Related Party Transactions

12 Months Ended

Dec. 31, 2015

Related Party Transactions

Related Party Transactions

12. Related Party Transactions

We sometimes pay to and/or receive fees from Penske Corporation and its affiliates for services rendered in the normal course of business, or to reimburse payments made to third parties on each other’s behalf. These transactions are reviewed periodically by our Audit Committee and reflect the provider’s cost or an amount mutually agreed upon by both parties. During 2015, 2014, and 2013, Penske Corporation and its affiliates billed us $6.7 million, $7.3 million, and $6.3 million, respectively, and we billed Penske Corporation and its affiliates $101 thousand, $56 thousand, and $24 thousand, respectively, for such services. As of December 31, 2015 and 2014, we had $64 thousand and $14 thousand of receivables from and $0.6 million and $0.7 million of payables to Penske Corporation and its subsidiaries, respectively.

PAG, Penske Corporation and certain affiliates have entered into a joint insurance agreement which provides that, with respect to any joint insurance (such as our joint commercial crime insurance policy), available coverage with respect to a loss shall be paid to each party per occurrence as stipulated in the policies. In the event of losses by us and Penske Corporation that exceed the limit of liability for any policy or policy period, the total policy proceeds will be allocated based on the ratio of premiums paid.

We are a 9.0% limited partner of PTL, a leading provider of transportation and supply chain services.  PTL is owned 41.1% by Penske Corporation, 9.0%by us, 29.9% by GECC and 20.0% by Mitsui & Co. Among other things, the relevant agreements provide us with specified distribution and governance rights and restrict our ability to transfer our interests. In 2015, 2014, and 2013, we received $13.8 million, $11.6 million, and $9.9 million, respectively, from PTL in pro rata cash dividends.  In 2014, we formed a venture with PTL, Penske Commercial Leasing Australia. The venture combines PTL’s fleet operations expertise with our market knowledge of commercial vehicles to rent heavy-duty commercial vehicles in Australia. This venture is accounted for as an equity method investment as discussed in Note 2.

In 2014, we acquired Transportation Resource Partners’ (“TRP”) ownership interest in PTG for $58.8 million, increasing our ownership to 91%. TRP is an organization that invests in transportation-related industries in which our CEO, Roger S. Penske, is a managing member.

From time to time we enter into joint venture relationships in the ordinary course of business, pursuant to which we own and operate automotive dealerships together with other investors. We may also provide these dealerships with working capital and other debt financing at costs that are based on our incremental borrowing rate. As of December 31, 2015, our automotive joint venture relationships were as follows:

		Ownership
Location	Dealerships	Interest
Fairfield, Connecticut	Audi, Mercedes-Benz, Sprinter, Porsche, smart	81.03	% (A) (C)
Greenwich, Connecticut	Mercedes-Benz	80.00	% (B) (C)
Northern Italy	BMW, MINI, Maserati	70.00	% (C)
Aachen, Germany	Audi, Citroën, Kia, Maserati, SEAT, Skoda, Toyota, Volkswagen	60.00	% (D)
Frankfurt, Germany	Lexus, Toyota, Volkswagen	50.00	% (E)
Barcelona, Spain	BMW, MINI	50.00	% (E)

(a) An entity controlled by one of our directors, Lucio A. Noto (the “Investor”), owns an 18.97% interest in this joint venture which entitles the Investor to 20% of the joint venture’s operating profits. In addition, the Investor has an option to purchase up to a total 20% interest in the joint venture for specified amounts.

(b) An entity controlled by one of our directors, Lucio A. Noto, owns a 20% interest in this joint venture.

(c) Entity is consolidated in our financial statements.

(d) Entity is consolidated in our financial statements as a result of our purchase of an additional 10%interest in this joint venture in the third quarter of 2015.

(e) Entity is accounted for using the equity method of accounting.

Additionally, we are party to non-automotive joint ventures including our investments in Penske Commercial Leasing Australia (45%), Penske Vehicle Services (31%), and National Powersport Auctions (7%) that are accounted for under the equity method as more fully discussed in Note 2, and our controlling interests in PTG (96%) and i.M. Branded (90%) that are consolidated in our financial statements.