13. Condensed Consolidating Financial Information

The following tables include condensed consolidating financial information as of June 30, 2016 and December 31, 2015 and for the three and six month periods ended June 30, 2016 and 2015 for Penske Automotive Group, Inc. (as the issuer of the 5.75% Notes, the 5.375% Notes, and the 5.50% Notes), guarantor subsidiaries and non-guarantor subsidiaries (primarily representing non-U.S. entities). Guarantor subsidiaries are directly or indirectly 100% owned by PAG, and the guarantees are full and unconditional, and joint and several. The guarantees may be released under certain circumstances upon resale, or transfer by us of the stock of the related guarantor or all or substantially all of the assets of the guarantor to a non-affiliate.

CONDENSED CONSOLIDATING BALANCE SHEET

June 30, 2016


					Penske
	Total				Automotive		Guarantor		Non‑Guarantor
	Company		Eliminations		Group		Subsidiaries		Subsidiaries
	(In millions)
Cash and cash equivalents	$	97.5	$	—	$	—	$	11.2	$	86.3
Accounts receivable, net		827.8		(439.7)		439.7		414.8		413.0
Inventories		3,351.8		—		—		1,911.5		1,440.3
Other current assets		101.7		—		3.2		33.5		65.0
Assets held for sale		6.8		—		—		6.8		—
Total current assets		4,385.6		(439.7)		442.9		2,377.8		2,004.6
Property and equipment, net		1,576.7		—		3.6		950.9		622.2
Intangible assets		1,722.2		—		—		1,099.9		622.3
Equity method investments		371.1		—		309.6		—		61.5
Other long-term assets		19.6		(2,316.0)		2,322.1		7.6		5.9
Total assets	$	8,075.2	$	(2,755.7)	$	3,078.2	$	4,436.2	$	3,316.5
Floor plan notes payable	$	2,061.8	$	—	$	—	$	1,213.7	$	848.1
Floor plan notes payable—non-trade		969.4		—		5.0		549.1		415.3
Accounts payable		554.8		—		2.6		176.2		376.0
Accrued expenses		403.3		(439.7)		0.9		171.1		671.0
Current portion of long-term debt		47.7		—		—		11.2		36.5
Liabilities held for sale		4.6		—		—		4.4		0.2
Total current liabilities		4,041.6		(439.7)		8.5		2,125.7		2,347.1
Long-term debt		1,613.1		(160.7)		1,336.8		196.1		240.9
Deferred tax liabilities		449.4		—		—		433.7		15.7
Other long-term liabilities		238.2		—		—		64.5		173.7
Total liabilities		6,342.3		(600.4)		1,345.3		2,820.0		2,777.4
Total equity		1,732.9		(2,155.3)		1,732.9		1,616.2		539.1
Total liabilities and equity	$	8,075.2	$	(2,755.7)	$	3,078.2	$	4,436.2	$	3,316.5

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2015


					Penske
	Total				Automotive		Guarantor		Non‑Guarantor
	Company		Eliminations		Group		Subsidiaries		Subsidiaries
	(In millions)
Cash and cash equivalents	$	62.4	$	—	$	—	$	—	$	62.4
Accounts receivable, net		782.3		(430.4)		430.4		400.8		381.5
Inventories		3,463.5		—		—		1,650.5		1,813.0
Other current assets		85.6		—		3.9		28.3		53.4
Assets held for sale		12.7		—		—		8.5		4.2
Total current assets		4,406.5		(430.4)		434.3		2,088.1		2,314.5
Property and equipment, net		1,520.1		—		4.0		822.0		694.1
Intangible assets		1,731.2		—		—		878.9		852.3
Equity method investments		336.4		—		298.2		—		38.2
Other long-term assets		19.2		(2,253.4)		2,259.9		7.2		5.5
Total assets	$	8,013.4	$	(2,683.8)	$	2,996.4	$	3,796.2	$	3,904.6
Floor plan notes payable	$	2,247.2	$	—	$	—	$	1,295.0	$	952.2
Floor plan notes payable—non-trade		1,132.4		—		154.7		339.8		637.9
Accounts payable		493.8		—		4.8		143.3		345.7
Accrued expenses		378.1		(430.4)		0.1		112.3		696.1
Current portion of long-term debt		28.0		—		—		5.7		22.3
Liabilities held for sale		6.2		—		—		4.4		1.8
Total current liabilities		4,285.7		(430.4)		159.6		1,900.5		2,656.0
Long-term debt		1,247.0		(256.4)		1,001.9		109.2		392.3
Deferred tax liabilities		433.4		—		—		413.4		20.0
Other long-term liabilities		212.4		—		—		68.9		143.5
Total liabilities		6,178.5		(686.8)		1,161.5		2,492.0		3,211.8
Total equity		1,834.9		(1,997.0)		1,834.9		1,304.2		692.8
Total liabilities and equity	$	8,013.4	$	(2,683.8)	$	2,996.4	$	3,796.2	$	3,904.6

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended June 30, 2016


					Penske
	Total				Automotive		Guarantor		Non-Guarantor
	Company		Eliminations		Group		Subsidiaries		Subsidiaries
	(In millions)
Revenues	$	5,254.1	$	—	$	—	$	2,868.6	$	2,385.5
Cost of sales		4,482.8		—		—		2,429.3		2,053.5
Gross profit		771.3		—		—		439.3		332.0
Selling, general and administrative expenses		582.7		—		5.2		326.3		251.2
Depreciation		24.5		—		0.4		11.7		12.4
Operating income		164.1		—		(5.6)		101.3		68.4
Floor plan interest expense		(13.1)		—		(0.5)		(7.7)		(4.9)
Other interest expense		(19.5)		—		(12.3)		(1.9)		(5.3)
Equity in earnings of affiliates		12.0		—		10.5		—		1.5
Equity in earnings of subsidiaries		—		(149.9)		149.9		—		—
Income from continuing operations before income taxes		143.5		(149.9)		142.0		91.7		59.7
Income taxes		(47.3)		49.9		(47.3)		(36.7)		(13.2)
Income from continuing operations		96.2		(100.0)		94.7		55.0		46.5
(Loss) income from discontinued operations, net of tax		(1.2)		1.2		(1.2)		(1.2)		—
Net income		95.0		(98.8)		93.5		53.8		46.5
Other comprehensive income (loss), net of tax		(55.5)		55.7		(55.5)		—		(55.7)
Comprehensive income		39.5		(43.1)		38.0		53.8		(9.2)
Less: Comprehensive income attributable to non-controlling interests		0.8		0.7		(0.7)		0.1		0.7
Comprehensive income attributable to Penske Automotive Group common stockholders	$	38.7	$	(43.8)	$	38.7	$	53.7	$	(9.9)

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended June 30, 2015


					Penske
	Total				Automotive		Guarantor		Non-Guarantor
	Company		Eliminations		Group		Subsidiaries		Subsidiaries
	(In millions)
Revenues	$	4,920.6	$	—	$	—	$	2,609.0	$	2,311.6
Cost of sales		4,189.3		—		—		2,203.6		1,985.7
Gross profit		731.3		—		—		405.4		325.9
Selling, general and administrative expenses		553.1		—		5.6		300.1		247.4
Depreciation		19.3		—		0.4		10.4		8.5
Operating income		158.9		—		(6.0)		94.9		70.0
Floor plan interest expense		(11.0)		—		(0.7)		(5.6)		(4.7)
Other interest expense		(16.4)		—		(10.2)		(1.4)		(4.8)
Equity in earnings of affiliates		12.0		—		10.5		—		1.5
Equity in earnings of subsidiaries		—		(148.4)		148.4		—		—
Income from continuing operations before income taxes		143.5		(148.4)		142.0		87.9		62.0
Income taxes		(47.7)		49.7		(47.7)		(34.1)		(15.6)
Income from continuing operations		95.8		(98.7)		94.3		53.8		46.4
(Loss) income from discontinued operations, net of tax		(0.1)		0.4		(0.4)		(0.1)		—
Net income		95.7		(98.3)		93.9		53.7		46.4
Other comprehensive income (loss), net of tax		38.3		(37.5)		38.3		—		37.5
Comprehensive income		134.0		(135.8)		132.2		53.7		83.9
Less: Comprehensive income attributable to non-controlling interests		1.5		0.2		(0.2)		—		1.5
Comprehensive income attributable to Penske Automotive Group common stockholders	$	132.5	$	(136.0)	$	132.4	$	53.7	$	82.4

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Six Months Ended June 30, 2016


					Penske
	Total				Automotive		Guarantor		Non-Guarantor
	Company		Eliminations		Group		Subsidiaries		Subsidiaries
	(In millions)
Revenues	$	10,078.7	$	—	$	—	$	5,257.8	$	4,820.9
Cost of sales		8,583.6		—		—		4,435.5		4,148.1
Gross profit		1,495.1		—		—		822.3		672.8
Selling, general and administrative expenses		1,141.6		—		11.3		622.1		508.2
Depreciation		45.3		—		0.8		22.5		22.0
Operating income		308.2		—		(12.1)		177.7		142.6
Floor plan interest expense		(25.9)		—		(1.3)		(14.4)		(10.2)
Other interest expense		(36.7)		—		(25.6)		(0.6)		(10.5)
Equity in earnings of affiliates		17.5		—		14.7		—		2.8
Equity in earnings of subsidiaries		—		(285.0)		285.0		—		—
Income from continuing operations before income taxes		263.1		(285.0)		260.7		162.7		124.7
Income taxes		(86.7)		94.7		(86.7)		(65.9)		(28.8)
Income from continuing operations		176.4		(190.3)		174.0		96.8		95.9
(Loss) income from discontinued operations, net of tax		(1.2)		1.3		(1.3)		(1.1)		(0.1)
Net income		175.2		(189.0)		172.7		95.7		95.8
Other comprehensive income (loss), net of tax		(54.3)		56.0		(54.3)		—		(56.0)
Comprehensive income		120.9		(133.0)		118.4		95.7		39.8
Less: Comprehensive income attributable to non-controlling interests		3.2		(0.8)		0.8		0.1		3.1
Comprehensive income attributable to Penske Automotive Group common stockholders	$	117.7	$	(132.2)	$	117.6	$	95.6	$	36.7

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Six Months Ended June 30, 2015


					Penske
	Total				Automotive		Guarantor		Non-Guarantor
	Company		Eliminations		Group		Subsidiaries		Subsidiaries
	(In millions)
Revenues	$	9,403.5	$	—	$	—	$	4,957.3	$	4,446.2
Cost of sales		7,982.3		—		—		4,175.2		3,807.1
Gross profit		1,421.2		—		—		782.1		639.1
Selling, general and administrative expenses		1,088.9		—		12.3		593.3		483.3
Depreciation		37.9		—		0.8		20.6		16.5
Operating income		294.4		—		(13.1)		168.2		139.3
Floor plan interest expense		(21.3)		—		(1.4)		(10.8)		(9.1)
Other interest expense		(32.7)		—		(20.0)		(2.7)		(10.0)
Equity in earnings of affiliates		18.7		—		16.3		—		2.4
Equity in earnings of subsidiaries		—		(275.4)		275.4		—		—
Income from continuing operations before income taxes		259.1		(275.4)		257.2		154.7		122.6
Income taxes		(86.5)		92.5		(86.5)		(62.4)		(30.1)
Income from continuing operations		172.6		(182.9)		170.7		92.3		92.5
(Loss) income from discontinued operations, net of tax		(1.0)		1.6		(1.6)		(1.2)		0.2
Net income		171.6		(181.3)		169.1		91.1		92.7
Other comprehensive income (loss), net of tax		(16.8)		14.8		(16.8)		—		(14.8)
Comprehensive income		154.8		(166.5)		152.3		91.1		77.9
Less: Comprehensive income attributable to non-controlling interests		1.6		0.8		(0.8)		—		1.6
Comprehensive income attributable to Penske Automotive Group common stockholders	$	153.2	$	(167.3)	$	153.1	$	91.1	$	76.3

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2016


			Penske
	Total		Automotive		Guarantor		Non‑Guarantor
	Company		Group		Subsidiaries		Subsidiaries
	(In millions)
Net cash provided by (used in) continuing operating activities	$	264.5	$	(90.1)	$	109.5	$	245.1
Investing activities:
Purchase of equipment and improvements		(136.7)		(0.4)		(149.9)		13.6
Acquisitions, net		(65.4)		—		(65.1)		(0.3)
Other		(25.0)		—		0.4		(25.4)
Net cash used in continuing investing activities		(227.1)		(0.4)		(214.6)		(12.1)
Financing activities:
Net (repayments) borrowings of long-term debt		(99.1)		(160.0)		36.9		24.0
Net (repayments) borrowings of floor plan notes payable—non-trade		(163.0)		(149.7)		209.3		(222.6)
Issuance of 5.50% senior subordinated notes		500.0		500.0		—		—
Payment of debt issuance costs		(6.6)		(6.6)		—		—
Repurchases of common stock		(173.6)		(173.6)		—		—
Dividends		(46.4)		(46.4)		—		—
Other		(9.8)		—		(5.2)		(4.6)
Distributions from (to) parent		—		126.8		(125.0)		(1.8)
Net cash provided by (used in) continuing financing activities		1.5		90.5		116.0		(205.0)
Net cash provided by discontinued operations		2.9		—		0.3		2.6
Effect of exchange rate changes on cash and cash equivalents		(6.7)		—		—		(6.7)
Net change in cash and cash equivalents		35.1		—		11.2		23.9
Cash and cash equivalents, beginning of period		62.4		—		—		62.4
Cash and cash equivalents, end of period	$	97.5	$	—	$	11.2	$	86.3

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2015


			Penske
	Total		Automotive		Guarantor		Non‑Guarantor
	Company		Group		Subsidiaries		Subsidiaries
	(In millions)
Net cash provided by continuing operating activities	$	270.6	$	9.4	$	73.8	$	187.4
Investing activities:
Purchase of equipment and improvements		(83.5)		(0.7)		(40.0)		(42.8)
Acquisitions, net		(86.4)		—		(21.7)		(64.7)
Net cash used in continuing investing activities		(169.9)		(0.7)		(61.7)		(107.5)
Financing activities:
Net repayments of long-term debt		(194.2)		(10.0)		(5.1)		(179.1)
Net borrowings (repayments) of floor plan notes payable—non-trade		120.3		64.0		(54.7)		111.0
Payment of debt issuance costs		(1.7)		—		—		(1.7)
Repurchases of common stock		(22.0)		(22.0)		—		—
Dividends		(40.7)		(40.7)		—		—
Other		0.2		—		—		0.2
Distributions from (to) parent		—		—		7.4		(7.4)
Net cash used in continuing financing activities		(138.1)		(8.7)		(52.4)		(77.0)
Net cash provided by discontinued operations		40.9		—		40.3		0.6
Effect of exchange rate changes on cash and cash equivalents		(0.4)		—		—		(0.4)
Net change in cash and cash equivalents		3.1		—		—		3.1
Cash and cash equivalents, beginning of period		36.3		—		—		36.3
Cash and cash equivalents, end of period	$	39.4	$	—	$	—	$	39.4