PENSKE AUTOMOTIVE GROUP, INC. [PAG] Filings

10-Q 1 pag-20210930x10q.htm 10-Q

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-12297

Penske Automotive Group, Inc.

(Exact name of registrant as specified in its charter)


Delaware		22-3086739
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

2555 Telegraph Road
Bloomfield Hills, Michigan		48302-0954
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:

(248) 648-2500

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Voting Common Stock, par value $0.0001 per share	PAG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

As of October 25, 2021, there were 78,295,038 shares of voting common stock outstanding.

Table of Contents

TABLE OF CONTENTS


	Page

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Condensed Balance Sheets as of September 30, 2021, and December 31, 2020	3

Consolidated Condensed Statements of Income for the three and nine months ended September 30, 2021, and 2020	4

Consolidated Condensed Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2021, and 2020	5

Consolidated Condensed Statements of Cash Flows for the nine months ended September 30, 2021, and 2020	6

Consolidated Condensed Statement of Equity for the three and nine months ended September 30, 2021, and 2020	7

Notes to Consolidated Condensed Financial Statements	9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3. Quantitative & Qualitative Disclosures About Market Risk	57

Item 4. Controls and Procedures	58

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	58

Item 1A. Risk Factors	58

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	59

Item 6. Exhibits	60

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS


	September 30,		December 31,
	2021		2020

	(Unaudited)
	(In millions, except share
	and per share amounts)
ASSETS
Cash and cash equivalents	$	119.2	$	49.5
Accounts receivable, net of allowance for doubtful accounts of $5.7 and $5.5		737.7		806.9
Inventories		2,598.4		3,425.6
Other current assets		121.4		126.8
Total current assets		3,576.7		4,408.8
Property and equipment, net		2,378.6		2,404.4
Operating lease right-of-use assets		2,410.9		2,416.5
Goodwill		2,050.9		1,928.4
Other indefinite-lived intangible assets		600.7		563.4
Equity method investments		1,668.2		1,500.3
Other long-term assets		33.3		25.4
Total assets	$	12,719.3	$	13,247.2
LIABILITIES AND EQUITY
Floor plan notes payable	$	962.2	$	1,780.5
Floor plan notes payable — non-trade		1,074.9		1,363.8
Accounts payable		808.8		675.4
Accrued expenses and other current liabilities		922.4		767.2
Current portion of long-term debt		67.9		87.5
Liabilities held for sale		0.5		0.5
Total current liabilities		3,836.7		4,674.9
Long-term debt		1,356.7		1,602.1
Long-term operating lease liabilities		2,341.1		2,350.3
Deferred tax liabilities		1,003.4		873.1
Other long-term liabilities		315.0		420.7
Total liabilities		8,852.9		9,921.1
Commitments and contingent liabilities (Note 11)
Equity
Penske Automotive Group stockholders’ equity:
Preferred Stock, $0.0001 par value; 100,000 shares authorized; none issued and outstanding		—		—
Common Stock, $0.0001 par value, 240,000,000 shares authorized; 78,294,013 shares issued and outstanding at September 30, 2021; 80,392,662 shares issued and outstanding at December 31, 2020		—		—
Non-voting Common Stock, $0.0001 par value; 7,125,000 shares authorized; none issued and outstanding		—		—
Class C Common Stock, $0.0001 par value; 20,000,000 shares authorized; none issued and outstanding		—		—
Additional paid-in capital		110.8		311.8
Retained earnings		3,921.5		3,151.3
Accumulated other comprehensive income (loss)		(190.2)		(160.6)
Total Penske Automotive Group stockholders’ equity		3,842.1		3,302.5
Non-controlling interest		24.3		23.6
Total equity		3,866.4		3,326.1
Total liabilities and equity	$	12,719.3	$	13,247.2

See Notes to Consolidated Condensed Financial Statements

Table of Contents

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

	(Unaudited)
	(In millions, except per share amounts)
Revenue:
Retail automotive dealership	$	5,634.9	$	5,258.0	$	17,039.4	$	12,828.1
Retail commercial truck dealership		717.3		590.9		1,777.3		1,481.5
Commercial vehicle distribution		145.1		122.7		441.9		322.2
Total revenues		6,497.3		5,971.6		19,258.6		14,631.8
Cost of sales:
Retail automotive dealership		4,624.0		4,408.3		14,188.2		10,834.0
Retail commercial truck dealership		602.0		517.8		1,479.3		1,279.4
Commercial vehicle distribution		105.6		89.0		329.5		232.3
Total cost of sales		5,331.6		5,015.1		15,997.0		12,345.7
Gross profit		1,165.7		956.5		3,261.6		2,286.1
Selling, general and administrative expenses		757.7		643.3		2,171.8		1,738.7
Depreciation		30.2		29.0		89.7		85.4
Operating income		377.8		284.2		1,000.1		462.0
Floor plan interest expense		(6.0)		(8.0)		(23.4)		(37.4)
Other interest expense		(16.2)		(29.1)		(53.8)		(89.2)
Debt redemption costs		—		(1.7)		(17.0)		(1.7)
Equity in earnings of affiliates		120.5		66.2		281.5		110.6
Income from continuing operations before income taxes		476.1		311.6		1,187.4		444.3
Income taxes		(120.1)		(64.1)		(308.0)		(100.7)
Income from continuing operations		356.0		247.5		879.4		343.6
Income from discontinued operations, net of tax		0.3		0.1		0.4		0.3
Net income		356.3		247.6		879.8		343.9
Less: Income attributable to non-controlling interests		1.2		1.0		3.3		0.5
Net income attributable to Penske Automotive Group common stockholders	$	355.1	$	246.6	$	876.5	$	343.4
Basic earnings per share attributable to Penske Automotive Group common stockholders:
Continuing operations	$	4.46	$	3.07	$	10.91	$	4.27
Discontinued operations		—		—		—		—
Net income attributable to Penske Automotive Group common stockholders	$	4.47	$	3.07	$	10.92	$	4.27
Shares used in determining basic earnings per share		79.5		80.3		80.3		80.4
Diluted earnings per share attributable to Penske Automotive Group common stockholders:
Continuing operations	$	4.46	$	3.07	$	10.91	$	4.27
Discontinued operations		—		—		—		—
Net income attributable to Penske Automotive Group common stockholders	$	4.47	$	3.07	$	10.92	$	4.27
Shares used in determining diluted earnings per share		79.5		80.4		80.3		80.4
Amounts attributable to Penske Automotive Group common stockholders:
Income from continuing operations	$	356.0	$	247.5	$	879.4	$	343.6
Less: Income attributable to non-controlling interests		1.2		1.0		3.3		0.5
Income from continuing operations, net of tax		354.8		246.5		876.1		343.1
Income from discontinued operations, net of tax		0.3		0.1		0.4		0.3
Net income attributable to Penske Automotive Group common stockholders	$	355.1	$	246.6	$	876.5	$	343.4
Cash dividends per share	$	0.45	$	—	$	1.32	$	0.42

See Notes to Consolidated Condensed Financial Statements

Table of Contents

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2021		2020		2021		2020

	(Unaudited)
	(In millions)
Net income		$	356.3	$	247.6	$	879.8	$	343.9
Other comprehensive income (loss):
Foreign currency translation adjustment			(42.6)		49.9		(40.7)		(15.4)
Unrealized gain (loss) on interest rate swaps:
Unrealized gain (loss) arising during the period, net of tax (provision) benefit of ($0.0), ($0.1), ($1.1), and $1.4, respectively			—		0.3		3.0		(3.8)
Reclassification adjustment for (gain) loss included in floor plan interest expense, net of tax provision (benefit) of ($0.1), $0.1, ($0.3), and $0.1, respectively			0.3		(0.2)		0.8		(0.2)
Unrealized gain (loss) on interest rate swaps, net of tax			0.3		0.1		3.8		(4.0)
Other adjustments to comprehensive income (loss), net			(0.5)		3.3		6.6		0.6
Other comprehensive income (loss), net of tax			(42.8)		53.3		(30.3)		(18.8)
Comprehensive income (loss)			313.5		300.9		849.5		325.1
Less: Comprehensive income (loss) attributable to non-controlling interests			0.8		1.4		2.6		0.8
Comprehensive income (loss) attributable to Penske Automotive Group common stockholders		$	312.7	$	299.5	$	846.9	$	324.3

See Notes to Consolidated Condensed Financial Statements

Table of Contents

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS


	Nine Months Ended
	September 30,
	2021		2020

	(Unaudited)
	(In millions)
Operating Activities:
Net income	$	879.8	$	343.9
Adjustments to reconcile net income to net cash from continuing operating activities:
Depreciation		89.7		85.4
Earnings of equity method investments		(203.4)		(88.9)
Income from discontinued operations, net of tax		(0.4)		(0.3)
Deferred income taxes		126.3		177.6
Debt redemption costs		17.0		1.7
Changes in operating assets and liabilities:
Accounts receivable		69.4		112.2
Inventories		863.6		1,043.5
Floor plan notes payable		(818.3)		(925.9)
Accounts payable and accrued expenses		290.5		172.1
Other		16.2		(71.8)
Net cash provided by continuing operating activities		1,330.4		849.5
Investing Activities:
Purchase of equipment and improvements		(157.5)		(114.3)
Proceeds from sale of dealerships		4.3		10.3
Proceeds from sale of equipment and improvements		54.9		19.8
Acquisitions net, including repayment of sellers’ floor plan notes payable of $24.3 and $0, respectively		(278.0)		—
Other		0.2		(4.4)
Net cash used in continuing investing activities		(376.1)		(88.6)
Financing Activities:
Proceeds from borrowings under U.S. credit agreement revolving credit line		1,487.0		956.0
Repayments under U.S. credit agreement revolving credit line		(1,595.0)		(1,001.0)
Issuance of 3.50% senior subordinated notes		—		550.0
Issuance of 3.75% senior subordinated notes		500.0		—
Repayment of 3.75% senior subordinated notes		—		(300.0)
Repayment of 5.50% senior subordinated notes		(500.0)		—
Net repayments of other long-term debt		(152.5)		(253.7)
Net repayments of floor plan notes payable — non-trade		(288.9)		(547.6)
Payments for contingent consideration		—		(31.6)
Repurchases of common stock		(206.9)		(29.4)
Dividends		(106.3)		(34.2)
Payment of debt issuance costs		(6.1)		(7.8)
Other		(12.8)		(5.0)
Net cash used in continuing financing activities		(881.5)		(704.3)
Discontinued operations:
Net cash provided by discontinued operating activities		0.4		0.2
Net cash provided by discontinued investing activities		—		—
Net cash provided by discontinued financing activities		—		—
Net cash provided by discontinued operations		0.4		0.2
Effect of exchange rate changes on cash and cash equivalents		(3.5)		7.8
Net change in cash and cash equivalents		69.7		64.6
Cash and cash equivalents, beginning of period		49.5		28.1
Cash and cash equivalents, end of period	$	119.2	$	92.7
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	79.8	$	106.7
Income taxes		44.5		32.1

See Notes to Consolidated Condensed Financial Statements

Table of Contents

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY


	Three Months Ended September 30, 2021

								Accumulated		Total
	Common Stock			Additional				Other		Penske
	Issued			Paid-in		Retained		Comprehensive		Automotive Group		Non-controlling		Total
	Shares	Amount		Capital		Earnings		Income (Loss)		Stockholders’ Equity		Interest		Equity

	(Unaudited)
	(Dollars in millions)
Balance, June 30, 2021	80,330,836	$	—	$	284.0	$	3,602.5	$	(147.8)	$	3,738.7	$	24.0	$	3,762.7
Equity compensation	(7,192)		—		5.7		—		—		5.7		—		5.7
Repurchases of common stock	(2,029,631)		—		(178.9)		—		—		(178.9)		—		(178.9)
Dividends	—		—		—		(36.1)		—		(36.1)		—		(36.1)
Interest rate swaps	—		—		—		—		0.3		0.3		—		0.3
Distributions to non-controlling interest	—		—		—		—		—		—		(0.5)		(0.5)
Foreign currency translation	—		—		—		—		(42.2)		(42.2)		(0.4)		(42.6)
Other	—		—		—		—		(0.5)		(0.5)		—		(0.5)
Net income	—		—		—		355.1		—		355.1		1.2		356.3
Balance, September 30, 2021	78,294,013	$	—	$	110.8	$	3,921.5	$	(190.2)	$	3,842.1	$	24.3	$	3,866.4


	Three Months Ended September 30, 2020

								Accumulated		Total
	Common Stock			Additional				Other		Penske
	Issued			Paid-in		Retained		Comprehensive		Automotive Group		Non-controlling		Total
	Shares	Amount		Capital		Earnings		Income (Loss)		Stockholders’ Equity		Interest		Equity

	(Unaudited)
	(Dollars in millions)
Balance, June 30, 2020	80,339,909	$	—	$	296.3	$	2,738.4	$	(274.8)	$	2,759.9	$	17.7	$	2,777.6
Equity compensation	750		—		5.1		—		—		5.1		—		5.1
Repurchases of common stock	(4,448)		—		(0.2)		—		—		(0.2)		—		(0.2)
Interest rate swaps	—		—		—		—		0.1		0.1		—		0.1
Foreign currency translation	—		—		—		—		49.5		49.5		0.4		49.9
Other	—		—		—		—		3.3		3.3		0.1		3.4
Net income	—		—		—		246.6		—		246.6		1.0		247.6
Balance, September 30, 2020	80,336,211	$	—	$	301.2	$	2,985.0	$	(221.9)	$	3,064.3	$	19.2	$	3,083.5

See Notes to Consolidated Condensed Financial Statements

Table of Contents

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY

Nine Months Ended September 30, 2021

Accumulated

Total

Common Stock

Additional

Other

Penske

PENSKE AUTOMOTIVE GROUP, INC. [PAG] Filings
10-Q	[2021-10-28]
10-Q	[2021-07-29]
10-Q	[2021-04-29]
10-K	[2021-02-19]
10-Q	[2020-10-27]
10-Q	[2020-07-30]
10-Q	[2020-05-06]
10-K	[2020-02-21]
10-Q	[2019-10-30]
10-Q	[2019-07-31]
10-Q	[2019-04-26]
10-K	[2019-02-22]
10-Q	[2018-10-26]
10-Q	[2018-07-27]
10-Q	[2018-04-27]
10-K	[2018-02-22]
10-Q	[2017-10-26]
10-Q	[2017-07-28]
10-Q	[2017-04-27]
10-K	[2017-02-24]
10-Q	[2016-10-27]
10-Q	[2016-07-29]
10-Q	[2016-04-27]
10-K	[2016-02-25]
10-Q	[2015-10-30]
10-Q	[2015-07-30]
10-Q	[2015-05-01]
10-K	[2015-02-26]
10-Q	[2014-10-29]
10-Q	[2014-07-31]
10-Q	[2014-05-05]
10-K	[2014-03-03]
10-Q	[2013-10-30]
10-Q	[2013-08-01]
10-Q	[2013-04-30]
10-K	[2013-02-28]
10-Q	[2012-11-02]
10-Q	[2012-08-03]
10-Q	[2012-05-04]
10-K	[2012-02-24]