Condensed Consolidating Financial Information

9 Months Ended

Sep. 30, 2019

Condensed Consolidating Financial Information

Condensed Consolidating Financial Information

15. Condensed Consolidating Financial Information

The following tables include condensed consolidating financial information as of September 30, 2019 and December 31, 2018 and for the three and nine month periods ended September 30, 2019 and 2018 for Penske Automotive Group, Inc. (as the issuer of the 5.75% Notes, the 5.375% Notes, the 5.50% Notes, and the 3.75% 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

September 30, 2019

					Penske
	Total				Automotive		Guarantor		Non-Guarantor
	Company		Eliminations		Group		Subsidiaries		Subsidiaries
Cash and cash equivalents	$	77.5	$	—	$	—	$	—	$	77.5
Accounts receivable, net		967.3		(493.6)		493.6		467.9		499.4
Inventories		4,043.9		—		—		2,156.7		1,887.2
Other current assets		98.8		—		7.7		21.6		69.5
Total current assets		5,187.5		(493.6)		501.3		2,646.2		2,533.6
Property and equipment, net		2,309.3		—		3.6		1,110.9		1,194.8
Operating lease right-of-use assets		2,384.4		—		9.3		1,632.9		742.2
Intangible assets		2,423.9		—		—		1,635.8		788.1
Equity method investments		1,362.8		—		1,298.2		—		64.6
Other long-term assets		21.6		(2,911.0)		2,920.2		3.1		9.3
Total assets	$	13,689.5	$	(3,404.6)	$	4,732.6	$	7,028.9	$	5,332.6
Floor plan notes payable	$	2,444.1	$	—	$	—	$	1,447.0	$	997.1
Floor plan notes payable — non-trade		1,410.6		—		227.2		515.4		668.0
Accounts payable		672.3		—		5.1		213.1		454.1
Accrued expenses and other current liabilities		722.2		(493.6)		1.6		296.0		918.2
Current portion of long-term debt		96.8		—		13.0		10.6		73.2
Liabilities held for sale		0.5		—		—		0.5		—
Total current liabilities		5,346.5		(493.6)		246.9		2,482.6		3,110.6
Long-term debt		2,282.5		(82.5)		1,817.6		256.4		291.0
Long-term operating lease liabilities		2,334.7		—		9.0		1,603.7		722.0
Deferred tax liabilities		620.7		—		—		615.8		4.9
Other long-term liabilities		446.0		—		—		36.6		409.4
Total liabilities		11,030.4		(576.1)		2,073.5		4,995.1		4,537.9
Total equity		2,659.1		(2,828.5)		2,659.1		2,033.8		794.7
Total liabilities and equity	$	13,689.5	$	(3,404.6)	$	4,732.6	$	7,028.9	$	5,332.6

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2018

					Penske
	Total				Automotive		Guarantor		Non-Guarantor
	Company		Eliminations		Group		Subsidiaries		Subsidiaries
Cash and cash equivalents	$	39.4	$	—	$	—	$	12.9	$	26.5
Accounts receivable, net		929.1		(481.7)		481.7		507.1		422.0
Inventories		4,040.1		—		—		1,961.6		2,078.5
Other current assets		86.6		—		10.6		17.8		58.2
Total current assets		5,095.2		(481.7)		492.3		2,499.4		2,585.2
Property and equipment, net		2,250.0		—		3.9		1,077.7		1,168.4
Intangible assets		2,238.2		—		—		1,422.6		815.6
Equity method investments		1,305.2		—		1,239.9		—		65.3
Other long-term assets		15.9		(2,814.3)		2,821.0		2.9		6.3
Total assets	$	10,904.5	$	(3,296.0)	$	4,557.1	$	5,002.6	$	4,640.8
Floor plan notes payable	$	2,362.2	$	—	$	—	$	1,348.3	$	1,013.9
Floor plan notes payable — non-trade		1,428.6		—		232.3		505.9		690.4
Accounts payable		598.2		—		4.9		196.6		396.7
Accrued expenses		566.6		(481.7)		1.4		160.2		886.7
Current portion of long-term debt		92.0		—		—		6.3		85.7
Liabilities held for sale		0.7		—		—		0.7		—
Total current liabilities		5,048.3		(481.7)		238.6		2,218.0		3,073.4
Long-term debt		2,124.7		(88.6)		1,683.8		225.7		303.8
Deferred tax liabilities		577.8		—		—		570.5		7.3
Other long-term liabilities		519.0		—		—		57.6		461.4
Total liabilities		8,269.8		(570.3)		1,922.4		3,071.8		3,845.9
Total equity		2,634.7		(2,725.7)		2,634.7		1,930.8		794.9
Total liabilities and equity	$	10,904.5	$	(3,296.0)	$	4,557.1	$	5,002.6	$	4,640.8

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended September 30, 2019

					Penske
	Total				Automotive		Guarantor		Non-Guarantor
	Company		Eliminations		Group		Subsidiaries		Subsidiaries
Revenues	$	5,967.6	$	—	$	—	$	3,478.6	$	2,489.0
Cost of sales		5,097.9		—		—		2,951.1		2,146.8
Gross profit		869.7		—		—		527.5		342.2
Selling, general and administrative expenses		672.8		—		6.6		375.1		291.1
Depreciation		27.5		—		0.3		15.2		12.0
Operating income		169.4		—		(6.9)		137.2		39.1
Floor plan interest expense		(21.4)		—		(1.9)		(14.7)		(4.8)
Other interest expense		(32.9)		—		(24.0)		(3.3)		(5.6)
Equity in earnings of affiliates		43.3		—		42.2		—		1.1
Equity in earnings of subsidiaries		—		(149.2)		149.2		—		—
Income from continuing operations before income taxes		158.4		(149.2)		158.6		119.2		29.8
Income taxes		(42.4)		40.0		(42.5)		(33.0)		(6.9)
Income from continuing operations		116.0		(109.2)		116.1		86.2		22.9
Income from discontinued operations, net of tax		0.1		(0.1)		0.1		0.1		—
Net income		116.1		(109.3)		116.2		86.3		22.9
Other comprehensive (loss) income, net of tax		(46.2)		44.7		(46.2)		—		(44.7)
Comprehensive income		69.9		(64.6)		70.0		86.3		(21.8)
Less: Comprehensive (loss) income attributable to non-controlling interests		(0.6)		0.5		(0.5)		—		(0.6)
Comprehensive income attributable to Penske Automotive Group common stockholders	$	70.5	$	(65.1)	$	70.5	$	86.3	$	(21.2)

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended September 30, 2018

					Penske
	Total				Automotive		Guarantor		Non-Guarantor
	Company		Eliminations		Group		Subsidiaries		Subsidiaries
Revenues	$	5,658.6	$	—	$	—	$	3,061.9	$	2,596.7
Cost of sales		4,806.0		—		—		2,584.1		2,221.9
Gross profit		852.6		—		—		477.8		374.8
Selling, general and administrative expenses		662.8		—		6.3		356.6		299.9
Depreciation		25.9		—		0.4		14.0		11.5
Operating income		163.9		—		(6.7)		107.2		63.4
Floor plan interest expense		(20.2)		—		(1.9)		(12.7)		(5.6)
Other interest expense		(28.3)		—		(19.1)		(2.3)		(6.9)
Equity in earnings of affiliates		41.7		—		40.7		—		1.0
Equity in earnings of subsidiaries		—		(144.2)		144.2		—		—
Income from continuing operations before income taxes		157.1		(144.2)		157.2		92.2		51.9
Income taxes		(27.1)		24.8		(27.1)		(14.6)		(10.2)
Income from continuing operations		130.0		(119.4)		130.1		77.6		41.7
Income from discontinued operations, net of tax		0.1		(0.1)		0.1		0.1		—
Net income		130.1		(119.5)		130.2		77.7		41.7
Other comprehensive (loss) income, net of tax		(17.5)		19.8		(17.5)		—		(19.8)
Comprehensive income		112.6		(99.7)		112.7		77.7		21.9
Less: Comprehensive (loss) income attributable to non-controlling interests		(0.2)		0.1		(0.1)		—		(0.2)
Comprehensive income attributable to Penske Automotive Group common stockholders	$	112.8	$	(99.8)	$	112.8	$	77.7	$	22.1

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Nine Months Ended September 30, 2019

					Penske
	Total				Automotive		Guarantor		Non-Guarantor
	Company		Eliminations		Group		Subsidiaries		Subsidiaries
Revenues	$	17,287.8	$	—	$	—	$	9,457.6	$	7,830.2
Cost of sales		14,698.8		—		—		7,962.9		6,735.9
Gross profit		2,589.0		—		—		1,494.7		1,094.3
Selling, general and administrative expenses		2,008.1		—		20.0		1,098.0		890.1
Depreciation		81.0		—		1.0		44.3		35.7
Operating income		499.9		—		(21.0)		352.4		168.5
Floor plan interest expense		(64.2)		—		(6.1)		(44.0)		(14.1)
Other interest expense		(93.2)		—		(62.5)		(9.3)		(21.4)
Equity in earnings of affiliates		109.6		—		106.0		—		3.6
Equity in earnings of subsidiaries		—		(436.3)		436.3		—		—
Income from continuing operations before income taxes		452.1		(436.3)		452.7		299.1		136.6
Income taxes		(118.6)		114.4		(118.8)		(85.5)		(28.7)
Income from continuing operations		333.5		(321.9)		333.9		213.6		107.9
Income from discontinued operations, net of tax		0.3		(0.3)		0.3		0.3		—
Net income		333.8		(322.2)		334.2		213.9		107.9
Other comprehensive (loss) income, net of tax		(52.2)		55.0		(52.2)		—		(55.0)
Comprehensive income		281.6		(267.2)		282.0		213.9		52.9
Less: Comprehensive (loss) income attributable to non-controlling interests		(1.1)		0.6		(0.6)		—		(1.1)
Comprehensive income attributable to Penske Automotive Group common stockholders	$	282.7	$	(267.8)	$	282.6	$	213.9	$	54.0

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Nine Months Ended September 30, 2018

					Penske
	Total				Automotive		Guarantor		Non-Guarantor
	Company		Eliminations		Group		Subsidiaries		Subsidiaries
Revenues	$	17,345.8	$	—	$	—	$	8,990.2	$	8,355.6
Cost of sales		14,739.0		—		—		7,561.6		7,177.4
Gross profit		2,606.8		—		—		1,428.6		1,178.2
Selling, general and administrative expenses		2,001.3		—		19.1		1,059.6		922.6
Depreciation		77.2		—		1.2		41.3		34.7
Operating income		528.3		—		(20.3)		327.7		220.9
Floor plan interest expense		(59.0)		—		(5.3)		(36.3)		(17.4)
Other interest expense		(86.7)		—		(58.8)		(6.2)		(21.7)
Equity in earnings of affiliates		95.0		—		91.7		—		3.3
Equity in earnings of subsidiaries		—		(470.1)		470.1		—		—
Income from continuing operations before income taxes		477.6		(470.1)		477.4		285.2		185.1
Income taxes		(104.7)		104.0		(104.7)		(67.0)		(37.0)
Income from continuing operations		372.9		(366.1)		372.7		218.2		148.1
Loss from discontinued operations, net of tax		0.2		(0.2)		0.2		0.2		—
Net income		373.1		(366.3)		372.9		218.4		148.1
Other comprehensive (loss) income, net of tax		(58.5)		56.4		(58.5)		—		(56.4)
Comprehensive income		314.6		(309.9)		314.4		218.4		91.7
Less: Comprehensive (loss) income attributable to non-controlling interests		(1.0)		1.2		(1.2)		—		(1.0)
Comprehensive income attributable to Penske Automotive Group common stockholders	$	315.6	$	(311.1)	$	315.6	$	218.4	$	92.7

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Nine Months Ended September 30, 2019

			Penske
	Total		Automotive		Guarantor		Non-Guarantor
	Company		Group		Subsidiaries		Subsidiaries
Net cash provided by (used in) continuing operating activities	$	660.8	$	(38.1)	$	457.0	$	241.9
Investing activities:
Purchase of equipment and improvements		(188.8)		(0.7)		(72.9)		(115.2)
Proceeds from sale of dealerships		7.3		—		7.3		—
Proceeds from sale-leaseback transactions		7.3		—		—		7.3
Acquisitions, net		(326.9)		—		(325.8)		(1.1)
Other		(2.3)		(2.6)		—		0.3
Net cash used in continuing investing activities		(503.4)		(3.3)		(391.4)		(108.7)
Financing activities:
Net borrowings (repayments) of long-term debt		170.3		144.9		34.1		(8.7)
Net (repayments) borrowings of floor plan notes payable — non-trade		(18.0)		(5.1)		9.5		(22.4)
Repurchases of common stock		(174.1)		(174.1)		—		—
Dividends		(97.3)		(97.3)		—		—
Other		0.1		0.1		—		—
Distributions from (to) parent		—		172.9		(122.3)		(50.6)
Net cash (used in) provided by continuing financing activities		(119.0)		41.4		(78.7)		(81.7)
Net cash provided by discontinued operations		0.2		—		0.2		—
Effect of exchange rate changes on cash and cash equivalents		(0.5)		—		—		(0.5)
Net change in cash and cash equivalents		38.1		—		(12.9)		51.0
Cash and cash equivalents, beginning of period		39.4		—		12.9		26.5
Cash and cash equivalents, end of period	$	77.5	$	—	$	(0.0)	$	77.5

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Nine Months Ended September 30, 2018

			Penske
	Total		Automotive		Guarantor		Non-Guarantor
	Company		Group		Subsidiaries		Subsidiaries
Net cash provided by (used in) continuing operating activities	$	535.9	$	16.1	$	356.2	$	163.6
Investing activities:
Purchase of equipment and improvements		(188.5)		(2.3)		(95.1)		(91.1)
Proceeds from sale of dealerships		58.4		—		55.9		2.5
Proceeds from sale-leaseback transactions		10.7		—		—		10.7
Acquisitions, net		(168.6)		—		—		(168.6)
Other		(3.5)		(2.4)		—		(1.1)
Net cash (used in) provided by continuing investing activities		(291.5)		(4.7)		(39.2)		(247.6)
Financing activities:
Net (repayments) borrowings of long-term debt		(41.0)		(172.0)		41.6		89.4
Net (repayments) borrowings of floor plan notes payable — non-trade		(59.6)		(23.3)		(50.1)		13.8
Repurchases of common stock		(55.8)		(55.8)		—		—
Dividends		(89.7)		(89.7)		—		—
Other		(6.2)		(0.3)		(5.9)		—
Distributions from (to) parent		—		329.7		(314.3)		(15.4)
Net cash (used in) provided by continuing financing activities		(252.3)		(11.4)		(328.7)		87.8
Net cash provided by discontinued operations		0.3		—		0.3		—
Effect of exchange rate changes on cash and cash equivalents		(0.5)		—		—		(0.5)
Net change in cash and cash equivalents		(8.1)		—		(11.4)		3.3
Cash and cash equivalents, beginning of period		45.7		—		14.8		30.9
Cash and cash equivalents, end of period	$	37.6	$	—	$	3.4	$	34.2