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4
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
oTRANSITION 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)
Delaware22-3086739
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
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 classTrading symbol(s)Name of each exchange on which registered
Voting Common Stock, par value $0.0001 per share
PAGNew 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 x No o
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 x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 FilerxAccelerated filer oNon-accelerated filer oSmaller reporting company oEmerging growth company o
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of April 26, 2024, there were 66,879,277 shares of voting common stock outstanding.


TABLE OF CONTENTS
Page
2

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
PENSKE AUTOMOTIVE GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31,
2024
December 31,
2023
(Unaudited)
(In millions, except share
and per share amounts)
ASSETS
Cash and cash equivalents$116.9 $96.4 
Accounts receivable, net of allowance for doubtful accounts of $6.9 and $6.8
1,062.8 1,114.6 
Inventories4,424.1 4,293.1 
Other current assets206.8 175.6 
Total current assets5,810.6 5,679.7 
Property and equipment, net2,827.8 2,765.2 
Operating lease right-of-use assets2,476.1 2,405.5 
Goodwill2,316.6 2,234.9 
Other indefinite-lived intangible assets836.0 748.2 
Equity method investments1,805.5 1,774.9 
Other long-term assets73.9 63.1 
Total assets$16,146.5 $15,671.5 
LIABILITIES AND EQUITY
Floor plan notes payable$2,376.7 $2,255.6 
Floor plan notes payable — non-trade1,479.2 1,515.9 
Accounts payable962.9 866.9 
Accrued expenses and other current liabilities876.0 809.8 
Current portion of long-term debt215.3 209.7 
Total current liabilities5,910.1 5,657.9 
Long-term debt1,461.9 1,419.5 
Long-term operating lease liabilities2,407.4 2,336.0 
Deferred tax liabilities1,245.2 1,231.7 
Other long-term liabilities275.8 270.8 
Total liabilities11,300.4 10,915.9 
Commitments and contingent liabilities (Note 10)
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; 67,049,359 shares issued and outstanding at March 31, 2024; 67,111,181 shares issued and outstanding at December 31, 2023
  
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  
Retained earnings5,113.1 4,990.3 
Accumulated other comprehensive income (loss)(297.3)(264.1)
Total Penske Automotive Group stockholders' equity4,815.8 4,726.2 
Non-controlling interest30.3 29.4 
Total equity4,846.1 4,755.6 
Total liabilities and equity$16,146.5 $15,671.5 
See Notes to Consolidated Condensed Financial Statements.
3

PENSKE AUTOMOTIVE GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Three Months Ended
March 31,
20242023
(Unaudited)
(In millions, except per share amounts)
Revenue:
Retail automotive dealership$6,478.0 $6,299.8 
Retail commercial truck dealership791.8 895.6 
Commercial vehicle distribution and other178.0 143.6 
Total revenues7,447.8 7,339.0 
Cost of sales:
Retail automotive dealership5,420.8 5,237.2 
Retail commercial truck dealership647.0 748.6 
Commercial vehicle distribution and other134.8 100.9 
Total cost of sales6,202.6 6,086.7 
Gross profit1,245.2 1,252.3 
Selling, general, and administrative expenses879.8 844.9 
Depreciation37.8 33.9 
Operating income327.6 373.5 
Floor plan interest expense(44.8)(27.9)
Other interest expense(21.3)(20.8)
Equity in earnings of affiliates33.3 82.1 
Income before income taxes294.8 406.9 
Income taxes(78.6)(107.3)
Net income216.2 299.6 
Less: Income attributable to non-controlling interests1.0 1.3 
Net income attributable to Penske Automotive Group common stockholders$215.2 $298.3 
Basic earnings per share attributable to Penske Automotive Group common stockholders:
Net income attributable to Penske Automotive Group common stockholders$3.21 $4.31 
Shares used in determining basic earnings per share67.1 69.2 
Diluted earnings per share attributable to Penske Automotive Group common stockholders:
Net income attributable to Penske Automotive Group common stockholders$3.21 $4.31 
Shares used in determining diluted earnings per share67.1 69.2 
Amounts attributable to Penske Automotive Group common stockholders:
Net income$216.2 $299.6 
Less: Income attributable to non-controlling interests1.0 1.3 
Net income attributable to Penske Automotive Group common stockholders$215.2 $298.3 
Cash dividends per share$0.87 $0.61 
See Notes to Consolidated Condensed Financial Statements.
4

PENSKE AUTOMOTIVE GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended
March 31,
20242023
(Unaudited)
(In millions)
Net income$216.2 $299.6 
Other comprehensive income, net of tax:
Foreign currency translation adjustment(36.6)18.3 
Other adjustments to comprehensive income3.6 4.8 
Other comprehensive income, net of tax(33.0)23.1 
Comprehensive income183.2 322.7 
Less: Comprehensive income attributable to non-controlling interests1.2 1.6 
Comprehensive income attributable to Penske Automotive Group common stockholders$182.0 $321.1 
See Notes to Consolidated Condensed Financial Statements.
5

PENSKE AUTOMOTIVE GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
20242023
(Unaudited)
(In millions)
Operating Activities:
Net income$216.2 $299.6 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation37.8 33.9 
Earnings of equity method investments(33.3)(82.1)
Deferred income taxes14.6 13.7 
Changes in operating assets and liabilities:
Accounts receivable75.9 (10.2)
Inventories(77.2)(95.2)
Floor plan notes payable134.8 8.1 
Accounts payable and accrued expenses130.5 131.6 
Other(43.3)11.8 
Net cash provided by operating activities456.0 311.2 
Investing Activities:
Purchases of property, equipment, and improvements(102.5)(102.4)
Acquisitions net, including repayment of sellers' floor plan notes payable of $83.1 and $0.0, respectively
(243.6) 
Other(6.3)(3.1)
Net cash used in investing activities(352.4)(105.5)
Financing Activities:
Proceeds from borrowings under revolving U.S. credit agreement and mortgage facilities668.7 611.7 
Repayments under revolving U.S. credit agreement and mortgage facilities(700.2)(512.0)
Net borrowings (repayments) of other debt80.2 (23.9)
Net repayments of floor plan notes payable — non-trade(30.7)(133.1)
Repurchases of common stock(32.9)(110.2)
Dividends(58.6)(42.3)
Payment of debt issuance costs(0.5)(2.0)
Other(8.1) 
Net cash used in financing activities(82.1)(211.8)
Effect of exchange rate changes on cash and cash equivalents(1.0)0.2 
Net change in cash and cash equivalents20.5 (5.9)
Cash and cash equivalents, beginning of period96.4 106.5 
Cash and cash equivalents, end of period$116.9 $100.6 
Supplemental disclosures of cash flow information:
Cash paid for:
Interest$68.6 $47.7 
Income taxes22.5 23.9 
See Notes to Consolidated Condensed Financial Statements.
6

PENSKE AUTOMOTIVE GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF EQUITY
Three Months Ended March 31, 2024
Voting and Non-voting Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Penske
Automotive Group
Stockholders' Equity
Non-controlling
Interest
Total
Equity
Issued
Shares
Amount
(Unaudited)
(Dollars in millions)
Balance, December 31, 2023
67,111,181 $ $ $4,990.3 $(264.1)$4,726.2 $29.4 $4,755.6 
Equity compensation159,507 — 7.5 — — 7.5 — 7.5 
Repurchases of common stock(221,329)— (7.5)(25.7)— (33.2)— (33.2)
Dividends— — — (58.6)— (58.6)— (58.6)
Distributions to non-controlling interest— — — — — — (0.3)(0.3)
Foreign currency translation— — — — (36.8)(36.8)0.2 (36.6)
Other— — — (8.1)3.6 (4.5)— (4.5)
Net income— — — 215.2 — 215.2 1.0 216.2 
Balance, March 31, 2024
67,049,359 $ $ $5,113.1 $(297.3)$4,815.8 $30.3 $4,846.1 
Three Months Ended March 31, 2023
Voting and Non-voting Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Penske
Automotive Group
Stockholders' Equity
Non-controlling
Interest
Total
Equity
Issued
Shares
Amount
(Unaudited)
(Dollars in millions)
Balance, December 31, 2022
69,681,891 $ $ $4,483.3 $(335.3)$4,148.0 $26.8 $4,174.8 
Equity compensation208,994 — 7.8 — — 7.8 — 7.8 
Repurchases of common stock(890,327)— (7.8)(103.5)— (111.3)— (111.3)
Dividends— — — (42.3)— (42.3)— (42.3)
Distributions to non-controlling interest— — — — — — (0.3)(0.3)
Foreign currency translation— — — — 18.0 18.0 0.3 18.3 
Other— — — — 4.8 4.8 — 4.8 
Net income— — — 298.3 — 298.3 1.3 299.6 
Balance, March 31, 2023
69,000,558 $ $ $4,635.8 $(312.5)$4,323.3 $28.1 $4,351.4 
See Notes to Consolidated Condensed Financial Statements.

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PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In millions, except share and per share amounts)
1. Interim Financial Statements
Unless the context otherwise requires, the use of the terms "PAG," "we," "us," and "our" in these Notes to the Consolidated Condensed Financial Statements refers to Penske Automotive Group, Inc. and its consolidated subsidiaries.
Business Overview and Concentrations
We are a diversified international transportation services company and one of the world's premier automotive and commercial truck retailers. We operate dealerships in the United States, the United Kingdom, Canada, Germany, Italy, and Japan, and we are one of the largest retailers of commercial trucks in North America for Freightliner. We also distribute and retail commercial vehicles, diesel and gas engines, power systems, and related parts and services principally in Australia and New Zealand. Additionally, we own 28.9% of Penske Transportation Solutions, a business that manages one of the largest, most comprehensive and modern trucking fleets in North America with trucks, tractors, and trailers under lease, rental, and/or maintenance contracts, and provides innovative transportation, supply chain, and technology solutions to its customers.
Retail Automotive. As of March 31, 2024, we operated 360 retail automotive franchised dealerships, of which 152 are located in the U.S. and 208 are located outside of the U.S. The franchised dealerships outside of the U.S. are located primarily in the U.K. As of March 31, 2024, we also operated 18 used vehicle dealerships, with six dealerships in the U.S. and 12 dealerships in the U.K., which retailed used vehicles under a one price, "no-haggle" methodology under the CarShop brand.
Each of our franchised dealerships offers a wide selection of new and used vehicles for sale. In addition to selling new and used vehicles, we generate higher-margin revenue at each of our dealerships through maintenance and repair services, the sale and placement of third-party finance and insurance products, third-party extended service and maintenance contracts, replacement and aftermarket automotive products, and at certain of our locations, collision repair services. We operate our franchised dealerships under franchise agreements with a number of automotive manufacturers and distributors that are subject to certain rights and restrictions typical of the industry. Beginning in 2023, we transitioned some of our dealerships in the U.K. and Europe to an agency model under which we receive a fee for facilitating the sale by the manufacturer of a new vehicle but do not hold the vehicle in inventory. Vehicles sold under this agency model are counted as new agency units sold instead of new retail units sold by us, and only the fee we receive from the manufacturer, not the price of the vehicle, is reported as new revenue (as opposed to previously recording all of the vehicle sale price as new revenue) with no corresponding cost of sale. We continue to provide new vehicle customer service under the agency model, and the agency model at this time has not changed our used vehicle sales operations or service and parts operations, although the long-term impact of the agency model at these dealerships as well as other agency models proposed by our manufacturer partners is uncertain.
During the three months ended March 31, 2024, we acquired 16 retail automotive franchises and opened one retail automotive franchise in the U.K., acquired one Ford dealership and one Chrysler/Dodge/Jeep/Ram dealership in the U.S., and acquired two retail automotive franchises in Italy. In the U.S., we also closed one CarShop location. In April 2024, we entered into an agreement to acquire two Porsche dealerships and one Ducati motorcycle dealership in Melbourne, Australia, which is expected to close in the second quarter of 2024, subject to customary conditions.
Retail Commercial Truck Dealership. We operate Premier Truck Group ("PTG"), a heavy- and medium-duty truck dealership group offering primarily Freightliner and Western Star trucks (both Daimler brands), with locations across nine U.S. states and the Canadian provinces of Ontario and Manitoba. As of March 31, 2024, PTG operated 43 locations selling new and/or used trucks, performing service and parts operations, or offering collision repair services.
Penske Australia. Penske Australia is the exclusive importer and distributor of Western Star heavy-duty trucks (a Daimler brand), MAN heavy- and medium-duty trucks and buses (a VW Group brand), and Dennis Eagle refuse collection vehicles, together with associated parts, across Australia, New Zealand, and portions of the Pacific. In most of these same markets, we are also a leading distributor of diesel and gas engines and power systems, principally representing MTU (a Rolls-Royce solution), Detroit Diesel, Allison Transmission, and Bergen Engines. Penske Australia offers products across the on- and off-highway markets, including in the trucking, mining, power generation, defense, marine, rail, and
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construction sectors and supports full parts and aftersales service through a network of branches, field service locations, and dealers across the region.
Penske Transportation Solutions. We hold a 28.9% ownership interest in Penske Truck Leasing Co., L.P. ("PTL"). PTL is owned 41.1% by Penske Corporation, 28.9% by us, and 30.0% by Mitsui & Co., Ltd. ("Mitsui"). We account for our investment in PTL under the equity method, and we therefore record our share of PTL's earnings on our statements of income under the caption "Equity in earnings of affiliates," which also includes the results of our other equity method investments. Penske Transportation Solutions ("PTS") is the universal brand name for PTL's various business lines through which it is capable of meeting customers' needs across the supply chain with a broad product offering that includes full-service truck leasing, truck rental, and contract maintenance along with logistic services, such as dedicated contract carriage, distribution center management, freight management, and dry van truckload carrier services.
Basis of Presentation
The accompanying unaudited consolidated condensed financial statements of PAG have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and disclosures normally included in our annual financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") have been condensed or omitted pursuant to the SEC rules and regulations. The information presented as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 is unaudited but includes all adjustments which our management believes to be necessary for the fair presentation of results for the periods presented. Results for interim periods are not necessarily indicative of results to be expected for the year. These consolidated condensed financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2023, which are included as part of our Annual Report on Form 10-K.
Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accounts requiring the use of estimates include accounts receivable, inventories, income taxes, intangible assets, leases, and certain reserves.
Fair Value of Financial Instruments
Accounting standards define fair value as the price that would be received from selling an asset, or paid to transfer a liability in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and also establishes the following three levels of inputs that may be used to measure fair value:
Level 1Quoted prices in active markets for identical assets or liabilities
Level 2Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted market prices in markets that are not active, or model-derived valuations or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
Our financial instruments consist of cash and cash equivalents, debt, floor plan notes payable, and forward exchange contracts used to hedge future cash flows. Other than our fixed rate debt, the carrying amount of all significant financial instruments approximates fair value due either to length of maturity, the existence of variable interest rates that approximate prevailing market rates, or as a result of mark to market accounting.
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Our fixed rate debt consists of amounts outstanding under our senior subordinated notes and mortgage facilities. We estimate the fair value of our senior unsecured notes using quoted prices for the identical liability (Level 2), and we estimate the fair value of our mortgage facilities using a present value technique based on our current market interest rates for similar types of financial instruments (Level 2). A summary of our fixed rate debt is as follows:
March 31, 2024December 31, 2023
Carrying ValueFair ValueCarrying Value Fair Value
3.50% senior subordinated notes due 2025
548.0 533.3 547.7 $529.7 
3.75% senior subordinated notes due 2029
496.0 445.4 495.8 444.4 
Mortgage facilities (1)
359.0 333.2 402.1 378.5 
_____________________
(1)In addition to fixed rate debt, our mortgage facilities also include revolving mortgage facilities through Toyota Motor Credit Corporation that bear interest at variable rates. The fair value equals the carrying value.
Income Taxes
Tax regulations may require items to be included in our tax return at different times than when those items are reflected in our financial statements. Some of the differences are permanent, such as expenses that are not deductible on our tax return, and some are temporary differences, such as the timing of depreciation expense. Temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that will be used as a tax deduction or credit in our tax return in future years which we have already recorded in our financial statements. Deferred tax liabilities generally represent deductions taken on our tax return that have not yet been recognized as an expense in our financial statements. We establish valuation allowances for our deferred tax assets if the amount of expected future taxable income is not more likely than not to allow for the use of the deduction or credit.
Recent Accounting Pronouncements
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This ASU provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued due to reference rate reform. Additionally, entities can elect to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain conditions are met. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope." This ASU refines the scope of ASC 848 and clarifies some of its guidance as part of the Board's monitoring of global reference rate reform activities. The ASU permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest in connection with reference rate reform activities. In December 2022, the FASB issued ASU 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848." This ASU defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. These new standards were effective upon issuance and generally can be applied to applicable contract modifications. While some of our floorplan arrangements and certain credit agreements had historically used LIBOR as a benchmark for calculating the applicable interest rate, all of our agreements previously utilizing LIBOR have transitioned to an alternative benchmark rate on or before July 1, 2023. These changes have not had a significant impact on our consolidated financial position, results of operations, and cash flows.
Segment Reporting
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." This ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss and also requires that public entities provide all annual disclosures about a reportable segment’s profit or loss and assets in interim periods. This ASU is effective for financial statements issued for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.
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Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and disclosures.
Income Taxes
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." This ASU expands public entities’ annual income tax disclosures by requiring disclosure of specific categories in the rate reconciliation and disclosure of additional information for reconciling items that meet a quantitative threshold. This ASU is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The amendments should be applied on a prospective basis with retrospective application permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and disclosures.
2. Revenues
Automotive and commercial truck dealerships generate the majority of our revenues. New and used vehicle revenues typically include sales to retail customers, to fleet customers, and to leasing companies providing consumer leasing. We generate finance and insurance revenues from sales of third-party extended service contracts, sales of third-party insurance policies, commissions relating to the sale of finance and lease contracts to third parties, and the sales of certain other products. Service and parts revenues include fees paid by customers for repair, maintenance and collision services, and the sale of replacement parts and other aftermarket accessories as well as warranty repairs that are reimbursed directly by various vehicle manufacturers. Revenues are recognized upon satisfaction of our performance obligations under contracts with our customers and are measured at the amount of consideration we expect to be entitled to in exchange for transferring goods or providing services. A discussion of revenue recognition by reportable segment is included below.
Retail Automotive and Retail Commercial Truck Dealership Revenue Recognition
Dealership Vehicle Sales. We record revenue for vehicle sales at a point in time when vehicles are delivered, which is when the transfer of title, risks and rewards of ownership, and control are considered passed to the customer. The amount of consideration we receive for vehicle sales, including any non-cash consideration representing the fair value of trade-in vehicles if applicable, is stated within the executed contract with our customer. Payment is typically due and collected within 30 days subsequent to transfer of control of the vehicle. For dealerships operating under an agency model, we receive a commission for each vehicle sale that we facilitate under the terms of the agency agreement with the manufacturer, which is recorded as new vehicle revenue.
Dealership Parts and Service Sales. We record revenue for vehicle service and collision work over time as work is completed and when parts are delivered to our customers. For service and parts revenues recorded over time, we utilize a method that considers total costs incurred to date and the applicable margin in relation to total expected efforts to complete our performance obligation in order to determine the appropriate amount of revenue to recognize over time. Recognition of this revenue over time reflects the amount of consideration we expect to be entitled to for the transfer of goods and services performed to date, representative of the amount for which we have a right to payment. The amount of consideration we receive for parts and service sales, including collision repair work, is based upon labor hours expended and parts utilized to perform and complete the necessary services to our customers. Payment is typically due upon delivery or within a period of time shortly thereafter. We receive payment from our customers upon transfer of control or within a period typically less than 30 days subsequent to the completion of services for the customer. We allow for customer returns of parts sales up to 30 days after the sale; however, parts returns are not material.
Dealership Finance and Insurance Sales. Subsequent to the sale of a vehicle to a customer, we sell installment sale contracts to various financial institutions on a non-recourse basis (with specified exceptions) to mitigate the risk of default. We receive a commission from the lender equal to either the difference between the interest rate charged to the customer and the interest rate set by the financing institution or a flat fee. We also receive commissions for facilitating the sale of various products to customers, including voluntary vehicle protection insurance, vehicle theft protection, and extended service contracts. These commissions are recorded as revenue at a point in time when the customer enters into the contract. Payment is typically due and collected within 30 days subsequent to the execution of the contract with the customer.
In the case of finance contracts, a customer may prepay or fail to pay their contract, thereby terminating the contract. Customers may also terminate extended service contracts and other insurance products, which are fully paid at purchase, and become eligible for refunds of unused premiums. In these circumstances, a portion of the commissions we received may be charged back based on the terms of the contracts. The revenue we record relating to these transactions is net of an
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estimate of the amount of chargebacks we will be required to pay. Our estimate is based upon our historical experience with similar contracts, including the impact of refinance and default rates on retail finance contracts and cancellation rates on extended service contracts and other insurance products. Aggregate reserves relating to chargeback activity were $48.4 million and $42.7 million as of March 31, 2024, and December 31, 2023, respectively.
Commercial Vehicle Distribution and Other Revenue Recognition
Penske Australia. We record revenue from the distribution of vehicles and other products at a point in time when delivered, which is when the transfer of title, risks and rewards of ownership, and control are considered passed to the customer. We record revenue for service or repair work over time as work is completed and when parts are delivered to our customers. For service and parts revenues recorded over time, we utilize a method that considers total costs incurred to date and the applicable margin in relation to total expected efforts to complete our performance obligation in order to determine the appropriate amount of revenue to recognize over time. Recognition of this revenue over time reflects the amount of consideration we expect to be entitled to for the transfer of goods and services performed to date, representative of the amount for which we have a right to payment.
The amount of consideration we receive for vehicle and product sales is stated within the executed contract with our customer. The amount of consideration we receive for parts and service sales is based upon labor hours expended and parts utilized to perform and complete the necessary services to our customers. Payment is typically due upon delivery, upon invoice, or within a period of time shortly thereafter. We receive payment from our customers upon transfer of control or within a period typically within 45 days subsequent to transfer of control or invoice.
We record revenue from the distribution of engines and other products at a point in time when delivered, which is when the transfer of title, risks and rewards of ownership, and control are considered passed to the customer. We record revenue for service or repair work over time as work is completed and when parts are delivered to our customers. For service and parts revenues recorded over time, we utilize a method that considers total costs incurred to date and the applicable margin in relation to total expected efforts to complete our performance obligation in order to determine the appropriate amount of revenue to recognize over time. Recognition of revenue over time reflects the amount of consideration we expect to be entitled to for the transfer of goods and services performed to date, representative of the amount for which we have a right to payment.
For our long-term power generation contracts, we record revenue over time as services are provided in accordance with contract milestones, which is considered an output method that requires judgment to determine our progress towards contract completion and the corresponding amount of revenue to recognize. Any revisions to estimates related to revenues or costs to complete contracts are recorded in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated.
The amount of consideration we receive for engine, product, and power generation sales is stated within the executed contract with our customer. The amount of consideration we receive for service sales is based upon labor hours expended and parts utilized to perform and complete the necessary services to our customers. Payment is typically due upon delivery, upon invoice, or within a period of time shortly thereafter. We receive payment from our customers upon transfer of control or within a period typically within 45 days subsequent to transfer of control or invoice.
Retail Automotive Dealership
The following tables disaggregate our retail automotive segment revenue by product type and geographic location for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
Retail Automotive Dealership Revenue20242023
New vehicle$2,802.6 $2,721.3 
Used vehicle2,336.2 2,297.1 
Finance and insurance, net206.0 206.8 
Service and parts746.1 683.0 
Fleet and wholesale387.1 391.6 
Total retail automotive dealership revenue$6,478.0 $6,299.8 
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Three Months Ended March 31,
Retail Automotive Dealership Revenue20242023
U.S.$3,415.0 $3,378.2 
U.K.2,546.5 2,472.4 
Germany, Italy, and Japan516.5 449.2 
Total retail automotive dealership revenue$6,478.0 $6,299.8 
Retail Commercial Truck Dealership
The following table disaggregates our retail commercial truck segment revenue by product type for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
Retail Commercial Truck Dealership Revenue20242023
New truck$494.2 $600.2 
Used truck62.4 49.5 
Finance and insurance, net5.3 5.0 
Service and parts223.6 228.0 
Other6.3 12.9 
Total retail commercial truck dealership revenue$791.8 $895.6 
Commercial Vehicle Distribution and Other
Our other reportable segment relates to our Penske Australia business. Commercial vehicle distribution and other revenue was $178.0 million, including $67.0 million of service and parts revenue, during the three months ended March 31, 2024, and $143.6 million, including $61.3 million of service and parts revenue, during the three months ended March 31, 2023.
Contract Balances
The following table summarizes our accounts receivable and unearned revenues as of March 31, 2024, and December 31, 2023:
March 31,
2024
December 31,
2023
Accounts receivable
Contracts in transit$319.8 $361.9 
Vehicle receivables175.8 170.6 
Manufacturer receivables212.0 218.9 
Trade receivables334.8 344.1 
Accrued expenses
Unearned revenues$267.4 $280.2 
Contracts in transit represent receivables from unaffiliated finance companies relating to the sale of customers' installment sales and lease contracts arising in connection with the sale of a vehicle by us. Vehicle receivables represent receivables for any portion of the vehicle sales price not paid by the finance company. Manufacturer receivables represent amounts due from manufacturers, including incentives, holdbacks, rebates, warranty claims, and other receivables due from the factory. Trade receivables represent receivables due from customers, including amounts due for parts and service sales as well as receivables due from finance companies and others for the commissions earned on financing and commissions earned on insurance and extended service products provided by third parties. We evaluate collectability of receivables and estimate an allowance for doubtful accounts based on the age of the receivable, contractual life, historical collection experience, current conditions, and forecasts of future economic conditions, which is recorded within "Accounts receivable" on our consolidated balance sheets with our receivables presented net of the allowance.
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Unearned revenues primarily relate to payments received from customers prior to satisfaction of our performance obligations, such as refundable customer deposits, non-refundable customer deposits, and deferred revenues from operating leases. These amounts are presented within "Accrued expenses and other current liabilities" on our consolidated balance sheets. Of the amounts recorded as unearned revenues as of December 31, 2023, $112.5 million was recognized as revenue during the three months ended March 31, 2024.
Additional Revenue Recognition Related Policies
We do not have any material significant payment terms associated with contracts with our customers. Payment is due and collected as previously detailed for each reportable segment. We do not offer material rights of return or service-type warranties.
Taxes collected from customers and remitted to governmental authorities are recorded on a net basis (excluded from revenue). Shipping costs incurred subsequent to transfer of control to our customers are recognized as cost of sales. Sales promotions that we offer to customers are accounted for as a reduction of revenues at the time of sale.
3. Leases
We lease land and facilities, including certain dealerships and office space. Our property leases are generally for an initial period between 5 and 20 years and are typically structured to include renewal options at our election. We include renewal options that we are reasonably certain to exercise in the measurement of our lease liabilities and right-of-use assets. We also have equipment leases that primarily relate to office and computer equipment, service and shop equipment, company vehicles, and other miscellaneous items. These leases are generally for a period of less than 5 years. We do not have any material leases, individually or in the aggregate, classified as a finance leasing arrangement.
We estimate the total undiscounted rent obligations under these leases, including any extension periods that we are reasonably certain to exercise, to be $5.4 billion as of March 31, 2024. Some of our lease arrangements include rental payments that are adjusted based on an index or rate, such as the Consumer Price Index (CPI). As the rate implicit in the lease is generally not readily determinable for our operating leases, the discount rates used to determine the present value of our lease liability are based on our incremental borrowing rate at the lease commencement date and commensurate with the remaining lease term. Our incremental borrowing rate for a lease is the rate of interest we would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
Pursuant to the leases for some of our larger facilities, we are required to comply with specified financial ratios, including a "rent coverage" ratio and a ratio of debt to earnings before interest, taxes, depreciation, and amortization ("EBITDA"), each as defined. For these leases, non-compliance with the ratios may require us to post collateral in the form of a letter of credit. A breach of the other lease covenants gives rise to certain remedies by the landlord, the most severe of which include the termination of the applicable lease and acceleration of the total rent payments due under the lease.
In connection with the sale, relocation, and closure of certain of our dealerships, we have entered into a number of third-party sublease agreements. The rent paid by our sub-tenants on such properties for the three months ended March 31, 2024 and 2023 was $3.9 million and $4.2 million, respectively. We have in the past and may in the future enter into sale-leaseback transactions to finance certain property acquisitions and capital expenditures, pursuant to which we sell property to third parties and agree to lease those assets back for a certain period of time. Such sales generate proceeds that vary from period to period. We do not have any material leases that have not yet commenced as of March 31, 2024.
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The following table summarizes our net operating lease cost during the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
20242023
Lease Cost
Operating lease cost (1)
$67.3 $64.4 
Sublease income(3.9)(4.2)
Total lease cost$63.4 $60.2 
_________________
(1)Includes short-term leases and variable lease costs, which are immaterial.
The following table summarizes supplemental cash flow information related to our operating leases:
Three Months Ended
March 31, 2024
Three Months Ended
March 31, 2023
Other Information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$66.5 $64.0 
Right-of-use assets modified or obtained in exchange for operating lease liabilities, net$102.1 $(23.2)
Supplemental balance sheet information related to the weighted average remaining lease term and discount rate of our leases is as follows:
March 31, 2024December 31, 2023
Lease Term and Discount Rate
Weighted-average remaining lease term - operating leases24 years24 years
Weighted-average discount rate - operating leases6.7 %6.7 %
The following table summarizes the maturity of our lease liabilities on an undiscounted cash flow basis and a reconciliation to the operating lease liabilities recognized on our consolidated condensed balance sheet as of March 31, 2024:
Maturity of Lease LiabilitiesMarch 31, 2024
2024 (1)
$190.0 
2025249.1 
2026244.0 
2027234.7 
2028233.0 
2029227.1 
2030 and thereafter
4,009.4 
Total future minimum lease payments$5,387.3 
Less: Imputed interest(2,891.9)
Present value of future minimum lease payments$2,495.4 
Current operating lease liabilities (2)
$88.0 
Long-term operating lease liabilities2,407.4 
Total operating lease liabilities $2,495.4 
____________________
(1)Excludes the three months ended March 31, 2024.
(2)Included within "Accrued expenses and other current liabilities" on Consolidated Condensed Balance Sheet as of March 31, 2024.
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4. Inventories
Inventories consisted of the following:
March 31,
2024
December 31,
2023
Retail automotive dealership new vehicles$2,001.4 $1,951.3 
Retail automotive dealership used vehicles1,161.1 1,186.3 
Retail automotive parts, accessories, and other162.7 156.2 
Retail commercial truck dealership vehicles and parts645.1 543.7 
Commercial vehicle distribution vehicles, parts, and engines453.8 455.6 
Total inventories$4,424.1 $4,293.1 
We receive credits from certain vehicle manufacturers that reduce the cost of sales when the vehicles are sold. Such credits amounted to $14.4 million and $13.3 million during the three months ended March 31, 2024 and 2023, respectively.
5. Business Combinations
During the three months ended March 31, 2024, we acquired 16 retail automotive franchises in the U.K. and acquired two retail automotive franchises in Italy. The companies acquired during the three months ended March 31, 2024, generated $198.9 million of revenue and $4.9 million of pre-tax income from our date of acquisition through March 31, 2024. During the three months ended March 31, 2023, we made no acquisitions. Our financial statements include the results of operations of the acquired entities from the date of acquisition. The fair value of the assets acquired and liabilities assumed have been recorded in our consolidated condensed financial statements and may be subject to adjustment pending completion of final valuation. The following table summarizes the aggregate consideration paid and the aggregate amounts of the assets acquired and liabilities assumed for the three months ended March 31, 2024:
Three Months Ended March 31,
2024
Accounts receivable$33.6 
Inventories90.3 
Other current assets 
Property and equipment14.9 
Indefinite-lived intangibles185.8 
Other noncurrent assets 
Current liabilities(55.1)
Noncurrent liabilities(25.9)
Total cash used in acquisitions$243.6 
Our following unaudited consolidated pro forma results of operations for the three months ended March 31, 2024 and 2023 give effect to acquisitions consummated during 2024 and 2023 as if they had occurred on January 1, 2023. This pro forma information is based on historical results of operations, adjusted for the income statement effects of incremental interest expense directly resulting from the acquisitions and the related tax effects. The pro forma information is not necessarily indicative of the results that would have been achieved had the transactions occurred on the first day of each of the periods presented or that may be achieved in the future:
Three Months Ended March 31,
20242023
Revenues$7,468.2 $7,688.4 
Net income attributable to Penske Automotive Group common stockholders215.4 304.6 
Net income per diluted common share$3.21 $4.40 
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6. Intangible Assets
The following is a summary of the changes in the carrying amount of goodwill and other indefinite-lived intangible assets during the three months ended March 31, 2024:
GoodwillOther Indefinite-
Lived Intangible
Assets
Balance, January 1, 2024
$2,234.9 $748.2 
Additions93.1 92.7 
Disposals  
Foreign currency translation(11.4)(4.9)
Balance, March 31, 2024
$2,316.6 $836.0 
As of March 31, 2024, the goodwill balance for reporting units within our Retail Automotive, Retail Commercial Truck, and Other reportable segments was $1,750.8 million, $492.3 million, and $73.5 million, respectively. There is no goodwill recorded in our Non-Automotive Investments reportable segment.
7. Vehicle Financing
We finance substantially all of the commercial vehicles we purchase for distribution, new vehicles for retail sale, and a portion of our used vehicle inventories for retail sale under floor plan and other revolving arrangements with various lenders, including the captive finance companies associated with automotive manufacturers. In the U.S., the floor plan arrangements are due on demand; however, we have not historically been required to repay floor plan advances prior to the sale of the vehicles that have been financed. We typically make monthly interest payments on the amount financed. Outside of the U.S., substantially all of the floor plan arrangements are payable on demand or have an original maturity of 90 days or less, and we are generally required to repay floor plan advances at the earlier of the sale of the vehicles that have been financed or the stated maturity.
The agreements typically grant a security interest in substantially all of the assets of our dealership and distribution subsidiaries and in the U.S., Australia, and New Zealand are guaranteed or partially guaranteed by us. Interest rates under the arrangements are variable and increase or decrease based on changes in the prime rate, the Secured Overnight Financing Rate ("SOFR"), the Sterling Overnight Index Average ("SONIA"), the Bank of England Base Rate, the Finance House Base Rate, the Euro Interbank Offered Rate, the Canadian Prime Rate, the Tokyo Interbank Offered Rate, the Australian Bank Bill Swap Rate, or the New Zealand Bank Bill Benchmark Rate. To date, we have not experienced any material limitation with respect to the amount or availability of financing from any institution providing us with vehicle financing. We also receive non-refundable credits from certain of our vehicle manufacturers, which are treated as a reduction of cost of sales as vehicles are sold.
The weighted average interest rate on floor plan borrowings was 4.9% and 4.0% for the three months ended March 31, 2024 and 2023, respectively. We classify floor plan notes payable to a party other than the manufacturer of a particular new vehicle and all floor plan notes payable relating to pre-owned vehicles as "Floor plan notes payable — non-trade" on our consolidated balance sheets and classify related cash flows as a financing activity on our consolidated statements of cash flows.
8. Earnings Per Share
Basic earnings per share is computed by dividing net income attributable to common stockholders by the number of weighted average shares of voting common stock outstanding, including unvested restricted stock awards which contain rights to non-forfeitable dividends. Diluted earnings per share is computed by dividing net income attributable to common stockholders by the number of weighted average shares of voting common stock outstanding, adjusted for the dilutive
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impact of unissued shares paid to directors during the year as compensation. A reconciliation of the number of shares used in the calculation of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023 follows:
Three Months Ended
March 31,
20242023
Weighted average number of common shares outstanding67,061,968 69,201,232 
Effect of non-participatory equity compensation15,433 17,629 
Weighted average number of common shares outstanding, including effect of dilutive securities67,077,401 69,218,861 
9. Long-Term Debt
Long-term debt consisted of the following:
March 31,
2024
December 31,
2023
U.S. credit agreement — revolving credit line$ $ 
U.K. credit agreement — revolving credit line80.8  
3.50% senior subordinated notes due 2025
548.0 547.7 
3.75% senior subordinated notes due 2029
496.0 495.8 
Canada credit agreement82.7 81.5 
Australia credit agreement65.1 62.7 
Mortgage facilities359.0 402.1 
Other45.6 39.4 
Total long-term debt1,677.2 1,629.2 
Less: current portion(215.3)(209.7)
Net long-term debt$1,461.9 $1,419.5 
U.S. Credit Agreement
Our U.S. Credit Agreement with Mercedes-Benz Financial Services USA LLC, Toyota Motor Credit Corporation, and Daimler Truck Financial Services USA LLC (as amended, the "U.S. Credit Agreement") provides for up to $1.2 billion in revolving loans for working capital, acquisitions, capital expenditures, investments, and other general corporate purposes and provides up to an additional $75 million of letters of credit. The U.S. Credit Agreement provides for a maximum of $400 million of borrowings for foreign acquisitions and expires on September 30, 2026. The interest rate on revolving loans is based on an adjusted Secured Overnight Financing Rate plus 1.50%, with uncollateralized borrowings in excess of a defined borrowing base bearing interest at adjusted SOFR plus 3.00%.
The U.S. credit agreement is fully and unconditionally guaranteed on a joint and several basis by substantially all of our U.S. subsidiaries and contains a number of significant operating covenants that, among other things, restrict our ability to dispose of assets, incur additional indebtedness, repay certain other indebtedness, pay dividends, create liens on assets, make investments or acquisitions, and engage in mergers or consolidations. We are also required to comply with specified financial and other tests and ratios, each as defined in the U.S. credit agreement, including a ratio of current assets to current liabilities, a fixed charge coverage ratio, a ratio of debt to stockholders' equity, and a ratio of debt to earnings before interest, taxes, depreciation, and amortization ("EBITDA"). A breach of these requirements would give rise to certain remedies under the agreement, the most severe of which is the termination of the agreement and acceleration of the amounts owed.
The U.S. credit agreement also contains typical events of default, including change of control, non-payment of obligations, and cross-defaults to our other material indebtedness. Substantially all of our U.S. assets are subject to security interests granted to the lenders under the U.S. credit agreement. As of March 31, 2024, we had no revolver borrowings under the U.S. credit agreement.
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U.K. Credit Agreement
Our U.K. credit agreement with the National Westminster Bank Plc and BMW Financial Services (GB) Limited provides up to a £200.0 million revolving line of credit to be used for working capital, acquisitions, capital expenditures, investments, and general corporate purposes. The revolving loans bear interest between defined Sterling Overnight Index Average (“SONIA”) plus 1.10% and defined SONIA plus 2.10%. In addition, the U.K. credit agreement includes a £100.0 million “accordion” feature which allows the U.K. subsidiaries to request up to an additional £100.0 million of facility capacity, subject to certain limitations. The lenders may agree to provide additional capacity, and, if not, the U.K. subsidiaries may add an additional lender, if available, to the facility to provide such additional capacity. In January 2024, the lenders agreed to extend the facility by one year, and it now expires in January 2028. The U.K. credit agreement is guaranteed by the holding company of a majority of our international subsidiaries, PAG International Ltd. As of March 31, 2024, we had £64.0 million ($80.8 million) revolver borrowings under the U.K. credit agreement.
The U.K. credit agreement is fully and unconditionally guaranteed on a joint and several basis by our U.K. subsidiaries, and contains a number of significant covenants that, among other things, limit the ability of our U.K. subsidiaries to pay dividends, dispose of assets, incur additional indebtedness, repay other indebtedness, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. In addition, our U.K. subsidiaries are required to comply with defined ratios and tests, including: a ratio of earnings before interest, taxes, amortization, and rental payments (“EBITAR”) to interest plus rental payments, a measurement of maximum capital expenditures, and a debt to EBITDA ratio. A breach of these requirements would give rise to certain remedies under the U.K. credit agreement, the most severe of which is the termination of the agreement and acceleration of any amounts owed.
The U.K. credit agreement also contains typical events of default, including change of control and non-payment of obligations and cross-defaults to other material indebtedness of our U.K. subsidiaries. Substantially all of our U.K. subsidiaries’ assets are subject to security interests granted to the lenders under the U.K. credit agreement.
Senior Subordinated Notes
We have issued the following senior subordinated notes:
DescriptionMaturity DateInterest Payment DatesPrincipal Amount
3.50% Notes
September 1, 2025February 15, August 15$550 million
3.75% Notes
June 15, 2029June 15, December 15$500 million
Each of these notes are our unsecured, senior subordinated obligations and are guaranteed on an unsecured senior subordinated basis by our 100% owned U.S. subsidiaries. Each also contains customary negative covenants and events of default. If we experience certain "change of control" events specified in the indentures, holders of these notes will have the option to require us to purchase for cash all or a portion of their notes at a price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest. In addition, if we make certain asset sales and do not reinvest the proceeds thereof or use such proceeds to repay certain debt, we will be required to use the proceeds of such asset sales to make an offer to purchase the notes at a price equal to 100% of the principal amount of the notes, plus accrued and unpaid interest.
Optional redemption. We may redeem the 3.50% Notes and the 3.75% Notes at the redemption prices noted in the respective indentures. Prior to June 15, 2024, we may redeem the 3.75% Notes at a redemption price equal to 100% of the principal thereof, plus an applicable make-whole premium, and any accrued and unpaid interest. In addition, we may redeem up to 40% of the Notes before June 15, 2024, with net cash proceeds from certain equity offerings at a redemption price equal to 103.750% of the principal thereof, plus accrued and unpaid interest.
Canada Credit Agreement
One of our Canadian subsidiaries is party to a CAD $150.0 million revolving line of credit with Daimler Truck Financial Services Canada Corporation ("DTFS") which we use in relation to our Canadian Premier Truck Group retail operations (the "Canada credit agreement"). The Canada credit agreement bears interest at a rate of Canadian Prime (determined by the Royal Bank of Canada) ("Canadian Prime Rate") minus 0.50%; provided that DTFS is entitled to demand repayment of any outstanding borrowings under the Canada revolving note and, following such demand, the interest rate on outstanding borrowings shall be increased to the Canadian Prime Rate plus 2.00%. The Canada credit agreement is guaranteed by PAG International Ltd. As of March 31, 2024, we had CAD $112.0 million ($82.7 million) of outstanding borrowings under the Canada credit agreement.
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Australia Credit Agreement
Penske Australia is party to an AU $100.0 million credit agreement with Daimler Truck Financial Services Australia Pty Ltd (the "Australia credit agreement"). The Australia credit agreement provides the lender with a secured interest in all assets of these businesses, is terminable with six months' notice, and carries an interest rate of Australian BBSW 30-day Bill Rate plus 2.29%. As of March 31, 2024, we had AU $100.0 million ($65.1 million) outstanding borrowings under the Australia credit agreement.
Mortgage Facilities
We are party to mortgages that bear interest at defined rates and require monthly principal and interest payments. We also have a revolving mortgage facility with Toyota Motor Credit Corporation in the U.S. On April 25, 2024, we increased our maximum borrowing capacity under the mortgage facility to $350.0 million, contingent on property values. Our borrowing capacity as of March 31, 2024, was $221.4 million. The facility bears interest at the prime rate minus 1.68% and expires in December 2028. As of March 31, 2024, we had no outstanding borrowings under this mortgage facility. Our mortgage facilities also contain typical events of default, including non-payment of obligations, cross-defaults to our other material indebtedness, certain change of control events, and the loss or sale of certain dealerships operated at the properties. Substantially all of the buildings and improvements on the properties financed pursuant to the mortgage facilities are subject to security interests granted to the lender. As of March 31, 2024, we owed $359.0 million of principal under all of our mortgage facilities.
10. Commitments and Contingent Liabilities
We are involved in litigation which may relate to claims brought by governmental authorities, issues with customers, and employment related matters, including class action claims and purported class action claims. As of March 31, 2024, we were not party to any legal proceedings, including class action lawsuits that, individually or in the aggregate, are reasonably expected to have a material adverse effect on our results of operations, financial condition, or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on our results of operations, financial condition, or cash flows.
We lease land and facilities, including certain dealerships and office space. Pursuant to the leases for some of our larger facilities, we are required to comply with specified financial ratios, including a "rent coverage" ratio and a debt to EBITDA ratio, each as defined. For these leases, non-compliance with the ratios may require us to post collateral in the form of a letter of credit. A breach of the other lease covenants gives rise to certain remedies by the landlord, the most severe of which include the termination of the applicable lease and acceleration of the total rent payments due under the lease. Refer to the disclosures provided in Note 3 for further description of our leases.
We have sold a number of dealerships to third parties and as a condition to certain of those sales, remain liable for the lease payments relating to the properties on which those businesses operate in the event of non-payment by the buyer. We are also party to lease agreements on properties that we no longer use in our retail operations that we have sublet to third parties. We rely on subtenants to pay the rent and maintain the property at these locations. In the event the subtenant does not perform as expected, we may not be able to recover amounts owed to us, and we could be required to fulfill these obligations. We believe we have made appropriate reserves relating to these locations.
Our floor plan credit agreements with Daimler Truck Financial Services Australia and Mercedes-Benz Financial Services New Zealand ("MBA") provide us revolving loans for the acquisition of commercial vehicles for distribution to our retail network. These facilities include a commitment to repurchase dealer vehicles in the event the dealer's floor plan agreement with MBA is terminated.
We have $24.8 million of letters of credit outstanding and $16.3 million of bank guarantees as of March 31, 2024, and have posted $24.1 million of surety bonds in the ordinary course of business.
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11. Equity
A summary of shares repurchased under our securities repurchase program is as follows:
Three Months Ended March 31,
20242023
Shares repurchased (1)
221,329 890,327 
Aggregate purchase price$32.9 $110.2 
Average purchase price per share$148.72 $123.76 
________________________
(1)Shares were repurchased under our securities repurchase program. We had $182.6 million in repurchase authorization remaining under the repurchase program as of March 31, 2024.
12. Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) by component during the three months ended March 31, 2024 and 2023, respectively, attributable to Penske Automotive Group common stockholders follows:
Three Months Ended March 31, 2024
Foreign
Currency
Translation
OtherAccumulated Other Comprehensive Income (Loss)
Balance at December 31, 2023
$(262.6)$(1.5)$(264.1)
Other comprehensive income (loss), net of tax(36.8)3.6 (33.2)
Balance at March 31, 2024
$(299.4)$2.1 $(297.3)
Three Months Ended March 31, 2023
Foreign
Currency
Translation
OtherAccumulated Other Comprehensive Income (Loss)
Balance at December 31, 2022
$(328.1)$(7.2)$(335.3)
Other comprehensive income, net of tax18.0 4.8 22.8 
Balance at March 31, 2023
$(310.1)$(2.4)$(312.5)
13. Segment Information
Our operations are organized by management into operating segments by line of business and geography. We have determined that we have four reportable segments as defined in generally accepted accounting principles for segment reporting: (i) Retail Automotive, consisting of our retail automotive dealership operations; (ii) Retail Commercial Truck, consisting of our retail commercial truck dealership operations in the U.S. and Canada; (iii) Other, consisting of our commercial vehicle and power systems distribution operations; and (iv) Non-Automotive Investments, consisting of our equity method investments in non-automotive operations which includes our investment in PTS and other various investments. The Retail Automotive reportable segment includes all automotive dealerships and all departments relevant to the operation of the dealerships and our retail automotive joint ventures. The individual dealership operations included in the Retail Automotive reportable segment represent two operating segments: United States Retail Automotive and International Retail Automotive. These operating segments have been aggregated into one reportable segment as their operations (A) have similar economic characteristics (all are automotive dealerships having similar margins), (B) offer similar products and services (all sell new and/or used vehicles, service, parts, and third-party finance and insurance products), (C) have similar target markets and customers (generally individuals), and (D) have similar distribution and
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marketing practices (all distribute products and services through dealership facilities that market to customers in similar fashions). Revenue and segment income for the three months ended March 31, 2024 and 2023 follows:
Three Months Ended March 31,
Retail
Automotive
Retail Commercial
Truck
OtherNon-Automotive
Investments
Total
Revenues
2024$6,478.0 $791.8 $178.0 $ $7,447.8 
20236,299.8 $895.6 $143.6 $ $7,339.0 
Segment income
2024$198.4 $50.5 $13.6 $32.3 $294.8 
2023256.7 $57.1 $12.1 $81.0 $406.9 
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those discussed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023, Part II, Item 1A. "Risk Factors" in this Quarterly Report on Form 10-Q, and those in our other periodic reports filed with the Securities and Exchange Commission, and "Forward-Looking Statements." We have acquired and initiated a number of businesses during the periods presented and addressed in this Management's Discussion and Analysis of Financial Condition and Results of Operations. Our financial statements include the results of operations of those businesses from the date acquired or when they commenced operations. Our period-to-period results of operations may vary depending on the dates of acquisitions or disposals.
Overview
We are a diversified international transportation services company and one of the world's premier automotive and commercial truck retailers. We operate dealerships in the United States, the United Kingdom, Canada, Germany, Italy, and Japan, and we are one of the largest retailers of commercial trucks in North America for Freightliner. We also distribute and retail commercial vehicles, diesel and gas engines, power systems, and related parts and services principally in Australia and New Zealand. We employ over 28,500 people worldwide. Additionally, we own 28.9% of Penske Transportation Solutions, a business that employs over 44,000 people worldwide, manages one of the largest, most comprehensive and modern trucking fleets in North America with over 442,000 trucks, tractors, and trailers under lease, rental, and/or maintenance contracts, and provides innovative transportation, supply chain, and technology solutions to its customers.
Business Overview
During the three months ended March 31, 2024, our business generated $7.4 billion in total revenue, which is comprised of approximately $6.5 billion from retail automotive dealerships, $791.8 million from retail commercial truck dealerships, and $178.0 million from commercial vehicle distribution and other operations. We generated $1,245.2 million in gross profit, which is comprised of $1,057.2 million from retail automotive dealerships, $144.8 million from retail commercial truck dealerships, and $43.2 million from commercial vehicle distribution and other operations.
Retail Automotive. We are one of the largest global automotive retailers as measured by the $25.2 billion in total retail automotive dealership revenue we generated in 2023. We are diversified geographically with 53% of our total retail automotive dealership revenues in the three months ended March 31, 2024, generated in the U.S. and Puerto Rico and 47% generated outside of the U.S. We offer over 40 vehicle brands with 72% of our retail automotive franchised dealership revenue generated from premium brands, such as Audi, BMW, Land Rover, Mercedes-Benz, and Porsche, in the three months ended March 31, 2024. As of March 31, 2024, we operated 360 retail automotive franchised dealerships, of which 152 are located in the U.S. and 208 are located outside of the U.S. The franchised dealerships outside of the U.S. are located primarily in the U.K. As of March 31, 2024, we also operated 18 used vehicle dealerships, with six dealerships in the U.S. and 12 dealerships in the U.K., which retailed used vehicles under a one price, "no-haggle" methodology under the CarShop brand. We retailed and wholesaled, including agency units, more than 154,000 vehicles in the three months ended March 31, 2024.
Each of our franchised dealerships offers a wide selection of new and used vehicles for sale. In addition to selling new and used vehicles, we generate higher-margin revenue at each of our dealerships through maintenance and repair services, the sale and placement of third-party finance and insurance products, third-party extended service and maintenance contracts, replacement and aftermarket automotive products, and at certain of our locations, collision repair services. We operate our franchised dealerships under franchise agreements with a number of automotive manufacturers and distributors that are subject to certain rights and restrictions typical of the industry. Beginning in 2023, we transitioned some of our dealerships in the U.K. and Europe to an agency model under which we receive a fee for facilitating the sale by the manufacturer of a new vehicle but do not hold the vehicle in inventory. Vehicles sold under this agency model are counted as new agency units sold instead of new retail units sold by us, and only the fee we receive from the manufacturer, not the price of the vehicle, is reported as new revenue (as opposed to previously recording all of the vehicle sale price as new revenue) with no corresponding cost of sale. We continue to provide new vehicle customer service under the agency model, and the agency model at this time has not changed our used vehicle sales operations or service and parts operations, although the long-term impact of the agency model at these dealerships as well as other agency models proposed by our manufacturer partners is uncertain.
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During the three months ended March 31, 2024, we acquired 16 retail automotive franchises and opened one retail automotive franchise in the U.K., acquired one Ford dealership and one Chrysler/Dodge/Jeep/Ram dealership in the U.S., and acquired two retail automotive franchises in Italy. In the U.S., we also closed one CarShop location. Retail automotive dealerships represented 87.0% of our total revenues and 84.9% of our total gross profit in the three months ended March 31, 2024. In April 2024, we entered into an agreement to acquire two Porsche dealerships and one Ducati motorcycle dealership in Melbourne, Australia, which is expected to close in the second quarter of 2024, subject to customary conditions.
Retail Commercial Truck Dealership. We operate Premier Truck Group ("PTG"), a heavy- and medium-duty truck dealership group offering primarily Freightliner and Western Star trucks (both Daimler brands), with locations across nine U.S. states and the Canadian provinces of Ontario and Manitoba. As of March 31, 2024, PTG operated 43 locations selling new and/or used trucks, performing service and parts operations, or offering collision repair services. We retailed and wholesaled 4,613 new and used trucks in the three months ended March 31, 2024. This business represented 10.6% of our total revenues and 11.6% of our total gross profit in the three months ended March 31, 2024.
Penske Australia. Penske Australia is the exclusive importer and distributor of Western Star heavy-duty trucks (a Daimler brand), MAN heavy- and medium-duty trucks and buses (a VW Group brand), and Dennis Eagle refuse collection vehicles, together with associated parts, across Australia, New Zealand, and portions of the Pacific. In most of these same markets, we are also a leading distributor of diesel and gas engines and power systems, principally representing MTU (a Rolls-Royce solution), Detroit Diesel, Allison Transmission, and Bergen Engines. Penske Australia offers products across the on- and off-highway markets, including in the trucking, mining, power generation, defense, marine, rail, and construction sectors and supports full parts and aftersales service through a network of branches, field service locations, and dealers across the region. These businesses represented 2.4% of our total revenues and 3.5% of our total gross profit in the three months ended March 31, 2024.
Penske Transportation Solutions. We hold a 28.9% ownership interest in Penske Truck Leasing Co., L.P. ("PTL"). PTL is owned 41.1% by Penske Corporation, 28.9% by us, and 30.0% by Mitsui & Co., Ltd. ("Mitsui"). We account for our investment in PTL under the equity method, and we therefore record our share of PTL's earnings on our statements of income under the caption "Equity in earnings of affiliates," which also includes the results of our other equity method investments. Penske Transportation Solutions ("PTS") is the universal brand name for PTL's various business lines through which it is capable of meeting customers' needs across the supply chain with a broad product offering that includes full-service truck leasing, truck rental, and contract maintenance along with logistics services, such as dedicated contract carriage, distribution center management, freight management, and dry van truckload carrier services. We recorded $32.5 million and $80.8 million in equity earnings from this investment for the three months ended March 31, 2024 and 2023, respectively.
Outlook
Retail Automotive. During the three months ended March 31, 2024, U.S. industry new light vehicle sales increased 5.6%, as compared to the same period last year, to 3.8 million units. U.K. new vehicle registrations increased 10.4% to 0.5 million registrations, including a 28.9% increase in fleet sales and partially offset by a 9.2% decrease in retail sales, as compared to the same period last year. New vehicle sales are being positively impacted by continued strong consumer demand, increased inventory availability, and manufacturer incentives. Our new vehicle days' supply is 40 as of March 31, 2024, compared to 39 as of December 31, 2023, as the supply of new vehicle inventory continues to increase. Our used vehicle days' supply is 36 as of March 31, 2024, compared to 48 as of December 31, 2023, and is being impacted by a lower supply of 1-4 year old used vehicles as a result of the lower number of new vehicles sold in recent years and fewer lease returns in the U.S. As a reference, our new and used days' supply was 71 and 52, respectively, as of December 31, 2019 (pre-COVID). While we continue to expect increasing new vehicle availability, production disruptions and supply shortages could result in suppressed new and used vehicle sales volumes, which would impact the availability and affordability of new and used vehicles. As the supply of new vehicles has improved, we experienced, and may continue to experience, reduced new and used vehicle gross profit. The U.S. Environmental Protection Agency, as well as several U.S. states, have adopted emissions limits on new vehicles which are designed to incent adoption of electric or other zero-emissions vehicles. New vehicle sales levels could be impacted by affordability challenges, inflation, higher interest rates, regulatory mandates, or a reduction in consumer spending resulting in decreased demand. The unavailability of quality, low-mileage used vehicles for sale may adversely impact our used vehicle operations.
Representatives of the U.K. government have proposed a ban on the sale of gasoline engines and gasoline hybrid engines in new cars and new vans that would take effect in 2035 while also providing government incentives on certain electric vehicles to entice consumers to transition from internal combustion vehicles to electric vehicles. In part due to
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these incentives, in the U.K. new registrations of electric vehicles, excluding hybrid, represented 15.5% of the overall market for the three months ended March 31, 2024, compared to 15.4% for the same period last year, and represented 19.1% of our U.K. new unit sales, compared with 19.8% over the same prior year period. During the three months ended March 31, 2024, 2.2% of new vehicle sales in the U.K. were sold by vehicle manufacturers directly to consumers outside of the retail automotive franchised system, principally consisting of one manufacturer. In the U.S., sales of electric vehicles increased 2.6% to 0.3 million units as compared to the same period last year. Electric Vehicle sales represented 7.3% of the overall U.S. market for the three months ended March 31, 2024, compared to 7.2% for the same period last year. During the three months ended March 31, 2024, 4.8% of new vehicle sales in the U.S. were sold by vehicle manufacturers directly to consumers outside of the retail automotive franchised system, principally consisting of one manufacturer.
Retail Commercial Truck Dealership. During the three months ended March 31, 2024, North American sales of Class 6-8 medium- and heavy-duty trucks, the vehicles sold by our PTG business, decreased 6.7% from the same period last year to 109,359 units. The Class 6-7 medium-duty truck market decreased 8.8% from the same period last year to 35,427 units, and Class 8 heavy-duty trucks, the largest North American market, decreased 5.6% from the same period last year to 73,932 units. We expect replacement demand to continue throughout 2024, although a continued weak freight market may impact unit sales and service and parts demand. As of March 31, 2024, the Class 6-8 medium- and heavy-duty truck backlog is 262,572 units according to data published by ACT Research. In April 2024, a Freightliner truck supplier experienced a fire at its facility, which is expected to impact the timing of vehicle deliveries to us. When the supply of commercial trucks improves to historical levels, we may experience reduced new and used commercial truck gross profit per unit together with higher sales volumes.
Commercial Vehicle Distribution and Other. During the three months ended March 31, 2024, the Australian heavy-duty truck market reported sales of 3,789 units, representing an increase of 4.8% from the same period last year, while the New Zealand market reported sales of 1,032 units, representing an increase of 2.7% from the same period last year. Additionally, our power system operations continue to grow through sales in the off-highway segments such as power generation solutions for large data centers, mining, and military applications.
Penske Transportation Solutions. A majority of PTS' revenue is generated by multi-year contracts for full-service leasing, contract maintenance, and logistics services. PTS also rents additional trucks to commercial customers in response to demand for freight as well as consumer customers. With a managed fleet of over 442,000 vehicles at March 31, 2024, PTS regularly sells trucks in order to maintain a low fleet age as well as in response to changes in demand for truck leasing and records a gain or loss on those sales. PTS expects a sequential increase in earnings in the second quarter of 2024 as compared to the first quarter of 2024. For 2024, PTS also expects continued demand for its full-service leasing business and continued lower gain on sale of used trucks as PTS continues to optimize its fleet size and increased fleet operating costs and increased interest expense as compared to 2023.
As described in "Forward-Looking Statements," there are a number of factors that could cause actual results to differ materially from our expectations, including those discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023, Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024, and our other periodic reports filed with the Securities and Exchange Commission.
Operating Overview
Automotive and commercial truck dealerships represent over 95% of our revenue and 80% of our earnings before taxes. Income from our PTS investment represents approximately 10% of our earnings before taxes. New and used vehicle revenues typically include sales to retail customers, agency customers, fleet customers, and leasing companies providing consumer leasing. We generate finance and insurance revenues from sales of third-party extended service contracts, sales of third-party insurance policies, commissions relating to the sale of finance and lease contracts to third parties, and the sales of certain other products. Service and parts revenues include fees paid by customers for repair, maintenance and collision services, and the sale of replacement parts and other aftermarket accessories as well as warranty repairs that are reimbursed directly by various vehicle manufacturers.
Our gross profit tends to vary with the mix of revenues we derive from the sale of new vehicles, used vehicles, finance and insurance products, and service and parts transactions. Our gross profit varies across product lines with vehicle sales usually resulting in lower gross profit margins and our other revenues resulting in higher gross profit margins. Factors such as inventory and vehicle availability, customer demand, consumer confidence, unemployment, general economic conditions, seasonality, weather, credit availability, fuel prices, and manufacturers' advertising and incentives also impact the mix of our revenues and therefore, influence our gross profit margin. The results of our commercial vehicle distribution and other business in Australia and New Zealand are principally driven by the number and types of products and vehicles
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ordered by our customers. Aggregate revenue and gross profit increased $108.8 million, or 1.5%, and decreased $7.1 million, or 0.6%, respectively, during the three months ended March 31, 2024, compared to the same period in 2023.
As exchange rates fluctuate, our revenue and results of operations as reported in U.S. Dollars fluctuate. For example, if the British Pound were to weaken against the U.S. Dollar, our U.K. results of operations would translate into less U.S. Dollar reported results. Foreign currency average rate fluctuations increased revenue and gross profit by $98.1 million and $13.2 million, respectively, for the three months ended March 31, 2024, compared to the same period in 2023. Foreign currency average rate fluctuations increased earnings per share by approximately $0.02 per share for the three months ended March 31, 2024, compared to the same period in 2023. Excluding the impact of foreign currency average rate fluctuations, aggregate revenue and gross profit increased 0.1% and decreased 1.6%, respectively, for the three months ended March 31, 2024, compared to the same period in 2023.
Our selling expenses consist of advertising and compensation for sales personnel, including commissions and related bonuses. General and administrative expenses include compensation for administration, finance, legal and general management personnel, rent, insurance, utilities, and other expenses. As the majority of our selling expenses are variable and a significant portion of our general and administrative expenses are subject to our control, we believe our expenses can be adjusted over time to reflect economic trends.
Equity in earnings of affiliates principally represents our share of the earnings from PTS, along with our investments in joint ventures and other non-consolidated investments.
Floor plan interest expense relates to financing incurred in connection with the acquisition of new and used vehicle inventories that are secured by those vehicles. Other interest expense consists of interest charges on all of our interest-bearing debt, other than interest relating to floor plan financing. The cost of our variable rate indebtedness is based on the prime rate, the Secured Overnight Financing Rate ("SOFR"), the Sterling Overnight Index Average ("SONIA"), the Bank of England Base Rate, the Finance House Base Rate, the Euro Interbank Offered Rate, the Canadian Prime Rate, the Tokyo Interbank Offered Rate, the Australian Bank Bill Swap Rate, and the New Zealand Bank Bill Benchmark Rate.
The future success of our business is dependent upon, among other things, macro-economic, geo-political, and industry conditions and events, including their impact on new and used vehicle sales, the availability of consumer credit, changes in consumer demand, consumer confidence levels, fuel prices, demand for trucks to move freight with respect to PTS and PTG, personal discretionary spending levels, interest rates, and unemployment rates; our ability to obtain vehicles and parts from our manufacturers, especially in light of supply chain disruptions due to natural disasters, the shortage of vehicle components, the war in Ukraine, challenges in sourcing labor or labor strikes or work stoppages, or other disruptions; changes in the retail model either from direct sales by manufacturers, a transition to an agency model of sales, sales by online competitors, or from the expansion of electric vehicles; the effects of a pandemic on the global economy, including our ability to react effectively to changing business conditions in light of any pandemic; the rate of inflation, including its impact on vehicle affordability; changes in interest rates and foreign currency exchange rates; our ability to consummate, integrate, and realize returns on acquisitions; with respect to PTS, changes in the financial health of its customers, labor strikes, or work stoppages by its employees, a reduction in PTS' asset utilization rates, continued availability from truck manufacturers and suppliers of vehicles and parts for its fleet, changes in values of used trucks which affects PTS' profitability on truck sales and regulatory risks and related compliance costs; our ability to realize returns on our significant capital investments in new and upgraded dealership facilities; our ability to navigate a rapidly changing automotive and truck landscape; our ability to respond to new or enhanced regulations in both our domestic and international markets relating to dealerships and vehicles sales, including those related to the sales process or emissions standards, as well as changes in consumer sentiment relating to commercial truck sales that may hinder our or PTS' ability to maintain, acquire, sell, or operate trucks; the success of our distribution of commercial vehicles, engines, and power systems; natural disasters; recall initiatives or other disruptions that interrupt the supply of vehicles or parts to us; the outcome of legal and administrative matters, and other factors over which management has limited control. See Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023, Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024, and our other periodic reports filed with the Securities and Exchange Commission.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the application of accounting policies that often involve making estimates and employing judgments. Such judgments influence the assets, liabilities, revenues, and expenses recognized in our financial statements. Management, on an ongoing basis, reviews these estimates and assumptions. Management may determine that
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modifications in assumptions and estimates are required, which may result in a material change in our results of operations or financial position.
The accounting policies and estimates that we believe to be most dependent upon the use of estimates and assumptions are revenue recognition, goodwill and other indefinite-lived intangible assets, investments, income taxes, and lease recognition. Refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2023 Annual Report on Form 10-K for additional detail and discussion of these critical accounting policies and estimates. There have been no material changes in critical accounting policies and estimates as described in our most recent Annual Report.
Refer to Part I, Item 1, Note 1 and Note 3 of the Notes to our Consolidated Condensed Financial Statements for disclosures regarding estimates and judgments related to lease recognition. Refer to Part I, Item 1, Note 2 of the Notes to our Consolidated Condensed Financial Statements for disclosures regarding estimates and judgments related to revenue recognition. Refer to "Income Taxes" within Part I, Item 1, Note 1 of the Notes to our Consolidated Condensed Financial Statements for disclosures regarding estimates and judgments related to income taxes.
Results of Operations
The following tables present comparative financial data relating to our operating performance in the aggregate and on a "same-store" basis. Dealership results are included in same-store comparisons when we have consolidated the acquired entity during the entirety of both periods being compared. As an example, if a dealership were acquired on January 15, 2022, the results of the acquired entity would be included in annual same-store comparisons beginning with the year ended December 31, 2024, and in quarterly same-store comparisons beginning with the quarter ended June 30, 2023.
Beginning in 2023, we transitioned some of our dealerships in the U.K. and Europe to an agency model under which these dealerships receive a fee for facilitating the sale by the manufacturer of a new vehicle but do not hold the vehicle in inventory. Vehicles sold under this agency model are counted as new agency units sold instead of new retail units sold by us, and only the fee we receive from the manufacturer, not the price of the vehicle, is reported as new revenue (as opposed to previously recording all of the vehicle sale price as new revenue) with no corresponding cost of sale. We continue to provide new vehicle customer service under the agency model, and the agency model at this time has not changed our used vehicle sales operations or service and parts operations, although the long-term impact of the agency model at these dealerships as well as other agency models proposed by our manufacturer partners is uncertain. As a result of the foregoing, we have presented below units sold under this agency model as "Agency units" beginning in 2023. Moreover, our retail automotive revenue per unit retailed and related gross profit per unit retailed for new vehicles excludes agency unit sales and associated revenue.
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Three Months Ended March 31, 2024, Compared to Three Months Ended March 31, 2023
Retail Automotive Dealership New Vehicle Data
(In millions, except unit and per unit amounts)
2024 vs. 2023
New Vehicle Data20242023Change% Change
New retail unit sales (excluding agency)48,667 47,662 1,005 2.1 %
Same-store new retail unit sales (excluding agency)46,807 47,566 (759)(1.6)%
New agency unit sales8,932 6,933 1,999 28.8 %
Same-store new agency unit sales8,528 6,893 1,635 23.7 %
New sales revenue$2,802.6 $2,721.3 $81.3 3.0 %
Same-store new sales revenue$2,688.7 $2,718.9 $(30.2)(1.1)%
New retail sales revenue per unit (excluding agency)$57,176 $56,822 $354 0.6 %
Same-store new retail sales revenue per unit (excluding agency)$57,015 $56,887 $128 0.2 %
Gross profit — new$272.4 $313.8 $(41.4)(13.2)%
Same-store gross profit — new$261.0 $313.7 $(52.7)(16.8)%
Average gross profit per new vehicle (excluding agency)$5,229 $6,315 $(1,086)(17.2)%
Same-store average gross profit per new vehicle (excluding agency)$5,195 $6,326 $(1,131)(17.9)%
Gross margin % — new9.7 %11.5 %(1.8)%(15.7)%
Same-store gross margin % — new9.7 %11.5 %(1.8)%(15.7)%
Units
Retail unit deliveries of new vehicles increased from 2023 to 2024 due to a 2,128 unit increase from net dealership acquisitions, coupled with an 876 unit, or 1.6%, increase in same-store new retail unit deliveries. Same-store retail units delivered increased 4.4% in the U.S. and decreased 1.6% internationally. Overall, new retail unit deliveries increased 5.2% in the U.S. and increased 5.8% internationally. We believe the increase in same-store retail unit sales in the U.S. is primarily due to continued consumer demand for new vehicles and increasing new vehicle availability, coupled with the pent-up demand resulting from lower vehicle availability in prior years, partially offset by manufacturer-initiated port holds on certain products. We believe the decrease in same-store unit sales internationally is due to limited availability of certain premium brands during the quarter as a result of limited production and product recalls.
Revenues
New vehicle sales revenue increased from 2023 to 2024 due to a $111.5 million increase from net dealership acquisitions, partially offset by a $30.2 million, or 1.1%, decrease in same-store revenues. Excluding $31.4 million of favorable foreign currency fluctuations, same-store new revenue decreased 2.3%. Same-store revenue (excluding agency) decreased due to the decrease in same-store new retail unit sales, which decreased revenue by $43.2 million, partially offset by a $128 per unit increase in same-store comparative average retail selling price (including a $657 per retail unit increase attributable to favorable foreign currency fluctuations), which increased revenue by $6.0 million. Excluding favorable foreign currency fluctuations, we believe the decrease in same-store comparative average retail selling price (excluding agency) is primarily due to an improved supply of many of the new vehicles we sell and a change in the sales mix.
Gross Profit
Retail gross profit from new vehicle sales decreased from 2023 to 2024 due to a $52.7 million, or 16.8%, decrease in same-store gross profit, partially offset by an $11.3 million increase from net dealership acquisitions. Excluding $3.1 million of favorable foreign currency fluctuations, same-store gross profit decreased 17.8%. Same-store gross profit (excluding agency) decreased due to a $1,131 per unit decrease in same-store comparative average gross profit (despite a $52 per retail unit increase attributable to favorable foreign currency fluctuations), which decreased gross profit by $52.9 million, coupled with the decrease in same-store new retail sales, which decreased retail gross profit by $4.8 million. We believe the decrease in same-store comparative average retail gross profit per unit (excluding agency) is primarily due to an improved supply of many of the new vehicles we sell and the mix of sales. We believe the resulting compression on gross margin is due to higher gross profit realized in the prior year as vehicle supply was constrained, coupled with higher financing costs.
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Retail Automotive Dealership Used Vehicle Data
(In millions, except unit and per unit amounts)
2024 vs. 2023
Used Vehicle Data20242023Change% Change
Used retail unit sales69,265 67,836 1,429 2.1 %
Same-store used retail unit sales66,725 66,578 147 0.2 %
Used retail sales revenue$2,336.2 $2,297.1 $39.1 1.7 %
Same-store used retail sales revenue$2,237.8 $2,269.6 $(31.8)(1.4)%
Used retail sales revenue per unit$33,729 $33,863 $(134)(0.4)%
Same-store used retail sales revenue per unit$33,538 $34,089 $(551)(1.6)%
Gross profit — used$129.9 $122.6 $7.3 6.0 %
Same-store gross profit — used$122.3 $122.1 $0.2 0.2 %
Average gross profit per used vehicle retailed$1,876 $1,808 $68 3.8 %
Same-store average gross profit per used vehicle retailed$1,833 $1,834 $(1)(0.1)%
Gross margin % — used5.6 %5.3 %0.3 %5.7 %
Same-store gross margin % — used5.5 %5.4 %0.1 %1.9 %
Units
Retail unit sales of used vehicles increased from 2023 to 2024 due to a 1,282 unit increase from net dealership acquisitions, coupled with a 147 unit, or 0.2%, increase in same-store used retail unit sales. Our same-store units decreased 0.5% in the U.S. and increased 0.7% internationally. Overall, our used units decreased 0.3% in the U.S. and increased 3.8% internationally. Same-store unit sales are being impacted by a lower supply of 1-4 year old used vehicles due to the fewer number of new vehicles sold in recent years, lower lease returns particularly in the U.S., and higher interest rates impacting the affordability of used vehicles.
Revenues
Used vehicle retail sales revenue increased from 2023 to 2024 due to a $70.9 million increase from net dealership acquisitions, partially offset by a $31.8 million, or 1.4%, decrease in same-store revenues. Excluding $48.7 million of favorable foreign currency fluctuations, same-store used retail revenue decreased 3.5%. The decrease in same-store revenue is due to a $551 per unit decrease in same-store comparative average selling price (despite a $730 per unit increase attributable to favorable foreign currency fluctuations), which decreased revenue by $36.7 million, partially offset by the increase in same-store used retail unit sales, which increased revenue by $4.9 million. We believe the decrease in same-store comparative average selling price is primarily due to the low overall vehicle inventory availability in the prior period which caused historically high used unit prices.
Gross Profit
Retail gross profit from used vehicle sales increased from 2023 to 2024 due to a $7.1 million increase from net dealership acquisitions, coupled with a $0.2 million, or 0.2%, increase in same-store gross profit. Excluding $2.4 million of favorable foreign currency fluctuations, same-store gross profit decreased 1.8%. The increase in same-store gross profit is due to the increase in same-store used retail unit sales, which increased gross profit by $0.3 million, partially offset by a $1 per unit decrease in same-store comparative average gross profit (despite a $36 per unit increase attributable to favorable foreign currency fluctuations), which decreased gross profit by $0.1 million. During the first quarter, we believe used vehicle values stabilized after experiencing valuation declines during the last half of 2023 which contributed to stable gross profit per unit.
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Retail Automotive Dealership Finance and Insurance Data
(In millions, except unit and per unit amounts)
2024 vs. 2023
Finance and Insurance Data20242023Change% Change
Total retail unit sales117,932 115,498 2,434 2.1 %
Total same-store retail unit sales113,532 114,144 (612)(0.5)%
Total agency unit sales8,932 6,933 1,999 28.8 %
Total same-store agency unit sales8,528 6,893 1,635 23.7 %
Finance and insurance revenue$206.0 $206.8 $(0.8)(0.4)%
Same-store finance and insurance revenue$201.6 $205.8 $(4.2)(2.0)%
Finance and insurance revenue per unit (excluding agency)$1,719 $1,773 $(54)(3.0)%
Same-store finance and insurance revenue per unit (excluding agency)$1,756 $1,790 $(34)(1.9)%
Finance and insurance revenue decreased from 2023 to 2024 due to a $4.2 million, or 2.0%, decrease in same-store revenue, partially offset by a $3.4 million increase from net dealership acquisitions. Excluding $3.1 million of favorable foreign currency fluctuations, same-store finance and insurance revenue decreased 3.5%. Same-store revenue (excluding agency) decreased due to a $34 per unit decrease in same-store comparative average finance and insurance retail revenue (despite a $27 per retail unit increase attributable to favorable foreign currency fluctuations), which decreased revenue by $3.9 million, coupled with the decrease in combined same-store new and used retail unit sales, which decreased revenue by $1.1 million. Same-store finance and insurance revenue per unit (excluding agency) decreased 1.5% in the U.S. and decreased 4.1% in the U.K. We believe the aggregate decrease in same-store finance and insurance revenue per unit (excluding agency) is primarily due to rising interest rates impacting overall customer affordability, coupled with an increase in lease penetration which limits our finance and insurance product sale opportunities.
Retail Automotive Dealership Service and Parts Data
(In millions)
2024 vs. 2023
Service and Parts Data20242023Change% Change
Service and parts revenue $746.1 $683.0 $63.1 9.2 %
Same-store service and parts revenue $713.7 $680.5 $33.2 4.9 %
Gross profit — service and parts$432.4 $398.9 $33.5 8.4 %
Same-store service and parts gross profit $417.5 $397.2 $20.3 5.1 %
Gross margin % — service and parts58.0 %58.4 %(0.4)%(0.7)%
Same-store service and parts gross margin %58.5 %58.4 %0.1 %0.2 %
Revenues
Service and parts revenue increased from 2023 to 2024, with an increase of 5.5% in the U.S. and an increase of 15.6% internationally. The increase in service and parts revenue is due to a $33.2 million, or 4.9%, increase in same-store revenues, coupled with a $29.9 million increase from net dealership acquisitions. Excluding $8.1 million of favorable foreign currency fluctuations, same-store revenue increased 3.7%. The increase in same-store revenue is due to a $23.0 million, or 4.7%, increase in customer pay revenue, an $8.4 million, or 5.9%, increase in warranty revenue, and a $1.8 million, or 4.0%, increase in vehicle preparation and body shop revenue. We believe the increase in same-store revenue is primarily due to vehicles remaining on the road longer due to affordability considerations, as well as increases in effective labor rates, the retail cost of parts due to inflation, and manufacturer recalls generating additional service.
Gross Profit
Service and parts gross profit increased from 2023 to 2024 due to a $20.3 million, or 5.1%, increase in same-store gross profit, coupled with a $13.2 million increase from net dealership acquisitions. Excluding $4.9 million of favorable foreign currency fluctuations, same-store gross profit increased 3.9%. The increase in same-store gross profit is due to the increase in same-store revenues, which increased gross profit by $19.4 million, coupled with a 0.1% increase in same-store gross margin, which increased gross profit by $0.9 million. The increase in same-store gross profit is due to a
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$12.7 million, or 5.4%, increase in customer pay gross profit, a $5.3 million, or 7.1%, increase in warranty gross profit, and a $2.3 million, or 2.6%, increase in vehicle preparation and body shop gross profit.
Retail Commercial Truck Dealership Data
(In millions, except unit and per unit amounts)
2024 vs. 2023
New Commercial Truck Data20242023Change% Change
New retail unit sales3,491 4,517 (1,026)(22.7)%
Same-store new retail unit sales3,362 4,517 (1,155)(25.6)%
New retail sales revenue$494.2 $600.2 $(106.0)(17.7)%
Same-store new retail sales revenue$474.4 $600.2 $(125.8)(21.0)%
New retail sales revenue per unit$141,564 $132,884 $8,680 6.5 %
Same-store new retail sales revenue per unit $141,092 $132,884 $8,208 6.2 %
Gross profit — new$34.6 $32.5 $2.1 6.5 %
Same-store gross profit — new $32.4 $32.5 $(0.1)(0.3)%
Average gross profit per new truck retailed$9,909 $7,190 $2,719 37.8 %
Same-store average gross profit per new truck retailed $9,651 $7,190 $2,461 34.2 %
Gross margin % — new7.0 %5.4 %1.6 %29.6 %
Same-store gross margin % — new 6.8 %5.4 %1.4 %25.9 %
Units
Retail unit sales of new trucks decreased from 2023 to 2024 due to a 1,155 unit, or 25.6%, decrease in same-store new retail unit sales, partially offset by a 129 unit increase from net dealership acquisitions. We believe the decrease in same-store unit sales is primarily due to the unusually high number of deliveries in the prior year period resulting from production timing and delivery delays throughout 2022 caused by manufacturer supply chain challenges, partially offset by replacement demand for medium- and heavy-duty trucks.
Revenues
New commercial truck retail sales revenue decreased from 2023 to 2024 due to a $125.8 million, or 21.0%, decrease in same-store revenues, partially offset by a $19.8 million increase from net dealership acquisitions. The decrease in same-store revenue is due to the decrease in same-store new retail unit sales, which decreased revenue by $153.4 million, partially offset by an $8,208 per unit increase in same-store comparative average selling price, which increased revenue by $27.6 million. We believe the increase in same-store comparative average selling price is primarily due to higher prices driven by replacement demand and the mix of units sold.
Gross Profit
New commercial truck retail gross profit increased from 2023 to 2024 due to a $2.2 million increase from net dealership acquisitions, partially offset by a $0.1 million, or 0.3%, decrease in same-store gross profit. The decrease in same-store gross profit is due to the decrease in same-store new retail unit sales, which decreased gross profit by $8.4 million, partially offset by a $2,461 per unit increase in same-store comparative average gross profit, which increased gross profit by $8.3 million. We believe the increase in same-store comparative average gross profit per unit is primarily due to a change in sales mix when compared to the same period last year.
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2024 vs. 2023
Used Commercial Truck Data20242023Change% Change
Used retail unit sales1,049 655 394 60.2 %
Same-store used retail unit sales1,024 655 369 56.3 %
Used retail sales revenue$62.4 $49.5 $12.9 26.1 %
Same-store used retail sales revenue$61.1 $49.5 $11.6 23.4 %
Used retail sales revenue per unit$59,517 $75,640 $(16,123)(21.3)%
Same-store used retail sales revenue per unit $59,684 $75,640 $(15,956)(21.1)%
Gross profit — used$3.3 $5.4 $(2.1)(38.9)%
Same-store gross profit — used$4.0 $5.4 $(1.4)(25.9)%
Average gross profit per used truck retailed$3,187 $8,195 $(5,008)(61.1)%
Same-store average gross profit per used truck retailed $3,884 $8,195 $(4,311)(52.6)%
Gross margin % — used5.3 %10.9 %(5.6)%(51.4)%
Same-store gross margin % — used6.5 %10.9 %(4.4)%(40.4)%
Units
Retail unit sales of used trucks increased from 2023 to 2024 due to a 369 unit, or 56.3%, increase in same-store retail unit sales, coupled with a 25 unit increase from net dealership acquisitions. We believe the increase in same-store unit sales is primarily due to the increase in availability and affordability of used trucks when compared with the prior year period, coupled with limited availability of certain new trucks resulting in higher demand of certain used trucks.
Revenues
Used commercial truck retail sales revenue increased from 2023 to 2024 due to an $11.6 million, or 23.4%, increase in same-store revenues, coupled with a $1.3 million increase from net dealership acquisitions. The increase in same-store revenue is due to the increase in same-store used retail unit sales, which increased revenue by $22.1 million, partially offset by a $15,956 per unit decrease in same-store comparative average selling price, which decreased revenue by $10.5 million. We believe the decrease in same-store comparative average selling price is primarily due to the declining value of used trucks, including as a result of lower freight spot rates when compared to the prior year period.
Gross Profit
Used commercial truck retail gross profit decreased from 2023 to 2024 primarily due to a $1.4 million, or 25.9%, decrease in same-store gross profit. The decrease in same-store gross profit is due to a $4,311 per unit decrease in same-store comparative average gross profit, which decreased gross profit by $2.8 million, partially offset by the increase in same-store used retail unit sales, which increased gross profit by $1.4 million. We believe the decrease in same-store comparative average gross profit per unit is primarily due to the decreased value of used trucks over the prior year, as a result of depressed freight spot rates when compared to the prior year period.
2024 vs. 2023
Service and Parts Data20242023Change% Change
Service and parts revenue$223.6 $228.0 $(4.4)(1.9)%
Same-store service and parts revenue $213.2 $228.0 $(14.8)(6.5)%
Gross profit — service and parts$98.1 $98.3 $(0.2)(0.2)%
Same-store service and parts gross profit $93.8 $98.3 $(4.5)(4.6)%
Gross margin % — service and parts43.9 %43.1 %0.8 %1.9 %
Same-store service and parts gross margin %44.0 %43.1 %0.9 %2.1 %
Revenues
Service and parts revenue decreased from 2023 to 2024 due to a $14.8 million, or 6.5%, decrease in same-store revenues, partially offset by a $10.4 million increase from net dealership acquisitions. Customer pay work represented approximately 77.8% of PTG's service and parts revenue, largely due to the significant amount of retail sales of parts and accessories. The decrease in same-store revenue is primarily due to a $17.2 million, or 9.4%, decrease in customer pay
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revenue and a $1.7 million, or 21.0%, decrease in body shop revenue, partially offset by a $4.1 million, or 11.4%, increase in warranty revenue. We believe the decrease in same-store service and parts revenue is due to customers delaying maintenance costs due to continued low freight rates.
Gross Profit
Service and parts gross profit decreased from 2023 to 2024 due to a $4.5 million, or 4.6%, decrease in same-store gross profit, partially offset by a $4.3 million increase from net dealership acquisitions. The decrease in same-store gross profit is due to the decrease in same-store revenues, which decreased gross profit by $6.5 million, partially offset by a 0.9% increase in same-store gross margin, which increased gross profit by $2.0 million. The decrease in same-store gross profit is primarily due to a $6.2 million, or 8.8%, decrease in customer pay gross profit and a $0.9 million, or 11.3%, decrease in body shop gross profit, partially offset by a $2.6 million, or 13.1%, increase in warranty gross profit.
Commercial Vehicle Distribution and Other Data
(In millions, except unit amounts)
2024 vs. 2023
Penske Australia Data20242023Change% Change
Commercial vehicle units (wholesale and retail)298 279 19 6.8 %
Power system units313 304 3.0 %
Sales revenue$178.0 $143.6 $34.4 24.0 %
Gross profit$43.2 $42.7 $0.5 1.2 %
Penske Australia primarily distributes and services commercial vehicles, engines, and power systems. This business generated $178.0 million of revenue during the three months ended March 31, 2024, compared to $143.6 million of revenue in the prior year, an increase of 24.0%. This business also generated $43.2 million of gross profit during the three months ended March 31, 2024, compared to $42.7 million of gross profit in the prior year, an increase of 1.2%.
Excluding $6.2 million of unfavorable foreign currency fluctuations, revenue increased 28.3% primarily due to an increase in service and parts sales revenue, coupled with an increase in unit sales. Excluding $1.6 million of unfavorable foreign currency fluctuations, gross profit increased 4.5% primarily due to the increased unit sales and mix of products sold as compared to the same period last year, coupled with an increase in higher margin remanufacturing activity and higher margin service and parts sales as a result of higher units in operation.
Selling, General, and Administrative Data
(In millions)
2024 vs. 2023
Selling, General, and Administrative Data20242023Change% Change
Personnel expense$521.1 $505.7 $15.4 3.0 %
Advertising expense$33.1 $32.3 $0.8 2.5 %
Rent & related expense$103.5 $95.4 $8.1 8.5 %
Other expense$222.1 $211.5 $10.6 5.0 %
Total SG&A expenses$879.8 $844.9 $34.9 4.1 %
Same-store SG&A expenses$845.8 $840.4 $5.4 0.6 %