Group 1 Automotive Inc: Form 10-Q for the period ended Mar 31, 2026

Management’s Discussion and Analysis of Financial Condition and Results of Operations, should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and the notes thereto, as well as our 2025 Form 10-K.

Overview

We are a leading operator in the automotive retail industry. We sell or lease 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 retail and wholesale. We have operations in geographically diverse markets that extend across 17 states in the U.S. and 62 towns and cities in the U.K. As of March 31, 2026, our retail network consisted of 143 dealerships in the U.S. and 110 dealerships in the U.K.

Recent Events

In April, 2026, we undertook cost-cutting measures within our U.S. business, reducing our staffing by nearly 700 full-time employees and reducing SG&A costs through contract and vendor elimination. We expect that these efforts will remove at least $50 million in annual costs from our U.S. operations.

On April 13, 2026, the U.K. Department for Transport announced a proposal to update minimum vehicle emissions standards to align with the Euro 7 standard implemented in the European Union. If adopted, the Euro 7 standard would set stricter standards for exhaust and non-exhaust vehicle emissions, including GHG emissions. Euro 7 would also set battery durability requirements for electric vehicles (“EVs”). If finalized, stricter emissions standards could result in increased costs and affect our results of operations.

On February 28, 2026, the U.S. and the State of Israel (“Israel”) commenced coordinated military operations against the Islamic Republic of Iran (“Iran”). The resulting conflict has increased volatility in global supply chains and energy markets, as well as geopolitical instability. Continued disruptions affecting energy supplies and critical maritime transit routes, particularly the Strait of Hormuz, could drive additional increases in fuel prices and reductions in supplies, which may adversely affect consumer demand for vehicles and broader economic conditions. Additionally, the conflict could negatively impact our supply chain and vehicle availability from manufacturers.

On February 20, 2026, the U.S. Supreme Court held that President Donald Trump lacked authority under the International Emergency Economic Powers Act (“IEEPA”) to impose certain reciprocal and other emergency-based tariffs. The decision invalidated those IEEPA-based tariff actions and halted their collection. On the same date, President Donald Trump issued an executive order, which formally terminated those IEEPA‑based tariff actions and directed that their collection cease. Tariffs imposed under other statutory authorities, including Section 232 (such as the automotive and medium/heavy-duty vehicle proclamations), were not affected by the ruling or executive order and remain in force.

The Supreme Court’s decision and related executive action have created uncertainty regarding the future tariff environment, including the potential for litigation, refund claims by parties directly subject to the invalidated tariffs, and the use of alternative statutory authorities by the administration to impose new or modified tariffs. We cannot predict the timing, scope, or outcome of future tariff‑related actions or their potential effect, if any, on our results of operations. We will continue to monitor the impact of the Trump Administration’s policies and the response of U.S. trading partners on our results of operations in future periods.

On February 18, 2026, the U.S. Environmental Protection Agency (“EPA”) issued a final rule rescinding the greenhouse gas (“GHG”) “Endangerment Finding,” which provides the authority underpinning the majority of the EPA’s GHG-related regulations, including those for emissions from new motor vehicles and engines, and the National Highway Traffic Safety Administration’s Corporate Average Fuel Economy standards. The final rule also repealed all of the EPA’s GHG emission standards for light-duty, medium-duty and heavy-duty motor vehicles and engines. Litigation challenging the EPA’s final rule is ongoing, and we cannot predict the final outcome. Certain states, such as California, have continued to adopt or have announced an intent to adopt standards regulating GHG and other vehicle emissions and setting EV targets. These efforts have been subject to litigation, the outcome of which is uncertain. As a result, there is significant uncertainty with respect to U.S. regulations related to GHG emissions.

The extent to which these geopolitical developments may impact our results of operations cannot be predicted at this time.

Critical Accounting Policies and Accounting Estimates

For discussion of our critical accounting policies and accounting estimates, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2025 Form 10-K. There have been no material changes to our critical accounting policies or accounting estimates since December 31, 2025.

Results of Operations

The “same store” amounts presented below include the results of dealerships and corporate headquarters for the identical months in each comparative period, commencing with the first full month in which we owned the dealership. Amounts related to divestitures are excluded from each comparative period, ending with the last full month in which we owned the dealership. Same store results provide a measurement of our ability to grow revenues and profitability of our existing stores and also provide a metric for peer group comparisons. For these reasons, same store results allow management to accurately manage and monitor the underlying performance of the business and is also useful to investors.

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. Our primary foreign currency exposure is to GBP. 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 USD 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. Additionally, we caution investors not to place undue reliance on non-GAAP measures, but also to consider them with the most directly comparable U.S. GAAP measures. Our management also uses constant currency and adjusted cash flows from operating, investing and financing activities 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. These metrics also allow investors to better understand and evaluate the information used by management to assess operating performance.

Retail new and used vehicle units sold include new and used vehicle agency units sold under agency arrangements with certain manufacturers in the U.K. The agency units and related revenues are excluded from the calculation of the average sales price per unit sold for new and used vehicles due to their net presentation within revenues as only the sales commission is reported in revenues for dealerships operating under an agency arrangement. The agency units and related net revenues are included in the calculation of gross profit per unit sold.

Certain amounts in the financial statements may not compute due to rounding. All computations have been calculated using unrounded amounts for all periods presented.

The following tables summarize our operating results on a reported basis and on a same store basis:

Reported Operating Data — Consolidated

(In millions, except unit data)

(1) Floorplan assistance is included within Gross profit — New vehicle retail sales above and Cost of sales — New vehicle retail sales in our Condensed Consolidated Statements of Operations.

Same Store Operating Data — Consolidated

(In millions, except unit data)

23

Reported Operating Data — U.S.

(In millions, except unit data)

24

Same Store Operating Data — U.S.

(In millions, except unit data)

25

U.S. Segment — Three Months Ended March 31, 2026 Compared to 2025

Revenues

Total revenues in the U.S. during the Current Quarter decreased $157.9 million, or 4.0%, as compared to the three months ended March 31, 2025 (“Prior Year Quarter”), driven by lower same store revenues and the disposition of stores.

Total same store revenues in the U.S. during the Current Quarter decreased $192.8 million, or 5.1%, as compared to the Prior Year Quarter, driven by lower revenues across most business lines.

New vehicle retail same store revenues underperformed the Prior Year Quarter, driven by a decrease in units sold, partially offset by higher pricing. This underperformance reflects affordability pressures impacting demand, as well as inventory pressure on certain brands. Additionally, the Prior Year Quarter had strong results ahead of the implementation of announced tariffs. We ended the Current Quarter with a U.S. new vehicle inventory supply of 51 days, 13 days higher than the Prior Year Quarter.

Used vehicle retail same store revenues underperformed the Prior Year Quarter, driven by a decrease in units sold, partially offset by higher pricing. We believe this underperformance reflects affordability pressures impacting demand, as well as ongoing inventory supply pressures that constrained available vehicle selection. We ended the Current Quarter with a U.S. used vehicle inventory supply of 26 days, consistent with the Prior Year Quarter. Used vehicle wholesale same store revenues outperformed the Prior Year Quarter, driven by higher pricing, partially offset by fewer units sold.

Parts and service same store revenues outperformed the Prior Year Quarter, driven by increases in customer pay, warranty and wholesale revenues, partially offset by a decrease in collision revenues. Higher same store technician count resulted in an increase in customer pay repair orders, compared to the Prior Year Quarter, reflecting our continued technician recruiting and retention efforts and our greater capacity to meet increased demand. We continue to invest in our aftersales capacity by undertaking new construction of dealerships and through expanding existing dealership facilities.

F&I same store revenues underperformed the Prior Year Quarter, driven by lower same store new and used vehicle retail units sold, partially offset by higher penetration rates on most of our products offered.

Gross Profit

Total gross profit in the U.S. during the Current Quarter decreased $27.7 million, or 4.1%, as compared to the Prior Year Quarter, driven by lower same store gross profit and the disposition of stores.

Total same store gross profit in the U.S. during the Current Quarter decreased $36.3 million, or 5.5%, as compared to the Prior Year Quarter, driven by decreases in new and used vehicle retail and F&I, partially offset by increases in used vehicle wholesale and parts and service gross profit.

New vehicle retail same store gross profit underperformed the Prior Year Quarter, driven by reduced inventory availability for certain brands, a decrease in gross profit per unit sold and a decline in same store new vehicle retail units sold.

Used vehicle retail same store gross profit underperformed the Prior Year Quarter, primarily driven by lower same store gross profit per unit sold, coupled with a decrease in same store used vehicle retail units sold. Additionally, the limited availability of new vehicle inventory for certain brands reduced used vehicle availability, further impacting used vehicle retail units sold. Used vehicle wholesale same store gross profit outperformed the Prior Year Quarter, driven by an increase in same store gross profit per unit sold, partially offset by a decrease in same store units sold.

Parts and service same store gross profit outperformed the Prior Year Quarter, driven by increases in customer pay and warranty gross profit, partially offset by decreases in wholesale and collision gross profit. We believe this reflects both the benefit of the strategic decision to reduce our collision footprint in exchange for higher margin service business, and our focus on shop efficiency.

F&I same store gross profit underperformed the Prior Year Quarter, driven by lower F&I revenues, with gross profit per unit performance remaining consistent.

Total same store gross margin in the U.S. decreased eight basis points for the Current Quarter as compared to the Prior Year Quarter.

SG&A Expenses

SG&A as a percentage of gross profit decreased 167 basis points and increased 434 basis points on an as reported and same store basis, respectively, compared to the Prior Year Quarter.

Total SG&A expenses in the U.S. during the Current Quarter decreased $29.2 million, or 6.5%, as compared to the Prior Year Quarter, primarily driven by an increase in gains recognized on disposal of assets of $40.5 million. Total same store SG&A expenses in the U.S. during the Current Quarter, increased $2.5 million, or 0.6%, as compared to the Prior Year Quarter, primarily driven by the absence of CDK outage related credits recognized in the Prior Year Quarter that did not recur in the Current Quarter, as well as higher third-party and professional service fees. These increases were partially offset by lower legal fees and employee related costs.

Reported Operating Data — U.K.

(In millions, except unit data)

28

Same Store Operating Data — U.K.

(In millions, except unit data)

29

U.K. Segment — Three Months Ended March 31, 2026 Compared to 2025

Retail new and used vehicle units sold include new and used vehicle agency units. The agency units and related revenues are excluded from the calculation of the average sales price per unit sold for new vehicles as only the sales commission is reported within revenues. The agency units and related net revenues are included in the calculation of gross profit per unit sold. The GBP to USD foreign currency exchange rate has fluctuated from £1 to $1.294 at March 31, 2025, to £1 to $1.322 at March 31, 2026, or an increase in the value of the GBP of 2.2%.

Revenues

Total revenues in the U.K. during the Current Quarter increased $59.7 million, or 3.8%, as compared to the Prior Year Quarter, driven by higher same store revenues and the acquisition of stores.

Total same store revenues in the U.K. during the Current Quarter increased $130.3 million, or 8.8%, as compared to the Prior Year Quarter, driven by outperformances across nearly all lines of business, led by used vehicle retail, parts and service and F&I, partially offset by a decline in used vehicle wholesale. On a constant currency basis, same store revenues increased 2.2%, reflecting underlying growth across most business lines, with the exception of new vehicle retail and used vehicle wholesale.

New vehicle retail same store revenues decreased 1.6%, on a constant currency basis compared to the Prior Year Quarter. The decrease occurred despite increases in both unit sales and average selling prices in USD, as average selling prices declined on a GBP basis. The Current Quarter ended with a U.K. new vehicle inventory supply of 19 days, an increase of three days compared to the Prior Year Quarter.

Used vehicle retail same store revenues increased 6.0% on a constant currency basis compared to the Prior Year Quarter, driven by increases in both unit sales and average selling prices. The Current Quarter ended with a U.K. used vehicle inventory supply of 42 days, a decrease of five days compared to the Prior Year Quarter. Used vehicle wholesale same store revenues, on a constant currency basis, underperformed the Prior Year Quarter, primarily due to a decline in wholesale used vehicle units sold.

Parts and service same store revenues increased 8.4% on a constant currency basis compared to the Prior Year Quarter, driven by increases in customer pay, warranty and wholesale revenues, partially offset by a decrease in collision revenue. We have invested in improvements to our U.K. customer contact center, streamlining operations to make scheduling appointments easier for customers, resulting in an increase in customer pay parts and service activity driving an increase in revenues as compared to the Prior Year Quarter.

F&I, net same store revenues, on a constant currency basis, outperformed the Prior Year Quarter, driven by higher income per contract from our retail finance fees, improved penetration rates on vehicle service contracts and higher new and used vehicle retail unit sales.

Gross Profit

Total gross profit in the U.K. during the Current Quarter increased $13.7 million, or 6.3%, as compared to the Prior Year Quarter, driven by the acquisition of stores and improved same store performance.

Total same store gross profit in the U.K. during the Current Quarter increased $24.5 million, or 12.1%, as compared to the Prior Year Quarter. On a constant currency basis, total same store gross profit increased 5.3%, driven by increases in parts and service, F&I and used vehicle retail, partially offset by downward pressure on new vehicle retail and used vehicle wholesale margins.

New vehicle retail same store gross profit, decreased 3.0% on a constant currency basis compared to the Prior Year Quarter, driven by lower gross profit per unit sold, partially offset by an increase in retail units sold. Vehicle affordability pressures continue to impact new vehicle margins.

Used vehicle retail same store gross profit increased 2.5% on a constant currency basis compared to the Prior Year Quarter, driven by an increase in retail units sold, partially offset by a decline in gross profit per unit sold.

Parts and service same store gross profit, on a constant currency basis, outperformed the Prior Year Quarter, driven by the increase in parts and service same store revenues, as discussed above.

F&I same store gross profit, on a constant currency basis, outperformed the Prior Year Quarter, as described above in F&I same store revenues.

Total same store gross margin in the U.K. increased 41 basis points, primarily driven by improvements in parts and service gross margin, offset by declines in our other lines of business.

SG&A Expenses

SG&A as a percentage of gross profit increased by 79 and decreased by 44 basis points on an as reported and same store basis, respectively, compared to the Prior Year Quarter.

Total SG&A expenses in the U.K. during the Current Quarter increased $12.5 million, or 7.4%, as compared to the Prior Year Quarter. Total same store SG&A expenses in the U.K. during the Current Quarter increased $18.0 million, or 11.5%, as compared to the Prior Year Quarter. On a constant currency basis, total same store SG&A expenses increased 4.2% as compared to the Prior Year Quarter. These increases on a total same store basis were primarily driven by higher employee related costs, vehicle delivery and facility costs, offset by lower professional service fees.

Consolidated Selected Comparisons — Three Months Ended March 31, 2026 Compared to 2025

The following table (in millions) and discussion of our results of operations are on a consolidated basis, unless otherwise noted.

Depreciation and Amortization Expense

Depreciation and amortization expense for the Current Quarter was higher compared to the Prior Year Quarter, primarily driven by acquired property and equipment in our U.S. and U.K. segments, as we continue to strategically add dealership related real estate and facilities to our investment portfolio and make improvements to our existing facilities intended to enhance the profitability of our dealerships and improve the overall customer experience.

Restructuring Charges

During the Current Quarter, we incurred $1.0 million of restructuring charges in the U.K. related to the 2025 Restructuring Plan, a decrease of $10.1 million compared to the restructuring charges incurred during the Prior Year Quarter, related to the 2024 Restructuring Plan that was completed during 2025. Restructuring charges primarily consist of planned workforce realignment, strategic closing of certain facilities and systems integrations, among other efforts to increase operational efficiency and profitability. The Company expects to take additional action throughout 2026 to further optimize operations and reduce costs.

Refer to Note 4. Restructuring within our Notes to Condensed Consolidated Financial Statements for further discussion of our restructuring plan.

Floorplan Interest Expense

Our floorplan interest expense fluctuates with changes in our outstanding borrowings and associated interest rates, which are based on SOFR, the U.S. prime rate or other benchmark rates. Outstanding borrowings largely fluctuate based on our levels of new and used vehicle inventory. To mitigate the impact of interest rate fluctuations, we employ an interest rate hedging strategy, whereby we swap variable interest rate exposure on a portion of our borrowings for a fixed interest rate.

Total floorplan interest expense during the Current Quarter decreased $3.6 million, or 13.4%, as compared to the Prior Year Quarter. The decrease in floorplan interest expense during the Current Quarter was driven by lower used vehicle inventories and reduced floorplan interest rates, along with higher floorplan offset interest income resulting from increased balances in offset accounts, compared to the Prior Year Quarter.

Refer to Note 7. Financial Instruments and Fair Value Measurements within our Notes to Condensed Consolidated Financial Statements for additional discussion of interest rate swaps.

Other Interest Expense, Net

Other interest expense, net consists of interest charges primarily on our 4.00% Senior Notes, 6.375% Senior Notes, real estate related debt and other debt, partially offset by interest income.

Other interest expense, net during the Current Quarter, increased $9.0 million, or 22.7%, as compared to the Prior Year Quarter. The increase in other interest expense, net during the Current Quarter was primarily attributable to interest expense associated with the Acquisition Line, partially offset by a decrease in interest expense associated with other debt. Refer to Note 9. Debt within our Notes to Condensed Consolidated Financial Statements for additional discussion of our debt.

Provision for Income Taxes

Provision for income taxes of $40.6 million during the Current Quarter increased by $0.9 million, or 2.1%, as compared to the Prior Year Quarter. The tax expense increase in the Current Quarter, as compared to the Prior Year Quarter, was primarily due to higher pre-tax income. Our Current Quarter effective tax rate of 23.8% is substantially consistent with the Prior Year Quarter’s effective tax rate of 23.7%.

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, considering future reversals of existing taxable temporary differences.

Liquidity and Capital Resources

Our liquidity and capital resources are primarily derived from cash on hand, cash temporarily invested as a pay down of our U.S. Floorplan Line and FMCC Facility levels (refer to Note 10. Floorplan Notes Payable within our Notes to Condensed Consolidated Financial Statements for additional information), cash from operations, borrowings under our credit facilities, working capital, dealership and real estate acquisition financing and proceeds from debt and equity offerings. We anticipate we will generate sufficient cash flows from operations, coupled with cash on hand and available borrowing capacity under our credit facilities, to fund our working capital requirements, service our debt and meet any other recurring operating expenditures.

Available Liquidity Resources

We had the following sources of liquidity available (in millions):

Cash Flows

We arrange our new and used vehicle inventory floorplan financing through lenders affiliated with our vehicle manufacturers and our Revolving Credit Facility. In accordance with U.S. GAAP, we report floorplan financed with lenders affiliated with our vehicle manufacturers (excluding the cash flows from or to manufacturer-affiliated lenders participating in our syndicated lending group) within Cash Flows from Operating Activities in the Condensed Consolidated Statements of Cash Flows. We report floorplan financed with the Revolving Credit Facility (including the cash flows from or to manufacturer-affiliated lenders participating in the facility) and other credit facilities in the U.K. unaffiliated with our manufacturer partners, within Cash Flows from Financing Activities in the Condensed Consolidated Statements of Cash Flows. Refer to Note 10. Floorplan Notes Payable within our Notes to Condensed Consolidated Financial Statements for additional discussion of our Revolving Credit Facility.

However, 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/used in operating activities” and “Adjusted net cash provided by/used in financing activities” 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. In addition, floorplan financing associated with dealership acquisitions and dispositions is classified as investing activities on an adjusted basis to eliminate excess volatility in our operating cash flows prepared in accordance with U.S. GAAP.

The following table reconciles cash flows on a U.S. GAAP basis to the corresponding adjusted amounts (in millions):

Sources and Uses of Liquidity from Operating Activities — Three Months Ended March 31, 2026 Compared to 2025

For the Current Quarter, net cash provided by operating activities decreased by $66.3 million, as compared to the Prior Year Quarter. On an adjusted basis for the same period, adjusted net cash provided by operating activities increased by $9.6 million. The increase on an adjusted basis was primarily driven by a $118.0 million increase in floorplan notes payable – manufacturer affiliates, a $63.9 million decrease in contracts-in-transit and vehicle receivables and a $22.5 million decrease in prepaid expenses and other assets, partially offset by a $148.1 million increase in inventories and a $39.7 million increase in non-cash gains from the disposition of assets.

Sources and Uses of Liquidity from Investing Activities — Three Months Ended March 31, 2026 Compared to 2025

For the Current Quarter, net cash provided by investing activities increased by $222.9 million, as compared to the Prior Year Quarter. On an adjusted basis for the same period, adjusted net cash provided by investing activities increased by $138.7 million, primarily due to a $151.6 million increase in proceeds from the disposition of franchises and property and equipment, as well as a $14.5 million decrease in acquisition activity. The increase was partially offset by a $31.8 million increase in purchases of property and equipment, including real estate.

In connection with one of the dispositions, $41.2 million in proceeds had not been received as of March 31, 2026 and was recorded as a receivable as of March 31, 2026, representing a non-cash investing activity. Refer to Note 3. Acquisitions and Dispositions within our Notes to Condensed Consolidated Financial Statements for further discussion of disposition activity.

Capital Expenditures

Our capital expenditures include costs to extend the useful lives of current dealership 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.

For the Current Quarter, $84.0 million was used to purchase property and equipment.

Sources and Uses of Liquidity from Financing Activities — Three Months Ended March 31, 2026 Compared to 2025

For the Current Quarter, net cash used in financing activities increased by $180.7 million, as compared to the Prior Year Quarter. On an adjusted basis for the same period, adjusted net cash used in financing activities increased by $172.5 million. The increase in net cash used in financing activities on an adjusted basis was primarily driven by a $405.3 million increase in net repayments on the Acquisition Line. This increase was partially offset by an increase in net borrowings on our U.S. Floorplan line of $171.4 million (representing the net cash activity in our floorplan offset account) and a $50.4 million decrease in repurchases of common stock.

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.

The following table summarizes the commitment of our credit facilities as of March 31, 2026 (in millions):

(1) The available balance at March 31, 2026, includes $149.1 million of immediately available funds. The remaining available balance can be used for vehicle inventory financing.

(2) The outstanding balance of $516.3 million is related to outstanding letters of credit of $12.3 million and $504.0 million in USD borrowings. The available borrowings may be limited from time to time, based on certain debt covenant calculations, and as a result, the outstanding balance plus available borrowings may not equal the total commitment.

(3) The available balance at March 31, 2026, includes $0.6 million of immediately available funds. The remaining available balance can be used for Ford new vehicle inventory financing.

(4) The available balance at March 31, 2026, includes no immediately available funds. The remaining available balance can be used for General Motors new and loaner vehicle inventory financing.

(5) The outstanding balance excludes $698.2 million of borrowings with manufacturer-affiliates and third-party financial institutions for foreign and loaner vehicle financing not associated with any of our U.S. credit facilities.

We have other credit facilities in the U.S. and the U.K. with third-party financial institutions, most of which are affiliated with the automobile manufacturers that provide financing for portions of our new, used and rental vehicle inventories. In addition, we have outstanding debt instruments, including our 4.00% and 6.375% Senior Notes, as well as real estate related and other debt instruments. Refer to Note 9. Debt within our Notes to Condensed Consolidated Financial Statements for further information.

Covenants

Our Revolving Credit Facility, indentures governing our 4.00% and 6.375% Senior Notes and certain mortgage term loans contain customary financial and operating covenants that place restrictions on us, including our ability to incur additional indebtedness, create liens or to sell or otherwise dispose of assets and merge or consolidate with other entities. Certain of our mortgage agreements contain cross-default provisions that, in the event of a default of certain mortgage agreements and of our Revolving Credit Facility, could trigger an uncured default.

As of March 31, 2026, we were in compliance with the requirements of the financial covenants under our debt agreements. We are required to maintain the ratios detailed in the following table:

Based on our position as of March 31, 2026, and our outlook as discussed within Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, we believe we have sufficient liquidity and do not anticipate any material liquidity constraints or issues with our ability to remain in compliance with our debt covenants.

Refer to Note 9. Debt and Note 10. Floorplan Notes Payable within our Notes to Condensed Consolidated Financial Statements for further discussion of our debt instruments, credit facilities and other financing arrangements existing as of March 31, 2026.

Share Repurchases and Dividends

From time to time, our Board of Directors authorizes the repurchase of shares of our common stock up to a certain monetary limit and at a prescribed cost limit per share. On November 11, 2025, our Board of Directors increased the share repurchase authorization to $500.0 million. For the Current Quarter, 205,190 shares were repurchased, at an average price of $353.08 per share, for a total of $72.4 million, excluding excise taxes of $0.5 million. As of March 31, 2026, we had $306.3 million available under our current share repurchase authorization.

During the Current Quarter, our Board of Directors approved an increase in the 2026 annual dividend rate to $2.20 per share, which represents an increase of 10%, or $0.20, as compared to the 2025 annual dividend rate of $2.00 per share. Consistent with this increase, a quarterly cash dividend of $0.55 per share on all shares of our common stock was approved, which resulted in $6.5 million paid to common shareholders and $0.1 million to unvested restricted stock award holders.

Future share repurchases and the payment of any future dividends are subject to the business judgment of our Board of Directors, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements, covenant compliance, changes in laws and regulations, current economic environment and other factors considered relevant.

For quantitative and qualitative disclosures about market risk affecting us, refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2025 Form 10-K. Our exposure to market risk has not changed materially since December 31, 2025.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under 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 Securities and Exchange Commission. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2026, 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 March 31, 2026, there were no changes 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 have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the Current Quarter, there were no changes to the Risk Factors disclosed in Item 1A. Risk Factors of our 2025 Form 10-K.