Penske Automotive Group Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

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, 2020

☐

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 26, 2020, there were 80,335,731 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, 2020, and December 31, 2019	3

Consolidated Condensed Statements of Income (Loss) for the three and nine months ended September 30, 2020, and 2019	4

Consolidated Condensed Statements of Comprehensive Income for the three and nine months ended September 30, 2020, and 2019	5

Consolidated Condensed Statements of Cash Flows for the nine months ended September 30, 2020, and 2019	6

Consolidated Condensed Statement of Equity for the three and nine months ended September 30, 2020, and 2019	7

Notes to Consolidated Condensed Financial Statements	9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3. Quantitative & Qualitative Disclosures About Market Risk	61

Item 4. Controls and Procedures	62

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	62

Item 1A. Risk Factors	62

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	64

Item 6. Exhibits	65

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS


	September 30,		December 31,
	2020		2019

	(Unaudited)
	(In millions, except share
	and per share amounts)
ASSETS
Cash and cash equivalents	$	92.7	$	28.1
Accounts receivable, net of allowance for doubtful accounts of $5.2 and $5.7		848.2		960.3
Inventories		3,209.7		4,260.7
Other current assets		198.8		85.0
Total current assets		4,349.4		5,334.1
Property and equipment, net		2,337.9		2,366.4
Operating lease right-of-use assets		2,378.7		2,360.5
Goodwill		1,901.1		1,911.0
Other indefinite-lived intangible assets		554.4		552.2
Equity method investments		1,465.7		1,399.0
Other long-term assets		22.5		19.5
Total assets	$	13,009.7	$	13,942.7
LIABILITIES AND EQUITY
Floor plan notes payable	$	1,484.0	$	2,412.5
Floor plan notes payable — non-trade		1,046.4		1,594.0
Accounts payable		717.2		638.8
Accrued expenses and other current liabilities		774.8		701.9
Current portion of long-term debt		85.6		103.3
Liabilities held for sale		0.5		0.5
Total current liabilities		4,108.5		5,451.0
Long-term debt		2,216.1		2,257.0
Long-term operating lease liabilities		2,319.3		2,301.2
Deferred tax liabilities		853.3		677.9
Other long-term liabilities		429.0		444.0
Total liabilities		9,926.2		11,131.1
Commitments and contingent liabilities (Note 12)
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; 80,336,211 shares issued and outstanding at September 30, 2020; 81,084,751 shares issued and outstanding at December 31, 2019		—		—
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		301.2		320.4
Retained earnings		2,985.0		2,675.8
Accumulated other comprehensive income (loss)		(221.9)		(202.8)
Total Penske Automotive Group stockholders’ equity		3,064.3		2,793.4
Non-controlling interest		19.2		18.2
Total equity		3,083.5		2,811.6
Total liabilities and equity	$	13,009.7	$	13,942.7

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,
	2020		2019		2020		2019

	(Unaudited)
	(In millions, except per share amounts)
Revenue:
Retail automotive dealership	$	5,258.0	$	5,155.4	$	12,828.1	$	15,442.9
Retail commercial truck dealership		590.9		692.3		1,481.5		1,451.4
Commercial vehicle distribution and other		122.7		119.9		322.2		393.5
Total revenues		5,971.6		5,967.6		14,631.8		17,287.8
Cost of sales:
Retail automotive dealership		4,408.3		4,407.9		10,834.0		13,159.0
Retail commercial truck dealership		517.8		605.7		1,279.4		1,251.9
Commercial vehicle distribution and other		89.0		84.3		232.3		287.9
Total cost of sales		5,015.1		5,097.9		12,345.7		14,698.8
Gross profit		956.5		869.7		2,286.1		2,589.0
Selling, general and administrative expenses		643.3		672.8		1,738.7		2,008.1
Depreciation		29.0		27.5		85.4		81.0
Operating income		284.2		169.4		462.0		499.9
Floor plan interest expense		(8.0)		(21.4)		(37.4)		(64.2)
Other interest expense		(30.8)		(32.9)		(90.9)		(93.2)
Equity in earnings of affiliates		66.2		43.3		110.6		109.6
Income from continuing operations before income taxes		311.6		158.4		444.3		452.1
Income taxes		(64.1)		(42.4)		(100.7)		(118.6)
Income from continuing operations		247.5		116.0		343.6		333.5
Income from discontinued operations, net of tax		0.1		0.1		0.3		0.3
Net income		247.6		116.1		343.9		333.8
Less: Income (loss) attributable to non-controlling interests		1.0		(0.1)		0.5		(0.4)
Net income attributable to Penske Automotive Group common stockholders	$	246.6	$	116.2	$	343.4	$	334.2
Basic earnings per share attributable to Penske Automotive Group common stockholders:
Continuing operations	$	3.07	$	1.42	$	4.27	$	4.02
Discontinued operations		—		—		—		—
Net income attributable to Penske Automotive Group common stockholders	$	3.07	$	1.42	$	4.27	$	4.03
Shares used in determining basic earnings per share		80.3		81.6		80.4		83.0
Diluted earnings per share attributable to Penske Automotive Group common stockholders:
Continuing operations	$	3.07	$	1.42	$	4.27	$	4.02
Discontinued operations		—		—		—		—
Net income attributable to Penske Automotive Group common stockholders	$	3.07	$	1.42	$	4.27	$	4.03
Shares used in determining diluted earnings per share		80.4		81.7		80.4		83.0
Amounts attributable to Penske Automotive Group common stockholders:
Income from continuing operations	$	247.5	$	116.0	$	343.6	$	333.5
Less: Income (Loss) attributable to non-controlling interests		1.0		(0.1)		0.5		(0.4)
Income from continuing operations, net of tax		246.5		116.1		343.1		333.9
Income from discontinued operations, net of tax		0.1		0.1		0.3		0.3
Net income attributable to Penske Automotive Group common stockholders	$	246.6	$	116.2	$	343.4	$	334.2
Cash dividends per share	$	—	$	0.40	$	0.42	$	1.17

See Notes to Consolidated Condensed Financial Statements

Table of Contents

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2020		2019		2020		2019

	(Unaudited)
	(In millions)
Net income		$	247.6	$	116.1	$	343.9	$	333.8
Other comprehensive income:
Foreign currency translation adjustment			49.9		(44.3)		(15.4)		(54.1)
Unrealized gain (loss) on interest rate swaps:
Unrealized gain (loss) arising during the period, net of tax provision (benefit) of $0.1, $0.0, ($1.4), and $0.0, respectively			0.3		—		(3.8)		—
Reclassification adjustment for loss included in floor plan interest expense, net of tax benefit of $0.1, $0.0, $0.1, and $0.0, respectively			(0.2)		—		(0.2)		—
Unrealized gain (loss) on interest rate swaps, net of tax			0.1		—		(4.0)		—
Other adjustments to comprehensive income, net			3.3		(1.9)		0.6		1.9
Other comprehensive income (loss), net of tax			53.3		(46.2)		(18.8)		(52.2)
Comprehensive income			300.9		69.9		325.1		281.6
Less: Comprehensive income (loss) attributable to non-controlling interests			1.4		(0.6)		0.8		(1.1)
Comprehensive income attributable to Penske Automotive Group common stockholders		$	299.5	$	70.5	$	324.3	$	282.7

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,
	2020		2019

	(Unaudited)
	(In millions)
Operating Activities:
Net income	$	343.9	$	333.8
Adjustments to reconcile net income to net cash from continuing operating activities:
Depreciation		85.4		81.0
Earnings of equity method investments		(88.9)		(77.8)
Income from discontinued operations, net of tax		(0.3)		(0.3)
Deferred income taxes		177.6		48.2
Changes in operating assets and liabilities:
Accounts receivable		112.2		(38.0)
Inventories		1,043.5		119.9
Floor plan notes payable		(925.9)		108.7
Accounts payable and accrued expenses		172.1		128.6
Other		(70.1)		(43.3)
Net cash provided by continuing operating activities		849.5		660.8
Investing Activities:
Purchase of equipment and improvements		(114.3)		(188.8)
Proceeds from sale of dealerships		10.3		7.3
Proceeds from sale-leaseback transactions		—		7.3
Proceeds from sale of equipment and improvements		19.8		5.1
Acquisitions net, including repayment of sellers’ floor plan notes payable of $0 and $138.5, respectively		—		(326.9)
Other		(4.4)		(7.4)
Net cash used in continuing investing activities		(88.6)		(503.4)
Financing Activities:
Proceeds from borrowings under U.S. credit agreement revolving credit line		956.0		1,458.0
Repayments under U.S. credit agreement revolving credit line		(1,001.0)		(1,383.0)
Issuance of 3.50% senior subordinated notes		550.0		—
Repayment of 3.75% senior subordinated notes		(300.0)		—
Net (repayments) borrowings of other long-term debt		(253.7)		95.3
Net repayments of floor plan notes payable — non-trade		(547.6)		(18.0)
Payments for contingent consideration		(31.6)		—
Repurchases of common stock		(29.4)		(174.1)
Dividends		(34.2)		(97.3)
Payment of deferred financing fees		(7.8)		—
Other		(5.0)		0.1
Net cash used in continuing financing activities		(704.3)		(119.0)
Discontinued operations:
Net cash provided by discontinued operating activities		0.2		0.2
Net cash provided by discontinued investing activities		—		—
Net cash provided by discontinued financing activities		—		—
Net cash provided by discontinued operations		0.2		0.2
Effect of exchange rate changes on cash and cash equivalents		7.8		(0.5)
Net change in cash and cash equivalents		64.6		38.1
Cash and cash equivalents, beginning of period		28.1		39.4
Cash and cash equivalents, end of period	$	92.7	$	77.5
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	106.7	$	139.6
Income taxes		32.1		69.8
Non cash activities:
Contingent consideration	$	—		10.6

See Notes to Consolidated Condensed Financial Statements

Table of Contents

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY


	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

Price	46.27	EPS	5
Shares	83	P/E	9
MCap	3,841	P/FCF	6
Net Debt	2,302	EBIT	552
TEV	6,143	TEV/EBIT	11
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-10-27
10-Q	2020-06-30	Filed 2020-07-31
10-Q	2020-03-31	Filed 2020-05-06
10-K	2019-12-31	Filed 2020-02-21
10-Q	2019-09-30	Filed 2019-10-30
10-Q	2019-06-30	Filed 2019-07-31
10-Q	2019-03-31	Filed 2019-04-26
10-K	2018-12-31	Filed 2019-02-22
10-Q	2018-09-30	Filed 2018-10-26
10-Q	2018-06-30	Filed 2018-07-27
10-Q	2018-03-31	Filed 2018-04-27
10-K	2017-12-31	Filed 2018-02-22
10-Q	2017-09-30	Filed 2017-10-26
10-Q	2017-06-30	Filed 2017-07-28
10-Q	2017-03-31	Filed 2017-04-27
10-K	2016-12-31	Filed 2017-02-24
10-Q	2016-09-30	Filed 2016-10-27
10-Q	2016-06-30	Filed 2016-07-29
10-Q	2016-03-31	Filed 2016-04-27
10-K	2015-12-31	Filed 2016-02-25
10-Q	2015-09-30	Filed 2015-10-30
10-Q	2015-06-30	Filed 2015-07-30
10-Q	2015-03-31	Filed 2015-05-01
10-K	2014-12-31	Filed 2015-02-26
10-Q	2014-09-30	Filed 2014-10-29
10-Q	2014-06-30	Filed 2014-07-31
10-Q	2014-03-31	Filed 2014-05-05
10-K	2013-12-31	Filed 2014-03-03
10-Q	2013-09-30	Filed 2013-10-30
10-Q	2013-06-30	Filed 2013-08-01
10-Q	2013-03-31	Filed 2013-04-30
10-K	2012-12-31	Filed 2013-02-28
10-Q	2012-09-30	Filed 2012-11-02
10-Q	2012-06-30	Filed 2012-08-03
10-Q	2012-03-31	Filed 2012-05-04
10-K	2011-12-31	Filed 2012-02-24
10-Q	2011-09-30	Filed 2011-11-07
10-Q	2011-06-30	Filed 2011-08-02
10-Q	2011-03-31	Filed 2011-05-03
10-K	2010-12-31	Filed 2011-02-28
10-Q	2010-09-30	Filed 2010-11-04
10-Q	2010-06-30	Filed 2010-07-30
10-Q	2010-03-31	Filed 2010-05-03
10-K	2009-12-31	Filed 2010-02-24

8-K	2020-11-20
8-K	2020-11-02
8-K	2020-10-22
8-K	2020-10-19
8-K	2020-10-14
8-K	2020-10-01
8-K	2020-08-20
8-K	2020-08-04
8-K	2020-08-04
8-K	2020-08-04
8-K	2020-07-29
8-K	2020-07-16
8-K	2020-07-06
8-K	2020-06-09
8-K	2020-05-13
8-K	2020-05-06
8-K	2020-03-30
8-K	2020-02-12
8-K	2020-02-05
8-K	2019-12-18
8-K	2019-10-29
8-K	2019-10-16
8-K	2019-07-30
8-K	2019-07-12
8-K	2019-06-27
8-K	2019-05-09
8-K	2019-04-25
8-K	2019-04-24
8-K	2019-02-07
8-K	2019-01-30
8-K	2019-01-22
8-K	2018-12-17
8-K	2018-12-13
8-K	2018-10-25
8-K	2018-10-17
8-K	2018-07-26
8-K	2018-07-18
8-K	2018-05-10
8-K	2018-04-25
8-K	2018-02-08
8-K	2018-02-01

EX-22	pag-20200930xex22.htm
EX-31.1	pag-20200930xex31d1.htm
EX-31.2	pag-20200930xex31d2.htm
EX-32	pag-20200930xex32.htm

PAG 10Q Quarterly Report

Penske Automotive Group Earnings 2020-09-30