Interim Financial Information

9 Months Ended

Sep. 30, 2011

Interim Financial Information [Abstract]

INTERIM FINANCIAL INFORMATION

1. INTERIM FINANCIAL INFORMATION

Business and Organization

Group 1 Automotive, Inc., a Delaware corporation, through its subsidiaries, is a leading operator in the automotive retailing industry with operations in the states of Alabama, California, Florida, Georgia, Kansas, Louisiana, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, Oklahoma, South Carolina and Texas in the United States of America (the “U.S.”) and in the towns of Brighton, Farnborough, Hailsham, Hindhead and Worthing in the United Kingdom (the “U.K.”). Through their dealerships, these subsidiaries sell new and used cars and light trucks; arrange related financing; sell vehicle service and insurance contracts; provide maintenance and repair services; and sell replacement parts. Group 1 Automotive, Inc. and its subsidiaries are herein collectively referred to as the “Company” or “Group 1.”

As of September 30, 2011, the Company’s U.S. retail network consisted of the following two regions (with the number of dealerships they comprised): (i) the East (42 dealerships in Alabama, Florida, Georgia, Louisiana, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York and South Carolina) and (ii) the West (58 dealerships in California, Kansas, Oklahoma and Texas). Each region is managed by a regional vice president who reports directly to the Company’s Chief Executive Officer and is responsible for the overall performance of their region, as well as for overseeing the market directors and dealership general managers that report to them. Each region is also managed by a regional chief financial officer who reports directly to the Company’s Chief Financial Officer. The Company’s five dealerships in the U.K. are also managed locally with direct reporting responsibilities to the Company’s corporate management team.

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. In the opinion of management, all adjustments of a normal and recurring nature considered necessary for a fair presentation have been included in the accompanying Consolidated Financial Statements. Due to seasonality and other factors, the results of operations for the interim period are not necessarily indicative of the results that will be realized for the entire fiscal year. These unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 (“2010 Form 10-K”).

All acquisitions of dealerships completed during the periods presented have been accounted for using the purchase method of accounting and their results of operations are included from the effective dates of the closings of the acquisitions. The allocations of purchase price to the assets acquired and liabilities assumed are assigned and recorded based on estimates of fair value. All intercompany balances and transactions have been eliminated in consolidation.

Amendments to Previously Filed Financial Statements

In June 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. The FSP clarified that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and therefore should be included in computing earnings per share (“EPS”) using the two-class method. The Company’s restricted stock awards and performance awards qualify as participating securities as each contain non-forfeitable rights to dividends. Therefore, the Company became subject to the guidance in the first quarter 2009.

Upon the adoption of FSP 03-6-1 and subsequently through the third quarter 2011, the Company failed to properly apply the two-class method for computing EPS. The Company has assessed the errors, both quantitatively and qualitatively, and determined that the effects on all prior periods are immaterial. Other than the corrections to basic and diluted earnings per share, the revisions have no effect on the Company’s consolidated statement of operations, consolidated balance sheet, consolidated statement of cash flows or its liquidity.

The following tables summarize the effect of correctly applying the two-class method for each quarter beginning in the first quarter of 2009 through the third quarter 2011:

	2009
	Q1		Q2		Q3		Q4			Year End
	(In thousands, except per share data)
As Reported:
Net income	$	8,375	$	10,082	$	18,340	$	(1,952	)	$	34,845
Weighted average basic shares outstanding		22,704		22,826		22,965		23,054			22,888
Weighted average dilutive shares outstanding		22,923		23,288		23,503		23,577			23,325
Basic earnings (loss) per common share	$	0.37	$	0.44	$	0.80	$	(0.08	)	$	1.52
Diluted earnings (loss) per common share	$	0.37	$	0.43	$	0.78	$	(0.08	)	$	1.49
Amended Basic:
Net income	$	8,375	$	10,082	$	18,340	$	(1,952	)	$	34,845
Less: Earnings allocated to participating securities		450		525		955		—			2,018
Net income (loss) available to common shares	$	7,925	$	9,557	$	17,385	$	(1,952	)	$	32,827
Weighted average basic common shares outstanding		22,704		22,826		22,965		23,054			22,888
Basic earnings (loss) per common share	$	0.35	$	0.42	$	0.76	$	(0.08	)	$	1.43
Amended Diluted:
Net income	$	8,375	$	10,082	$	18,340	$	(1,952	)	$	34,845
Less: Earnings allocated to participating securities		450		524		954		—			2,016
Net income (loss) available to common shares	$	7,925	$	9,558	$	17,386	$	(1,952	)	$	32,829
Weighted average dilutive common shares outstanding		22,712		22,851		22,984		23,073			22,906
Diluted earnings (loss) per common share	$	0.35	$	0.42	$	0.76	$	(0.08	)	$	1.43

	2010
	Q1		Q2		Q3		Q4		Year End
	(In thousands, except per share data)
As Reported:
Net income	$	7,981	$	12,769	$	18,985	$	10,569	$	50,304
Weighted average basic shares outstanding		23,135		23,084		22,419		22,442		22,767
Weighted average dilutive shares outstanding		23,688		23,638		22,926		23,027		23,317
Basic earnings per common share	$	0.34	$	0.55	$	0.85	$	0.47	$	2.21
Diluted earnings per common share	$	0.34	$	0.54	$	0.83	$	0.46	$	2.16
Amended Basic:
Net income	$	7,981	$	12,769	$	18,985	$	10,569	$	50,304
Less: Dividends paid to participating securities		—		—		—		118		118
Less: Undistributed earnings allocated to participating securities		457		718		1,187		444		2,557
Net income available to common shares	$	7,524	$	12,051	$	17,798	$	10,007	$	47,629
Weighted average basic common shares outstanding		23,135		23,084		22,419		22,442		22,767
Basic earnings per common share	$	0.33	$	0.52	$	0.79	$	0.45	$	2.09
Amended Diluted:
Net income	$	7,981	$	12,769	$	18,985	$	10,569	$	50,304
Less: Dividends paid to participating securities		—		—		—		118		118
Less: Undistributed earnings allocated to participating securities		456		717		1,186		444		2,555
Net income available to common shares	$	7,525	$	12,052	$	17,799	$	10,007	$	47,631
Weighted average dilutive common shares outstanding		23,156		23,108		22,433		22,467		22,788
Diluted earnings per common share	$	0.32	$	0.52	$	0.79	$	0.45	$	2.09

	2011
	Q1		Q2		Q3
	(In thousands, except per share data)
As Reported:
Net income	$	15,362	$	24,683	$	21,494
Weighted average basic shares outstanding		22,582		22,533		22,020
Weighted average dilutive shares outstanding		23,264		23,183		22,778
Basic earnings per common share	$	0.68	$	1.10	$	0.98
Diluted earnings per common share	$	0.66	$	1.06	$	0.94
Amended Basic:
Net income	$	15,362	$	24,683	$	21,494
Less: Dividends paid to participating securities		148		142		168
Less: Undistributed earnings allocated to participating securities		768		1,284		1,098
Net income available to common shares	$	14,446	$	23,257	$	20,228
Weighted average basic common shares outstanding		22,582		22,533		22,020
Basic earnings per common share	$	0.64	$	1.03	$	0.92
Amended Diluted:
Net income	$	15,362	$	24,683	$	21,494
Less: Dividends paid to participating securities		148		142		168
Less: Undistributed earnings allocated to participating securities		763		1,278		1,088
Net income available to common shares	$	14,451	$	23,263	$	20,238
Weighted average dilutive common shares outstanding		22,736		22,651		22,219
Diluted earnings per common share	$	0.64	$	1.03	$	0.91