GROUP 1 AUTOMOTIVE INCGPI
GROUP 1 AUTOMOTIVE INC Fair Value Disclosure
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Accounting standards define fair value as the price that would be received from selling an asset or paid to transfer a liability in the most advantageous market in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and establishes the following three levels of inputs that may be used to measure fair value:
•Level 1 — Quoted prices for identical assets or liabilities in active markets.
•Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or model-derived valuations or other inputs that are observable or that can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Cash and Cash Equivalents, Contracts-In-Transit and Vehicle Receivables, Accounts and Notes Receivable, Accounts Payable, Variable Rate Long-Term Debt and Floorplan Notes Payable
The fair values of these financial instruments approximate their carrying values due to the short-term nature of these instruments and/or the existence of variable interest rates.
Fixed Rate Long-Term Debt
The Company estimates the fair value of its $750.0 million 4.00% Senior Notes due August 2028 (“4.00% Senior Notes”) and the $500.0 million 6.375% Senior Notes due January 2030 (“6.375% Senior Notes”) using quoted prices for the identical liability (Level 1) and estimates the fair value of its fixed-rate mortgage facilities using a present value method based on current market interest rates for similar types of financial instruments (Level 2). Refer to Note 14. Debt for further discussion of the Company’s long-term debt arrangements.
The carrying value and fair value of the Company’s fixed rate long-term debt were as follows (in millions):
(1) Carrying value excludes unamortized debt issuance costs.
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
Carrying Value (1) | Fair Value | Carrying Value (1) | Fair Value | |||||||||||||||||||||||
4.00% Senior Notes | $ | 750.0 | $ | 737.2 | $ | 750.0 | $ | 701.5 | ||||||||||||||||||
6.375% Senior Notes | 500.0 | 516.6 | 500.0 | 502.4 | ||||||||||||||||||||||
| Real estate related | 130.0 | 130.3 | 140.6 | 136.4 | ||||||||||||||||||||||
| Total | $ | 1,380.0 | $ | 1,384.1 | $ | 1,390.6 | $ | 1,340.4 | ||||||||||||||||||
Derivative Financial Instruments
The Company holds interest rate swaps to hedge against variability of interest payments indexed to SOFR. The Company’s interest rate swaps are measured at fair value utilizing a SOFR forward yield curve matched to the identical maturity term of the instrument being measured. Observable inputs utilized in the income approach valuation method incorporate identical contractual notional amounts, fixed coupon rates, periodic terms for interest payments and contract maturity. The fair value of the interest rate swaps 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 using the spread between the SOFR yield curve and the relevant interest rate according to rating agencies. The inputs to the fair value measurements reflect Level 2 of the hierarchy framework.
Assets associated with the Company’s interest rate swaps, as reflected gross in the Consolidated Balance Sheets, were as follows (in millions):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Assets: | ||||||||||||||
| $ | 4.9 | $ | 1.8 | |||||||||||
| 40.6 | 77.5 | |||||||||||||
| Total assets | $ | 45.5 | $ | 79.3 | ||||||||||
(1) As of December 31, 2025 and December 31, 2024, the balance included gross fair value of $2.2 million and $3.4 million, respectively, related to the de-designated swap as described below.
There were no liabilities associated with the Company’s interest rate swaps as of December 31, 2025 and December 31, 2024.
Interest Rate Swaps De-designated as Cash Flow Hedges
As of December 31, 2025, the Company had one de-designated mortgage interest rate swap with a notional value of $25.0 million and an interest rate of 0.60%. The de-designated swap will mature on March 1, 2030. No interest rate swaps were de-designated by the Company during the year ended December 31, 2025.
The Company recorded unrealized mark-to-market losses of $1.3 million, $0.5 million and $0.3 million and realized gains of $1.0 million, $1.6 million and $1.0 million associated with the de-designated interest rate swaps within Other interest expense, net, for the years ended December 31, 2025, 2024 and 2023 respectively.
Interest Rate Swaps Designated as Cash Flow Hedges
Interest rate swaps designated as cash flow hedges and the related gains or losses are deferred in stockholders’ equity as a component of AOCI in the Company’s Consolidated Balance Sheets. The deferred gains or losses are recognized in income in the period in which the related items being hedged are recognized in expense. Monthly contractual settlements of the positions are recognized as Floorplan interest expense or Other interest expense, net, in the Company’s Consolidated Statements of Operations. Gains or losses for periods where future forecasted hedged transactions are deemed probable of not occurring are reclassified from AOCI into income as Floorplan interest expense or Other interest expense, net.
As of December 31, 2025, the Company held 25 interest rate swaps designated as cash flow hedges with a total notional value of $825.9 million that fixed its underlying SOFR at a weighted average rate of 1.23%. As of December 31, 2024, the Company held 28 interest rate swaps designated as cash flow hedges with a total notional value of $889.3 million that fixed its underlying SOFR at a weighted average rate of 1.23%. The maturity dates of the Company’s designated interest rate swaps range between January 1, 2026 and December 31, 2031.
The following tables present the impact of the Company’s interest rate swaps designated as cash flow hedges (in millions):
The amount of gain expected to be reclassified out of AOCI into earnings as an offset to Floorplan interest expense or Other interest expense, net in the next twelve months is $18.7 million.| Amount of Unrealized Income (Loss), Net of Tax, Recognized in Other Comprehensive Income (Loss) | ||||||||||||||||||||
| Years Ended December 31, | ||||||||||||||||||||
| Derivatives in Cash Flow Hedging Relationship | 2025 | 2024 | 2023 | |||||||||||||||||
| Interest rate swaps | $ | (4.7) | $ | 21.5 | $ | 10.4 | ||||||||||||||
| Amount Reclassified from Other Comprehensive Income (Loss) into Statements of Operations | ||||||||||||||||||||
Statements of Operations Classification | Years Ended December 31, | |||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Floorplan interest expense, net | $ | 15.7 | $ | 20.6 | $ | 15.4 | ||||||||||||||
| Other interest expense, net | $ | 10.8 | $ | 17.0 | $ | 17.9 | ||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 14, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 13, 2020 | |
| 2018 | Feb 19, 2019 | |
| 2017 | Feb 20, 2018 | |
| 2016 | Feb 17, 2017 | |
| 2015 | Feb 17, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.