Acquisitions

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

Acquisitions

In 2021, we completed the following acquisitions:

•In February 2021, Fields Chrysler Jeep Dodge Ram and Land Rover Orlando in Florida.

•In March 2021, Fink Auto Group in Florida.

•In March 2021, Avondale Nissan in Arizona.

•In April 2021, The Suburban Collection in Michigan.

•In April 2021, Planet Honda in New Jersey.

•In May 2021, Superstore Auto Group in Nevada.

•In May 2021, Center BMW and Center Acura in California.

•In June 2021, Southwest Kia Group in Arizona.

•In June 2021, Herrin-Gear Toyota in Mississippi.

•In June 2021, Michael’s Subaru and Michael’s Toyota in Washington.

•In July 2021, Koby Subaru in Alabama.

•In August 2021, Rock Honda in California.

•In August 2021, Pfaff Automotive Partners in Canada.

•In September 2021, Curry Honda in Georgia.

•In September 2021, Orange Coast Chrysler Dodge Jeep Ram Fiat in California.

•In November 2021, Coral Springs Audi and Fort Lauderdale Audi in Florida.

•In November 2021, Pfaff Harley-Davidson in Canada.

•In December 2021, Elder Ford of Tampa in Florida.

•In December 2021, Elder Ford of Troy and Elder Ford of Romeo in Michigan.

Revenue and operating income contributed by the 2021 acquisitions subsequent to the date of acquisition were as follows:


	Year Ended December 31,
(Dollars in millions)	2021
Revenue	$	4,130.0
Operating income	211.3

In 2020, we completed the following acquisitions:

•In February 2020, Sacramento Lexus and Roseville Lexus in California.

•In June 2020, Hank’s Body Shop in Billings, Montana.

•In June 2020, Chrysler Dodge Jeep Ram of Bend and Nissan of Bend in Oregon.

•In July 2020, Subaru of Thousand Oaks in California.

•In July 2020, BMW of San Francisco in California.

•In August 2020, John Eagle Auto Group,a ten store platform in Texas.

•In September 2020, Knoxville Chrysler Dodge Jeep Ram in Tennessee.

•In October 2020, Latham Ford in New York.

•In November 2020, nine stores from Keyes Auto Group: eight in California and one in Arizona.

•In November 2020, Ramsey Subaru and Mazda in Iowa.

•In November 2020, Sterling Motorcars in Virginia.

All acquisitions were accounted for as business combinations under the acquisition method of accounting. The results of operations of the acquired stores are included in our Consolidated Financial Statements from the date of acquisition.

The following tables summarize the consideration paid for the acquisitions and the preliminary amount of identified assets acquired and liabilities assumed as of the acquisition date:


	Year Ended December 31,
(Dollars in millions)	2021		2020
Cash paid, net of cash acquired	$	2,697.5	$	1,503.1
Contingent consideration	—		4.6
Preliminary fair value of redeemable non-controlling interest	33.1		—


Debt and finance lease obligations	356.0		218.9
Total consideration paid	$	3,086.6	$	1,726.6


	Year Ended December 31,
(Dollars in millions)	2021		2020
Trade receivables, net	$	1.3	$	0.2
Inventories	626.2		358.9

Property and equipment	767.5		529.9
Other assets	1,726.2		858.4
Floor plan notes payable	(4.0)		(13.1)

Other liabilities	(30.6)		(8.5)
	3,086.6		1,725.8
Goodwill	—		0.8
Total net assets acquired and liabilities assumed	$	3,086.6	$	1,726.6

In 2021, the Company expanded into Canada through a partnership with Toronto-based Pfaff Automotive Partners. As part of the acquisition, the Company was granted the right to purchase (Call Option), and granted Pfaff Automotive a right to sell (Put Option), the remaining interest after a three-year period, with a purchase price based on Pfaff’s pro rata share of assets at the date of exercise of the Call or Put Option, as applicable. As a result of this redemption feature, the Company recorded redeemable non-controlling interest, at its preliminary estimate of acquisition-date fair value, that is classified as mezzanine equity in the accompanying consolidated balance sheets at December 31, 2021.

The purchase price allocations for the 2021 acquisitions are preliminary as we have not obtained all of the detailed information to finalize the opening balance sheet related to real estate purchased, leases assumed and the allocation of franchise value to each reporting unit. Management has recorded the purchase price allocations based on the information that is currently available.

We expect substantially all of the goodwill related to acquisitions completed in 2021 to be deductible for federal income tax purposes.

The purchase price allocations for the 2020 acquisitions were finalized in 2021, including amounts posted to contingent consideration, real estate, franchise value, and goodwill, reducing the amounts posted to “Other assets” shown in the table above.

We account for franchise value as an indefinite-lived intangible asset. We recognized $20.2 million and $3.0 million, respectively, in acquisition related expenses as a component of selling, general and administrative expenses in the Consolidated Statements of Operations in 2021 and 2020, respectively.

The following unaudited pro forma summary presents consolidated information as if the acquisitions had occurred on January 1 of the year:


	Year Ended December 31,
(Dollars in millions, except for per share amounts)	2021		2020
Revenue	$	25,519.8	$	19,528.5
Net income	1,123.7		621.4
Basic net income per share	39.02		26.08
Diluted net income per share	38.73		25.80

These amounts have been calculated by applying our accounting policies and estimates. The results of the acquired stores have been adjusted to reflect the following: depreciation on a straight-line basis over the expected lives for property, plant and equipment; accounting for inventory on a specific identification method; and recognition of interest expense for real estate financing related to stores where we purchased the facility. No non-recurring pro forma adjustments directly attributable to the acquisitions are included in the reported pro forma revenues and earnings.