Group 1 Automotive(GPI) - 2020 Q2 - Quarterly Report

Sales Performance - AcceleRide® online sales increased by 190% year-over-year during Q2 2020[102] - U.S. new and used retail unit sales dropped approximately 50% in March 2020 compared to the same period in 2019[109] - U.K. dealerships were closed from late March 2020 through May 18, 2020, resulting in the inability to deliver approximately 35% of contracted vehicles[110] - New vehicle retail sales decreased by 32.1% to $1,062.7 million compared to $1,565.4 million in the previous year[118] - Used vehicle retail sales fell by 23.6% to $641.2 million from $838.9 million year-over-year[118] - Retail new vehicles sold dropped by 37.1% to 26,472 units from 42,093 units year-over-year[118] - Retail used vehicles sold decreased by 23.2% to 30,528 units from 39,745 units in the previous year[118] - New vehicle retail sales dropped by $610.5 million, or 20.7%, from $2,943.4 million in 2019 to $2,332.9 million in 2020[123] - Used vehicle retail sales fell by $258.0 million, or 15.8%, from $1,631.0 million in 2019 to $1,373.1 million in 2020[123] Revenue and Profit Decline - Total revenues declined by 29.1% to $2,131.2 million, down from $3,005.7 million in the same period last year[118] - Total revenues decreased by $894.7 million, or 30.2%, from $2,966.9 million in 2019 to $2,072.2 million in 2020[120] - Total revenues decreased by $1,051.5 million, or 18.4%, from $5,725.9 million in 2019 to $4,674.4 million in 2020[123] - Total gross profit decreased by 21.0% to $358.8 million compared to $454.3 million in the prior year[118] - Total gross profit decreased by $99.3 million, or 22.1%, from $449.3 million in 2019 to $349.9 million in 2020[120] - Total gross profit decreased by $121.4 million, or 13.9%, from $874.2 million in 2019 to $752.8 million in 2020[123] Cost Management and SG&A Expenses - The company has furloughed or terminated approximately 8,000 employees to reduce costs and preserve liquidity[112] - SG&A expenses decreased by $104.4 million, or 31.3%, from $333.9 million in 2019 to $229.5 million in 2020[120] - SG&A expenses in the U.S. decreased by $63.5 million, or 12.1%, for the six months ended June 30, 2020, compared to the same period in 2019[135] - SG&A expenses decreased by $30.7 million, or 52.1%, from $59.0 million to $28.3 million[137] - SG&A expenses as a percentage of gross profit increased by 440 basis points to 90.1% due to the decline in gross profit[149] Digital Initiatives and Strategic Focus - The company emphasizes digital initiatives to improve customer experience and facilitate online transactions[102] - The focus on parts and service operations aims to increase retention of service technicians and advisors, enhancing service capacity without additional capital investment[104] - Strategic acquisitions and dispositions are planned to enhance the dealership portfolio and improve underperforming locations[107] - The company aims to expand the "Val-U-Line®" sales program to increase used retail volume by targeting a specific customer niche[104] - Future growth opportunities through acquisitions remain in the U.S., U.K., and Brazil as the economy recovers from the pandemic[107] Impact of COVID-19 - The COVID-19 pandemic significantly impacted operations, with a sharp decline in sales and service repair orders in March 2020[108] - The overall decline in revenues and profits was attributed to reduced demand and inventory shortages caused by the COVID-19 pandemic[126] - The company’s operations were significantly impacted by reduced demand due to the COVID-19 pandemic and government restrictions[140] - The COVID-19 pandemic significantly impacted dealership operations, leading to government-mandated closures affecting all U.K. dealerships[146] Financial Position and Cash Flow - The company reported a working capital surplus of $59.5 million as of June 30, 2020, down from $94.0 million at the end of 2019, a decrease of $34.5 million[186] - For the six months ended June 30, 2020, the company generated $688.2 million in net cash flows from operating activities, a 172.1% increase from $252.9 million in the same period in 2019[184] - The company used $579.0 million in net cash flows from financing activities for the six months ended June 30, 2020, compared to $157.8 million in the same period in 2019[191] - Total cash liquidity as of June 30, 2020, was $373.8 million, including $72.7 million in cash and $193.3 million in additional borrowing capacity[199] Tax and Compliance - The effective tax rate for the three months ended June 30, 2020, increased to 28.7% from 22.2% in the same period in 2019, primarily due to increased excess compensation[175] - The company expects its effective tax rate for the remainder of 2020 to be between 23.0% and 24.0%[176] - The company has initiated preparations to comply with Brazil's General Data Protection Act (GDPA), which will take effect in May 2021, potentially impacting operations[208] - The U.S. Environmental Protection Agency has set new CAFE and GHG emissions standards, increasing stringency by 1.5% annually through model year 2026, which may lead to legal challenges[209]