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DISCONTINUED OPERATIONS AND OTHER DIVESTITURES | 9 Months Ended
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Sep. 30, 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 an agreement to effect the Brazil Disposal. The sale price of approximately BRL 510.0 million included a holdback amount as of the Brazil Disposition Date (as defined herein), for general representations and warranties, of BRL 115.0 million, to be held in escrow for a period of five years from the close of the transaction (the “Brazil Disposal Escrow”). At the conclusion of the five-year period, the remaining funds held in the Brazil Disposal Escrow will be released to the Company. This amount has been included in the proceeds received. On July 1, 2022 (“Brazil Disposition Date”), the Company closed on the Brazil Disposal. During the fourth quarter of 2021, the Company recognized a net loss of $77.5 million on the Brazil Disposal. During the three and nine months ended September 30, 2022, the Company recognized additional net losses of $3.7 million and $10.0 million on the disposal of the Brazil Disposal Group. 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, the Company included the currency translation adjustments recorded in AOCI as a loss of $122.8 million attributable to the Brazil Disposal Group. The loss on sale indicated an impairment of assets, however, the loss was entirely the result of the reclassification of the translation adjustment from AOCI. Prior to the Brazil Disposition Date, the Company recorded a valuation allowance against the assets held for sale for the Brazil Disposal to reflect the expected loss not attributable to a particular asset within the Brazil Disposal Group. On and following the Brazil Disposition Date, the Company reclassified into earnings the currency translation loss attributable to the Brazil Disposal Group. The currency translation loss was offset by the reversal of the previously recorded valuation allowance. In addition, the purchase price of the Brazil Disposal 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. 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. On June 30, 2022, the Company settled the foreign currency derivative for a loss of $8.4 million. During the three months ended September 30, 2022, the Company received additional proceeds for final working capital adjustments related to the Brazil Disposal of $4.1 million. The resulting gain was recognized within Discontinued Operations and included within the net loss recorded during the three months ended September 30, 2022, as described above. Additionally, during the three months ended September 30, 2022, the Buyer, with approval by the Company, entered into a tax settlement associated with the Brazil Disposal with the Brazilian tax authority for BRL 23.0 million or approximately $4.5 million. The settlement was accrued within Accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheet and recorded as Provision for income taxes within Discontinued Operations and included within the net loss recorded during the three months ended September 30, 2022, as described above. The settlement will be paid out of the existing Brazil Disposal Escrow balance within one year. As of September 30, 2022, the Company had a remaining receivable balance of $21.8 million associated with the Brazil Disposal Escrow recorded in Other long-term assets on the Condensed Consolidated Balance Sheet, of which $7.5 million is expected to be paid to settle the Company’s portion of accrued liabilities retained subsequent to the Brazil Disposition Date, including the tax settlement described above. The following table summarizes the fair value of the proceeds received from the disposition and net carrying value of the assets disposed as of September 30, 2022 (in millions):
Fair value of proceeds from disposition |  | $ | 92.5 |  |
Net assets disposed |  | 48.8 |  |
Gain before currency translation adjustments |  | 43.7 |  |
Amount of currency translation loss recorded in AOCI |  | (122.8) |  |
Incremental costs to sell |  | 8.4 |  |
Net loss on the Brazil Disposal |  | $ | (87.5) |  |
Results of the Brazil Discontinued Operations were as follows (in millions):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
REVENUES: |  |  |  |  |  |  |  |
New vehicle retail sales |  | $ | — |  |  | $ | 62.3 |  |  | $ | 109.0 |  |  | $ | 146.3 |
Used vehicle retail sales |  | — |  |  | 18.0 |  |  | 44.0 |  |  | 40.5 |
Used vehicle wholesale sales |  | — |  |  | 3.3 |  |  | 10.1 |  |  | 8.0 |
Parts and service sales |  | — |  |  | 11.1 |  |  | 23.8 |  |  | 28.2 |
Finance, insurance and other, net |  | — |  |  | 1.7 |  |  | 3.3 |  |  | 4.4 |
Total revenues |  | — |  |  | 96.4 |  |  | 190.2 |  |  | 227.3 |
COST OF SALES: |  |  |  |  |  |  |  |
New vehicle retail sales |  | — |  |  | 56.1 |  |  | 98.5 |  |  | 131.5 |
Used vehicle retail sales |  | — |  |  | 16.4 |  |  | 41.2 |  |  | 36.9 |
Used vehicle wholesale sales |  | — |  |  | 3.1 |  |  | 10.0 |  |  | 7.4 |
Parts and service sales |  | — |  |  | 6.2 |  |  | 14.5 |  |  | 15.9 |
Total cost of sales |  | — |  |  | 81.9 |  |  | 164.2 |  |  | 191.6 |
GROSS PROFIT |  | — |  |  | 14.5 |  |  | 26.1 |  |  | 35.7 |
Selling, general and administrative expenses |  | (4.6) |  |  | 8.8 |  |  | 14.8 |  |  | 24.0 |
Depreciation and amortization expense |  | — |  |  | 0.4 |  |  | 0.9 |  |  | 1.1 |
Asset impairments |  | 0.1 |  |  | — |  |  | 6.3 |  |  | — |
INCOME FROM OPERATIONS — DISCONTINUED OPERATIONS |  | 4.5 |  |  | 5.3 |  |  | 4.0 |  |  | 10.6 |
Floorplan interest expense |  | — |  |  | 0.4 |  |  | 1.4 |  |  | 0.7 |
Other interest (income) expense, net |  | (0.7) |  |  | 0.1 |  |  | (1.1) |  |  | 0.8 |
Loss on extinguishment of debt |  | — |  |  | 3.8 |  |  | — |  |  | 3.8 |
Other expenses |  | 1.5 |  |  | — |  |  | 1.5 |  |  | — |
INCOME BEFORE INCOME TAXES — DISCONTINUED OPERATIONS |  | 3.7 |  |  | 0.9 |  |  | 2.2 |  |  | 5.2 |
Provision for income taxes |  | 5.0 |  |  | 1.3 |  |  | 5.1 |  |  | 2.4 |
NET (LOSS) INCOME — DISCONTINUED OPERATIONS |  | $ | (1.3) |  |  | $ | (0.4) |  |  | $ | (2.9) |  |  | $ | 2.8 |
The following table presents cash flows from operating and investing activities for the Brazil Discontinued Operations (in millions):
|  | Nine Months Ended September 30,
|  | 2022 |  | 2021
Net cash provided by operating activities — discontinued operations |  | $ | 26.6 |  |  | $ | 8.1 |
Net cash provided by (used in) investing activities — discontinued operations |  | $ | 59.1 |  |  | $ | (1.4) |
Assets and liabilities of the Brazil Discontinued Operations were as follows (in millions):
|  | September 30, 2022 |  | December 31, 2021
Cash and cash equivalents |  | $ | — |  |  | $ | 3.7 |
Contracts-in-transit and vehicle receivables, net |  | — |  |  | 2.3 |
Accounts and notes receivable, net |  | — |  |  | 11.8 |
Inventories |  | — |  |  | 37.2 |
Prepaid expenses |  | — |  |  | 1.9 |
Other current assets |  | 1.3 |  |  | — |
Current assets of discontinued operations |  | 1.3 |  |  | 56.9 |
Property and equipment, net |  | — |  |  | 22.3 |
Operating lease assets |  | — |  |  | 2.4 |
Other long-term assets |  | 21.8 |  |  | 7.8 |
Non-current assets of discontinued operations |  | 21.8 |  |  | 32.5 |
Total assets, before valuation allowance |  | 23.2 |  |  | 89.5 |
Valuation allowance |  | — |  |  | (76.4) |
Total assets, net of valuation allowance |  | $ | 23.2 |  |  | $ | 13.0 |
Floorplan notes payable — credit facility and other |  | $ | — |  |  | $ | 3.3 |
Floorplan notes payable — manufacturer affiliates |  | — |  |  | 20.1 |
Current operating lease liabilities |  | — |  |  | 2.5 |
Accounts payable |  | — |  |  | 13.7 |
Accrued expenses and other current liabilities |  | 7.5 |  |  | 8.7 |
Current liabilities of discontinued operations |  | $ | 7.5 |  |  | $ | 48.3 |
Assets and Liabilities Held for Sale Assets and liabilities classified as held for sale consisted of the following (in millions):
|  | September 30, 2022 |  | December 31, 2021
Current assets classified as held for sale |  |  |  |
Brazil Discontinued Operations |  | $ | — |  |  | $ | 13.0 |
Prime Acquisition (1) |  | 7.4 |  |  | 52.3 |
Other (2) |  | 31.2 |  |  | 34.9 |
Total current assets classified as held for sale |  | $ | 38.6 |  |  | $ | 100.3 |
Current liabilities classified as held for sale |  |  |  |
Brazil Discontinued Operations |  | $ | — |  |  | $ | 48.3 |
Prime Acquisition (1) |  | 1.2 |  |  | 1.6 |
Other |  | 4.0 |  |  | — |
Total current liabilities classified as held for sale |  | $ | 5.2 |  |  | $ | 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 $11.3 million and $9.9 million of goodwill reclassified to assets held for sale as of September 30, 2022 and December 31, 2021, respectively. 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 nine months ended September 30, 2022, the Company recorded a net pre-tax gain totaling $31.3 million related to the disposition of five dealerships representing five franchises in the U.S. The dispositions reduced goodwill by $36.9 million. The Company also terminated one franchise representing one dealership in the U.K. During the nine months ended September 30, 2021, the Company recorded a net pre-tax gain totaling $1.8 million related to the disposition of two dealerships representing two franchises and one franchise within an existing dealership in the U.S. The dispositions reduced goodwill by $2.2 million. 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 https://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 https://asc.fasb.org/subtopic&trid=2122178 + Details
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