.9 ) (13.3 )%
Total gross profit $ 752.8 $ 874.2 $ (121.4 ) (13.9 )% $ (5.4 ) (13.3 )%
Gross margin:
New vehicle retail sales 5.2 % 4.8 % 0.4 %
Used vehicle retail sales 6.2 % 6.1 % 0.1 %
Used vehicle wholesale sales 2.3 % 0.3 % 2.0 %
Total used 5.9 % 5.6 % 0.3 %
Parts and service sales 53.3 % 54.0 % (0.7 )%
F&I, net 100.0 % 100.0 % - %
Total gross margin 16.1 % 15.3 % 0.8 %
Units sold:
Retail new vehicles sold 59,921 79,538 (19,617 ) (24.7 )%
Retail used vehicles sold 65,316 77,152 (11,836 ) (15.3 )%
Wholesale used vehicles sold 18,718 25,384 (6,666 ) (26.3 )%
Total used 84,034 102,536 (18,502 ) (18.0 )%
Average sales price per unit sold:
New vehicle retail $ 38,932 $ 37,006 $ 1,926 5.2 % $ (449 ) 6.4 %
Used vehicle retail $ 21,022 $ 21,140 $ (119 ) (0.6 )% $ (156 ) 0.2 %
Gross profit per unit sold:
New vehicle retail sales $ 2,021 $ 1,758 $ 263 14.9 % $ (27 ) 16.5 %
Used vehicle retail sales $ 1,310 $ 1,298 $ 11 0.9 % $ (9 ) 1.6 %
Used vehicle wholesale sales $ 162 $ 22 $ 140 627.6 % $ (4 ) 643.9 %
Total used $ 1,054 $ 982 $ 72 7.3 % $ (8 ) 8.1 %
F&I PRU $ 1,643 $ 1,521 $ 121 8.0 % $ (7 ) 8.4 %
Other:
SG&A expenses $ 544.5 $ 657.3 $ (112.8 ) (17.2 )% $ (5.5 ) (16.3 )%
SG&A as % gross profit 72.3 % 75.2 % (2.9 )%
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Reported Operating Data -U.S. (In millions, except unit and per unit amounts) Three Months Ended June 30, 2020 2019 Increase/(Decrease) % Change Revenues: New vehicle retail sales$ 915.7 $ 1,188.8 $ (273.1 ) (23.0 )% Used vehicle retail sales 540.9 625.5 (84.5 ) (13.5 )% Used vehicle wholesale sales 30.5 44.3 (13.8 ) (31.1 )% Total used 571.4 669.7 (98.3 ) (14.7 )% Parts and service sales 254.2 309.6 (55.4 ) (17.9 )% F&I, net 89.8 110.5 (20.7 ) (18.8 )% Total revenues$ 1,831.1 $ 2,278.7 $ (447.6 ) (19.6 )% Gross profit: New vehicle retail sales$ 56.5 $ 54.8 $ 1.8 3.2 % Used vehicle retail sales 41.0 43.3 (2.4 ) (5.5 )% Used vehicle wholesale sales 1.6 0.9 0.7 73.8 % Total used 42.6 44.2 (1.7 ) (3.8 )% Parts and service sales 135.6 167.2 (31.6 ) (18.9 )% F&I, net 89.8 110.5 (20.7 ) (18.8 )% Total gross profit$ 324.5 $ 376.7 $ (52.2 ) (13.9 )% Gross margin: New vehicle retail sales 6.2 % 4.6 % 1.6 % Used vehicle retail sales 7.6 % 6.9 % 0.6 % Used vehicle wholesale sales 5.2 % 2.1 % 3.2 % Total used 7.4 % 6.6 % 0.8 % Parts and service sales 53.3 % 54.0 % (0.7 )% F&I, net 100.0 % 100.0 % - % Total gross margin 17.7 % 16.5 % 1.2 % Units sold: Retail new vehicles sold 21,937 30,318 (8,381 ) (27.6 )% Retail used vehicles sold 26,132 30,477 (4,345 ) (14.3 )% Wholesale used vehicles sold 5,150 6,828 (1,678 ) (24.6 )% Total used 31,282 37,305 (6,023 ) (16.1 )% Average sales price per unit sold: New vehicle retail$ 41,742 $ 39,211 $ 2,531 6.5 % Used vehicle retail$ 20,699 $ 20,522 $ 177 0.9 % Gross profit per unit sold: New vehicle retail sales$ 2,576 $ 1,806 $ 771 42.7 % Used vehicle retail sales$ 1,568 $ 1,422 $ 146 10.3 % Used vehicle wholesale sales$ 311 $ 135 $ 176 130.4 % Total used$ 1,361 $ 1,186 $ 175 14.7 % F&I PRU$ 1,868 $ 1,818 $ 50 2.7 % Other: SG&A expenses$ 203.3 $ 268.1 $ (64.8 ) (24.2 )% SG&A as % gross profit 62.6 % 71.2 % (8.5 )% 32
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Same Store Operating Data -U.S. (In millions, except unit and per unit amounts) Three Months Ended June 30, 2020 2019 Increase/(Decrease) % Change Revenues: New vehicle retail sales$ 898.0 $ 1,184.7 $ (286.7 ) (24.2 )% Used vehicle retail sales 527.2 619.7 (92.5 ) (14.9 )% Used vehicle wholesale sales 29.9 43.4 (13.5 ) (31.2 )% Total used 557.1 663.1 (106.0 ) (16.0 )% Parts and service sales 249.3 308.0 (58.6 ) (19.0 )% F&I, net 88.8 109.8 (21.0 ) (19.1 )% Total revenues$ 1,793.3 $ 2,265.6 $ (472.4 ) (20.8 )% Gross profit: New vehicle retail sales$ 54.7 $ 54.5 $ 0.1 0.2 % Used vehicle retail sales 39.9 42.9 (3.0 ) (7.1 )% Used vehicle wholesale sales 1.6 0.9 0.7 73.9 % Total used 41.5 43.9 (2.4 ) (5.4 )% Parts and service sales 133.0 166.3 (33.3 ) (20.0 )% F&I, net 88.8 109.8 (21.0 ) (19.1 )% Total gross profit$ 317.9 $ 374.5 $ (56.6 ) (15.1 )% Gross margin: New vehicle retail sales 6.1 % 4.6 % 1.5 % Used vehicle retail sales 7.6 % 6.9 % 0.6 % Used vehicle wholesale sales 5.4 % 2.1 % 3.3 % Total used 7.4 % 6.6 % 0.8 % Parts and service sales 53.3 % 54.0 % (0.7 )% F&I, net 100.0 % 100.0 % - % Total gross margin 17.7 % 16.5 % 1.2 % Units sold: Retail new vehicles sold 21,583 30,171 (8,588 ) (28.5 )% Retail used vehicles sold 25,616 30,055 (4,439 ) (14.8 )% Wholesale used vehicles sold 5,087 6,723 (1,636 ) (24.3 )% Total used 30,703 36,778 (6,075 ) (16.5 )% Average sales price per unit sold: New vehicle retail$ 41,608 $ 39,267 $ 2,341 6.0 % Used vehicle retail$ 20,581 $ 20,618 $ (37 ) (0.2 )% Gross profit per unit sold: New vehicle retail sales$ 2,533 $ 1,808 $ 725 40.1 % Used vehicle retail sales$ 1,557 $ 1,429 $ 129 9.0 % Used vehicle wholesale sales$ 316 $ 137 $ 178 129.8 % Total used$ 1,351 $ 1,193 $ 159 13.3 % F&I PRU$ 1,882 $ 1,824 $ 58 3.2 % Other: SG&A expenses$ 199.1 $ 266.3 $ (67.1 ) (25.2 )% SG&A as % gross profit 62.6 % 71.1 % (8.5 )% 33
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The following discussion of ourU.S. operating results is on a same store basis. The difference between reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings. OurU.S. dealership operations have been impacted by the reduced demand caused by the COVID-19 pandemic and the restrictions put in place by local governments to contain the virus. Revenues Total revenues in theU.S. during the three months endedJune 30, 2020 decreased$447.6 million , or 19.6%, as compared to the same period in 2019. Total same store revenues in theU.S. during the three months endedJune 30, 2020 decreased$472.4 million , or 20.8%, as compared to the same period in 2019, driven by declines in all of our revenue streams. The declines of 24.2% in new vehicle retail same store sales, 14.9% in used vehicle retail same store sales and 31.2% in used vehicle wholesale same store sales were driven by decreases of 28.5%, 14.8% and 24.3% in new vehicle, used vehicle retail and used vehicle wholesale unit sales, respectively. The declines in new and used vehicle retail and used vehicle wholesale unit sales were related to reduced demand at our dealerships caused by the COVID-19 pandemic and ensuing inventory shortages later in the quarter as OEMs struggled to restart factories closed because of the pandemic. Despite the challenges faced during the quarter, our recent online new and used vehicle sales initiative, AcceleRide® was instrumental in allowing us to connect with and serve our customers throughout the restricted social distancing environment impacting all of our markets at varying times throughout the second quarter. During the second quarter of 2020, AcceleRide® sales were up 190% from a year ago. Parts and service same store revenues decreased 19.0% driven by a 14.1% decline in customer pay revenues, a 35.2% decline in collision revenues, a 23.2% decline in warranty revenues and a 14.9% decline in wholesale parts revenues. Parts and service same store revenues declined compared to the same period last year due to the impacts of the COVID-19 pandemic during the quarter. F&I same store revenues decreased 19.1%, driven by a 21.6% decline in same store total retail unit sales coupled with a decline in income per contract on finance and vehicle services contracts which were partially offset by a decline in our overall chargeback experience and higher penetration rates on many of our finance and insurance product offerings. Gross Profit Total gross profit in theU.S. during the three months endedJune 30, 2020 decreased$52.2 million , or 13.9%, as compared to the same period in 2019. Total same store gross profit in theU.S. during the three months endedJune 30, 2020 decreased$56.6 million , or 15.1%, as compared to the same period in 2019. The decrease in same store gross profit was driven by declines in parts and service, F&I and used vehicle retail gross profit partially offset by increases in new vehicle retail and used vehicle wholesale gross profit compared to the same period last year. New vehicle same store gross profit increased 0.2% driven by a 40.1% increase in new vehicle gross profit per unit sold which more than offset a 28.5% decrease in same store new vehicle retail unit sales. The increase in same store new vehicle gross profit per unit sold reflects increased incentives provided by the manufacturers and supply constraints as many manufacturers put a hold on production due to the COVID-19 pandemic. Used vehicle retail same store gross profit decreased 7.1% reflecting a 14.8% decrease in used vehicle retail same store unit sales partially offset by an increase of 9.0% in used vehicle retail same store gross profit per unit sold over the same period in 2019. The increase in used vehicle retail same store gross profit per unit sold reflects supply constraints as the COVID-19 pandemic has negatively impacted our ability to obtain used vehicle inventory. Used vehicle wholesale gross profit increased 73.9% as industry supply constraints drove up auction prices. Parts and service same store gross profit and F&I same store gross profit declined by 20.0% and 19.1%, respectively, driven by the decreases discussed above. Total same store gross margin increased 120 basis points driven by higher vehicle prices as a result of supply shortages of new and used vehicle inventory. SG&A Expenses Our SG&A expenses consist primarily of personnel costs, including salaries, commissions and incentive-based compensation, as well as rent and facility costs, advertising and other expenses, which include legal, professional fees and general corporate expenses. Total SG&A expenses in theU.S. during the three months endedJune 30, 2020 decreased$64.8 million , or 24.2%, as compared to the same period in 2019. Total same store SG&A expenses in theU.S. during the three months endedJune 30, 2020 decreased$67.1 million , or 25.2%, as compared to the same period in 2019. OurU.S. dealership operations were directly impacted by reduced demand caused by the COVID-19 pandemic. In an effort to reduce costs, we furloughed and terminated employees and significantly reduced advertising, outside services and other SG&A expenses. Total same store SG&A expenses in theU.S. in the second quarter of 2019 included$4.0 million in net costs associated with a hailstorm inTexas . Total same store SG&A expenses in theU.S. in second quarter of 2020 included a$10.6 million expense for an out-of-period adjustment related to stock-based compensation. Total same store SG&A as a percent of gross profit decreased 850 basis points compared to the same period in 2019 to 62.6% driven by the cost cutting measures taken to offset the negative impact of the COVID-19 pandemic. 34
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Reported Operating Data -U.S. (In millions, except unit and per unit amounts) Six Months Ended June 30, 2020 2019 Increase/(Decrease) % Change Revenues: New vehicle retail sales$ 1,904.1 $ 2,220.5 $ (316.5 ) (14.3 )% Used vehicle retail sales 1,111.2 1,219.9 (108.6 ) (8.9 )% Used vehicle wholesale sales 77.3 87.1 (9.8 ) (11.2 )% Total used 1,188.6 1,307.0 (118.4 ) (9.1 )% Parts and service sales 558.9 607.2 (48.4 ) (8.0 )% F&I, net 187.2 206.7 (19.5 ) (9.4 )% Total revenues$ 3,838.7 $ 4,341.5 $ (502.8 ) (11.6 )% Gross profit: New vehicle retail sales$ 103.8 $ 105.6 $ (1.8 ) (1.7 )% Used vehicle retail sales 72.9 81.6 (8.7 ) (10.7 )% Used vehicle wholesale sales 2.4 2.1 0.3 16.4 % Total used 75.3 83.7 (8.4 ) (10.0 )% Parts and service sales 299.1 327.7 (28.6 ) (8.7 )% F&I, net 187.2 206.7 (19.5 ) (9.4 )% Total gross profit$ 665.4 $ 723.6 $ (58.2 ) (8.0 )% Gross margin: New vehicle retail sales 5.5 % 4.8 % 0.7 % Used vehicle retail sales 6.6 % 6.7 % (0.1 )% Used vehicle wholesale sales 3.1 % 2.4 % 0.7 % Total used 6.3 % 6.4 % (0.1 )% Parts and service sales 53.5 % 54.0 % (0.4 )% F&I, net 100.0 % 100.0 % - % Total gross margin 17.3 % 16.7 % 0.7 % Units sold: Retail new vehicles sold 46,432 56,708 (10,276 ) (18.1 )% Retail used vehicles sold 53,800 59,794 (5,994 ) (10.0 )% Wholesale used vehicles sold 12,177 13,978 (1,801 ) (12.9 )% Total used 65,977 73,772 (7,795 ) (10.6 )% Average sales price per unit sold: New vehicle retail$ 41,008 $ 39,157 $ 1,850 4.7 % Used vehicle retail$ 20,655 $ 20,401 $ 254 1.2 % Gross profit per unit sold: New vehicle retail sales$ 2,235 $ 1,861 $ 374 20.1 % Used vehicle retail sales$ 1,355 $ 1,365 $ (10 ) (0.7 )% Used vehicle wholesale sales$ 199 $ 149 $ 50 33.6 % Total used$ 1,142 $ 1,135 $ 7 0.6 % F&I PRU$ 1,868 $ 1,774 $ 93 5.3 % Other: SG&A expenses$ 460.8 $ 524.2 $ (63.5 ) (12.1 )% SG&A as % gross profit 69.2 % 72.4 % (3.2 )% 35
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Same Store Operating Data -U.S. (In millions, except unit and per unit amounts) Six Months Ended June 30, 2020 2019 Increase/(Decrease) % Change Revenues: New vehicle retail sales$ 1,868.4 $ 2,208.7 $ (340.3 ) (15.4 )% Used vehicle retail sales 1,085.2 1,207.6 (122.3 ) (10.1 )% Used vehicle wholesale sales 76.2 85.0 (8.8 ) (10.3 )% Total used 1,161.5 1,292.5 (131.1 ) (10.1 )% Parts and service sales 547.7 601.6 (53.9 ) (9.0 )% F&I, net 185.4 205.4 (20.0 ) (9.7 )% Total revenues$ 3,763.0 $ 4,308.2 $ (545.2 ) (12.7 )% Gross profit: New vehicle retail sales$ 99.8 $ 105.0 $ (5.2 ) (5.0 )% Used vehicle retail sales 71.0 80.9 (9.9 ) (12.3 )% Used vehicle wholesale sales 2.4 2.1 0.3 15.9 % Total used 73.4 83.0 (9.6 ) (11.6 )% Parts and service sales 293.0 324.9 (31.9 ) (9.8 )% F&I, net 185.4 205.4 (20.0 ) (9.7 )% Total gross profit$ 651.6 $ 718.3 $ (66.7 ) (9.3 )% Gross margin: New vehicle retail sales 5.3 % 4.8 % 0.6 % Used vehicle retail sales 6.5 % 6.7 % (0.2 )% Used vehicle wholesale sales 3.2 % 2.5 % 0.7 % Total used 6.3 % 6.4 % (0.1 )% Parts and service sales 53.5 % 54.0 % (0.5 )% F&I, net 100.0 % 100.0 % - % Total gross margin 17.3 % 16.7 % 0.6 % Units sold: Retail new vehicles sold 45,737 56,316 (10,579 ) (18.8 )% Retail used vehicles sold 52,826 58,923 (6,097 ) (10.3 )% Wholesale used vehicles sold 12,047 13,685 (1,638 ) (12.0 )% Total used 64,873 72,608 (7,735 ) (10.7 )% Average sales price per unit sold: New vehicle retail$ 40,851 $ 39,220 $ 1,631 4.2 % Used vehicle retail$ 20,544 $ 20,494 $ 50 0.2 % Gross profit per unit sold: New vehicle retail sales$ 2,181 $ 1,865 $ 317 17.0 % Used vehicle retail sales$ 1,343 $ 1,373 $ (30 ) (2.2 )% Used vehicle wholesale sales$ 203 $ 154 $ 49 31.7 % Total used$ 1,132 $ 1,143 $ (12 ) (1.0 )% F&I PRU$ 1,881 $ 1,782 $ 99 5.6 % Other: SG&A expenses$ 451.2 $ 522.5 $ (71.3 ) (13.7 )% SG&A as % gross profit 69.2 % 72.7 % (3.5 )% 36
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The following discussion of ourU.S. operating results is on a same store basis. The difference between reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings. OurU.S. dealership operations have been significantly impacted by the reduced demand caused by the COVID-19 pandemic and the restrictions put in place by local governments to contain the virus. Revenues Total revenues in theU.S. during the six months endedJune 30, 2020 decreased$502.8 million , or 11.6%, as compared to the same period in 2019. Total same store revenues in theU.S. during the six months endedJune 30, 2020 decreased$545.2 million , or 12.7%, as compared to the same period in 2019. The decrease inU.S. same store revenues was driven by declines in all of our revenue streams. The declines of 15.4% in new vehicle retail same store sales, 10.1% in used vehicle retail same store sales and 10.3% in used vehicle wholesale same store sales were driven by declines of 18.8%, 10.3% and 12.0% in new vehicle, used vehicle retail and used vehicle wholesale unit sales, respectively, reflecting reduced demand at our dealerships caused by the COVID-19 pandemic and inventory shortages. Partially offsetting these declines, our recent online new and used vehicle sales initiative, AcceleRide® was instrumental in allowing us to connect with and serve our customers throughout the restricted social distancing environment impacting all of our markets at varying times. Parts and service same store revenues decreased 9.0% driven by a 15.1% decrease in warranty revenues, a 6.0% decrease in customer-pay revenues, a 15.4% decrease in collision revenues, and a 4.9% decrease in wholesale parts revenues. Parts and service same store revenues were up 8.4% at the end ofFebruary 2020 compared to the same period last year but were dampened by the impacts of COVID-19 for the remaining months throughJune 30, 2020 . F&I same store revenues decreased 9.7% driven by a 14.5% decrease in same store retail unit sales as discussed above, which was partially offset by higher penetration rates on many of our finance and insurance product offerings and a decline in our overall chargeback experience. Gross profit Total gross profit in theU.S. during the six months endedJune 30, 2020 decreased$58.2 million , or 8.0%, as compared to the same period in 2019. Total same store gross profit in theU.S. during the six months endedJune 30, 2020 decreased$66.7 million , or 9.3%, as compared to the same period in 2019.The decrease in total gross profit was driven by decreases in all of our operations except for used vehicle wholesale. New vehicle retail same store gross profit decreased 5.0% driven by an 18.8% decrease in new vehicle unit sales partially offset by a 17.0% increase in same store new vehicle gross profit per unit sold. The increase in same store new vehicle gross profit per unit sold was related to supply constraints of new vehicle inventory as many manufacturers put a hold on production due to COVID-19. The 12.3% decrease in same store used vehicle retail gross profit was related to a 10.3% decline in used vehicle retail unit sales coupled with a 2.2% decrease in used vehicle retail same store average gross profit per unit sold. The decline in used vehicle retail same store gross profit was related to the reduced demand caused by the COVID-19 pandemic. Parts and service same store gross profit and F&I same store gross profit decreased 9.8% and 9.7%, respectively, driven by decreases described above. Total same store gross margin increased 60 basis points primarily as a result of higher new vehicle margins related to the supply constraints of inventory in the industry. SG&A Expenses Our SG&A expenses consist primarily of personnel costs, including salaries, commissions and incentive-based compensation, as well as rent and facility costs, advertising and other expenses, which include legal, professional fees and general corporate expenses. Total SG&A expenses in theU.S. during the six months endedJune 30, 2020 decreased$63.5 million , or 12.1%, as compared to the same period in 2019. Total same store SG&A expenses in theU.S. during the six months endedJune 30, 2020 , decreased$71.3 million , or 13.7%, as compared to the same period in 2019. TheU.S. dealership operations were directly impacted by reduced demand caused by the COVID-19 pandemic. In an effort to reduce costs, we furloughed and terminated employees and significantly reduced advertising and other SG&A expenses. Total same store SG&A expenses in theU.S. for the first six months of 2019 included$6.0 million in net costs associated with hailstorms inTexas andOklahoma ;$1.1 million in net gains on real estate and dealership transactions; and$1.8 million in non-core legal expenses. Total same store SG&A expenses in theU.S. during the second quarter of 2020 included$10.6 million in expense for an out-of-period adjustment related to stock-based compensation. Total same store SG&A as a percent of gross profit decreased 350 basis points over the same period in 2019 driven by cost cutting measures taken due to the impact of the COVID-19 pandemic. 37
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Reported Operating Data -U.K. (In millions, except unit and per unit amounts) Three Months
Ended
Currency Impact on Constant
Increase/ Current Period Currency %
2020 2019 (Decrease) % Change Results Change
Revenues:
New vehicle retail sales
(3.0 ) (50.6 )%
Used vehicle wholesale
sales 15.3 46.9 (31.6 ) (67.5 )% (0.5 ) (66.4 )%
Total used 108.1 240.9 (132.8 ) (55.1 )% (3.5 ) (53.7 )%
Parts and service sales 21.8 56.4 (34.5 ) (61.3 )% (0.7 ) (60.0 )%
F&I, net 6.4 15.0 (8.6 ) (57.4 )% (0.2 ) (56.2 )%
Total revenues $ 263.5 $ 614.4 $ (350.9 ) (57.1 )% $ (8.3 ) (55.8 )%
Gross profit:
New vehicle retail sales $ 5.9 $ 10.6 $ (4.8 ) (44.8 )% $ (0.2 ) (43.2 )%
Used vehicle retail sales 4.9 8.3 (3.4 ) (41.1 )% (0.2 ) (39.1 )%
Used vehicle wholesale
sales 0.4 (1.3 ) 1.6 127.3 % - 128.0 %
Total used 5.2 7.0 (1.8 ) (25.2 )% (0.2 ) (22.8 )%
Parts and service sales 11.9 31.5 (19.5 ) (62.1 )% (0.4 ) (60.9 )%
F&I, net 6.4 15.0 (8.6 ) (57.4 )% (0.2 ) (56.2 )%
Total gross profit $ 29.4 $ 64.1 $ (34.7 ) (54.1 )% $ (0.9 ) (52.7 )%
Gross margin:
New vehicle retail sales 4.6 % 3.5 % 1.1 %
Used vehicle retail sales 5.3 % 4.3 % 1.0 %
Used vehicle wholesale
sales 2.3 % (2.7 )% 5.0 %
Total used 4.8 % 2.9 % 1.9 %
Parts and service sales 54.7 % 55.9 % (1.2 )% F&I, net
100.0 % 100.0 % - %
Total gross margin 11.2 % 10.4 % 0.7 %
Units sold:
Retail new vehicles sold 3,841 9,266 (5,425 ) (58.5 )%
Retail used vehicles sold 4,040 8,280 (4,240 ) (51.2 )%
Wholesale used vehicles
sold 1,829 5,772 (3,943 ) (68.3 )%
Total used 5,869 14,052 (8,183 ) (58.2 )%
Average sales price per
unit sold:
New vehicle retail $ 33,119 $ 32,617 $ 502 1.5 % $ (1,012 ) 4.6 %
Used vehicle retail
(1.9 )%$ (740 ) 1.2 % Gross profit per unit sold: New vehicle retail sales$ 1,527 $ 1,147 $ 380 33.2 % $ (45 ) 37.1 %
Used vehicle retail sales
20.8 % $ (40 ) 24.8 % Used vehicle wholesale sales$ 192 $ (223 ) $ 415 186.1 % $ (5 ) 188.2 % Total used$ 892 $ 498 $ 394 79.1 % $ (29 ) 84.9 % F&I PRU$ 808 $ 853 $ (45 ) (5.2 )% $ (23 ) (2.6 )% Other: SG&A expenses$ 28.3 $ 59.0 $ (30.7 ) (52.1 )%$ (1.0 ) (50.4 )%
SG&A as % gross profit 96.2 % 92.1 % 4.1 %
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Same Store Operating Data -U.K. (In millions, except unit and per unit amounts) Three Months
Ended
Currency Impact on Constant
Increase/ Current Period Currency %
2020 2019 (Decrease) % Change Results Change
Revenues:
New vehicle retail sales
(2.8 ) (53.3 )%
Used vehicle wholesale
sales 14.2 45.6 (31.4 ) (68.8 )% (0.5 ) (67.8 )%
Total used 99.8 234.6 (134.8 ) (57.5 )% (3.2 ) (56.1 )%
Parts and service sales 20.0 52.0 (32.0 ) (61.5 )% (0.6 ) (60.2 )%
F&I, net 5.9 14.6 (8.7 ) (59.3 )% (0.2 ) (58.2 )%
Total revenues $ 242.4 $ 593.5 $ (351.1 ) (59.2 )% $ (7.6 ) (57.9 )%
Gross profit:
New vehicle retail sales $ 5.3 $ 10.5 $ (5.1 ) (49.0 )% $ (0.2 ) (47.5 )%
Used vehicle retail sales 4.6 8.4 (3.8 ) (45.3 )% (0.2 ) (43.5 )%
Used vehicle wholesale
sales 0.3 (1.2 ) 1.6 127.8 % - 128.5 %
Total used 4.9 7.1 (2.2 ) (30.8 )% (0.2 ) (28.6 )%
Parts and service sales 10.9 29.5 (18.6 ) (63.1 )% (0.3 ) (61.9 )%
F&I, net 5.9 14.6 (8.7 ) (59.3 )% (0.2 ) (58.2 )%
Total gross profit $ 27.1 $ 61.6 $ (34.6 ) (56.1 )% $ (0.8 ) (54.7 )%
Gross margin:
New vehicle retail sales 4.6 % 3.6 % 1.0 %
Used vehicle retail sales 5.3 % 4.4 % 0.9 %
Used vehicle wholesale
sales 2.4 % (2.7 )% 5.2 %
Total used 4.9 % 3.0 % 1.9 %
Parts and service sales 54.3 % 56.6 % (2.3 )% F&I, net
100.0 % 100.0 % - %
Total gross margin 11.2 % 10.4 % 0.8 %
Units sold:
Retail new vehicles sold 3,490 8,983 (5,493 ) (61.1 )%
Retail used vehicles sold 3,675 8,111 (4,436 ) (54.7 )%
Wholesale used vehicles
sold 1,692 5,630 (3,938 ) (69.9 )%
Total used 5,367 13,741 (8,374 ) (60.9 )%
Average sales price per
unit sold:
New vehicle retail $ 33,416 $ 32,537 $ 879 2.7 % $ (1,022 ) 5.8 %
Used vehicle retail
- %$ (749 ) 3.2 % Gross profit per unit sold: New vehicle retail sales$ 1,533 $ 1,169 $ 364 31.2 % $ (45 ) 35.1 %
Used vehicle retail sales
20.8 % $ (41 ) 24.7 % Used vehicle wholesale sales$ 205 $ (221 ) $ 426 192.5 % $ (5 ) 194.8 % Total used$ 917 $ 518 $ 399 77.1 % $ (30 ) 82.9 % F&I PRU$ 827 $ 853 $ (26 ) (3.0 )% $ (23 ) (0.3 )% Other: SG&A expenses$ 24.8 $ 55.9 $ (31.1 ) (55.7 )%$ (0.9 ) (54.1 )%
SG&A as % gross profit 91.5 % 90.6 % 0.9 %
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The following discussion of ourU.K. operating results is on a same store basis. The difference between reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings. OurU.K. dealership operations have been significantly impacted by the reduced demand caused by the COVID-19 pandemic and the restrictions put in place by the national government to contain the virus. Revenues Total revenues in theU.K. during the three months endedJune 30, 2020 decreased$350.9 million , or 57.1%, as compared to the same period in 2019. Total same store revenues in theU.K. during the three months endedJune 30, 2020 decreased$351.1 million , or 59.2%, as compared to the same period in 2019. On a constant currency basis, total same store revenues decreased 57.9%, driven by decreases in all of our operations due to the COVID-19 pandemic. BeginningMarch 21, 2020 , the government mandated the closure of allU.K. dealerships in efforts to stop the spread of the virus and the government shutdown remained in effect throughMay 18, 2020 for service, with the exception of emergency vehicle repairs.U.K. showrooms were allowed to reopenJune 1, 2020 and performed well for the month. On a constant currency basis, new vehicle retail same store revenues declined 58.9% driven by a 61.1% decrease in new vehicle retail same store unit sales, partially offset by a 5.8% increase in average new vehicle retail same store sales price. Used vehicle retail same store revenues on a constant currency basis decreased 53.3% as used vehicle retail same store unit sales declined 54.7%, partially offset by a 3.2% increase in average used retail same store sales price. Parts and service same store revenues decreased 60.2% on a constant currency basis as all of our parts and service businesses were negatively impacted by COVID-19, with declines of 57.1% in customer-pay, 66.2% in warranty, 67.7% in collision and 60.2% in wholesale parts revenues. F&I same store revenues on a constant currency basis decreased 58.2%, driven by lower penetration rates coupled with the decline in retail unit sales volumes. Gross Profit Total gross profit in theU.K. during the three months endedJune 30, 2020 decreased$34.7 million , or 54.1%, as compared to the same period in 2019. Total same store gross profit in theU.K. during the three months endedJune 30, 2020 decreased$34.6 million , or 56.1%, as compared to the same period in 2019. On a constant currency basis, total same store gross profit decreased 54.7%, driven by decreases in all of our operations, except used vehicle wholesale, due to COVID-19. New vehicle retail same store gross profit decreased 47.5% on a constant currency basis, driven by a 61.1% decrease in new vehicle retail same store unit sales, partially offset by a 35.1% increase in new vehicle retail same store gross profit per unit. The increase in new vehicle gross profit per unit is primarily due to current supply constraints. On a constant currency basis, used vehicle retail same store gross profit decreased 43.5%, reflecting a 54.7% decline in used vehicle retail same store unit sales, partially offset by a 24.7% increase in used vehicle retail same store gross profit per unit sold. The increase in used vehicle retail same store gross profit per unit sold reflects supply constraints similar to new vehicles. The overall decline in new vehicle and used vehicle retail same store gross profits was directly related to the closures caused by the COVID-19 pandemic. Used vehicle wholesale same store gross profit improved 128.5% on a constant currency basis due to the increase in auction prices due to supply constraints. Parts and service same store gross profit on a constant currency basis decreased 61.9% due to a 60.2% decrease in revenues, as discussed above. F&I same store revenues on a constant currency basis decreased 58.2% as previously discussed. SG&A Expenses Our SG&A expenses consist primarily of personnel costs, including salaries, commissions and incentive-based compensation, as well as rent and facility costs, advertising and other expenses, which include legal, professional fees and general corporate expenses. Total SG&A expenses in theU.K. during the three months endedJune 30, 2020 decreased$30.7 million , or 52.1%, as compared to the same period in 2019. Total same store SG&A expenses in theU.K. during the three months endedJune 30, 2020 , decreased$31.1 million , or 55.7%, as compared to the same period in 2019. On a constant currency basis, total same store SG&A expenses decreased 54.1%, driven by the implementation and execution of cost reduction strategies as a reaction to the COVID-19 pandemic, which enabled us to partially offset the adverse effect of significantly lower gross profit. Total same store SG&A expenses in the second quarter of 2020 included$1.2 million in severance costs for redundancy driven by the COVID-19 pandemic. As a percentage of gross profit, total same store SG&A expenses increased 90 basis points over the same period in 2019 to 91.5%, reflecting the decline in gross profit discussed above. 40
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Reported Operating Data -U.K. (In millions, except unit and per unit amounts) Six Months
Ended
Currency Impact on Constant
Increase/ Current Period Currency %
2020 2019 (Decrease) % Change Results Change
Revenues:
New vehicle retail sales
(31.8 )%$ (11.5 ) (29.9 )% Used vehicle retail sales 281.6 397.6 (115.9 ) (29.2 )% (4.7 ) (28.0 )% Used vehicle wholesale sales 51.1 92.1 (41.1 ) (44.6 )% (0.8 ) (43.7 )% Total used 332.7 489.7 (157.0 ) (32.1 )% (5.5 ) (30.9 )% Parts and service sales 78.3 115.9 (37.7 ) (32.5 )% (1.3 ) (31.4 )% F&I, net 19.7 30.2 (10.5 ) (34.7 )% (0.4 ) (33.3 )% Total revenues$ 854.2 $ 1,256.6 $ (402.4 ) (32.0 )%$ (18.7 ) (30.5 )% Gross profit: New vehicle retail sales$ 17.9 $ 27.4 $ (9.5 ) (34.6 )%$ (0.6 ) (32.3 )% Used vehicle retail sales 14.0 16.6 (2.5 ) (15.3 )% (0.3 ) (13.6 )% Used vehicle wholesale sales 0.3 (2.3 ) 2.6 113.9 % - 114.1 % Total used 14.4 14.3 0.1 0.6 % (0.3 ) 2.5 % Parts and service sales 42.3 64.2 (22.0 ) (34.2 )% (0.7 ) (33.1 )% F&I, net 19.7 30.2 (10.5 ) (34.7 )% (0.4 ) (33.3 )% Total gross profit$ 94.2 $ 136.1 $ (41.8 ) (30.7 )%$ (2.1 ) (29.2 )% Gross margin: New vehicle retail sales 4.2 % 4.4 % (0.2 )% Used vehicle retail sales 5.0 % 4.2 % 0.8 % Used vehicle wholesale sales 0.6 % (2.5 )% 3.1 % Total used 4.3 % 2.9 % 1.4 % Parts and service sales 54.0 % 55.4 % (1.4 )% F&I, net 100.0 % 100.0 % - % Total gross margin 11.0 % 10.8 % 0.2 % Units sold: Retail new vehicles sold 12,735 19,610 (6,875 ) (35.1 )% Retail used vehicles sold 12,064 16,711 (4,647 ) (27.8 )% Wholesale used vehicles sold 6,413 11,139 (4,726 ) (42.4 )% Total used 18,477 27,850 (9,373 ) (33.7 )% Average sales price per unit sold: New vehicle retail$ 33,255 $ 31,657 $ 1,598 5.0 %$ (900 ) 7.9 %
Used vehicle retail
(1.9 )%$ (388 ) (0.2 )% Gross profit per unit sold: New vehicle retail sales$ 1,407 $ 1,397 $ 10 0.7 % $ (50 ) 4.3 %
Used vehicle retail sales
17.4 % $ (23 ) 19.6 % Used vehicle wholesale sales$ 50 $ (206 ) $ 256 124.2 % $ (1 ) 124.4 % Total used$ 777 $ 513 $ 265 51.6 % $ (15 ) 54.5 % F&I PRU$ 794 $ 830 $ (37 ) (4.4 )% $ (18 ) (2.3 )% Other: SG&A expenses$ 88.2 $ 118.2 $ (30.1 ) (25.4 )%$ (1.8 ) (23.9 )%
SG&A as % gross profit 93.5 % 86.9 % 6.6 %
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Same Store Operating Data -U.K. (In millions, except unit and per unit amounts) Six Months
Ended
Currency Impact on Constant
Increase/ Current Period Currency %
2020 2019 (Decrease) % Change Results Change
Revenues:
New vehicle retail sales
(35.4 )%$ (10.6 ) (33.6 )% Used vehicle retail sales 260.4 385.4 (125.0 ) (32.4 )% (4.3 ) (31.3 )% Used vehicle wholesale sales 46.9 89.1 (42.1 ) (47.3 )% (0.8 ) (46.5 )% Total used 307.4 474.5 (167.1 ) (35.2 )% (5.1 ) (34.1 )% Parts and service sales 69.7 107.1 (37.3 ) (34.9 )% (1.2 ) (33.8 )% F&I, net 18.0 29.3 (11.3 ) (38.5 )% (0.4 ) (37.1 )% Total revenues$ 782.3 $ 1,209.9 $ (427.6 ) (35.3 )%$ (17.3 ) (33.9 )% Gross profit: New vehicle retail sales$ 16.4 $ 26.7 $ (10.3 ) (38.5 )%$ (0.6 ) (36.2 )% Used vehicle retail sales 13.1 16.3 (3.3 ) (19.9 )% (0.3 ) (18.3 )% Used vehicle wholesale sales 0.3 (2.1 ) 2.4 114.3 % - 114.5 % Total used 13.4 14.2 (0.9 ) (6.0 )% (0.3 ) (4.2 )% Parts and service sales 37.7 60.0 (22.2 ) (37.1 )% (0.7 ) (36.0 )% F&I, net 18.0 29.3 (11.3 ) (38.5 )% (0.4 ) (37.1 )% Total gross profit$ 85.6 $ 130.2 $ (44.6 ) (34.3 )%$ (1.9 ) (32.8 )% Gross margin: New vehicle retail sales 4.2 % 4.5 % (0.2 )% Used vehicle retail sales 5.0 % 4.2 % 0.8 % Used vehicle wholesale sales 0.6 % (2.4 )% 3.0 % Total used 4.4 % 3.0 % 1.4 % Parts and service sales 54.1 % 56.0 % (1.9 )% F&I, net 100.0 % 100.0 % - % Total gross margin 10.9 % 10.8 % 0.2 % Units sold: Retail new vehicles sold 11,519 18,618 (7,099 ) (38.1 )% Retail used vehicles sold 11,036 16,228 (5,192 ) (32.0 )% Wholesale used vehicles sold 5,872 10,810 (4,938 ) (45.7 )% Total used 16,908 27,038 (10,130 ) (37.5 )% Average sales price per unit sold: New vehicle retail$ 33,613 $ 32,173 $ 1,440 4.5 %$ (920 ) 7.3 %
Used vehicle retail
(0.6 )%$ (394 ) 1.0 % Gross profit per unit sold: New vehicle retail sales$ 1,425 $ 1,433 $ (8 ) (0.5 )% $ (51 ) 3.0 %
Used vehicle retail sales
17.8 % $ (23 ) 20.1 % Used vehicle wholesale sales$ 51 $ (194 ) $ 246 126.4 % $ (1 ) 126.7 % Total used$ 792 $ 527 $ 265 50.4 % $ (15 ) 53.3 % F&I PRU$ 799 $ 841 $ (42 ) (5.0 )% $ (18 ) (2.8 )% Other: SG&A expenses$ 77.1 $ 111.6 $ (34.4 ) (30.9 )%$ (1.6 ) (29.5 )%
SG&A as % gross profit 90.1 % 85.7 % 4.4 %
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The following discussion of ourU.K. operating results is on a same store basis. The difference between reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings. OurU.K. dealership operations have been significantly impacted by the reduced demand caused by the COVID-19 pandemic and the restrictions put in place by the national government to contain the virus. Revenues Total revenues in theU.K. during the six months endedJune 30, 2020 decreased$402.4 million , or 32.0%, as compared to the same period in 2019. Total same store revenues in theU.K. during the six months endedJune 30, 2020 decreased$427.6 million , or 35.3%, as compared to the same period in 2019. On a constant currency basis, total same store revenues decreased 33.9%, driven by decreases in all of our operations due to the COVID-19 pandemic. BeginningMarch 21, 2020 , the government mandated the closure of allU.K. dealerships in efforts to stop the spread of the virus. The government shutdown remained in effect throughMay 18, 2020 for service, with the exception of emergency vehicle repairs, andJune 1, 2020 for showrooms. New vehicle retail same store revenues on a constant currency basis decreased 33.6%, as a 38.1% decrease in new vehicle retail same store unit sales was partially offset by a 7.3% increase in new vehicle retail same store average sales price per unit sold. On a constant currency basis, used vehicle retail same store revenues decreased 31.3%, as a 32.0% decrease in used vehicle retail same store unit sales was partially offset by a 1.0% increase in used vehicle retail same store average sales price per unit sold. Parts and service same store revenues decreased 33.8% on a constant currency basis driven by declines of 27.1% in customer-pay, 45.5% in warranty, 45.6% in collision, and 34.0% in wholesale parts revenues. The decreases in all parts and service businesses are a result of the limitations on the business due to COVID-19. F&I same store revenues on a constant currency basis decreased 37.1% driven by the decline in retail unit sales and lower penetration rates, partially offset by an increase in income per contract on finance fees. Gross profit Total gross profit in theU.K. during the six months endedJune 30, 2020 decreased$41.8 million , or 30.7%, as compared to the same period in 2019. Total same store gross profit in theU.K. during the six months endedJune 30, 2020 decreased$44.6 million , or 34.3%, as compared to the same period in 2019. On a constant currency basis, total same store gross profit decreased 32.8%, driven by decreases in all of our operations, except for used vehicle wholesale, due to COVID-19. New vehicle retail same store gross profit on a constant currency basis decreased 36.2%, driven by a 38.1% decline in new vehicle retail same store unit sales, partially offset by a 3.0% increase in new vehicle retail same store average gross profit per unit sold. The increase in new vehicle retail same store gross profit per unit sold reflects supply constraints that occurred during the second quarter of 2020 related to the COVID-19 pandemic. Used vehicle retail same store gross profit on a constant currency basis decreased 18.3% on a 32.0% decrease in used vehicle retail same store unit sales, partially offset by a 20.1% increase in used vehicle retail same store average gross profit per unit sold. The increase in used vehicle retail same store average gross profit per unit sold reflects supply constraints similar to new vehicles. The overall gross profit declines on new and used vehicles are a result of the COVID-19 pandemic. Used vehicle wholesale same store gross profit improved 114.5% on a constant currency basis due to increases in auction prices. Parts and service same store gross profit on a constant currency basis decreased 36.0% as a result of a 33.8% decline in revenues discussed above. F&I same store on a constant currency basis decreased 37.1% as discussed above. SG&A Expenses Our SG&A expenses consist primarily of personnel costs, including salaries, commissions and incentive-based compensation, as well as rent and facility costs, advertising and other expenses, which include legal, professional fees and general corporate expenses. Total SG&A expenses in theU.K. during the six months endedJune 30, 2020 decreased$30.1 million , or 25.4%, as compared to the same period in 2019. Total same store SG&A expenses in theU.K. during the six months endedJune 30, 2020 , decreased$34.4 million , or 30.9%, as compared to the same period in 2019. On a constant currency basis, total same store SG&A expenses decreased 29.5%. This decline was driven by the implementation and execution of cost reduction strategies as a reaction to the COVID-19 pandemic, which enabled us to partially offset the negative impact of lower gross profit. Total same store SG&A expenses in 2020 included$1.2 million in severance costs for redundancy due to the COVID-19 pandemic. As a percentage of gross profit, total same store SG&A expenses increased 440 basis points over the same period in 2019 to 90.1%, reflecting the decline in gross profit discussed above. 43
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Reported Operating Data -Brazil (In millions, except unit and per unit amounts) Three Months
Ended
Currency Impact on Constant
Increase/ Current Period Currency %
2020 2019 (Decrease) % Change Results ChangeRevenues:
New vehicle retail sales
(2.6 ) (48.0 )%
Used vehicle wholesale
sales 2.9 4.8 (2.0 ) (40.5 )% (1.1 ) (18.5 )%
Total used 10.3 24.3 (13.9 ) (57.4 )% (3.7 ) (42.1 )%
Parts and service sales 5.9 12.2 (6.3 ) (51.5 )% (2.2 ) (33.7 )%
F&I, net 0.6 1.8 (1.2 ) (67.7 )% (0.2 ) (56.0 )%
Total revenues $ 36.6 $ 112.6 $ (76.0 ) (67.5 )% $ (13.2 ) (55.8 )%
Gross profit:
New vehicle retail sales $ 1.4 $ 4.3 $ (2.9 ) (67.9 )% $ (0.5 ) (56.6 )%
Used vehicle retail sales 0.4 1.7 (1.2 ) (74.2 )% (0.1 ) (65.3 )%
Used vehicle wholesale
sales 0.1 0.3 (0.2 ) (70.7 )% - (59.8 )%
Total used 0.5 1.9 (1.4 ) (73.7 )% (0.2 ) (64.5 )%
Parts and service sales 2.5 5.4 (2.9 ) (54.5 )% (0.9 ) (37.8 )%
F&I, net 0.6 1.8 (1.2 ) (67.7 )% (0.2 ) (56.0 )%
Total gross profit $ 4.9 $ 13.5 $ (8.5 ) (63.3 )% $ (1.8 ) (50.1 )%
Gross margin:
New vehicle retail sales 7.0 % 5.8 % 1.2 %
Used vehicle retail sales 5.8 % 8.6 % (2.8 )%
Used vehicle wholesale
sales 2.8 % 5.7 % (2.9 )%
Total used 4.9 % 8.0 % (3.1 )%
Parts and service sales 41.8 % 44.5 % (2.7 )% F&I, net
100.0 % 100.0 % - %
Total gross margin 13.5 % 12.0 % 1.5 %
Units sold:
Retail new vehicles sold 694 2,509 (1,815 ) (72.3 )%
Retail used vehicles sold 356 988 (632 ) (64.0 )%
Wholesale used vehicles
sold 324 484 (160 ) (33.1 )%
Total used 680 1,472 (792 ) (53.8 )%
Average sales price per
unit sold:
New vehicle retail $ 28,495 $ 29,637 $ (1,141 ) (3.9 )% $ (10,198 ) 30.6 %
Used vehicle retail $ 20,983 $ 19,673 $ 1,311 6.7 % $ (7,400 ) 44.3 %
Gross profit per unit sold:
New vehicle retail sales $ 1,999 $ 1,725 $ 274 15.9 % $ (710 ) 57.0 %
Used vehicle retail sales $ 1,213 $ 1,693 $ (480 ) (28.4 )% $ (419 ) (3.6 )%
Used vehicle wholesale
sales $ 247 $ 565 $ (318 ) (56.3 )% $ (92 ) (39.9 )%
Total used $ 752 $ 1,322 $ (570 ) (43.1 )% $ (264 ) (23.2 )%
F&I PRU $ 550 $ 511 $ 39 7.5 % $ (199 ) 46.5 %
Other:
SG&A expenses $ 5.6 $ 11.6 $ (6.0 ) (51.5 )% $ (2.1 ) (33.7 )%
SG&A as % gross profit 114.0 % 86.1 % 27.9 %
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Same Store Operating Data -Brazil (In millions, except unit and per unit amounts) Three Months
Ended
Currency Impact on Constant
Increase/ Current Period Currency %
2020 2019 (Decrease) % Change Results Change
Revenues:
New vehicle retail sales
(10.9 ) (59.5 )% (2.6 ) (45.2 )%
Used vehicle wholesale
sales 2.9 3.3 (0.4 ) (12.8 )% (1.1 ) 19.5 %
Total used 10.3 21.7 (11.4 ) (52.4 )% (3.7 ) (35.4 )%
Parts and service sales 5.9 11.9 (6.0 ) (50.3 )% (2.2 ) (32.0 )%
F&I, net 0.6 1.7 (1.2 ) (67.0 )% (0.2 ) (55.0 )%
Total revenues $ 36.6 $ 107.8 $ (71.3 ) (66.1 )% $ (13.1 ) (53.9 )%
Gross profit:
New vehicle retail sales $ 1.4 $ 4.3 $ (2.9 ) (67.8 )% $ (0.5 ) (56.4 )%
Used vehicle retail sales 0.4 1.5 (1.1 ) (71.7 )% (0.1 ) (61.9 )%
Used vehicle wholesale
sales 0.1 0.3 (0.2 ) (71.1 )% - (60.3 )%
Total used 0.5 1.8 (1.3 ) (71.6 )% (0.2 ) (61.7 )%
Parts and service sales 2.5 5.2 (2.8 ) (53.1 )% (0.9 ) (35.9 )%
F&I, net 0.6 1.7 (1.2 ) (67.0 )% (0.2 ) (55.0 )%
Total gross profit $ 4.9 $ 13.1 $ (8.2 ) (62.3 )% $ (1.8 ) (48.7 )%
Gross margin:
New vehicle retail sales 7.0 % 5.9 % 1.1 %
Used vehicle retail sales 5.8 % 8.3 % (2.5 )% Used vehicle wholesale sales
2.8 % 8.4 % (5.6 )%
Total used 4.9 % 8.3 % (3.3 )%
Parts and service sales 41.8 % 44.2 % (2.5 )% F&I, net
100.0 % 100.0 % - %
Total gross margin 13.5 % 12.1 % 1.4 %
Units sold:
Retail new vehicles sold 694 2,478 (1,784 ) (72.0 )%
Retail used vehicles sold 356 943 (587 ) (62.2 )%
Wholesale used vehicles
sold 324 439 (115 ) (26.2 )%
Total used 680 1,382 (702 ) (50.8 )%
Average sales price per
unit sold:
New vehicle retail $ 28,495 $ 29,272 $ (777 ) (2.7 )% $ (10,193 ) 32.2 %
Used vehicle retail $ 20,905 $ 19,490 $ 1,415 7.3 % $ (7,384 ) 45.1 %
Gross profit per unit sold:
New vehicle retail sales $ 1,999 $ 1,738 $ 261 15.0 %
0.9 %
Used vehicle wholesale
sales $ 247 $ 630 $ (383 ) (60.8 )% $ (92 ) (46.2 )%
Total used $ 748 $ 1,297 $ (549 ) (42.3 )% $ (263 ) (22.1 )%
F&I PRU $ 550 $ 511 $ 39 7.6 % $ (199 ) 46.6 %
Other:
SG&A expenses $ 5.6 $ 11.8 $ (6.2 ) (52.3 )% $ (2.1 ) (34.8 )%
SG&A as % gross profit 114.0 % 90.1 % 23.9 %
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The following discussion of ourBrazil operating results is on a same store basis. The difference between reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings. OurBrazil dealership operations have been significantly impacted by the reduced demand caused by the COVID-19 pandemic and the restrictions put in place by local governments to contain the virus. Revenues Total revenues inBrazil during the three months endedJune 30, 2020 decreased$76.0 million , or 67.5%, as compared to the same period in 2019. Total same store revenues inBrazil during the three months endedJune 30, 2020 decreased$71.3 million , or 66.1%, as compared to the same period in 2019. On a constant currency basis, total same store revenues decreased 53.9% driven by declines in all business lines except for used vehicle wholesale caused by the COVID-19 pandemic. BeginningMarch 20, 2020 , all our dealerships were required to close in efforts to stop the spread of the virus and while our service centers reopened and operated throughout the second quarter, our showrooms did not reopen untilMay 2020 with reduced hours. New vehicle retail same store revenues on a constant currency basis decreased 63.0% as a 72.0% decrease in new vehicle retail same store unit sales was partially offset by a 32.2% increase in new vehicle retail same store average sales price per unit sold. The decline in new vehicle same store unit sales was a result of the reduced demand and closure of our dealerships caused by the COVID-19 pandemic. Used vehicle retail same store revenues on a constant currency basis decreased 45.2% reflecting a 62.2% decrease in used vehicle same store unit sales partially offset by a 45.1% increase in used vehicle retail same store average sales price per unit sold. The decrease in used vehicle retail same store unit sales was driven by the COVID-19 pandemic. Used vehicle wholesale same store revenues increased 19.5% on a constant currency basis. The improvement in used vehicle wholesale same store revenues and the increases in new and used vehicle retail same store average sales price per unit sold were driven by a change in brand mix, which has shifted towards our higher priced luxury brands. Parts and service same store revenues on a constant currency basis decreased 32.0% driven by declines in warranty, customer-pay and collision revenues, partially offset by an increase in wholesale revenues. F&I same store revenues on a constant currency basis decreased 55.0% primarily due to the decline in retail unit sales partially offset by an increase in income per contract for our retail finance fees. Gross Profit Total gross profit inBrazil during the three months endedJune 30, 2020 decreased$8.5 million , or 63.3%, as compared to the same period in 2019. Total same store gross profit inBrazil during the three months endedJune 30, 2020 decreased$8.2 million , or 62.3%, as compared to the same period in 2019. On a constant currency basis, total same store gross profit decreased 48.7% driven by declines in all business lines. New vehicle retail same store gross profit on a constant currency basis decreased 56.4% driven by the 72.0% decline in new vehicle retail same store units sold partially offset by a 55.8% increase in new vehicle retail same store average gross profit per unit sold. The improvement in new vehicle retail same store gross profit reflects the mix shift towards our higher priced luxury brands and supply constraints experienced during the COVID-19 pandemic. Used vehicle retail same store gross profit on a constant currency basis decreased 61.9% reflecting the 62.2% decline in used vehicle retail same store unit sales. Parts and service same store gross profit on a constant currency basis decreased 35.9% as a result of the 32.0% decrease in revenues described above. F&I same store gross profit on a constant currency basis decreased 55.0% as discussed above. SG&A Expenses Our SG&A expenses consist primarily of personnel costs, including salaries, commissions and incentive-based compensation, as well as rent and facility costs, advertising and other expenses, which include legal, professional fees and general corporate expenses. Total SG&A expenses inBrazil during the three months endedJune 30, 2020 decreased$6.0 million , or 51.5%, as compared to the same period in 2019. Total same store SG&A expenses inBrazil during the three months endedJune 30, 2020 decreased$6.2 million , or 52.3%, as compared to the same period in 2019. On a constant currency basis, total same store SG&A expenses decreased 34.8%. The decrease in same store SG&A can be more than explained by expense control measures taken by management due to COVID-19, primarily driven by a decrease in personnel expense. Despite the reduction in same store SG&A expenses, total same store SG&A as a % of gross profit increased to 114.0% driven by the decline in same store gross profit discussed above. 46
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Reported Operating Data -Brazil (In millions, except unit and per unit amounts) Six Months
Ended
Currency Impact on Constant
Increase/ Current Period Currency %
2020 2019 (Decrease) % Change Results Change
Revenues:
New vehicle retail sales
(13.3 ) (32.6 )% (5.8 ) (18.3 )%
Used vehicle wholesale
sales 6.7 8.9 (2.2 ) (24.3 )% (1.6 ) (5.7 )%
Total used 34.1 49.5 (15.4 ) (31.1 )% (7.5 ) (16.0 )%
Parts and service sales 15.5 24.2 (8.7 ) (36.1 )% (3.7 ) (20.7 )%
F&I, net 2.3 3.8 (1.5 ) (39.1 )% (0.5 ) (26.2 )%
Total revenues $ 129.1 $ 216.0 $ (86.9 ) (40.2 )% $ (28.0 ) (27.3 )%
Gross profit:
New vehicle retail sales $ 4.9 $ 8.1 $ (3.2 ) (39.8 )% $ (1.1 ) (26.9 )%
Used vehicle retail sales 1.5 2.9 (1.4 ) (49.1 )% (0.3 ) (38.1 )%
Used vehicle wholesale
sales 0.3 0.6 (0.3 ) (50.2 )% (0.1 ) (38.8 )%
Total used 1.8 3.5 (1.7 ) (49.2 )% (0.4 ) (38.2 )%
Parts and service sales 6.7 10.7 (4.0 ) (37.6 )% (1.6 ) (22.8 )%
F&I, net 2.3 3.8 (1.5 ) (39.1 )% (0.5 ) (26.2 )%
Total gross profit $ 15.6 $ 26.1 $ (10.4 ) (40.1 )% $ (3.5 ) (26.6 )%
Gross margin:
New vehicle retail sales 6.3 % 5.9 % 0.5 %
Used vehicle retail sales 5.4 % 7.2 % (1.7 )% Used vehicle wholesale sales
4.2 % 6.4 % (2.2 )%
Total used 5.2 % 7.0 % (1.8 )%
Parts and service sales 43.1 % 44.1 % (1.0 )% F&I, net
100.0 % 100.0 % - %
Total gross margin 12.1 % 12.1 % - %
Units sold:
Retail new vehicles sold 2,665 4,649 (1,984 ) (42.7 )%
Retail used vehicles sold 1,454 2,076 (622 ) (30.0 )%
Wholesale used vehicles
sold 799 956 (157 ) (16.4 )%
Total used 2,253 3,032 (779 ) (25.7 )%
Average sales price per
unit sold:
New vehicle retail $ 28,994 $ 29,798 $ (804 ) (2.7 )% $ (6,111 ) 17.8 %
Used vehicle retail
(3.8 )%$ (4,014 ) 16.7 % Gross profit per unit sold: New vehicle retail sales$ 1,839 $ 1,752 $ 87 5.0 %$ (396 ) 27.6 % Used vehicle retail sales$ 1,019 $ 1,402 $ (382 ) (27.3 )%$ (219 ) (11.6 )% Used vehicle wholesale sales$ 356 $ 597 $ (241 ) (40.4 )% $ (81 ) (26.8 )% Total used$ 784 $ 1,148 $ (364 ) (31.7 )%$ (170 ) (16.9 )% F&I PRU$ 557 $ 561 $ (4 ) (0.6 )%$ (118 ) 20.5 % Other: SG&A expenses$ 16.2 $ 24.0 $ (7.7 ) (32.3 )%$ (3.9 ) (16.0 )%
SG&A as % gross profit 103.8 % 91.9 % 11.9 %
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Same Store Operating Data -Brazil (In millions, except unit and per unit amounts) Six Months
Ended
Currency Impact on Constant
Increase/ Current Period Currency %
2020 2019 (Decrease) % Change Results Change
Revenues:
New vehicle retail sales
(10.7 ) (28.0 )% (5.8 ) (12.7 )%
Used vehicle wholesale
sales 6.7 6.8 - (0.7 )% (1.7 ) 24.0 %
Total used 34.1 44.8 (10.7 ) (23.9 )% (7.5 ) (7.2 )%
Parts and service sales 15.5 23.6 (8.1 ) (34.5 )% (3.7 ) (18.8 )%
F&I, net 2.3 3.7 (1.4 ) (37.9 )% (0.5 ) (24.7 )%
Total revenues $ 129.1 $ 207.8 $ (78.7 ) (37.9 )% $ (28.0 ) (24.4 )%
Gross profit:
New vehicle retail sales $ 4.9 $ 8.1 $ (3.2 ) (39.8 )% $ (1.1 ) (26.8 )%
Used vehicle retail sales 1.5 2.9 (1.4 ) (49.3 )% (0.3 ) (38.2 )%
Used vehicle wholesale
sales 0.3 0.6 (0.3 ) (48.6 )% (0.1 ) (37.0 )%
Total used 1.8 3.5 (1.7 ) (49.2 )% (0.4 ) (38.0 )%
Parts and service sales 6.7 10.3 (3.7 ) (35.6 )% (1.6 ) (20.4 )%
F&I, net 2.3 3.7 (1.4 ) (37.9 )% (0.5 ) (24.7 )%
Total gross profit $ 15.6 $ 25.7 $ (10.0 ) (39.1 )% $ (3.5 ) (25.4 )%
Gross margin:
New vehicle retail sales 6.3 % 6.0 % 0.3 %
Used vehicle retail sales 5.4 % 7.7 % (2.3 )% Used vehicle wholesale sales
4.2 % 8.2 % (3.9 )%
Total used 5.2 % 7.7 % (2.6 )%
Parts and service sales 43.1 % 43.9 % (0.7 )% F&I, net
100.0 % 100.0 % - %
Total gross margin 12.1 % 12.3 % (0.2 )%
Units sold:
Retail new vehicles sold 2,665 4,604 (1,939 ) (42.1 )%
Retail used vehicles sold 1,454 2,001 (547 ) (27.3 )%
Wholesale used vehicles
sold 799 889 (90 ) (10.1 )%
Total used 2,253 2,890 (637 ) (22.0 )%
Average sales price per
unit sold:
New vehicle retail $ 28,994 $ 29,474 $ (480 ) (1.6 )% $ (6,113 ) 19.1 %
Used vehicle retail
(1.0 )%$ (4,008 ) 20.1 % Gross profit per unit sold: New vehicle retail sales$ 1,839 $ 1,768 $ 71 4.0 %$ (396 ) 26.4 % Used vehicle retail sales$ 1,018 $ 1,458 $ (440 ) (30.2 )%$ (221 ) (15.0 )% Used vehicle wholesale sales$ 356 $ 622 $ (267 ) (42.9 )% $ (81 ) (29.9 )% Total used$ 783 $ 1,201 $ (418 ) (34.8 )%$ (172 ) (20.5 )% F&I PRU$ 557 $ 560 $ (3 ) (0.5 )%$ (118 ) 20.7 % Other: SG&A expenses$ 16.2 $ 23.2 $ (7.0 ) (30.3 )%$ (3.9 ) (13.5 )%
SG&A as % gross profit 103.5 % 90.5 % 13.0 %
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The following discussion of ourBrazil operating results is on a same store basis. The difference between reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings. OurBrazil dealership operations have been significantly impacted by the reduced demand caused by the COVID-19 pandemic and the restrictions put in place by local governments to contain the virus. Revenues Total revenues inBrazil during the six months endedJune 30, 2020 decreased$86.9 million , or 40.2%, as compared to the same period in 2019. Total same store revenues inBrazil during the six months endedJune 30, 2020 decreased$78.7 million , or 37.9%, as compared to the same period in 2019. On a constant currency basis, total same store revenues decreased 24.4% with declines in all revenue lines except for used vehicle wholesale. BeginningMarch 20, 2020 , all our dealerships were required to close in efforts to stop the spread of the virus and while our service centers reopened and operated throughout the second quarter, our showrooms did not reopen untilMay 2020 with reduced hours. New vehicle retail same store revenues on a constant currency basis decreased 31.1%, as a 42.1% decrease in new vehicle retail same store unit sales was partially offset by a 19.1% increase in new vehicle retail same store average sales price per unit sold. The decline in new vehicle same store unit sales was a result of the reduced demand and closure of our dealerships caused by the COVID-19 pandemic. Used vehicle retail same store revenues on a constant currency basis decreased 12.7%, as a 27.3% decrease in used vehicle retail same store unit sales more than offset a 20.1% increase in used vehicle retail same store average sales price per unit sold. The decrease in used vehicle retail same store unit sales was driven by the COVID-19 pandemic. Used vehicle wholesale same store revenues increased 24.0% on a constant currency basis. The improvement in used vehicle wholesale same store revenues and the increases in new and used vehicle retail same store average sales price per unit sold reflect a shift in brand mix to higher priced luxury brands. Parts and service same store revenues on a constant currency basis decreased 18.8% driven by declines in warranty, customer-pay and collision revenues partially offset by an increase in wholesale revenues. F&I same store revenues on a constant currency basis decreased 24.7% primarily as a result of a decline in our retail unit sales partially offset by an improvement in income per contract on our retail finance fees. Gross profit Total gross profit inBrazil during the six months endedJune 30, 2020 decreased$10.4 million , or 40.1%, as compared to the same period in 2019. Total same store gross profit inBrazil during the six months endedJune 30, 2020 decreased$10.0 million , or 39.1%, as compared to the same period in 2019. On a constant currency basis total same store gross profit decreased 25.4% driven by declines in all business lines. New vehicle retail same store gross profit on a constant currency basis decreased 26.8%, driven by a 42.1% decrease in new vehicle retail same store units sold partially offset by a 26.4% increase in new vehicle retail same store average gross profit per unit sold. The improvement in new vehicle retail same store gross profit per unit reflects the shift towards our higher priced luxury brands and supply constraints experienced during the COVID-19 pandemic. Used vehicle retail same store gross profit on a constant currency basis decreased 38.2%, reflecting a 27.3% decrease in used vehicle retail same store unit sales and a 15.0% decrease in used vehicle retail same store average gross profit per unit sold. The declines were attributable to the negative impacts of COVID-19. Parts and service same store gross profit decreased 20.4% on a constant currency basis, driven by the 18.8% decrease in parts and service revenues described above. F&I same store gross profit on a constant currency basis decreased 24.7% as discussed above. SG&A Expenses Our SG&A expenses consist primarily of personnel costs, including salaries, commissions and incentive-based compensation, as well as rent and facility costs, advertising and other expenses, which include legal, professional fees and general corporate expenses. Total SG&A expenses inBrazil during the six months endedJune 30, 2020 decreased$7.7 million , or 32.3%, as compared to the same period in 2019. Total same store SG&A expenses inBrazil during the six months endedJune 30, 2020 , decreased$7.0 million , or 30.3%, as compared to the same period in 2019. On a constant currency basis, total same store SG&A expenses decreased 13.5% while total same store gross profit decreased 25.4%, resulting in a 1,300 basis points increase in total same store SG&A as a % of gross profit. The decrease in SG&A expenses was a result of cost control initiatives implemented by the management team centered around reducing personnel expense and lower legal expenses. Total same store SG&A expenses in 2020 included$0.9 million of severance costs associated with the termination of employees as a result of the COVID-19 pandemic. 49
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The following discussion of our results of operations is on a consolidated basis, unless otherwise noted. Depreciation and Amortization Expense Our total depreciation and amortization expense increased from$17.9 million to$18.8 million and from$34.9 million to$37.4 million for the three and six months endedJune 30, 2020 , respectively, when compared to the same period in 2019. This increase is substantially explained by the increase in ourU.S. segment, as we continue to strategically add dealership-related real estate to our investment portfolio and make improvements to our existing facilities intended to enhance the profitability of our dealerships and the overall customer experience. Impairment of Assets We evaluate intangible assets, consisting entirely of indefinite-lived franchise rights and goodwill, for impairment annually, or more frequently if events or circumstances indicate possible impairment. During the three and six months endedJune 30, 2020 , we recorded goodwill impairment charges of$10.7 million within theBrazil reporting unit. During the three and six months endedJune 30, 2020 , we recorded franchise rights impairment charges of$11.1 million within theU.K. segment and$0.1 million within theBrazil segment. During the three and six months endedJune 30, 2019 , there was no impairment to indefinite-lived franchise rights or goodwill. See Part I, "Item 1. Financial Statements," Note 8 "Intangibles" for additional discussion of our interim impairment assessment. We also review long-lived assets that are held-for-use, including our property and equipment and ROU assets, for impairment at the lowest level of identifiable cash flows whenever there are indicators that the carrying value of these assets may not be recoverable. During the three and six months endedJune 30, 2020 , we recognized ROU asset impairment charges of$1.7 million relating to seven dealerships within theU.K. segment and$0.2 million relating to one dealership within theBrazil segment. During the three and six months endedJune 30, 2019 , we recognized asset impairment charges of$0.5 million within theBrazil segment. See Part I, "Item 1. Financial Statements," Note 1 "Interim Financial Information" for additional discussion of our interim impairment assessment. The impairment charges were recognized within Asset impairments in our Condensed Consolidated Statements of Operations. Floorplan Interest Expense Our floorplan interest expense fluctuates with changes in our borrowings outstanding and interest rates, which are based on LIBOR (or Prime rate in some cases), plus a spread in theU.S. andU.K. , and a benchmark rate plus a spread inBrazil . To mitigate the impact of interest rate fluctuations, we employ an interest rate hedging strategy, whereby we swap variable interest rate exposure for a fixed interest rate over the term of the variable interest rate borrowing. For the three months endedJune 30, 2020 , total floorplan interest expense decreased 36.4% as compared to the same period in 2019. For the six months endedJune 30, 2020 , total floorplan interest expense decreased 27.3% as compared to the same period in 2019. The decrease in both comparative periods is primarily due to lower weighted average interest rates as a result of a decline in LIBOR and lower inventory levels, partially offset by higher expense on our interest rate swaps. Other Interest Expense, Net Other interest expense, net consists of interest charges primarily on our real estate related debt, working capital lines of credit and other long-term debt, partially offset by interest income. For the three months endedJune 30, 2020 , other interest expense, net decreased from$18.0 million to$16.2 million as compared to the same period in 2019. For the six months endedJune 30, 2020 , other interest expense, net decreased from$36.9 million to$34.3 million as compared to the same period in 2019. The decrease in both comparative periods was primary attributable to the redemption of our 5.25% Senior Notes onApril 2, 2020 and lower interest rates on our Acquisition Line and real estate related debt, partially offset by increased borrowings on said debt. Loss on Extinguishment of Debt OnApril 2, 2020 , we fully redeemed$300.0 million in aggregate principal amount of our outstanding 5.25% Senior Notes dueJune 2023 , at a premium of 102.625%. The total redemption price, consisting of the principal amount of the notes redeemed plus associated premium, amounted to$307.9 million . We recognized a loss on extinguishment of$10.4 million which included write offs of unamortized discount in the amount of$1.9 million and unamortized premium in the amount of$0.6 million . 50
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Provision for Income Taxes Our provision for income taxes decreased$1.8 million to$12.2 million for the three months endedJune 30, 2020 as compared to the same period in 2019. For the six months endedJune 30, 2020 , our provision for income taxes decreased$6.3 million to$21.3 million , as compared to the same period in 2019. The decreases were primarily due to decreases in pretax book income. For the three months endedJune 30, 2020 , our effective tax rate increased to 28.7% from 22.2% as compared to the same period in 2019. This increase was primarily due to an increase in excess compensation from an out-of-period adjustment to accelerate stock-based compensation, and the decrease in tax deductions in excess of book expense with respect to RSAs that vested in 2020, offset by changes to valuation allowances provided for net operating losses in certainU.S. states and inBrazil . For the six months endedJune 30, 2020 , our effective tax rate increased to 26.2% from 23.9% as compared to the same period in 2019. This increase was primarily due to the increase in excess compensation expense as a result of the out-of-period adjustment to accelerate stock-based compensation, offset by changes to valuation allowances provided for net operating losses in certainU.S. states and inBrazil , and the increase of tax deductions in excess of book expense with respect to RSAs that vested in 2020. We expect our effective tax rate for the remainder of 2020 will be between 23.0% and 24.0%. 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. The anticipated effects of the COVID-19 pandemic should not materially impact our estimated effective tax rate for the full-year of 2020. 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 Floorplan Line and FMCC Facility levels (see Part I, "Item 1. Financial Statements," Note 10 "Floorplan Notes Payable" in the Notes to Condensed Consolidated Financial Statements for additional information), cash from operations, borrowings under our credit facilities, which provide vehicle floorplan financing, working capital, dealership and real estate acquisition financing and proceeds from debt and equity offerings. Based on current facts and circumstances, we believe we will have adequate cash flow, coupled with available borrowing capacity, to fund our current operations, capital expenditures and acquisitions for the next 12 months. If economic and business conditions deteriorate or if our capital expenditures or acquisition plans for 2020 change, we may need to access the private or public capital markets to obtain additional funding. See "Sources and Uses of Liquidity from Investing Activities" below for further discussion of expectations regarding future capital expenditures. Cash on Hand As ofJune 30, 2020 , our total cash on hand was$72.7 million . The balance of cash on hand excludes$107.8 million of immediately available funds used to pay down our Floorplan Line and FMCC Facility as ofJune 30, 2020 . We use the pay down of our Floorplan Line and FMCC Facility as a channel for the short-term investment of excess cash. Cash Flows We utilize various credit facilities to finance the purchase of our new and used vehicle inventory. With respect to all new vehicle floorplan borrowings in the normal course of business, the manufacturers of the vehicles draft our credit facilities directly with no cash flows to or from us. With respect to borrowings for used vehicle financing, we finance up to 85% of the value of our used vehicle inventory in theU.S. and the funds flow directly between us and the lender. 51
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We categorize the cash flows associated with borrowings and repayments on these various credit facilities as Cash Flows from Operating Activities or Cash Flows from Financing Activities in our Condensed Consolidated Statements of Cash Flows. All borrowings from, and repayments to, lenders affiliated with our vehicle manufacturers (excluding the cash flows from or to manufacturer-affiliated lenders participating in our syndicated lending group) are presented within Cash Flows from Operating Activities in the Condensed Consolidated Statements of Cash Flows in conformity withU.S. GAAP. All borrowings from, and repayments to, the Revolving Credit Facility (see Part I, "Item 1. Financial Statements," Note 10 "Floorplan Notes Payable" in the Notes to Condensed Consolidated Financial Statements for additional information) (including the cash flows from or to manufacturer-affiliated lenders participating in the facility) and other credit facilities in theU.K. andBrazil unaffiliated with our manufacturer partners (collectively, "Non-OEM Floorplan Credit Facilities"), are presented within Cash Flows from Financing Activities in conformity withU.S. GAAP. However, the incurrence of all floorplan notes payable represents an activity necessary to acquire inventory for resale, resulting in a trade payable. Our decision to utilize our Revolving Credit Facility does not substantially alter the process by which our vehicle inventory is financed, nor does it significantly impact the economics of our vehicle procurement activities. Therefore, 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 withU.S. GAAP and avoids the potential to mislead the users of our financial statements. In addition, for dealership acquisitions and dispositions that are negotiated as asset purchases, we do not assume transfer of liabilities for floorplan financing in the execution of the transactions. Therefore, borrowings and repayments of all floorplan financing associated with dealership acquisition and disposition are characterized as either Cash Flow from Operating Activities or Cash Flow from Financing Activities in our Condensed Consolidated Statements of Cash Flows presented in conformity withU.S. GAAP, depending on the relationship described above. However, the floorplan financing activity is so closely related to the inventory acquisition process that we believe the presentation of all acquisition and disposition related floorplan financing activities should be classified as investing activity to correspond with the associated inventory activity, which more closely reflects the cash flows associated with our acquisitions and disposition strategy and eliminates excess volatility in our operating cash flows prepared in accordance withU.S. GAAP. We have made such adjustments in our adjusted operating cash flow presentations. The following table reconciles cash flows provided by (used in) operating, investing and financing activities on aU.S. GAAP basis to the corresponding adjusted amounts (in millions):
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