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Consolidating Condensed Financial Information | 9 Months Ended
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Sep. 30, 2012
Consolidating Condensed Financial Information |
Consolidating Condensed Financial Information |
12. Consolidating Condensed Financial Information The following tables include condensed consolidating financial information as of September 30, 2012 and December 31, 2011 and for the three and nine month periods ended September 30, 2012 and 2011 for Penske Automotive Group, Inc. (as the issuer of the 5.75% Notes), guarantor subsidiaries and non-guarantor subsidiaries (primarily representing foreign entities). 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, 2012
|  | Total Company |  | Eliminations |  | Penske Automotive Group |  | Guarantor Subsidiaries |  | Non-Guarantor Subsidiaries |
|  | (In thousands) |
Cash and cash equivalents |  | $ | 25,935 |  | $ | — |  | $ | — |  | $ | 17,573 |  | $ | 8,362 |
Accounts receivable, net |  | 505,770 |  | (335,225 | ) | 335,225 |  | 251,951 |  | 253,819 |
Inventories |  | 1,864,773 |  | — |  | — |  | 1,088,681 |  | 776,092 |
Other current assets |  | 91,204 |  | — |  | 4,359 |  | 39,216 |  | 47,629 |
Assets held for sale |  | 38,005 |  | — |  | — |  | 14,261 |  | 23,744 |
Total current assets |  | 2,525,687 |  | (335,225 | ) | 339,584 |  | 1,411,682 |  | 1,109,646 |
Property and equipment, net |  | 961,488 |  | — |  | 4,527 |  | 593,139 |  | 363,822 |
Intangible assets |  | 1,210,959 |  | — |  | — |  | 705,790 |  | 505,169 |
Equity method investments |  | 304,101 |  | — |  | 256,258 |  | — |  | 47,843 |
Other long-term assets |  | 21,945 |  | (1,416,874 | ) | 1,430,869 |  | 5,378 |  | 2,572 |
Total assets |  | $ | 5,024,180 |  | $ | (1,752,099 | ) | $ | 2,031,238 |  | $ | 2,715,989 |  | $ | 2,029,052 |
Floor plan notes payable |  | $ | 1,254,895 |  | $ | — |  | $ | — |  | $ | 709,549 |  | $ | 545,346 |
Floor plan notes payable — non-trade |  | 704,280 |  | — |  | 100,255 |  | 335,054 |  | 268,971 |
Accounts payable |  | 275,032 |  | — |  | 2,447 |  | 111,342 |  | 161,243 |
Accrued expenses |  | 259,146 |  | (335,225 | ) | 145 |  | 142,064 |  | 452,162 |
Current portion of long-term debt |  | 14,929 |  | — |  | — |  | 3,746 |  | 11,183 |
Liabilities held for sale |  | 34,124 |  | — |  | — |  | 11,038 |  | 23,086 |
Total current liabilities |  | 2,542,406 |  | (335,225 | ) | 102,847 |  | 1,312,793 |  | 1,461,991 |
Long-term debt |  | 815,918 |  | (38,382 | ) | 660,000 |  | 75,129 |  | 119,171 |
Deferred tax liabilities |  | 231,999 |  | — |  | — |  | 205,955 |  | 26,044 |
Other long-term liabilities |  | 165,466 |  | — |  | — |  | 93,724 |  | 71,742 |
Total liabilities |  | 3,755,789 |  | (373,607 | ) | 762,847 |  | 1,687,601 |  | 1,678,948 |
Total equity |  | 1,268,391 |  | (1,378,492 | ) | 1,268,391 |  | 1,028,388 |  | 350,104 |
Total liabilities and equity |  | $ | 5,024,180 |  | $ | (1,752,099 | ) | $ | 2,031,238 |  | $ | 2,715,989 |  | $ | 2,029,052 |
CONDENSED CONSOLIDATING BALANCE SHEET December 31, 2011
|  | Total Company |  | Eliminations |  | Penske Automotive Group |  | Guarantor Subsidiaries |  | Non-Guarantor Subsidiaries |
|  | (In thousands) |
Cash and cash equivalents |  | $ | 28,676 |  | $ | — |  | $ | — |  | $ | 27,249 |  | $ | 1,427 |
Accounts receivable, net |  | 438,769 |  | (297,782 | ) | 305,386 |  | 281,689 |  | 149,476 |
Inventories |  | 1,572,568 |  | — |  | — |  | 894,246 |  | 678,322 |
Other current assets |  | 80,179 |  | — |  | 2,306 |  | 40,321 |  | 37,552 |
Assets held for sale |  | 81,122 |  | — |  | — |  | 36,642 |  | 44,480 |
Total current assets |  | 2,201,314 |  | (297,782 | ) | 307,692 |  | 1,280,147 |  | 911,257 |
Property and equipment, net |  | 856,674 |  | — |  | 6,730 |  | 547,731 |  | 302,213 |
Intangible assets |  | 1,132,181 |  | — |  | — |  | 699,453 |  | 432,728 |
Equity method investments |  | 298,640 |  | — |  | 246,658 |  | — |  | 51,982 |
Other long-term assets |  | 13,490 |  | (1,360,808 | ) | 1,369,182 |  | 3,381 |  | 1,735 |
Total assets |  | $ | 4,502,299 |  | $ | (1,658,590 | ) | $ | 1,930,262 |  | $ | 2,530,712 |  | $ | 1,699,915 |
Floor plan notes payable |  | $ | 977,548 |  | $ | — |  | $ | — |  | $ | 560,999 |  | $ | 416,549 |
Floor plan notes payable — non-trade |  | 691,888 |  | — |  | 90,892 |  | 335,621 |  | 265,375 |
Accounts payable |  | 220,538 |  | — |  | 1,633 |  | 112,805 |  | 106,100 |
Accrued expenses |  | 201,179 |  | (297,782 | ) | — |  | 99,092 |  | 399,869 |
Current portion of long-term debt |  | 3,414 |  | — |  | — |  | 3,414 |  | — |
Liabilities held for sale |  | 55,820 |  | — |  | — |  | 17,818 |  | 38,002 |
Total current liabilities |  | 2,150,387 |  | (297,782 | ) | 92,525 |  | 1,129,749 |  | 1,225,895 |
Long-term debt |  | 846,777 |  | (38,073 | ) | 697,324 |  | 77,060 |  | 110,466 |
Deferred tax liabilities |  | 217,902 |  | — |  | — |  | 198,348 |  | 19,554 |
Other long-term liabilities |  | 146,820 |  | — |  | — |  | 92,613 |  | 54,207 |
Total liabilities |  | 3,361,886 |  | (335,855 | ) | 789,849 |  | 1,497,770 |  | 1,410,122 |
Total equity |  | 1,140,413 |  | (1,322,735 | ) | 1,140,413 |  | 1,032,942 |  | 289,793 |
Total liabilities and equity |  | $ | 4,502,299 |  | $ | (1,658,590 | ) | $ | 1,930,262 |  | $ | 2,530,712 |  | $ | 1,699,915 |
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 |  | $ | 3,401,409 |  | $ | — |  | $ | — |  | $ | 2,008,394 |  | $ | 1,393,015 |
Cost of sales |  | 2,890,413 |  | — |  | — |  | 1,697,032 |  | 1,193,381 |
Gross profit |  | 510,996 |  | — |  | — |  | 311,362 |  | 199,634 |
Selling, general and administrative expenses |  | 409,432 |  | — |  | 5,073 |  | 245,553 |  | 158,806 |
Depreciation |  | 14,037 |  | — |  | 328 |  | 7,661 |  | 6,048 |
Operating income (loss) |  | 87,527 |  | — |  | (5,401 | ) | 58,148 |  | 34,780 |
Floor plan interest expense |  | (10,055 | ) | — |  | (2,322 | ) | (4,320 | ) | (3,413 | )
Other interest expense |  | (11,689 | ) | — |  | (7,695 | ) | (804 | ) | (3,190 | )
Equity in earnings of affiliates |  | 8,814 |  | — |  | 7,784 |  | — |  | 1,030 |
Equity in earnings of subsidiaries |  | — |  | (81,949 | ) | 81,949 |  | — |  | — |
Debt redemption costs |  | (17,753 | ) | — |  | (17,753 | ) | — |  | — |
Income (loss) from continuing operations before income taxes |  | 56,844 |  | (81,949 | ) | 56,562 |  | 53,024 |  | 29,207 |
Income taxes |  | (15,308 | ) | 22,179 |  | (15,308 | ) | (14,717 | ) | (7,462 | )
Income (loss) from continuing operations |  | 41,536 |  | (59,770 | ) | 41,254 |  | 38,307 |  | 21,745 |
(Loss) income from discontinued operations, net of tax |  | (223 | ) | 223 |  | (223 | ) | 242 |  | (465 | )
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 interest |  | 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 Three Months Ended September 30, 2011
|  | Total Company |  | Eliminations |  | Penske Automotive Group |  | Guarantor Subsidiaries |  | Non-Guarantor Subsidiaries |
|  | (In thousands) |
Revenues |  | $ | 2,898,441 |  | $ | — |  | $ | — |  | $ | 1,704,606 |  | $ | 1,193,835 |
Cost of sales |  | 2,437,678 |  | — |  | — |  | 1,417,915 |  | 1,019,763 |
Gross profit |  | 460,763 |  | — |  | — |  | 286,691 |  | 174,072 |
Selling, general and administrative expenses |  | 369,783 |  | — |  | 4,381 |  | 225,818 |  | 139,584 |
Depreciation |  | 12,427 |  | — |  | 471 |  | 6,655 |  | 5,301 |
Operating income (loss) |  | 78,553 |  | — |  | (4,852 | ) | 54,218 |  | 29,187 |
Floor plan interest expense |  | (6,837 | ) | — |  | (449 | ) | (3,194 | ) | (3,194 | )
Other interest expense |  | (11,153 | ) | — |  | (6,347 | ) | (988 | ) | (3,818 | )
Debt discount amortization |  | — |  | — |  | — |  | — |  | — |
Equity in earnings (losses) of affiliates |  | 9,623 |  | — |  | 7,359 |  | 825 |  | 1,439 |
Equity in earnings of subsidiaries |  | — |  | (74,137 | ) | 74,137 |  | — |  | — |
Income (loss) from continuing operations before income taxes |  | 70,186 |  | (74,137 | ) | 69,848 |  | 50,861 |  | 23,614 |
Income taxes |  | (13,246 | ) | 14,064 |  | (13,246 | ) | (7,281 | ) | (6,783 | )
Income (loss) from continuing operations |  | 56,940 |  | (60,073 | ) | 56,602 |  | 43,580 |  | 16,831 |
(Loss) income from discontinued operations, net of tax |  | (895 | ) | 895 |  | (895 | ) | (754 | ) | (141 | )
Net income (loss) |  | 56,045 |  | (59,178 | ) | 55,707 |  | 42,826 |  | 16,690 |
Other comprehensive income (loss), net of tax |  | (25,827 | ) | 26,327 |  | (25,827 | ) | (5,379 | ) | (20,948 | )
Comprehensive income |  | 30,218 |  | (32,851 | ) | 29,880 |  | 37,447 |  | (4,258 | )
Less: Comprehensive income attributable to non-controlling interest |  | 338 |  | — |  | — |  | — |  | 338 |
Comprehensive income attributable to Penske Automotive Group common stockholders |  | $ | 29,880 |  | $ | (32,851 | ) | $ | 29,880 |  | $ | 37,447 |  | $ | (4,596 | )
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 |  | $ | 10,006,631 |  | $ | — |  | $ | — |  | $ | 5,852,620 |  | $ | 4,154,011 |
Cost of sales |  | 8,477,057 |  | — |  | — |  | 4,923,776 |  | 3,553,281 |
Gross profit |  | 1,529,574 |  | — |  | — |  | 928,844 |  | 600,730 |
Selling, general and administrative expenses |  | 1,216,231 |  | — |  | 14,408 |  | 732,673 |  | 469,150 |
Depreciation |  | 41,013 |  | — |  | 936 |  | 22,258 |  | 17,819 |
Operating income (loss) |  | 272,330 |  | — |  | (15,344 | ) | 173,913 |  | 113,761 |
Floor plan interest expense |  | (29,675 | ) | — |  | (6,774 | ) | (12,309 | ) | (10,592 | )
Other interest expense |  | (35,474 | ) | — |  | (21,986 | ) | (2,668 | ) | (10,820 | )
Equity in earnings (losses) of affiliates |  | 21,392 |  | — |  | 18,538 |  | — |  | 2,854 |
Equity in earnings of subsidiaries |  | — |  | (253,149 | ) | 253,149 |  | — |  | — |
Debt redemption costs |  | (17,753 | ) | — |  | (17,753 | ) | — |  | — |
Income (loss) from continuing operations before income taxes |  | 210,820 |  | (253,149 | ) | 209,830 |  | 158,936 |  | 95,203 |
Income taxes |  | (69,052 | ) | 83,308 |  | (69,052 | ) | (59,469 | ) | (23,839 | )
Income (loss) from continuing operations |  | 141,768 |  | (169,841 | ) | 140,778 |  | 99,467 |  | 71,364 |
(Loss) income from discontinued operations, net of tax |  | (3,837 | ) | 3,837 |  | (3,837 | ) | (1,755 | ) | (2,082 | )
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 interest |  | 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 INCOME Nine Months Ended September 30, 2011
|  | Total Company |  | Eliminations |  | Penske Automotive Group |  | Guarantor Subsidiaries |  | Non-Guarantor Subsidiaries |
|  | (In thousands) |
Revenues |  | $ | 8,466,560 |  | $ | — |  | $ | — |  | $ | 4,902,510 |  | $ | 3,564,050 |
Cost of sales |  | 7,112,376 |  | — |  | — |  | 4,071,715 |  | 3,040,661 |
Gross profit |  | 1,354,184 |  | — |  | — |  | 830,795 |  | 523,389 |
Selling, general and administrative expenses |  | 1,098,132 |  | — |  | 14,120 |  | 671,606 |  | 412,406 |
Depreciation |  | 36,132 |  | — |  | 1,013 |  | 19,450 |  | 15,669 |
Operating income (loss) |  | 219,920 |  | — |  | (15,133 | ) | 139,739 |  | 95,314 |
Floor plan interest expense |  | (20,617 | ) | — |  | (911 | ) | (10,414 | ) | (9,292 | )
Other interest expense |  | (32,889 | ) | — |  | (18,581 | ) | (2,237 | ) | (12,071 | )
Debt discount amortization |  | (1,718 | ) | — |  | (1,718 | ) | — |  | — |
Equity in earnings (losses) of affiliates |  | 17,527 |  | — |  | 14,711 |  | 825 |  | 1,991 |
Equity in earnings of subsidiaries |  | — |  | (202,948 | ) | 202,948 |  | — |  | — |
Income (loss) from continuing operations before income taxes |  | 182,223 |  | (202,948 | ) | 181,316 |  | 127,913 |  | 75,942 |
Income taxes |  | (49,289 | ) | 55,235 |  | (49,289 | ) | (33,581 | ) | (21,654 | )
Income (loss) from continuing operations |  | 132,934 |  | (147,713 | ) | 132,027 |  | 94,332 |  | 54,288 |
(Loss) income from discontinued operations, net of tax |  | (2,833 | ) | 2,833 |  | (2,833 | ) | (2,351 | ) | (482 | )
Net income (loss) |  | 130,101 |  | (144,880 | ) | 129,194 |  | 91,981 |  | 53,806 |
Other comprehensive income (loss), net of tax |  | (10,782 | ) | 10,301 |  | (10,782 | ) | (9,093 | ) | (1,208 | )
Comprehensive income |  | 119,319 |  | (134,579 | ) | 118,412 |  | 82,888 |  | 52,598 |
Less: Comprehensive income attributable to non-controlling interest |  | 907 |  | — |  | — |  | — |  | 907 |
Comprehensive income attributable to Penske Automotive Group common stockholders |  | $ | 118,412 |  | $ | (134,579 | ) | $ | 118,412 |  | $ | 82,888 |  | $ | 51,691 |
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 |  | $ | 264,612 |  | $ | 95,748 |  | $ | 34,840 |  | $ | 134,024 |
Investing activities: |  |  |  |  |  |  |  |  |
Purchase of equipment and improvements |  | (96,447 | ) | (766 | ) | (67,192 | ) | (28,489 | )
Proceeds from sale-leaseback transactions |  | 1,584 |  | — |  | — |  | 1,584 |
Dealership acquisitions, net |  | (137,805 | ) | — |  | (3,416 | ) | (134,389 | )
Other |  | 3,496 |  | (3,812 | ) | — |  | 7,308 |
Net cash from continuing investing activities |  | (229,172 | ) | (4,578 | ) | (70,608 | ) | (153,986 | )
Financing activities: |  |  |  |  |  |  |  |  |
Issuance of 5.75% senior subordinated notes |  | 550,000 |  | 550,000 |  | — |  | — |
Repurchase of 7.75% senior subordinated notes |  | (390,755 | ) | (390,755 | ) | — |  | — |
Repurchase of 3.5% senior subordinated convertible notes |  | (62,687 | ) | (62,687 | ) |  |  |  |
Net borrowings (repayments) of other long-term debt |  | (133,913 | ) | (149,000 | ) | (1,598 | ) | 16,685 |
Net borrowings (repayments) of floor plan notes payable — non-trade |  | 29,681 |  | 9,363 |  | 11,179 |  | 9,139 |
Repurchase 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 |  | (55,765 | ) | (91,170 | ) | 14,328 |  | 21,077 |
Net cash from discontinued operations |  | 17,584 |  | — |  | 11,764 |  | 5,820 |
Net change in cash and cash equivalents |  | (2,741 | ) | — |  | (9,676 | ) | 6,935 |
Cash and cash equivalents, beginning of period |  | 28,676 |  | — |  | 27,249 |  | 1,427 |
Cash and cash equivalents, end of period |  | $ | 25,935 |  | $ | — |  | $ | 17,573 |  | $ | 8,362 |
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Nine Months Ended September 30, 2011
|  | Total Company |  | Penske Automotive Group |  | Guarantor Subsidiaries |  | Non-Guarantor Subsidiaries |
|  | (In thousands) |
Net cash from continuing operating activities |  | $ | 180,110 |  | $ | (39,647 | ) | $ | 226,147 |  | $ | (6,390 | )
Investing activities: |  |  |  |  |  |  |  |  |
Purchase of equipment and improvements |  | (79,770 | ) | (1,972 | ) | (44,629 | ) | (33,169 | )
Dealership acquisitions, net |  | (232,106 | ) | — |  | (230,426 | ) | (1,680 | )
Other |  | 2,865 |  | — |  | — |  | 2,865 |
Net cash from continuing investing activities |  | (309,011 | ) | (1,972 | ) | (275,055 | ) | (31,984 | )
Financing activities: |  |  |  |  |  |  |  |  |
Repurchase of 3.5% senior subordinated convertible notes |  | (87,278 | ) | (87,278 | ) | — |  | — |
Net borrowings (repayments) of other long-term debt |  | 151,807 |  | 120,000 |  | 57,015 |  | (25,208 | )
Net borrowings (repayments) of floor plan notes payable — non-trade |  | 98,131 |  | 64,008 |  | (32,995 | ) | 67,118 |
Proceeds from exercises of options, including excess tax benefit |  | 3,018 |  | 3,018 |  | — |  | — |
Repurchase of common stock |  | (44,263 | ) | (44,263 | ) | — |  | — |
Dividends |  | (13,866 | ) | (13,866 | ) | — |  | — |
Distributions from (to) parent |  | — |  | — |  | 5,572 |  | (5,572 | )
Net cash from continuing financing activities |  | 107,549 |  | 41,619 |  | 29,592 |  | 36,338 |
Net cash from discontinued operations |  | 11,347 |  | — |  | 10,151 |  | 1,196 |
Net change in cash and cash equivalents |  | (10,005 | ) | — |  | (9,165 | ) | (840 | )
Cash and cash equivalents, beginning of period |  | 19,904 |  | — |  | 15,411 |  | 4,493 |
Cash and cash equivalents, end of period |  | $ | 9,899 |  | $ | — |  | $ | 6,246 |  | $ | 3,653 |

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