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DISCONTINUED OPERATIONS AND OTHER DIVESTITURES | 3 Months Ended
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Mar. 31, 2022
Discontinued Operations and Disposal Groups [Abstract] |
DISCONTINUED OPERATIONS AND OTHER DIVESTITURES | DISCONTINUED OPERATIONS AND OTHER DIVESTITURES Brazil Discontinued Operations On November 12, 2021, the Company entered into the Brazil Disposal. The Brazil Disposal is expected to close before the end of the second quarter of 2022. The sale price of BRL 510.0 million includes a holdback amount, for general representations and warranties, of BRL 115.0 million or approximately $24.2 million, to be held in escrow for a period of five years from the close of the transaction. At the conclusion of the five-year period, the remaining funds held in escrow would be released to the Company. This amount has been included in the estimated proceeds. During the fourth quarter of 2021, the Company recognized a net loss of $77.5 million on the Brazil Disposal. During the three months ended March 31, 2022, the Company did not recognize any additional net loss on the disposal of the Brazil Disposal Group. The following table summarizes the estimated fair value of proceeds expected and net carrying value of the assets disposed as of March 31, 2022 (in millions):
Estimated fair value of proceeds from disposition |  | $ | 106.0 |  |
Estimated net assets disposed |  | 51.2 |  |
Estimated gain before currency translation adjustments |  | 54.8 |  |
Estimated amount of currency translation loss recorded in AOCI |  | (118.3) |  |
Estimated incremental costs to sell |  | 14.0 |  |
Net loss on disposal of the Brazil Disposal Group |  | $ | (77.5) |  |
Upon sale of a foreign entity, amounts recorded within Accumulated Other Comprehensive Income (loss) (“AOCI”) on the Condensed Consolidated Balance Sheets, are required to be reclassified into earnings on the date of disposition. For purposes of determining the net gain or loss on the Brazil Disposal Group, the Company included the non-cash currency translation adjustment recorded in AOCI of a loss of $118.3 million attributable to the Brazil Disposal Group. The loss on sale indicates an impairment of assets, however, the loss was entirely the result of the reclassification of the non-cash currency translation adjustment from AOCI. For the three months ended March 31, 2022, the Company has presented a valuation allowance against assets held for sale of the Brazil Disposal Group to reflect the expected loss not attributable to a particular asset within the Brazil Disposal Group. In addition, the purchase price is denominated in BRL, which is subject to foreign currency exchange risk. In order to partially mitigate this risk, the Company entered into a foreign currency derivative for the conversion of BRL to USD in the form of a costless collar which protects the Company from significant downside exposure on $70.0 million of the expected purchase consideration. Any gains or losses associated with the foreign currency derivative are presented as estimated incremental costs to sell in the table above and are fully offset by corresponding foreign currency impacts to the estimated fair value of proceeds from the disposition. Results of the Brazil Discontinued Operations were as follows (in millions):
|  | Three Months Ended March 31, |  |
|  | 2022 |  | 2021 |  |  |  |
REVENUES: |  |  |  |  |  |  |  |
New vehicle retail sales |  | $ | 48.6 |  |  | $ | 34.1 |  |  |  |  |
Used vehicle retail sales |  | 22.2 |  |  | 10.7 |  |  |  |  |
Used vehicle wholesale sales |  | 5.3 |  |  | 2.0 |  |  |  |  |
Parts and service sales |  | 10.7 |  |  | 7.9 |  |  |  |  |
Finance, insurance and other, net |  | 1.5 |  |  | 1.4 |  |  |  |  |
Total revenues |  | 88.3 |  |  | 56.1 |  |  |  |  |
COST OF SALES: |  |  |  |  |  |  |  |
New vehicle retail sales |  | 43.8 |  |  | 30.8 |  |  |  |  |
Used vehicle retail sales |  | 20.6 |  |  | 9.6 |  |  |  |  |
Used vehicle wholesale sales |  | 5.3 |  |  | 1.8 |  |  |  |  |
Parts and service sales |  | 6.3 |  |  | 4.5 |  |  |  |  |
Total cost of sales |  | 76.1 |  |  | 46.7 |  |  |  |  |
GROSS PROFIT |  | 12.3 |  |  | 9.4 |  |  |  |  |
Selling, general and administrative expenses |  | 8.7 |  |  | 7.1 |  |  |  |  |
Depreciation and amortization expense |  | 0.4 |  |  | 0.3 |  |  |  |  |
INCOME FROM DISCONTINUED OPERATIONS |  | 3.1 |  |  | 2.1 |  |  |  |  |
Floorplan interest expense |  | 0.7 |  |  | — |  |  |  |  |
Other interest (income) expense, net |  | (0.1) |  |  | 0.6 |  |  |  |  |
INCOME BEFORE INCOME TAXES — DISCONTINUED OPERATIONS |  | 2.5 |  |  | 1.4 |  |  |  |  |
Provision for income taxes |  | 0.7 |  |  | 0.4 |  |  |  |  |
NET INCOME — DISCONTINUED OPERATIONS |  | $ | 1.8 |  |  | $ | 1.0 |  |  |  |  |
The following table presents cash flows from operating and investing activities for the Brazil Discontinued Operations (in millions):
|  | Three Months Ended March 31,
|  | 2022 |  | 2021
Net cash provided by (used in) operating activities — discontinued operations |  | $ | 11.8 |  |  | $ | (6.6) |
Net cash used in investing activities — discontinued operations |  | $ | (0.3) |  |  | $ | (0.5) |
Assets and liabilities of the Brazil Discontinued Operations were as follows (in millions):
|  | March 31, 2022 |  | December 31, 2021
Cash and cash equivalents |  | $ | 15.2 |  |  | $ | 3.7 |
Contracts-in-transit and vehicle receivables, net |  | 5.7 |  |  | 2.3 |
Accounts and notes receivable, net |  | 11.6 |  |  | 11.8 |
Inventories |  | 37.0 |  |  | 37.2 |
Prepaid expenses |  | 2.3 |  |  | 1.9 |
Assets of Brazil Discontinued Operations — current |  | 71.8 |  |  | 56.9 |
Property and equipment, net |  | 26.0 |  |  | 22.3 |
Operating lease assets |  | 2.5 |  |  | 2.4 |
Other long-term assets |  | 9.6 |  |  | 7.8 |
Assets of Brazil Discontinued Operations — non-current (1) |  | 38.1 |  |  | 32.5 |
Total assets, before valuation allowance |  | 109.9 |  |  | 89.5 |
Valuation allowance |  | (63.5) |  |  | (76.4) |
Total assets, net of valuation allowance (1) |  | $ | 46.3 |  |  | $ | 13.0 |
Floorplan notes payable — credit facility and other |  | $ | 1.7 |  |  | $ | 3.3 |
Floorplan notes payable — manufacturer affiliates |  | 23.0 |  |  | 20.1 |
Current operating lease liabilities |  | 2.6 |  |  | 2.5 |
Accounts payable |  | 22.6 |  |  | 13.7 |
Accrued expenses and other current liabilities |  | 22.5 |  |  | 8.7 |
Liabilities of Brazil Discontinued Operations — current |  | $ | 72.5 |  |  | $ | 48.3 |
(1) The assets of the Brazil Discontinued Operations are classified in current assets in the Condensed Consolidated Balance Sheet as of March 31, 2022 and December 31, 2021, as the Brazil Disposal is expected to close before the end of the second quarter of 2022. Assets and Liabilities Held for Sale Assets and liabilities classified as held for sale consisted of the following (in millions):
|  | March 31, 2022 |  | December 31, 2021
Current assets classified as held for sale |  |  |  |
Brazil Discontinued Operations |  | $ | 46.3 |  |  | $ | 13.0 |
Prime Acquisition (1) |  | 26.6 |  |  | 52.3 |
Other (2) |  | 8.8 |  |  | 34.9 |
Total current assets classified as held for sale |  | $ | 81.8 |  |  | $ | 100.3 |
Current liabilities classified as held for sale |  |  |  |
Brazil Discontinued Operations |  | $ | 72.5 |  |  | $ | 48.3 |
Prime Acquisition (1) |  | 1.5 |  |  | 1.6 |
Other |  | 0.7 |  |  | — |
Total current liabilities classified as held for sale |  | $ | 74.6 |  |  | $ | 49.9 |
(1) For additional details on current assets and current liabilities classified as held for sale in connection with the Prime Acquisition as of the acquisition date, refer to Note 3. Acquisitions. (2) Includes $7.5 million and $9.9 million of goodwill reclassified to assets held for sale as of March 31, 2022 and December 31, 2021. Other Divestitures The Company’s dispositions generally consist of dealership assets and related real estate. Gains and losses on dispositions are recorded in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. During the three months ended March 31, 2022, the Company recorded a net pre-tax gain totaling $18.7 million related to the disposition of two dealerships representing two franchises in the U.S. The dispositions reduced goodwill by $17.0 million. During the three months ended March 31, 2021, the Company recorded a net pre-tax gain totaling $1.0 million related to the disposition of one dealership representing one franchise and one franchise within an existing dealership in the U.S. The Company also terminated one franchise representing one dealership in the U.K.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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