UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
   
 FORM 10-Q
   
þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 30, 2017
or
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                     
Commission File Number: 1-13461
   
Group 1 Automotive, Inc.
   
(Exact name of registrant as specified in its charter) 
 Delaware 76-0506313 
 
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
       
  
800 Gessner, Suite 500
Houston, Texas 77024
(Address of principal executive offices) (Zip code)
  
  
(713) 647-5700
(Registrant's telephone number, including area code)
  
       
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerþ ¨Accelerated filer
   
Non-accelerated filer¨(Do not check if a smaller reporting company)¨Smaller reporting company
     
   
¨

Emerging growth company
If an emerging growth company, indicate by check mark if that registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ¨    No  þ
As of July 31,October 27, 2017, the registrant had 20,855,19020,859,019 shares of common stock, par value $0.01, outstanding.


Table of Contents

TABLE OF CONTENTS
 
   
 
Item 1.
 
Item 2.
Item 3.
Item 4.
   
 
Item 1.
Item 1A.
Item 2.
Item 6.

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 
 June 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
 (Unaudited)   (Unaudited)  
(In thousands, except per share amounts)(In thousands, except per share amounts)
ASSETS
CURRENT ASSETS:        
Cash and cash equivalents $26,573
 $20,992
 $66,883
 $20,992
Contracts-in-transit and vehicle receivables, net 217,378
 269,508
 288,200
 269,508
Accounts and notes receivable, net 158,542
 173,364
 187,672
 173,364
Inventories, net 1,803,909
 1,651,815
 1,651,789
 1,651,815
Prepaid expenses and other current assets 87,470
 34,908
 38,111
 34,908
Total current assets 2,293,872
 2,150,587
 2,232,655
 2,150,587
PROPERTY AND EQUIPMENT, net 1,167,345
 1,125,883
 1,269,397
 1,125,883
GOODWILL 878,776
 876,763
 914,224
 876,763
INTANGIBLE FRANCHISE RIGHTS 285,689
 284,876
 294,120
 284,876
OTHER ASSETS 18,903
 23,794
 20,598
 23,794
Total assets $4,644,585
 $4,461,903
 $4,730,994
 $4,461,903
        
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:        
Floorplan notes payable - credit facility and other $1,214,084
 $1,136,654
 $1,077,287
 $1,136,654
Offset account related to floorplan notes payable - credit facility (55,579) (59,626) (46,248) (59,626)
Floorplan notes payable - manufacturer affiliates 430,619
 392,661
 399,804
 392,661
Offset account related to floorplan notes payable - manufacturer affiliates (21,000) (25,500) (22,000) (25,500)
Current maturities of long-term debt and short-term financing 53,184
 72,419
 80,996
 72,419
Current liabilities from interest rate risk management activities

 1,626
 3,941
 823
 3,941
Accounts payable 330,747
 356,099
 436,851
 356,099
Accrued expenses 173,173
 176,469
 208,770
 176,469
Total current liabilities 2,126,854
 2,053,117
 2,136,283
 2,053,117
LONG-TERM DEBT, net of current maturities 1,263,845
 1,212,809
 1,292,689
 1,212,809
DEFERRED INCOME TAXES 174,220
 161,502
 181,244
 161,502
LIABILITIES FROM INTEREST RATE RISK MANAGEMENT ACTIVITIES 18,065
 20,470
 16,157
 20,470
OTHER LIABILITIES 89,953
 83,805
 93,474
 83,805
STOCKHOLDERS’ EQUITY:        
Common stock, $0.01 par value, 50,000 shares authorized; 25,565 and 25,663 issued, respectively 256
 257
Common stock, $0.01 par value, 50,000 shares authorized; 25,523 and 25,663 issued, respectively 255
 257
Additional paid-in capital 287,410
 290,899
 288,970
 290,899
Retained earnings 1,116,195
 1,053,301
 1,141,066
 1,053,301
Accumulated other comprehensive loss (136,268) (146,944) (126,415) (146,944)
Treasury stock, at cost; 4,702 and 4,258 shares, respectively (295,945) (267,313)
Treasury stock, at cost; 4,661 and 4,258 shares, respectively (292,729) (267,313)
Total stockholders’ equity 971,648
 930,200
 1,011,147
 930,200
Total liabilities and stockholders’ equity $4,644,585
 $4,461,903
 $4,730,994
 $4,461,903

GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016 2017 2016 2017 2016
 (Unaudited, in thousands, except per share amounts) (Unaudited, in thousands, except per share amounts)
REVENUES:                
New vehicle retail sales $1,448,768
 $1,540,759
 $2,785,981
 $2,950,609
 $1,710,241
 $1,587,952
 $4,496,222
 $4,538,562
Used vehicle retail sales 685,949
 715,778
 1,346,876
 1,403,949
 743,038
 702,620
 2,089,914
 2,106,569
Used vehicle wholesale sales 99,377
 96,279
 203,534
 197,871
 104,827
 104,218
 308,361
 302,089
Parts and service sales 331,631
 322,073
 651,329
 630,665
 343,193
 319,676
 994,522
 950,341
Finance, insurance and other, net 106,470
 107,560
 203,304
 207,710
 110,993
 108,710
 314,297
 316,419
Total revenues 2,672,195
 2,782,449
 5,191,024
 5,390,804
 3,012,292
 2,823,176
 8,203,316
 8,213,980
COST OF SALES:                
New vehicle retail sales 1,373,857
 1,459,611
 2,641,843
 2,797,734
 1,621,909
 1,507,517
 4,263,752
 4,305,252
Used vehicle retail sales 641,036
 667,513
 1,256,958
 1,306,484
 695,915
 656,652
 1,952,873
 1,963,136
Used vehicle wholesale sales 99,644
 96,331
 203,701
 196,474
 105,012
 106,077
 308,713
 302,551
Parts and service sales 152,766
 148,875
 300,108
 290,891
 158,036
 146,262
 458,144
 437,153
Total cost of sales 2,267,303
 2,372,330
 4,402,610
 4,591,583
 2,580,872
 2,416,508
 6,983,482
 7,008,092
GROSS PROFIT 404,892
 410,119
 788,414
 799,221
 431,420
 406,668
 1,219,834
 1,205,888
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 298,568
 299,022
 588,347
 592,687
 328,327
 299,006
 916,674
 891,692
DEPRECIATION AND AMORTIZATION EXPENSE 14,093
 12,713
 27,699
 25,177
 15,059
 12,891
 42,758
 38,067
ASSET IMPAIRMENTS 
 1,024
 
 1,956
 9,526
 10,855
 9,526
 12,812
INCOME FROM OPERATIONS 92,231
 97,360
 172,368
 179,401
 78,508
 83,916
 250,876
 263,317
OTHER EXPENSE:                
Floorplan interest expense (13,226) (11,593) (25,168) (22,603) (13,491) (11,135) (38,659) (33,737)
Other interest expense, net (17,315) (16,705) (34,314) (33,634) (17,874) (17,094) (52,188) (50,729)
INCOME BEFORE INCOME TAXES 61,690
 69,062
 112,886
 123,164
 47,143
 55,687
 160,029
 178,851
PROVISION FOR INCOME TAXES (22,557) (22,482) (39,814) (42,293) (17,262) (20,321) (57,076) (62,614)
NET INCOME $39,133
 $46,580
 $73,072
 $80,871
 $29,881
 $35,366
 $102,953
 $116,237
BASIC EARNINGS PER SHARE $1.84
 $2.12
 $3.42
 $3.57
 $1.43
 $1.65
 $4.85
 $5.23
Weighted average common shares outstanding 20,516
 21,057
 20,604
 21,753
 20,222
 20,568
 20,475
 21,355
DILUTED EARNINGS PER SHARE $1.84
 $2.12
 $3.42
 $3.57
 $1.43
 $1.65
 $4.85
 $5.22
Weighted average common shares outstanding 20,522
 21,070
 20,609
 21,762
 20,225
 20,578
 20,480
 21,364
CASH DIVIDENDS PER COMMON SHARE $0.24
 $0.23
 $0.48
 $0.45
 $0.24
 $0.23
 $0.72
 $0.68


GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016 2017 2016 2017 2016
 (Unaudited, in thousands) (Unaudited, in thousands)
NET INCOME $39,133
 $46,580
 $73,072
 $80,871
 $29,881
 $35,366
 $102,953
 $116,237
Other comprehensive income (loss), net of taxes:                
Foreign currency translation adjustment 4,462
 (6,068) 8,600
 (3,913) 8,399
 (6,341) 16,998
 (10,254)
Net unrealized gain (loss) on interest rate risk management activities:                
Unrealized loss arising during the period, net of tax benefit of $1,542, $3,373, $1,308 and $10,058, respectively (2,570) (5,621) (2,180) (16,763)
Reclassification adjustment for loss included in interest expense, net of tax provision of $1,193, $1,285, $2,554 and $2,553, respectively 1,989
 2,141
 4,256
 4,256
Unrealized gain (loss) arising during the period, net of tax benefit (provision) of $154, $(713), $1,462 and $9,345, respectively (257) 1,188
 (2,437) (15,575)
Reclassification adjustment for loss included in interest expense, net of tax provision of $1,027, $1,267, $3,581 and $3,822, respectively 1,711
 2,112
 5,968
 6,367
Unrealized gain (loss) on interest rate risk management activities, net of tax (581) (3,480) 2,076
 (12,507) 1,454
 3,300
 3,531
 (9,208)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES 3,881
 (9,548) 10,676
 (16,420) 9,853
 (3,041) 20,529
 (19,462)
COMPREHENSIVE INCOME $43,014
 $37,032
 $83,748
 $64,451
 $39,734
 $32,325
 $123,482
 $96,775


GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY 
 Common Stock 
Additional
Paid-in Capital
 Retained Earnings 
Accumulated
Other
Comprehensive Loss
 Treasury Stock   Common Stock 
Additional
Paid-in Capital
 Retained Earnings 
Accumulated
Other
Comprehensive Loss
 Treasury Stock  
 Shares Amount Total Shares Amount Total
 (Unaudited, in thousands) (Unaudited, in thousands)
BALANCE, December 31, 2016 25,663
 $257
 $290,899
 $1,053,301
 $(146,944) $(267,313) $930,200
 25,663
 $257
 $290,899
 $1,053,301
 $(146,944) $(267,313) $930,200
Net income 
 
 
 73,072
 
 
 73,072
 
 
 
 102,953
 
 
 102,953
Other comprehensive income, net 
 
 
 
 10,676
 
 10,676
 
 
 
 
 20,529
 
 20,529
Acquisition of treasury stock 
 
 
 
 
 (41,015) (41,015) 
 
 
 
 
 (42,084) (42,084)
Net issuance of treasury shares to employee stock compensation plans (98) (1) (13,927) 
 
 12,383
 (1,545) (140) (2) (16,502) 
 
 16,668
 164
Stock-based compensation 
 
 10,438
 
 
 
 10,438
 
 
 14,573
 
 
 
 14,573
Cash dividends, net of estimated forfeitures relative to participating securities 
 
 
 (10,178) 
 
 (10,178) 
 
 
 (15,188) 
 
 (15,188)
BALANCE, June 30, 2017 25,565
 $256
 $287,410
 $1,116,195
 $(136,268) $(295,945) $971,648
BALANCE, September 30, 2017 25,523
 $255
 $288,970
 $1,141,066
 $(126,415) $(292,729) $1,011,147


GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended June 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (Unaudited, in thousands) (Unaudited, in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income $73,072
 $80,871
 $102,953
 $116,237
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization 27,699
 25,177
 42,758
 38,067
Deferred income taxes 11,095
 7,984
 16,102
 14,347
Asset impairments 
 1,956
 9,526
 12,812
Stock-based compensation 10,459
 10,169
 14,606
 14,879
Amortization of debt discount and issue costs 1,849
 2,085
 2,852
 2,783
Gain on disposition of assets (314) (617) (848) (1,812)
Other (676) 584
 (548) 1,039
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:        
Accounts payable and accrued expenses (28,480) 15,473
 85,163
 78,905
Accounts and notes receivable 13,582
 8,564
 (8,892) 370
Inventories (142,165) (22,080) 68,454
 60,839
Contracts-in-transit and vehicle receivables 53,405
 44,667
 (15,273) 49,581
Prepaid expenses and other assets (2,377) 15,573
 (2,297) 17,957
Floorplan notes payable - manufacturer affiliates 37,779
 (17,268) (5,164) (19,064)
Deferred revenues (243) (271) 475
 (328)
Net cash provided by operating activities 54,685
 172,867
 309,867
 386,612
CASH FLOWS FROM INVESTING ACTIVITIES:        
Cash paid in acquisitions, net of cash received (95) (54,739) (109,082) (57,327)
Proceeds from disposition of franchises, property and equipment 2,582
 13,985
 5,133
 23,072
Purchases of property and equipment, including real estate (67,266) (70,272) (144,310) (125,692)
Deposits for real estate and dealership acquisitions (57,099) (193)
Other 2,074
 3,349
 1,526
 2,924
Net cash used in investing activities (119,804) (107,870) (246,733) (157,023)
CASH FLOWS FROM FINANCING ACTIVITIES:        
Borrowings on credit facility - floorplan line and other 3,369,580
 3,373,126
 5,053,598
 5,040,726
Repayments on credit facility - floorplan line and other (3,288,367) (3,325,917) (5,108,475) (5,147,766)
Borrowings on credit facility - acquisition line 47,509
 150,020
 68,085
 220,020
Repayments on credit facility - acquisition line (15,000) (140,020) (35,576) (220,020)
Borrowings on other debt 5,137
 19,653
 126,316
 37,786
Principal payments on other debt (542) (22,248) (88,701) (31,832)
Borrowings on debt related to real estate, net of debt issue costs 12,901
 30,754
 39,031
 42,654
Principal payments on debt related to real estate (13,897) (12,215) (21,269) (18,845)
Employee stock purchase plan purchases, net of employee tax withholdings 2,487
 136
 4,196
 1,452
Repurchases of common stock, amounts based on settlement date (39,025) (115,246) (40,094) (127,606)
Tax effect from stock-based compensation 
 (85) 
 (148)
Dividends paid (10,200) (10,124) (15,221) (15,054)
Other 
 (3,159) 
 (3,420)
Net cash provided by (used in) financing activities 70,583
 (55,325)
Net cash used in financing activities (18,110) (222,053)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 117
 2,256
 867
 2,345
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,581
 11,928
 45,891
 9,881
CASH AND CASH EQUIVALENTS, beginning of period 20,992
 13,037
 20,992
 13,037
CASH AND CASH EQUIVALENTS, end of period $26,573
 $24,965
 $66,883
 $22,918
SUPPLEMENTAL CASH FLOW INFORMATION:        
Purchases of property and equipment, including real estate, accrued in accounts payable $11,105
 $21,241
 $10,364
 $19,920

The accompanying notes are an integral part of these consolidated financial statements.
7

Table of Contents
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. INTERIM FINANCIAL INFORMATION
Business and Organization
Group 1 Automotive, Inc., a Delaware corporation, is a leading operator in the automotive retailing industry with business activities in 1415 states in the United States of America ("U.S."), 2128 towns in the United Kingdom ("U.K.") and four states in Brazil. Group 1 Automotive, Inc. and its subsidiaries are collectively referred to as the "Company" in these Notes to Consolidated Financial Statements.
The Company, through its regions, sells new and used cars and light trucks; arranges related vehicle financing; sells service and insurance contracts; provides automotive maintenance and repair services; and sells vehicle parts. As of JuneSeptember 30, 2017, the Company’s U.S. retail network consisted of 112115 dealerships within the following states: Alabama, California, Florida, Georgia, Kansas, Louisiana, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New Mexico, Oklahoma, South Carolina, and Texas. The President of U.S. Operations reports directly to the Company's Chief Executive Officer and is responsible for the overall performance of the U.S. region, as well as for overseeing the market directors and dealership general managers. In addition, as of JuneSeptember 30, 2017, the Company had two international regions: (a) the U.K., which consisted of 3143 dealerships and (b) Brazil, which consisted of 16 dealerships. The operations of the Company's international regions are structured similar to the U.S. region, each with a regional vice president reporting directly to the Company's Chief Executive Officer.
The Company's operating results are generally subject to seasonal variations, as well as changes in the economic environment. This seasonality is generally attributable to consumer buying trends and the timing of manufacturer new vehicle model introductions. In addition, in some regions of the U.S., vehicle purchases decline during the winter months due to inclement weather. As a result, U.S. revenues and operating income are typically lower in the first and fourth quarters and higher in the second and third quarters. For the U.K., the first and third quarters tend to be stronger, driven by the vehicle license plate change months of March and September. For Brazil, the Company expects higher volumes in the third and fourth calendar quarters. The first quarter in Brazil is generally the weakest, driven by more consumer vacations and activities associated with Carnival. Other factors unrelated to seasonality, such as changes in economic conditions, manufacturer incentive programs, severe weather events and changes in current exchange rates may exaggerate seasonal or cause counter-seasonal fluctuations in the Company's revenues and operating income.
Basis of Presentation
The accompanying unaudited condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP") 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 U.S. GAAP 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 unaudited condensed 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 any other interim period or for the entire fiscal year. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (“2016 Form 10-K”).
All business acquisitions 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 and are subject to change within the purchase price allocation period (generally one year from the respective acquisition date). All intercompany balances and transactions have been eliminated in consolidation.
Business Segment Information
The Company has three reportable segments: the U.S., which includes the activities of the Company's corporate office, the U.K. and Brazil. The reportable segments are the business activities of the Company for which discrete financial information is available and for which operating results are regularly reviewed by its chief operating decision maker to allocate resources and assess performance. The Company's chief operating decision maker is its Chief Executive Officer. See Note 14, "Segment Information," for additional details regarding the Company's reportable segments.
Recently Adopted Accounting Pronouncements
In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The amendments in the accounting standard replace the lower of cost or market test with a lower of cost and net realizable value test. The amendments in this ASU should be

8

Table of Contents         GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

replaced the lower of cost or market test with a lower of cost and net realizable value test. The amendments in this ASU were to be applied prospectively and arewere effective for interim and annual periods beginning after December 15, 2016. The Company adopted ASU 2015-11 during the first quarter of 2017. The adoption of this ASU did not materially impact its consolidated financial statements or results of operations.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendment addresses several aspects of the accounting for share-based payment award transactions, including: income tax consequences; classification of awards as either equity or liabilities; and classification on the statement of cash flows. The Company adopted ASU 2016-09 during the first quarter of 2017. The adoption of this ASU did not materially impact its consolidated financial statements or results of operations.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) that amends the accounting guidance on revenue recognition. The amendments in this ASU are intended to provide a framework for addressing revenue issues, improve comparability of revenue recognition practices, and improve disclosure requirements. This ASU sets forth a five-step model for determining when and how revenue is recognized. Under the model, an entity will be required to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. The amendments in this accounting standard update are effective for interim and annual reporting periods beginning after December 15, 2017. The standard can be adopted either retrospectively to each reporting period presented or as a cumulative effect adjustment as of the date of adoption. To assess the impact of the ASU, the Company established an internal implementation team to review its current accounting policies and practices, identify all material revenue streams, assess the impact of the ASU on its material revenue streams and identify potential differences with current policies and practices. The Company’s internal implementation team has substantially completed its initial review of the likely impacts that the application of the amendments in this ASU will have on its consolidated financial statements.
The team has initially identified the Company’s material revenue streams to be the sale of new and used vehicles; arrangement of associated vehicle financing; the sale of service and insurance contracts; the performance of vehicle maintenance and repair services; and the sale of vehicle parts. The team has begun its review ofreviewed a sample of associated contracts and other related documents but currently, hasassociated with each revenue stream. The team does not quantified an estimated impactanticipate any changes to the timing of changes, if any, to its current revenue recognition policiesfor the sale of new and practices. used vehicles. The team is currently evaluating the constraint factors for a portion of the transaction price for certain service and insurance contracts. The new standard requires that an estimate of variable consideration, subject to a constraint, be included in the transaction price and recognized when or as the performance obligation is satisfied. In the event variable consideration is considered fully constrained, recognition will occur once the uncertainties associated with the constraint are determined to be resolved. However, in the event the team's evaluation determines the variable consideration is not fully constrained, revenue would be subject to accelerated recognition under the new standard. As it relates to vehicle maintenance and repair services, the Company currently recognizes revenue once the repair service is completed. The team is currently assessing whether revenue will be recognized over time as the services are performed, under the new standard.
The Company’s implementation team is in the preliminaryfinal stages of evaluating the additional disclosure requirements of the ASU, as well as the change, if any, to the Company’s underlying accounting and financial reporting systems and processes necessary to support the recognition and disclosure requirements. The Company expects to identify and implement the necessary changes, if any, during the fourth quarter of 2017. At this time, based on this review, the Company does not expect the adoption to materially impact its consolidated financial statements. The Company currently expects towill adopt the amendments of this ASU during the first fiscal quarter of 2018, asusing the modified retrospective approach with a cumulative effect adjustment as of the date of adoption, but will not make a final decision on the adoption method until later in 2017.adoption.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The amendments in this ASU relate to the accounting for leasing transactions. This standard requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than 12 months. In addition, this standard requires both lessees and lessors to disclose certain key information about lease transactions. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is in the process of evaluating the impact that adoption will have on its consolidated balance sheet and statement of income. However, the Company expects that the adoption of the provisions of the ASU will have a significant impact on its consolidated balance sheet, as currently approximately half of its real estate is rented, not owned, via operating leases. Adoption of this ASU is required to be done using a modified retrospective approach.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. The amendment replaces the current incurred loss impairment methodology of recognizing credit losses when a loss is probable, with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to assess credit loss estimates. The standard will be effective for fiscal

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years beginning after December 15, 2019, with early adoption permitted for periods after December 15, 2018. The Company is currently evaluating the impact that the adoption of the provisions of the ASU will have on its consolidated financial statements or results of operations, andbut does not expect the amendments in this ASU to materially impact its consolidated financial statements.     
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendment addresses several specific cash flow issues with the objective of reducing the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard will be effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.

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The Company is currently evaluating the impact that the adoption of the provisions of the ASU will have on its consolidated financial statements.     
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, a consensus of the FASB Emerging Issues Task Force ("EITF"). The amendments require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU do not provide a definition of restricted cash or restricted cash equivalents. The standard will be effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of the provisions of the ASU will have on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business in order to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this ASU should be applied prospectively and are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact on its consolidated financial statements as it will depend on the facts and circumstances of any specific future transactions.
In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. The amendments in this update require the disclosure of the impact that a recently issued ASU will have on the financial statements of a registrant when such standards are to be adopted in a future period. The SEC staff viewviews that a registrant should evaluate ASU's that have not yet been adopted to determine the appropriate financial statement disclosures about the potential material effects of those ASU's on the financial statements when adopted. The Company does not expect the amendments in this ASU to materially impact its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendment eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value. The amendments in this update should be applied prospectively and are effective for interim and annual periods beginning after December 15, 2019. Earlier application is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact that the adoption of the provisions of the ASU will have on its consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. The amendments in this update provide clarity and reduce both diversity in practice and cost and complexity when applying the guidance of Topic 718 to a change to the terms or conditions of a share-based payment award. Under the new guidance, an entity will not apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: 1) the award's fair value (or calculated value or intrinsic value, if those measurement methods are used), 2) the award's vesting conditions, and 3) the award's classification as an equity or liability instrument. The amendments in this ASU should be applied prospectively and are effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact on its consolidated financial statements as it will depend on the facts and circumstances of any specific future transactions.
2. ACQUISITIONS AND DISPOSITIONS
During the six months ended June 30,In August 2017, the Company opened one dealershipFASB issued ASU 2017-12, Derivatives and Hedging (Topic 715): Targeted Improvements to Accounting for one awarded franchiseHedging Activities. The amendments in this update better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the U.K., opened one dealership for one awarded franchisefair value of a hedging instrument to be presented in the U.S. and added motorcycles to an existing BMW dealership in Brazil. In addition, during the six months ended June 30, 2017, the Company disposed of two dealerships in Brazil representing two franchises.
During the six months ended June 30, 2016, the Company acquired 12 U.K. dealerships, inclusive of 15 franchises. The Company also acquired one dealership and opened two dealerships in Brazil for two acquired and two previously awarded franchises. Aggregate consideration paid for these dealerships totaled $60.4 million, including the associated real estate and goodwill. Also, included in the consideration paid was $3.9 million of cash received in the acquisition of the dealerships and a payable to the seller as of June 30, 2016 of $1.8 million. The purchase price was allocated based upon the consideration paid and the estimated fair values of the assets acquired and liabilities assumed at the acquisition date. In addition, during the six months ended June 30, 2016, the Company disposed of two U.S. dealerships and four dealerships in Brazil. As a result of these

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the same income statement line as the hedged item. The guidance also eases the administrative burden of hedge documentation requirements and assessing hedge effectiveness. The amendments to cash flow and net investment hedge relationships should be applied using a modified retrospective approach while the presentation and disclosure requirements are applied prospectively, effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact that the adoption of the provisions of the ASU will have on its consolidated financial statements.


2. ACQUISITIONS AND DISPOSITIONS
During the nine months ended September 30, 2017, the Company acquired 12 U.K. dealerships, inclusive of 14 franchises, and opened one dealership for one awarded franchise in the U.K. In addition, the Company acquired three dealerships in the U.S., inclusive of four franchises, and opened one dealership for one awarded franchise in the U.S. and added motorcycles to an existing BMW dealership in Brazil. Aggregate consideration paid for these dealerships totaled $120.2 million, including the associated real estate and goodwill. Also included in the consideration paid was $11.2 million of cash received in the acquisition of the dealerships. The purchase prices have been allocated based upon the consideration paid and the estimated fair values of the assets acquired and liabilities assumed at the acquisition dates. The allocation of the purchase prices are preliminary and based on estimates and assumptions that are subject to change within the purchase price allocation periods (generally one year from the respective acquisition date). In addition, during the nine months ended September 30, 2017, the Company disposed of two dealerships in Brazil representing two franchises.
During the nine months ended September 30, 2016, the Company acquired 12 U.K. dealerships, inclusive of 15 franchises. The Company also acquired one dealership and opened two dealerships in Brazil for one acquired and one previously awarded franchise. Aggregate consideration paid for these dealerships totaled $61.2 million, including the associated real estate and goodwill, as well as $3.9 million of cash received in the acquisition of the dealerships. The purchase prices were allocated based upon the consideration paid and the estimated fair values of the assets acquired and liabilities assumed at the acquisition dates. In addition, during the nine months ended September 30, 2016, the Company disposed of four U.S. dealerships and four dealerships in Brazil. As a result of these U.S. and Brazil dispositions, a net pretax gain of $0.7$1.8 million and a net pretax loss of $1.4$0.8 million, respectively, were recognized for the sixnine months ended JuneSeptember 30, 2016.
3. DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT ACTIVITIES
The periodic interest rates of the Revolving Credit Facility (as defined in Note 8, “Credit Facilities”) and certain variable-rate real estate related borrowings in the U.S. are indexed to the one-month London Inter Bank Offered Rate (“LIBOR”), plus an associated company credit risk rate. In order to minimize the earnings variability related to fluctuations in these periodic interest rates, the Company employs an interest rate hedging strategy, whereby it enters into arrangements with various financial institutional counterparties with investment grade credit ratings, swapping its variable interest rate exposure for a fixed interest rate over terms not to exceed the related variable-rate debt.
The Company presents the fair value of all interest rate derivative instruments on its Consolidated Balance Sheets. The Company measures the fair value of its interest rate derivative instruments utilizing an income approach valuation technique, converting future amounts of cash flows to a single present value in order to obtain a transfer exit price within the bid and ask spread that is most representative of the fair value of its derivative instruments. In measuring fair value, the Company utilizes the option-pricing Black-Scholes present value technique for all of its derivative instruments. This option-pricing technique utilizes a one-month LIBOR forward yield curve, obtained from an independent external service provider, matched to the identical maturity term of the instrument being measured. Observable inputs utilized in the income approach valuation technique incorporate identical contractual notional amounts, fixed coupon rates, periodic terms for interest payments and contract maturity. The fair value estimate of the interest rate derivative instruments also considers the credit risk of the Company for instruments in a liability position or the counterparty for instruments in an asset position. The credit risk is calculated by using the spread between the one-month LIBOR yield curve and the relevant average 10 and 20-year rate according to Standard and Poor’s. The Company has determined the valuation measurement inputs of these derivative instruments to maximize the use of observable inputs that market participants would use in pricing similar or identical instruments and market data obtained from independent sources, which is readily observable or can be corroborated by observable market data for substantially the full term of the derivative instrument. Further, the valuation measurement inputs minimize the use of unobservable inputs. Accordingly, the Company has classified the derivatives within Level 2 of the hierarchy framework as described by Accounting Standards Codification ("ASC") 820, Fair Value Measurement.

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The related gains or losses on these interest rate derivative instruments are deferred in stockholders’ equity as a component of accumulated other comprehensive loss. These deferred gains and losses are recognized in income in the period in which the related items being hedged are recognized in expense. However, to the extent that the change in value of a derivative contract does not perfectly offset the change in the value of the items being hedged, that ineffective portion is immediately recognized in other income or expense. Monthly contractual settlements of these swap positions are recognized as floorplan or other interest expense in the Company’s accompanying Consolidated Statements of Operations. All of the Company’s interest rate derivative instruments are designated as cash flow hedges. As of JuneSeptember 30, 2017, all of the Company’s derivative instruments that were in effect were determined to be effective. The Company had no gains or losses related to ineffectiveness or amounts excluded from effectiveness testing recognized in the Consolidated Statements of Operations for both the three and sixnine months ended JuneSeptember 30, 2017 or 2016, respectively.
The Company held interest rate derivative instruments in effect as of JuneSeptember 30, 2017 of $824.8$823.9 million in notional value that fixed its underlying one-month LIBOR at a weighted average rate of 2.5%. The Company records the majority of the impact of the periodic settlements of these swaps as a component of floorplan interest expense. For the three months ended JuneSeptember 30, 2017 and 2016, the impact of the Company’s interest rate hedges in effect increased floorplan interest expense by $2.7$2.3 million and $2.9$2.8 million, respectively. For the sixnine months ended JuneSeptember 30, 2017 and 2016, the impact of the Company’s interest rate hedges in effect increased floorplan interest expense by $5.7$8.0 million and $5.6$8.4 million, respectively. Total floorplan interest expense, inclusive of the aforementioned impact of the Company's interest rate hedges, was $13.2$13.5 million and $11.6$11.1 million for the three months ended JuneSeptember 30, 2017 and 2016, respectively, and $25.2$38.7 million and $22.6$33.7 million for the sixnine months ended JuneSeptember 30, 2017 and 2016, respectively. For the six months ended June 30, 2017, the Company entered into two interest rate derivative instruments with a notional value of $11.0 million that were immediately effective.
In addition to the $824.8$823.9 million of swaps in effect as of JuneSeptember 30, 2017, the Company held 12 additional interest rate derivative instruments with forward start dates between December 2017 and December 2020 and expiration dates between December 2020 and December 2030. The aggregate notional value of these 12 forward-starting swaps was $625.0 million, and the weighted average interest rate was 2.2%. The combination of the interest rate derivative instruments currently in effect and these forward-starting derivative instruments is structured such that the notional value in effect at any given time through December 2030 does not exceed $918.4 million, which is less than the Company's expectation for variable-rate debt outstanding during such period.

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As of JuneSeptember 30, 2017 and December 31, 2016, the Company reflected liabilities from interest rate risk management activities of $19.7$17.0 million and $24.4 million, respectively, in its Consolidated Balance Sheets. In addition, as of JuneSeptember 30, 2017 and December 31, 2016, the Company reflected $8.1$7.7 million and $9.5 million, respectively, of assets from interest rate risk management activities in Other Assets in the Consolidated Balance Sheets. Included in Accumulated Other Comprehensive Loss at JuneSeptember 30, 2017 and 2016 were accumulated unrealized losses, net of income taxes, totaling $7.3$5.8 million and $32.0$28.7 million, respectively, related to these interest rate derivative instruments.
The following table presents the impact during the current and comparative prior year periods for the Company's interest rate derivative instruments on its Consolidated Statements of Operations and Consolidated Balance Sheets.
 
Amount of Unrealized Income (Loss), Net of Tax, Recognized in Other Comprehensive Income (Loss)

 
Amount of Unrealized Income (Loss), Net of Tax, Recognized in Other Comprehensive Income (Loss)

 Six Months Ended June 30, Nine Months Ended September 30,
Derivatives in Cash Flow Hedging Relationship 2017 2016 2017 2016
 (In thousands) (In thousands)
Interest rate derivative instruments $(2,180) $(16,763) $(2,437) $(15,575)
        
 
Amount of Loss Reclassified from Other Comprehensive Income (Loss) into Statements of Operations

 
Amount of Loss Reclassified from Other Comprehensive Income (Loss) into Statements of Operations

Location of Loss Reclassified from Other Comprehensive Income (Loss) into Statements of Operations Six Months Ended June 30, Nine Months Ended September 30,
2017 2016 2017 2016
 (In thousands) (In thousands)
Floorplan interest expense $(5,656) $(5,623) $(7,995) $(8,414)
Other interest expense (1,154) (1,186) (1,554) (1,775)

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The amount of loss expected to be reclassified out of other comprehensive income (loss) into earnings as additional floorplan interest expense or other interest expense in the next twelve months is $10.0$9.5 million.
4. STOCK-BASED COMPENSATION PLANS
The Company provides stock-based compensation benefits to employees and non-employee directors pursuant to its 2014 Long Term Incentive Plan (the "Incentive Plan"), as well as to employees pursuant to its Employee Stock Purchase Plan, as amended (the "Purchase Plan", formerly named the 1998 Employee Stock Purchase Plan).
2014 Long Term Incentive Plan
The Incentive Plan provides for the grant of options (including options qualified as incentive stock options under the Internal Revenue Code of 1986 and options that are non-qualified), restricted stock, performance awards, bonus stock, and phantom stock to the Company's employees, consultants, non-employee directors and officers. The Incentive Plan expires on May 21, 2024. The terms of the awards (including vesting schedules) are established by the Compensation Committee of the Company’s Board of Directors. As of JuneSeptember 30, 2017, there were 1,068,4551,074,695 shares available for issuance under the Incentive Plan.
Restricted Stock Awards
Under the Incentive Plan, the Company grants to non-employee directors and certain employees restricted stock awards or, at their election, restricted stock units at no cost to the recipient. Restricted stock awards qualify as participating securities as each award contains non-forfeitable rights to dividends. As such, the two-class method is required for the computation of earnings per share. See Note 5, “Earnings Per Share,” for further details. Restricted stock awards are considered outstanding at the date of grant but are subject to vesting periods upon issuance of up to five years. Restricted stock units are considered vested at the time of issuance. However, since they convey no voting rights, they are not considered outstanding when issued. Restricted stock units settle in cash upon the termination of the grantees’ employment or directorship. In the event an employee or non-employee director terminates his or her employment or directorship with the Company prior to the lapse of the restrictions, the shares, in most cases, will be forfeited to the Company. The Company issues new shares or treasury shares, if available, when restricted stock vests. Compensation expense for restricted stock awards is calculated based on the market price of the Company’s common stock at the date of grant and recognized over the requisite service period. Forfeitures are estimated

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at the time of valuation and reduce expense ratably over the vesting period. This estimate is adjusted annually based on the extent to which actual or expected forfeitures differ from the previous estimate.
A summary of the restricted stock awards as of JuneSeptember 30, 2017, along with the changes during the sixnine months then ended, is as follows:
 Awards 
Weighted Average
Grant Date
Fair Value
 Awards 
Weighted Average
Grant Date
Fair Value
Nonvested at December 31, 2016 850,422
 $67.25
 850,422
 $67.25
Granted 188,789
 76.50
 205,789
 75.04
Vested (216,519) 69.43
 (252,015) 70.55
Forfeited (70,578) 68.20
 (93,818) 68.67
Nonvested at June 30, 2017 752,114
 $68.87
Nonvested at September 30, 2017 710,378
 $68.16
Employee Stock Purchase Plan
The Purchase Plan authorizes the issuance of up to 4.5 million shares of common stock and provides that no options to purchase shares may be granted under the Purchase Plan after May 19, 2025. The Purchase Plan is available to all employees of the Company and its participating subsidiaries and is a qualified plan as defined by Section 423 of the Internal Revenue Code. At the end of each fiscal quarter (the “Option Period”) during the term of the Purchase Plan, employees can acquire shares of common stock from the Company at 85% of the fair market value of the common stock on the first or the last day of the Option Period, whichever is lower. As of JuneSeptember 30, 2017, there were 1,197,5011,166,445 shares available for issuance under the Purchase Plan. During the sixnine months ended JuneSeptember 30, 2017 and 2016, the Company issued 65,04296,098 and 44,806125,154 shares, respectively, of common stock to employees participating in the Purchase Plan. With respect to shares issued under the Purchase Plan, the Company's Board of Directors has authorized specific share repurchases to fund the shares issuable under the Purchase Plan.
The weighted average per share fair value of employee stock purchase rights issued pursuant to the Purchase Plan was $17.38$16.69 and $14.11$13.05 for the sixnine months ended JuneSeptember 30, 2017 and 2016, respectively. The fair value of stock purchase

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rights is calculated using the grant date stock price, the value of the embedded call option and the value of the embedded put option.
Stock-Based Compensation
Total stock-based compensation cost was $4.4$4.1 million and $4.7 million for the three months ended JuneSeptember 30, 2017 and 2016, respectively, and $10.5$14.6 million and $10.2$14.9 million for the sixnine months ended JuneSeptember 30, 2017 and 2016, respectively. Cash received from Purchase Plan purchases was $3.8$5.5 million and $3.9$5.6 million for the sixnine months ended JuneSeptember 30, 2017 and 2016, respectively.

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5. EARNINGS PER SHARE
The two-class method is utilized for the computation of the Company's earnings per share (“EPS”). The two-class method requires a portion of net income to be allocated to participating securities, which are unvested awards of share-based payments with non-forfeitable rights to receive dividends or dividend equivalents. The Company’s restricted stock awards are participating securities. Income allocated to these participating securities is excluded from net earnings available to common shares, as shown in the table below. Basic EPS is computed by dividing net income available to basic common shares by the weighted average number of basic common shares outstanding during the period. Diluted EPS is computed by dividing net income available to diluted common shares by the weighted average number of dilutive common shares outstanding during the period.
The following table sets forth the calculation of EPS for the three and sixnine months ended JuneSeptember 30, 2017 and 2016.
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016 2017 2016 2017 2016
 (In thousands, except per share amounts) (In thousands, except per share amounts)
Weighted average basic common shares outstanding 20,516
 21,057
 20,604
 21,753
 20,222
 20,568
 20,475
 21,355
Dilutive effect of employee stock purchases, net of assumed repurchase of treasury stock 6
 13
 5
 9
 3
 10
 5
 9
Weighted average dilutive common shares outstanding 20,522
 21,070
 20,609
 21,762
 20,225
 20,578
 20,480
 21,364
Basic:                
Net Income $39,133
 $46,580
 $73,072
 $80,871
 $29,881
 $35,366
 $102,953
 $116,237
Less: Earnings allocated to participating securities 1,389
 1,885
 2,645
 3,224
 1,024
 1,427
 3,660
 4,652
Earnings available to basic common shares $37,744
 $44,695
 $70,427
 $77,647
 $28,857
 $33,939
 $99,293
 $111,585
Basic earnings per common share $1.84
 $2.12
 $3.42
 $3.57
 $1.43
 $1.65
 $4.85
 $5.23
Diluted:                
Net Income $39,133
 $46,580
 $73,072
 $80,871
 $29,881
 $35,366
 $102,953
 $116,237
Less: Earnings allocated to participating securities 1,389
 1,884
 2,645
 3,223
 1,023
 1,426
 3,659
 4,651
Earnings available to diluted common shares $37,744
 $44,696
 $70,427
 $77,648
 $28,858
 $33,940
 $99,294
 $111,586
Diluted earnings per common share $1.84
 $2.12
 $3.42
 $3.57
 $1.43
 $1.65
 $4.85
 $5.22
6. INCOME TAXES
The Company is subject to U.S. federal income taxes and income taxes in numerous U.S. states. In addition, the Company is subject to income tax in the U.K. and Brazil relative to its foreign subsidiaries. The Company's effective income tax rate of 36.6% for the three months ended JuneSeptember 30, 2017 was more than the U.S. federal statutory rate of 35.0%, due primarily to the taxes provided for in U.S. state jurisdictions, and valuation allowances provided for net operating losses and other deferred tax assets in certain U.S. states and in Brazil and unrecognized tax benefits with respect to uncertain tax positions, partially offset by income generated in the U.K., which is taxed at a lower statutory rate. The Company's effective income tax rate of 35.3%35.7% of pretax income for the sixnine months ended JuneSeptember 30, 2017, was approximately equal tomore than the U.S. federal statutory rate of 35.0%, as taxes provided for in the U.S. state jurisdictions and valuation allowances provided for net operating losses and other deferred tax assets in certain U.S. states and in Brazil and unrecognized tax benefits with respect to uncertain tax positions, were primarilysubstantially offset by (a) income generated in the U.K., which is taxed at a lower statutory rate, (b) the tax impact of dealership dispositions in Brazil, and (c) excess tax deductions for restricted stock resulting from the adoption of ASU 2016-09 during the sixnine months ended JuneSeptember 30, 2017.
For the three and sixnine months ended JuneSeptember 30, 2017, the Company's effective tax rate increased to 36.6% and 35.3%35.7%, respectively, as compared to 32.6%36.5% and 34.3%35.0% for the three and sixnine months ended JuneSeptember 30, 2016, respectively. This increase was primarily due to the mix effect resulting from taxes provided for in foreign jurisdictions, changes to valuation allowances provided for net operating losses and other deferred tax assets in certain U.S. states and in Brazil and unrecognized tax benefits with respect to uncertain tax positions during the three and nine months ended September 30, 2017, partially offset by excess tax deductions for restricted stock resulting from the adoption of ASU 2016-09 during the sixnine months ended JuneSeptember 30, 2017, as well as the tax impact of dealership dispositions in Brazil during the threenine months ended JuneSeptember 30, 2016 .2016.
As of JuneSeptember 30, 2017, the Company recorded $1.2 million unrecognized tax benefits, including $0.2 million of related interest and penalty. As of December 31, 2016, the Company had no unrecognized tax benefits with respect to uncertain tax positions and did not incur any interest and penalties nor did it accrue any interest for the six months ended June 30, 2017. When applicable, consistent with prior practice, the Company recognizes interest and penalties related to uncertain tax positions in income tax expense.

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tax positions and did not incur any interest and penalties. Consistent with prior treatment of tax related assessments, the Company recognizes interest and penalties related to uncertain tax positions in income tax expense.
The Company's taxable years 20122013 and subsequent remain open for examination in the U.S. The Company's taxable years 2015 and subsequent remain open in the U.K. and taxable years 20112012 and subsequent remain open in Brazil.

7. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS
Accounts and notes receivable consisted of the following: 
 June 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
 (unaudited)   (unaudited)  
 (In thousands) (In thousands)
Amounts due from manufacturers $87,967
 $95,754
 $111,768
 $95,754
Parts and service receivables 36,293
 35,318
 38,523
 35,318
Finance and insurance receivables 20,412
 24,866
 23,681
 24,866
Other 16,486
 20,322
 16,643
 20,322
Total accounts and notes receivable 161,158
 176,260
 190,615
 176,260
Less allowance for doubtful accounts 2,616
 2,896
 2,943
 2,896
Accounts and notes receivable, net $158,542
 $173,364
 $187,672
 $173,364
Inventories consisted of the following: 
 June 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
 (unaudited)   (unaudited)  
 (In thousands) (In thousands)
New vehicles $1,279,416
 $1,156,383
 $1,095,792
 $1,156,383
Used vehicles 313,612
 294,812
 344,271
 294,812
Rental vehicles 141,215
 131,080
 138,501
 131,080
Parts, accessories and other 78,676
 77,762
 81,912
 77,762
Total inventories 1,812,919
 1,660,037
 1,660,476
 1,660,037
Less lower of cost or net realizable value 9,010
 8,222
Less lower of cost or net realizable value allowance 8,687
 8,222
Inventories, net $1,803,909
 $1,651,815
 $1,651,789
 $1,651,815
New, used and rental vehicles are valued at the lower of specific cost or net realizable value and are removed from inventory using the specific identification method. Parts and accessories are valued at lower of cost (determined on either a first-in, first-out or an average cost basis) or net realizable value.

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Property and equipment consisted of the following:
 Estimated Useful Lives in Years June 30, 2017 December 31, 2016 Estimated Useful Lives in Years September 30, 2017 December 31, 2016
 (unaudited) (unaudited)
   (dollars in thousands)   (dollars in thousands)
Land  $414,616
 $400,163
  $448,554
 $400,163
Buildings 25 to 50 578,768
 553,961
 25 to 50 669,416
 553,961
Leasehold improvements varies 186,444
 170,060
 varies 181,336
 170,060
Machinery and equipment 7 to 20 111,310
 100,164
 7 to 20 116,174
 100,164
Furniture and fixtures 3 to 10 93,760
 87,691
 3 to 10 99,880
 87,691
Company vehicles 3 to 5 11,757
 11,632
 3 to 5 11,691
 11,632
Construction in progress  61,602
 66,658
  44,323
 66,658
Total 1,458,257
 1,390,329
 1,571,374
 1,390,329
Less accumulated depreciation 290,912
 264,446
 301,977
 264,446
Property and equipment, net $1,167,345
 $1,125,883
 $1,269,397
 $1,125,883
During the sixnine months ended JuneSeptember 30, 2017, the Company incurred $48.4$71.0 million of capital expenditures for the construction of new or expanded facilities and the purchase of equipment and other fixed assets in the maintenance of the Company’s dealerships and facilities, excluding $15.9 million of capital expenditures accrued as of December 31, 2016. As of JuneSeptember 30, 2017, the Company had accrued $11.1$10.4 million of capital expenditures. In addition, the Company purchased real estate (including land and buildings) during the sixnine months ended JuneSeptember 30, 2017 associated with existing dealership operations totaling $14.0$67.8 million. And, in conjunction with the acquisition of dealerships and franchises in the nine months ended September 30, 2017, the Company acquired $29.2 million of real estate and other property and equipment.
8. CREDIT FACILITIES
In the U.S., the Company has a $1.8 billion revolving syndicated credit arrangement that matures on June 17, 2021 and is comprised of 24 financial institutions, including six manufacturer-affiliated finance companies (“Revolving Credit Facility”). The Company also has a $300.0 million floorplan financing arrangement (“FMCC Facility”) with Ford Motor Credit Company (“FMCC”) for financing of new Ford vehicles in the U.S. and other floorplan financing arrangements with several other automobile manufacturers for financing of a portion of its U.S. rental vehicle inventory. In the U.K., the Company has financing arrangements with BMW Financial Services NA, LLC ("BMWFS"), Volkswagen Finance, Toyota Motor Credit Corporation, FMCC and a third-party financial institution for financing of its new, used and rental vehicles. In Brazil, the Company has financing arrangements for new, used, and rental vehicles with several financial institutions, most of which are manufacturer affiliated. Within the Company's Consolidated Balance Sheets, Floorplan notes payable - credit facility and other primarily reflects amounts payable for the purchase of specific new, used and rental vehicle inventory (with the exception of new and rental vehicle purchases financed through lenders affiliated with the respective manufacturer) whereby financing is provided by the Revolving Credit Facility. Floorplan notes payable - manufacturer affiliates reflects amounts related to the purchase of vehicles whereby financing is provided by the FMCC Facility, the financing of a portion of the Company's rental vehicles in the U.S., as well as the financing of new, used, and rental vehicles with manufacturer affiliates in both the U.K. and Brazil. Payments on the floorplan notes payable are generally due as the vehicles are sold. As a result, these obligations are reflected in the accompanying Consolidated Balance Sheets as current liabilities.

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Revolving Credit Facility
The Company's Revolving Credit Facility provides a total borrowing capacity of $1.8 billion and expires on June 17, 2021. The Revolving Credit Facility consists of two tranches, providing a maximum of $1.75 billion for U.S. vehicle inventory floorplan financing (“Floorplan Line”), as well as a maximum of $360.0 million and a minimum of $50.0 million for working capital and general corporate purposes, including acquisitions (“Acquisition Line”). The capacity under these two tranches can be re-designated within the overall $1.8 billion commitment, subject to the aforementioned limits. Up to $125.0 million of the Acquisition Line can be borrowed in either euros or British pound sterling. The Revolving Credit Facility can be expanded to a maximum commitment of $2.1 billion, subject to participating lender approval. The Floorplan Line bears interest at rates equal to the LIBOR plus 125 basis points for new vehicle inventory and the LIBOR plus 150 basis points for used vehicle inventory. The Acquisition Line bears interest at the LIBOR plus 150 basis points plus a margin that ranges from zero to 100 basis points, depending on the Company's total adjusted leverage ratio, for borrowings in U.S. dollars and a LIBOR equivalent plus 125 to 250 basis points, depending on the Company's total adjusted leverage ratio, on borrowings in euros or British pound sterling. The Floorplan Line requires a commitment fee of 0.15% per annum on the unused portion. Amounts borrowed by the Company under the Floorplan Line for specific vehicle inventory are to be repaid upon the sale of the vehicle financed, and in no case is a borrowing for a vehicle to remain outstanding for greater than one year. The Acquisition Line also requires a commitment fee ranging from 0.20% to 0.45% per annum, depending on the Company’s total adjusted leverage ratio, based on a minimum commitment of $50.0 million less outstanding borrowings. In conjunction with the Revolving Credit Facility, the Company has $4.8$4.5 million of related unamortized costs as of JuneSeptember 30, 2017, which are included in Prepaid expenses and other current assets and Other Assets on the accompanying Consolidated Balance Sheets and amortized over the term of the facility.
After considering the outstanding balance of $1,147.1$1,017.2 million at JuneSeptember 30, 2017, the Company had $292.9$422.8 million of available floorplan borrowing capacity under the Floorplan Line. Included in the $292.9$422.8 million available borrowings under the Floorplan Line was $55.6$46.2 million of immediately available funds. The weighted average interest rate on the Floorplan Line was 2.5% and 2.0% as of JuneSeptember 30, 2017 and December 31, 2016, respectively, excluding the impact of the Company’s interest rate derivative instruments. With regards to the Acquisition Line, there were $32.5$33.5 million borrowings outstanding as of JuneSeptember 30, 2017 and no borrowings outstanding as of December 31, 2016. After considering $29.3 million of outstanding letters of credit and other factors included in the Company’s available borrowing base calculation, there was $298.8$297.1 million of available borrowing capacity under the Acquisition Line as of JuneSeptember 30, 2017. The amount of available borrowing capacity under the Acquisition Line is limited from time to time based upon certain debt covenants.
All of the U.S. dealership-owning subsidiaries are co-borrowers under the Revolving Credit Facility. The Company’s obligations under the Revolving Credit Facility are secured by essentially all of the Company's U.S. personal property (other than equity interests in dealership-owning subsidiaries), including all motor vehicle inventory and proceeds from the disposition of dealership-owning subsidiaries, excluding inventory financed directly with manufacturer-affiliates and other third-party financing institutions. The Revolving Credit Facility contains a number of significant covenants that, among other things, restrict the Company’s ability to make disbursements outside of the ordinary course of business, dispose of assets, incur additional indebtedness, create liens on assets, make investments and engage in mergers or consolidations. The Company is also required to comply with specified financial tests and ratios defined in the Revolving Credit Facility, such as the fixed charge coverage and total adjusted leverage ratios. Further, the Revolving Credit Facility restricts the Company’s ability to make certain payments, such as dividends or other distributions of assets, properties, cash, rights, obligations or securities (“Restricted Payments”). The Restricted Payments cannot exceed the sum of $208.5 million plus (or minus if negative) (a) one-half of the aggregate consolidated net income for the period beginning on April 1, 2014 and ending on the date of determination and (b) the amount of net cash proceeds received from the sale of capital stock after June 2, 2014 and ending on the date of determination less (c) cash dividends and share repurchases after June 2, 2014 (“Credit Facility Restricted Payment Basket”). For purposes of the calculation of the Credit Facility Restricted Payment Basket, net income represents such amounts per the consolidated financial statementsConsolidated Financial Statements adjusted to exclude the Company’s foreign operations, non-cash interest expense, non-cash asset impairment charges, and non-cash stock-based compensation. As of JuneSeptember 30, 2017, the Credit Facility Restricted Payment Basket totaled $120.6$134.4 million. The Company was in compliance with all applicable covenants and ratios under the Revolving Credit Facility as of JuneSeptember 30, 2017.
Ford Motor Credit Company Facility
The FMCC Facility provides for the financing of, and is collateralized by, the Company’s Ford new vehicle inventory in the U.S., including affiliated brands. This arrangement provides for $300.0 million of floorplan financing and is an evergreen arrangement that may be canceled with 30 days' notice by either party. As of JuneSeptember 30, 2017, the Company had an outstanding balance of $164.1$131.7 million under the FMCC Facility with an available floorplan borrowing capacity of $135.9$168.3 million. Included in the $135.9$168.3 million available borrowings under the FMCC Facility was $21.0$22.0 million of immediately available funds. This

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available funds. This facility bears interest at a rate of Prime plus 150 basis points minus certain incentives. The interest rate on the FMCC Facility was 5.75% before considering the applicable incentives as of JuneSeptember 30, 2017.
Other Credit Facilities
The Company has credit facilities with BMWFS, Volkswagen Finance, Toyota Motor Credit Corporation, FMCC and a third-party financial institution for the financing of new, used and rental vehicle inventories related to its U.K. operations. These facilities are denominated in British pound sterling and are evergreen arrangements that may be canceled with notice by either party and bear interest at a base rate, plus a surcharge that varies based upon the type of vehicle being financed. As of JuneSeptember 30, 2017, borrowings outstanding under these facilities totaled $126.1$123.1 million, with annual interest rates charged on borrowings outstanding under these facilities, after the grace period of zero to 30 days, ranging from 1.25% to 3.95%.
The Company has credit facilities with financial institutions in Brazil, most of which are affiliated with the manufacturers, for the financing of new, used and rental vehicle inventories related to its Brazilian operations. These facilities are denominated in Brazilian real and have renewal terms ranging from one month to twelve months. They may be canceled with notice by either party and bear interest at a benchmark rate, plus a surcharge that varies based upon the type of vehicle being financed. As of JuneSeptember 30, 2017, borrowings outstanding under these facilities totaled $18.3$22.5 million, with annual interest rates charged on borrowings outstanding under these facilities, after the grace period of zero to 90 days, ranging from 14.67%12.67% to 19.70%18.86%.
Excluding rental vehicles financed through the Revolving Credit Facility, financing for U.S. rental vehicles is typically obtained directly from the automobile manufacturers. These financing arrangements generally require small monthly payments and mature in varying amounts over a period of two years. Rental vehicles are typically transferred to used vehicle inventory when they are removed from service and repayment of the borrowing is required at that time. As of JuneSeptember 30, 2017, borrowings outstanding under these rental vehicle facilities totaled $112.5$114.3 million, with interest rates that vary up to 5.75%.
9. LONG-TERM DEBT
The Company carries its long-term debt at face value, net of applicable discounts and capitalized debt issuance costs. Long-term debt consisted of the following:
 June 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
 (dollars in thousands) (dollars in thousands)
5.00% Senior Notes (aggregate principal of $550,000 at June 30, 2017 and December 31, 2016) $541,256
 $540,465
5.25% Senior Notes (aggregate principal of $300,000 at June 30, 2017 and December 31, 2016) 295,869
 295,591
5.00% Senior Notes (aggregate principal of $550,000 at September 30, 2017 and December 31, 2016) $541,658
 $540,465
5.25% Senior Notes (aggregate principal of $300,000 at September 30, 2017 and December 31, 2016) 296,009
 295,591
Acquisition Line 32,509
 
 33,508
 
Real Estate Related and Other Long-Term Debt 388,830
 385,358
 411,439
 385,358
Capital lease obligations related to real estate, maturing in varying amounts through June 2034 with a weighted average interest rate of 9.9% 45,703
 47,613
Capital lease obligations related to real estate, maturing in varying amounts through June 2034 with a weighted average interest rate of 9.4% and 9.9%, respectively 52,738
 47,613
 1,304,167
 1,269,027
 1,335,352
 1,269,027
Less current maturities of long-term debt 40,322
 56,218
 42,663
 56,218
 $1,263,845
 $1,212,809
 $1,292,689
 $1,212,809
Included in current maturities of long-term debt and short-term financing in the Company's Consolidated Balance Sheets as of JuneSeptember 30, 2017, and December 31, 2016, was $12.9$38.3 million and $16.2 million, respectively, of short-term financing that was due within one year.
5.00% Senior Notes
On June 2, 2014, the Company issued $350.0 million aggregate principal amount of its 5.00% senior notes due 2022("2022 ("5.00% Notes"). Subsequently, on September 9, 2014, the Company issued an additional $200.0 million of 5.00% Notes at a discount of 1.5% from face value. The 5.00% Notes will mature on June 1, 2022 and pay interest semiannually, in arrears, in cash on each June 1 and December 1, beginning December 1, 2014. On or after June 1, 2017, the Company may redeem some or all of the 5.00% Notes at specified prices, plus accrued and unpaid interest. The Company may be required to purchase the 5.00% Notes if it sells certain assets or triggers the change in control provisions defined in the 5.00% Notes indenture. The 5.00% Notes are senior unsecured obligations and rank equal in right of payment to all of the Company's existing and future senior unsecured debt and senior in right of payment to all of its future subordinated debt. The 5.00% Notes are guaranteed by substantially all of the Company's U.S. subsidiaries. The U.S. subsidiary guarantees rank equally in the right of payment to all of the Company's U.S. subsidiary guarantor’s existing and future subordinated debt. In addition, the 5.00% Notes are structurally subordinated to the liabilities of its non-guarantor subsidiaries and are subject to customary covenants, including a

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structurally subordinated to the liabilities of its non-guarantor subsidiaries and are subject to customary covenants, including a restricted payment basket and debt limitations. The restricted payment basket calculation under the terms of the 5.00% Notes is the same as under the Credit Facility Restricted Payment Basket. The 5.00% Notes were registered with the Securities and Exchange Commission in June 2015. The 5.00% Notes are presented net of unamortized underwriters' fees, discount and debt issuance costs, which are being amortized over a period of eight years in conjunction with the term of the 5.00% Notes, of $8.7$8.3 million as of JuneSeptember 30, 2017.
5.25% Senior Notes
On December 8, 2015, the Company issued 5.25% senior unsecured notes with a face amount of $300.0 million due to mature on December 15, 2023 (“5.25% Notes”). The 5.25% Notes pay interest semiannually, in arrears, in cash on each June 15 and December 15, beginning June 15, 2016. Using proceeds of certain equity offerings, the Company may redeem up to 35% of the 5.25% Notes prior to December 15, 2018, subject to certain conditions, at a redemption price equal to 105% of principal amount of the 5.25% Notes plus accrued and unpaid interest. Otherwise, the Company may redeem some or all of the 5.25% Notes prior to December 15, 2018 at a redemption price equal to 100% of the principal amount of the 5.25% Notes redeemed, plus an applicable make-whole premium, and plus accrued and unpaid interest. On or after December 15, 2018, the Company may redeem some or all of the 5.25% Notes at specified prices, plus accrued and unpaid interest. The Company may be required to purchase the 5.25% Notes if it sells certain assets or triggers the change in control provisions defined in the 5.25% Notes indenture. The 5.25% Notes are senior unsecured obligations and rank equal in right of payment to all of the Company’s existing and future senior unsecured debt and senior in right of payment to all of its future subordinated debt. The 5.25% Notes are guaranteed by substantially all of the Company’s U.S. subsidiaries. The U.S. subsidiary guarantees rank equally in the right of payment to all of the Company’s U.S. subsidiary guarantor’s existing and future subordinated debt. In addition, the 5.25% Notes are structurally subordinated to the liabilities of its non-guarantor subsidiaries and are subject to customary covenants, including a restricted payment basket and debt limitations. The restricted payment basket calculation under the terms of the 5.25% Notes is the same as under the Credit Facility Restricted Payment Basket. The 5.25% Notes are presented net of unamortized underwriters' fees and debt issuance costs, which are being amortized over a period of eight years in conjunction with the term of the 5.25% Notes, of $4.1$4.0 million as of JuneSeptember 30, 2017.
Acquisition Line
See Note 8, "Credit Facilities," for further discussion on the Company's Revolving Credit Facility and Acquisition Line.
Real Estate Related and Other Long-Term Debt
The Company, as well as certain of its wholly-owned subsidiaries, has entered into separate term mortgage loans in the U.S. with three of its manufacturer-affiliated finance partners, Toyota Motor Credit Corporation, BMWFS and FMCC, as well as several third-party financial institutions. These mortgage loans may be expanded for borrowings related to specific buildings and/or properties and are guaranteed by the Company. Each mortgage loan was made in connection with, and is secured by mortgage liens on, the real property owned by the Company that is mortgaged under the loans. The mortgage loans bear interest at fixed rates between 3.00% and 4.69%, and at variable indexed rates plus a spread between 1.50% and 2.50% per annum. The mortgage loans consist of 5556 term loans for an aggregate principal amount of $361.7$371.8 million. As of JuneSeptember 30, 2017, borrowings outstanding under these notesmortgage loans totaled $312.9$318.5 million, with $29.0$29.4 million classified as a current maturity of long-term debt. For the sixnine months ended JuneSeptember 30, 2017, the Company made no additional net borrowings and made principal payments of $9.1 million.$10.2 million and $13.7 million, respectively. These mortgage loans are presented net of unamortized underwriters' fees, discount and debt issuance costs, which are being amortized over the terms of the mortgage loans, of $0.6 million as of JuneSeptember 30, 2017. The agreements provide for monthly payments based on 15 or 20-year amortization schedules and mature between November 2017 and December 2024. These mortgage loans are cross-collateralized and cross-defaulted with the mortgages of each respective financial institution.
The Company has entered into 1516 separate term mortgage loans in the U.K. with other third-party financial institutions which are secured by the Company’s U.K. properties. These mortgage loans (collectively, “U.K. Notes”) are denominated in British pound sterling and are being repaid in monthly installments that will mature by September 2034. As of JuneSeptember 30, 2017, borrowings under the U.K. Notes totaled $63.8$80.4 million, with $5.8$7.4 million classified as a current maturity of long-term debt in the accompanying Consolidated Balance Sheets. For the sixnine months ended JuneSeptember 30, 2017, the Company made additional borrowings and principal payments of $12.9$28.9 million and $2.4$3.9 million, respectively, associated with the U.K. Notes.
In addition to the real estate related and other long-term debt, the Company also has two short-term revolving working capital loan agreements and an unsecured loan agreement with a third-party financial institutioninstitutions in the U.K. and U.S., respectively. As of JuneSeptember 30, 2017, short-term borrowings under the U.K. and U.S. third-party loans totaled $12.9$13.2 million and $25.1 million, respectively, and are included in current maturities of long-term debt and short-term financing in the Company's Consolidated Balance Sheets. For the sixnine months ended JuneSeptember 30, 2017, the Company made additional borrowings of $5.1 million and made$25.1 million under the U.K. and U.S. third-party loans, respectively, and no principal payments.

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The Company has a separate term mortgage loan in Brazil with a third-party financial institution (the "Brazil Note"). The Brazil Note is denominated in Brazilian real and is secured by one of the Company’s Brazilian properties, as well as a guarantee from the Company. The Brazil Note is being repaid in monthly installments that will mature by April 2025. As of JuneSeptember 30,

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2017, borrowings under the Brazil Note totaled $3.5$3.6 million, with $0.4$0.3 million classified as a current maturity of long-term debt in the accompanying Consolidated Balance Sheets. For the sixnine months ended JuneSeptember 30, 2017, the Company made no additional borrowings and made principal payments of $0.3$0.4 million associated with the Brazil Note.
The Company also has a working capital loan agreement with a third-party financial institution in Brazil. The principal balance on this loan is due by February 2020 with interest only payments being made quarterly until the due date. As of JuneSeptember 30, 2017, borrowings outstanding under the Brazilian third-party loan totaled $6.7$7.0 million, which are classified as long-term debt in the accompanying Consolidated Balance Sheets. For the sixnine months ended JuneSeptember 30, 2017, the Company made no additional borrowings or principal payments.
Fair Value of Long-Term Debt
The Company's outstanding 5.00% Notes had a fair value of $562.4$570.5 million and $548.4 million as of JuneSeptember 30, 2017 and December 31, 2016, respectively. The Company's outstanding 5.25% Notes had a fair value of $300.8$304.4 million and $297.0 million as of JuneSeptember 30, 2017 and December 31, 2016, respectively. The Company's fixed interest rate borrowings included in real estate related and other long-term debt totaled $90.4$88.4 million and $93.9 million as of JuneSeptember 30, 2017 and December 31, 2016, respectively. The fair value of such fixed interest rate borrowings was $90.4$88.6 million and $94.5 million as of JuneSeptember 30, 2017 and December 31, 2016, respectively. The fair value estimates are based on Level 2 inputs of the fair value hierarchy available as of JuneSeptember 30, 2017 and December 31, 2016. The Company determined the estimated fair value of its long-term debt using available market information and commonly accepted valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, these estimates are not necessarily indicative of the amounts that the Company, or holders of the instruments, could realize in a current market exchange. The use of different assumptions and/or estimation methodologies could have a material effect on estimated fair values. The carrying value of the Company’s variable rate debt approximates fair value due to the short-term nature of the interest rates.
10. FAIR VALUE MEASUREMENTS
ASC 820 defines fair value as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; requires disclosure of the extent to which fair value is used to measure financial and non-financial assets and liabilities, the inputs utilized in calculating valuation measurements, and the effect of the measurement of significant unobservable inputs on earnings, or changes in net assets, as of the measurement date; and establishes a three-level valuation hierarchy based upon the transparency of inputs utilized in the measurement and valuation of financial assets or liabilities as of the measurement date:
Level 1 — unadjusted, quoted prices for identical assets or liabilities in active markets;
Level 2 — quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted market prices that are observable or that can be corroborated by observable market data by correlation; and
Level 3 — unobservable inputs based upon the reporting entity’s internally developed assumptions that market participants would use in pricing the asset or liability.
The Company’s financial instruments consist primarily of cash and cash equivalents, contracts-in-transit and vehicle receivables, accounts and notes receivable, investments in debt and equity securities, accounts payable, credit facilities, long-term debt and interest rate derivative instruments. The fair values of cash and cash equivalents, contracts-in-transit and vehicle receivables, accounts and notes receivable, accounts payable, and credit facilities approximate their carrying values due to the short-term nature of these instruments and/or the existence of variable interest rates. The Company evaluated its assets and liabilities for those that met the criteria of the disclosure requirements and fair value framework of ASC 820 and identified demand obligations, interest rate derivative instruments, and investment balances in certain financial institutions as having met such criteria.
The Company periodically invests in unsecured, corporate demand obligations with manufacturer-affiliated finance companies, which bear interest at a variable rate and are redeemable on demand by the Company. Therefore, the Company has classified these demand obligations as cash and cash equivalents in the accompanying Consolidated Balance Sheets. The Company determined that the valuation measurement inputs of these instruments include inputs other than quoted market prices, that are observable or that can be corroborated by observable data by correlation. Accordingly, the Company has classified these instruments within Level 2 of the hierarchy framework.

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In addition, the Company maintains an investment balance with certain of the financial institutions in Brazil that provide credit facilities for the financing of new, used and rental vehicle inventories. The investment balances bear interest at a variable rate and are redeemable by the Company in the future under certain conditions. The Company has classified these investment balances as long-term assets in the accompanying Consolidated Balance Sheets. The Company determined that the valuation measurement inputs of these instruments include inputs other than quoted market prices, that are observable or that can be

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corroborated by observable data by correlation. Accordingly, the Company has classified these instruments within Level 2 of the hierarchy framework.
The Company's derivative financial instruments are recorded at fair market value. See Note 3, "Derivative Instruments and Risk Management Activities" for further details regarding the Company's derivative financial instruments. See Note 9, "Long-term Debt" for details regarding the fair value of the Company's long-term debt.
Assets and liabilities recorded at fair value, within Level 2 of the hierarchy framework, in the accompanying balance sheets as of JuneSeptember 30, 2017 and December 31, 2016, respectively, were as follows:
 As of June 30, 2017 As of December 31, 2016 As of September 30, 2017 As of December 31, 2016
 (In thousands) (In thousands)
Assets:        
Investments $731
 $3,254
 $708
 $3,254
Demand obligations 13
 12
 13
 12
Interest rate derivative financial instruments $8,087
 $9,484
 7,701
 9,484
Total $8,831
 $12,750
 $8,422
 $12,750
Liabilities:        
Interest rate derivative financial instruments $19,691
 $24,411
 $16,979
 $24,411
Total $19,691
 $24,411
 $16,979
 $24,411
11. COMMITMENTS AND CONTINGENCIES
From time to time, the Company’s dealerships are named in various types of litigation involving customer claims, employment matters, class action claims, purported class action claims, as well as claims involving the manufacturer of automobiles, contractual disputes and other matters arising in the ordinary course of business. Due to the nature of the automotive retailing business, the Company may be involved in legal proceedings or suffer losses that could have a material adverse effect on the Company’s business. In the normal course of business, the Company is required to respond to customer, employee and other third-party complaints. Amounts that have been accrued or paid related to the settlement of litigation are included in selling, general and administrative expenses in the Company’s Consolidated Statements of Operations. In addition, the manufacturers of the vehicles that the Company sells and services have audit rights allowing them to review the validity of amounts claimed for incentive, rebate or warranty-related items and charge the Company back for amounts determined to be invalid payments under the manufacturers’ programs, subject to the Company’s right to appeal any such decision. Amounts that have been accrued or paid related to the settlement of manufacturer chargebacks of recognized incentives and rebates are included in cost of sales in the Company’s Consolidated Statements of Operations, while such amounts for manufacturer chargebacks of recognized warranty-related items are included as a reduction of Revenues in the Company’s Consolidated Statements of Operations.
Legal Proceedings
In late June 2016, Volkswagen agreed to pay up to an aggregate of $14.7 billion to settle claims stemming from the diesel emissions scandal, including claims from customers and automotive dealers. In October 2016, the Company received notification from Volkswagen that it is entitled to receive, in the aggregate, approximately $13.2 million in connection with the Company's current and prior ownership of seven Volkswagen dealerships in the U.S. The Company accepted and executed the offer in the fourth quarter of 2016 and received half of the compensation in a lump sum amount in January 2017 with the remaining amount to be paid over 18 months. The Company has received fiveeight of the remaining 18 monthly installments as of JuneSeptember 30, 2017. The Company recognized the entire settlement as an offset to Selling, General and Administrative Expenses ("SG&A") in the Consolidated Statements of Operations for the year ended December 31, 2016. Also, in conjunction with the Volkswagen diesel emissions scandal, Volkswagen agreed in March 2017 to settle allegations of damages by the Company relative to its three Audi branded dealerships. The Company received the cash and recognized the settlement as an offset to SG&A in the accompanying Consolidated Statements of Operations for the sixnine months ended JuneSeptember 30, 2017.
Currently, the Company is not party to any legal proceedings that, individually or in the aggregate, are reasonably expected to have a material adverse effect on the Company's results of operations, financial condition, or cash flows, including

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class action lawsuits. However, the results of current, or future, matters cannot be predicted with certainty, and an unfavorable resolution of one or more of such matters could have a material adverse effect on the Company's results of operations, financial condition, or cash flows.

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Other Matters
The Company, acting through its subsidiaries, is the lessee under many real estate leases that provide for the use by the Company’s subsidiaries of their respective dealership premises. Pursuant to these leases, the Company’s subsidiaries generally agree to indemnify the lessor and other parties from certain liabilities arising as a result of the use of the leased premises, including environmental liabilities, or a breach of the lease by the lessee. Additionally, from time to time, the Company enters into agreements in connection with the sale of assets or businesses in which it agrees to indemnify the purchaser, or other parties, from certain liabilities or costs arising in connection with the assets or business. Also, in the ordinary course of business in connection with purchases or sales of goods and services, the Company enters into agreements that may contain indemnification provisions. In the event that an indemnification claim is asserted, liability would be limited by the terms of the applicable agreement.
From time to time, primarily in connection with dealership dispositions, the Company’s subsidiaries sublet to the dealership purchaser the subsidiaries’ interests in any real property leases associated with such dealerships and continue to be primarily obligated on the lease. In these situations, the Company’s subsidiaries retain primary responsibility for the performance of certain obligations under such leases. To the extent that the Company remains primarily responsible under such leases, a quantification of such lease obligations is included in the Company's disclosure of future minimum lease payments for non-cancelable operating leases in Note 18, Operating Leases"Operating Leases" to "Item 8. Financial Statements and Supplementary Data" of the 2016 Form 10-K.
In certain instances, also in connection with dealership dispositions, the Company’s subsidiaries assign to the dealership purchaser the subsidiaries’ interests in any real property leases associated with such dealerships. The Company’s subsidiaries may retain secondary responsibility for the performance of certain obligations under such leases to the extent that the assignee does not perform, if such performance is required following the assignment of the lease. Additionally, the Company and its subsidiaries may remain subject to the terms of a guaranty made by the Company and its subsidiaries in connection with such leases. In these circumstances, the Company generally has indemnification rights against the assignee in the event of non-performance under these leases, as well as certain defenses. The Company and its subsidiaries also may be called on to perform other obligations under these leases, such as environmental remediation of the leased premises or repair of the leased premises upon termination of the lease. However, potential environmental liabilities are generally known at the time of the sale of the dealership if not previously remediated. The Company does not have any known material environmental commitments or contingencies and presently has no reason to believe that it or its subsidiaries will be called on to so perform. Although not estimated to be material, the Company’s exposure under these leases is difficult to estimate and there can be no assurance that any performance of the Company or its subsidiaries required under these leases would not have a material adverse effect on the Company’s business, financial condition, or cash flows.

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12. INTANGIBLE FRANCHISE RIGHTS AND GOODWILL
The following is a roll-forward of the Company’s intangible franchise rights and goodwill accounts by reportable segment:
Intangible Franchise Rights Intangible Franchise Rights 
U.S. U.K. Brazil Total U.S. U.K. Brazil Total 
(In thousands) (In thousands) 
BALANCE, December 31, 2016$260,534
 $17,337
 $7,005
 $284,876
 $260,534
 $17,337
 $7,005
 $284,876
 
Additions through acquisitions8,035
 8,762
 
 16,797
 
Impairments(9,526) 
 
 (9,526) 
Currency translation
 923
 (110) 813
 
 1,771
 202
 1,973
 
BALANCE, June 30, 2017$260,534
 $18,260
 $6,895
 $285,689
 
BALANCE, September 30, 2017$259,043
 $27,870
 $7,207
 $294,120
 
Goodwill Goodwill 
U.S. U.K. Brazil Total U.S. U.K. Brazil Total 
(In thousands) (In thousands) 
BALANCE, December 31, 2016$805,935
 $57,054
 $13,774
 $876,763
(1) 
$805,935
 $57,054
 $13,774
 $876,763
(1) 
Additions through acquisitions
 
 95
 95
 29,171
 3,737
 95
 33,003
 
Disposals
 
 (933) (933) 
 
 (933) (933) 
Currency translation
 3,039
 (177) 2,862
 
 5,008
 401
 5,409
 
Tax adjustments(11) 
 
 (11) (18) 
 
 (18) 
BALANCE, June 30, 2017$805,924
 $60,093
 $12,759
 $878,776
(1) 
BALANCE, September 30, 2017$835,088
 $65,799
 $13,337
 $914,224
(1) 
(1) Net of accumulated impairment of $97.8 million.
The Company evaluates intangible franchise rights and goodwill assets for impairment annually or more frequently if events or circumstances indicate possible impairment. During the three months ended September 30, 2017, the Company identified circumstances indicating possible impairment of some individual franchise rights, requiring a quantitative assessment. The Company did not identify any such circumstances relative to the goodwill for each of its reporting units. Based on the results of the Company's assessment, the Company determined that the fair value of the franchise rights on one of its U.S. dealerships was below its respective carrying value, resulting in franchise asset impairment charges of $9.5 million. This was recognized as an asset impairment in the Company's Consolidated Statements of Operations during the three months ended September 30, 2017.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

13. ACCUMULATED OTHER COMPREHENSIVE LOSS
Changes in the balances of each component of accumulated other comprehensive loss for the sixnine months ended JuneSeptember 30, 2017 and 2016 were as follows: 
 Six Months Ended June 30, 2017 Nine Months Ended September 30, 2017
 Accumulated foreign currency translation loss Accumulated loss on interest rate swaps Total Accumulated foreign currency translation loss Accumulated loss on interest rate swaps Total
 (In thousands) (In thousands)
Balance, December 31, 2016 $(137,613) $(9,331) $(146,944) $(137,613) $(9,331) $(146,944)
Other comprehensive income (loss) before reclassifications:     
     
Pre-tax 8,600
 (3,488) 5,112
 16,998
 (3,899) 13,099
Tax effect 
 1,308
 1,308
 
 1,462
 1,462
Amounts reclassified from accumulated other comprehensive income to:     

     

Floorplan interest expense (pre-tax) 
 5,656
 5,656
 
 7,995
 7,995
Other interest expense (pre-tax) 
 1,154
 1,154
 
 1,554
 1,554
Tax effect 
 (2,554) (2,554) 
 (3,581) (3,581)
Net current period other comprehensive income 8,600
 2,076
 10,676
 16,998
 3,531
 20,529
Balance, June 30, 2017 $(129,013) $(7,255) $(136,268)
Balance, September 30, 2017 $(120,615) $(5,800) $(126,415)
 Six Months Ended June 30, 2016 Nine Months Ended September 30, 2016
 Accumulated foreign currency translation loss Accumulated loss on interest rate swaps Total Accumulated foreign currency translation loss Accumulated loss on interest rate swaps Total
 (In thousands) (In thousands)
Balance, December 31, 2015 $(118,532) $(19,452) $(137,984) $(118,532) $(19,452) $(137,984)
Other comprehensive loss before reclassifications:            
Pre-tax (3,913) (26,821) (30,734) (10,254) (24,920) (35,174)
Tax effect 
 10,058
 10,058
 
 9,345
 9,345
Amounts reclassified from accumulated other comprehensive loss to:            
Floorplan interest expense (pre-tax) 
 5,623
 5,623
 
 8,414
 8,414
Other interest expense (pre-tax) 
 1,186
 1,186
 
 1,775
 1,775
Tax effect 
 (2,553) (2,553) 
 (3,822) (3,822)
Net current period other comprehensive loss (3,913) (12,507) (16,420) (10,254) (9,208) (19,462)
Balance, June 30, 2016 $(122,445) $(31,959) $(154,404)
Balance, September 30, 2016 $(128,786) $(28,660) $(157,446)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

14. SEGMENT INFORMATION
As of JuneSeptember 30, 2017, the Company had three reportable segments: (1) the U.S., (2) the U.K., and (3) Brazil. Each of the reportable segments is comprised of retail automotive franchises, which sell new and used cars and light trucks; arranges related vehicle financing; sells service and insurance contracts; provides automotive maintenance and repair services; and sells vehicle parts. The vast majority of the Company's corporate activities are associated with the operations of the U.S. operating segment and therefore the corporate financial results are included within the U.S. reportable segment.
Reportable segment revenue, income (loss) before income taxes, (provision) benefit for income taxes and net income (loss) were as follows for the three and sixnine months ended JuneSeptember 30, 2017 and 2016:
Three Months Ended June 30, 2017  Six Months Ended June 30, 2017Three Months Ended September 30, 2017  Nine Months Ended September 30, 2017
U.S. U.K. Brazil Total  U.S. U.K. Brazil TotalU.S. U.K. Brazil Total  U.S. U.K. Brazil Total
(In thousands)  (In thousands)(In thousands)  (In thousands)
Total revenues(1)$2,123,690
 $437,103
 $111,402
 $2,672,195
  $4,091,409
 $887,430
 $212,185
 $5,191,024
$2,301,959
 $590,726
 $119,607
 $3,012,292
  $6,393,368
 $1,478,156
 $331,792
 $8,203,316
Income before income taxes56,069
 4,929
 692
 61,690
  101,675
 10,310
 901
 112,886
41,133
 5,435
 575
 47,143
  142,808
 15,745
 1,476
 160,029
Provision for income taxes(21,696) (806) (55) (22,557)  (38,043) (1,676) (95) (39,814)
(Provision) benefit for income taxes(16,258) (1,105) 101
 (17,262)  (54,301) (2,781) 6
 (57,076)
Net income (1)(2)
34,373
 4,123
 637
 39,133
  63,632
 8,634
 806
 73,072
24,875
 4,330
 676
 29,881
  88,507
 12,964
 1,482
 102,953
(1) Includes an after tax gain on a legal settlementthe impact of chargeback reserves for finance and insurance revenues associated with an Original Equipment Manufacturer partnercatastrophic events of $1.1$6.6 million for the three and nine months ended September 30, 2017, in the U.S, for the six months ended June 30, 2017.U.S. segment.
 Three Months Ended June 30, 2016  Six Months Ended June 30, 2016
 U.S. U.K. Brazil Total  U.S. U.K. Brazil Total
 (In thousands)  (In thousands)
Total revenues$2,207,381
 $467,792
 $107,276
 $2,782,449
  $4,289,014
 $899,688
 $202,102
 $5,390,804
Income (loss) before income taxes61,784
 7,929
 (651) 69,062
  111,989
 13,449
 (2,274) 123,164
(Provision) benefit for income taxes(22,854) (1,586) 1,958
 (22,482)  (41,685) (2,756) 2,148
 (42,293)
Net income (loss) (1)
38,930
 6,343
 1,307
 46,580
  70,304
 10,693
 (126) 80,871
(1)(2) Includes the following, after tax: loss due to catastrophic events of $1.7$9.0 million and $3.4$9.4 million, inclusive of the finance and insurance chargeback reserve noted above, for the three and nine months ended September 30, 2017, respectively, in the U.S. segment and asset impairment charges of $5.9 million for the three and sixnine months ended JuneSeptember 30, 2017, respectively, in the U.S. segment.
 Three Months Ended September 30, 2016  Nine Months Ended September 30, 2016
 U.S. U.K. Brazil Total  U.S. U.K. Brazil Total
 (In thousands)  (In thousands)
Total revenues$2,274,723
 $435,976
 $112,447
 $2,823,176
  $6,563,739
 $1,335,663
 $314,578
 $8,213,980
Income (loss) before income taxes52,619
 3,922
 (854) 55,687
  164,607
 17,371
 (3,127) 178,851
(Provision) benefit for income taxes(19,722) (702) 103
 (20,321)  (61,406) (3,458) 2,250
 (62,614)
Net income (loss) (1)
32,897
 3,220
 (751) 35,366
  103,201
 13,913
 (877) 116,237
(1) Includes the following, after tax: asset impairment charges of $6.7 million and $7.7 million for the three and nine months ended September 30, 2016, respectively, in the U.S.; segment; loss due to catastrophic events of $0.3 million and $3.7 million for the three and nine months ended September 30, 2016, respectively, in the U.S. segment; gain on real estate and dealership transactions of $0.7 million and $1.1 million for the three and nine months ended September 30, 2016, respectively, in the U.S. segment; and foreign deferred income tax benefit of $1.7 million for the three and sixnine months ended JuneSeptember 30, 2016 in Brazil.the Brazil segment.
Reportable segment total assets as of JuneSeptember 30, 2017 and December 31, 2016, were as follows:
 As of June 30, 2017
 U.S. U.K. Brazil Total
 (In thousands)
Total assets$3,942,349
 $577,543
 $124,693
 $4,644,585
 As of September 30, 2017
 U.S. U.K. Brazil Total
 (In thousands)
Total assets$3,890,087
 $698,103
 $142,804
 $4,730,994
 As of December 31, 2016
 U.S. U.K. Brazil Total
 (In thousands)
Total assets$3,855,701
 $482,937
 $123,265
 $4,461,903



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following tables include condensed consolidating financial information as of JuneSeptember 30, 2017 and December 31, 2016, and for the three and sixnine months ended JuneSeptember 30, 2017 and 2016, for Group 1 Automotive, Inc.’s (as issuer of the 5.00% Notes) guarantor subsidiaries and non-guarantor subsidiaries (representing foreign entities). The condensed consolidating financial information includes certain allocations of balance sheet, statement of operations and cash flows items that are not necessarily indicative of the financial position, results of operations or cash flows of these entities had they operated on a stand-alone basis. In accordance with Rule 3-10 of Regulation S-X, condensed consolidated financial statements of non-guarantors are not required. The Company has no assets or operations independent of its subsidiaries. Obligations under the 5.00% Senior Notes are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by the Company’s current wholly owned domestic subsidiaries and certain of the Company’s future domestic subsidiaries, with the exception of the Company’s “minor” subsidiaries (as defined by Rule 3-10 of Regulation S-X). There are no significant restrictions on the ability of the Company or subsidiary guarantors for the Company to obtain funds from its subsidiary guarantors by dividend or loan. None of the subsidiary guarantors’ assets represent restricted assets pursuant to SEC Rule 4-08(e)(3) of Regulation S-X.
CONDENSED CONSOLIDATED BALANCE SHEET
JuneSeptember 30, 2017
Group 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Total CompanyGroup 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Total Company
(Unaudited, in thousands)(Unaudited, in thousands)
ASSETS
CURRENT ASSETS:                  
Cash and cash equivalents$
 $5,878
 $20,695
 $
 $26,573
$
 $8,646
 $58,237
 $
 $66,883
Contracts-in-transit and vehicle receivables, net
 165,502
 51,876
 
 217,378

 213,638
 74,562
 
 288,200
Accounts and notes receivable, net
 125,375
 33,167
 
 158,542

 139,013
 48,659
 
 187,672
Intercompany accounts receivable32,509
 10,115
 
 (42,624) 
33,508
 12,451
 
 (45,959) 
Inventories, net
 1,539,571
 264,338
 
 1,803,909

 1,334,340
 317,449
 
 1,651,789
Prepaid expenses and other current assets477
 7,152
 79,841
 
 87,470
216
 6,157
 31,738
 
 38,111
Total current assets32,986
 1,853,593
 449,917
 (42,624) 2,293,872
33,724
 1,714,245
 530,645
 (45,959) 2,232,655
PROPERTY AND EQUIPMENT, net
 1,023,669
 143,676
 
 1,167,345

 1,086,863
 182,534
 
 1,269,397
GOODWILL
 805,924
 72,852
 
 878,776

 835,089
 79,135
 
 914,224
INTANGIBLE FRANCHISE RIGHTS
 260,534
 25,155
 
 285,689

 259,043
 35,077
 
 294,120
INVESTMENT IN SUBSIDIARIES2,878,385
 
 
 (2,878,385) 
2,971,551
 
 
 (2,971,551) 
OTHER ASSETS
 13,470
 5,433
 
 18,903

 12,408
 8,190
 
 20,598
Total assets$2,911,371
 $3,957,190
 $697,033
 $(2,921,009) $4,644,585
$3,005,275
 $3,907,648
 $835,581
 $(3,017,510) $4,730,994
                  
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:                  
Floorplan notes payable — credit facility and other$
 $1,202,663
 $11,421
 $
 $1,214,084
$
 $1,063,464
 $13,823
 $
 $1,077,287
Offset account related to floorplan notes payable - credit facility
 (55,579) 
 
 (55,579)
 (46,248) 
 
 (46,248)
Floorplan notes payable — manufacturer affiliates
 297,651
 132,968
 
 430,619

 267,990
 131,814
 
 399,804
Offset account related to floorplan notes payable - manufacturer affiliates
 (21,000) 
 
 (21,000)
 (22,000) 
 
 (22,000)
Current maturities of long-term debt and short-term financing
 33,978
 19,206
 
 53,184
25,054
 34,403
 21,539
 
 80,996
Current liabilities from interest rate risk management activities
 1,626
 
 
 1,626

 823
 
 
 823
Accounts payable
 185,036
 145,711
 
 330,747

 214,278
 222,573
 
 436,851
Intercompany accounts payable934,759
 
 42,624
 (977,383) 
972,583
 
 45,959
 (1,018,542) 
Accrued expenses
 145,092
 28,081
 
 173,173

 176,196
 32,574
 
 208,770
Total current liabilities934,759
 1,789,467
 380,011
 (977,383) 2,126,854
997,637
 1,688,906
 468,282
 (1,018,542) 2,136,283
LONG-TERM DEBT, net of current maturities869,633
 323,769
 70,443
 
 1,263,845
871,175
 327,132
 94,382
 
 1,292,689
LIABILITIES FROM INTEREST RATE RISK MANAGEMENT ACTIVITIES
 18,065
 
 
 18,065

 16,157
 
 
 16,157
DEFERRED INCOME TAXES AND OTHER LIABILITIES(937) 259,357
 5,753
 
 264,173
(1,100) 264,501
 11,317
 
 274,718
STOCKHOLDERS’ EQUITY:        
        
Group 1 stockholders’ equity1,107,916
 2,501,291
 240,826
 (2,878,385) 971,648
1,137,563
 2,583,535
 261,600
 (2,971,551) 1,011,147
Intercompany note receivable
 (934,759) 
 934,759
 

 (972,583) 
 972,583
 
Total stockholders’ equity1,107,916
 1,566,532
 240,826
 (1,943,626) 971,648
1,137,563
 1,610,952
 261,600
 (1,998,968) 1,011,147
Total liabilities and stockholders’ equity$2,911,371
 $3,957,190
 $697,033
 $(2,921,009) $4,644,585
$3,005,275
 $3,907,648
 $835,581
 $(3,017,510) $4,730,994

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


CONDENSED CONSOLIDATED BALANCE SHEET
December 31, 2016
 Group 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Total Company
 (In thousands)
ASSETS
CURRENT ASSETS:         
Cash and cash equivalents$
 $8,039
 $12,953
 $
 $20,992
Contracts-in-transit and vehicle receivables, net
 241,097
 28,411
 
 269,508
Accounts and notes receivable, net
 140,985
 32,379
 
 173,364
Intercompany accounts receivable
 8,929
 
 (8,929) 
Inventories, net
 1,386,871
 264,944
 
 1,651,815
Prepaid expenses and other current assets516
 7,188
 27,204
 
 34,908
Total current assets516
 1,793,109
 365,891
 (8,929) 2,150,587
PROPERTY AND EQUIPMENT, net
 990,084
 135,799
 
 1,125,883
GOODWILL
 805,935
 70,828
 
 876,763
INTANGIBLE FRANCHISE RIGHTS
 260,534
 24,342
 
 284,876
INVESTMENT IN SUBSIDIARIES2,787,328
 
 
 (2,787,328) 
OTHER ASSETS
 19,313
 4,481
 
 23,794
Total assets$2,787,844
 $3,868,975
 $601,341
 $(2,796,257) $4,461,903
          
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:         
Floorplan notes payable — credit facility and other$
 $1,131,718
 $4,936
 $
 $1,136,654
Offset account related to floorplan notes payable - credit facility
 (59,626) 
 
 (59,626)
Floorplan notes payable — manufacturer affiliates
 281,747
 110,914
 
 392,661
Offset account related to floorplan notes payable - manufacturer affiliates
 (25,500) 
 
 (25,500)
Current maturities of long-term debt and short-term financing
 44,659
 27,760
 
 72,419
Current liabilities from interest rate risk management activities


 3,941
 
 
 3,941
Accounts payable
 211,050
 145,049
 
 356,099
Intercompany accounts payable875,662
 
 8,929
 (884,591) 
Accrued expenses
 156,648
 19,821
 
 176,469
Total current liabilities875,662
 1,744,637
 317,409
 (884,591) 2,053,117
LONG-TERM DEBT, net of current maturities836,056
 324,540
 52,213
 
 1,212,809
LIABILITIES FROM INTEREST RATE RISK MANAGEMENT ACTIVITIES
 20,470
 
 
 20,470
DEFERRED INCOME TAXES AND OTHER LIABILITIES(1,020) 240,348
 5,979
 
 245,307
STOCKHOLDERS’ EQUITY:         
Group 1 stockholders’ equity1,077,146
 2,414,642
 225,740
 (2,787,328) 930,200
Intercompany note receivable
 (875,662) 
 875,662
 
Total stockholders’ equity1,077,146
 1,538,980
 225,740
 (1,911,666) 930,200
Total liabilities and stockholders’ equity$2,787,844
 $3,868,975
 $601,341
 $(2,796,257) $4,461,903

2728

Table of Contents         GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended JuneSeptember 30, 2017
Group 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Total CompanyGroup 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Total Company
(Unaudited, in thousands)(Unaudited, in thousands)
REVENUES:$
 $2,123,691
 $548,504
 $
 $2,672,195
$
 $2,301,958
 $710,334
 $
 $3,012,292
COST OF SALES:
 1,783,218
 484,085
 
 2,267,303

 1,948,390
 632,482
 
 2,580,872
GROSS PROFIT
 340,473
 64,419
 
 404,892

 353,568
 77,852
 
 431,420
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES533
 242,014
 56,021
 
 298,568
433
 259,119
 68,775
 
 328,327
DEPRECIATION AND AMORTIZATION EXPENSE
 11,926
 2,167
 
 14,093

 12,380
 2,679
 
 15,059
ASSET IMPAIRMENTS
 9,526
 
 
 9,526
INCOME (LOSS) FROM OPERATIONS(533) 86,533
 6,231
 
 92,231
(433) 72,543
 6,398
 
 78,508
OTHER EXPENSE:        

        

Floorplan interest expense
 (12,062) (1,164) 
 (13,226)
 (12,014) (1,477) 
 (13,491)
Other interest expense, net
 (16,568) (747) 
 (17,315)

 (16,726) (1,148) 
 (17,874)
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF SUBSIDIARIES(533) 57,903
 4,320
 
 61,690
(433) 43,803
 3,773
 
 47,143
BENEFIT (PROVISION) FOR INCOME TAXES200
 (21,895) (862) 
 (22,557)163
 (16,423) (1,002) 
 (17,262)
EQUITY IN EARNINGS OF SUBSIDIARIES39,467
 
 
 (39,467) 
30,151
 
 
 (30,151) 
NET INCOME (LOSS)$39,134
 $36,008
 $3,458
 $(39,467) $39,133
$29,881
 $27,380
 $2,771
 $(30,151) $29,881
COMPREHENSIVE INCOME (LOSS)
 (581) 4,462
 
 3,881
COMPREHENSIVE INCOME
 1,454
 8,399
 
 9,853
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO PARENT$39,134
 $35,427
 $7,920
 $(39,467) $43,014
$29,881
 $28,834
 $11,170
 $(30,151) $39,734




























2829

Table of Contents         GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



CONDENSED CONSOLIDATED STATEMENTS OF INCOME
SixNine Months Ended JuneSeptember 30, 2017
Group 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Total CompanyGroup 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Total Company
(Unaudited, in thousands)(Unaudited, in thousands)
REVENUES:$
 $4,091,409
 $1,099,615
 $
 $5,191,024
$
 $6,393,367
 $1,809,949
 $
 $8,203,316
COST OF SALES:
 3,430,341
 972,269
 
 4,402,610

 5,378,731
 1,604,751
 
 6,983,482
GROSS PROFIT
 661,068
 127,346
 
 788,414

 1,014,636
 205,198
 
 1,219,834
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES2,499
 474,625
 111,223
 
 588,347
2,932
 733,744
 179,998
 
 916,674
DEPRECIATION AND AMORTIZATION EXPENSE
 23,493
 4,206
 
 27,699

 35,873
 6,885
 
 42,758
ASSET IMPAIRMENTS
 9,526
 
 
 9,526
INCOME (LOSS) FROM OPERATIONS(2,499) 162,950
 11,917
 
 172,368
(2,932) 235,493
 18,315
 
 250,876
OTHER EXPENSE:                  
Floorplan interest expense
 (22,940) (2,228) 
 (25,168)
 (34,954) (3,705) 
 (38,659)
Other interest expense, net
 (32,842) (1,472) 
 (34,314)
 (49,568) (2,620) 
 (52,188)
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF SUBSIDIARIES(2,499) 107,168
 8,217
 
 112,886
(2,932) 150,971
 11,990
 
 160,029
BENEFIT (PROVISION) FOR INCOME TAXES937
 (38,979) (1,772) 
 (39,814)1,100
 (55,402) (2,774) 
 (57,076)
EQUITY IN EARNINGS OF SUBSIDIARIES74,634
 
 
 (74,634) 
104,785
 
 
 (104,785) 
NET INCOME (LOSS)$73,072
 $68,189
 $6,445
 $(74,634) $73,072
$102,953
 $95,569
 $9,216
 $(104,785) $102,953
OTHER COMPREHENSIVE INCOME, NET OF TAXES
 2,076
 8,600
 
 10,676

 3,531
 16,998
 
 20,529
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO PARENT$73,072
 $70,265
 $15,045
 $(74,634) $83,748
$102,953
 $99,100
 $26,214
 $(104,785) $123,482



2930

Table of Contents         GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended JuneSeptember 30, 2016
Group 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Total CompanyGroup 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Total Company
(Unaudited, in thousands)(Unaudited, in thousands)
REVENUES:$
 $2,207,383
 $575,066
 $
 $2,782,449
$
 $2,274,723
 $548,453
 $
 $2,823,176
COST OF SALES:
 1,862,787
 509,543
 
 2,372,330

 1,927,997
 488,511
 
 2,416,508
GROSS PROFIT
 344,596
 65,523
 
 410,119

 346,726
 59,942
 
 406,668
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES605
 243,312
 55,105
 
 299,022
435
 244,450
 54,121
 
 299,006
DEPRECIATION AND AMORTIZATION EXPENSE
 10,642
 2,071
 
 12,713

 11,061
 1,830
 
 12,891
ASSET IMPAIRMENTS
 1,024
 
 
 1,024

 10,855
 
 
 10,855
INCOME (LOSS) FROM OPERATIONS(605) 89,618
 8,347
 
 97,360
(435) 80,360
 3,991
 
 83,916
OTHER EXPENSE:                  
Floorplan interest expense
 (10,402) (1,191) 
 (11,593)
 (9,979) (1,156) 
 (11,135)
Other interest expense, net
 (16,072) (633) 
 (16,705)
 (16,376) (718) 
 (17,094)
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF SUBSIDIARIES(605) 63,144
 6,523
 
 69,062
(435) 54,005
 2,117
 
 55,687
BENEFIT (PROVISION) FOR INCOME TAXES227
 (23,081) 372
 
 (22,482)164
 (19,884) (601) 
 (20,321)
EQUITY IN EARNINGS OF SUBSIDIARIES46,958
 
 
 (46,958) 
35,637
 
 
 (35,637) 
NET INCOME (LOSS)$46,580
 $40,063
 $6,895
 $(46,958) $46,580
$35,366
 $34,121
 $1,516
 $(35,637) $35,366
OTHER COMPREHENSIVE LOSS, NET OF TAXES
 (3,480) (6,068) 
 (9,548)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES
 (6,341) 3,300
 
 (3,041)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO PARENT$46,580
 $36,583
 $827
 $(46,958) $37,032
$35,366
 $27,780
 $4,816
 $(35,637) $32,325




























3031

Table of Contents         GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


CONDENSED CONSOLIDATED STATEMENTS OF INCOME
SixNine Months Ended JuneSeptember 30, 2016

Group 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Total CompanyGroup 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Total Company
(Unaudited, in thousands)(Unaudited, in thousands)
REVENUES:$
 $4,289,016
 $1,101,788
 $
 $5,390,804
$
 $6,563,739
 $1,650,241
 $
 $8,213,980
COST OF SALES:
 3,611,709
 979,874
 
 4,591,583

 5,539,707
 1,468,385
 
 7,008,092
GROSS PROFIT
 677,307
 121,914
 
 799,221

 1,024,032
 181,856
 
 1,205,888
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES1,808
 486,327
 104,552
 
 592,687
2,243
 730,776
 158,673
 
 891,692
DEPRECIATION AND AMORTIZATION EXPENSE
 21,238
 3,939
 
 25,177

 32,298
 5,769
 
 38,067
ASSET IMPAIRMENTS
 1,533
 423
 
 1,956

 12,389
 423
 
 12,812
INCOME (LOSS) FROM OPERATIONS(1,808) 168,209
 13,000
 
 179,401
(2,243) 248,569
 16,991
 
 263,317
OTHER EXPENSE:                  
Floorplan interest expense
 (20,450) (2,153) 
 (22,603)
 (30,428) (3,309) 
 (33,737)
Other interest expense, net
 (32,124) (1,510) 
 (33,634)
 (48,501) (2,228) 
 (50,729)
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF SUBSIDIARIES(1,808) 115,635
 9,337
 
 123,164
(2,243) 169,640
 11,454
 
 178,851
BENEFIT (PROVISION) FOR INCOME TAXES677
 (42,362) (608) 
 (42,293)841
 (62,246) (1,209) 
 (62,614)
EQUITY IN EARNINGS OF SUBSIDIARIES82,002
 
 
 (82,002) 
117,639
 
 
 (117,639) 
NET INCOME (LOSS)$80,871
 $73,273
 $8,729
 $(82,002) $80,871
$116,237
 $107,394
 $10,245
 $(117,639) $116,237
OTHER COMPREHENSIVE LOSS, NET OF TAXES
 (12,507) (3,913) 
 (16,420)
 (9,208) (10,254) 
 (19,462)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO PARENT$80,871
 $60,766
 $4,816
 $(82,002) $64,451
$116,237
 $98,186
 $(9) $(117,639) $96,775


3132

Table of Contents         GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SixNine Months Ended JuneSeptember 30, 2017
Group 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Total CompanyGroup 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Total Company
(Unaudited, in thousands)(Unaudited, in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:              
Net cash provided by (used in) operating activities$73,072
 $(32,554) $14,167
 $54,685
Net cash provided by operating activities$102,951
 $188,979
 $17,937
 $309,867
CASH FLOWS FROM INVESTING ACTIVITIES:              
Cash paid in acquisitions, net of cash received
 
 (95) (95)
 (62,475) (46,607) (109,082)
Proceeds from disposition of franchises, property and equipment
 265
 2,317
 2,582

 2,807
 2,326
 5,133
Purchases of property and equipment, including real estate
 (60,594) (6,672) (67,266)
 (131,622) (12,688) (144,310)
Deposits for real estate and dealership acquisitions
 273
 (57,372) (57,099)
Other
 2,074
 
 2,074

 1,526
 
 1,526
Net cash used in investing activities
 (57,982) (61,822) (119,804)
 (189,764) (56,969) (246,733)
CASH FLOWS FROM FINANCING ACTIVITIES:              
Borrowings on credit facility - floorplan line and other
 3,319,971
 49,609
 3,369,580

 5,053,598
 
 5,053,598
Repayments on credit facility - floorplan line and other
 (3,244,979) (43,388) (3,288,367)
 (5,108,475) 
 (5,108,475)
Borrowings on credit facility - acquisition line47,509
 
 
 47,509
68,085
 
 
 68,085
Repayments on credit facility - acquisition line(15,000) 
 
 (15,000)(35,576) 
 
 (35,576)
Borrowings on other debt
 
 5,137
 5,137
25,054
 
 101,262
 126,316
Principal payments on other debt
 (542) 
 (542)
 (787) (87,914) (88,701)
Borrowings on debt related to real estate
 

 12,901
 12,901

 10,156
 28,875
 39,031
Principal payments on debt related to real estate
 (11,183) (2,714) (13,897)
 (16,819) (4,450) (21,269)
Employee stock purchase plan purchases, net of employee tax withholdings2,487
 
 
 2,487
4,196
 
 
 4,196
Repurchases of common stock, amounts based on settlement date(39,025) 
 
 (39,025)(40,094) 
 
 (40,094)
Dividends paid(10,200) 
 
 (10,200)(15,221) 
 
 (15,221)
Borrowings (repayments) with subsidiaries32,214
 (65,909) 33,695
 
74,826
 (110,857) 36,031
 
Investment in subsidiaries(91,057) 91,017
 40
 
(184,221) 174,576
 9,645
 
Net cash provided by (used in) financing activities(73,072) 88,375
 55,280
 70,583
(102,951) 1,392
 83,449
 (18,110)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
 
 117
 117

 
 867
 867
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 (2,161) 7,742
 5,581
NET INCREASE IN CASH AND CASH EQUIVALENTS
 607
 45,284
 45,891
CASH AND CASH EQUIVALENTS, beginning of period
 8,039
 12,953
 20,992

 8,039
 12,953
 20,992
CASH AND CASH EQUIVALENTS, end of period$
 $5,878
 $20,695
 $26,573
$
 $8,646
 $58,237
 $66,883


3233

Table of Contents         GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SixNine Months Ended JuneSeptember 30, 2016
Group 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Total CompanyGroup 1 Automotive, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Total Company
(Unaudited, in thousands)(Unaudited, in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:              
Net cash provided by operating activities$80,872
 $88,538
 $3,457
 $172,867
$116,237
 $269,096
 $1,279
 $386,612
CASH FLOWS FROM INVESTING ACTIVITIES:              
Cash paid in acquisitions, net of cash received
 
 (54,739) (54,739)
 
 (57,327) (57,327)
Proceeds from disposition of franchises, property and equipment
 12,728
 1,257
 13,985

 21,735
 1,337
 23,072
Purchases of property and equipment, including real estate
 (59,894) (10,378) (70,272)
 (110,495) (15,197) (125,692)
Deposits for real estate and dealership acquisitions
 (193) 
 (193)
Other
 3,200
 149
 3,349

 2,653
 271
 2,924
Net cash used in investing activities
 (44,159) (63,711) (107,870)
 (86,107) (70,916) (157,023)
CASH FLOWS FROM FINANCING ACTIVITIES:              
Borrowings on credit facility - floorplan line and other
 3,373,126
 
 3,373,126

 5,040,726
 
 5,040,726
Repayments on credit facility - floorplan line and other
 (3,325,917) 
 (3,325,917)
 (5,147,766) 
 (5,147,766)
Borrowings on credit facility - acquisition line150,020
 
 
 150,020
220,020
 
 
 220,020
Repayments on credit facility - acquisition line(140,020) 
 
 (140,020)(220,020) 
 
 (220,020)
Borrowings on other debt
 
 19,653
 19,653

 
 37,786
 37,786
Principal payments on other debt
 (461) (21,787) (22,248)
 (692) (31,140) (31,832)
Borrowings on debt related to real estate, net of debt issue costs
 30,754
 
 30,754

 42,654
 
 42,654
Principal payments on debt related to real estate
 (9,611) (2,604) (12,215)
 (14,941) (3,904) (18,845)
Employee stock purchase plan purchases, net of employee tax withholdings136
 
 
 136
1,452
 
 
 1,452
Repurchases of common stock, amounts based on settlement date(115,246) 
 
 (115,246)(127,606) 
 
 (127,606)
Tax effect from stock-based compensation(85) 
 
 (85)(148) 
 
 (148)
Dividends paid(10,124) 
 
 (10,124)(15,054) 
 
 (15,054)
Other(2,736) (423) 
 (3,159)(2,997) (423) 
 (3,420)
Borrowings (repayments) with subsidiaries233,120
 (236,314) 3,194
 
241,050
 (245,906) 4,856
 
Investment in subsidiaries(195,937) 123,624
 72,313
 
(212,934) 142,166
 70,768
 
Net cash provided by (used in) financing activities(80,872) (45,222) 70,769
 (55,325)(116,237) (184,182) 78,366
 (222,053)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
 
 2,256
 2,256

 
 2,345
 2,345
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 (843) 12,771
 11,928

 (1,193) 11,074
 9,881
CASH AND CASH EQUIVALENTS, beginning of period
 6,338
 6,699
 13,037

 6,338
 6,699
 13,037
CASH AND CASH EQUIVALENTS, end of period$
 $5,495
 $19,470
 $24,965
$
 $5,145
 $17,773
 $22,918

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Form 10-Q”) includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Forward-looking statements may appear throughout this report including, but not limited to, the following sections: "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Quantitative and Qualitative Disclosures About Market Risk." This information includes statements regarding our strategy, plans, goals or current expectations with respect to, among other things:
our future operating performance;
our ability to maintain or improve our margins;
operating cash flows and availability of capital;
the completion of future acquisitions and divestitures;
the future revenues of acquired dealerships;
future stock repurchases, refinancing of debt, and dividends;
future capital expenditures;
changes in sales volumes and availability of credit for customer financing in new and used vehicles and sales volumes in the parts and service markets;
business trends in the retail automotive industry, including the level of manufacturer incentives, new and used vehicle retail sales volume, customer demand, interest rates and changes in industry-wide inventory levels;
availability of financing for inventory, working capital, real estate and capital expenditures; and
implementation of international and domestic trade tariffs.
Although we believe that the expectations reflected in these forward-looking statements are reasonable when and as made, we cannot assure you that these expectations will prove to be correct. When used in this Form 10-Q, the words “anticipate,” “believe,” “estimate,” “expect,” "intend," “may” and similar expressions, as they relate to our company and management, are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Known material factors that could cause actual results to differ from those in the forward-looking statements for a number of reasons, including:
future deterioration in the economic environment, including consumer confidence, interest rates, the prices of oil and gasoline, the level of manufacturer incentives and the availability of consumer credit may affect the demand for new and used vehicles, replacement parts, maintenance and repair services and finance and insurance products;
adverse domestic and international developments such as war, terrorism, political conflicts or other hostilities may adversely affect the demand for our products and services;
the existing and future regulatory environment, including legislation related to the Dodd-Frank Wall Street Reform and Consumer Protection Act, climate control changes legislation, and unexpected litigation or adverse legislation, including changes in state franchise laws, may impose additional costs on us or otherwise adversely affect us;
a concentration of risk associated with our principal automobile manufacturers, especially Toyota, Nissan, Honda, BMW, Ford, Daimler, General Motors, Chrysler, and Volkswagen, because of financial distress, bankruptcy, natural disasters that disrupt production or other reasons, may not continue to produce or make available to us vehicles that are in high demand by our customers or provide financing, insurance, advertising or other assistance to us;
restructuring by one or more of our principal manufacturers, up to and including bankruptcy may cause us to suffer financial loss in the form of uncollectible receivables, devalued inventory or loss of franchises;
requirements imposed on us by our manufacturers may require dispositions, limit our acquisitions or increases in the level of capital expenditures related to our dealership facilities;

our existing and/or new dealership operations may not perform at expected levels or achieve expected improvements;
our failure to achieve expected future cost savings or future costs may be higher than we expect;
manufacturer quality issues, including the recall of vehicles, may negatively impact vehicle sales and brand reputation;
available capital resources, increases in cost of financing (such as higher interest rates) and our various debt agreements may limit our ability to complete acquisitions, complete construction of new or expanded facilities, repurchase shares or pay dividends;
our ability to refinance or obtain financing in the future may be limited and the cost of financing could increase significantly;
foreign exchange controls and currency fluctuations;
new accounting standards could materially impact our reported earnings per share;
our ability to acquire new dealerships and successfully integrate those dealerships into our business;
the impairment of our goodwill, our indefinite-lived intangibles and our other long-lived assets;
natural disasters, adverse weather events and other catastrophic events;
our foreign operations and sales in the U.K. and Brazil, which pose additional risks;
the inability to adjust our cost structure and inventory levels to offset any reduction in the demand for our products and services;
loss of our key personnel;
competition in our industry may impact our operations or our ability to complete additional acquisitions;
the failure to achieve expected sales volumes from our new franchises;
insurance costs could increase significantly and all of our losses may not be covered by insurance; and
our inability to obtain inventory of new and used vehicles and parts, including imported inventory, at the cost, or in the volume, we expect.
For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016 (the "2016 Form 10-K"), as well as "Management's Discussion and Analysis"Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk."
Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no responsibility to publicly release the result of any revision of our forward-looking statements after the date they are made.


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements because of various factors. See “Cautionary Statement about Forward-Looking Statements.”
In the preparation of our financial statements and reporting of our operating results in accordance with United States generally accepted accounting principles ("U.S. GAAP"), certain non-core business items are required to be presented. Examples of items that we consider non-core include non-cash asset impairment charges, gains and losses on dealership, franchise or real estate transactions, and catastrophic events such as hail storms, hurricanes, and snow storms. In order to improve the transparency of our disclosures, provide a meaningful presentation of results from our core business operations and improve period-over-period comparability, we have included certain adjusted financial measures that exclude the impact of these non-core business items. These adjusted measures are not measures of financial performance under U.S. GAAP, but are instead considered non-GAAP financial performance measures.
In addition, management evaluates our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our underlying business and results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our current period reported results for entities reporting in currencies other than United States dollars using comparative period exchange rates rather than the actual exchange rates in effect during the respective periods. The constant currency performance measures should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with U.S. GAAP.
Our management uses these adjusted measures in conjunction with U.S. GAAP financial measures to assess our business, including communication with our Board of Directors, investors and industry analysts concerning financial performance. Therefore, we believe these adjusted financial measures are relevant and useful to users of the following financial information. For further explanation and reconciliation to the most directly comparable U.S. GAAP measures, see "Non-GAAP Financial Measures" below.
Overview
We are a leading operator in the automotive retail industry. Through our dealerships, we sell new and used cars and light trucks; arrange related vehicle financing; sell service and insurance contracts; provide automotive maintenance and repair services; and sell vehicle parts. Our operations are aligned into three geographic regions: the United States ("U.S."), the United Kingdom ("U.K.") and Brazil. Our President of U.S. Operations reports directly to our Chief Executive Officer and is responsible for the overall performance of the U.S. region, as well as for overseeing the dealership operations management. The operations of the Company's international regions are structured similar to the U.S. region, each with a regional vice president reporting directly to the Company's Chief Executive Officer. As such, our three reportable segments are the U.S., which includes the activities of our corporate office, the U.K. and Brazil.
As of JuneSeptember 30, 2017, we owned and operated 210228 franchises, representing 3032 brands of automobiles, at 159174 dealership locations and 4547 collision centers worldwide. We own 147151 franchises at 112115 dealerships and 29 collision centers in the U.S., 4256 franchises at 3143 dealerships and nine11 collision centers in the U.K., and 21 franchises at 16 dealerships and 7seven collision centers in Brazil. Our U.S. operations are primarily located in major metropolitan areas in Alabama, California, Florida, Georgia, Kansas, Louisiana, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New Mexico, Oklahoma, South Carolina and Texas in the U.S., in 2128 towns of the U.K. and in key metropolitan markets in the states of Sao Paulo, Parana, Mato Grosso do Sul and Santa Catarina in Brazil.
Outlook
During the sixnine months ended JuneSeptember 30, 2017, industry new vehicle registrations in the U.S. declined 2.3%1.9% as compared to the same period a year ago. In response, and particularly given the headwinds we are experiencinghave recently experienced in most of our energy-dependent markets, we are focused on opportunities to enhance our operating results by: (a) improving our new and used vehicle gross profit per unit sold; (b) continuing to focus on our higher margin parts and service business, implementing strategic selling methods, and improving operational efficiencies; (c) investing capital where necessary to support our anticipated growth, particularly in our parts and service business; and (d) further leveraging our revenue and gross profit growth through the continued implementation of cost efficiencies. More recently, Hurricane Harvey had a significantly negative impact on our U.S. operations, particularly in Southeast Texas, resulting in loss of business and other storm-related issues during the three months ended September 30, 2017. However, in the aftermath of the storm, we experienced a substantial lift in new and used vehicle sales. In the short-term, we expect to continue to realize a notable improvement in our new and used vehicle sales in the impacted markets, as well as to experience growth in our aftersales operations with the continued recovery from Hurricane Harvey.

In terms of gross domestic product ("GDP"), the U.K. economy represents the fifth largest economy in the world. In June 2016, the majority vote in favor of the Referendum of the United Kingdom’s Membership of the European Union (E.U.) (referred to as Brexit)"Brexit"), advising for the exit of the U.K. from the European Union, initially created much uncertainty in the U.K., as well as the global markets. The overall U.K. economy and, more specifically, retail automotive industry sales were further disrupted in 2017 by the U.K. general election in June 2017, as well as multiple acts of violence and terrorism. As a

result, the U.K. industry's new vehicle sales have experienced more volatility than normal. Industry new vehicle registrations in the U.K. decreased 1.3%3.9% in the sixnine months ended JuneSeptember 30, 2017, as compared to the same period a year ago. We expect industry sales to remain volatile in the near future and potentially down for the full year 2017. In addition, the announcement of Brexit initially caused significant exchange rate fluctuations that resulted in the weakening of the British pound sterling, in which we conduct business in the U.K., against the U.S. dollar and other global currencies. The weakening of the British pound sterling has and may continue to adversely affect our results of operations as reported under U.S. GAAP, as well as have a negative impact on the pricing and affordability of the vehicles in the U.K. Volatility in exchange rates is expected tomay continue in the short term.
In terms of GDP, the Brazilian economy represents the ninth largest economy in the world. At present, the Brazilian economy has beenis in a recession and, though it has recently exhibited signs of recovery, continues to face many challenges. Industry new vehicle registrations in Brazil increased 4.3%7.9% for the sixnine months ended JuneSeptember 30, 2017 as compared to the same period a year ago. We expect macro-economic conditions in Brazil, as well as retail automotive industry sales, to remain challenged in the near term. As a result, we are focused on continued implementation of cost efficiencies and leveraging our structure with dealership acquisitions. Longer term, we expect sustained improvements in industry sales volumes and are utilizing a strategy of aligning with growing brands. We expect that the net impact to our profitability of this adjustment to our portfolio, as well as of a more efficient organizational structure, will be positive.
We expect that our consolidated operations will continue to consistently generate positive cash flow in the future and we are focused on maximizing the return that we generate from our invested capital, as well as positioning our balance sheet to take advantage of investment opportunities as they arise. Our capital allocation strategy is dynamic and dependent on a variety of market conditions and, as such, we will continue to monitor the relative value of dealership acquisitions, share repurchases and shareholder dividends in the future. However, we remain committed to our growth-by-acquisition strategy and, over the long term, we believe that significant opportunities exist to enhance our portfolio with dealership acquisitions in the U.S., U.K. and Brazil that provide satisfactory returns on our investment. We will continue to pursue dealership investment opportunities that we believe will add value for our stockholders.
We continue to closely scrutinize all planned future capital spending and work closely with our manufacturer partners to make prudent capital investment decisions that are expected to generate an adequate return and/or improve the customer experience. We anticipate that our capital spending for the year of 2017 will be less than $120.0 million. This amount excludes real estate purchases associated with franchise acquisitions and lease buy-outs.
Financial and Operational Highlights
Our operating results reflect the combined performance of each of our interrelated business activities, which include the sale of new vehicles, used vehicles, finance and insurance products, and parts, as well as maintenance, repair and collision restoration services. Historically, each of these activities has been directly or indirectly impacted by a variety of supply/demand factors, including vehicle inventories, consumer confidence, discretionary spending levels, availability and affordability of consumer credit, manufacturer incentives, weather patterns, fuel prices and interest rates. For example, during periods of sustained economic downturn or significant supply/demand imbalances, new vehicle sales may be negatively impacted as consumers tend to shift their purchases to used vehicles. Some consumers may even delay their purchasing decisions altogether, electing instead to continue to maintain and repair their existing vehicles. In such cases, however, we believe the new vehicle sales impact on our overall business is mitigated by our ability to offer other products and services, such as used vehicles and parts, as well as maintenance, repair and collision business.services. In addition, our ability to expediently adjust our cost structure in response to changes in new vehicle sales volumes also tempers the negative impact of such volume changes.
In the U.S., we generally experience higher volumes of vehicle sales and service in the second and third calendar quarters of each year. This seasonality is generally attributable to consumer buying trends and the timing of manufacturer new vehicle model introductions. In addition, in some regions of the U.S., vehicle purchases decline during the winter months due to inclement weather. As a result, our U.S. revenues and operating income are typically lower in the first and fourth calendar quarters and higher in the second and third quarters. For the U.K., the first and third quarters' sales volumes tend to be stronger, driven by the vehicle license plate change months of March and September. For Brazil, we expect higher sales volumes in the third and fourth quarters. The first quarter is generally the weakest, driven by heavy consumer vacations and activities associated with Carnival. Other factors unrelated to seasonality, such as changes in economic conditions, manufacturer incentive programs, andthe impact of severe weather events, or changes in currency exchange rates, may exaggerate seasonal or cause counter-seasonal fluctuations in our reported consolidated revenues and consolidated operating income.

For the three months ended JuneSeptember 30, 2017, our total revenues increased 6.7% from 2016 levels to $3.0 billion, reflecting a 35.5% increase in the U.K., combined with an increase of 6.3% and 1.2% in Brazil and the U.S., respectively. The increase in the U.K. was primarily the result of 30.7% increase in new vehicle retail sales driven by the acquisition of a dealership group in July of 2017 combined with same store total revenue growth of 8.8%. Our results in the U.S. were bolstered, particularly in our Houston and Beaumont markets, as a result of increased sales for replacement vehicles following the devastation of Hurricane Harvey. For the nine months ended September 30, 2017, our total revenues decreased 4.0% from 2016 levels0.1% to $2.7$8.2 billion, reflecting a 6.6%2.6% decline in the U.S., partially offset by a 10.7% and 3.8% decrease5.5% increase in the U.K. and U.S, respectively, and partially offset by an increase of 3.8% in Brazil. TheBrazil, respectively. In the U.S., the 2.6% decline in the U.S.total revenues was primarily the result ofexplained by a 4.9% decrease5.2% decline in used vehicle retail sales and 2.8% decline in new vehicle revenues andretail sales. The increase in Brazil was a 6.8% dropresult of an 18.7% growth in used vehicle retail revenues partially offsetand overall growth in used vehicle wholesale revenues.
For the three months ended September 30, 2017, our total gross profit improved $24.8 million, or 6.1%, to $431.4 million from 2016 levels, primarily as a result of 33.9%, 14.5% and 2.0% increases in the U.K., Brazil and U.S., respectively. The strong performance in the U.K. is primarily explained by increases in gross profit of 46.6%, 42.9%, and 22.6% in total used vehicle sales, finance and insurance business lines and new vehicle retail sales. In Brazil, total gross profit increased as a 4.5%result of a 26.7% improvement in our finance and insurance business lines combined with an improvement of 22.0% and 11.9% in our parts and service business lines and used vehicle retail sales, respectively. In the U.S., total gross profit increased primarily due to a 7.7% improvement in our new vehicle gross profit reflecting higher volumes coupled with improved profitability per unit. For the nine months ended September 30, 2017, our total gross profit increased 1.2% over the prior year period to $1.2 billion, primarily as a result of $7.1 million, or 21.3%, increase in Brazil, coupled with a $16.3 million, or 10.9%, increase in the U.K. The improvement in gross profit in Brazil is primarily a result of 69.1% and 24.5% improvements in used and new vehicle gross profit per units sold, respectively. The improvement in the U.K. primarily reflects a 15.8% gross profit growth in our finance and insurance businesses, coupled with a 14.2% and 13.0% gross profit improvement in our parts and services revenues. In the U.K., the decrease in total revenues was more than explained by the fluctuation in currency exchange rates between periods. On a constant currency basis, total revenues in the U.K. improved

4.7% from 2016 levels, primarily driven by growth in ourbusiness lines and used vehicle retail sales, respectively. The U.S. gross profit results for the three and nine months ended September 30, 2017 included a reserve for anticipated chargebacks specifically related to finance and insurance revenues. In Brazil, the increasecontracts expected to be canceled on vehicles flooded in Hurricane Harvey. The total revenuesreserve recognized was driven by improvements in used vehicle retail revenues and finance and insurance revenues, as well as the impact of fluctuations in currency exchange rates between periods. For the six months ended June 30, 2017, our total revenues decreased 3.7% from 2016 levels to $5.2 billion, reflecting a 4.6% and 1.4% decrease in$6.6 million. Adjusting for this reserve, the U.S. and U.K, respectively, partially offset by an increase of 5.0% in Brazil.
Forgross profit improved 3.9% for the three months ended JuneSeptember 30, 2017 total gross profit decreased 1.3% from 2016 levels to $404.9 million reflecting a 6.3% and 1.2% decrease indeclined 0.3% for the U.K. and U.S., respectively, and partially offset by an increase of $2.3 million, or 20.5%, in our Brazilian operations. The decline in the U.S. was primarily the result of a 7.5% decrease in new vehicle gross profit and an 8.7% drop in used vehicle retail gross profit, partially offset by a 3.7% improvement in our parts and services gross profit. In the U.K., the decrease in total gross profit was more than explained by the fluctuation in currency exchange rates between periods. On a constant currency basis, total gross profit in the U.K. improved 5.0% from 2016 levels, primarily driven by growth in our used vehicle retail, parts and service, and finance and insurance business lines. Our Brazil gross profit growth results were primarily driven by a 31.4% improvement in our parts and service gross profit and a 23.0% growth in our finance and insurance gross profit. For the sixnine months ended JuneSeptember 30, 2017, total gross profit decreased 1.4% over the prior year period to $788.4 million, reflecting a 2.4% decline in the U.S. that was partially offset by a 0.2% improvement in the U.K. and a 25.3% increase in Brazil.2017.
Selling, General and Administrative expenses ("SG&A") declined 0.2%rose 9.8% to $298.6$328.3 million in the secondthird quarter of 2017, as compared to the prior year period,2016 levels, primarily as a result of a 0.6% decreaseincreases of 34.8%, 6.2%, and 1.9% in the U.S.U.K., offset by 6.5%U.S. and 0.8% increases in Brazil, and the U.K., respectively. The increase in SG&A in Brazil isthe U.K. was primarily as a result of the fluctuationsacquisition of a group of dealerships in exchange rates. On a constant currency basis,July 2017. For the nine months ended September 30, 2017, SG&A rose 2.8% over the prior year period, driven by increases of 15.4%, 7.1%, and 0.6% in the U.K., Brazil and the U.S., respectively. Included in SG&A for the U.S., for the three and nine months ended September 30, 2017, was down 2.3%$8.1 million and $8.8 million, respectively, in Brazil comparedcharges primarily related to 2016,inventory losses and property damages incurred as a result of continued cost control efforts. SG&A as a percent of gross profit in Brazil improved 11.9 percentage points to 91.0% in the three months ended June 30, 2017. For the six months ended June 30, 2017,Hurricane Harvey. On an adjusted basis, total SG&A decreased 0.7% fromrose 6.4% and 2.4% for the prior period to $588.3 million, reflecting a 2.3% decrease in the U.S., offset by 10.2%three and 5.7% increases in Brazil and the U.K.,nine months ended September 30, 2017, respectively.
As a result, our net income declined for the three months ended JuneSeptember 30, 2017 by 16.0%15.5% to $39.1$29.9 million and diluted earnings per share dropped 13.2%13.3% to $1.84.$1.43. For the sixnine months ended JuneSeptember 30, 2017, net income declined 9.6%11.4% to $73.1$103.0 million and diluted earnings per share decreased 4.2%7.1% to $3.42.$4.85. Our operating results as reported on a U.S. GAAP basis for the three months ended JuneSeptember 30, 2017 were impacted by the following non-core items: $0.6$14.7 million in losses associated with catastrophic events on a pre-tax basis ($0.49.0 million on an after-tax basis) and $0.3, $9.5 million in acquisition costsof non-cash impairment charges on both a pre-tax basis ($5.9 million on an after-tax basis), $0.8 million associated with real estate and dealership transactions ($0.5 million on an after-tax basis. Ourbasis), $0.8 million of allowance for uncertain tax purposes, and a $0.7 million loss associated with a legal settlement ($0.5 million on an after-tax basis). For the nine months ended September 30, 2017, our operating results as reported on a U.S. GAAP basis for the six months ended June 30, 2017 were impacted by the following non-core items: a pre-tax gain of $1.8 million ($1.1 million on an after-tax basis) associated with a legal settlement with an Original Equipment Manufacturer ("OEM"), $0.6$15.3 million in losses associated with catastrophic events on a pre-tax basis ($0.49.4 million on an after-tax basis), $9.5 million of non-cash impairment charges on a pre-tax basis ($5.9 million on an after-tax basis), $0.8 million associated with real estate and dealership transactions ($0.5 million on an after-tax basis), $0.8 million of allowance for uncertain tax purposes, and $0.3 million inof acquisition costs, partially offset by a $1.1 million gain associated with legal settlements ($0.7 million on both a pre-tax andan after-tax basis.basis). On a comparable basis, our operating results as reported on a U.S. GAAP basis for the three months ended JuneSeptember 30, 2016 were negatively impacted by the following non-core items: $2.8 million related to vehicle inventory losses from hail and flooding in Texas on a pre-tax basis ($1.7 million on an after-tax basis), $1.0$10.8 million of non-cash impairment charges on a pre-tax basis ($0.66.7 million on an after-tax basis), $0.5 million of losses related to catastrophic events on a pre-tax basis ($0.3 million on an after-tax basis), and a $0.3 million of net lossescharge for a foreign transaction tax in Brazil on both a pre-tax and after-tax basis, partially offset by a $1.1 million pre-tax gain related to real estate and dealership transactions on a pre-tax basis ($0.20.7 million on an after-tax basis), partially offset by a $1.7 million related to a foreign deferred income tax benefit on an after-tax basis.. For the sixnine months ended JuneSeptember 30, 2016, our operating results were negatively impacted by the following non-core items: $5.4$12.3 million of non-cash impairment charges on a pre-tax basis ($7.7 million on an after-tax basis), $5.9 million of losses related to catastrophic events on a pre-tax basis ($3.4 million on an after-tax basis), $1.5 million of non-cash impairment charges on a pre-tax basis ($0.93.7 million on an after-tax basis), $0.6 million of acquisition costs on both a pre-tax and after-tax basis, and $0.1a $0.3 million charge for a foreign transaction tax in Brazil on both a pre-tax and after-tax basis, partially offset by a $1.7

million benefit related to foreign deferred income taxes on an after-tax basis and $1.0 million of net lossesgains related to real estate and dealership transactions on a pre-tax basis ($0.40.3 million on an after-tax basis), partially offset by a $1.7. Adjusting for those items, our adjusted net income rose 11.1% for the three months ended September 30, 2017 to $46.6 million relatedand declined 5.7% for the nine months ended September 30, 2017 to a foreign deferred income tax benefit on an after-tax basis.$119.2 million. Adjusted earnings per diluted share improved 13.8% for the three months ended September 30, 2017 to $2.23 and decreased 1.1% for the nine months ended September 30, 2017 to $5.62. These non-core items have been excluded from our U.S. GAAP results in the following discussion of "adjusted" results. Please see "Non-GAAP Financial Measures" for further explanation and reconciliation of the U.S. GAAP and non-GAAP data.




Key Performance Indicators
Consolidated Statistical Data
The following table highlights certain of the key performance indicators we use to manage our business.
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016 2017 2016 2017 2016
Unit Sales                
Retail Sales                
New Vehicle 40,876
 43,644
 79,166
 84,425
 48,321
 45,597
 127,487
 130,022
Used Vehicle 32,003
 32,951
 63,569
 65,742
 34,349
 33,012
 97,918
 98,754
Total Retail Sales 72,879
 76,595
 142,735
 150,167
 82,670
 78,609
 225,405
 228,776
Wholesale Sales 14,075
 13,684
 28,604
 28,050
 14,967
 15,027
 43,571
 43,077
Total Vehicle Sales 86,954
 90,279
 171,339
 178,217
 97,637
 93,636
 268,976
 271,853
Gross Margin                
New Vehicle Retail Sales 5.2% 5.3% 5.2% 5.2% 5.2% 5.1% 5.2% 5.1%
Total Used Vehicle Sales 5.7% 5.9% 5.8% 6.2% 5.5% 5.5% 5.7% 5.9%
Parts and Service Sales 53.9% 53.8% 53.9% 53.9% 54.0% 54.2% 53.9% 54.0%
Total Gross Margin 15.2% 14.7% 15.2% 14.8% 14.3% 14.4% 14.9% 14.7%
Adjusted Total gross margin 14.5% 14.4% 14.9% 14.7%
SG&A (1) as a % of Gross Profit
 73.7% 72.9% 74.6% 74.2% 76.1% 73.5% 75.1% 73.9%
Adjusted SG&A (1) as a % of Gross Profit (2)
 73.5% 72.2% 74.7% 73.4% 72.8% 73.6% 74.0% 73.5%
Operating Margin 3.5% 3.5% 3.3% 3.3% 2.6% 3.0% 3.1% 3.2%
Adjusted Operating Margin (2)
 3.5% 3.6% 3.3% 3.5% 3.5% 3.3% 3.4% 3.4%
Pretax Margin 2.3% 2.5% 2.2% 2.3% 1.6% 2.0% 2.0% 2.2%
Adjusted Pretax Margin (2)
 2.3% 2.6% 2.2% 2.4% 2.4% 2.3% 2.3% 2.4%
Finance and Insurance Revenues per Retail Unit Sold $1,461
 $1,404
 $1,424
 $1,383
 $1,343
 $1,383
 $1,394
 $1,383
Adjusted Finance and Insurance Revenues per Retail Unit Sold (2)
 $1,422
 $1,383
 $1,423
 $1,383
(1) 
Selling, general and administrative expenses.
(2) 
See "Non-GAAP Financial Measures" for more details.
The following discussion briefly highlights certain of the results and trends occurring within our business. Throughout the following discussion, references may be made to Same Store results and variances, which are discussed in more detail in the “Results of Operations” section that follows.
Our consolidated revenues from new vehicle retail sales declined 6.0%increased 7.7% for the three months ended JuneSeptember 30, 2017, as compared to the same period in 2016, consisting of declinesincreases of 4.9%3.3%, 11.7%30.7% and 2.4%2.3% in the U.S., U.K, and Brazil, respectively. The increase in our consolidated new vehicle retail revenues was primarily driven by a 6.0% increase in our new vehicle retail unit sales coupled with a 1.6% increase in our average new vehicle retail sales price. In the U.S., industry new vehicle registrations declined 3.1%1.0% during the quarter ended JuneSeptember 30, 2017 as compared to the same period a year ago. Our U.S. new vehicle retail unit sales decreased 7.2%outperformed the industry and increased 1.5% for the three months ended JuneSeptember 30,

2017, as compared to the same period in 2016, primarily as the result oflargely explained by a 16.4% increase in our over-weight exposure to many energy-dependentHouston and Beaumont markets in Texas and Oklahoma that have been particularly soft as a result of weaknessdemand for replacement vehicles due to flooding from Hurricane Harvey, which damaged hundreds of thousands of vehicles in the oil industry. For the three months ended June 30, 2017, our new vehicle unit sales in Texas were down 5.6%, while our Oklahoma unit sales were down 10.7%, when compared to the same periods a year ago. The reduced U.S. new vehicle sales volumesregion. These increases were partially offset by increasescontinued weakness in our other oil dependent markets. Our average new vehicle retail sales price of 2.4%in the U.S. increased 1.8% for the second quarter ofended September 30, 2017 as compared to the same period last year.2016. The increasesincrease in our average U.S. new vehicle retail sales price was primarily due to the shift in the mix of new retail units sold, as our truck unit sales increased to 59.3%61.1% of total new vehicle retail units sold for the three months ended JuneSeptember 30, 2017 as compared to 55.6%55.9% last year, generally correlating with lower gas prices.prices but bolstered this quarter by the increased demand for trucks in our hurricane impacted markets of Houston and Beaumont. Our U.K. revenues from new vehicle retail sales increased 30.7% for the three months ended September 30, 2017 as compared to a year ago, primarily reflecting the acquisition of the Beadles dealership group in early July. In the U.K., industry sales experienced a decline of 10.3%8.9% for the three months ended JuneSeptember 30, 2017 as compared to the same period last year. The decrease in industry sales in the U.K. followed record sales in the first quarter of 2017, primarily due to the consumers pulling ahead purchases in March aswas a result of the road tariff increase startingeconomic and political uncertainty, as well as confusion surrounding air quality plans that has led to a drop in demand for cars purchased in April 2017.diesel vehicles. Our U.K. operations significantly outperformed the industry for the secondthird quarter of 2017. As2017 as compared to last year, we experienced a decline of only 1.4%growing 2.9% in Same Store new vehicle retail unit sales and reflecting continued successful execution by our operating team on key initiatives and a favorable brand mix. For the three months ended JuneSeptember 30, 2017, Brazil new vehicle retail revenues declined 2.4%increased 2.3%, reflectinghowever on a 15.7%constant currency basis, new vehicle retail revenues remained relatively flat as compared to last year as the decline in new vehicle retail unit sales thatof 10.3% was partially offset by a 15.7% increasean 11.3% improvement in the average new vehicle average retail sales price on a constant currency basis, when compared to the same period in 2016. ThisThe decline in new vehicle unit sales in Brazil was the result reflectsof our focus on improving margins, as well as a favorable brand mix and dealership disposition activity.strategy of balancing volumes while protecting our margins. For the sixnine months ended JuneSeptember 30, 2017, our consolidated revenues from new vehicle retail sales declined 5.6%0.9%, as compared to the same period in 2016, reflecting declines in the U.S., U.K. and Brazil of 6.2%2.8%, 3.6% and 3.2%1.2%,

respectively. respectively, partially offset by an improvement of 7.9% in the U.K. In the U.S., the decline in revenues was primarily attributable to an 8.9% decreasecontinued weakness in retail new unit sales that was the result of an 8.6% and 13.5% decrease in year-to-date unit sales for 2017demand in our largely energy-dependent marketsmarkets. In Brazil, new vehicle retail revenues declined due to our luxury mix, where the industry has been weak, and the focus on improving margins. The increase in Texas and Oklahoma, respectively. For the six months ended June 30, 2017, U.K. new vehicle retail unit sales increased by 11.1% and new vehicle retail revenues increased 9.8% on a constant currency basis as compared to the same period in 2016, primarily reflectingreflects acquisition activity and the continued successful execution by our operating team on key initiatives. In Brazil, new vehicle retail revenues declined for the six months ended June 30, 2017 as a result of a 24.1% decrease in unit sales that was partially offset by an improvement in new vehicle average retail price. Consolidated new vehicle retail gross margin declinedincreased 10 basis points to 5.2% for both the three and nine months ended June 30, 2017 and remained flat for the six months ended JuneSeptember 30, 2017, as compared to the same periods last year. In the U.S., our new vehicle retail gross margin also declinedimproved 20 and 10 basis points, respectively, to 5.0%5.1% for the three and nine months ended June 30, 2017 and remained flat for the six months ended JuneSeptember 30, 2017, as compared to the same periods in 2016. Our new vehicle gross profit per retail unit “PRU”(“PRU”) in the U.S. declined 0.3%increased 6.1% and 3.8%, primarilyrespectively, for the three and nine months ended September 30, 2017 as compared to the same periods last year partially driven by a mix shiftperformance in our total new vehicle retail unit sales away from our domestic brandsHurricane Harvey impacted markets of Houston and toward our import brands, which tend to generate lower gross profit PRU.Beaumont. Our new vehicle retail gross margin in the U.K. remained flatdeclined 40 and 20 basis points, respectively, for the three and nine months ended June 30, 2017 and declined 10 basis points for the six months ended JuneSeptember 30, 2017, as compared to the same periods a year ago. Offsetting the declines in the U.S. and U.K., were increases inIn Brazil, new vehicleour gross margin of 30 and 20declined 10 basis points to 5.7% for the three and six months ended JuneSeptember 30, 2017 respectively,and improved 10 basis points to 5.8% for the nine months ended September 30, 2017 as compared to 2016 as a result of our operating teamsteam's disciplined approach to new vehicle pricing that focused on sacrificingbalancing volume forwith increased gross profit per unit. As a result, we improved new vehicle gross profit PRU sold in Brazil by 22.1%11.1% and 31.9%24.5%, respectively, for the three and sixnine months ended JuneSeptember 30, 2017, as compared to last year.
Our used vehicle results are directly affected by economic conditions, the level of manufacturer incentives on new vehicles and new vehicle financing, the number and quality of trade-ins and lease turn-ins, the availability of consumer credit, and our ability to effectively manage the level and quality of our overall used vehicle inventory. Our total revenues from used vehicle retail sales decreased 4.2% and 4.1%increased 5.8% for the three and six months ended JuneSeptember 30, 2017 respectively,and declined 0.8% for the nine months ended September 30, 2017, as compared to the same periods in 2016 primarily drivenreflecting improvements in the U.K. and Brazil, partially offset by a decline in the U.S. In the U.S., used vehicle retail revenues declined 6.8%2.3% and 6.7%5.2%, respectively, for the three and sixnine months ended JuneSeptember 30, 2017, as a result of a decrease in used vehicle retail units sold of 6.2%3.3% and 6.6%5.5%, coupled with a decreasepartially offset by an increase in the average used vehicle retail price of 0.7%1.0% and 0.1%0.3%, respectively, as compared to the same periods last year. The decline in used vehicle retail units sold in the U.S. was primarilypartially a result of energy market weakness and a lag in used vehicle replacement demand softness in our Texas and Oklahoma energy-dependenthurricane impacted markets, as well as an overall lack of used vehicle inventory caused by the decline in industry new vehicle sales volume and the resulting lower used vehicle trade-in volume. Our energy dependentUnlike the sales activity we experienced in our new vehicle business in our hurricane impacted markets experienced declines inof Houston and Beaumont, many used car customers delayed purchases on replacement of flooded vehicles until settlement of insurance claims were finalized, which tempered used vehicle retail unit sales of 7.4% and 8.4%, respectively, for the three and six months ended June 30, 2017 as compared to 2016.in September 2017. The U.K. generated increases in used vehicle retail revenues of 4.5%47.9% and 4.6%18.3% for the three and sixnine months ended JuneSeptember 30, 2017, respectively, as a result of the increases in used vehicle retail unit sales of 16.1%46.1% for the secondthird quarter of 2017 and 19.0%28.0% for the first sixnine months of 2017, as compared to the same periods in 2016. This improvement was primarily driven by a strong performance by our operating team.team and the impact of dealership acquisitions. Further, the enactment of the U.K. road tariff in April 2017 lowered taxes associated with used vehicles purchases relative to new vehicle, resulting in a shift in consumer demand towards used vehicles. The increase in revenues in the U.K., as reported in U.S. dollars, was dampenedslightly tempered by the impactunfavorable change of exchange rates between periods. On a constant currency basis, used vehicle retail revenues improved 17.2%48.3% and 19.1%28.8% for the three and sixnine months ended June

September 30, 2017, respectively.respectively, as compared to the same periods last year. In Brazil, our used vehicle retail revenues increased by 20.8%13.4% and 21.6%18.7%, respectively, during the three and sixnine months ended JuneSeptember 30, 2017 as compared to the same periods in 2016. The increase in Brazil for the quarter ended September 30, 2017 was due to an increase in the average used vehicle retail sales price of 33.2% and 48.2% that10.9%, coupled with a 2.3% increase in the used vehicle retail units. For the nine months ended September 30, 2017, the increase in used vehicle retail revenues for Brazil was a result of an increase in the average used vehicle retail sales price of 35.0%, which was partially offset by a 12.0% decrease in the used vehicle retail units sales of 9.3% and 17.9%, respectively, as compared to the same periods in 2016.units. These improvements primarily reflect an increased focus by our operations team and enhanced processes that have been implemented. Total used vehicle retail gross profit decreased 6.9% and 7.7%increased 2.5% for the three and six monthsmonth ended JuneSeptember 30, 2017 respectively, as compared to the same periodsperiod last year. Theyear as a result of a 4.1% improvement in total used vehicle retail unit sales which was partially offset by a 1.4% decline in total used vehicle retail gross profit forPRU. For the three and six month periodsnine months ended September 30, 2017 as compared to the same period a year ago, our total used vehicle gross profit decreased 4.5% primarily as a result of 2017 was driven by a 4.2% and 4.7% decrease3.6% decline in total used vehicle retail gross profit PRU respectively, coupled with a 2.9% and 3.3% decrease0.8% decline in total used vehicle retail unit sales for the quarter and year ended June 30, 2017, respectively, as compared to the same periods last year.sales. We generated improvements in used vehicle retail gross profit PRU in our Brazil operations for the three and sixnine months ended JuneSeptember 30, 2017 that was offset by declines in the U.S.of 9.4% and the U.K.69.1%, respectively, as compared to the same periods a year ago. The improvement in used vehicle retail gross profit PRU in Brazil for the three months and six months ended June 30, 2017 wasago which were primarily due to improved sales processes and the overall strong performance of our operating team. In the U.S., the used vehicle gross profit PRU decline was primarily caused by a lack of trade-in supply, as mentioned above, which forced our dealerships to purchase more expensive inventory at auction, increasing inventory cost and shrinking gross profit per unit. The decline in used vehicle gross profit PRU in the U.K. was primarily explained by an unfavorable change in exchange rates between periods, as well as the impact of efforts to liquidate both an extraordinarily high level of used vehicle trade-in inventory from March 2017 new vehicle sales volumes (as described above) and used vehicle diesel inventory in response to shrinking demand by consumers.
Our total parts and service revenue increased 3.0% and 3.3% respectively,0.1% for the three and six months ended JuneSeptember 30, 2017 and decreased 3.0% for the nine months ended September 30, 2017 as compared to the same periods in 2016. ForIn the U.K., used vehicle retail gross profit PRU declined 2.8% and 11.7%, respectively, for the three and nine month ended September 30, 2017. The decline in the U.K. for the quarter and sixnine months ended JuneSeptember 30, 2017 thiswas primarily the result of acquisition activity, as we work to integrate our sales processes and procedures into the newly acquired dealerships.
Our total parts and service revenue increased 7.4% and 4.6%, respectively, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. This growth was primarily driven by increases in our customer pay parts and service, warranty parts and service, customer-paywholesale parts and service and collision portions of the business.parts and service. These increases were primarily due to the execution of key management initiatives, dealership acquisition activity, an increase

in the number of units being recalled, expansion of our operating capacity and an increase in the number of late-model vehicles in operation, which tend to more consistently return to the dealership for warranty, maintenance and repair services. Our overall parts and service revenue was negatively impacted by the loss of over a week of business in our hurricane impacted markets along the Gulf and Atlantic coasts due to both store closures and lack of demand, as thousands of customers were either out of town or tending to property clean-up. Additionally, our collision revenues were also negatively impacted as most repairs in the Houston and Beaumont markets were delayed through the month of September due to the lack of rental car availability for our collision customers. During the first sixnine months of 2017, our warranty parts and service revenues were bolstered particularly by manufacturers' high volume recall campaigns in the U.S., particularly in for our Lexus, Nissan, and Ford brands. For three months ended June 30, 2017, ourOur parts and service gross margin improved 10declined 20 basis points for three months ended September 30, 2017, as compared to a year ago, driven by a decrease in the U.S. of 100 basis points that was partially offset by increases in the U.K. and Brazil of 160 and 780 basis points, and 10.1 percentage points, respectively, and partially offset by a decline in the U.S. of 40 basis points.respectively. For the sixnine months ended JuneSeptember 30, 2017, our parts and service gross margin remained flatdeclined 10 basis points compared to a year ago as the decline of 80 basis points in the U.S. was fullypartially offset by improvements in the U.K. and Brazil.Brazil of 240 and 790 basis points, respectively. The declinesdecline in our U.S. parts and service gross margin for both the three and six months ended June 30, 2017 was primarily due to declines in internal reconditioning service, which we report as 100.0% margin, resulting from decreases in total retail vehicles sales volumes in 2017 compared to 2016.margin. The increases in the U.K. for both the second quarter and first half of 2017U.K reflect higher margins in our warranty parts and service, customer pay parts and service and wholesale parts businesses as compared to the same periodsperiod last year. In Brazil, the increases were primarily as a result of improvements in our customer-pay parts and service and collision portions of the business, as well as the discontinuation of our wholesale parts business, which is a relatively lower margin business.
Our consolidated finance and insurance revenues PRU sold, increased 4.1% and 3.0%decreased 2.9% for the three and six months ended JuneSeptember 30, 2017 and increased 0.8% for the nine months ended September 30, 2017, as compared to the same periods in 2016. After adjusting for $6.6 million in chargeback expense for reserves associated with expected finance and insurance product cancellations on vehicles sold by us and damaged by flooding from Hurricane Harvey, adjusted consolidated finance and insurance revenues PRU sold increased 2.8% and 2.9%, respectively, for the three and nine months ended September 30, 2017, as compared to the same periods last year. Growth in income per contract on many of our product offerings was partially offset by a decline in penetration rates on our retail finance fees, coupled with the mix effect of a relatively greater contribution from the U.K. In the U.S., on an adjusted basis, we generated a 5.4% and 5.0%5.2% increase in finance and insurance revenues PRU to $1,688$1,673 and $1,663,$1,667, respectively, for the three and sixnine months ended JuneSeptember 30, 2017, as compared to the same periodperiods last year. In Brazil, finance and insurance revenues PRU improved 42.8%35.7% and 71.9%58.7%, respectively, for the three and sixnine months ended JuneSeptember 30, 2017 to $674$673 and $691$684 as compared to the same periods in 2016. These improvements were partially offset by a 4.4% and 9.8% decline forIn the three and six months ended June 30, 2017 inU.K., finance and insurance revenues PRU in the U.K.improved 5.9% for the same comparable periods. Thethree months ended September 30, 2017 and declined 4.7% for the nine months ended September 30, 2017 as compared to last year. This decline for the nine months ended September 30, 2017 was due to the change in the U.K. was more than explained by exchange rate differences. Onrates, as on a constant currency basis, finance and insurance revenues PRU in the U.K. increased 7.0% and 2.5% for the three and six months ended June 30, 2017, respectively,3.6%, as compared to the same periods in 2016.last year.

Our total consolidated gross margin increased 50decreased 10 basis points for the three months ended JuneSeptember 30, 2017 to 15.2%14.3%, as compared to the same period in 20162016. On an adjusted basis, our consolidated gross margin increased 10 basis points to 14.5% for the same comparable period as declines in the newparts and used vehicle sectors of ourservice business were more than offset by an improvementimprovements in the new vehicle sector of our parts and service business and a favorable mix effect.business. For the sixnine months ended JuneSeptember 30, 2017, total consolidated gross margin increased 4020 basis points to 15.2%14.9% as compared to the same period last year as stable marginsimprovement in our new vehicle and parts and service business coupled with a favorable mix effect, more than offset a decline in our used vehicle and parts and service business.
Our consolidated SG&A expenses decreasedincreased in absolute dollars by 0.2%9.8% and 0.7%2.8% for the three and sixnine months ended JuneSeptember 30, 2017, respectively, as compared to the same periods in 2016. In the U.S., for the decreasequarter, the increase in SG&A expense was driven by a $7.7 million increase in expenses wasrelated to catastrophic events, a $2.0 million increase in net loss on dealership transactions, and a $0.7 million legal settlement. In addition, SG&A expense increased in the U.S. as the result of the impact of lowerhigher volumes and gross profits on compensation expense lower insurance deductible charges relating to catastrophic events that occurred in 2017, and a decline in loaner vehicle costs in 2017. Additionally contributing to the decline in SG&A expenses for the three and six months of 2017, we recorded a pre-tax gain of $1.8 million in the first quarter of 2017 related to a settlement with an OEM.other selling expenses. For the three months and nine months ended JuneSeptember 30, 2017, our consolidated SG&A expenses as a percentage of gross profit increased 80260 basis points to 73.7%,76.1% and for the six months ended June 30, 2017, our consolidated SG&A expenses as a percentage of gross profit increased 40120 basis points to 74.6%75.1%, respectively, as compared to the same periodperiods a year ago. On an adjusted basis, our consolidated SG&A expenses as a percentage of gross profit increaseddecreased by 13080 basis points to 73.5% and 74.7%, respectively,72.8% for the three and six months ended JuneSeptember 30, 2017 when compared to a year ago, reflecting higher gross profit in all three segments and our ability to leverage our cost structure. For the nine months ended September 30, 2017, our adjusted consolidated SG&A expense as a percentage of gross profit increased 50 basis points to 74.0%, as compared to the same period in 2016. This increase was primarily due to the decline in total gross profit, coupled with the mix effect of our growing U.K. operations that inherently have a higher cost structure.
The combination of all of these factors resulted in an operating margin of 3.5%2.6% and 3.3%3.1%, respectively, for the three and sixnine months ended JuneSeptember 30, 2017, which were flat compared todeclined 40 and 10 basis points, respectively, from the same comparable periods in the prior year. On an adjusted basis, operating margin declined 10improved 20 basis points for the three months ended JuneSeptember 30, 2017 to 3.5%, and declined 20 basis points to 3.3%remained flat at 3.4% for the sixnine months ended JuneSeptember 30, 2017, as compared to the same period in 2016.
For the three and sixnine months ended JuneSeptember 30, 2017, floorplan interest expense increased 14.1%21.2% and 11.3%14.6%, respectively, as compared to the same periods in 2016, primarily driven by increases in the average London Interbank Offered Rate (“LIBOR”) interest rate since the fourth quarter of 2016 that resulted in higher U.S. floorplan interest expense. The impact of the increase in LIBOR was partially offset by declines in our U.S. weighted average borrowings when compared to 2016. Other interest expense, for the three and sixnine months ended JuneSeptember 30, 2017, increased 3.7%4.6% and 2.0%2.9%, respectively, as compared to the same periodperiods in 2016.2016, primarily explained by incremental mortgage borrowings.
We address these items further, and other variances between the periods presented, in the “Results of Operations” section below.


Critical Accounting Policies and Accounting Estimates
The preparation of our Consolidated Financial Statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions. In particular, to evaluate the carrying value of goodwill and intangible franchise rights for impairment, we must estimate the fair market value of the net assets of each of our reporting units and our intangible franchise rights, using estimates, assumptions and unobservable inputs that require us to use our knowledge of (1) the industry, (2) recent transactions and (3) reasonable performance expectations for our operations.
We disclosed certain critical accounting policies and estimates in our 2016 Form 10-K, and no significant changes have occurred since that time.

Results of Operations
The "Same Store" amounts presented below include the results of dealerships for the identical months in each period presented in comparison, commencing with the first full month in which the dealership was owned by us and, in the case of dispositions, ending with the last full month it was owned by us. The following table summarizes our combined Same Store results for the three and sixnine months ended JuneSeptember 30, 2017, as compared to 2016. Same Store results also include the activities of our corporate headquarters.

Total Same Store Data
(dollars in thousands, except per unit amounts)
 Three Months Ended June 30,  Six Months Ended June 30, Three Months Ended September 30,  Nine Months Ended September 30,
 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016
Revenues                  
New Vehicle Retail $1,438,047
 (5.2)% (3.8)% $1,516,766
  $2,732,511
 (5.4)% (3.8)% $2,887,567
 $1,632,489
 4.3% 4.2% $1,564,571
  $4,364,999
 (2.0)% (1.0)% $4,452,137
Used Vehicle Retail 677,701
 (3.6)% (1.8)% 703,128
  1,314,103
 (4.1)% (2.4)% 1,370,057
 701,226
 1.4% 1.3% 691,715
  2,015,330
 (2.3)% (1.1)% 2,061,772
Used Vehicle Wholesale 98,244
 4.0% 7.5% 94,509
  196,196
 3.0% 6.5% 190,512
 95,935
 (6.6)% (6.6)% 102,722
  292,131
 (0.4)% 2.0% 293,234
Parts and Service 329,798
 4.2% 5.3% 316,549
  639,421
 4.0% 4.9% 614,923
 331,540
 5.1% 5.0% 315,570
  970,961
 4.3% 5.0% 930,493
Finance, Insurance and Other 105,338
 (0.3)% 0.6% 105,626
  200,036
 (1.7)% (0.8)% 203,520
 106,839
 (0.1)% (0.1)% 106,914
  306,875
 (1.1)% (0.6)% 310,435
Total Revenues $2,649,128
 (3.2)% (1.7)% $2,736,578
  $5,082,267
 (3.5)% (1.9)% $5,266,579
 $2,868,029
 3.1% 3.0% $2,781,492
  $7,950,296
 (1.2)% (0.2)% $8,048,071
Cost of Sales                  
New Vehicle Retail $1,363,523
 (5.1)% (3.7)% $1,436,514
  $2,590,795
 (5.4)% (3.8)% $2,737,285
 $1,548,248
 4.2% 4.1% $1,485,200
  $4,139,043
 (2.0)% (1.0)% $4,222,485
Used Vehicle Retail 633,220
 (3.4)% (1.5)% 655,541
  1,225,430
 (3.8)% (2.1)% 1,274,449
 655,929
 1.5% 1.4% 646,339
  1,881,359
 (2.1)% (0.9)% 1,920,788
Used Vehicle Wholesale 98,458
 4.1% 7.8% 94,538
  196,015
 3.9% 7.4% 188,668
 96,189
 (8.0)% (8.0)% 104,549
  292,204
 (0.3)% 2.0% 293,217
Parts and Service 151,945
 4.1% 5.1% 145,916
  294,820
 4.2% 4.9% 283,050
 152,684
 5.8% 5.7% 144,345
  447,504
 4.7% 5.2% 427,395
Total Cost of Sales $2,247,146
 (3.7)% (2.1)% $2,332,509
  $4,307,060
 (3.9)% (2.3)% $4,483,452
 $2,453,050
 3.1% 2.9% $2,380,433
  $6,760,110
 (1.5)% (0.5)% $6,863,885
Gross Profit $401,982
 (0.5)% 0.7% $404,069
  $775,207
 (1.0)% 0.1% $783,127
 $414,979
 3.5% 3.4% $401,059
  $1,190,186
 0.5% 1.2% $1,184,186
SG&A $295,041
 1.1% 2.5% $291,844
  $572,432
 (0.1)% 1.1% $572,764
 $313,146
 6.6% 6.5% $293,749
  $885,579
 2.2% 3.0% $866,513
Adjusted SG&A (1)
 $294,110
 1.8% 3.2% $288,825
  $573,334
 1.2% 2.4% $566,365
 $303,479
 3.6% 3.5% $293,025
  $876,814
 2.0% 2.8% $859,391
Depreciation and Amortization Expenses $13,760
 10.3% 11.7% $12,477
  $26,820
 9.9% 11.3% $24,393
 $14,239
 12.6% 12.6% $12,643
  $41,058
 10.9% 11.7% $37,036
Floorplan Interest Expense $13,172
 14.2% 15.2% $11,535
  $24,683
 11.3% 12.4% $22,182
 $13,246
 19.3% 19.3% $11,100
  $37,930
 14.0% 14.7% $33,282
Gross Margin                  
New Vehicle Retail 5.2% 5.3%  5.2% 5.2% 5.2% 5.1%  5.2% 5.2%
Total Used Vehicle 5.7% 6.0%  5.9% 6.2% 5.7% 5.5%  5.8% 6.0%
Parts and Service 53.9% 53.9%  53.9% 54.0% 53.9% 54.3%  53.9% 54.1%
Total Gross Margin 15.2% 14.8%  15.3% 14.9% 14.5% 14.4%  15.0% 14.7%
Adjusted Total Gross Margin (1)
 14.7% 14.4%     
Adjusted Finance, Insurance and Other, Net (1)
 $113,389
 6.1% 6.0% $106,914
  $313,425
 1.0% 1.5% $310,435
Adjusted Total Revenue (1)
 $2,874,579
 3.3% 3.2% $2,781,492
  $7,956,846
 (1.1)% (0.1)% $8,048,071
Adjusted Gross Profit (1)
 $421,529
 5.1% 5.0% $401,059
  $1,196,736
 1.1% 1.8% $1,184,186
SG&A as a % of Gross Profit 73.4% 72.2%  73.8% 73.1% 75.5% 73.2%  74.4% 73.2%
Adjusted SG&A as a % of Gross Profit (1)
 73.2% 71.5%  74.0% 72.3% 72.0% 73.1%  73.3% 72.6%
Operating Margin 3.5% 3.6%  3.5% 3.5% 2.7% 3.0%  3.2% 3.3%
Adjusted Operating Margin (1)
 3.6% 3.8%  3.4% 3.7% 3.6% 3.4%  3.5% 3.6%
Finance and Insurance Revenues per Retail Unit Sold $1,466
 3.8% 4.8% $1,412
  $1,439
 2.9% 3.9% $1,398
 $1,372
 (1.3)% (1.3)% $1,390
  $1,415
 1.4% 2.0% $1,395
Adjusted Finance and Insurance Revenues per Retail Unit Sold (1)
 $1,456
 4.7% 4.7% $1,390
  $1,445
 3.6% 4.2% $1,395
(1)See "Non-GAAP Financial Measures" for more details.


The discussion that follows provides explanation for the variances noted above. Each table presents by primary income statement line item comparative financial and non-financial data of our Same Store locations, those locations acquired or disposed of (“Transactions”) during the periods and the consolidated company for the three and sixnine months ended JuneSeptember 30, 2017 and 2016.
Our Same Store operating results as reported on a U.S. GAAP basis for the three months ended JuneSeptember 30, 2017 were negatively impacted by the following non-core items (on a pre-tax basis): $0.6$14.7 million in losses associated with catastrophic events, $9.5 million of non-cash impairment charges, $0.8 million of net losses related to real estate and $0.3dealership transactions, and $0.7 million in acquisition costs.associated with a legal settlement. For the sixnine months ended JuneSeptember 30, 2017, our Same Store operating results were impacted by the following non-core items (on a pre-tax basis): $1.8 million gain associated with a legal settlement with an OEM, $0.6$15.4 million in losses related to catastrophic events, $9.5 million of non-cash impairment charges, $0.8 million of net losses related to real estate and dealership transactions, $0.3 million in acquisition costs.costs, partially offset by $1.1 million gain associated with legal settlements. On a comparable basis, our Same Store operating results as reported on a U.S. GAAP basis for the three months ended JuneSeptember 30, 2016 were negatively impacted by the following non-core items (on a pre-tax basis): $2.8$10.8 million of non-cash impairment charges, $0.5 million of losses related to catastrophic events, $1.0 million of non-cash impairment charges and $0.3 million of net losses related to real estate and dealership transactions.foreign transaction tax. Our Same Store operating results on a U.S. GAAP basis for the sixnine months ended JuneSeptember 30, 2016 were negatively impacted by the following non-core items (on a pre-tax basis): $5.4$12.3 million of non-cash impairment charges, $5.9 million of losses related to catastrophic events, $1.5 million of non-cash impairment charges, $0.6 million of acquisition costs, and $0.4 million of net lossesloss related to real estate and dealership transactions.transactions, and $0.3 million of foreign transaction tax. These non-core items have been excluded from our U.S. GAAP results in the following discussion of "adjusted" results. Please see "Non-GAAP Financial Measures" for further explanation and reconciliation of the Same Store U.S. GAAP and non-GAAP data.
    

New Vehicle Retail Data
(dollars in thousands, except per unit amounts)
 Three Months Ended June 30,  Six Months Ended June 30, Three Months Ended September 30,  Nine Months Ended September 30,
 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016
Retail Unit Sales                  
Same Stores                  
U.S. 30,675
 (5.7)% 32,534
  58,173
 (7.1)% 62,596
 34,917
 2.5% 34,080
  93,090
 (3.7)% 96,676
U.K. 7,630
 (1.4)% 7,741
  15,280
 4.5% 14,625
 8,573
 2.9% 8,331
  23,853
 3.9% 22,956
Brazil 2,130
 (8.6)% 2,331
  3,709
 (18.3)% 4,538
 2,155
 0.1% 2,152
  5,864
 (12.3)% 6,690
Total Same Stores 40,435
 (5.1)% 42,606
  77,162
 (5.6)%  81,759
 45,645
 2.4% 44,563
  122,807
 (2.8)%  126,322
Transactions 441
 1,038
  2,004
 2,666
 2,676
 1,034
  4,680
 3,700
Total 40,876
 (6.3)% 43,644
  79,166
 (6.2)%  84,425
 48,321
 6.0% 45,597
  127,487
 (1.9)%  130,022
Retail Sales Revenues                  
Same Stores   
          
       
U.S. $1,140,004
 (3.9)% N/A $1,185,994
  $2,158,251
 (4.8)% N/A $2,267,346
 $1,283,050
 3.6% N/A $1,238,239
  $3,441,300
 (1.8)% N/A $3,505,583
U.K. 226,002
 (13.0)% (2.6)% 259,904
  448,307
 (8.9)% 3.7% 492,143
 270,750
 6.5% 6.2% 254,246
  719,059
 (3.7)% 4.6% 746,389
Brazil 72,041
 1.7% (6.7)% 70,868
  125,953
 (1.7)% (14.8)% 128,078
 78,689
 9.2% 6.5% 72,086
  204,640
 2.2% (7.8)% 200,165
Total Same Stores 1,438,047
 (5.2)% (3.8)% 1,516,766
  2,732,511
 (5.4)% (3.8)% 2,887,567
 1,632,489
 4.3% 4.2% 1,564,571
  4,364,999
 (2.0)% (1.0)% 4,452,137
Transactions 10,721
 23,993
  53,470
 63,042
 77,752
 23,381
  131,223
 86,425
Total $1,448,768
 (6.0)% (4.6)% $1,540,759
  $2,785,981
 (5.6)% (3.9)% $2,950,609
 $1,710,241
 7.7% 7.5% $1,587,952
  $4,496,222
 (0.9)% 0.2% $4,538,562
Gross Profit                  
Same Stores                  
U.S. $56,994
 (6.6)% N/A $61,049
  $108,198
 (5.3)% N/A $114,285
 $65,712
 7.2% N/A $61,270
  $173,908
 (0.9)% N/A $175,554
U.K. 13,424
 (12.5)% (2.1)% 15,342
  26,123
 (9.3)% 3.2% 28,786
 14,065
 1.0% 0.5% 13,919
  40,190
 (5.9)% 2.2% 42,704
Brazil 4,106
 6.3% (2.4)% 3,861
  7,395
 2.6% (11.5)% 7,211
 4,464
 6.7% 4.2% 4,182
  11,858
 4.1% (6.2)% 11,394
Total Same Stores 74,524
 (7.1)% (5.6)% 80,252
  141,716
 (5.7)% (4.0)% 150,282
 84,241
 6.1% 5.9% 79,371
  225,956
 (1.6)% (0.6)% 229,652
Transactions 387
 896
  2,422
 2,593
 4,091
 1,064
  6,514
 3,658
Total $74,911
 (7.7)% (6.1)% $81,148
  $144,138
 (5.7)% (3.9)% $152,875
 $88,332
 9.8% 9.6% $80,435
  $232,470
 (0.4)% 0.8% $233,310
Gross Profit per Retail Unit Sold                  
Same Stores 
 
        
 
       
U.S. $1,858
 (1.0)% N/A $1,876
  $1,860
 1.9% N/A $1,826
 $1,882
 4.7% N/A $1,798
  $1,868
 2.9% N/A $1,816
U.K. $1,759
 (11.3)% (0.7)% $1,982
  $1,710
 (13.1)% (1.3)% $1,968
 $1,641
 (1.8)% (2.3)% $1,671
  $1,685
 (9.4)% (1.6)% $1,860
Brazil $1,928
 16.4% 6.8% $1,656
  $1,994
 25.5% 8.3% $1,589
 $2,071
 6.6% 4.0% $1,943
  $2,022
 18.7% 7.0% $1,703
Total Same Stores $1,843
 (2.2)% (0.5)% $1,884
  $1,837
 (0.1)% 1.7% $1,838
 $1,846
 3.6% 3.4% $1,781
  $1,840
 1.2% 2.2% $1,818
Transactions $878
 $863
  $1,209
 $973
 $1,529
 $1,029
  $1,392
 $989
Total $1,833
 (1.4)% 0.3% $1,859
  $1,821
 0.6% 2.5% $1,811
 $1,828
 3.6% 3.4% $1,764
  $1,823
 1.6% 2.8% $1,794
Gross Margin                  
Same Stores                  
U.S. 5.0% 5.1%  5.0% 5.0% 5.1% 4.9%  5.1% 5.0%
U.K. 5.9% 5.9%  5.8% 5.8% 5.2% 5.5%  5.6% 5.7%
Brazil 5.7% 5.4%  5.9% 5.6% 5.7% 5.8%  5.8% 5.7%
Total Same Stores 5.2% 
 5.3%  5.2% 5.2% 5.2% 
 5.1%  5.2% 5.2%
Transactions 3.6% 3.7%  4.5% 4.1% 5.3% 4.6%  5.0% 4.2%
Total 5.2% 5.3%  5.2% 5.2% 5.2% 5.1%  5.2% 5.1%

Same Store New Vehicle Unit Sales
The following table sets forth our Same Store new vehicle retail unit sales volume by manufacturer:
 Three Months Ended June 30,  Six Months Ended June 30, Three Months Ended September 30,  Nine Months Ended September 30,
 2017 % Increase/(Decrease) 2016  2017 % Increase/(Decrease) 2016 2017 % Increase/(Decrease) 2016  2017 % Increase/(Decrease) 2016
Toyota/Scion/Lexus (1)
 10,367
 (4.2)% 10,820
  19,195
 (6.2)% 20,469
 12,592
 9.0% 11,548
  31,787
 (0.7)% 32,017
Volkswagen/Audi/Porsche 5,859
 14.2% 5,132
  15,027
 7.8% 13,946
BMW/MINI 5,322
 (9.2)% 5,863
  10,472
 (5.5)% 11,076
 5,544
 (8.0)% 6,024
  16,016
 (6.3)% 17,100
Volkswagen/Audi/Porsche 5,008
 5.6% 4,741
  9,168
 4.0% 8,814
Ford/Lincoln 4,363
 (8.5)% 4,769
  9,037
 (4.4)% 9,450
 4,776
 (3.2)% 4,932
  13,813
 (4.0)% 14,382
Honda/Acura 3,905
 (3.1)% 4,028
  7,401
 (5.9)% 7,865
 4,367
 8.9% 4,010
  11,768
 (0.9)% 11,875
Nissan 2,974
 16.1% 2,561
  6,033
 9.7% 5,500
 3,150
 7.4% 2,933
  9,183
 8.9% 8,433
Chevrolet/GMC/Buick/Cadillac 2,427
 (26.9)% 3,318
  4,976
 (23.6)% 6,517
 2,938
 (12.1)% 3,342
  7,914
 (19.7)% 9,859
Chrysler/Dodge/Jeep/RAM 1,878
 0.9% 1,861
  4,959
 (6.3)% 5,294
Hyundai/Kia 1,756
 0.7% 1,744
  3,069
 (12.0)% 3,488
 1,838
 0.8% 1,824
  4,907
 (7.6)% 5,312
Mercedes-Benz/smart/Sprinter 1,737
 (8.2)% 1,893
  3,214
 (5.8)% 3,411
 1,628
 (15.9)% 1,935
  4,842
 (9.4)% 5,346
Chrysler/Dodge/Jeep/RAM 1,678
 (7.3)% 1,810
  3,081
 (10.3)% 3,433
Other 898
 (15.2)% 1,059
  1,516
 (12.7)% 1,736
 1,075
 5.2% 1,022
  2,591
 (6.1)% 2,758
Total 40,435
 (5.1)% 42,606
  77,162
 (5.6)% 81,759
 45,645
 2.4% 44,563
  122,807
 (2.8)% 126,322
(1) The Scion brand was discontinued by Toyota during the third quarter of 2016.
In total, our Same Store new vehicle retail unit sales decreased 5.1%increased 2.4% for the three months ended JuneSeptember 30, 2017, as compared to the same period in 2016. The decreaseincrease was driven by decreasesimprovements of 5.7%2.5%, 1.4%2.9%, and 8.6%0.1% in the U.S., U.K., and Brazil, respectively. Overall, the U.S. industry sales declined 3.1%1.0% for the three months ended JuneSeptember 30, 2017 as compared to the same period a year ago. The declineincrease in our U.S. new vehicle retail unit sales was primarily due to increased sales in Houston and Beaumont in September as a result of replacement demand caused by flooding from Hurricane Harvey which damaged hundreds of thousands of vehicles in the region. For the three months ended September 30, 2017, our unit sales in our hurricane impacted markets of Houston and Beaumont were up 16.4%, collectively, when compared to the same period a year ago. These gains were partially offset by softness in the energy markets of Texas and Oklahoma, as well as an overall decline in new vehicle retail demand in the industry compared to 2016. ForU.K. industry sales were down 8.9% for the three months ended JuneSeptember 30, 2017, our unit sales in our energy-dependent markets of Texas and Oklahoma were down 6.4% and 10.7%, respectively, whenas compared to the same period a year ago.in 2016. Our Same Store U.K. new vehicle sales outperformed the U.K. auto industry, increasing 2.9% for the three months ended September 30, 2017 as compared to the same period last year. The strong performance in the U.K. is primarily attributable to our brand portfolio and our management team. We experienced an 8.6% declinea 0.1% increase in our Same Store new vehicle retail unit sales in Brazil, which was weaker than the overall industry, reflecting our intentional efforts to prioritize margins over volume. U.K. industry sales were down 10.3% forFor the threenine months ended June 30, 2017, as compared to the same period in 2016, following record sales in the first quarter of 2017, primarily due to consumers pulling ahead purchases in March as a result of the road tariff increase starting for cars purchased in April of 2017. Our Same Store U.K. new vehicle sales outperformed the U.K. auto industry, declining only 1.4% for the three months ended June 30, 2017 as compared to the same period last year. For the six months ended JuneSeptember 30, 2017, as compared to the same period in 2016, total Same Store new vehicle retail unit sales decreased 5.6%2.8%, primarily driven by decreases of 7.1%3.7% in the U.S. and 18.3%12.3% in Brazil, partially offset by a 4.5%3.9% increase in the U.K. The decline was primarily a result of weaker demand in our energy dependent markets in the U.S. and our focus on margins in Brazil.
Our total Same Store revenues from new vehicle retail sales revenue decreased 5.2%increased 4.3% for the three months ended JuneSeptember 30, 2017, as compared to the same period in 2016, reflecting declinesincreases in the U.S. and, U.K., partially offset by an increase inand Brazil. The 3.9% decrease3.6% increase in U.S. Same Store new vehicle revenue was primarily due to the declineincrease in new vehicle retail units of 5.7%2.5%, partially offset bycoupled with a 1.9%1.1% increase in the average new vehicle retail sales price to $37,164.$36,746. The increase in U.S. Same Store average new vehicle retail sales price was primarily due to a mix shift in sales from cars to trucks, generally driven by lower gas prices.prices, but bolstered this quarter by the increased demand for trucks in the hurricane impacted markets. For the secondthird quarter of 2017, U.S. Same Store new vehicle retail truck sales represented 59.2%60.9% of total Same Store new vehicle retail units sold, as compared to 56.1%56.3% for the same period last year. Our U.K. Same Store new vehicle retail revenues decreased 13.0%increased 6.5% for the three months ended JuneSeptember 30, 2017, as compared to the same period last year, largely explained by the changea 3.5% increase in exchange rate between the periods. On a constant currency basis, our U.K. Same Store new vehicle retail revenues fell 2.6% for the second quarter of 2017, driven by the 1.4% decrease in new vehicle retail units and a 1.1% decrease in the average new vehicle retail sales price when compared to 2016 on a constant currency basis. The declineand the 2.9% increase in our U.K. average new vehicle retail sales price is primarily due to a shift in consumer preference away from vehicles with diesel engines, which generally generate higher sales prices.units sold. Our Brazil Same Store new vehicle retail sales revenue increased 1.7%9.2% for the three months ended JuneSeptember 30, 2017 as compared to last year, more than explained by the change in exchange rates between periods. On a constant currency basis, our Brazil Same Store new vehicle sales revenue declined 6.7%, driven by the 8.6% decrease in new vehicle retail units, partially offset by a 2.1%9.0% increase in the average new vehicle retail sales price.price and the 0.1% increase in new vehicle retail units. For the sixnine months ended JuneSeptember 30, 2017, total Same Store new vehicle retail sales revenues decreased 5.4%2.0% as compared to the same period in 2016, primarily driven by a 4.8%, 8.9%,1.8% and a 1.7%3.7% decrease in the U.S. and U.K., U.K. and Brazil, respectively.respectively, partially offset by a 2.2% increase in Brazil. The decreasesdecrease in new vehicles sales revenue in the U.S. and Brazil primarily relaterelates to a decrease of 7.1% and 18.3%3.7% in new vehicle retail units, respectively.units. The decline in new vehicles sales revenue in the U.K. primarily relates to a deterioration of 7.3% in the average new vehicle retail sales price, which is more than explained by an unfavorable change in exchange rates between periods as, on a constant currency basis, new vehicle retail revenue per retail unit increased 0.7% when compared to the same period in the previous year. The 2.2% increase in new vehicle sales revenues in the U.K.Brazil is more than explained by the change in exchange rates between periods as, on a constant

currency basis, new vehicle sales revenues increased 3.7%decreased 7.8%. This increasedecrease was

driven by a 4.5% growth12.3% reduction in new vehicle retail unit sales.sales, reflecting our decision to focus on improving margins. The level of retail sales, as well as our own ability to retain or grow market share during any future period, is difficult to predict.
Our total Same Store new vehicle gross profit decreased 7.1%increased 6.1% for the three months ended JuneSeptember 30, 2017, as compared to the same period in 2016, reflecting declinesincreases in the U.S. and, U.K., partially offset by an increase inand Brazil. In the U.S., Same Store new vehicle gross profit decreased 6.6%increased 7.2%, explained by a 5.7% decrease2.5% increase in new vehicle retail units and a 1.0% decrease4.7% increase in gross profit PRU to $1,858.$1,882. The declineincrease in new vehicle gross profit PRU was primarily driven by a mix shifthigh demand in our total new vehicle retail units sold from our domestic brandsHouston and toward our import brands that tend to generate lower gross profit PRU.Beaumont markets, bolstered by increased demand for trucks, as a result of the impact of Hurricane Harvey. For the three months ended June 30, 2017, our U.S. import sales represented 52.8% of our total new vehicle retail sales compared to 49.3% a year ago while our domestic sales fell to 23.8% of total new vehicle retail sales from 26.4% for the same period in 2016. For the three months ended JuneSeptember 30, 2017, our Same Store new vehicle gross profit in the U.K. decreased 12.5%increased 1.0%, primarily explainedas a 2.9% increase in Same Store new vehicle retail units sales was partially offset by the changea 1.8% decline in exchange rates between periods. On a constant currency basis, our U.K. Same Store new vehicle gross profit declined 2.1%, as a result of the 1.4% decline in retail new vehicle units sold, coupled with a 0.7% decline in gross profit PRU on a constant currency basis.PRU. In Brazil, Same Store new vehicle gross profit increased 6.3%6.7% for the three months ended JuneSeptember 30, 2017 as compared to the same period in 2016. The increase in gross profit in Brazil is more than explained by changeswas primarily due to a 6.6% increase in the currency exchange rate between periods. On a constant currency basis,new vehicle gross profit declined 2.4%, reflecting the volume decline of 8.6%, partially offset by anPRU and a 0.1% increase of 6.8% in gross profit PRU.retail unit sales volume. The increase in new vehicle gross profit PRU was primarily driven by strategic initiatives focused around improving new vehicle gross profit per retail unit sold. Our total Same Store new vehicle gross margin for the three months ended JuneSeptember 30, 2017, as compared to the same period in 2016, decreasedincreased 10 basis points from 5.3%5.1% to 5.2%. For the sixnine months ended JuneSeptember 30, 2017, as compared to the same period a year ago, total Same Store gross new vehicle gross profit decreased by 5.7%1.6%, driven by a decrease of 5.3%0.9% in the U.S., coupled with a 9.3%5.9% decrease in the U.K., and partially offset by an increase of 2.6%4.1% in Brazil. The decline in the U.S was primarily due to persistent demand weakness in our energy dependent markets. The decrease in the U.K. was more than explained by the change in exchange rates between periods as on a constant currency basis new vehicle gross profit increased 2.2%, primarily due to a 3.9% increase in retail unit sales volume. The increase in Brazil was more than explained by the change in exchange rates between periods as on a constant currency basis, new vehicle gross profit declined 6.2% resulting from the 12.3% decline in new vehicle retail sales volume. For the sixnine months ended JuneSeptember 30, 2017, our total Same Store new vehicle gross margin remained unchanged at 5.2%, when compared to the same period in 2016.
Most manufacturers offer interest assistance to offset floorplan interest charges incurred in connection with inventory purchases. This assistance varies by manufacturer, but generally provides for a defined amount, adjusted periodically for changes in market interest rates, regardless of our actual floorplan interest rate or the length of time for which the inventory is financed. We record these incentives as a reduction of new vehicle cost of sales as the vehicles are sold, impacting the gross profit and gross margin detailed above. The total assistance recognized in cost of sales during the three months ended JuneSeptember 30, 2017 and 2016 was $11.7$13.6 million and $12.3$13.0 million, respectively. The amount of interest assistance we recognize in a given period is primarily a function of: (a) the mix of units being sold, as U.S. domestic brands tend to provide more assistance, (b) the specific terms of the respective manufacturers' interest assistance programs and market interest rates, (c) the average wholesale price of inventory sold, and (d) our rate of inventory turnover. Over the past three years, consolidated manufacturers' interest assistance as a percentage of our total consolidated floorplan interest expense has ranged from 88.0% in the first quarter of 2017 to 139.9% in the third quarter of 2015. In the U.S., manufacturers' interest assistance was 94.9%110.7% of floorplan interest expense in the secondthird quarter of 2017 as compared to 116.3%128.5% in the secondthird quarter of 2016.
We increaseddecreased our new vehicle inventory levels by $123.0$60.6 million, or 10.6%5.2%, from $1,156.4 million as of December 31, 2016 to $1,279.4$1,095.8 million as of JuneSeptember 30, 2017. As compared to JuneSeptember 30, 2016, our inventory levels have increaseddecreased by $20.9$70.3 million, or 1.7%6.0%. These increasesdecreases were driven by the U.S., primarily as a result of softnessincreased sales activity during September 2017 in theour hurricane impacted markets of Houston market sales that we experienced in June 2017.and Beaumont. Our consolidated days' supply of new vehicle inventory increaseddecreased to 7544 days as of JuneSeptember 30, 2017, which was updown from 62 days as of to December 31, 2016 and updown from 7359 days as of JuneSeptember 30, 2016.

Used Vehicle Retail Data
(dollars in thousands, except per unit amounts)
 Three Months Ended June 30,  Six Months Ended June 30, Three Months Ended September 30,  Nine Months Ended September 30,
 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016
Retail Unit Sales                  
Same Stores                  
U.S. 25,134
 (4.9)% 26,430
  50,063
 (5.2)% 52,787
 26,093
 (2.6)% 26,800
  76,156
 (4.3)% 79,587
U.K. 5,329
 9.7% 4,860
  9,921
 9.3% 9,075
 5,094
 9.7% 4,643
  15,015
 9.5% 13,718
Brazil 969
 4.1% 931
  1,897
 (4.1)% 1,979
 1,028
 11.5% 922
  2,925
 0.8% 2,901
Total Same Stores 31,432
 (2.4)% 32,221
  61,881
 (3.1)% 63,841
 32,215
 (0.5)% 32,365
  94,096
 (2.2)% 96,206
Transactions 571
 730
  1,688
 1,901
 2,134
 647
  3,822
 2,548
Total 32,003
 (2.9)% 32,951
  63,569
 (3.3)% 65,742
 34,349
 4.1% 33,012
  97,918
 (0.8)% 98,754
Retail Sales Revenues                  
Same Stores                  
U.S. $535,010
 (5.6)% N/A $566,676
  $1,056,956
 (5.3)% N/A $1,116,531
 $557,657
 (1.9)% N/A $568,306
  $1,614,613
 (4.2)% N/A $1,684,837
U.K. 121,817
 0.9% 13.1% 120,775
  215,868
 (2.5)% 10.8% 221,449
 120,723
 15.3% 15.6% 104,692
  336,591
 3.2% 12.4% 326,141
Brazil 20,874
 33.2% 22.3% 15,677
  41,279
 28.7% 10.5% 32,077
 22,846
 22.1% 19.0% 18,717
  64,126
 26.2% 13.4% 50,794
Total Same Stores 677,701
 (3.6)% (1.8)% 703,128
  1,314,103
 (4.1)% (2.4)% 1,370,057
 701,226
 1.4% 1.3% 691,715
  2,015,330
 (2.3)% (1.1)% 2,061,772
Transactions 8,248
 12,650
  32,773
 33,892
 41,812
 10,905
  74,584
 44,797
Total $685,949
 (4.2)% (2.2)% $715,778
  $1,346,876
 (4.1)% (2.1)% $1,403,949
 $743,038
 5.8% 5.7% $702,620
  $2,089,914
 (0.8)% 0.6% $2,106,569
Gross Profit                  
Same Stores                  
U.S. $36,641
 (7.9)% N/A $39,778
  $74,576
 (9.2)% N/A $82,131
 $37,638
 (3.3)% N/A $38,909
  $112,216
 (7.3)% N/A $121,040
U.K. 6,335
 (5.4)% 6.3% 6,694
  11,078
 (6.8)% 5.9% 11,892
 5,970
 18.6% 19.0% 5,034
  17,047
 0.7% 10.1% 16,926
Brazil 1,505
 35.0% 24.2% 1,115
  3,019
 90.5% 67.1% 1,585
 1,689
 17.9% 14.9% 1,433
  4,708
 56.0% 43.8% 3,018
Total Same Stores 44,481
 (6.5)% (5.1)% 47,587
  88,673
 (7.3)% (6.0)% 95,608
 45,297
 (0.2)% (0.2)% 45,376
  133,971
 (5.0)% (4.1)% 140,984
Transactions 432
 678
  1,245
 1,857
 1,826
 592
  3,070
 2,449
Total $44,913
 (6.9)% (5.5)% $48,265
  $89,918
 (7.7)% (6.4)% $97,465
 $47,123
 2.5% 2.5% $45,968
  $137,041
 (4.5)% (3.5)% $143,433
Gross Profit per Unit Sold                  
Same Stores                  
U.S. $1,458
 (3.1)% N/A $1,505
  $1,490
 (4.2)% N/A $1,556
 $1,442
 (0.7)% N/A $1,452
  $1,474
 (3.1)% N/A $1,521
U.K. $1,189
 (13.7)% (3.1)% $1,377
  $1,117
 (14.7)% (3.1)% $1,310
 $1,172
 8.1% 8.5% $1,084
  $1,135
 (8.0)% 0.6% $1,234
Brazil $1,553
 29.6% 19.3% $1,198
  $1,591
 98.6% 74.4% $801
 $1,643
 5.7% 3.1% $1,554
  $1,610
 54.8% 42.6% $1,040
Total Same Stores $1,415
 (4.2)% (2.8)% $1,477
  $1,433
 (4.3)% (3.1)% $1,498
 $1,406
 0.3% 0.2% $1,402
  $1,424
 (2.8)% (2.0)% $1,465
Transactions $757
 $929
  $738
 $977
 $856
 $915
  $803
 $961
Total $1,403
 (4.2)% (2.7)% $1,465
  $1,414
 (4.7)% (3.2)% $1,483
 $1,372
 (1.4)% (1.5)% $1,392
  $1,400
 (3.6)% (2.7)% $1,452
Gross Margin                  
Same Stores                  
U.S. 6.8% 7.0%  7.1% 7.4% 6.7% 6.8%  7.0% 7.2%
U.K. 5.2% 5.5%  5.1% 5.4% 4.9% 4.8%  5.1% 5.2%
Brazil 7.2% 7.1%  7.3% 4.9% 7.4% 7.7%  7.3% 5.9%
Total Same Stores 6.6% 
 6.8%  6.7% 7.0% 6.5% 
 6.6%  6.6% 6.8%
Transactions 5.2% 5.4%  3.8% 5.5% 4.4% 5.4%  4.1% 5.5%
Total 6.5% 6.7%  6.7% 6.9% 6.3% 6.5%  6.6% 6.8%

Used Vehicle Wholesale Data
(dollars in thousands, except per unit amounts)
 Three Months Ended June 30,  Six Months Ended June 30, Three Months Ended September 30,  Nine Months Ended September 30,
 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016
Wholesale Unit Sales                  
Same Stores                  
U.S. 9,662
 3.6% 9,326
  19,643
 1.0% 19,439
 9,672
 (10.7)% 10,832
  29,315
 (3.2)% 30,271
U.K. 3,883
 0.1% 3,879
  7,244
 0.1% 7,240
 3,795
 6.5% 3,563
  11,039
 2.2% 10,803
Brazil 234
 59.2% 147
  481
 37.0% 351
 242
 (14.5)% 283
  723
 14.0% 634
Total Same Stores 13,779
 3.2% 13,352
  27,368
 1.3% 27,030
 13,709
 (6.6)% 14,678
  41,077
 (1.5)% 41,708
Transactions 296
 332
  1,236
 1,020
 1,258
 349
  2,494
 1,369
Total 14,075
 2.9% 13,684
  28,604
 2.0% 28,050
 14,967
 (0.4)% 15,027
  43,571
 1.1% 43,077
Wholesale Sales Revenues                  
Same Stores                  
U.S. $66,221
 8.2% N/A $61,222
  $136,766
 6.9% N/A $127,983
 $62,552
 (15.5)% N/A $74,020
  $199,320
 (1.3)% N/A $202,003
U.K. 29,604
 (9.4)% 1.5% 32,669
  54,000
 (12.2)% (0.2)% 61,469
 30,565
 9.6% 9.8% 27,891
  84,564
 (5.4)% 3.1% 89,360
Brazil 2,419
 291.4% 260.4% 618
  5,430
 412.3% 344.4% 1,060
 2,818
 247.5% 239.0% 811
  8,247
 340.8% 301.7% 1,871
Total Same Stores 98,244
 4.0% 7.5% 94,509
  196,196
 3.0% 6.5% 190,512
 95,935
 (6.6)% (6.6)% 102,722
  292,131
 (0.4)% 2.0% 293,234
Transactions 1,133
 1,770
  7,338
 7,359
 8,892
 1,496
  16,230
 8,855
Total $99,377
 3.2% 6.8% $96,279
  $203,534
 2.9% 6.7% $197,871
 $104,827
 0.6% 0.6% $104,218
  $308,361
 2.1% 4.8% $302,089
Gross Profit                  
Same Stores                  
U.S. $248
 978.3% N/A $23
  $(95) (107.5)% N/A $1,264
 $(138) 90.7% N/A $(1,477)  $(232) (8.9)% N/A $(213)
U.K. (661) (581.4)% (641.0)% (97)  (162) (132.4)% (132.2)% 500
 (332) 18.8% 17.3% (409)  (494) (637.0)% (1,035.6)% 92
Brazil 199
 342.2% 308.5% 45
  438
 447.5% 376.9% 80
 216
 266.1% 258.5% 59
  653
 373.2% 330.1% 138
Total Same Stores (214) (637.9)% (894.7)% (29)  181
 (90.2)% (93.3)% 1,844
 (254) 86.1% 85.5% (1,827)  (73) (529.4)% (3,053.6)% 17
Transactions (53) (23)  (348) (447) 69
 (32)  (279) (479)
Total $(267) (413.5)% (570.2)% $(52)  $(167) (112.0)% (120.2)% $1,397
 $(185) 90.0% 89.3% $(1,859)  $(352) 23.8% (381.7)% $(462)
Gross Profit per Wholesale Unit Sold                  
Same Stores                  
U.S. $26
 1,200.0% N/A $2
  $(5) (107.7)% N/A $65
 $(14) 89.7% N/A $(136)  $(8) (14.3)% N/A $(7)
         
U.K. $(170) (580.0)% (640.2)% $(25)  $(22) (131.9)% (132.2)% $69
 $(87) 24.3% 22.3% $(115)  $(45) (600.0)% (1,015.6)% $9
Brazil $850
 177.8% 156.6% $306
  $911
 299.6% 248.0% $228
 $893
 329.3% 319.2% $208
  $903
 314.2% 277.1% $218
Total Same Stores $(16) (700.0)% (863.9)% $(2)  $7
 (89.7)% (93.4)% $68
 $(19) 84.7% 84.5% $(124)  $(2) —% (3,099.0)% $
Transactions $(179) $(69)  $(282) $(438) $55
 $(92)  $(112) $(350)
Total $(19) (375.0)% (551.6)% $(4)  $(6) (112.0)% (119.8)% $50
 $(12) 90.3% 89.2% $(124)  $(8) 27.3% (376.2)% $(11)
Gross Margin                  
Same Stores                  
U.S. 0.4% —%  (0.1)% 1.0% (0.2)% (2.0)%  (0.1)% (0.1)%
U.K. (2.2)% (0.3)%  (0.3)% 0.8% (1.1)% (1.5)%  (0.6)% 0.1%
Brazil 8.2% 7.3%  8.1% 7.5% 7.7% 7.3%  7.9% 7.4%
Total Same Stores (0.2)% 
 —%  0.1% 1.0% (0.3)% 
 (1.8)%  —% —%
Transactions (4.7)% (1.3)%  (4.7)% (6.1)% 0.8% (2.1)%  (1.7)% (5.4)%
Total (0.3)% (0.1)%  (0.1)% 0.7% (0.2)% (1.8)%  (0.1)% (0.2)%
 

Total Used Vehicle Data
(dollars in thousands, except per unit amounts)
 Three Months Ended June 30,  Six Months Ended June 30, Three Months Ended September 30,  Nine Months Ended September 30,
 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016
Used Vehicle Unit Sales                  
Same Stores                  
U.S. 34,796
 (2.7)% 35,756
  69,706
 (3.5)% 72,226
 35,765
 (5.0)% 37,632
  105,471
 (4.0)% 109,858
U.K. 9,212
 5.4% 8,739
  17,165
 5.2% 16,315
 8,889
 8.3% 8,206
  26,054
 6.3% 24,521
Brazil 1,203
 11.6% 1,078
  2,378
 2.1% 2,330
 1,270
 5.4% 1,205
  3,648
 3.2% 3,535
Total Same Stores 45,211
 (0.8)% 45,573
  89,249
 (1.8)% 90,871
 45,924
 (2.4)% 47,043
  135,173
 (2.0)% 137,914
Transactions 867
 1,062
  2,924
 2,921
 3,392
 996
  6,316
 3,917
Total 46,078
 (1.2)% 46,635
  92,173
 (1.7)% 93,792
 49,316
 2.7% 48,039
  141,489
 (0.2)% 141,831
Sales Revenues                  
Same Stores                  
U.S. $601,231
 (4.2)% N/A $627,898
  $1,193,722
 (4.1)% N/A $1,244,514
 $620,209
 (3.4)% N/A $642,326
  $1,813,933
 (3.9)% N/A $1,886,840
U.K. 151,421
 (1.3)% 10.6% 153,444
  269,868
 (4.6)% 8.4% 282,918
 151,288
 14.1% 14.4% 132,583
  421,155
 1.4% 10.4% 415,501
Brazil 23,293
 42.9% 31.4% 16,295
  46,709
 41.0% 21.1% 33,137
 25,664
 31.4% 28.1% 19,528
  72,373
 37.4% 23.6% 52,665
Total Same Stores 775,945
 (2.7)% (0.7)% 797,637
  1,510,299
 (3.2)% (1.3)% 1,560,569
 797,161
 0.3% 0.3% 794,437
  2,307,461
 (2.0)% (0.7)% 2,355,006
Transactions 9,381
 14,420
  40,111
 41,251
 50,704
 12,401
  90,814
 53,652
Total $785,326
 (3.3)% (1.2)% $812,057
  $1,550,410
 (3.2)% (1.0)% $1,601,820
 $847,865
 5.1% 5.1% $806,838
  $2,398,275
 (0.4)% 1.1% $2,408,658
Gross Profit                  
Same Stores                  
U.S. $36,889
 (7.3)% N/A $39,801
  $74,481
 (10.7)% N/A $83,395
 $37,500
 0.2% N/A $37,432
  $111,984
 (7.3)% N/A $120,827
U.K. 5,674
 (14.0)% (3.1)% 6,597
  10,916
 (11.9)% 0.4% 12,392
 5,638
 21.9% 22.2% 4,625
  16,553
 (2.7)% 4.4% 17,018
Brazil 1,704
 46.9% 35.2% 1,160
  3,457
 107.6% 81.9% 1,665
 1,905
 27.7% 24.5% 1,492
  5,361
 69.9% 56.3% 3,156
Total Same Stores 44,267
 (6.9)% (5.7)% 47,558
  88,854
 (8.8)% (7.7)% 97,452
 45,043
 3.4% 3.4% 43,549
  133,898
 (5.0)% (4.5)% 141,001
Transactions 379
 655
  897
 1,410
 1,895
 560
  2,791
 1,970
Total $44,646
 (7.4)% (6.1)% $48,213
  $89,751
 (9.2)% (8.0)% $98,862
 $46,938
 6.4% 6.3% $44,109
  $136,689
 (4.4)% (4.7)% $142,971
Gross Profit per Unit Sold                  
Same Stores                  
U.S. $1,060
 (4.8)% N/A $1,113
  $1,069
 (7.4)% N/A $1,155
 $1,049
 5.4% N/A $995
  $1,062
 (3.5)% N/A $1,100
U.K. $616
 (18.4)% (8.1)% $755
  $636
 (16.3)% (4.6)% $760
 $634
 12.4% 12.8% $564
  $635
 (8.5)% (1.7)% $694
Brazil $1,416
 31.6% 21.1% $1,076
  $1,454
 103.4% 78.3% $715
 $1,500
 21.2% 18.2% $1,238
  $1,470
 64.6% 51.5% $893
Total Same Stores $979
 (6.2)% (4.9)% $1,044
  $996
 (7.1)% (6.0)% $1,072
 $981
 5.9% 5.9% $926
  $991
 (3.0)% (2.5)% $1,022
Transactions $437
 $617
  $307
 
 $483
 $559
 $562
  $442
 
 $503
Total $969
 (6.3)% (5.0)% $1,034
  $974
 (7.6)% (6.4)% $1,054
 $952
 3.7% 3.6% $918
  $966
 (4.2)% (4.5)% $1,008
Gross Margin                  
Same Stores                  
U.S. 6.1% 6.3%  6.2% 6.7% 6.0% 5.8%  6.2% 6.4%
U.K. 3.7% 4.3%  4.0% 4.4% 3.7% 3.5%  3.9% 4.1%
Brazil 7.3% 7.1%  7.4% 5.0% 7.4% 7.6%  7.4% 6.0%
Total Same Stores 5.7% 6.0%  5.9% 6.2% 5.7% 5.5%  5.8% 6.0%
Transactions 4.0% 4.5%  2.2% 3.4% 3.7% 4.5%  3.1% 3.7%
Total 5.7% 5.9%  5.8% 6.2% 5.5% 5.5%  5.7% 5.9%


In addition to factors such as general economic conditions and consumer confidence, our used vehicle business is affected by the level of manufacturer incentives on new vehicles and new vehicle financing, the number and quality of used vehicle

trade-ins and lease turn-ins, the availability of consumer credit, and our ability to effectively manage the level and quality of our overall used vehicle inventory.
Our total Same Store used vehicle retail revenues decreased $25.4increased $9.5 million, or 3.6%1.4%, for the three months ended JuneSeptember 30, 2017, as compared to the same period in 2016, reflecting a 2.4%1.8% increase in average used vehicle retail selling price to $21,767, partially offset by 0.5% decrease in total Same Store used vehicle retail unit sales, coupled with a 1.2% decreasesales. The increase in average used vehicle retail selling price to $21,561. In the U.S.,our total Same Store used vehicle retail revenues decreased $31.7 million, or 5.6%, reflecting a 4.9% decrease in Same Store used vehicle retail unit sales, coupled with a 0.7%, or $155, decreasewas primarily driven by increases in the average used vehicle retail sales price. TheU.K. and Brazil that were partially offset by a decline in Same Store used vehicle retail unit sales was driven by a 7.8% decline in sales in our energy dependent markets of Texas and Oklahoma.the U.S. In the U.K., Same Store used vehicle retail revenues increased by $1.0$16.0 million, or 0.9%15.3%, for the quarter ended JuneSeptember 30, 2017. ThisThe increase in Same Store used vehicle retail revenue was driven by a 9.7% increase in Same Store used vehicle retail unit sales that was partially offset by an 8.0% declineand a 5.1% increase in the Same Store average used vehicle retail sales price, as a result of the change in exchange rates between periods. On a constant currency basis, our U.K. Same Store used vehicle retail revenue increased 13.1% and our average used vehicle retail sales price increased 3.2% for second quarter of 2017 as compared to 2016.price. These increases were primarily driven by a strong performance from our operating team, as well as the road tariff that went into effect in April 2017 that lowered associated taxes on used vehicles relative to new vehicles, shifting consumer demand towards used vehicles. In Brazil, for the three months ended JuneSeptember 30, 2017, Same Store used vehicle retail revenues increased 33.2%22.1%, reflecting a 27.9%9.5% increase in the average used vehicle retail selling price, coupled with 4.1%11.5% increase in Same Store used vehicle retail unit sales. These improvements reflect an increased focus by our operations team and enhanced processes that are being implemented. In the U.S., Same Store used vehicle retail revenues decreased $10.6 million, or 1.9%, reflecting a 2.6% decrease in Same Store used vehicle retail unit sales, partially offset by 0.8%, or $167, increase in the average used vehicle retail sales price. The decline in Same Store used vehicle retail unit sales was driven by a 2.8% decline in sales in our energy dependent markets which was partially caused by a lag in vehicle replacement demand in our hurricane impacted markets of Houston and Beaumont. For the sixnine months ended JuneSeptember 30, 2017, our total Same Store used vehicle retail revenues declined 4.1%2.3%, primarily as a result of a 2.2% decrease in used vehicle retail unit sales and average used vehicle retail sales price by 3.1% and 1.0%, respectively.sales. The decline in our total Same Store average used vehicle retail sales pricerevenue and Same Store retail unit sales can be more than explained by the change in exchange rates between periods.energy market weakness. On a constant currency basis, our total Same Store average used vehicle retail sales price increased 0.7%.revenues declined 1.1% for the nine months ended September 30, 2017 as compared to the same period last year.
In total, our Same Store used vehicle retail total gross profit for the three months ended JuneSeptember 30, 2017 decreased 6.5%0.2%, as compared to the same period in 2016, reflecting declinesa decline in the U.S. and U.K. that werewas partially offset by improvements in the U.K. and Brazil. In the U.S., Same Store used vehicle gross profit decreased by 7.9%3.3%, driven by a decline in Same Store used vehicle gross profit PRUretail unit sales of 3.1%2.6%, or $47, coupled with the decrease in Same Store used vehicle retail unit sales of 4.9%. The decline in U.S. Same Store used vehicle retail gross profit PRU reflects demand weakness in our energy-dependent markets. In addition, lower new vehicle sales volumes resulted in a decline in our supply of used vehicle trade-in units, which generate our highest used vehicle margins, causing our U.S. dealerships to purchase more expensive inventory at auction.0.7%, or $10. In the U.K., Same Store used vehicle retail gross profit declined 5.4%increased 18.6%. The decline in the U.K. is more thanThis improvement can be explained by the change in exchange rates between periods, as on a constant currency basis, Same Store used vehicle retail gross profit improved 6.3%. The improvement on a constant currency basis reflects theincrease of 8.1% and 9.7% increase in Same Store used vehiclegross profit PRU and retail unit sales, partially offset by a 3.1% decline inrespectively, resulting from improving used vehicle retail gross profit per unit. The decrease in used vehicle retail gross profit PRU in the U.K. primarily reflected the impact of efforts to liquidateindustry conditions and a high level of used trade-in inventory from March 2017 new vehicle sales volumes and much ofstrong performance by our used vehicle diesel inventory as a result of the shift in consumer demand.operating teams. In Brazil, the increase of 35.0%17.9% in Same Store used vehicle retail gross profit resulted from a $355, or 29.6%,5.7% increase in Same Store used vehicle retail gross profit PRU, coupled with a 4.1%an 11.5% increase in Same Store used vehicle retail unit sales. The improvement in Same Store used vehicle retail gross profit and gross profit PRU in Brazil is primarily a result of the implementation of new and improved sales processes by our local operating team, as well as the impact of the exchange rates between periods.team. For the sixnine months ended JuneSeptember 30, 2017, as compared to the same period in 2016, total Same Store used vehicle retail gross profit decreased 7.3%5.0%, as a result of a decrease in Same Store used vehicle retail units and gross profit PRU of 3.1%2.2% and 4.3%2.8%, respectively.
During the three months ended JuneSeptember 30, 2017, total Same Store used vehicle wholesale revenue increased 4.0%decreased 6.6%, as compared to the same period in 2016, driven by increasesa decline in the U.S. and Brazil that were partially offset by a decreaseincreases in the U.K. and Brazil. In the U.S., the 8.2% increase15.5% decrease in Same Store used vehicle wholesale revenue for the three months ended JuneSeptember 30, 2017 was the result of a 3.6% increase10.7% decrease in Same Store wholesale used vehicle unit sales, primarily driven by strategic initiatives to sell more vehicles through retail channels and a 4.4% increase inlower our reliance on the auction markets. In addition, used vehicle wholesale average sales price. The increase in our Same Store used vehicle wholesale units was primarily driven by weakened demand for used vehicle sales in our energy markets that drove an increaseprice decreased in the liquidation of aged used vehicle inventory through auctions. The increase in our Same Store average used vehicle wholesale sales price was the result of a 2.3% increase in average used vehicle market prices for the second quarter of 2017 compared to a year ago, as reflected in the Manheim index.U.S. by 5.4%. In the U.K., Same Store used vehicle wholesale revenue declined 9.4%increased 9.6%, which is more than explained by the weaker currency exchange rate.6.5% increase in Same Store wholesale used vehicle units sales coupled with a 2.9% increase in used vehicle wholesale average sales price. In Brazil, Same Store used vehicle wholesale revenue increased primarily as a result of an improvement in Same Store used vehicle wholesale average sales price, coupled with an increasepartially offset by a decrease in Same Store wholesale used vehicle unit sales. For the sixnine months ended JuneSeptember 30, 2017, as compared to the same period in 2016, total Same Store used vehicle wholesale revenue increased 3.0%, driven bywas relatively flat as a 1.3% increase1.5% decrease in Same Store used vehicle wholesale unit sales coupled withwas offset by a 1.7%1.2% increase in Same Store average used vehicle wholesale selling price.

Our total Same Store used vehicle wholesale gross profit declinedincreased 86.1% from a loss of $1.8 million for the three months ended JuneSeptember 30, 2016 to a loss of $0.3 million for the comparable period in 2017. This improvement was driven by a decrease84.7%, or $105, increase in our Same Store used vehicle wholesale gross profit per unit from a loss of $2$124 per unit for the three months ended JuneSeptember 30, 2016 to a loss of $16$19 per unit for the same period in 2017,this year, coupled with a 3.2%decrease in total Same Store used vehicle wholesale units of 6.6%. In the U.S., used vehicle wholesale gross profit increased 90.7% for the three months ended September 30, 2017, primarily as a result of an 89.7% increase in wholesale gross profit per unit to a loss of $14,

coupled with a 10.7% decline in used vehicle wholesale units in 2017 as compared to the same period in 2016. The increase in used vehicle wholesale units. The declinegross profit for the three months ended September 30, 2017, corresponds with a 3.9% increase in ourthe Same Store used vehicle market prices during the third quarter of 2017, as reflected in the Manheim index. In the U.K., the 18.8% increase in Same Store used vehicle wholesale gross profit was primarily due todriven by the declineincrease of 24.3% in U.K. Same Store used vehicle wholesale gross profit per wholesale unit sold from a loss of $25 in 2016 to a loss of $170$87, partially offset by the 6.5% growth in 2017 that was primarily a result of the liquidation of much of our used vehicle diesel inventory aswholesale units. In Brazil, the increase in Same Store used vehicle wholesale gross profit was driven by the increase in Same Store used vehicle wholesale gross profit per unit from a resultprofit of the shift in consumer demand.$208 to $893. For the sixnine months ended JuneSeptember 30, 2017, our total Same Store used vehicle wholesale gross profit decreased 90.2%, primarily as a result of decrease of 89.7%a decline in used vehicleSame Store wholesale gross profit per wholesale unit sales in the U.S., as compared to the same period in 2016.
As of JuneSeptember 30, 2017, we increased our used vehicle inventory levels by $18.8$49.5 million, or 6.4%16.8%, from December 31, 2016. However, we decreased our used vehicle inventory levels2016 and by $2.5$29.0 million, or 0.8%,9.2% from JuneSeptember 30, 2016 to $313.6$344.3 million, primarily reflecting increased levels in the U.K. as a result of June 30, 2017, primarily due to a decline indealership acquisitions and increased trade-in activity associated with lowerresulting from improved new vehicle retail vehicle unit sales volume during the second quarter of 2017 in the U.S. as compared to 2016.sales. Our consolidated days' supply of used vehicle inventory decreased to 3332 days, as of JuneSeptember 30, 2017, as compared to 35 days as of December 31, 2016 and 34 days as of JuneSeptember 30, 2016. In the U.S., days' supply of used vehicle inventory decreased by twothree days from JuneSeptember 30, 2016 to 3230 days as of JuneSeptember 30, 2017.
Parts and Service Data
(dollars in thousands)
 Three Months Ended June 30,  Six Months Ended June 30, Three Months Ended September 30,  Nine Months Ended September 30,
 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016
Parts and Services Revenue                  
Same Stores                  
U.S. $282,293
 5.6% N/A $267,248
  $553,453
 4.9% N/A $527,383
 $281,735
 4.7% N/A $269,072
  $835,188
 4.9% N/A $796,455
U.K. 35,900
 (9.3)% 1.7% 39,566
  64,119
 (8.0)% 4.6% 69,672
 37,360
 5.7% 6.0% 35,360
  101,479
 (3.4)% 5.1% 105,032
Brazil 11,605
 19.2% 9.5% 9,735
  21,849
 22.3% 5.8% 17,868
 12,445
 11.7% 9.0% 11,138
  34,294
 18.2% 6.9% 29,006
Total Same Stores 329,798
 4.2% 5.3% 316,549
  639,421
 4.0% 4.9% 614,923
 331,540
 5.1% 5.0% 315,570
  970,961
 4.3% 5.0% 930,493
Transactions 1,833
 5,524
  11,908
 15,742
 11,653
 4,106
  23,561
 19,848
Total $331,631
 3.0% 4.1% $322,073
  $651,329
 3.3% 4.4% $630,665
 $343,193
 7.4% 7.3% $319,676
  $994,522
 4.6% 5.4% $950,341
Gross Profit                  
Same Stores                  
U.S. $151,781
 5.0% N/A $144,602
  $297,781
 3.9% N/A $286,664
 $151,481
 2.9% N/A $147,215
  $449,262
 3.5% N/A $433,879
U.K. 20,704
 (7.0)% 4.2% 22,262
  36,763
 (3.8)% 9.3% 38,220
 21,710
 10.3% 10.6% 19,683
  58,473
 1.0% 9.7% 57,903
Brazil 5,368
 42.4% 30.6% 3,769
  10,057
 43.9% 24.3% 6,989
 5,665
 30.9% 27.8% 4,327
  15,722
 38.9% 25.5% 11,316
Total Same Stores 177,853
 4.2% 5.4% 170,633
  344,601
 3.8% 4.9% 331,873
 178,856
 4.5% 4.4% 171,225
  523,457
 4.0% 4.8% 503,098
Transactions 1,012
 2,565
  6,620
 7,901
 6,301
 2,189
  12,921
 10,090
Total $178,865
 3.3% 4.5% $173,198
  $351,221
 3.4% 4.7% $339,774
 $185,157
 6.8% 6.7% $173,414
  $536,378
 4.5% 5.4% $513,188
Gross Margin                  
Same Stores                  
U.S. 53.8% 54.1%  53.8% 54.4% 53.8% 54.7%  53.8% 54.5%
U.K. 57.7% 56.3%  57.3% 54.9% 58.1% 55.7%  57.6% 55.1%
Brazil 46.3% 38.7%  46.0% 39.1% 45.5% 38.8%  45.8% 39.0%
Total Same Stores 53.9% 53.9%  53.9% 54.0% 53.9% 54.3%  53.9% 54.1%
Transactions 55.2% 46.4%  55.6% 50.2% 54.1% 53.3%  54.8% 50.8%
Total 53.9% 53.8%  53.9% 53.9% 54.0% 54.2%  53.9% 54.0%
Our total Same Store parts and service revenues increased $13.2$16.0 million, or 4.2%5.1%, to $329.8$331.5 million for the three months ended JuneSeptember 30, 2017, as compared to the same period in 2016, primarily driven by growth in the U.S., U.K. and Brazil that was partially offset by a decline in our U.K. business.Brazil. For the three months ended JuneSeptember 30, 2017, our U.S. Same Store parts and service revenue increased 5.6%4.7%, or $15.0$12.7 million, despite losing over a week of sales in key markets as a result of Hurricanes Harvey and Irma, reflecting a 2.8%3.5% increase in customer-pay parts and service revenue, a 15.8%8.2% increase in warranty parts and service revenues, a 5.0%0.7% increase in collision revenue, and a 2.7%6.4% increase in wholesale parts revenues, when compared to the same period in 2016. The growth in our

warranty and customer-pay parts and service revenue in the U.S. was supported by the continued progress we are making in adding service technicians and advisors, and

expanding shop capacity where applicable. In addition, the increase in warranty parts and service revenue in the U.S. was driven by high volume recall campaigns within our Nissan, Ford, and Lexus brands that occurredinitiated during the second quarter of 2017. The increase in collision revenue was primarily attributable to strategic initiatives that continue to enhance our operational processes, the addition of technicians to increase operating capacity and the expansion of direct repair programs with insurance companies. Our collision revenues were negatively impacted as most repairs in our Houston and Beaumont markets were delayed through the month of September due to the lack of rental car availability.
Our U.K. Same Store parts and service revenues decreased 9.3%increased 5.7%, or $3.7$2.0 million, for the three months ended JuneSeptember 30, 2017, as compared to 2016. This decline can be more than explained by a change in exchange rates. On a constant currency basis, weWe realized a 1.7%10.6% increase in our Same Store parts and service revenues, driven by anreflecting a 3.1% increase of 11.8% in ourcustomer-pay parts and service revenue, a 7.0% increase in warranty parts and service revenues, an 8.4% increase in collision revenue, and a 5.6%an 11.1% increase in our collision revenues.wholesale parts revenues, when compared to the same period in 2016. We grew our warranty parts and service revenue in the U.K., due to an increase in high volume recalls within our BMW and Audi brands that occurred during the secondthird quarter of 2017. Additionally, the increases in warranty parts and service revenue and collision revenues are attributable to the implementation of2017, management initiatives designed to enhance processes and increase productivity, as well asand the expansion of our service and collision capacity by increasingthrough an increase in the number of technicians by 21.3%5.9%. However, the growth in our warranty parts and service and collision businesses absorbed that added capacity, resulting in our customer-pay parts and service revenues partially offsetting these increases with a 1.6% decline in revenues.
Our Same Store parts and service revenues in Brazil increased 19.2%11.7%, or $1.9$1.3 million, for the three months ended JuneSeptember 30, 2017, compared to the same period 2016. The increase in Brazil Same Store parts and service revenues was driven by a 13.8%an 8.6% increase in customer-pay parts and service revenue, a 56.2%28.1% increase in warranty parts and service revenue, and a 20.3%15.7% increase in our collision revenue, partially offset by a strategic decision to exit the wholesale parts business in Brazil at the end of 2016.
Our total Same Store parts and service revenue improved $24.5$40.5 million, or 4.0%4.3%, to $639.4$971.0 million for the sixnine months ended JuneSeptember 30, 2017, as compared to the same period in 2016 primarily reflecting increases in the U.S and Brazil that were partially offset by a decrease in U.K. business. For the sixnine months ended JuneSeptember 30, 2017, our U.S. same store parts and service revenues improved 4.9% primarily as a result of a 3.9%3.8% increase in customer-pay parts and service revenues, a 1.5%3.1% increase in wholesale parts revenues, an 11.7%a 10.5% increase in warranty parts and service revenues, and a 4.2%3.0% increase in collision revenues. Our U.K. same store parts and service revenues decreased 8.0%, which is more than explained by changes in exchange rates between periods. On a constant currency basis, all sectors of our U.K. parts and service business improved over the prior year. For the sixnine months ended JuneSeptember 30, 2017, our Brazil Same Store parts and service revenues increased 22.3%18.2%, as we experienced improvements in our customer-pay parts and service, warranty parts and service, and collision businesses, when compared to the same period a year ago. Our U.K. same store parts and service revenues decreased 3.4%, which is more than explained by changes in exchange rates between periods. On a constant currency basis, our U.K. parts and service business improved 5.1% over the prior year, reflecting growth in all areas of the business.
Our total Same Store parts and service gross profit for the three months ended JuneSeptember 30, 2017 increased 4.2%4.5%, as compared to the same period in 2016. This increase in gross profit was driven by increases of 42.4%30.9% in Brazil, and 5.0% in the U.S., partially offset by a decline of 7.0%10.3% in the U.K. The increaseand 2.9% in the U.S. was driven by improvements in our customer-pay, warranty, and collision businesses. The increase in Same Store parts and service gross profit in Brazil primarily reflects improvements in our customer-paywarranty parts and service revenue due to an implementation of new processes and collision businesses.strong performance in our Honda and BMW brands. In the U.K, the declineincrease in Same Store parts and service gross profit is more than explainedwas primarily associated with improvements in our wholesale parts revenues driven by a growth of presence for Jaguar and Ford brands. The increases in the changeU.S. was driven by improvements in currency exchange rates between periods. On a constant currency basis, Same Storeour warranty, wholesale parts revenues, and customer-pay parts and service gross profit increased by 5.4%.primarily reflecting continued efforts to improve internal processes. For the sixnine months ended JuneSeptember 30, 2017, our total Same Store gross profit increased 3.8%4.0%, as compared to the same period a year ago, primarily driven by increases of 43.9% and 3.9%38.9% in Brazil, and3.5% in the U.S., respectively, and partially offset by a 3.8% decrease1.0% in the U.K. The increases in Brazil, the U.S. and Brazilthe U.K. were driven by our customer-pay parts and service, warranty parts and service and collision businesses. The decline in the U.K. was more than explained by the change in the exchange rates between periods, as on a local currency basis U.K. Same Store parts and service gross profit improved 9.3%.
For the three months ended JuneSeptember 30, 2017, our total Same Store parts and service gross margin remained the same, asdeclined 40 basis points compared to the same period in 2016. This result was driven by a 3090 basis-point decrease in the U.S., partially offset by 140240 and 760670 basis-point improvements in the U.K. and Brazil, respectively. The decline in the U.S. primarily reflects a decrease in internal work between the parts and service departments of our dealerships and the new and used vehicle departments, as a result of a decline in total retail vehicle sales volumes for the secondthird quarter of 2017 as compared to the same period in 2016. The increase in the U.K. reflects higher margins in all aspects of the parts and service business as compared to the same period last year. The increase in Same Store parts and service gross margin in Brazil was the result of improved profitability in our customer-pay parts and service and collision businesses. Both the U.K. and Brazil increases reflect the impact of strategic initiatives implemented by our respective operating teams. For the sixnine months ended JuneSeptember 30, 2017, our total Same Store parts and service gross margin declined 1020 basis points compared to the same periodsperiod in 2016. This decline was driven by our U.S. Same Store parts and service gross margin that declined by 6070 basis-points reflecting a decline in the internal work mentioned above.

Finance and Insurance Data
(dollars in thousands, except per unit amounts)
 Three Months Ended June 30,  Six Months Ended June 30, Three Months Ended September 30,  Nine Months Ended September 30,
 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016
Retail New and Used Unit Sales                  
Same Stores                  
U.S. 55,809
 (5.4)% 58,964
  108,236
 (6.2)% 115,383
 61,010
 0.2% 60,880
  169,246
 (4.0)% 176,263
U.K. 12,959
 2.8% 12,601
  25,201
 6.3% 23,700
 13,667
 5.3% 12,974
  38,868
 6.0% 36,674
Brazil 3,099
 (5.0)% 3,262
  5,606
 (14.0)% 6,517
 3,183
 3.5% 3,074
  8,789
 (8.4)% 9,591
Total Same Stores 71,867
 (4.0)% 74,827
  139,043
 (4.5)% 145,600
 77,860
 1.2% 76,928
  216,903
 (2.5)% 222,528
Transactions 1,012
 1,768
  3,692
 4,567
 4,810
 1,681
  8,502
 6,248
Total 72,879
 (4.9)% 76,595
  142,735
 (4.9)% 150,167
 82,670
 5.2% 78,609
  225,405
 (1.5)% 228,776
Retail Finance Fees                  
Same Stores                  
U.S. $29,173
 (5.5)% N/A $30,878
  $55,152
 (8.6)% N/A $60,325
 $30,942
 (0.5)% N/A $31,082
  $86,095
 (5.8)% N/A $91,407
U.K. 6,005
 14.9% 28.6% 5,228
  10,277
 6.0% 20.4% 9,694
 5,358
 11.0% 10.9% 4,829
  15,635
 7.6% 17.0% 14,524
Brazil 511
 72.6% 60.0% 296
  965
 69.0% 46.7% 571
 650
 50.5% 46.7% 432
  1,615
 61.0% 46.7% 1,003
Total Same Stores 35,689
 (2.0)% (0.1)% 36,402
  66,394
 (5.9)% (4.2)% 70,590
 36,950
 1.7% 1.6% 36,343
  103,345
 (3.4)% (2.2)% 106,934
Transactions 348
 451
  1,230
 1,194
 2,298
 420
  3,527
 1,614
Total $36,037
 (2.2)% (0.3)% $36,853
  $67,624
 (5.8)% (3.8)% $71,784
 $39,248
 6.8% 6.7% $36,763
  $106,872
 (1.5)% (0.2)% $108,548
Vehicle Service Contract Fees                  
Same Stores                  
U.S. $36,629
 2.7% N/A $35,677
  $71,195
 2.3% N/A $69,569
 $35,658
 (4.4)% N/A $37,308
  $106,853
 —% N/A $106,878
U.K. 152
 78.8% 98.5% 85
  324
 50.0% 69.7% 216
 145
 (7.6)% (7.7)% 157
  469
 25.4% 35.6% 374
Brazil 
 —% —% 
  
 —% —% 
 
 —% —% 
  
 —% —% 
Total Same Stores 36,781
 2.8% 2.9% 35,762
  71,519
 2.5% 2.5% 69,785
 35,803
 (4.4)% (4.4)% 37,465
  107,322
 0.1% 0.1% 107,252
Transactions 138
 421
  160
 773
 303
 477
  463
 1,247
Total $36,919
 2.0% 2.1% $36,183
  $71,679
 1.6% 1.7% $70,558
 $36,106
 (4.8)% (4.8)% $37,942
  $107,785
 (0.7)% (0.6)% $108,499
Insurance and Other                  
Same Stores                  
U.S. $28,077
 0.1% N/A $28,046
  $52,922
 (0.8)% N/A $53,339
 $28,595
 1.1% N/A $28,295
  $81,516
 (0.1)% N/A $81,634
U.K. 3,237
 (22.9)% (13.7)% 4,200
  6,411
 (17.7)% (6.4)% 7,794
 3,984
 9.2% 9.1% 3,648
  10,394
 (9.1)% (1.2)% 11,440
Brazil 1,554
 27.8% 17.1% 1,216
  2,790
 38.7% 20.1% 2,012
 1,507
 29.6% 26.4% 1,163
  4,298
 35.4% 22.3% 3,175
Total Same Stores 32,868
 (1.8)% (1.0)% 33,462
  62,123
 (1.6)% (0.8)% 63,145
 34,086
 3.0% 2.8% 33,106
  96,208
 —% 0.5% 96,249
Transactions 646
 1,062
  1,878
 2,223
 1,553
 899
  3,432
 3,123
Total $33,514
 (2.9)% (2.2)% $34,524
  $64,001
 (2.1)% (1.2)% $65,368
 $35,639
 4.8% 4.7% $34,005
  $99,640
 0.3% 0.9% $99,372
Total Finance and Insurance Revenues                  
Same Stores                  
U.S. $93,879
 (0.8)% N/A $94,601
  $179,269
 (2.2)% N/A $183,233
 $95,195
 (1.5)% N/A $96,685
  $274,464
 (1.9)% N/A $279,919
U.K. 9,394
 (1.3)% 10.6% 9,513
  17,012
 (3.9)% 9.2% 17,704
 9,487
 9.9% 9.8% 8,634
  26,498
 0.6% 9.4% 26,338
Brazil 2,065
 36.6% 25.4% 1,512
  3,755
 45.4% 26.0% 2,583
 2,157
 35.2% 31.9% 1,595
  5,913
 41.5% 28.1% 4,178
Total Same Stores 105,338
 (0.3)% 0.6% 105,626
  200,036
 (1.7)% (0.8)% 203,520
 106,839
 (0.1)% (0.1)% 106,914
  306,875
 (1.1)% (0.6)% 310,435
Transactions 1,132
 1,934
  3,268
 4,190
 4,154
 1,796
  7,422
 5,984
Total $106,470
 (1.0)% (0.1)% $107,560
  $203,304
 (2.1)% (1.1)% $207,710
 $110,993
 2.1% 2.0% $108,710
  $314,297
 (0.7)% —% $316,419
Finance and Insurance Revenues per Retail Unit Sold         
Same Stores         
U.S. $1,682
 4.9% N/A $1,604
  $1,656
 4.3% N/A $1,588
U.K. $725
 (4.0)% 7.5% $755
  $675
 (9.6)% 2.7% $747
Brazil $666
 43.5% 32.0% $464
  $670
 69.2% 46.5% $396
Total Same Stores $1,466
 3.8% 4.8% $1,412
  $1,439
 2.9% 3.9% $1,398
Transactions $1,119
 
 $1,094
  $885
 
 $917
Total $1,461
 4.1% 5.0% $1,404
  $1,424
 3.0% 4.0% $1,383

Finance and Insurance Revenues per Retail Unit Sold                 
Same Stores                 
U.S. $1,560
 (1.8)% N/A $1,588
  $1,622
 2.1% N/A $1,588
U.K. $694
 4.4% 4.2% $665
  $682
 (5.0)% 3.2% $718
Brazil $678
 30.6% 27.4% $519
  $673
 54.4% 39.8% $436
Total Same Stores $1,372
 (1.3)% (1.3)% $1,390
  $1,415
 1.4% 2.0% $1,395
Transactions $864
 
   $1,068
  $873
 
   $958
Total $1,343
 (2.9)% (3.0)% $1,383
  $1,394
 0.8% 1.5% $1,383
Adjusted Total Finance and Insurance Revenues (1)
                 
Same Stores                 
U.S. $101,745
 5.2% N/A $96,685
  $281,014
 0.4% N/A $279,919
U.K. 9,487
 9.9% 9.8% 8,634
  26,498
 0.6% 9.4% 26,338
Brazil 2,157
 35.2% 31.9% 1,595
  5,913
 41.5% 28.1% 4,178
Total Same Stores 113,389
 6.1% 6.0% 106,914
  313,425
 1.0% 1.5% 310,435
Transactions 4,154
     1,796
  7,422
     5,984
Total $117,543
 8.1% 8.1% $108,710
  $320,847
 1.4% 2.1% $316,419
Adjusted Finance and Insurance Revenues per Retail Unit Sold (1)
                 
Same Stores                 
U.S. $1,668
 5.0% N/A $1,588
  $1,660
 4.5% N/A $1,588
U.K. $694
 4.4% 4.2% $665
  $682
 (5.0)% 3.2% $718
Brazil $678
 30.6% 27.4% $519
  $673
 54.4% 39.8% $436
Total Same Stores $1,456
 4.7% 4.7% $1,390
  $1,445
 3.6% 4.2% $1,395
Transactions $864
     $1,068
  $873
     $958
Total $1,422
 2.8% 2.8% $1,383
  $1,423
 2.9% 3.6% $1,383
(1)
See "Non-GAAP Financial Measures" for more details.
Our total Same Store financeFinance and insuranceInsurance revenues remained relatively flat for the three months ended JuneSeptember 30, 2017, as compared to the same period in 2016. After adjusting for $6.6 million in chargeback expense for reserves associated with expected finance and insurance product cancellations on vehicles sold by the Company and damaged by flooding from Hurricane Harvey, our adjusted total Same Store finance and insurance revenues increased $6.5 million, or 6.1%, to $113.4 million for the three months ended September 30, 2017, as all of our segments experienced improvements compared to the same period in 2016. Our adjusted U.S. Same Store finance and insurance revenue improved $5.1 million, or 5.2%, primarily as a result of increases in income per contract and penetration rates for most of our major U.S. product offerings. Additionally, our U.S. Same Store finance and insurance revenue was bolstered by an increase in retail sales volume. In the U.K., our Same Store finance and insurance revenues increased 9.9%, as compared to the same period in 2016, driven by increases in income per contract for most of our product offerings and a 5.3% increase in our retail sales volume, partially offset by declines in our penetration rates and an increase in our overall chargeback experience. Our Brazil Same Store finance and insurance revenue increased $0.6 million, or 35.2%, for the three months ended September 30, 2017. Our total Same Store finance and insurance revenue PRU declined 1.3% for the quarter ended September 30, 2017, to $1,372, as compared to the same period in 2016. Our adjusted total Same Store finance and insurance revenue PRU improved 4.7% for the quarter ended September 30, 2017, to $1,456. This improvement can be explained by increases in PRU for all of our segments compared to the same period in 2016.
For the nine months ended September 30, 2017, our total Same Store finance and insurance revenues decreased $3.6 million, or 1.1%, as compared to the same period a year ago. On an adjusted basis, our total Same Store finance and insurance revenues increased 1.0%, or $3.0 million, for the nine months ended September 30, 2017, as compared to the same period in 2016, driven by improvements in all three of our segments. Our adjusted U.S. Same Store finance and insurance revenues increased $1.1 million, or 0.4%, for the nine months ended September 30, 2017, as compared to the same period in 2016, as a 36.6% increasedeclines in Brazil wasretail sales volumes were more than offset by a 0.8%improvements in penetration rates and 1.3% decline in the U.S. and the U.K., respectively. Our U.S. Same Store finance and insurance revenue declined $0.7 million, or 0.8%, primarily as a result of a 5.4% decrease in total vehicle retail unit sales volume, partially offset by a 4.9% improvement in PRU. The PRU improvement reflects increases in income per contract as well as penetration rates, for mostin many of our major U.S. product offerings. In the U.K., our Same Store finance and insurance revenues decreased 1.3%, as compared to the same period in 2016, with the decrease more than explained by the change in exchange rates. On a constant currency basis, our U.K. Same Store finance and insurance revenue increased 10.6% as compared to the same period in 2016, with the improvement driven by a 2.8% increase in new and used vehicle retail unit sales volume coupled with improvements in income per contract for our retail finance and vehicle service contract fees. Our Brazil Same Store finance and insurance revenue increased $0.6$0.2 million, or 36.6%0.6%, for the three months ended June 30, 2017, explained by increases in penetration rates and income per contract for our retail finance fees. Our total Same Store finance and insurance revenue PRU improved 3.8% for the quarter ended June 30, 2017,primarily related to $1,466. This improvement can be explained by increases in the U.S. and Brazil of 4.9% and 43.5%, respectively, compared to the same period in 2016. These increases were partially offset by a 4.0% decline in the U.K. The U.K. decrease was more than explained by an unfavorable change in exchange rates between periods. On a constant currency basis, U.K. Same Store finance and insurance revenues PRU increased 7.5% in the second quarter of 2017 compared to the same period in 2016.
Our total Same Store finance and insurance revenues decreased 1.7%, or $3.5 million, for the six months ended June 30, 2017, as compared to the same period in 2016, driven by declines in the U.S. and the U.K., partially offset by an improvement in Brazil. Our U.S. Same Store finance and insurance revenues decreased $4.0 million, or 2.2%, for the six months ended June 30, 2017, as compared to the same period in 2016. The decline was driven by a 6.2% decrease in total retail sales volumes, partially offset by a 4.3% increase in PRU. In the U.K., our Same Store finance and insurance revenues decreased $0.7 million, or 3.9%, as a 6.3%6.0% increase in total retail sales volume and improvements in income per contract for our retail finance and vehicle service contract fees were more than offset by the change in exchange rates between periods.fees. On a constant currency basis, our U.K. Same Store finance and revenue increased 9.2%9.4% as compared to the same period in 2016. Our Same Store finance and insurance revenues in Brazil increased 45.4%41.5%, or $1.2$1.7 million, for the sixnine months ended JuneSeptember 30, 2017, as compared to the same period in 2016. This improvement was driven byrelated to increases in penetration rates and income per contract for our retail finance fees. For the sixnine months ended JuneSeptember 30, 2017, our total Same Store finance and insurance revenues PRU increased 2.9%1.4% to $1,439,$1,415, as compared to the same period in 2016. On an adjusted basis, our total Same Store finance and insurance revenues PRU increased 3.6% to $1,445, as compared

to the same period in 2016, which is explained by improvements in the U.S. and Brazil of 4.3%4.5% and 69.2%54.4%, respectively, as compared to the same period in 2016. These increases were partially offset by a 9.6%5.0% decline in the U.K. that was driven by the change in exchange rates between periods as, on a constant currency basis, Same Store finance and insurance revenues PRU increased 2.7%3.2% when compared to the same period in 2016.








Selling, General and Administrative Data
(dollars in thousands)
 Three Months Ended June 30,  Six Months Ended June 30, Three Months Ended September 30,  Nine Months Ended September 30,
 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016
Personnel                  
Same Stores                  
U.S. $154,346
 0.8% N/A $153,084
  $306,455
 (0.1)% N/A $306,712
 $159,819
 2.8% N/A $155,512
  $466,274
 0.9% N/A $462,224
U.K. 23,696
 (2.5)% 9.3% 24,310
  42,930
 (2.4)% 11.0% 43,976
 24,689
 8.9% 9.1% 22,664
  67,618
 1.5% 10.3% 66,640
Brazil 6,926
 35.5% 24.3% 5,112
  13,062
 40.7% 21.7% 9,284
 7,041
 10.6% 7.9% 6,366
  20,103
 28.5% 16.5% 15,650
Total Same Stores 184,968
 1.3% 2.6% 182,506
  362,447
 0.7% 1.8% 359,972
 191,549
 3.8% 3.7% 184,542
  553,995
 1.7% 2.5% 544,514
Transactions 1,642
 3,573
  8,207
 10,239
 8,282
 2,928
  16,490
 13,167
Total $186,610
 0.3% 1.6% $186,079
  $370,654
 0.1% 1.4% $370,211
 $199,831
 6.6% 6.5% $187,470
  $570,485
 2.3% 3.2% $557,681
Advertising                  
Same Stores                  
U.S. $18,494
 7.0% N/A $17,290
  $34,469
 6.1% N/A $32,492
 $16,886
 (3.8)% N/A $17,545
  $51,355
 2.6% N/A $50,037
U.K. 1,231
 (18.0)% (7.9)% 1,502
  2,475
 (7.0)% 6.1% 2,661
 1,504
 (6.2)% (5.9)% 1,604
  3,979
 (6.7)% 1.3% 4,265
Brazil 148
 (31.5)% (37.1)% 216
  265
 (40.7)% (49.1)% 447
 195
 (54.3)% (55.5)% 427
  460
 (47.4)% (52.0)% 874
Total Same Stores 19,873
 4.6% 5.3% 19,008
  37,209
 4.5% 5.4% 35,600
 18,585
 (5.1)% (5.1)% 19,576
  55,794
 1.1% 1.7% 55,176
Transactions 283
 418
  720
 945
 1,058
 409
  1,778
 1,354
Total $20,156
 3.8% 4.5% $19,426
  $37,929
 3.8% 4.8% $36,545
 $19,643
 (1.7)% (1.7)% $19,985
  $57,572
 1.8% 2.5% $56,530
Rent and Facility Costs                  
Same Stores                  
U.S. $20,569
 (2.7)% N/A $21,140
  $40,740
 (1.2)% N/A $41,250
 $21,018
 5.3% N/A $19,966
  $61,758
 0.9% N/A $61,216
U.K. 4,367
 (1.4)% 10.5% 4,429
  7,170
 (5.0)% 7.8% 7,547
 4,149
 4.6% 5.1% 3,967
  11,320
 (1.7)% 6.8% 11,515
Brazil 2,155
 23.9% 13.6% 1,740
  4,223
 26.9% 9.4% 3,327
 2,253
 12.9% 10.0% 1,996
  6,476
 21.7% 9.6% 5,323
Total Same Stores 27,091
 (0.8)% 0.5% 27,309
  52,133
 —% 0.8% 52,124
 27,420
 5.8% 5.6% 25,929
  79,554
 1.9% 2.4% 78,054
Transactions 717
 1,432
  2,887
 4,046
 1,788
 1,213
  4,675
 5,258
Total $27,808
 (3.2)% (1.9)% $28,741
  $55,020
 (2.0)% (1.1)% $56,170
 $29,208
 7.6% 7.5% $27,142
  $84,229
 1.1% 1.7% $83,312
Other SG&A                  
Same Stores                  
U.S. $49,325
 (0.3)% N/A $49,473
  $97,021
 (4.5)% N/A $101,558
 $61,139
 22.0% N/A $50,128
  $158,161
 4.3% N/A $151,685
U.K. 11,318
 2.3% 14.6% 11,065
  19,225
 0.4% 14.0% 19,139
 11,196
 5.6% 6.0% 10,601
  30,421
 2.3% 11.0% 29,739
Brazil 2,466
 (0.7)% (8.7)% 2,483
  4,397
 0.6% (13.0)% 4,371
 3,257
 9.6% 6.8% 2,973
  7,654
 4.2% (5.6)% 7,345
Total Same Stores 63,109
 0.1% 2.0% 63,021
  120,643
 (3.5)% (1.9)% 125,068
 75,592
 18.7% 18.6% 63,702
  196,236
 4.0% 4.9% 188,769
Transactions 885
 1,755
  4,101
 4,693
 4,053
 707
  8,152
 5,400
Total $63,994
 (1.2)% 0.7% $64,776
  $124,744
 (3.9)% (2.0)% $129,761
 $79,645
 23.7% 23.6% $64,409
  $204,388
 5.3% 6.5% $194,169
Total SG&A                  
Same Stores                  
U.S. $242,734
 0.7% N/A $240,987
  $478,685
 (0.7)% N/A $482,012
 $258,862
 6.5% N/A $243,151
  $737,548
 1.7% N/A $725,162
U.K. 40,612
 (1.7)% 10.2% 41,306
  71,800
 (2.1)% 11.3% 73,323
 41,538
 7.0% 7.2% 38,836
  113,338
 1.1% 9.8% 112,159
Brazil 11,695
 22.4% 12.4% 9,551
  21,947
 25.9% 8.8% 17,429
 12,746
 8.4% 5.7% 11,762
  34,693
 18.8% 7.6% 29,192
Total Same Stores 295,041
 1.1% 2.5% 291,844
  572,432
 (0.1)% 1.1% 572,764
 313,146
 6.6% 6.5% 293,749
  885,579
 2.2% 3.0% 866,513
Transactions 3,527
 7,178
  15,915
 19,923
 15,181
 5,257
  31,095
 25,179
Total $298,568
 (0.2)% 1.2% $299,022
  $588,347
 (0.7)% 0.7% $592,687
 $328,327
 9.8% 9.7% $299,006
  $916,674
 2.8% 3.7% $891,692

Total Gross Profit                  
Same Stores                  
U.S. $339,543
 (0.1)% N/A $340,053
  $659,729
 (1.2)% N/A $667,577
 $349,888
 2.1% N/A $342,602
  $1,009,618
 (0.1)% N/A $1,010,179
U.K. 49,196
 (8.4)% 2.6% 53,714
  90,814
 (6.5)% 6.3% 97,102
 50,900
 8.6% 8.6% 46,861
  141,714
 (1.6)% 7.1% 143,963
Brazil 13,243
 28.5% 18.0% 10,302
  24,664
 33.7% 15.6% 18,448
 14,191
 22.4% 19.4% 11,596
  38,854
 29.3% 17.0% 30,044
Total Same Stores 401,982
 (0.5)% 0.7% 404,069
  775,207
 (1.0)% 0.1% 783,127
 414,979
 3.5% 3.4% 401,059
  1,190,186
 0.5% 1.2% 1,184,186
Transactions 2,910
 6,050
  13,207
 16,094
 16,441
 5,609
  29,648
 21,702
Total $404,892
 (1.3)% (0.1)% $410,119
  $788,414
 (1.4)% (0.1)% $799,221
 $431,420
 6.1% 6.0% $406,668
  $1,219,834
 1.2% 2.0% $1,205,888
SG&A as a % of Gross Profit                  
Same Stores                  
U.S. 71.5% 70.9%  72.6% 72.2% 74.0% 71.0%  73.1% 71.8%
U.K. 82.6% 76.9%  79.1% 75.5% 81.6% 82.9%  80.0% 77.9%
Brazil 88.3% 92.7%  89.0% 94.5% 89.8% 101.4%  89.3% 97.2%
Total Same Stores 73.4% 72.2%  73.8% 73.1% 75.5% 73.2%  74.4% 73.2%
Transactions 121.2% 118.6%  120.5% 123.8% 92.3% 93.7%  104.9% 116.0%
Total 73.7% �� 72.9%  74.6% 74.2% 76.1% 73.5%  75.1% 73.9%
Adjusted Total SG&A (1)
                  
Same Stores                  
U.S. $242,091
 1.7% N/A $237,968
  $479,875
 0.8% N/A $476,174
 $249,195
 2.7% N/A $242,701
  $729,071
 1.4% N/A $718,875
U.K. 40,324
 (2.4)% 9.5% 41,306
  71,512
 (1.7)% 11.7% 72,762
 41,538
 7.0% 7.2% 38,836
  113,050
 1.3% 10.1% 111,598
Brazil 11,695
 22.4% 12.4% 9,551
  21,947
 25.9% 8.8% 17,429
 12,746
 11.0% 8.2% 11,488
  34,693
 20.0% 8.6% 28,918
Total Same Stores 294,110
 1.8% 3.2% 288,825
  573,334
 1.2% 2.4% 566,365
 303,479
 3.6% 3.5% 293,025
  876,814
 2.0% 2.8% 859,391
Transactions 3,527
 7,178
  15,915
 20,618
 15,181
 6,433
  31,095
 20,618
Total $297,637
 0.6% 1.9% $296,003
  $589,249
 0.4% 1.8% $586,983
 $318,660
 6.4% 6.4% $299,458
  $907,909
 3.2% 3.4% $880,009
Adjusted SG&A as a % of Gross Profit (1)
                  
Same Stores                  
U.S. 71.3% 70.0%  72.7% 71.3% 69.9% 70.8%  71.7% 71.2%
U.K. 82.0% 76.9%  78.7% 74.9% 81.6% 82.9%  79.8% 77.5%
Brazil 88.3% 92.7%  89.0% 94.5% 89.8% 99.1%  89.3% 96.3%
Total Same Stores 73.2% 71.5%  74.0% 72.3% 72.0% 73.1%  73.3% 72.6%
Transactions 121.2% 118.6%  120.5% 128.1% 92.3% 114.7%  104.9% 95.0%
Total 73.5% 72.2%  74.7% 73.4% 72.8% 73.6%  74.0% 73.5%
                  
Employees 13,700 13,400  13,700
 13,400
 14,200 13,300  14,200 13,300
(1)See "Non-GAAP Financial Measures" for more details.
Our SG&A consists primarily of salaries, commissions and incentive-based compensation, as well as rent and facility costs, advertising, insurance, benefits, utilities and other fixed expenses. We believe that the majority of our personnel, all of our advertising and a portion of certain other expenses are variable and can be adjusted in response to changing business conditions. We continue to aggressively pursue opportunities that take advantage of our size and negotiating leverage with our vendors and service providers in order to more effectively rationalize our cost structure.
Our total Same Store SG&A increased 1.1%6.6% for the three months ended JuneSeptember 30, 2017, as compared to the same period in 2016, with the change more than explained by increases of 22.4%8.4%, 7.0%, and 0.7%6.5% in Brazil, the U.K. and the U.S., respectively, partially offset by a decrease of 1.7%as well as the mix effect from our growth in the U.K. operations that inherently have a higher cost structure. After adjusting for non-core Same Store other SG&A itemscharges of $0.6$8.1 million in charges related to catastrophic events, and $0.3$0.8 million in losses on real estate and dealership acquisition coststransactions and $0.7 million associated with a legal settlement, our adjusted total Same Store SG&A increased 1.8%3.6% for the three months ended JuneSeptember 30, 2017, as compared to the same period in 2016. On a comparable basis, adjusted total Same Store SG&A for three months ended JuneSeptember 30, 2016 excluded non-core Same Store other SG&A items of $2.8$0.5 million in deductible charges related to catastrophic events and $0.3 million related to losses on real estate and dealership dispositions.in foreign transaction tax. Our total Same Store SG&A decreased 0.1%increased 2.2% for the sixnine months ended JuneSeptember 30, 2017, as compared to the same period in 2016, as decreasesa result of 2.1%increases of 18.8%, 1.7%, and 0.7%1.1% in Brazil, the U.S. and the U.K., respectively, were substantially offset by an increase of 25.9% in Brazil.respectively. After adjusting for non-core Same Store

other SG&A items, including a pre-tax gain of $1.8$1.1 million related to a settlement with

an OEM, $0.6legal settlements, $8.8 million in charges related to catastrophic events, $0.8 million in losses on real estate and $0.4dealership transactions, and $0.3 million of costs related to dealership acquisitions, our adjusted total Same Store SG&A increased 1.2%2.0% for the sixnine months ended JuneSeptember 30, 2017, as compared to the same period in 2016. On a comparable basis, adjusted total Same Store SG&A for sixnine months ended JuneSeptember 30, 2016 excluded non-core Same Store other SG&A items of $5.4$5.9 million in deductible charges related to catastrophic events, $0.6 million in costs related to dealership acquisitions, and $0.4 million of losses related to real estate and dealership dispositions.transactions, and $0.3 million in foreign transaction tax.
Our total Same Store personnel costs increased 1.3%3.8% for the three months ended JuneSeptember 30, 2017, to $185.0$191.5 million, as compared to the same period in 2016, more than explained by increases of 35.5%2.8%, 8.9%, and 0.8%10.6% in Brazil and the U.S., respectively, partially offset by a 2.5% decline in personnel costs in the U.K., and Brazil, respectively. The increase in Same Store personnel costs in the U.S. was primarily explained by an increase in variable commission payments, largely driven by the improved retail new vehicle sales and profitability performance in our Houston and Beaumont markets, as a result of flooding from Hurricane Harvey in September 2017, as well as the impact of non-core charges for disaster pay for our employees who were Hurricane Harvey and Irma victims. The increases in the U.K. and Brazil primarily relatesrelate to variable costs associated with an overall improvement in profitability in the region. The increase in Same Store personnel costs in the U.S. can primarily be explained by the variable costs associated with the growth in our parts and services business. The decrease in Same Store personnel costs in U.K. was more than explained by changes in the currency exchange rate between periods. On a constant currency basis, Same Store personnel costs in the U.K. rose 9.3% largely due to increased commission payments in response to an overall increase in Same Store gross profit. For the sixnine months ended JuneSeptember 30, 2017, as compared to the same period in 2016, our total Same Store personnel costs increased 0.7%1.7%, more than explained by increases of 0.9%, 28.5%, and 1.5% in the U.S., Brazil, and the U.K., respectively. The increase in Brazil was primarily explained by an increase in variable commission payments as a result of 40.7%a 10.9% overall increase in Brazil, partially offset by decreases of 2.4% and 0.1% in the U.K. and U.S., respectively. On a constant currency basis, Same Store personnel costs in the U.K. rose by 11.0% for the six months ended June 30, 2017.revenues.
For the three months ended JuneSeptember 30, 2017, our consolidated Same Store advertising costs increased 4.6%decreased 5.1% to $19.9$18.6 million, more than explained by a 7.0% increasedecreases of 3.8%, 54.3%, and 6.2% in the U.S., partially offset by decreases of 31.5% and 18.0% in Brazil, and the U.K,U.K., respectively. The increasedecrease in the U.S., for the three months ended JuneSeptember 30, 2017, was largely driven by activity designedthe result of initiatives to generate incremental sales opportunities and capture market sharecontrol costs in response to athe overall decline in new and used vehicle retail sales in our energy-dependent markets, such as Texas and Oklahoma.the retail automotive industry. The decrease in Brazil, for the three months ended JuneSeptember 30, 2017, can be explained by management's cost rationalization efforts in the first halfthrough most of 2017. The decrease in the U.K, for the three months ended JuneSeptember 30, 2017, was the result of ongoing initiatives to control costs in response to the decline in the general economy, as well as the retail automotive industry. For the sixnine months ended JuneSeptember 30, 2017, as compared to the same period in 2016, our consolidated Same Store advertising costs increased 4.5%1.1%, to $37.2$55.8 million, more thanprimarily explained by a 6.1%2.6% increase in the U.S., partially offset by decreases of 40.7%47.4% and 7.0%6.7% in Brazil and the U.K., respectively. The decrease in Brazil was a result of our ongoing efforts to reduce costs and increase margins. The decrease in the U.K. for the sixnine months ended JuneSeptember 30, 2017 was more than explained by the change in exchange rates, as on a constant currency basis, Same Store advertising costs increased 6.1%1.3%.
Our consolidated Same Store rent and facility costs decreased 0.8%increased 5.8% to $27.1$27.4 million for the three months ended JuneSeptember 30, 2017, as compared to the same period a year ago, explained by increases of 5.3%, 12.9%, and 4.6% in the U.S., Brazil, and the U.K., respectively. The increase in the U.S. is more than explained by an increasenon-core charges for building and property damage as a result of 23.9% in Brazil, offset by decreases of 2.7%Hurricanes Harvey and 1.4% in the U.S.Irma. We continue to execute on our strategy to own more real estate, thereby reducing rent costs, and U.K., respectively.on initiatives to control costs. The increase in Brazil resulted from additional rent expense incurred as a result of annual increases in rental rates.rates during 2017. The decrease in the U.S. can be explained by strategic efforts to own the real estate associated with our dealerships, thereby reducing rent expense. The decreaseincrease in the U.K. iswas more than explained by the change in exchange rates between periods. On a constant currency basis, Same Store rent and facility costs in the U.K. rose 10.5%, as a result of an increase in property taxes, as well as rent expense, associated with new facilities. For the sixnine months ended JuneSeptember 30, 2017, our consolidated Same Store rent and facility costs remained flatincreased 5.8% to $27.4 million, as compared to the same period last year.a year ago, more than explained by increases of 21.7% and 0.9%, in Brazil and the U.S., respectively, partially offset by a decrease of 1.7% in the U.K. The increase in Brazil resulted from additional rent expense incurred as a result of annual increases in rental rates during 2017. The decrease in the U.K. for the nine months ended September 30, 2017 was more than explained by the change in exchange rates, as on a constant currency basis, Same Store rent and facility costs increased 6.8%, reflecting increases in property taxes and rent expense for new facilities.
For the three months ended JuneSeptember 30, 2017, our total Same Store other SG&A increased 0.1%18.7% to $63.1$75.6 million as compared to the same period in 2016, as a 2.3%resulting from increases of 22.0%, 5.6%, and 9.6% in the U.S., U.K., and Brazil, respectively. The 22.0% increase in the U.S. can be partially attributed to the non-core charges for vehicle damage as a result of Hurricane Harvey. The increases in the U.K. was substantially offset by decreases of 0.7% and 0.3% in Brazil and the U.S., respectively. The increase in U.K. iswere also primarily explained by higher loaner vehicle costs associated with an increaseincreases in our partsexpenses that generally correlate to the overall growth of gross profit that increased 8.6% and service and collision businesses. The decrease in Brazil can be explained by management's initiatives to reduce cost for third-party services. The decrease in the U.S. is primarily a result of a reduction in insurance deductible charges relating to catastrophic events that occurred in 2016 and did not repeat at the same levels for 2017.22.4%, respectively. For the sixnine months ended JuneSeptember 30, 2017, as compared to 2016, our total Same Store other SG&A decreased 3.5%increased 4.0% to $120.6$196.2 million, driven by a decreasereflecting increases of 4.5%4.3%, 2.3%, and 4.2% in the U.S., partially offset by increases of 0.6%U.K., and 0.4% in Brazil, and the U.K., respectively. After adjusting for the non-core items mentioned above, our adjusted total Same Store other SG&A for the six months ended June 30, 2017 increased 2.8% compared to the same period in 2016. The increase in Brazil is more than explained by the change in exchange rates between periods, as Same Store other SG&A decreased 13.0% on a constant currency basis.
Our total Same Store SG&A as a percentage of gross profit for the three months ended JuneSeptember 30, 2017, as compared to 2016, increased 120230 basis points to 73.4%75.5%, primarily driven by 570 and 60a 300 basis point increasesincrease in the U.K. and U.S., respectively, coupled with the mix effect of our growing U.K. operations that inherently have a higher cost structure, and partially offset by a 440improvements of 1,160 and 130 basis points improvement in Brazil. The increase inBrazil and the U.K. is primarily related to certain variable costs that outpaced the growth in our Same Store gross profit and are the focus of future cost rationalization initiatives., respectively. The increase in the U.S. can be more than explained by an overall decline in total Same Store gross profit in the U.S., coupled with our effortsnon-core charges related to capture market share, particularly in our energy-dependent markets.catastrophic events mentioned above. The improvementimprovements in Brazil wasand the U.K. were attributable to the growth in Same Store gross profit, as well as the cost rationalization efforts discussed above. For the sixnine months ended JuneSeptember 30, 2017, as compared to the same period in 2016, our total Same Store SG&A as a percentage of gross profit increased 70120 basis

points to 73.8%74.4%, more than explained by a 360210 and 40130 basis point increases in the U.K. and U.S., respectively. Offsetting these increases, our Same Store SG&A as a percentage of gross profit in Brazil improved 550 790

basis points to 89.0%89.3% for the sixnine months ended JuneSeptember 30, 2017 compared to a year ago, primarily reflecting continued leverage of our cost structure realized with a growth in gross profit. On an adjusted basis, total Same Store SG&A as a percentage of gross profit increased 170improved 110 basis points to 73.2%72.0% for the second quarter ofthree months ended September 30, 2017, as compared to 2016, driven by an increaseimprovements of 510930, 130, and 13090 basis points in Brazil, the U.K. and U.S., respectively. For the sixnine months ended JuneSeptember 30, 2017, as compared to the same period in 2016, our adjusted total Same Store SG&A as a percentage of gross profit increased 17070 basis points to 74.0%73.3%, driven by 380230 and 14050 basis point increases in the U.K. and U.S. Same Store SG&A as a percentage of gross profit, respectively, partially offset by a 550700 basis point decreaseimprovement in Brazil.
Depreciation and Amortization Data
(dollars in thousands)
 Three Months Ended June 30,  Six Months Ended June 30, Three Months Ended September 30,  Nine Months Ended September 30,
 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016
Same Stores                  
U.S. $11,686
 12.5% N/A $10,385
  $23,080
 11.5% N/A $20,708
 $12,060
 11.2% N/A $10,843
  $35,140
 11.4% N/A $31,552
U.K. 1,732
 (0.1)% 12.0% 1,734
  3,076
 (0.3)% 13.3% 3,084
 1,813
 17.1% 17.4% 1,548
  4,888
 5.5% 14.8% 4,632
Brazil 342
 (4.5)% (12.3)% 358
  664
 10.5% (4.0)% 601
 366
 45.2% 42.0% 252
  1,030
 20.9% 8.5% 852
Total Same Stores 13,760
 10.3% 11.7% 12,477
  26,820
 9.9% 11.3% 24,393
 14,239
 12.6% 12.6% 12,643
  41,058
 10.9% 11.7% 37,036
Transactions 333
 236
  879
 784
 820
 248
  1,700
 1,031
Total $14,093
 10.9% 12.3% $12,713
  $27,699
 10.0% 11.5% $25,177
 $15,059
 16.8% 16.8% $12,891
  $42,758
 12.3% 13.3% $38,067
Our total Same Store depreciation and amortization expense increased 10.3%12.6% and 9.9%10.9% for the three and sixnine months ended JuneSeptember 30, 2017, respectively, as compared to the same periodperiods in 2016, as we continue to strategically add dealership-related real estate to our investment portfolio and make improvements to our existing facilities intended to enhance the profitability of our dealerships and the overall customer experience. We critically evaluate all planned future capital spending, working closely with our manufacturer partners to maximize the return on our investments.
Floorplan Interest Expense
(dollars in thousands)
 Three Months Ended June 30,  Six Months Ended June 30, Three Months Ended September 30,  Nine Months Ended September 30,
 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016 2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016  2017 % Increase/(Decrease) Constant Currency % Increase/(Decrease) 2016
Same Stores                  
U.S. $12,013
 16.5% N/A $10,314
  $22,888
 13.0% N/A $20,261
 $11,879
 19.9% N/A $9,911
  $34,767
 15.2% N/A $30,173
U.K. 1,048
 (6.2)% 5.2% 1,117
  1,761
 (5.4)% 7.4% 1,862
 1,227
 15.4% 15.6% 1,063
  2,988
 2.2% 10.5% 2,925
Brazil 111
 6.7% (1.3)% 104
  34
 (42.4)% (35.6)% 59
 140
 11.1% 8.9% 126
  175
 (4.9)% (4.7)% 184
Total Same Stores 13,172
 14.2% 15.2% 11,535
  24,683
 11.3% 12.4% 22,182
 13,246
 19.3% 19.3% 11,100
  37,930
 14.0% 14.7% 33,282
Transactions 54
 58
  485
 421
 245
 35
  729
 455
Total $13,226
 14.1% 15.1% $11,593
  $25,168
 11.3% 12.5% $22,603
 $13,491
 21.2% 21.2% $11,135
  $38,659
 14.6% 15.4% $33,737
Total manufacturer’s assistance $11,672
 (5.3)% (5.1)% $12,325
  $22,185
 (6.9)% (6.7)% $23,839
 $13,561
 4.5% 4.5% $12,979
  $35,745
 (2.9)% (2.7)% $36,818
Our floorplan interest expense fluctuates with changes in our borrowings outstanding and interest rates, which are based on the one-month LIBOR (or Prime rate in some cases) plus a spread in the U.S. and U.K. and a benchmark rate plus a spread in Brazil.
To mitigate the impact of interest rate fluctuations, we employ an interest rate hedging strategy, whereby we swap variable interest rate exposure for a fixed interest rate over the term of the variable interest rate debt. As of JuneSeptember 30, 2017, we had interest rate swaps with an aggregate notional amount of $824.8$823.9 million in effect that fixed our underlying one-month LIBOR at a weighted average interest rate of 2.5%. The majority of the monthly settlements of these interest rate swap

liabilities are recognized as floorplan interest expense. From time to time, we utilize excess cash on hand to pay down our floorplan borrowings, and the resulting interest earned is recognized as an offset to our gross floorplan interest expense.

Our total Same Store floorplan interest expense increased 14.2%19.3% and 11.3%14.0% for the three and sixnine months ended JuneSeptember 30, 2017, respectively, as compared to the same periods in 2016. These increases were primarily driven by the increaseincreases in our Same Store floorplan interest expense in the U.S. of 16.5%19.9% and 13.0%15.2% for the three and sixnine months ended JuneSeptember 30, 2017, respectively, due towhich are more than explained by the increases in LIBOR interest rates since the fourth quarter of 2016. These increases were partially offset by declines in our U.S. weighted average borrowings compared to the same periods a year ago. In the U.K., our Same Store floorplan interest expense decreased 6.2%increased 15.4% and 5.4%2.2%, respectively, for the three and sixnine months ended JuneSeptember 30, 2017, more than explained by the change in exchange rates between periods. On a constant currency basis, total Same Store floorplan interest expense in the U.K. increased 5.2% and 7.4%, primarily driven by increases in our weighted average borrowings. In Brazil, our Same Store floorplan interest expense increased 6.7% for the three months ended June 30, 2017, more than explainedborrowings, partially offset by the change in exchange rates between periods. On a constant currency basis, Same Store floorplan interest expense declined 1.3%. For the six months ended June 30, 2017, on a U.S. dollar basis, our Brazil Same Store floorplan interest expense declined 42.4%. These declines in Brazil floorplan interest expense were primarily a result of improvements in vehicle inventory management processes, a decreasedecreases in our floorplan borrowing rate and the execution of strategic cash management policies.weighted average interest rates.
Other Interest Expense, net
Other interest expense, net consists of interest charges primarily on our real estate related debt, working capital lines of credit and our other long-term debt, partially offset by interest income. For the three months ended JuneSeptember 30, 2017, other interest expenseexpenses net increased $0.6$0.8 million, or 3.7%4.6%, to $17.3$17.9 million, as compared to the same period in 2016. For the six months ended June 30, 2017, other net interest expense increased $0.7 million, or 2.0%, to $34.3 million, as compared to the same period in 2016. These increases wereThis increase was primarily attributable to higheran increase in the weighted average interest rates associated with real estate and other long-term debt. For the nine months ended September 30, 2017, other interest expense, net increased $1.5 million, or 2.9%, to $52.2 million, as compared to the same period in 2016.
Provision for Income Taxes
Our provision for income taxes increased $0.1decreased $3.1 million to $22.6$17.3 million for the three months ended JuneSeptember 30, 2017, as compared to the same period in 2016 and $5.5 million to $57.1 million for the nine months ended September 30, 2017, as compared to the same period in 2016. The increase is primarily attributable to the tax impact of dealership dispositions in Brazil during the three months ended June 30, 2016 that did not repeat in 2017, offset by lower pretax book income in 2017. For the six months ended June 30, 2017, our provision for income taxes decreased $2.5 million to $39.8 million, as compared to the same period in 2016. This decrease wasThese decreases were primarily due to the decline of pretax book income in 2017. For the three months ended JuneSeptember 30, 2017, our effective tax rate increased to 36.6% from 32.6%36.5% as compared to the same period in 2016. For the sixnine months ended JuneSeptember 30, 2017, our effective tax rate increased to 35.3%35.7% from 34.3%35.0% from the same period in 2016. These increases were primarily due to the mix effect resulting from taxes provided for in foreign jurisdictions, changes to valuation allowances provided for net operating losses and other deferred tax assets in certain U.S. states and in Brazil, as well as theand unrecognized tax impact of dealership dispositions in Brazil during the three months ended June 30, 2016 that did not repeat in 2017.benefits with respect to uncertain tax positions. The impact of these items was partially offset by excess tax deductions for restricted stock resulting from the adoption of ASU 2016-09 during the sixnine months ended JuneSeptember 30, 2017.
On anAfter adjusting for the impact of unrecognized tax benefits with respect to uncertain tax positions, our adjusted basis,effective tax rate decreased to 36.0% from 36.5% for the three months ended JuneSeptember 30, 2017, our adjusted effective tax rate increased to 36.4% from 35.1% as compared to the same period in 2016. For the sixnine months ended JuneSeptember 30, 2017, our adjusted effective tax rate decreased to 35.2%35.5% from 35.4%35.8% for the same period in 2016. These increases and decreases were primarily due to the aforementioned items related to the tax rates excludingand the tax impactmix effect of dealership dispositionsthe growth in the U.K., which has a lower statutory rate than the U.S. and Brazil, duringrelative to the three months ended June 30, 2016 that was excluded from our provision for income taxes as a non-core item.rest of the company.
We expect our effective tax rate for the full-year of 2017 will be between 35.0% and 36.0%. We believe that it is more likely than not that our deferred tax assets, net of valuation allowances provided, will be realized, based primarily on assumptions of our future taxable income and taxes available in carry back periods.

Liquidity and Capital Resources
Our liquidity and capital resources are primarily derived from cash on hand, cash temporarily invested as a pay down of Floorplan Line and FMCC Facility (defined below) levels, cash from operations, borrowings under our credit facilities, which provide vehicle floorplan financing, working capital and dealership and real estate acquisition financing, and proceeds from debt and equity offerings. Based on current facts and circumstances, we believe we will have adequate cash flow, coupled with available borrowing capacity, to fund our current operations, capital expenditures and acquisitions for the remainder of 2017. If economic and business conditions deteriorate or if our capital expenditures or acquisition plans for 2017 change, we may need to access the private or public capital markets to obtain additional funding.
Cash on Hand. As of JuneSeptember 30, 2017, our total cash on hand was $26.6$66.9 million. The balance of cash on hand excludes $76.6$68.2 million of immediately available funds used to pay down our Floorplan Line and FMCC Facility (defined below) as of JuneSeptember 30, 2017. We use the pay down of our Floorplan Line and FMCC Facility as a channel for the short-term investment of excess cash.
Cash Flows. With respect to all new vehicle floorplan borrowings in the normal course of business, the manufacturers of the vehicles draft our credit facilities directly. No cash flows to or from us. With respect to borrowings for used vehicle financing, we finance up to 85% of the value of our used vehicle inventory in the U.S., and the funds flow directly to us from the lender. All borrowings from, and repayments to, lenders affiliated with our vehicle manufacturers (excluding the cash flows from or to manufacturer-affiliated lenders participating in our syndicated lending group) are presented within Cash Flows from Operating Activities on the Consolidated Statements of Cash Flows in conformity with U.S. GAAP. All borrowings from, and repayments to, the Revolving Credit Facility (defined below) (including the cash flows from or to manufacturer-affiliated lenders participating in the facility) and other credit facilities in the U.K. and Brazil unaffiliated with our manufacturer partners (collectively, "Non-OEM Floorplan Credit Facilities"), are presented within Cash Flows from Financing Activities in conformity with U.S. GAAP. However, the incurrence of all floorplan notes payable represents an activity necessary to acquire inventory for resale, resulting in a trade payable. Our decision to utilize our Revolving Credit Facility does not substantially alter the process by which our vehicle inventory is financed, nor does it significantly impact the economics of our vehicle procurement activities. Therefore, we believe that all floorplan financing of inventory purchases in the normal course of business should correspond with the related inventory activity and be classified as an operating activity. As a result, we use the non-GAAP measure "Adjusted net cash provided by operating activities," which makes such reclassification, to further evaluate our cash flows. We believe that this classification eliminates excess volatility in our operating cash flows prepared in accordance with U.S. GAAP and avoids the potential to mislead the users of our financial statements.
In addition, because the majority of our dealership acquisitions and dispositions are negotiated as asset purchases, we do not assume transfer of liabilities for floorplan financing in the execution of the transactions. Therefore, borrowings and repayments of all floorplan financing associated with dealership acquisition and disposition are characterized as either operating or financing activities in our statement of cash flows presented in conformity with U.S. GAAP, depending on the relationship described above. However, the floorplan financing activity is so closely related to the inventory acquisition process that we believe the presentation of all acquisition and disposition related floorplan financing activities should be classified as investing activity to correspond with the associated inventory activity, and we have made such adjustments in our adjusted operating cash flow presentations.
The following tables set forth selected historical information regarding cash flows from our Consolidated Statements of Cash Flows on a GAAP and on an adjusted, non-GAAP basis. For further explanation and reconciliation to the most directly comparable GAAP measures, see "Non-GAAP Financial Measures" below. 
 Six Months Ended June 30, Nine Months Ended September 30,
GAAP Basis 2017 2016 2017 2016
 (In thousands) (In thousands)
Net cash provided by operating activities $54,685
 $172,867
 $309,867
 $386,612
Net cash used in investing activities (119,804) (107,870) (246,733) (157,023)
Net cash provided by (used in) financing activities 70,583
 (55,325)
Net cash used in financing activities (18,110) (222,053)
Effect of exchange rate changes on cash 117
 2,256
 867
 2,345
Net increase in cash and cash equivalents $5,581
 $11,928
 $45,891
 $9,881

 Six Months Ended June 30, Nine Months Ended September 30,
Adjusted, Non-GAAP Basis 2017 2016 2017 2016
 (In thousands) (In thousands)
Adjusted net cash provided by operating activities $127,352
 $152,095
 $231,582
 $237,793
Adjusted net cash used in investing activities (119,804) (112,292) (232,000) (167,468)
Adjusted net cash used in financing activities (2,084) (30,131)
Adjusted net cash provided by (used in) financing activities 45,442
 (62,789)
Effect of exchange rate changes on cash 117
 2,256
 867
 2,345
Net increase in cash and cash equivalents $5,581
 $11,928
 $45,891
 $9,881
Sources and Uses of Liquidity from Operating Activities
For the sixnine months ended JuneSeptember 30, 2017, we generated $54.7$309.9 million of net cash flow from operating activities. On an adjusted basis for the same period, we generated $127.4$231.6 million in net cash flow from operating activities, primarily consisting of $73.1$103.0 million in net income, as well as non-cash adjustments related to depreciation and amortization of $27.7$42.8 million, stock-based compensation of $10.5$14.6 million, deferred income taxes of $11.1$16.1 million, asset impairments of $9.5 million, and a $4.2$44.2 million net change in operating assets and liabilities. Included in the adjusted net changes of operating assets and liabilities were cash inflows of $13.6 million from the net decrease in accounts and notes receivable, $110.4 million from the net increase in floorplan borrowings, and $53.4$68.5 million from decreases of vehicle receivablesin inventory levels and contracts-in-transit.$85.2 million from increases in accounts payable and accrued expenses. These cash inflows were partially offset by adjusted cash outflows of $142.2$8.9 million from the net increase in accounts and notes receivable, $83.4 million from the net decrease in floorplan borrowings, $15.3 million from increases of inventory levels, $28.5 million from decreases in accounts payablevehicle receivables and accrued expenses,contracts-in-transit, and $2.4$2.3 million from the net increase in prepaid expenses and other assets.
For the sixnine months ended JuneSeptember 30, 2016, we generated $172.9$386.6 million of net cash flow from operating activities. On an adjusted basis for the same period, we generated $152.1$237.8 million in net cash flow from operating activities, primarily consisting of $80.9$116.2 million in net income, as well as non-cash adjustments related to depreciation and amortization of $25.2$38.1 million, stock-based compensation of $10.2$14.9 million, deferred income taxes of $8.0$14.3 million, asset impairments of $12.8 million, and a $23.9$39.4 million net change in operating assets and liabilities. Included in the adjusted net changes of operating assets and liabilities were cash inflows of $8.6$0.4 million from the net decrease in accounts and notes receivable, $15.5$78.9 million from increases in accounts payable and accrued expenses, $44.7$49.6 million from decreases of vehicle receivables and contracts-in-transit, $60.8 million from decreases in inventory levels and $15.6$18.0 million from the net decrease in prepaid expenses and other assets. These cash inflows were partially offset by adjusted cash outflows of $22.1 million from increases of inventory levels and $38.0$167.9 million from the net decrease in floorplan borrowings.
Working Capital. At JuneSeptember 30, 2017, we had $167.0$96.4 million of working capital. Changes in our working capital are explained primarily by changes in floorplan notes payable outstanding. Borrowings on our new vehicle floorplan notes payable, subject to agreed upon pay-off terms, are equal to 100% of the factory invoice of the vehicles. Borrowings on our used vehicle floorplan notes payable, subject to agreed upon pay-off terms, are limited to 85% of the aggregate book value of our used vehicle inventory, except in the U.K. and Brazil. At times, we have made payments on our floorplan notes payable using excess cash flow from operations and the proceeds of debt and equity offerings. As needed, we re-borrow the amounts later, up to the limits on the floorplan notes payable discussed above, for working capital, acquisitions, capital expenditures or general corporate purposes.
Sources and Uses of Liquidity from Investing Activities
During the sixnine months ended JuneSeptember 30, 2017, we used $119.8$246.7 million in net cash flow for investing activities. On an adjusted basis for the same period, we used $232.0 million in net cash flow for investing activities, primarily consisting of $57.1$94.3 million usedof cash flows for escrow deposits on real estatedealership acquisition activity and dealership acquisitions, and $67.3$144.3 million for purchases of property and equipment and to construct new and improve existing facilities. Within this total of property and equipment purchases, $48.4$71.0 million was used for capital expenditures, $14.0$67.8 million was used for the purchase of real estate associated with existing dealership operations and $4.8$5.5 million represents the net decrease in the accrual for capital expenditures from year-end. These cash outflows were partially offset by cash inflows of $2.6$5.1 million related to dispositions of franchises and fixed assets and $2.0$1.5 million related toof other items.
During the sixnine months ended JuneSeptember 30, 2016, we used $107.9$157.0 million in net cash flow for investing activities. On an adjusted basis for the same period, we used $167.5 million in net cash flow for investing activities, primarily consisting of $54.7$57.3 million of cash flows for dealership acquisition activity and $70.3$125.7 million for purchases of property and equipment and to construct new and improve existing facilities, which consisted of $50.9$78.9 million for capital expenditures, $7.9$34.0 million for the purchase of real estate associated with existing dealership operations and an $11.5a $12.8 million net decrease in the accrual for capital expenditures from year-end. These cash outflows were partially offset by cash inflows of $14.0$12.6 million related to dispositions of franchises and fixed assets and $3.2$2.9 million of other items. After adjusting for $4.4 million of cash outflows associated with the change in floorplan notes payable in conjunction with dealership disposition activity, our adjusted net cash flow used in investing activities for the six months ended June 30, 2016 was $112.3 million.


Capital Expenditures. Our capital expenditures include costs to extend the useful lives of current facilities, as well as to start or expand operations. In general, expenditures relating to the construction or expansion of dealership facilities are driven by dealership acquisition activity, new franchises being granted to us by a manufacturer, significant growth in sales at an existing facility, relocation opportunities, or manufacturer imaging programs. We critically evaluate all planned future capital spending, working closely with our manufacturer partners to maximize the return on our investments. We forecast our capital expenditures for the full year of 2017 will be less than $120.0 million which could generally be funded from excess cash.
Acquisitions. We evaluate the expected return on investment in our consideration of potential business purchases. In general, the purchase price, excluding real estate and floorplan liabilities, is approximately 15% to 20% of the annual revenue. Cash needed to complete our acquisitions normally comes from excess working capital, operating cash flows of our dealerships, and borrowings under our floorplan facilities, term loans and our Acquisition Line (defined below).
Sources and Uses of Liquidity from Financing Activities
For the sixnine months ended JuneSeptember 30, 2017, we generated $70.6used $18.1 million in net cash flow from financing activities. On an adjusted basis for the same period, we used $2.1generated $45.4 million in net cash flow from financing activities, primarily related to cash outflows of $39.0 million to repurchase our Company's common stock, $10.2 million for dividend payments, and $1.0 million of net payments related to real estate debt. These outflows were partially offset by cash inflows of $8.5$16.9 million in net borrowings on our Floorplan lines (representing the net cash activity in our floorplan offset accounts), $32.5 million of net borrowings on our Acquisition Line, $17.8 million of net borrowings of real estate debt, and $4.6$29.4 million of net borrowings of other debt. These inflows were partially offset by cash outflows of $40.1 million to repurchase our Company's common stock and $15.2 million for dividend payments.
For the sixnine months ended JuneSeptember 30, 2016, we used $55.3$222.1 million in net cash flow fromfor financing activities. On an adjusted basis for the same period, we used $62.8 million in net cash for financing activities, primarily related to cash outflows of $115.2$127.6 million to repurchase our Company's common stock $2.6 million of net payments of other debt, and $10.1$15.1 million for dividend payments. These cash outflows were partially offset by cash inflows of $47.2$50.4 million in net borrowings on our Floorplan Line $10.0 million of net borrowings on our Acquisition Line and $18.5 million in net borrowings of long-term debt related to real estate loans. Adjusting for $25.2 million of cash outflows from net repayments associated with our non-OEM floorplan notes payable, the adjusted cash flow from financing activities associated with our Floorplan Line was $72.4 million (representing the net cash activity in our floorplan offset accounts). In total, we used $30.1, $23.8 million in adjusted net cash flow from financing activities.borrowings of real estate debt, and $7.8 million of net borrowings of other debt.

Credit Facilities, Debt Instruments and Other Financing Arrangements. Our various credit facilities, debt instruments and other financing arrangements are used to finance the purchase of inventory and real estate, provide acquisition funding and provide working capital for general corporate purposes.
Revolving Credit Facility. Our revolving credit facility provides a total borrowing capacity of $1.8 billion and expires on June 17, 2021 (the "Revolving Credit Facility"). The Revolving Credit Facility, which is comprised of 24 financial institutions, including six manufacturer-affiliated finance companies, consists of two tranches, providing a maximum of $1.75 billion for U.S. vehicle inventory floorplan financing (“Floorplan Line”), as well as a maximum of $360.0 million and a minimum of $50.0 million for working capital and general corporate purposes, including acquisitions (“Acquisition Line”). The capacity under these two tranches can be re-designated within the overall $1.8 billion commitment, subject to the aforementioned limits. Up to $125.0 million of the Acquisition Line can be borrowed in either euros or British pound sterling. The Revolving Credit Facility can be expanded to a maximum commitment of $2.1 billion, subject to participating lender approval. The Floorplan Line bears interest at rates equal to the LIBOR plus 125 basis points for new vehicle inventory and the LIBOR plus 150 basis points for used vehicle inventory. The Acquisition Line bears interest at the LIBOR plus 150 basis points plus a margin that ranges from zero to 100 basis points, depending on our total adjusted leverage ratio, for borrowings in U.S. dollars and a LIBOR equivalent plus 125 to 250 basis points, depending on our total adjusted leverage ratio, on borrowings in euros or British pound sterling. The Floorplan Line requires a commitment fee of 0.15% per annum on the unused portion. The Acquisition Line also requires a commitment fee ranging from 0.20% to 0.45% per annum, depending on our total adjusted leverage ratio, based on a minimum commitment of $50.0 million less outstanding borrowings.
After considering the outstanding balance of $1,147.1$1,017.2 million at JuneSeptember 30, 2017, we had $292.9$422.8 million of available floorplan borrowing capacity under the Floorplan Line. Included in the $292.9$422.8 million available borrowings under the Floorplan Line was $55.6$46.2 million of immediately available funds. The weighted average interest rate on the Floorplan Line was 2.5% as of JuneSeptember 30, 2017, excluding the impact of our interest rate derivative instruments. With regards to the Acquisition Line, there were $32.5$33.5 million borrowings outstanding as of JuneSeptember 30, 2017. After considering $29.3 million of outstanding letters of credit and other factors included in our available borrowing base calculation, there was $298.8$297.1 million of available borrowing capacity under the Acquisition Line as of JuneSeptember 30, 2017. The amount of available borrowing capacity under the Acquisition Line is limited from time to time based upon certain debt covenants.
All of our U.S. dealership-owning subsidiaries are co-borrowers under the Revolving Credit Facility. Our obligations under the Revolving Credit Facility are secured by essentially all of our U.S. personal property (other than equity interests in dealership-owning subsidiaries), including all motor vehicle inventory and proceeds from the disposition of dealership-owning

subsidiaries, excluding inventory financed directly with manufacturer-affiliates and other third-party financing institutions. The Revolving Credit Facility contains a number of significant covenants that, among other things, restrict our ability to make disbursements outside of the ordinary course of business, dispose of assets, incur additional indebtedness, create liens on assets, make investments and engage in mergers or consolidations. We are also required to comply with specified financial tests and ratios defined in the Revolving Credit Facility, such as the fixed charge coverage and total adjusted leverage ratios. Further, the Revolving Credit Facility restricts our ability to make certain payments, such as dividends or other distributions of assets, properties, cash, rights, obligations or securities (“Restricted Payments”). The Restricted Payments cannot exceed the sum of $208.5 million plus (or minus if negative) (a) one-half of the aggregate consolidated net income for the period beginning on April 1, 2014 and ending on the date of determination and (b) the amount of net cash proceeds received from the sale of capital stock after June 2, 2014 and ending on the date of determination less (c) cash dividends and share repurchases after June 2, 2014 (“Credit Facility Restricted Payment Basket”). For purposes of the calculation of the Credit Facility Restricted Payment Basket, net income represents such amounts per our consolidated financial statements, adjusted to exclude our foreign operations, non-cash interest expense, non-cash asset impairment charges, and non-cash stock-based compensation. As of JuneSeptember 30, 2017, the Credit Facility Restricted Payment Basket totaled $120.6$134.4 million.
As of JuneSeptember 30, 2017, we were in compliance with all our financial covenants, including:
 As of JuneSeptember 30, 2017
 Required Actual
Total Adjusted Leverage Ratio< 5.50 3.823.72
Fixed Charge Coverage Ratio> 1.20 2.412.43
Based upon our current five-year operating and financial projections, we believe that we will remain compliant with such covenants in the future.
Ford Motor Credit Company Facility. Our floorplan financing arrangement ("FMCC Facility") with Ford Motor Credit Company ("FMCC") provides for the financing of, and is collateralized by, our U.S. Ford new vehicle inventory, including affiliated brands. This arrangement provides for $300.0 million of floorplan financing and is an evergreen arrangement that may be canceled with 30 days' notice by either party. As of JuneSeptember 30, 2017, we had an outstanding balance of $164.2$131.7 million under the FMCC Facility with an available floorplan borrowing capacity of $135.9$168.3 million. Included in the $135.9$168.3 million available borrowings under the FMCC Facility was $21.0$22.0 million of immediately available funds. This facility bears interest at a rate of Prime plus 150 basis points minus certain incentives. The interest rate on the FMCC Facility was 5.75% before considering the applicable incentives as of JuneSeptember 30, 2017.
The following table summarizes the position of our U.S. credit facilities as of JuneSeptember 30, 2017. 
 As of June 30, 2017 As of September 30, 2017
U.S. Credit Facilities 
Total
Commitment
 Outstanding Available 
Total
Commitment
 Outstanding Available
   (In thousands)     (In thousands)  
Floorplan Line (1)
 $1,440,000
 $1,147,084
 $292,916
 $1,440,000
 $1,017,215
 $422,785
Acquisition Line (2)
 360,000
 61,186
 298,814
 360,000
 62,861
 297,139
Total Revolving Credit Facility 1,800,000
 1,208,270
 591,730
 1,800,000
 1,080,076
 719,924
FMCC Facility (3)
 300,000
 164,150
 135,850
 300,000
 131,732
 168,268
Total U.S. Credit Facilities (4)
 $2,100,000
 $1,372,420
 $727,580
 $2,100,000
 $1,211,808
 $888,192

(1)The available balance at JuneSeptember 30, 2017 includes $55.6$46.2 million of immediately available funds.
(2)The outstanding balance of $61.2$62.9 million is related to outstanding letters of credit of $29.3 million and $31.9$33.5 million in borrowings as of JuneSeptember 30, 2017. The borrowings outstanding under the Acquisition Line represent 25.0 million British pound sterling translated at the spot rate on the day borrowed, solely for the purpose of calculating the Outstanding and Available borrowings under the Acquisition Line. The available borrowings may be limited from time to time, based on certain debt covenants.
(3)The available balance at JuneSeptember 30, 2017 includes $21.0$22.0 million of immediately available funds.
(4)The outstanding balance excludes $256.9$260.0 million of borrowings with manufacturer-affiliates and third-party financial institutions for foreign and rental vehicle financing not associated with any of our U.S. credit facilities.
Other Inventory Credit Facilities. We have credit facilities with BMW Financial Services NA, LLC ("BMWFS"), Volkswagen Finance, Toyota Motor Credit Corporation, FMCC and a third-party financial institution for the financing of new, used and rental vehicle inventories related to our U.K. operations. These facilities are denominated in British pound sterling and are evergreen arrangements that may be canceled with notice by either party and bear interest at a base rate, plus a surcharge that varies based upon the type of vehicle being financed. The annual interest rates charged on borrowings outstanding under

these facilities, after the grace period of zero to 30 days, range from 1.25% to 3.95%. As of JuneSeptember 30, 2017, borrowings outstanding under these facilities totaled $126.1$123.1 million.

We have credit facilities with financial institutions in Brazil, most of which are affiliated with the manufacturers, for the financing of new, used and rental vehicle inventories related to our Brazilian operations. These facilities are denominated in Brazilian real and have renewal terms ranging from one month to twelve months. They may be canceled with notice by either party and bear interest at a benchmark rate, plus a surcharge that varies based upon the type of vehicle being financed. As of JuneSeptember 30, 2017, the annual interest rates charged on borrowings outstanding under these facilities, after the grace period of zero to 90 days, range from 14.67%12.67% to 19.70%18.86%. As of JuneSeptember 30, 2017, borrowings outstanding under these facilities totaled $18.3$22.5 million.
Other Inventory Financing Arrangements. Excluding rental vehicles financed through the Revolving Credit Facility, financing for U.S. rental vehicles is typically obtained directly from the automobile manufacturers. These financing arrangements generally require small monthly payments and mature in varying amounts over a period of two years. As of JuneSeptember 30, 2017, the interest rate charged on borrowings related to our rental vehicle fleet varies up to 5.75%. Rental vehicles are typically transferred to used vehicle inventory when they are removed from service and repayment of the borrowing is required at that time. As of JuneSeptember 30, 2017, borrowings outstanding under these facilities totaled $112.5$114.3 million.
5.00% Senior Notes. On June 2, 2014, we issued $350.0 million aggregate principal amount of our 5.00% senior notes due June 1, 2022 ("5.00% Notes"). Subsequently, on September 9, 2014, we issued an additional $200.0 million of 5.00% Notes at a discount of 1.5% from face value. The 5.00% Notes pay interest semiannually, in arrears, in cash on each June 1 and December 1, beginning December 1, 2014. On or after June 1, 2017, we may redeem some or all of the 5.00% Notes at specified prices, plus accrued and unpaid interest. We may be required to purchase the 5.00% Notes if we sell certain assets or trigger the change in control provisions defined in the 5.00% Notes indenture. The 5.00% Notes are senior unsecured obligations and rank equal in right of payment to all of our existing and future senior unsecured debt and senior in right of payment to all of our future subordinated debt. The 5.00% Notes are guaranteed by substantially all of our U.S. subsidiaries. The U.S. subsidiary guarantees rank equally in the right of payment to all of our U.S. subsidiary guarantor’s existing and future subordinated debt. In addition, the 5.00% Notes are structurally subordinated to the liabilities of our non-guarantor subsidiaries and are subject to customary covenants, including a restricted payment basket and debt limitations. The restricted payment basket calculation under the terms of the 5.00% Notes is the same as under the Credit Facility Restricted Payment Basket. The 5.00% Notes were registered with the Securities and Exchange Commission in June 2015. The 5.00% Notes are presented net of unamortized underwriters' fees, discount and debt issuance costs, which are being amortized over a period of eight years in conjunction with the term of the 5.00% Notes, of $8.7$8.3 million as of JuneSeptember 30, 2017.
5.25% Senior Notes. On December 8, 2015, we issued $300.0 million aggregate principal amount of our 5.25% senior notes due to mature on December 15, 2023 ("5.25% Notes") in a private placement exempt from the registration requirements of the SEC. The 5.25% Notes and the related guarantees have not been, and will not be, registered under the Securities Act or the securities laws of any other jurisdiction. The 5.25% Notes pay interest semiannually, in arrears, in cash on each June 15 and December 15, beginning June 15, 2016. Using proceeds of certain equity offerings, we may redeem up to 35.0% of the 5.25% Notes prior to December 15, 2018, subject to certain conditions, at a redemption price equal to 105.25% of principal amount of the 5.25% Notes plus accrued and unpaid interest. Otherwise, we may redeem some or all of the 5.25% Notes prior to December 15, 2018 at a redemption price equal to 100% of the principal amount of the 5.25% Notes redeemed, plus an applicable make-whole premium, plus accrued and unpaid interest. On or after December 15, 2018, we may redeem some or all of the 5.25% Notes at specified prices, plus accrued and unpaid interest. We may be required to purchase the 5.25% Notes if we sell certain assets or trigger the change in control provisions defined in the 5.25% Notes indenture. The 5.25% Notes are senior unsecured obligations and rank equal in right of payment to all of our existing and future senior unsecured debt and senior in right of payment to all of our future subordinated debt. The 5.25% Notes are guaranteed by substantially all of our U.S. subsidiaries. The U.S. subsidiary guarantees rank equally in the right of payment to all of our U.S. subsidiary guarantor’s existing and future subordinated debt. In addition, the 5.25% Notes are structurally subordinated to the liabilities of our non-guarantor subsidiaries and are subject to customary covenants, including a restricted payment basket and debt limitations. The restricted payment basket calculation under the terms of the 5.25% Notes is the same as under the Credit Facility Restricted Payment Basket. The 5.25% Notes are presented net of unamortized underwriters' fees and debt issuance costs, which are being amortized over a period of eight years in conjunction with the term of the 5.25% Notes, of $4.1$4.0 million as of JuneSeptember 30, 2017.
Real Estate Related and Other Long-Term Debt. We have entered into separate term mortgage loans in the U.S. with three of our manufacturer-affiliated finance partners, Toyota Motor Credit Corporation, BMWFS and FMCC, as well as several third-party financial institutions. These mortgage loans may be expanded for borrowings related to specific buildings and/or properties and are guaranteed by us. Each mortgage loan was made in connection with, and is secured by mortgage liens on, the real property owned by us that is mortgaged under the loans. These mortgage loans bear interest at fixed rates between 3.00%

and 4.69%, and at variable indexed rates plus a spread between 1.50% and 2.50% per annum and mature between November 2017 and December 2024. As of JuneSeptember 30, 2017, the aggregate outstanding balance under these mortgage loans was $312.9$318.5 million, with $29.0$29.4 million classified as a current maturity of long-term debt in the accompanying Consolidated Balance Sheets. These mortgage loans are presented net of unamortized underwriters' fees, discount and debt issuance costs, which are being amortized over the terms of the mortgage loans, of $0.6 million as of JuneSeptember 30, 2017.

Additionally, we have entered into 1516 separate term mortgage loans in the U.K. with other third-party financial institutions which are secured by our U.K. properties. These mortgage loans (collectively, “U.K. Notes”) are denominated in British pound sterling and are being repaid in monthly installments that will mature by September 2034. As of JuneSeptember 30, 2017, borrowings under the U.K. Notes totaled $63.8$80.4 million, with $5.8$7.4 million classified as a current maturity of long-term debt in the accompanying Consolidated Balance Sheets.
In addition to the real estate related and other long-term debt, we have two short-term revolving working capital loan agreements and an unsecured loan agreement with a third-party financial institutioninstitutions in the U.K. and U.S., respectively. As of JuneSeptember 30, 2017, short-term borrowings under the U.K. and U.S. third-party loans totaled $12.9 million. For the six months ended June 30, 2017, we made additional borrowings of $5.1$13.2 million and made no principal payments.$25.1 million, respectively, and are included in current maturities of long-term debt and short-term financing in the Company's Consolidated Balance Sheets.
We have also entered into a separate term mortgage loan in Brazil with a third-party financial institution to finance the purchase and construction of dealership properties (the "Brazil Note"). The Brazil Note is denominated in Brazilian real and is secured by one of our Brazilian properties as purchased and/or constructed, as well as a guarantee from us. The Brazil Note is being repaid in monthly installments that will mature by April 2025. As of JuneSeptember 30, 2017, borrowings under the Brazil Note totaled $3.5$3.6 million, with $0.4$0.3 million classified as a current maturity of long-term debt in the accompanying Consolidated Balance Sheets.
We also have a working capital loan agreement with a third-party financial institution in Brazil. The principal balance on this loan is due by February 2020 with interest only payments being made quarterly until the due date. As of JuneSeptember 30, 2017, borrowings under the Brazilian third-party loan totaled $6.7$7.0 million classified as long-term debt in the accompanying Consolidated Balance Sheets.
Stock Issuances. No shares of our common stock were issued during the three months ended JuneSeptember 30, 2017 or JuneSeptember 30, 2016.
Stock Repurchases. From time to time, our Board of Directors gives authorization to repurchase shares of our common stock, subject to the restrictions of various debt agreements and our judgment. We issue new shares or treasury shares, if available, when restricted stock vests. With respect to shares issued under the Employee Stock Purchase Plan, as amended (the "Purchase Plan", formerly named the 1998 Employee Stock Purchase Plan), our Board of Directors has authorized specific share repurchases to fund the shares issuable under the Purchase Plan.
During the three months ended JuneSeptember 30, 2017, we repurchased 629,29820,000 shares at an average price of $62.01$53.46 per share, for a total of $39.0 million. These repurchases include 231,759 shares repurchased under the prior $150.0 million authorization for a total cost of $14.7$1.1 million. In May 2017, our Board of Directors approved a new authorization of $75.0 million for the purchase of our common shares, replacing the prior $150.0 million authorization. As of JuneSeptember 30, 2017, we have $50.7$49.6 million of repurchase authorization remaining. Future repurchases are subject to the discretion of our Board of Directors after considering our results of operations, financial condition, cash flows, capital requirements, existing debt covenants, outlook for our business, general business conditions and other factors. These stock repurchase amounts exclude 27,338 shares received this year in net settlement of pre-acquisition contingencies related to our 2013 acquisition of UAB Motors.
Dividends. The payment of dividends is subject to the discretion of our Board of Directors after considering the results of operations, financial condition, cash flows, capital requirements, outlook for our business, general business conditions, the political and legislative environments and other factors.
Further, we are limited under the terms of the Revolving Credit Facility, certain mortgage loans, 5.00% Notes and 5.25% Notes in our ability to make cash dividend payments to our stockholders and to repurchase shares of our outstanding common stock. As of JuneSeptember 30, 2017, the restricted payment baskets limit us to $120.6$134.4 million in restricted payments. Generally, these restricted payment baskets will increase in future periods by 50.0% of our future cumulative net income, adjusted to exclude our foreign operations, non-cash interest expense, non-cash asset impairment charges, and non-cash stock-based compensation, plus the net proceeds received from the sale of our capital stock, and decrease by the amount of future payments for cash dividends and share repurchases. For the sixnine months ended JuneSeptember 30, 2017, we paid dividends of $9.8$14.7 million to common stock shareholders and $0.4$0.5 million to unvested restricted stock award holders.
Non-GAAP Financial Measures
In addition to evaluating the financial condition and results of our operations in accordance with U.S. GAAP, from time to time our management evaluates and analyzes results and any impact on the Company of strategic decisions and actions relating to, among other things, cost reduction, growth, and profitability improvement initiatives, and other events outside of normal, or "core,

"core," business and operations, by considering alternative financial measures not prepared in accordance with U.S. GAAP. In our evaluation of results from time to time, we exclude items that do not arise directly from core operations, such as non-cash asset impairment charges, gains and losses on dealership franchise or real estate transactions, and catastrophic events, such as hail storms, hurricanes, and snow storms. Because these non-core charges and gains materially affect the Company's financial condition or results in the specific period in which they are recognized, management also evaluates, and makes resource

allocation and performance evaluation decisions based on, the related non-GAAP measures excluding such items. This includes evaluating measures such as adjusted selling, general and administrative expenses, adjusted net income, adjusted diluted income per share, adjusted cash flows from operating, investing and financing activities and constant currency. These adjusted measures are not measures of financial performance under U.S. GAAP, but are instead considered non-GAAP financial performance measures. Non-GAAP measures do not have definitions under U.S. GAAP and may be defined differently by and not be comparable to similarly titled measures used by other companies. As a result, any non-GAAP financial measures considered and evaluated by management are reviewed in conjunction with a review of the most directly comparable measures calculated in accordance with U.S. GAAP. We caution investors not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable U.S. GAAP measures.
In addition to using such non-GAAP measures to evaluate results in a specific period, management believes that such measures may provide more complete and consistent comparisons of operational performance on a period-over-period historical basis and a better indication of expected future trends. Our management also uses these adjusted measures in conjunction with U.S. GAAP financial measures to assess our business, including communication with our Board of Directors, investors and industry analysts concerning financial performance. We disclose these non-GAAP measures, and the related reconciliations, because we believe investors use these metrics in evaluating longer-term period-over-period performance, and to allow investors to better understand and evaluate the information used by management to assess operating performance. The exclusion of certain expenses in the calculation of non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. We anticipate excluding these expenses in the future presentation of our non-GAAP financial measures.
In addition, we evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our underlying business and results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our current period reported results for entities reporting in currencies other than U.S. dollars using comparative period exchange rates rather than the actual exchange rates in effect during the respective periods. The constant currency performance measures should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with U.S. GAAP.

The following tables reconcile certain reported non-GAAP measures to the most comparable U.S. GAAP measure from our Statements of Operations by segment and on a consolidated basis (dollars in thousands, except per share amounts). Only adjusted amounts are reconciled below:
   U.S. Adjustments for   U.S. Adjustments for
 Three Months Ended June 30, 2017 Three Months Ended September 30, 2017
 U.S. GAAP Catastrophic events Non-GAAP Adjusted U.S. GAAP Catastrophic events Gain / loss on real estate and dealership transactions Legal settlements Non-cash asset impairment Allowance for uncertain tax positions Non-GAAP Adjusted
Finance, insurance and other revenues, net $96,383
 $6,550
 $
 $
 $
 $
 $102,933
Selling, general and administrative expenses $243,844
 $(643) $243,201
 261,787
 (8,149) (798) (720) 
 
 252,120
Asset impairments 9,526
 
 
 
 (9,526) 
 
Income from operations 84,703
 643
 85,346
 69,874
 14,699
 798
 720
 9,526
 
 95,617
Income before income taxes 56,069
 643
 56,712
 41,133
 14,699
 798
 720
 9,526
 
 66,876
Provision for income taxes (21,696) (250) (21,946)
Benefit (provision) for income taxes (16,258) (5,677) (301) (270) (3,579) 834
 (25,251)
Net income $34,373
 $393
 $34,766
 $24,875
 $9,022
 $497
 $450
 $5,947
 $834
 $41,625
                    
SG&A as % Gross Profit: 71.6   71.4
 74.0           70.0
Operating Margin %: 4.0   4.0
 3.0           4.1
Pretax Margin %: 2.6   2.7
 1.8           2.9
                    
Same Store Finance, insurance and other revenues, net $95,195
 $6,550
 $
 $
 $
 $
 $101,745
Same Store SG&A $242,734
 $(643) $242,091
 258,862
 (8,149) (798) (720) 
 
 249,195
Same Store SG&A as % Gross Profit: 71.5
   71.3
 74.0
           69.9
                    
Same Store income from operations $85,123
 $643
 $85,766
 $69,440
 $14,699
 $798
 $720
 $9,526
 $
 $95,183
Same Store Operating Margin %: 4.0
   4.1
 3.0
           4.2
    U.K. Adjustments for  
  Three Months Ended June 30, 2017
  U.S. GAAP Acquisition costs Non-GAAP Adjusted
Selling, general and administrative expenses $42,456
 $(288) $42,168
Income from operations 6,666
 288
 6,954
Income before income taxes 4,929
 288
 5,217
Provision for income taxes (806) 
 (806)
Net income $4,123
 $288
 $4,411
       
SG&A as % Gross Profit: 83.4
   82.8
Operating Margin %: 1.5
   1.6
Pretax Margin %: 1.1
   1.2
       
Same Store SG&A $40,612
 $(288) $40,324
Same Store SG&A as % Gross Profit: 82.6
   82.0
       
Same Store income from operations $6,852
 $288
 $7,140
Same Store Operating Margin %: 1.6
   1.7


   Consolidated Adjustments for   Consolidated Adjustments for
 Three Months Ended June 30, 2017 Three Months Ended September 30, 2017
 U.S. GAAP Catastrophic events Acquisition costs Non-GAAP Adjusted U.S. GAAP Catastrophic events Gain / loss on real estate and dealership transactions Legal settlements Non-cash asset impairment Allowance for uncertain tax positions Non-GAAP Adjusted
Finance, insurance and other revenues, net $110,993
 $6,550
 $
 $
 $
 $
 $117,543
Selling, general and administrative expenses $298,568
 $(643) $(288) $297,637
 328,327
 (8,149) (798) (720) 
 
 318,660
Asset impairments 9,526
 
 
 
 (9,526) 
 
Income from operations 92,231
 643
 288
 93,162
 78,508
 14,699
 798
 720
 9,526
 
 104,251
Income before income taxes 61,690
 643
 288
 62,621
 47,143
 14,699
 798
 720
 9,526
 
 72,886
Provision for income taxes (22,557) (250) 
 (22,807)
Benefit (provision) for income taxes (17,262) (5,677) (301) (270) (3,579) 834
 (26,255)
Net income $39,133
 $393
 $288
 $39,814
 $29,881
 $9,022
 $497
 $450
 $5,947
 $834
 $46,631
Less: Adjusted earnings allocated to participating securities 1,389
 14
 10
 1,413
 1,023
 311
 17
 16
 206
 30
 1,603
Adjusted net income available to diluted common shares $37,744
 $379
 $278
 $38,401
 $28,858
 $8,711
 $480
 $434
 $5,741
 $804
 $45,028
                      
Diluted income per common share $1.84
 $0.02
 $0.01
 $1.87
 $1.43
 $0.44
 $0.02
 $0.02
 $0.28
 $0.04
 $2.23
                      
Effective tax rate % 36.6
     36.4
 36.6
           36.0
                      
SG&A as % Gross Profit: 73.7
     73.5
 76.1
           72.8
Operating Margin %: 3.5
     3.5
 2.6
           3.5
Pretax Margin %: 2.3
     2.3
 1.6
           2.4
                      
Same Store Finance, insurance and other revenues, net $106,839
 $6,550
 $
 $
 $
 $
 $113,389
Same Store SG&A $295,041
 $(643) $(288) $294,110
 313,146
 (8,149) (798) (720) 
 
 303,479
Same Store SG&A as % Gross Profit: 73.4
     73.2
 75.5
           72.0
                      
Same Store income from operations $93,181
 $643
 $288
 $94,112
 $78,068
 $14,699
 $798
 $720
 $9,526
 $
 $103,811
Same Store Operating Margin %: 3.5
     3.6
 2.7
           3.6

   U.S. Adjustments for   U.S. Adjustments for
 Six Months Ended June 30, 2017 Nine Months Ended September 30, 2017
 U.S. GAAP Catastrophic events Legal settlement Non-GAAP Adjusted U.S. GAAP Catastrophic events Gain / loss on real estate and dealership transactions 
Legal settlements (1)
 Non-cash asset impairment Allowance for uncertain tax positions Non-GAAP Adjusted
Finance, insurance and other revenues, net $276,754
 $6,550
 $
 $
 $
 $
 $283,304
Selling, general and administrative expenses $480,117
 $(643) $1,833
 $481,307
 741,904
 (8,792) (798) 1,113
 
 
 733,427
Asset impairments 9,526
 
 
 
 (9,526) 
 
Income (loss) from operations 157,459
 643
 (1,833) 156,269
 227,333
 15,341
 798
 (1,113) 9,526
 
 251,885
Income (loss) before income taxes 101,675
 643
 (1,833) 100,485
 142,808
 15,341
 798
 (1,113) 9,526
 
 167,360
Benefit (provision) for income taxes (38,043) (250) 696
 (37,597) (54,301) (5,926) (301) 426
 (3,579) 834
 (62,847)
Net income (loss) $63,632
 $393
 $(1,137) $62,888
 $88,507
 $9,415
 $497
 $(687) $5,947
 $834
 $104,513
                      
SG&A as % Gross Profit: 72.6     72.8
 73.1           71.8
Operating Margin %: 3.8     3.8
 3.6           3.9
Pretax Margin %: 2.5     2.5
 2.2           2.6
                      
Same Store Finance, insurance and other revenues, net $274,464
 $6,550
 $
 $
 $
 $
 $281,014
Same Store SG&A $478,685
 $(643) $1,833
 $479,875
 737,548
 (8,792) (798) 1,113
 
 
 729,071
Same Store SG&A as % Gross Profit: 72.6
     72.7
 73.1
           71.7
                      
Same Store income (loss) from operations $157,964
 $643
 $(1,833) $156,774
 $227,404
 $15,341
 $798
 $(1,113) $9,526
 $
 $251,956
Same Store Operating Margin %: 3.9
     3.8
 3.6
           4.0

    U.K. Adjustments for  
  Nine Months Ended September 30, 2017
  U.S. GAAP Acquisition costs Non-GAAP Adjusted
Selling, general and administrative expenses $137,475
 $(288) $137,187
Income from operations 21,554
 288
 21,842
Income before income taxes 15,745
 288
 16,033
Provision for income taxes (2,781) 
 (2,781)
Net income $12,964
 $288
 $13,252
       
SG&A as % Gross Profit: 83.4
   83.2
Operating Margin %: 1.5
   1.5
Pretax Margin %: 1.1
   1.1
       
Same Store SG&A $113,338
 $(288) $113,050
Same Store SG&A as % Gross Profit: 80.0
   79.8
       
Same Store income from operations $23,488
 $288
 $23,776
Same Store Operating Margin %: 1.9
   1.9




    U.K. Adjustments for  
  Six Months Ended June 30, 2017
  U.S. GAAP Acquisition costs Non-GAAP Adjusted
Selling, general and administrative expenses $84,080
 $(288) $83,792
Income from operations 13,662
 288
 13,950
Income before income taxes 10,310
 288
 10,598
Provision for income taxes (1,676) 
 (1,676)
Net income $8,634
 $288
 $8,922
       
SG&A as % Gross Profit: 83.1
   82.8
Operating Margin %: 1.5
   1.6
Pretax Margin %: 1.2
   1.2
       
Same Store SG&A $71,800
 $(288) $71,512
Same Store SG&A as % Gross Profit: 79.1
   78.7
       
Same Store income from operations $15,938
 $288
 $16,226
Same Store Operating Margin %: 2.0
   2.0
   Consolidated Adjustments for   Consolidated Adjustments for
 Six Months Ended June 30, 2017 Nine Months Ended September 30, 2017
 U.S. GAAP Catastrophic events Acquisition costs 
Legal settlements (1)
 Non-GAAP Adjusted U.S. GAAP Catastrophic events Gain / loss on real estate and dealership transactions Acquisition costs 
Legal settlements (1)
 Non-cash asset impairment Allowance for uncertain tax positions Non-GAAP Adjusted
Finance, insurance and other revenues, net $314,297
 $6,550
 $
 $
 $
 $
 $
 $320,847
Selling, general and administrative expenses $588,347
 $(643) $(288) $1,833
 $589,249
 916,674
 (8,792) (798) (288) 1,113
 
 
 907,909
Asset impairments 9,526
 
 
 
 
 (9,526) 
 
Income (loss) from operations 172,368
 643
 288
 (1,833) 171,466
 250,876
 15,341
 798
 288
 (1,113) 9,526
 
 275,716
Income (loss) before income taxes 112,886
 643
 288
 (1,833) 111,984
 160,029
 15,341
 798
 288
 (1,113) 9,526
 
 184,869
Benefit (provision) for income taxes (39,814) (250) 
 696
 (39,368) (57,076) (5,926) (301) 
 426
 (3,579) 834
 (65,622)
Net income (loss) $73,072
 $393
 $288
 $(1,137) $72,616
 $102,953
 $9,415
 $497
 $288
 $(687) $5,947
 $834
 $119,247
Less: Adjusted earnings (loss) allocated to participating securities 2,645
 14
 11
 (42) 2,628
 3,659
 340
 18
 10
 (25) 215
 31
 4,248
Adjusted net income (loss) available to diluted common shares $70,427
 $379
 $277
 $(1,095) $69,988
 $99,294
 $9,075
 $479
 $278
 $(662) $5,732
 $803
 $114,999
                          
Diluted income (loss) per common share $3.42
 $0.02
 $0.01
 $(0.05) $3.40
 $4.85
 $0.44
 $0.03
 $0.02
 $(0.03) $0.27
 $0.04
 $5.62
                          
Effective tax rate % 35.3
       35.2
 35.7
             35.5
                          
SG&A as % Gross Profit: 74.6
       74.7
 75.1
             74.0
Operating Margin %: 3.3
       3.3
 3.1
             3.4
Pretax Margin %: 2.2
       2.2
 2.0
             2.3
                          
Same Store Finance, insurance and other revenues, net $306,875
 $6,550
 $
 $
 $
 $
 $
 $313,425
Same Store SG&A $572,432
 $(643) $(288) $1,833
 $573,334
 885,579
 (8,792) (798) (288) 1,113
 
 
 876,814
Same Store SG&A as % Gross Profit: 73.8
       74.0
 74.4
             73.3
                          
Same Store income (loss) from operations $93,181
 $643
 $288
 $(1,833) $92,279
 $78,068
 $15,341
 $798
 $288
 $(1,113) $9,526
 $
 $102,908
Same Store Operating Margin %: 3.5
       3.4
 3.2
             3.5
(1) For the sixnine months ended JuneSeptember 30, 2017, we recognized a net pre-tax gain related to a settlement with an OEM of $1.8 million.


   U.S. Adjustments for     U.S. Adjustments for  
 Three Months Ended June 30, 2016 Three Months Ended September 30, 2016
 U.S. GAAP Catastrophic events Gain / loss on real estate and dealership transactions Non-cash asset impairment Non-GAAP Adjusted U.S. GAAP Catastrophic events Gain / loss on real estate and dealership transactions Non-cash asset impairment Non-GAAP Adjusted
Selling, general and administrative expenses $245,389
 $(2,769) $(250) $
 $242,370
 $246,501
 $(450) $1,176
 $
 $247,227
Asset impairments 1,024
 
 
 (1,024) 
 10,855
 
 (62) (10,793) 
Income from operations 87,542
 2,769
 250
 1,024
 91,585
Income before income taxes 61,784
 2,769
 250
 1,024
 65,827
Provision for income taxes (22,854) (1,042) (94) (391) (24,381)
Net income $38,930
 $1,727
 $156
 $633
 $41,446
Income (loss) from operations 78,308
 450
 (1,114) 10,793
 88,437
Income (loss) before income taxes 52,619
 450
 (1,114) 10,793
 62,748
Benefit (provision) for income taxes (19,722) (169) 418
 (4,047) (23,520)
Net income (loss) $32,897
 $281
 $(696) $6,746
 $39,228
                    
SG&A as % Gross Profit: 71.2
       70.3
 71.1
       71.3
Operating Margin %: 4.0
       4.1
 3.4
       3.9
Pretax Margin %: 2.8
       3.0
 2.3
       2.8
                    
2016 v. 2017                    
Same Store SG&A $240,987
 $(2,769) $(250) $
 $237,968
 $243,151
 $(450) $
 $
 $242,701
Same Store SG&A as % Gross Profit: 70.9
       70.0
 71.0
       70.8
                    
Same Store income from operations $87,666
 $2,769
 $250
 $1,024
 $91,709
 $77,817
 $450
 $
 $10,793
 $89,060
Same Store Operating Margin %: 4.0
       4.2
 3.5
       4.0
   Brazil Adjustments for     
Brazil Adjustments for

  
 Three Months Ended June 30, 2016 Three Months Ended September 30, 2016
 U.S. GAAP Foreign deferred income tax benefit Non-GAAP Adjusted U.S. GAAP Foreign transaction tax Non-GAAP Adjusted
Benefit (provision) for income taxes $1,958
 $(1,686) $272
Selling, general and administrative expenses $12,896
 $(274) $12,622
Income (loss) from operations (696) 274
 (422)
Income (loss) before income taxes (854) 274
 (580)
Net income (loss) $1,307
 $(1,686) $(379) $(751) $274
 $(477)
      
SG&A as % Gross Profit: 103.6
   101.4
Operating Margin %: (0.6)   (0.4)
Pretax Margin %: (0.8)   (0.5)
      
2016 v. 2017      
Same Store SG&A $11,762
 $(274) $11,488
Same Store SG&A as % Gross Profit: 101.4
   99.1
      
Same Store income (loss) from operations $(418) $274
 $(144)
Same Store Operating Margin %: (0.4)
   (0.1)

   Consolidated Adjustments for     Consolidated Adjustments for  
 Three Months Ended June 30, 2016 Three Months Ended September 30, 2016
 U.S. GAAP Catastrophic events Gain / loss on real estate and dealership transactions Foreign deferred income tax benefit Non-cash asset impairment Non-GAAP Adjusted U.S. GAAP Catastrophic events Gain / loss on real estate and dealership transactions Foreign transaction tax Non-cash asset impairment Non-GAAP Adjusted
Selling, general and administrative expenses $299,022
 $(2,769) $(250) $
 $
 $296,003
 $299,006
 $(450) $1,176
 $(274) $
 $299,458
Asset impairments 1,024
 
 
 
 (1,024) 
 10,855
 
 (62) 
 (10,793) 
Income from operations 97,360
 2,769
 250
 
 1,024
 101,403
Income before income taxes 69,062
 2,769
 250
 
 1,024
 73,105
Provision for income taxes (22,482) (1,042) (94) (1,686) (391) (25,695)
Income (loss) from operations 83,916
 450
 (1,114) 274
 10,793
 94,319
Income (loss) before income taxes 55,687
 450
 (1,114) 274
 10,793
 66,090
Benefit (provision) for income taxes (20,321) (169) 418
 
 (4,047) (24,119)
Net income (loss) 46,580
 1,727
 156
 (1,686) 633
 47,410
 35,366
 281
 (696) 274
 6,746
 41,971
Less: Adjusted earnings (loss) allocated to participating securities 1,884
 70
 6
 (68) 26
 1,918
 1,426
 11
 (28) 11
 275
 1,695
Adjusted net income (loss) available to diluted common shares $44,696
 $1,657
 $150
 $(1,618) $607
 $45,492
 $33,940
 $270
 $(668) $263
 $6,471
 $40,276
                        
Diluted income (loss) per common share $2.12
 $0.08
 $0.01
 $(0.08) $0.03
 $2.16
 $1.65
 $0.01
 $(0.03) $0.01
 $0.32
 $1.96
                        
Effective tax rate % 32.6
         35.1
 36.5
         36.5
                        
SG&A as % Gross Profit: 72.9
         72.2
 73.5
         73.6
Operating Margin %: 3.5
         3.6
 3.0
         3.3
Pretax Margin %: 2.5
         2.6
 2.0
         2.3
                        
2016 v. 2017                        
Same Store SG&A $291,844
 $(2,769) $(250) $
 $
 $288,825
 $293,749
 $(450) $
 $(274) $
 $293,025
Same Store SG&A as % Gross Profit: 72.2
         71.5
 73.2
         73.1
                        
Same Store income from operations $98,733
 $2,769
 $250
 $
 $1,024
 $102,776
 $83,876
 $450
   $274
 $10,793
 $95,393
Same Store Operating Margin %: 3.6
         3.8
 3.0
         3.8
   U.S. Adjustments for    U.S. Adjustments for 
 Six Months Ended June 30, 2016 Nine Months Ended September 30, 2016
 U.S. GAAP Catastrophic events Gain / loss on real estate and dealership transactions Acquisition costs Non-cash asset impairment Non-GAAP Adjusted U.S. GAAP Catastrophic events Gain / loss on real estate and dealership transactions Acquisition costs Non-cash asset impairment Non-GAAP Adjusted
Selling, general and administrative expenses $491,229
 $(5,423) $680
 $(30) $
 $486,456
 $737,730
 $(5,873) $1,856
 $(30) $
 $733,683
Asset impairments 1,533
 
 
 
 (1,533) 
 12,389
 
 (62) 
 (12,327) 
Income (loss) from operations 163,308
 5,423
 (680) 30
 1,533
 169,614
 241,616
 5,873
 (1,794) 30
 12,327
 258,052
Income (loss) before income taxes 111,989
 5,423
 (680) 30
 1,533
 118,295
 164,607
 5,873
 (1,794) 30
 12,327
 181,043
Benefit (provision) for income taxes (41,685) (2,038) 255
 (11) (586) (44,065) (61,406) (2,207) 672
 (11) (4,634) (67,586)
Net income (loss) $70,304
 $3,385
 $(425) $19
 $947
 $74,230
 $103,201
 $3,666
 $(1,122) $19
 $7,693
 $113,457
                        
SG&A as % Gross Profit: 72.5
         71.8
 72.0
         71.6
Operating Margin %: 3.8
         4.0
 3.7
         3.9
Pretax Margin %: 2.6
         2.8
 2.5
         2.8
                        
2016 v. 2017                        
Same Store SG&A $482,012
 $(5,423) $(385) $(30) $
 $476,174
 $725,162
 $(5,873) $(384) $(30) $
 $718,875
Same Store SG&A as % Gross Profit: 72.2         71.3
 71.8         71.2
                        
Same Store income from operations $163,332
 $5,423
 $385
 $30
 $1,534
 $170,704
 $241,149
 $5,873
 $385
 $30
 $12,327
 $259,764
Same Store Operating Margin %: 3.9
         4.0
 3.7
         4.0

   U.K. Adjustments for    U.K. Adjustments for 
 Six Months Ended June 30, 2016 Nine Months Ended September 30, 2016
 U.S. GAAP Acquisition costs Non-GAAP Adjusted U.S. GAAP Acquisition costs Non-GAAP Adjusted
Selling, general and administrative expenses $79,545
 $(561) $78,984
 $119,154
 $(561) $118,593
Income from operations 18,170
 561
 18,731
 24,474
 561
 25,035
Income before income taxes 13,449
 561
 14,010
 17,371
 561
 17,932
Net income $10,693
 $561
 $11,254
 $13,913
 $561
 $14,474
            
SG&A as % Gross Profit: 78.7
   78.1
 80.2
   79.8
Operating Margin %: 2.0
   2.1
 1.8
   1.9
Pretax Margin %: 1.5
   1.6
 1.3
   1.3
            
2016 v. 2017            
Same Store SG&A $73,323
 $(561) $72,762
 $112,159
 $(561) $111,598
Same Store SG&A as % Gross Profit: 75.5   74.9 77.9   77.5
            
Same Store income from operations $20,695
 $561
 $21,256
 $27,172
 $561
 $27,733
Same Store Operating Margin %: 2.4   2.5 2.1   2.1
   Brazil Adjustments for     Brazil Adjustments for  
 Six Months Ended June 30, 2016 Nine Months Ended September 30, 2016
 U.S. GAAP Gain / loss on real estate and dealership transactions Foreign deferred income tax benefit Non-GAAP Adjusted U.S. GAAP Gain / loss on real estate and dealership transactions Foreign transaction tax Foreign deferred income tax benefit Non-GAAP Adjusted
Selling, general and administrative expenses $21,913
 $(371) $
 $21,542
 $34,808
 $(372) $(274) $
 $34,162
Asset impairments 423
 (423) 
 
 423
 (423) 
 
 
Income (loss) from operations (2,077) 794
 
 (1,283) (2,773) 795
 274
 
 (1,704)
Income (loss) before income taxes (2,274) 794
 
 (1,480) (3,127) 795
 274
 
 (2,058)
Benefit (provision) for income taxes 2,148
 
 (1,686) 462
 2,250
 
 
 (1,686) 564
Net income (loss) $(126) $794
 $(1,686) $(1,018) $(877) $795
 $274
 $(1,686) $(1,494)
                  
SG&A as % Gross Profit: 105.2
     103.4
 104.6
       102.6
Operating Margin %: (1.0)     (0.6) (0.9)       (0.5)
Pretax Margin %: (1.1)     (0.7) (1.0)       (0.7)
          
2016 v. 2017          
Same Store SG&A $29,192
 $
 $(274) $
 $28,918
Same Store SG&A as % Gross Profit: 97.2
       96.3
          
Same Store income from operations $
 $
 $274
 $
 $274
Same Store Operating Margin %: (0.4)
       (0.1)

   
Consolidated Adjustments for

     
Consolidated Adjustments for

  
 
Six Months Ended June 30, 2016

 
Nine Months Ended September 30, 2016

 U.S. GAAP Catastrophic events Gain / loss on real estate and dealership transactions Acquisition costs Foreign deferred income tax benefit Non-cash asset impairment Non-GAAP Adjusted U.S. GAAP Catastrophic events Gain / loss on real estate and dealership transactions Acquisition costs Foreign transaction tax Foreign deferred income tax benefit Non-cash asset impairment Non-GAAP Adjusted
Selling, general and administrative expenses $592,687
 $(5,423) $310
 $(591) $
 $
 $586,983
 $891,692
 $(5,873) $1,485
 $(591) $(274) $
 $
 $886,439
Asset impairments 1,956
 
 (423) 
 
 (1,533) 
 12,812
 
 (485) 
 
 
 (12,327) 
Income from operations 179,401
 5,423
 113
 591
 
 1,533
 187,061
Income before income taxes 123,164
 5,423
 113
 591
 
 1,533
 130,824
Income (loss) from operations 263,317
 5,873
 (1,000) 591
 274
 
 12,327
 281,382
Income (loss) before income taxes 178,851
 5,873
 (1,000) 591
 274
 
 12,327
 196,916
Benefit (provision) for income taxes (42,293) (2,038) 255
 (11) (1,686) (586) (46,359) (62,614) (2,207) 672
 (11) 
 (1,686) (4,634) (70,480)
Net income (loss) $80,871
 $3,385
 $368
 $580
 $(1,686) $947
 $84,465
 $116,237
 $3,666
 $(328) $580
 $274
 $(1,686) $7,693
 $126,436
Less: Adjusted earnings (loss) allocated to participating securities 3,223
 135
 15
 23
 (67) 38
 3,367
 4,651
 147
 (13) 23
 11
 (68) 310
 5,061
Adjusted net income (loss) available to diluted common shares $77,648
 $3,250
 $353
 $557
 $(1,619) $909
 $81,098
 $111,586
 $3,519
 $(315) $557
 $263
 $(1,618) $7,383
 $121,375
                              
Diluted income (loss) per common share $3.57
 $0.15
 $0.02
 $0.02
 $(0.07) $0.04
 $3.73
 $5.22
 $0.16
 $(0.01) $0.02
 $0.01
 $(0.07) $0.35
 $5.68
                              
Effective tax rate 34.3
           35.4
 35.0
             35.8
                              
SG&A as % Gross Profit: 74.2
           73.4
 73.9
             73.5
Operating Margin %: 3.3
           3.5
 3.2
             3.4
Pretax Margin %: 2.3
           2.4
 2.2
             2.4
                              
2016 v. 2017                              
Same Store SG&A $572,764
 $(5,423) $(385) $(591) $
 $
 $566,365
 $866,513
 $(5,873) $(384) $(591) $(274) $
 $
 $859,391
Same Store SG&A as % Gross Profit: 73.1
          72.3 73.2             72.6
                              
Same Store income from operations $184,445
 $5,423
 $385
 $591
 $
 $1,534
 $192,378
 $268,321
 $5,873
 $385
 $591
 $274
 $
 $12,327
 $287,771
Same Store Operating Margin %: 3.5
          3.7 3.3             3.6


The following table reconciles cash flow provided by (used in) operating, investing and financing activities on a U.S. GAAP basis to the corresponding adjusted amounts (dollars in thousands):
 Six Months Ended June 30, Nine Months Ended September 30,
 2017 2016 % Change 2017 2016 % Change
CASH FLOWS FROM OPERATING ACTIVITIES          
Net cash provided by operating activities $54,685
 $172,867
 (68.4) $309,867
 $386,612
 (19.9)
Change in floorplan notes payable-credit facilities, excluding floorplan offset account and net acquisition and disposition related activity 72,667
 (22,772) 
 (78,285) (145,819) 
Change in floorplan notes payable-manufacturer affiliates associated with net acquisition and disposition related activity 
 2,000
  
 (3,000) 
Adjusted net cash provided by operating activities $127,352

$152,095
 (16.3) $231,582

$237,793
 (2.6)
CASH FLOWS FROM INVESTING ACTIVITIES          
Net cash used in investing activities $(119,804) $(107,870) 11.1 $(246,733) $(157,023) 57.1
Change in cash paid for acquisitions, associated with floorplan notes payable 14,733
 
 
Change in proceeds from disposition of franchises, property and equipment, associated with floorplan notes payable 
 (4,422)  
 (10,445) 
Adjusted net cash used in investing activities $(119,804)
$(112,292) 6.7 $(232,000)
$(167,468) 38.5
CASH FLOWS FROM FINANCING ACTIVITIES          
Net cash provided by (used in) financing activities $70,583
 $(55,325) 227.6
Net cash used in financing activities $(18,110) $(222,053) (91.8)
Change in net borrowings and repayments on floorplan notes payable-credit facilities, excluding net activity associated with our floorplan offset account (72,667) 25,194
 
 63,552
 159,264
 
Adjusted net cash used in financing activities $(2,084)
$(30,131) (93.1)
Adjusted net cash provided by (used in) financing activities $45,442

$(62,789) 172.4
Item 3. Quantitative and Qualitative Disclosures About Market Risk
This Quantitative and Qualitative Disclosures About Market Risk contains information about our market-sensitive financial instruments that constitute forward-looking statements. See “Cautionary Statement about Forward-Looking Statements.”
We are exposed to a variety of market risks, including interest rate risk and foreign currency exchange rate risk. We address interest rate risks primarily through the use of interest rate swaps. We do not currently hedge foreign exchange risk, as discussed further below. The following quantitative and qualitative information is provided about foreign currency exchange rates and financial instruments to which we are a party at JuneSeptember 30, 2017, and from which we may incur future gains or losses from changes in market interest rates. We do not enter into derivative or other financial instruments for speculative or trading purposes.
Hypothetical changes in interest rates and foreign currency exchange rates chosen for the following estimated sensitivity analysis are considered to be reasonable near-term changes generally based on consideration of past fluctuations for each risk category. However, since it is not possible to accurately predict future changes in interest rate and foreign currency exchange rates, these hypothetical changes may not necessarily be an indicator of probable future fluctuations.
As of JuneSeptember 30, 2017, our 5.00% Notes, with an outstanding principal amount of $550.0 million, had a fair value and carrying amount of $562.4$570.5 million and $541.3$541.7 million, respectively. At December 31, 2016, our 5.00% Notes, with an outstanding principal amount of $550.0 million, had a fair value and carrying amount of $548.4 million and $540.5 million, respectively. As of JuneSeptember 30, 2017, our 5.25% Notes, with an outstanding principal amount of $300.0 million, had a fair value and carrying amount of $300.8$304.4 million and $295.9$296.0 million, respectively. At December 31, 2016, our 5.25% Notes, with an outstanding principal amount of $300.0 million, had a fair value and carrying amount of $297.0 million and $295.6 million, respectively. Our other fixed-rate debt, primarily consisting of real estate related debt, had outstanding borrowings of $90.4$88.4 million and $93.9 million as of JuneSeptember 30, 2017 and December 31, 2016, respectively. The fair value of such fixed interest rate borrowings was $90.4$88.6 million and $94.5 million as of JuneSeptember 30, 2017 and December 31, 2016, respectively.
Interest Rates. We have interest rate risk in our variable-rate debt obligations. Our policy is to monitor the effects of market changes in interest rates and manage our interest rate exposure through the use of a combination of fixed and floating-rate debt and interest rate swaps.
We use interest rate swaps to adjust our exposure to interest rate movements, when appropriate, based upon market conditions. As of JuneSeptember 30, 2017, we held interest rate swaps in effect with aggregate notional amounts of $824.8$823.9 million that fixed our underlying one-month LIBOR at a weighted average rate of 2.5%. These hedge instruments are designed to convert floating rate vehicle floorplan payables under our Revolving Credit Facility and variable rate real estate related

borrowings to fixed rate debt. We entered into these swaps with several financial institutions that have investment grade credit ratings, thereby

minimizing the risk of credit loss. We reflect the current fair value of all derivatives on our Consolidated Balance Sheets. The fair value of interest rate swaps is impacted by the forward one-month LIBOR curve and the length of time to maturity of the swap contracts. The related gains or losses on these transactions are deferred in stockholders’ equity as a component of accumulated other comprehensive loss. As of JuneSeptember 30, 2017, net unrealized losses, net of income taxes, totaled $7.3$5.8 million. These deferred gains and losses are recognized in income in the period in which the related items being hedged are recognized in expense. However, to the extent that the change in value of a derivative contract does not perfectly offset the change in the value of the items being hedged, that ineffective portion is immediately recognized in the results of operations. All of our interest rate hedges are designated as cash flow hedges. As of JuneSeptember 30, 2017, all of our derivative contracts were determined to be effective. In addition to the $824.8823.9 million of swaps in effect as of JuneSeptember 30, 2017, we also held 12 interest rate swaps with forward start dates between December 2017 and December 2020 and expiration dates between December 2020 and December 2030. As of JuneSeptember 30, 2017, the aggregate notional amount of these swaps was $625.0 million with a weighted average interest rate of 2.2%. The combination of these swaps is structured such that the notional value in effect at any given time through December 2030 does not exceed $918.4 million.
A summary of our interest rate swaps, including those in effect, as well as forward-starting, follows (dollars in millions):
 Q2 2017Q3 2017Q4 20172018201920202021202220232024202520262027202820292030 Q3 2017Q4 20172018201920202021202220232024202520262027202820292030
Weighted average notional amount in effect during the period $825
$824
$822
$821
$917
$614
$432
$168
$134
$125
$125
$100
$100
$100
$100
$100
 $824
$822
$821
$917
$614
$432
$168
$134
$125
$125
$100
$100
$100
$100
$100
Weighted average interest rate during the period 2.53%2.53%2.53%2.59%2.28%2.21%1.76%1.74%1.81%1.81%1.81%1.85%1.85%1.85%1.85%1.85% 2.53%2.53%2.59%2.28%2.21%1.76%1.74%1.81%1.81%1.81%1.85%1.85%1.85%1.85%1.85%
As of JuneSeptember 30, 2017, we had $1,700.4$1,587.9 million of variable-rate borrowings outstanding. Based on the average amount of variable-rate borrowings outstanding for the sixnine months ended JuneSeptember 30, 2017, and before the impact of our interest rate swaps described above, a 100 basis-point change in interest rates would have resulted in an approximate $16.2$16.3 million change to our annual interest expense. After consideration of the average interest rate swaps described in effect during the three months ended JuneSeptember 30, 2017, a 100 basis-point change would have yielded a net annual change of $8.0$8.1 million in annual interest expense. This interest rate sensitivity increased from JuneSeptember 30, 2016 primarily as a result of the increase in variable-rate floorplan borrowings.
Our exposure to changes in interest rates with respect to our variable-rate floorplan borrowings is partially mitigated by manufacturers’ interest assistance, which historically has been influenced by changes in market based variable interest rates. We reflect interest assistance as a reduction of new vehicle inventory cost until the associated vehicle is sold. During the three months ended JuneSeptember 30, 2017, we recognized $11.7$13.6 million of interest assistance as a reduction of new vehicle cost of sales. For the past three years, the reduction to our new vehicle cost of sales has ranged from 88.0% of our floorplan interest expense for the first quarter of 2017 to 139.9% for the third quarter of 2015. In the U.S., manufacturer's interest assistance was 94.9%110.7% of floorplan interest expense in the secondthird quarter of 2017. Although we can provide no assurance as to the amount of future interest assistance, it is our expectation, based on historical practice of the OEMS that an increase in prevailing interest rates would result in increased assistance from certain manufacturers over time.
Foreign Currency Exchange Rates. As of JuneSeptember 30, 2017, we had dealership operations in the U.K. and Brazil. The functional currency of our U.K. subsidiaries is the British pound sterling (£) and of our Brazil subsidiaries is the Brazilian real (R$). We intend to remain permanently invested in these foreign operations and, as such, do not hedge against foreign currency fluctuations that may temporarily impact our investment in our U.K. and Brazil subsidiaries. If we change our intent with respect to such international investment, we would expect to implement strategies designed to manage those risks in an effort to mitigate the effect of foreign currency fluctuations on our earnings and cash flows. A 10% devaluation in average exchange rates for the British pound sterling to the U.S. dollar would have resulted in an $80.7a $134.4 million decrease to our revenues for the sixnine months ended JuneSeptember 30, 2017. A 10% devaluation in average exchange rates for the Brazilian real to the U.S. dollar would have resulted in a $19.3$30.2 million decrease to our revenues for the sixnine months ended JuneSeptember 30, 2017. We believe that inflation rates over the last few years have not had a significant impact on our consolidated revenues or profitability. We do not expect inflation to have near-term material effects on the sale of our products and services on a consolidated basis; however, we cannot be sure there will be no such effect in the future. We finance substantially all of our inventory through various revolving floor plan arrangements with interest rates that vary based on various benchmarks. Such rates have historically increased during periods of increasing inflation.

For additional information about our market sensitive financial instruments please see Part II, “Item 7. Management’s Discussion & Analysis of Financial Condition and Results of Operations," "Item 7A. Quantitative and Qualitative Disclosures About Market Risk” and Note 4 to “Item 8. Financial Statements and Supplementary Data” in our 2016 Form 10-K.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of JuneSeptember 30, 2017 at the reasonable assurance level.
Our management, including our principal executive officer and our principal financial officer, does not expect that our disclosure controls and procedures can prevent all possible errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that objectives of the control system are met. There are inherent limitations in all control systems, including the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the intentional acts of one or more persons. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and while our disclosure controls and procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control system, misstatements due to possible errors or fraud may occur and not be detected.
Changes in Internal Control over Financial Reporting
During the three months ended JuneSeptember 30, 2017, there was no change in our system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings
In late June 2016, Volkswagen agreed to pay up to an aggregate of $14.7 billion to settle claims stemming from the diesel emissions scandal. In October 2016, we received notification from Volkswagen that we are entitled to receive, in the aggregate, approximately $13.2 million in connection with our current and prior ownership of seven Volkswagen dealerships in the U.S. We accepted and executed the offer in the fourth quarter of 2016 and received half of the compensation in a lump sum amount in January 2017 with the remaining amount to be paid over 18 months. We have received fiveeight of the remaining 18 monthly installments as of JuneSeptember 30, 2017. Also, in conjunction with the Volkswagen diesel emissions scandal, Volkswagen agreed in March 2017 to settle allegations of damages by us relative to our three Audi branded dealerships. We received the cash settlement for Audi in the second quarter of 2017.
We are not party to any legal proceedings, including class action lawsuits that, individually or in the aggregate, are reasonably expected to have a material adverse effect on our results of operations, financial condition or cash flows. For a discussion of our legal proceedings, see Part I, “Item 1. Financial Statements,” Notes to Consolidated Financial Statements, Note 11, “Commitments and Contingencies.”
Item 1A. Risk Factors
In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors previously disclosed in “Item 1A. Risk Factors” of our 2016 Form 10-K. Readers should carefully consider the factors discussed in Part 1, “Item 1A. Risk Factors” in our 2016 Form 10-K, which could materially affect our business, financial condition or future results. The risks described in our 2016 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds     
The following table provides information about purchases of equity securities that are registered by us pursuant to Section 12 of the Exchange Act during the three months ended JuneSeptember 30, 2017:
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
        (In thousands, excluding commissions)
April 1 - April 30, 2017 
 $
 
 $22,394
May 1 - May 10, 2017 (2)
 231,759
 $63.58
 231,759
 $7,659
May 12 - May 31, 2017 316,539
 $61.77
 316,539
 $55,448
June 1 - June 30, 2017 81,000
 $58.50
 81,000
 $50,710
Total 629,298
 $62.01
 629,298
  
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
        (In thousands, excluding commissions)
July 1 - July 31, 2017 
 $
 
 $50,710
August 1 - August 31, 2017 20,000
 $53.46
 20,000
 $49,641
September 1 - September 30, 2017 
 $
 
 $49,641
Total 20,000
 $53.46
 20,000
  
(1) In May 2017, the Board of Directors approved a new authorization of up to $75.0 million of shares of our common stock, replacing the prior $150.0 million authorization. Future repurchases are subject to the discretion of our Board of Directors after considering our results of operations, financial condition, cash flows, capital requirements, existing debt covenants, outlook for our business, general business conditions and other factors. During the three months ended JuneSeptember 30, 2017, 629,29820,000 shares were repurchased for a total cost of $39.0$1.1 million.

(2) Shares repurchased under the prior $150.0 million authorization for a total cost of $14.7 million.

Item 6. Exhibits
Those exhibits to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index immediately preceding the exhibits filed herewith and such listing is incorporated herein by reference.


EXHIBIT INDEX
Exhibit
Number
Description
Amended and Restated Certificate of Incorporation of Group 1 Automotive, Inc. (incorporated by reference to Exhibit 3.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed May 22, 2015)


Third Amended and Restated Bylaws of Group 1 Automotive, Inc. (incorporated by reference to Exhibit 3.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed April 6, 2017)


Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*XBRL Instance Document
 101.SCH*XBRL Taxonomy Extension Schema Document
 101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
 101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
 101.LAB*XBRL Taxonomy Extension Label Linkbase Document
 101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document

*Filed or furnished herewith

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
   
  Group 1 Automotive, Inc.
  
 By:                                  /s/  John C. Rickel
  John C. Rickel
  Senior Vice President and Chief Financial Officer
  (Duly Authorized Officer and Principal Financial
  and Accounting Officer)
Date: AugustNovember 2, 2017

EXHIBIT INDEX
84
Exhibit
Number
Description
3.1
Amended and Restated Certificate of Incorporation of Group 1 Automotive, Inc. (incorporated by reference to Exhibit 3.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed May 22, 2015)


3.2
Third Amended and Restated Bylaws of Group 1 Automotive, Inc. (incorporated by reference to Exhibit 3.1 of Group 1 Automotive, Inc.’s Current Report on Form 8-K (File No. 001-13461) filed April 6, 2017)


31.1*Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*XBRL Instance Document
 101.SCH*XBRL Taxonomy Extension Schema Document
 101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
 101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
 101.LAB*XBRL Taxonomy Extension Label Linkbase Document
 101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document

*Filed or furnished herewith

80