Discontinued Operations and Divestitures

12 Months Ended

Dec. 31, 2015

Discontinued Operations and Divestitures

Discontinued Operations and Divestitures

4. Discontinued Operations and Divestitures

Assets Held for Sale and Discontinued Operations

We classify an entity as held for sale in the period in which all of the following criteria are met:

management, having the authority to approve the action, commits to a plan to sell the entity;

the entity is available for immediate sale in its present condition;

an active program to locate a buyer and other actions required to complete the plan to sell have been initiated;

the sale is probable and transfer is expected to be completed within one year;

the entity is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and

actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

As discussed previously, in April 2014, the FASB issued ASU No. 2014-08 that changed the definition of a discontinued operation to include only those disposals of components of an entity or components of an entity that are classified as held for sale that represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. We adopted this accounting standard update effective January 1, 2015.

Prior to the adoption of ASU No. 2014-08, we accounted for dispositions as discontinued operations when it was evident that the operations and cash flows of an entity being disposed of would be eliminated from ongoing operations and we would not have any significant continuing involvement in its operations. The results of operations for those entities that were classified as discontinued operations prior to adoption of ASU No. 2014-08 are included in “Loss from discontinued operations” in the accompanying Consolidated Statements of Income for all periods presented and will continue to be reported within discontinued operations in the future. Beginning with disposals or entities classified as held for sale subsequent to January 1, 2015, only those that represent a strategic shift that has, or will have, a major impact on our operations and financial results will be included in discontinued operations.

We had no entities newly classified as held for sale in 2015. As such, the combined financial information presented below represents only retail automotive dealerships and our car rental business that were classified as discontinued operations prior to adoption of ASU No. 2014-08:

	Year Ended December 31,
	2015		2014		2013
Revenues	$	75.8	$	206.8	$	486.1
Pre-tax loss		(6.7)		(31.5)		(4.9)
Pre-tax gain on disposal		2.9		14.8		0.8

	December 31,
	2015		2014
Inventories	$	6.2	$	17.5
Other assets		6.9		138.1
Total assets	$	13.1	$	155.6
Floor plan notes payable (including non-trade)	$	4.3	$	14.6
Other liabilities		1.9		93.6
Total liabilities	$	6.2	$	108.2

In September 2015, one of our dealerships that previously met the criteria for classification as discontinued operations prior to the adoption of ASU No. 2014-08, that had been classified as held for sale, was reclassified as held and used. Combined financial information for the dealership returned to held and used is as follows:

	Year Ended December 31,
	2015		2014		2013
Revenues	$	64.7	$	54.8	$	38.6
Pre-tax loss		(3.1)		(2.3)		(1.3)

Divestitures

In February 2015, we divested our car rental business that included Hertz car rental franchises in the Memphis, Tennessee market and certain markets throughout Indiana. We received proceeds of $17.8million from the sale excluding sales of car rental vehicles. In June 2015, we disposed of two U.S. retail automotive franchises: Nissan and Infiniti of San Francisco, California. The results of operations of these franchises and our car rental business are included in discontinued operations for the years ended December 31, 2015, 2014, and 2013.

In September 2015, we sold our 50% interest in our Max Cycles non-automotive joint venture, which operates BMW motorcycle dealerships. In October 2015, our Penske-Wynn Ferrari/Maserati joint venture sold substantially all of its assets to a third party. We accounted for both of these investments using the equity method of accounting. The equity earnings associated with these investments is included within continuing operations under the caption “Equity in earnings of affiliates” for the years ended December 31, 2015, 2014, and 2013. 

In December 2015, we closed of one of our retail commercial truck used truck locations in New Mexico.  Additionally, in January 2016, we closed of one of our retail commercial truck parts locations in Oklahoma. The results of operations for these businesses are included in continuing operations for the years ended December 31, 2015 and 2014, as these businesses did not meet the criteria described above for discontinued operations treatment.