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ACQUISITIONS AND DISPOSITIONS | 9 Months Ended
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Sep. 30, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] |
ACQUISITIONS AND DISPOSITIONS | ACQUISITIONS AND DISPOSITIONS Inchcape Acquisition On August 1, 2024 (the “Acquisition Date”), the Company completed the acquisition of Inchcape Retail automotive operations (“Inchcape Retail”), consisting of 54 dealership locations, certain real estate and three collision centers across the U.K. (collectively referred to as the “Inchcape Acquisition”), for aggregate consideration of approximately $517.0 million. The accounting for the Inchcape Acquisition is considered to be preliminary. The Company is continuing to analyze and assess relevant information related to the valuation of certain property, equipment, intangible assets, property lease contracts and deferred tax assets. Due to the recent timing and complexity of the Inchcape Acquisition, these amounts are provisional and subject to change as the Company’s fair value assessments are finalized. The Company will reflect any such adjustments in subsequent filings. The results of the Inchcape Acquisition are included in the U.K. segment. The acquired goodwill is not deductible for income tax purposes. The following table summarizes the consideration paid and aggregate amounts of assets acquired and liabilities assumed as of the Acquisition Date (in millions):
Total consideration |  | $ | 517.0 |
Identifiable assets acquired and liabilities assumed |  |
Cash |  | $ | 23.4 |
Contracts-in-transit and vehicle receivables, net |  | 27.6 |
Accounts receivable, net |  | 47.8 |
Inventories |  | 384.3 |
Prepaid expenses and other current assets |  | 13.0 |
Property and equipment |  | 316.8 |
Operating lease assets |  | 72.3 |
Long-term deferred tax asset |  | 19.3 |
Total assets acquired |  | 904.6 |
Floorplan notes payable |  | 236.4 |
Accounts payable |  | 204.6 |
Accrued expenses |  | 54.5 |
Operating lease liabilities |  | 72.3 |
Other liabilities |  | 5.9 |
Total liabilities assumed |  | 573.7 |
Total identifiable net assets |  | 330.9 |
Goodwill |  | $ | 186.1 |
The Company recorded $12.9 million and $14.8 million, respectively, of costs related to the Inchcape Acquisition during the three and nine months ended September 30, 2024. These costs are included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. The Company’s Condensed Consolidated Statements of Operations included revenues and net income attributable to Inchcape Retail from the Acquisition Date through September 30, 2024, of $333.8 million and $5.1 million, respectively. The following unaudited pro forma financial information presents consolidated information of the Company as if the Inchcape Acquisition had occurred on January 1, 2023 (in millions):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2024 |  | 2023 |  | 2024 |  | 2023
Revenues |  | $ | 5,446.0 |  |  | $ | 5,403.0 |  |  | $ | 15,952.7 |  |  | $ | 15,432.2 |
Net income |  | $ | 157.1 |  |  | $ | 191.2 |  |  | $ | 431.6 |  |  | $ | 478.8 |
This pro forma information incorporates the Company’s accounting policies and adjusts the results of Inchcape Retail assuming that the fair value adjustments in connection with the Inchcape Acquisition occurred on January 1, 2023. They have also been adjusted to reflect the $14.8 million of acquisition-related costs incurred during the nine months ended September 30, 2024 as having occurred on January 1, 2023. Pro forma data may not be indicative of the results that would have been obtained had these events actually occurred at the beginning of the period presented and is not intended to be a projection of future results. Other Acquisitions The Company accounts for business combinations under the acquisition method of accounting, under which the Company allocates the purchase price to the assets acquired and liabilities assumed based on an estimate of fair value. During the nine months ended September 30, 2024, the Company acquired nine dealerships in the U.S., including three Honda, two Lexus, one Toyota, one Kia, one Hyundai and one Mercedes-Benz dealerships. The Company also acquired one Toyota Certified pre-owned center and three collision centers in the U.S. Aggregate consideration paid for these dealerships, which were accounted for as business combinations, was $690.4 million. Goodwill associated with the acquisitions totaled $287.8 million. During the nine months ended September 30, 2024, the Company acquired four Mercedes-Benz dealerships in the U.K. Aggregate consideration paid for these dealerships, which were accounted for as business combinations, was $86.3 million. Goodwill associated with the acquisitions totaled $34.3 million. The accounting for these acquisitions is considered to be preliminary and subject to change as the Company’s fair value assessments are finalized. The Company is continuing to analyze and assess relevant information related to the valuation of property, equipment and intangible assets. The Company will reflect any required fair value adjustments in subsequent periods. During the nine months ended September 30, 2023, the Company acquired one Chevrolet dealership, one Kia dealership and three Buick-GMC dealerships in the U.S. Aggregate consideration paid for these dealerships, which were accounted for as business combinations, was $363.4 million. Goodwill associated with the acquisitions totaled $58.8 million. In October 2024, the Company acquired a BMW/MINI dealership located north of London in the U.K. During the three months ended September 30, 2024, the Company made an escrow payment of $32.1 million related to the acquisition to an escrow agent, which was then paid to the sellers in October 2024. As the escrow payment was made prior to the closing of the transaction, the amount is recorded within Other current assets in the Condensed Consolidated Balance Sheets as of September 30, 2024 and as Escrow payments for acquisitions within Net cash used in investing activities in the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024. The Company will account for the business combination in future periods. Dispositions The Company’s divestitures generally consist of dealership assets and related real estate. Gains and losses on divestitures are recorded within Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. During the nine months ended September 30, 2024, the Company recorded a net pre-tax gain totaling $52.9 million related to the disposition of eight dealerships and one collision center in the U.S. The dispositions reduced goodwill by $66.4 million. During the nine months ended September 30, 2023, the Company recorded a net pre-tax gain totaling $18.1 million related to the disposition of nine dealerships in the U.S. The dispositions reduced goodwill by $44.7 million. The Company also terminated two franchises in the U.S. Assets held for sale in the Condensed Consolidated Balance Sheets includes $9.8 million and $39.8 million of goodwill that has been reclassified to assets held for sale as of September 30, 2024 and December 31, 2023, respectively.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205-20/tableOfContent + Details
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