Group 1 Automotive(US:GPI)2021-02-24 17:44Financial Performance - In 2020, total revenues decreased by 9.9% compared to 2019, with gross margins increasing from 15.1% to 16.3%, resulting in a decline in total gross profit of only 2.6%[125] - Total revenues decreased by 11.0% to $10,605.0 million in 2020 from $11,912.9 million in 2019[143] - New vehicle retail sales fell by 12.7% to $5,463.0 million, while used vehicle retail sales decreased by 9.2% to $3,023.6 million[143] - Gross profit for total revenues declined by 3.7% to $1,730.1 million, with a gross margin of 16.3% compared to 15.1% in the previous year[143] - Retail new vehicles sold decreased by 17.9% to 137,302 units, and retail used vehicles sold fell by 12.6% to 136,865 units[143] - Total gross profit in the U.S. decreased by $8.8 million, or 0.6%, while same store gross profit decreased by $23.1 million, or 1.6%[152] - Total gross profit in the U.K. decreased by $19.6 million, or 7.3%, for the year ended December 31, 2020, compared to 2019[154] - Total gross profit in Brazil decreased by $18.7 million, or 34.9%, with a gross margin increase from 12.0% to 13.9%[160] Sales and Market Trends - The annual new light vehicle unit sales in the U.S. decreased by 14.8% to 14.5 million units in 2020 compared to 2019, while new vehicle registrations in the U.K. and Brazil decreased by 29.4% and 26.6%, respectively[124] - The company expects sustained improvements in industry sales volumes in 2021 as all three markets recover from the pandemic[124] - New vehicle retail same store revenues decreased by 17.7%, with a 23.3% decline in unit sales partially offset by a 7.2% increase in average sales price per unit sold[157] Cost Management and Expenses - SG&A expenses reduced by 14.6% to $1,143.0 million, resulting in SG&A as a percentage of gross profit at 66.1%[143] - SG&A expenses decreased by $128.5 million, or 12.0%, reflecting cost management efforts[151] - Total SG&A expenses in the U.K. decreased by $45.6 million, or 19.3%, for the year ended December 31, 2020, compared to 2019[154] - Total SG&A expenses in Brazil for the year ended December 31, 2020, decreased by $14.9 million, or 32.4%, with same store SG&A expenses down $14.2 million, or 31.3%[165] Impairments and Charges - The company recorded goodwill impairment charges of $10.7 million in the Brazil reporting unit due to the impact of the COVID-19 pandemic[133] - Impairments of intangible franchise rights were recorded at $20.8 million in 2020, compared to $19.0 million in 2019, due to the adverse impact of the pandemic[134] - The company recorded a goodwill impairment charge of $10.7 million in the Brazil region for the year ended December 31, 2020, with no impairments in 2019 and 2018[93] Cash Flow and Liquidity - Cash liquidity as of December 31, 2020, was $263.7 million, including $87.3 million in cash on hand and $176.4 million in immediately available funds[126] - Net cash provided by operating activities was $805.4 million for the year ended December 31, 2020, with adjusted net cash flow of $503.7 million[185] - The company had a working capital surplus of $161.5 million as of December 31, 2020, an increase of $67.4 million from the previous year[187] Debt and Financing - The company issued $550.0 million in 4.00% Senior Notes, which are expected to lower annual interest expense by approximately $5.5 million[197] - The company fully redeemed $550.0 million of 5.00% Senior Notes and $300.0 million of 5.25% Senior Notes, recognizing losses on extinguishment of $3.3 million and $10.4 million respectively[197][198] - Total contractual obligations as of December 31, 2020, amounted to $3,207.2 million, with $1,255.9 million due within one year[206] Operational Risks and Challenges - The company experienced a material adverse impact on its business due to the COVID-19 pandemic, affecting all markets in the U.S., U.K., and Brazil, starting from mid-March 2020[96] - The company faces substantial competition in automotive sales and services, impacting sales volumes and margins[88] - The company is subject to risks from economic downturns, including declines in vehicle sales and increases in interest rates, which could adversely affect manufacturers and, in turn, the company[83] Regulatory and Compliance Issues - The company is subject to numerous laws and regulations regarding data protection, which could pose compliance risks[99] - Compliance with automotive laws and regulations is critical, as violations may lead to administrative, civil, or criminal penalties[105] - Environmental laws impose obligations that may result in significant costs and liabilities for the company[107]