13. Consolidating Condensed Financial Information

The following tables include condensed consolidating financial information as of September 30, 2013 and December 31, 2012 and for the three and nine month periods ended September 30, 2013 and 2012 for Penske Automotive Group, Inc. (as the issuer of the 5.75% Notes), guarantor subsidiaries and non-guarantor subsidiaries (primarily representing foreign entities). Guarantor subsidiaries are directly or indirectly 100% owned by PAG, and the guarantees are full and unconditional, and jointly and several. The condensed consolidating financial information includes certain allocations of balance sheet, income statement and cash flow items which are not necessarily indicative of the financial position, results of operations and cash flows of these entities on a stand-alone basis.

CONDENSED CONSOLIDATING BALANCE SHEET
September 30, 2013

	Total Company		Eliminations			Penske Automotive Group		Guarantor Subsidiaries		Non-Guarantor Subsidiaries
	(In thousands)

Cash and cash equivalents	$	71,101	$	—		$	—	$	7,514	$	63,587
Accounts receivable, net	588,311		(378,659		)	378,659		292,806		295,505
Inventories	2,293,390		—			—		1,300,592		992,798
Other current assets	83,508		—			2,955		32,593		47,960
Assets held for sale	1,065		—			—		165		900

Total current assets	3,037,375		(378,659		)	381,614		1,633,670		1,400,750
Property and equipment, net	1,211,020		—			4,251		814,083		392,686
Intangible assets	1,401,497		—			—		768,677		632,820
Equity method investments	333,081		—			280,730		—		52,351
Other long-term assets	27,831		(1,602,664		)	1,613,941		5,232		11,322

Total assets	$	6,010,804	$	(1,981,323	)	$	2,280,536	$	3,221,662	$	2,489,929


Floor plan notes payable	$	1,537,185	$	—		$	—	$	884,700	$	652,485
Floor plan notes payable — non-trade	802,051		—			128,100		375,983		297,968
Accounts payable	380,000		—			2,841		128,236		248,923
Accrued expenses	275,483		(378,659		)	205		142,530		511,407
Current portion of long-term debt	46,894		—			—		36,236		10,658
Liabilities held for sale	2,592		—			—		383		2,209

Total current liabilities	3,044,205		(378,659		)	131,146		1,568,068		1,723,650
Long-term debt	1,014,070		(96,472		)	692,000		166,262		252,280
Deferred tax liabilities	338,430		—			—		313,342		25,088
Other long-term liabilities	156,708		—			—		77,865		78,843

Total liabilities	4,553,413		(475,131		)	823,146		2,125,537		2,079,861
Total equity	1,457,391		(1,506,192		)	1,457,390		1,096,125		410,068

Total liabilities and equity	$	6,010,804	$	(1,981,323	)	$	2,280,536	$	3,221,662	$	2,489,929

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2012

	Total Company		Eliminations			Penske Automotive Group		Guarantor Subsidiaries		Non-Guarantor Subsidiaries
	(In thousands)

Cash and cash equivalents	$	43,447	$	—		$	—	$	36,478	$	6,969
Accounts receivable, net	554,851		(340,917		)	340,917		375,442		179,409
Inventories	2,000,206		—			—		1,212,521		787,685
Other current assets	90,485		—			3,546		55,841		31,098
Assets held for sale	71,107		—			—		28,716		42,391

Total current assets	2,760,096		(340,917		)	344,463		1,708,998		1,047,552
Property and equipment, net	1,031,188		—			4,474		662,722		363,992
Intangible assets	1,263,590		—			—		761,005		502,585
Equity method investments	303,160		—			252,816		—		50,344
Other long-term assets	20,956		(1,527,156		)	1,540,447		5,029		2,636

Total assets	$	5,378,990	$	(1,868,073	)	$	2,142,200	$	3,137,754	$	1,967,109


Floor plan notes payable	$	1,408,362	$	—		$	—	$	917,391	$	490,971
Floor plan notes payable — non-trade	725,526		—			112,085		346,683		266,758
Accounts payable	263,881		—			3,344		124,663		135,874
Accrued expenses	223,972		(340,917		)	450		114,636		449,803
Current portion of long-term debt	19,493		—			—		9,745		9,748
Liabilities held for sale	51,279		—			—		17,766		33,513

Total current liabilities	2,692,513		(340,917		)	115,879		1,530,884		1,386,667
Long-term debt	918,024		(38,692		)	710,000		121,618		125,098
Deferred tax liabilities	287,818		—			—		260,445		27,373
Other long-term liabilities	164,314		—			—		85,151		79,163

Total liabilities	4,062,669		(379,609		)	825,879		1,998,098		1,618,301
Total equity	1,316,321		(1,488,464		)	1,316,321		1,139,656		348,808

Total liabilities and equity	$	5,378,990	$	(1,868,073	)	$	2,142,200	$	3,137,754	$	1,967,109

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended September 30, 2013

	Total Company			Eliminations			Penske Automotive Group			Guarantor Subsidiaries			Non-Guarantor Subsidiaries
	(In thousands)

Revenues	$	3,824,143		$	—		$	—		$	2,296,224		$	1,527,919
Cost of sales	3,244,235			—			—			1,933,197			1,311,038

Gross profit	579,908			—			—			363,027			216,881
Selling, general and administrative expenses	454,188			—			5,475			280,222			168,491
Depreciation	15,784			—			417			9,538			5,829

Operating income (loss)	109,936			—			(5,892		)	73,267			42,561
Floor plan interest expense	(10,840		)	—			(2,428		)	(4,951		)	(3,461		)
Other interest expense	(12,370		)	—			(7,159		)	(1,951		)	(3,260		)
Equity in earnings of affiliates	11,240			—			10,035			—			1,205
Equity in earnings of subsidiaries	—			(103,153		)	103,153			—			—

Income (loss) from continuing operations before income taxes	97,966			(103,153		)	97,709			66,365			37,045
Income taxes	(31,692		)	33,458			(31,692		)	(24,116		)	(9,342		)

Income (loss) from continuing operations	66,274			(69,695		)	66,017			42,249			27,703
Income (loss) from discontinued operations, net of tax	(742		)	742			(742		)	(151		)	(591		)

Net income (loss)	65,532			(68,953		)	65,275			42,098			27,112
Other comprenhensive income (loss), net of tax	38,449			(38,622		)	38,449			824			37,798

Comprehensive income	103,981			(107,575		)	103,724			42,922			64,910
Less: Comprehensive income attributable to non-controlling interests	257			—			—			—			257

Comprehensive income attributable to Penske Automotive Group common stockholders	$	103,724		$	(107,575	)	$	103,724		$	42,922		$	64,653

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended September 30, 2012

	Total Company			Eliminations			Penske Automotive Group			Guarantor Subsidiaries			Non-Guarantor Subsidiaries
	(In thousands)

Revenues	$	3,336,020		$	—		$	—		$	1,997,423		$	1,338,597
Cost of sales	2,834,536			—			—			1,687,417			1,147,119

Gross profit	501,484			—			—			310,006			191,478
Selling, general and administrative expenses	400,039			—			5,073			244,259			150,707
Depreciation	13,704			—			328			7,580			5,796

Operating income (loss)	87,741			—			(5,401		)	58,167			34,975
Floor plan interest expense	(9,951		)	—			(2,322		)	(4,300		)	(3,329		)
Other interest expense	(11,583		)	—			(7,695		)	(804		)	(3,084		)
Equity in earnings of affiliates	8,814			—			7,784			—			1,030
Equity in earnings of subsidiaries	—			(82,373		)	82,373			—			—
Debt redemption costs	(17,753		)	—			(17,753		)	—			—

Income (loss) from continuing operations before income taxes	57,268			(82,373		)	56,986			53,063			29,592
Income taxes	(15,421		)	22,292			(15,421		)	(14,733		)	(7,559		)

Income (loss) from continuing operations	41,847			(60,081		)	41,565			38,330			22,033
Income (loss) from discontinued operations, net of tax	(534		)	534			(534		)	219			(753		)

Net income (loss)	41,313			(59,547		)	41,031			38,549			21,280
Other comprehensive income (loss), net of tax	17,948			(16,882		)	17,948			175			16,707

Comprehensive income	59,261			(76,429		)	58,979			38,724			37,987
Less: Comprehensive income attributable to non-controlling interests	489			(207		)	207			—			489

Comprehensive income attributable to Penske Automotive Group common stockholders	$	58,772		$	(76,222	)	$	58,772		$	38,724		$	37,498

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Nine Months Ended September 30, 2013

	Total Company			Eliminations			Penske Automotive Group			Guarantor Subsidiaries			Non-Guarantor Subsidiaries
	(In thousands)

Revenues	$	10,927,917		$	—		$	—		$	6,616,079		$	4,311,838
Cost of sales	9,244,779			—			—			5,545,896			3,698,883

Gross profit	1,683,138			—			—			1,070,183			612,955
Selling, general and administrative expenses	1,308,958			—			15,328			820,249			473,381
Depreciation	45,300			—			1,206			26,743			17,351

Operating income (loss)	328,880			—			(16,534		)	223,191			122,223
Floor plan interest expense	(32,008		)	—			(7,174		)	(15,044		)	(9,790		)
Other interest expense	(36,163		)	—			(20,555		)	(4,214		)	(11,394		)
Equity in earnings of affiliates	22,489			—			18,865			—			3,624
Equity in earnings of subsidiaries	—			(307,531		)	307,531			—			—

Income (loss) from continuing operations before income taxes	283,198			(307,531		)	282,133			203,933			104,663
Income taxes	(95,263		)	103,839			(95,263		)	(77,745		)	(26,094		)

Income (loss) from continuing operations	187,935			(203,692		)	186,870			126,188			78,569
Income (loss) from discontinued operations, net of tax	(1,889		)	1,889			(1,889		)	(184		)	(1,705		)

Net income (loss)	186,046			(201,803		)	184,981			126,004			76,864
Other comprehensive income (loss), net of tax	4,313			(4,516		)	4,313			2,997			1,519

Comprehensive income	190,359			(206,319		)	189,294			129,001			78,383
Less: Comprehensive income attributable to non-controlling interests	1,599			(534		)	534			—			1,599

Comprehensive income attributable to Penske Automotive Group common stockholders	$	188,760		$	(205,785	)	$	188,760		$	129,001		$	76,784

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Nine Months Ended September 30, 2012

	Total Company			Eliminations			Penske Automotive Group			Guarantor Subsidiaries			Non-Guarantor Subsidiaries
	(In thousands)

Revenues	$	9,814,784		$	—		$	—		$	5,821,934		$	3,992,850
Cost of sales	8,313,365			—			—			4,897,098			3,416,267

Gross profit	1,501,419			—			—			924,836			576,583
Selling, general and administrative expenses	1,188,658			—			14,408			728,842			445,408
Depreciation	40,014			—			936			22,018			17,060

Operating income (loss)	272,747			—			(15,344		)	173,976			114,115
Floor plan interest expense	(29,319		)	—			(6,774		)	(12,247		)	(10,298		)
Other interest expense	(35,155		)	—			(21,986		)	(2,668		)	(10,501		)
Equity in earnings of affiliates	21,392			—			18,538			—			2,854
Equity in earnings of subsidiaries	—			(254,241		)	254,241			—			—
Debt redemption costs	(17,753		)	—			(17,753		)	—			—

Income (loss) from continuing operations before income taxes	211,912			(254,241		)	210,922			159,061			96,170
Income taxes	(69,347		)	83,603			(69,347		)	(59,519		)	(24,084		)

Income (loss) from continuing operations	142,565			(170,638		)	141,575			99,542			72,086
Income (loss) from discontinued operations, net of tax	(4,634		)	4,634			(4,634		)	(1,830		)	(2,804		)

Net income (loss)	137,931			(166,004		)	136,941			97,712			69,282
Other comprehensive income (loss), net of tax	17,758			(15,150		)	17,758			(74		)	15,224

Comprehensive income	155,689			(181,154		)	154,699			97,638			84,506
Less: Comprehensive income attributable to non-controlling interests	1,197			(207		)	207			—			1,197

Comprehensive income attributable to Penske Automotive Group common stockholders	$	154,492		$	(180,947	)	$	154,492		$	97,638		$	83,309

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Nine Months Ended September 30, 2013

	Total Company			Penske Automotive Group			Guarantor Subsidiaries			Non-Guarantor Subsidiaries
	(In thousands)

Net cash from continuing operating activities	$	297,997		$	59,444		$	56,502		$	182,051

Investing activities:
Purchase of equipment and improvements	(122,952		)	(983		)	(84,506		)	(37,463		)
Purchase of Penske Car Rental vehicles	(82,313		)	—			(82,313		)	—
Acquisitions, net	(221,160		)	—			(22,005		)	(199,155		)
Other	(7,493		)	—			(7,522		)	29

Net cash from continuing investing activities	(433,918		)	(983		)	(196,346		)	(236,589		)

Financing activities:
Net borrowings (repayments) of long-term debt	123,825			(18,000		)	71,147			70,678
Net borrowings (repayments) of floor plan notes payable — non-trade	76,525			16,015			29,300			31,210
Repurchases of common stock	(15,813		)	(15,813		)	—			—
Dividends	(40,663		)	(40,663		)	—			—
Distributions from (to) parent	—			—			1,154			(1,154		)
Other	235			—			—			235

Net cash from continuing financing activities	144,109			(58,461		)	101,601			100,969

Net cash from discontinued operations	19,466			—			9,279			10,187

Net change in cash and cash equivalents	27,654			—			(28,964		)	56,618
Cash and cash equivalents, beginning of period	43,447			—			36,478			6,969

Cash and cash equivalents, end of period	$	71,101		$	—		$	7,514		$	63,587

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Nine Months Ended September 30, 2012

	Total Company			Penske Automotive Group			Guarantor Subsidiaries			Non-Guarantor Subsidiaries
	(In thousands)

Net cash from continuing operating activities	$	262,748		$	95,748		$	40,064		$	126,936

Investing activities:
Purchase of equipment and improvements	(96,380		)	(766		)	(67,233		)	(28,381		)
Proceeds from sale-leaseback transactions	1,584			—			—			1,584
Acquisitions, net	(137,805		)	—			(3,416		)	(134,389		)
Other	3,496			(3,812		)	—			7,308

Net cash from continuing investing activities	(229,105		)	(4,578		)	(70,649		)	(153,878		)

Financing activities:
Repurchase of 3.5% senior subordinated convertible notes	(62,687		)	(62,687		)	—			—
Issuance of 5.75% senior subordinated notes	550,000			550,000			—			—
Repurchase of 7.75% senior subordinated notes	(390,755		)	(390,755		)	—			—
Net borrowings (repayments) of long-term debt	(133,913		)	(149,000		)	(1,598		)	16,685
Net borrowings (repayments) of floor plan notes payable — non-trade	32,410			9,363			11,471			11,576
Repurchases of common stock	(9,829		)	(9,829		)	—			—
Dividends	(29,760		)	(29,760		)	—			—
Payment of deferred financing fees	(8,502		)	(8,502		)	—			—
Distributions from (to) parent	—			—			4,747			(4,747		)

Net cash from continuing financing activities	(53,036		)	(91,170		)	14,620			23,514

Net cash from discontinued operations	18,282			—			6,725			11,557

Net change in cash and cash equivalents	(1,111		)	—			(9,240		)	8,129
Cash and cash equivalents, beginning of period	26,997			—			26,767			230

Cash and cash equivalents, end of period	$	25,886		$	—		$	17,527		$	8,359