Acquisitions

12 Months Ended

Dec. 31, 2019

In 2019, we completed the following acquisitions:


•	On May 1, 2019, Hamilton Honda in Hamilton Township, New Jersey.


•	On May 20, 2019, Ford Lincoln of Morgantown in Morgantown, West Virginia.


•	On July 1, 2019, Jaguar Landrover Mission Viejo in Mission Viejo, California.


•	On August 19, 2019, Hazleton Honda in Hazle Township, PA.


•	On October 7, 2019, Chrysler Dodge Jeep Ram Fiat of Morgantown and Subaru of Morgantown in Morgantown, West Virginia.


•	On November 4, 2019, Wesley Chapel Toyota, Wesley Chapel Honda, and Tampa Honda in Florida.

Revenue and operating income contributed by the 2019 acquisitions subsequent to the date of acquisition were as follows (in millions):



Year Ended December 31,	2019
Revenue	$	232.3
Operating income	3.1

In 2018, we completed the following acquisitions:


•	On January 15, 2018, Ray Laks Honda in Orchard Park, New York and Ray Laks Acura in Buffalo, New York.


•	On February 26, 2018, Day Auto Group, a seven store platform based in Pennsylvania.


•	On March 1, 2018, Prestige Auto Group, a six store platform based in New Jersey and New York.


•	On April 2, 2018, Broadway Ford in Idaho Falls, Idaho.


•	On April 23, 2018, Buhler Ford in Eatontown, New Jersey.

All acquisitions were accounted for as business combinations under the acquisition method of accounting. The results of operations of the acquired stores are included in our Consolidated Financial Statements from the date of acquisition.

The following tables summarize the consideration paid in cash and equity securities for the acquisitions and the preliminary amount of identified assets acquired and liabilities assumed as of the acquisition date (in millions):



Consideration paid for the Year Ended December 31,	2019		2018
Cash paid, net of cash acquired	$	366.6	$	373.8
Debt issued	26.4		125.1
	$	393.0	$	498.9



Assets acquired and liabilities assumed for the Year Ended December 31,	2019			2018
Trade receivables, net	$	—		$	0.7
Inventories	105.2			180.0
Franchise value	—			29.8
Property and equipment	124.0			179.7
Other assets	193.1			48.6
Floor plan notes payable	—			(10.8		)
Other liabilities	(29.3		)	(2.3		)
	393.0			425.7
Goodwill	—			73.2
	$	393.0		$	498.9

The purchase price allocations for the 2019 acquisitions are preliminary as we have not obtained all of the detailed information to finalize the opening balance sheet related to real estate purchased, leases assumed and the allocation of franchise value to each reporting unit. Management has recorded the purchase price allocations based on the information that is currently available.

We expect substantially all of the goodwill related to acquisitions completed in 2019 to be deductible for federal income tax purposes.

We account for franchise value as an indefinite-lived intangible asset. We recognized $2.5 million and $4.3 million, respectively, in acquisition related expenses as a component of selling, general and administrative expenses in the Consolidated Statements of Operations in 2019 and 2018, respectively.

The following unaudited pro forma summary presents consolidated information as if the acquisitions had occurred on January 1 of the previous year (in millions, except for per share amounts):



Year Ended December 31,	2019		2018
Revenue	$	13,193.4	$	12,831.9
Net income	280.2		275.6
Basic net income per share	12.07		11.31
Diluted net income per share	11.98		11.26

These amounts have been calculated by applying our accounting policies and estimates. The results of the acquired stores have been adjusted to reflect the following: depreciation on a straight-line basis over the expected lives for property, plant and equipment; accounting for inventory on a specific identification method; and recognition of interest expense for real estate financing related to stores where we purchased the facility. No non-recurring pro forma adjustments directly attributable to the acquisitions are included in the reported pro forma revenues and earnings.