Revenues

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

The Company’s material revenue streams are the sale of new and used vehicles; the sale of vehicle parts; the performance of maintenance and repair services; and the arrangement of vehicle financing and the sale of service and other insurance contracts. Revenue recognition for each of these streams is discussed below. With respect to the cost of freight and shipping from the Company’s dealerships to its customers, its policy is to recognize such cost within cost of sales in the Consolidated Statements of Operations. Also, with respect to taxes assessed by governmental authorities that are imposed upon new and used vehicle sales transactions and collected by the Company from its customers, the Company’s policy is to exclude such amounts from revenues.

On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”) using the modified retrospective method applied to those contracts that were not completed as of January 1, 2018. The Company recognized an after-tax cumulative-effect adjustment to retained earnings of $4.8 million for maintenance and repair services and $6.6 million for the arrangement of associated vehicle financing and the sale of service and insurance contracts as of the date of adoption. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with historical accounting policies under Topic 605, Revenue Recognition.

The following tables present the Company's revenues disaggregated by its geographical segments (in millions):



	Year Ended December 31, 2019
	U.S.		U.K.		Brazil		Total
New vehicle retail sales	$	4,832.2	$	1,195.1	$	286.8	$	6,314.1
Used vehicle retail sales	2,509.9		771.3		85.4		3,366.6
Used vehicle wholesale sales	174.5		162.3		18.3		355.2
Total new and used vehicle sales	7,516.6		2,128.7		390.6		10,035.9
Parts and service sales ⁽¹⁾	1,234.4		227.9		47.6		1,510.0
Finance, insurance and other, net ⁽²⁾	433.2		57.0		7.6		497.9
Total revenues	$	9,184.2	$	2,413.7	$	445.9	$	12,043.8



	Year Ended December 31, 2018
	U.S.		U.K.		Brazil		Total
New vehicle retail sales	$	4,682.8	$	1,217.1	$	281.4	$	6,181.4
Used vehicle retail sales	2,307.0		771.7		87.4		3,166.1
Used vehicle wholesale sales	178.9		173.8		16.9		369.6
Total new and used vehicle sales	7,168.7		2,162.6		385.7		9,717.0
Parts and service sales ⁽¹⁾	1,153.3		217.6		46.0		1,416.9
Finance, insurance and other, net ⁽²⁾	401.3		57.2		9.0		467.5
Total revenues	$	8,723.3	$	2,437.4	$	440.7	$	11,601.4



	Year Ended December 31, 2017
	U.S.		U.K.		Brazil		Total
New vehicle retail sales	$	4,768.9	$	1,092.6	$	296.1	$	6,157.5
Used vehicle retail sales	2,160.7		546.3		92.0		2,799.0
Used vehicle wholesale sales	250.7		136.8		12.7		400.2
Total new and used vehicle sales	7,180.2		1,775.7		400.7		9,356.7
Parts and service sales	1,124.4		165.8		47.9		1,338.0
Finance, insurance and other, net	376.0		44.5		8.5		429.0
Total revenues	$	8,680.6	$	1,986.0	$	457.2	$	11,123.7

⁽¹⁾The Company has applied the optional exemption not to disclose revenue related to remaining performance obligations on its maintenance and repair services as the duration of these contracts is less than one year.

⁽²⁾Includes variable consideration recognized of $19.5 million and $18.7 million during the years ended December 31, 2019 and 2018, respectively, relating to performance obligations satisfied in previous periods on the Company’s retrospective commission income contracts. Refer to Arrangement of Vehicle Financing and the Sale of Service and Other Insurance Contracts for further discussion of these arrangements.

New and Used Vehicle Sales

Revenue from the sale of new and used vehicles is recognized upon delivery of the vehicle to the customer, which is the point at which transfer of control occurs and when the performance obligation is satisfied. In some cases, the Company uses a third-party auction as an agent to facilitate delivery of used vehicles to the customer.

The transaction price for new and used vehicle sales is the stand-alone sales price of each individual vehicle and is generally settled within 30 days of the satisfaction of the performance obligation.

Parts Sales

Revenue from the sale of vehicle parts is recognized upon delivery of the parts to the customer, which is the point at which transfer of control occurs and when the performance obligation is satisfied.

The transaction price for vehicle parts sales is the stand-alone sales price of each individual part and is generally settled within 30 days of the satisfaction of the performance obligation.

Maintenance and Repair Services

The Company performs maintenance and repair services, including collision restoration, and revenue is recognized upon completion of the services, which occurs over time. The Company has an enforceable right to payment in certain jurisdictions, and as such, the transfer of control of vehicle maintenance and repair services and satisfaction of the performance obligation to its customer occurs over time. The Company uses the input method for the measurement of progress and recognition of revenue, utilizing labor hours and parts applied to the customer vehicle to estimate the services performed for which the Company has an enforceable right to payment. The Company believes this method is the most objective measure of progress and provides a faithful depiction of the Company’s transfer of services to the customer.

The transaction price for maintenance and repair services is the total of the labor and, if applicable, vehicle parts used in the performance of the service, as well as the margin above cost charged to the customer.

Arrangement of Vehicle Financing and the Sale of Service and Other Insurance Contracts

The Company receives commissions from F&I providers for the arrangement of vehicle financing and the sale of service and other insurance products. Within the context of these contracts with the F&I providers, the Company has determined that it is an agent for the F&I providers.

The Company has a single performance obligation associated with the F&I contracts, which is the facilitation of the financing of the vehicle or sale of the insurance product. Revenue from these contracts is recognized when the finance or insurance contract is executed with the purchaser and when the performance obligation is satisfied.

With regards to the upfront commission for these contracts, the transaction price is the amount earned for each individual contract executed and is generally collected within 30 days of the satisfaction of the performance obligation.

Charge backs

The Company may be charged back in the future for unearned financing, insurance contract or vehicle service contract fees in the event of early termination of the contracts by customers. A reserve for future amounts estimated to be charged back, representing variable consideration, is recorded as a reduction of Finance, insurance and other, net in the Consolidated Statements of Operations. The reserve is estimated based on the Company’s historical charge back results and the termination provisions of the applicable contracts, and was $49.7 million and $46.4 million at December 31, 2019 and 2018, respectively.

Retrospective commissions and associated contract assets

In some cases, the Company also earns retrospective commission income by participating in the future profitability of the portfolio of product contracts sold by the Company. This contingent consideration is variable and is generally settled over five to seven years from the satisfaction of the performance obligation. The Company utilizes the “expected value” method to predict the amount of consideration to which the Company will be entitled, subject to constraint in the estimate. The estimated amount under the expected value method is accrued upfront when the product contract is executed with the end user, which is when the performance obligation is satisfied. The estimated amount is reflected as a contract asset within Other current assets and Other long-term assets in the Consolidated Balance Sheets until the right to such consideration becomes unconditional, at which time amounts due are reclassified to accounts receivable. Changes in the estimated amount of variable consideration to be ultimately realized are adjusted through revenue.

The change in contract assets during the year ended December 31, 2019 is reflected in the table below (in millions):



	F&I, net
Contract Assets, January 1, 2019	$	14.6
Changes related to revenue recognition during the period	19.5
Invoiced during the period	(12.5		)
Contract Assets, December 31, 2019	$	21.6