PENSKE AUTOMOTIVE GROUP, INC. [PAG] Filings

10-Q 1 pag-20240331.htm 10-Q pag-20240331

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


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

For the quarterly period ended March 31, 2024


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

For the transition period from to

Commission file number 1-12297

Penske Automotive Group, Inc.

(Exact name of registrant as specified in its charter)


Delaware			22-3086739
(State or other jurisdiction of 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 class	Trading symbol(s)	Name of each exchange on which registered
Voting Common Stock, par value $0.0001 per share	PAG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 Filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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TABLE OF CONTENTS


			Page

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of March 31, 2024, and December 31, 2023			3
Consolidated Condensed Statements of Income for the three months ended March 31, 2024 and 2023			4
Consolidated Condensed Statements of Comprehensive Income for the three months ended March 31, 2024 and 2023			5
Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2024 and 2023			6
Consolidated Condensed Statement of Equity for the three months ended March 31, 2024 and 2023			7
Notes to Consolidated Condensed Financial Statements			8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative & Qualitative Disclosures About Market Risk			46
Item 4. Controls and Procedures			46
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			48
Item 1A. Risk Factors			48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			50
Item 6. Exhibits			51

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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
Inventories	4,424.1		4,293.1
Other current assets	206.8		175.6
Total current assets	5,810.6		5,679.7
Property and equipment, net	2,827.8		2,765.2
Operating lease right-of-use assets	2,476.1		2,405.5
Goodwill	2,316.6		2,234.9
Other indefinite-lived intangible assets	836.0		748.2
Equity method investments	1,805.5		1,774.9
Other long-term assets	73.9		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-trade	1,479.2		1,515.9
Accounts payable	962.9		866.9
Accrued expenses and other current liabilities	876.0		809.8
Current portion of long-term debt	215.3		209.7

Total current liabilities	5,910.1		5,657.9
Long-term debt	1,461.9		1,419.5
Long-term operating lease liabilities	2,407.4		2,336.0
Deferred tax liabilities	1,245.2		1,231.7
Other long-term liabilities	275.8		270.8
Total liabilities	11,300.4		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 earnings	5,113.1		4,990.3
Accumulated other comprehensive income (loss)	(297.3)		(264.1)
Total Penske Automotive Group stockholders' equity	4,815.8		4,726.2
Non-controlling interest	30.3		29.4
Total equity	4,846.1		4,755.6
Total liabilities and equity	$	16,146.5	$	15,671.5

See Notes to Consolidated Condensed Financial Statements.

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PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME


	Three Months Ended March 31,
	2024		2023
	(Unaudited)
	(In millions, except per share amounts)
Revenue:
Retail automotive dealership	$	6,478.0	$	6,299.8
Retail commercial truck dealership	791.8		895.6
Commercial vehicle distribution and other	178.0		143.6
Total revenues	7,447.8		7,339.0
Cost of sales:
Retail automotive dealership	5,420.8		5,237.2
Retail commercial truck dealership	647.0		748.6
Commercial vehicle distribution and other	134.8		100.9
Total cost of sales	6,202.6		6,086.7
Gross profit	1,245.2		1,252.3
Selling, general, and administrative expenses	879.8		844.9
Depreciation	37.8		33.9
Operating income	327.6		373.5
Floor plan interest expense	(44.8)		(27.9)
Other interest expense	(21.3)		(20.8)

Equity in earnings of affiliates	33.3		82.1
Income before income taxes	294.8		406.9
Income taxes	(78.6)		(107.3)


Net income	216.2		299.6
Less: Income attributable to non-controlling interests	1.0		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 share	67.1		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 share	67.1		69.2
Amounts attributable to Penske Automotive Group common stockholders:
Net income	$	216.2	$	299.6
Less: Income attributable to non-controlling interests	1.0		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.

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PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended March 31,
	2024		2023
	(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 income	3.6		4.8
Other comprehensive income, net of tax	(33.0)		23.1
Comprehensive income	183.2		322.7
Less: Comprehensive income attributable to non-controlling interests	1.2		1.6
Comprehensive income attributable to Penske Automotive Group common stockholders	$	182.0	$	321.1

See Notes to Consolidated Condensed Financial Statements.

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PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
	2024		2023
	(Unaudited)
	(In millions)
Operating Activities:
Net income	$	216.2	$	299.6
Adjustments to reconcile net income to net cash from operating activities:
Depreciation	37.8		33.9
Earnings of equity method investments	(33.3)		(82.1)

Deferred income taxes	14.6		13.7

Changes in operating assets and liabilities:
Accounts receivable	75.9		(10.2)
Inventories	(77.2)		(95.2)
Floor plan notes payable	134.8		8.1
Accounts payable and accrued expenses	130.5		131.6
Other	(43.3)		11.8
Net cash provided by operating activities	456.0		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 facilities	668.7		611.7
Repayments under revolving U.S. credit agreement and mortgage facilities	(700.2)		(512.0)
Net borrowings (repayments) of other debt	80.2		(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 equivalents	20.5		(5.9)
Cash and cash equivalents, beginning of period	96.4		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 taxes	22.5		23.9

See Notes to Consolidated Condensed Financial Statements.

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PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY


	Three Months Ended March 31, 2024
	Voting and Non-voting Common Stock			Additional 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 compensation	159,507	—		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 Stock			Additional 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 compensation	208,994	—		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.

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 1			Quoted prices in active markets for identical assets or liabilities

Level 2			Observable 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 3			Unobservable 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, 2024		December 31, 2023
	Carrying Value	Fair Value	Carrying 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 Revenue	2024		2023
New vehicle	$	2,802.6	$	2,721.3
Used vehicle	2,336.2		2,297.1
Finance and insurance, net	206.0		206.8
Service and parts	746.1		683.0
Fleet and wholesale	387.1		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 Revenue	2024		2023
U.S.	$	3,415.0	$	3,378.2
U.K.	2,546.5		2,472.4
Germany, Italy, and Japan	516.5		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 Revenue	2024		2023
New truck	$	494.2	$	600.2
Used truck	62.4		49.5
Finance and insurance, net	5.3		5.0
Service and parts	223.6		228.0
Other	6.3		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 receivables	175.8		170.6
Manufacturer receivables	212.0		218.9
Trade receivables	334.8		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,
	2024		2023
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, 2024		December 31, 2023
Lease Term and Discount Rate
Weighted-average remaining lease term - operating leases	24 years		24 years
Weighted-average discount rate - operating leases	6.7	%	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 Liabilities	March 31, 2024
2024 (1)	$	190.0
2025	249.1
2026	244.0
2027	234.7
2028	233.0
2029	227.1
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 liabilities	2,407.4
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 vehicles	1,161.1		1,186.3
Retail automotive parts, accessories, and other	162.7		156.2
Retail commercial truck dealership vehicles and parts	645.1		543.7
Commercial vehicle distribution vehicles, parts, and engines	453.8		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
Inventories	90.3
Other current assets	—
Property and equipment	14.9
Indefinite-lived intangibles	185.8
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,
	2024		2023
Revenues	$	7,468.2	$	7,688.4

Net income attributable to Penske Automotive Group common stockholders	215.4		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:


	Goodwill		Other Indefinite- Lived Intangible Assets
Balance, January 1, 2024	$	2,234.9	$	748.2
Additions	93.1		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,
	2024	2023
Weighted average number of common shares outstanding	67,061,968	69,201,232
Effect of non-participatory equity compensation	15,433	17,629
Weighted average number of common shares outstanding, including effect of dilutive securities	67,077,401	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 line	80.8		—

3.50% senior subordinated notes due 2025	548.0		547.7
3.75% senior subordinated notes due 2029	496.0		495.8
Canada credit agreement	82.7		81.5


Australia credit agreement	65.1		62.7
Mortgage facilities	359.0		402.1
Other	45.6		39.4
Total long-term debt	1,677.2		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:

Description

Maturity Date

Interest Payment Dates

Principal Amount

3.50% Notes

September 1, 2025

February 15, August 15

$550 million

3.75% Notes

June 15, 2029

June 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,
	2024		2023
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		Other		Accumulated 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		Other		Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2022	$	(328.1)	$	(7.2)	$	(335.3)


Other comprehensive income, net of tax	18.0		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		Other		Non-Automotive Investments		Total
Revenues
2024	$	6,478.0	$	791.8	$	178.0	$	—	$	7,447.8
2023	6,299.8		$	895.6	$	143.6	$	—	$	7,339.0
Segment income
2024	$	198.4	$	50.5	$	13.6	$	32.3	$	294.8
2023	256.7		$	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.

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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 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.

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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 Data	2024			2023			Change			% 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 sales	8,932			6,933			1,999			28.8	%
Same-store new agency unit sales	8,528			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 % — new	9.7		%	11.5		%	(1.8)		%	(15.7)	%
Same-store gross margin % — new	9.7		%	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 Data	2024			2023			Change			% Change
Used retail unit sales	69,265			67,836			1,429			2.1	%
Same-store used retail unit sales	66,725			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 % — used	5.6		%	5.3		%	0.3		%	5.7	%
Same-store gross margin % — used	5.5		%	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 Data	2024		2023		Change		% Change
Total retail unit sales	117,932		115,498		2,434		2.1	%
Total same-store retail unit sales	113,532		114,144		(612)		(0.5)	%
Total agency unit sales	8,932		6,933		1,999		28.8	%
Total same-store agency unit sales	8,528		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 Data	2024			2023			Change			% 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 parts	58.0		%	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 Data	2024			2023			Change			% Change
New retail unit sales	3,491			4,517			(1,026)			(22.7)	%
Same-store new retail unit sales	3,362			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 % — new	7.0		%	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 Data	2024			2023			Change			% Change
Used retail unit sales	1,049			655			394			60.2	%
Same-store used retail unit sales	1,024			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 % — used	5.3		%	10.9		%	(5.6)		%	(51.4)	%
Same-store gross margin % — used	6.5		%	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 Data	2024			2023			Change			% 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 parts	43.9		%	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 Data	2024		2023		Change		% Change
Commercial vehicle units (wholesale and retail)	298		279		19		6.8	%
Power system units	313		304		9		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 Data	2024			2023			Change			% 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	%

Personnel expense as % of gross profit	41.8		%	40.4		%	1.4		%	3.5	%
Advertising expense as % of gross profit	2.7		%	2.6		%	0.1		%	3.8	%
Rent & related expense as % of gross profit	8.3		%	7.6		%	0.7		%	9.2	%
Other expense as % of gross profit	17.9		%	16.9		%	1.0		%	5.9	%
Total SG&A expenses as % of gross profit	70.7		%	67.5		%	3.2		%	4.7	%
Same-store SG&A expenses as % of same-store gross profit	70.5		%	67.3		%	3.2		%	4.8	%

Selling, general, and administrative expenses ("SG&A") increased from 2023 to 2024 due to a $29.5 million increase from net acquisitions, coupled with a $5.4 million, or 0.6%, increase in same-store SG&A. Excluding $9.2 million of

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unfavorable foreign currency fluctuations, same-store SG&A decreased 0.4%. SG&A as a percentage of gross profit was 70.7%, an increase of 320 basis points compared to 67.5% in the prior year. SG&A expenses as a percentage of total revenue were 11.8% and 11.5% in the three months ended March 31, 2024 and 2023, respectively. We believe the increase in SG&A as a percentage of gross profit is primarily due to increases in personnel expenses, rent expenses, customer service vehicle loaner expenses, and information technology expenses.

Depreciation

(In millions)


					2024 vs. 2023
	2024		2023		Change	% Change
Depreciation	$	37.8	$	33.9	3.9	11.5	%

Depreciation increased from 2023 to 2024 due to a $2.9 million, or 8.8%, increase in same-store depreciation due to capital expenditures, coupled with a $1.0 million increase from net dealership acquisitions.

Floor Plan Interest Expense

(In millions)


					2024 vs. 2023
	2024		2023		Change	% Change
Floor plan interest expense	$	44.8	$	27.9	16.9	60.6	%

Floor plan interest expense increased from 2023 to 2024 due to a $15.0 million, or 53.8%, increase in same-store floor plan interest expense, coupled with a $1.9 million increase from net acquisitions. The overall increase is due to increases in average amounts outstanding under floor plan arrangements due to increasing levels of inventory, coupled with increases in applicable rates.

Other Interest Expense

(In millions)


					2024 vs. 2023
	2024		2023		Change	% Change
Other interest expense	$	21.3	$	20.8	0.5	2.4	%

Other interest expense increased from 2023 to 2024 due to increases in applicable rates, coupled with increases in average revolver borrowing amounts outstanding under our credit agreements.

Equity in Earnings of Affiliates

(In millions)


					2024 vs. 2023
	2024		2023		Change	% Change
Equity in earnings of affiliates	$	33.3	$	82.1	(48.8)	(59.4)	%

Equity in earnings of affiliates decreased from 2023 to 2024 due to a $48.3 million, or 59.8%, decrease in earnings from our investment in PTS, coupled with a decrease in earnings from our retail automotive joint ventures. We believe the decrease in our PTS equity earnings is primarily due to lower commercial rental utilization, lower consumer rental revenue, higher interest rates and average debt balances, and lower gains from the sale of revenue earning vehicles offset by improved operating results in full-service leasing and distribution center management.

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Income Taxes

(In millions)


					2024 vs. 2023
	2024		2023		Change	% Change
Income taxes	$	78.6	$	107.3	(28.7)	(26.7)	%

Income taxes decreased from 2023 to 2024 primarily due to a $112.1 million decrease in our pre-tax income compared to the prior year. Our effective tax rate was 26.7% during the three months ended March 31, 2024, compared to 26.4% during the three months ended March 31, 2023, primarily due to fluctuations in our geographic pre-tax income mix.

Liquidity and Capital Resources

Our cash requirements are primarily for working capital, inventory financing, the acquisition of new businesses, the improvement and expansion of existing facilities, the purchase or construction of new facilities, debt service and repayments, dividends, and potential repurchases of our outstanding securities under the program discussed below. Historically, these cash requirements have been met through cash flow from operations, borrowings under our credit agreements and floor plan arrangements, the issuance of debt securities, sale-leaseback transactions, real estate financings, and dividends and distributions from joint venture investments.

We have historically expanded our operations through organic growth and the acquisition of dealerships and other businesses. We believe that cash flow from operations, dividends and distributions from PTS and our joint venture investments, and our existing capital resources, including the liquidity provided by our credit agreements and floor plan financing arrangements, will be sufficient to fund our existing operations and current commitments for at least the next twelve months. In the event that economic conditions are more severely impacted than we expect due to geo-political conditions, any pandemic or vehicle shortages resulting from supply chain difficulties, we pursue significant acquisitions or other expansion opportunities, pursue significant repurchases of our outstanding securities, or refinance or repay existing debt, we may need to raise additional capital either through the public or private issuance of equity or debt securities or through additional borrowings, which sources of funds may not necessarily be available on terms acceptable to us, if at all. In addition, our liquidity could be negatively impacted in the event we fail to comply with the covenants under our various financing and operating agreements or in the event our floor plan financing is withdrawn. Future events, including acquisitions, divestitures, new or revised operating lease agreements, borrowings or repayments under our credit agreements and our floor plan arrangements, raising capital, and purchases or refinancing of our securities, may also impact our liquidity.

We expect that scheduled payments of our debt instruments will be funded through cash flows from operations or borrowings under our credit agreements. In the case of payments upon the maturity or termination dates of our debt instruments, we currently expect to be able to refinance such instruments in the normal course of business or otherwise fund them from cash flows from operations or borrowings under our credit agreements. Refer to the disclosures provided in Part I, Item 1, Note 9 of the Notes to our Consolidated Financial Statements set forth below for a detailed description of our long-term debt obligations and scheduled interest payments.

Floor plan notes payable are revolving inventory-secured financing arrangements. Refer to the disclosures provided in Part I, Item 1, Note 7 of the Notes to our Consolidated Financial Statements for a detailed description of financing for the vehicles we purchase, including discussion of our floor plan and other revolving arrangements.

Refer to the disclosures provided in Part I, Item 1, Note 10 of the Notes to our Consolidated Financial Statements for a description of our off-balance sheet arrangements which includes a repurchase commitment related to our floor plan credit agreement with Daimler Truck Financial Services Australia and Mercedes-Benz Financial Services New Zealand.

As of March 31, 2024, we had $116.9 million of cash available to fund our operations and capital commitments. In addition, we had $1.2 billion, £136.0 million ($171.7 million), CAD $38.0 million ($28.1 million), and $221.4 million available for borrowing under our U.S. credit agreement, U.K. credit agreement, Canada credit agreement, and the revolving mortgage facility through Toyota Motor Credit Corporation in the U.S., respectively.

Securities Repurchases

From time to time, our Board of Directors has authorized securities repurchase programs pursuant to which we may, as market conditions warrant, purchase our outstanding common stock or debt on the open market, in privately negotiated

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transactions, via a tender offer, through a pre-arranged trading plan, pursuant to the terms of an accelerated share repurchase program, or by other means. We have historically implemented pre-arranged trading plans as part of our securities repurchase programs. These plans authorize share repurchases based on parameters outlined in the specific plan during periods when we otherwise would not trade in our securities, such as the period approaching the end of a quarter through our public announcement of earnings. We have historically funded any such repurchases using cash flow from operations, borrowings under our U.S. credit agreement, and borrowings under our U.S. floor plan arrangements. The decision to make repurchases will be based on factors such as general economic and industry conditions, the market price of the relevant security versus our view of its intrinsic value, the potential impact of such repurchases on our capital structure, and our consideration of any alternative uses of our capital, such as for acquisitions, dividends, the repayment of our existing indebtedness, and strategic investments in our current businesses, in addition to any then-existing limits imposed by our finance agreements and securities trading policy. As of March 31, 2024, $182.6 million remained outstanding and available for repurchases under our securities repurchase program approved by our Board of Directors. This authority has no expiration. Refer to the disclosures provided in Part I, Item 1, Note 11 of the Notes to our Consolidated Condensed Financial Statements for a summary of shares repurchased during the three months ended March 31, 2024.

Dividends

We paid the following cash dividends on our common stock in 2023 and 2024:

Per Share Dividends


2023

First Quarter	$	0.61
Second Quarter	$	0.66
Third Quarter	$	0.72
Fourth Quarter	$	0.79


2024

First Quarter	$	0.87

While future quarterly or other cash dividends will depend upon a variety of factors considered relevant by our Board of Directors, which may include our expectations regarding the severity and duration of vehicle production issues, the rate of inflation, including its impact on vehicle affordability, earnings, cash flow, capital requirements, restrictions relating to any then-existing indebtedness, financial condition, alternative uses of capital, and other factors, we currently expect to continue to pay comparable dividends in the future.

Vehicle Financing

Refer to the disclosures provided in Part I, Item I, Note 7 of the Notes to our Consolidated Condensed Financial Statements for a detailed description of financing for the vehicles we purchase, including discussion of our floor plan and other revolving arrangements.

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Long-Term Debt Obligations

As of March 31, 2024, we had the following long-term debt obligations outstanding:


(In millions)	March 31, 2024
U.S. credit agreement — revolving credit line	$	—
U.K. credit agreement — revolving credit line	80.8

3.50% senior subordinated notes due 2025	548.0
3.75% senior subordinated notes due 2029	496.0
Canada credit agreement	82.7


Australia credit agreement	65.1
Mortgage facilities	359.0
Other	45.6
Total long-term debt	$	1,677.2

As of March 31, 2024, we were in compliance with all covenants under our credit agreements, and we believe we will remain in compliance with such covenants for the next twelve months. Refer to the disclosures provided in Part I, Item 1, Note 9 of the Notes to our Consolidated Condensed Financial Statements for a detailed description of our long-term debt obligations.

Short-Term Borrowings

We have six principal sources of short-term borrowings: the revolving portion of the U.S. credit agreement, the revolving portion of the U.K. credit agreement, our Canada credit agreement, our Australia credit agreement, the revolving mortgage facility through Toyota Motor Credit Corporation, and the floor plan agreements that we utilize to finance our vehicle inventories. We are also able to access availability under the floor plan agreements to fund our cash needs.

During the three months ended March 31, 2024, outstanding revolving commitments varied between $0.0 million and $90.0 million under the U.S. credit agreement, between £0.0 million and £150.0 million ($0.0 million and $189.4 million) under the U.K. credit agreement's revolving credit line, between CAD $105.0 million and CAD $112.0 million ($77.6 million and $82.7 million) under the Canada credit agreement, between AU $55.0 million and AU $100.0 million ($35.8 million and $65.1 million) under the Australia credit agreement, and between $0.0 million and $160.0 million under the revolving mortgage facility through Toyota Motor Credit Corporation in the U.S. The amounts outstanding under our floor plan agreements varied based on the timing of the receipt and expenditure of cash in our operations, driven principally by the levels of our vehicle inventories.

PTS Dividends

We hold a 28.9% ownership interest in PTS as noted above. Their partnership agreement requires PTS, subject to applicable law and the terms of its credit agreements, to make quarterly distributions to the partners with respect to each fiscal year by no later than 45 days after the end of each of the first three quarters of the year and by April 15 of the following year. PTS' partnership agreement and certain of its debt agreements allow partner distributions only as long as it is not in default under those agreements and the amount it pays does not exceed 50% of its consolidated net income, unless its debt-to-equity ratio is less than 3.0 to 1.0, in which case its distributions may not exceed 80% of its consolidated net income. We receive pro rata cash distributions relating to this investment, typically in April, May, August, and November of each year. During 2023, we received $168.8 million of pro rata cash distributions relating to this investment, and we currently expect to continue to receive future distributions from PTS quarterly, subject to its financial performance.

Sale/Leaseback Arrangements

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 and/or leasehold improvements 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.

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Operating Leases

We estimate the total rent obligations under our operating leases, including any extension periods that we are reasonably certain to exercise at our discretion and assuming constant consumer price indices, to be $5.4 billion. As of March 31, 2024, we were in compliance with all financial covenants under these leases consisting principally of leases for dealership and other properties, and we believe we will remain in compliance with such covenants for the next twelve months. Refer to the disclosures provided in Part I, Item 1, Note 3 and Note 10 of the Notes to our Consolidated Condensed Financial Statements for a description of our operating leases.

Supplemental Guarantor Financial Information

The following is a description of the terms and conditions of the guarantees with respect to senior subordinated notes of Penske Automotive Group, Inc. ("PAG") as the issuer of the 3.50% Notes and the 3.75% Notes (collectively the "Senior Subordinated Notes").

Each of the Senior Subordinated Notes are unsecured, senior subordinated obligations and are guaranteed on an unsecured senior subordinated basis by our 100% owned U.S. subsidiaries ("Guarantor subsidiaries"). Each of the Senior Subordinated Notes also contains customary negative covenants and events of default. If we experience certain "change of control" events specified in their respective indentures, holders of these Senior Subordinated Notes will have the option to require us to purchase for cash all or a portion of their Senior Subordinated Notes at a price equal to 101% of the principal amount of the Senior Subordinated 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 Senior Subordinated Notes at a price equal to 100% of the principal amount of the Senior Subordinated Notes, plus accrued and unpaid interest.

Guarantor subsidiaries are directly or indirectly 100% owned by PAG, and the guarantees are full and unconditional and joint and several. The guarantees may be released under certain circumstances upon resale or transfer by us of the stock of the related guarantor or all or substantially all of the assets of the guarantor to a non-affiliate. Non-wholly owned and foreign subsidiaries of PAG do not guarantee the Senior Subordinated Notes ("Non-Guarantor subsidiaries"). The following tables present summarized financial information for PAG and the Guarantor subsidiaries on a combined basis. The financial information of PAG and Guarantor subsidiaries is presented on a combined basis; intercompany balances and transactions between PAG and Guarantor subsidiaries have been eliminated; PAG's or Guarantor subsidiaries' amounts due from, amounts due to, and transactions with non-issuer and Non-Guarantor subsidiaries and related parties are disclosed separately.

Condensed income statement information:


	PAG and Guarantor Subsidiaries
	Three Months Ended March 31, 2024		Twelve Months Ended December 31, 2023
Revenues	$	3,911.7	$	16,439.2
Gross profit	706.4		2,948.4
Equity in earnings of affiliates	32.5		289.5

Net income	143.4		835.5
Net income attributable to Penske Automotive Group	143.4		835.5

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Condensed balance sheet information:


	PAG and Guarantor Subsidiaries
	March 31, 2024		December 31, 2023
Current assets (1)	$	2,955.6	$	3,066.2
Property and equipment, net	1,487.4		1,447.6
Equity method investments	1,758.3		1,727.7
Other noncurrent assets	3,702.8		3,693.2
Current liabilities	2,477.8		2,546.6
Noncurrent liabilities	3,922.2		3,946.7

__________

(1)Includes $536.2 million and $535.1 million as of March 31, 2024, and December 31, 2023, respectively, due from Non-Guarantor subsidiaries.

During the three months ended March 31, 2024, PAG received $15.1 million from Non-Guarantor subsidiaries. During the twelve months ended December 31, 2023, PAG received $142.9 million from Non-Guarantor subsidiaries.

Cash Flows

The following table summarizes the changes in our cash provided by (used in) operating, investing, and financing activities. The major components of these changes are discussed below.


	Three Months Ended March 31,
(In millions)	2024		2023
Net cash provided by operating activities	$	456.0	$	311.2
Net cash used in investing activities	(352.4)		(105.5)
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 equivalents	$	20.5	$	(5.9)

Cash Flows from Operating Activities

Cash flows from operating activities include net income, as adjusted for non-cash items and the effects of changes in working capital.

We finance substantially all of the commercial vehicles we purchase for distribution, new vehicles for retail sale (however, see Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, "Overview" for a discussion of the agency model of distribution), 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. We retain the right to select which, if any, financing source to utilize in connection with the procurement of vehicle inventories. Many vehicle manufacturers provide vehicle financing for the dealers representing their brands; however, it is not a requirement that we utilize this financing. Historically, our floor plan finance source has been based on aggregate pricing considerations.

In accordance with generally accepted accounting principles relating to the statement of cash flows, we report all cash flows arising in connection with floor plan notes payable with the manufacturer of a particular new vehicle as an operating activity in our statement of cash flows, and we report all cash flows arising in connection with floor plan notes payable to a party other than the manufacturer of a particular new vehicle, all floor plan notes payable relating to pre-owned vehicles, and all floor plan notes payable related to our commercial vehicles in Australia and New Zealand as a financing activity in our statement of cash flows. Currently, the majority of our non-trade vehicle financing is with other manufacturer captive lenders. 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 believe that changes in aggregate floor plan liabilities are typically linked to changes in vehicle inventory and therefore, are an integral part of understanding changes in our working capital and operating cash flow. As a result, we prepare the following reconciliation to highlight our operating cash flows with all changes in vehicle floor plan being

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classified as an operating activity for informational purposes:


	Three Months Ended March 31,
(In millions)	2024		2023
Net cash provided by operating activities as reported	$	456.0	$	311.2
Floor plan notes payable — non-trade as reported	(30.7)		(133.1)
Net cash provided by operating activities including all floor plan notes payable	$	425.3	$	178.1

Cash Flows from Investing Activities

Cash flows from investing activities consist primarily of cash used for capital expenditures and cash used for net expenditures for acquisitions and other investments. Capital expenditures were $102.5 million and $102.4 million during the three months ended March 31, 2024 and 2023, respectively. Capital expenditures relate primarily to improvements to our existing dealership facilities, the construction of new facilities, the acquisition of the property or buildings associated with existing leased facilities, and the acquisition of land for future development. We currently expect to finance our capital expenditures with operating cash flows or borrowings under our credit agreements. Cash used in acquisitions and other investments, net of cash acquired, was $243.6 million during the three months ended March 31, 2024, and included cash used to repay sellers' floor plan liabilities in such business acquisitions of $83.1 million, compared to no cash used in acquisitions and other investments during the three months ended March 31, 2023.

Cash Flows from Financing Activities

Cash flows from financing activities include net borrowings of debt, net repayments of floor plan notes payable non-trade, repurchases of common stock, dividends, and payments for debt issuance costs.

We had net borrowings of debt of $48.7 million and $75.8 million during the three months ended March 31, 2024 and 2023, respectively. We had net repayments of floor plan notes payable non-trade of $30.7 million and $133.1 million during the three months ended March 31, 2024 and 2023, respectively. We repurchased 0.2 million and 0.9 million shares of common stock under our securities repurchase program for $32.9 million and $110.2 million during the three months ended March 31, 2024 and 2023, respectively. We also paid cash dividends to our stockholders of $58.6 million and $42.3 million during the three months ended March 31, 2024 and 2023, respectively. We made payments for debt issuance costs of $0.5 million and $2.0 million during the three months ended March 31, 2024, and 2023, respectively.

Tax Developments

Global Minimum Tax

The Organization for Economic Co-operation and Development (“OECD”), an international association of thirty-eight countries including the United States, has proposed reform of international taxation known as Pillar Two, which imposes a global minimum corporate income tax rate of 15% on multinational companies. In December 2022, the European Union (“EU”) Member States formally adopted a directive that implements the OECD Pillar Two framework, which is expected to be enacted into the national laws of the EU member states. Certain countries in which we operate have enacted legislation to adopt the Pillar Two framework effective for the Company for the calendar year 2024. Several other countries are also considering changes to their local tax laws to implement this framework in the future. We expect enacted Pillar Two legislation to increase tax compliance obligations; however, we do not anticipate any monetary impact from any Pillar Two legislation as all of the jurisdictions in which we operate are expected to have an effective tax rate greater than the minimum threshold of 15%. We will continue to monitor new guidance in this area including proposed and enacted legislative changes as further information becomes available.

Related Party Transactions

Stockholders Agreement

Several of our directors and officers are affiliated with Penske Corporation or related entities. Roger Penske, our Chair of the Board and Chief Executive Officer, is also Chair of the Board and Chief Executive Officer of Penske Corporation and through entities affiliated with Penske Corporation is our largest stockholder owning approximately 51.5% of our outstanding common stock. Mitsui & Co., Ltd. and Mitsui & Co. (USA), Inc. (collectively, "Mitsui") own approximately 19.9% of our outstanding common stock. Mitsui, Penske Corporation and Penske Automotive Holdings Corp. (together with Penske Corporation, the "Penske companies") are parties to a stockholders agreement which expires March 26, 2030

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(the "Stockholders Agreement"). Pursuant to the Stockholders Agreement, in connection with any shareholder election of directors, the Penske companies agreed to vote their shares for two directors who are representatives of Mitsui as long as Mitsui owns in excess of 20% of our outstanding common stock, and for one director as long as Mitsui owns in excess of 10% of our outstanding common stock. Mitsui agreed to vote its shares for up to fourteen directors voted for by the Penske companies.

Voting Agreement

Penske Corporation (“PC”) and the Company entered into a voting agreement (the “Voting Agreement”) pursuant to which PC agreed, on each matter brought to a vote at any annual or special meeting of our stockholders and in connection with any action proposed to be taken by consent of our stockholders in lieu of a meeting, to vote all shares of Voting Common Stock, or other voting or equity securities of ours which could be issued (together with the Voting Common Stock, the “Voting Securities”) beneficially owned by PC, that, together with the Voting Securities held by Roger S. Penske, our Chair and Chief Executive Officer, and any entity that Roger S. Penske controls, exceed 43.57% of the outstanding Voting Securities (the “Excess Voting Securities”), in the same proportion as all votes cast by stockholders other than PC, Roger S. Penske or any entity that Roger S. Penske controls (except as otherwise required by the existing PM Shareholders Agreement described below). Any Voting Securities that are not Excess Voting Securities may be voted at the discretion of PC. The Voting Agreement will terminate per its terms at the time that PC ceases to beneficially own 30% or more of the Voting Securities then outstanding. Notwithstanding the foregoing, the Voting Agreement does not impact the provisions of the Stockholders Agreement noted above as currently in effect.

Other Related Party Interests and Transactions

Robert Kurnick, Jr., our President and a director, is also the Vice Chair and a director of Penske Corporation and an Advisory Board member of PTS. Bud Denker, our Executive Vice President, Human Resources, is also the President of Penske Corporation. Greg Penske, the Vice Chair of our Board of Directors, is the son of our Chair and is also a director of Penske Corporation. Michael Eisenson, one of our directors, is also a director of Penske Corporation and an Advisory Board member of PTS. Lisa Davis, one of our directors, is also an Advisory Board member of PTS. Kota Odagiri, one of our directors, is also an employee of Mitsui & Co.

We sometimes pay to and/or receive fees from Penske Corporation, its subsidiaries, and its affiliates for services rendered in the ordinary course of business or to reimburse payments made to third parties on each other's behalf. These transactions are reviewed periodically by our Audit Committee and reflect the provider's cost or an amount mutually agreed upon by both parties.

We own a 28.9% interest in PTS. PTS, discussed previously, is owned 41.1% by Penske Corporation, 28.9% by us, and 30.0% by Mitsui. The PTS partnership agreement, among other things, provides us with specified partner distribution and governance rights and restricts our ability to transfer our interest. The partnership has an eleven-member Advisory Board. We have the right to appoint one Advisory Board member and appointed Robert H. Kurnick, Jr., our President. Lisa Davis and Michael Eisenson, our directors, are also members of the Advisory Board. We have the right to pro rata quarterly distributions equal to at least 50% of PTS' consolidated net income, as well as specified minority rights which require our and/or Mitsui's consent for certain actions taken by PTS as specified in the PTS partnership agreement.

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Joint Venture Relationships

From time to time, we enter into joint venture relationships in the ordinary course of business, pursuant to which we own and operate automotive dealerships together with other investors. We may also provide these dealerships with working capital and other debt financing at costs that are based on our incremental borrowing rate. As of March 31, 2024, our automotive joint venture relationships were as follows:

Location

Dealerships

Ownership Interest

Fairfield, Connecticut

Audi, Mercedes-Benz, Sprinter, Porsche

80.00% (A)

Greenwich, Connecticut

Mercedes-Benz

80.00% (A)

Northern Italy

BMW, MINI, Maserati, Porsche, Audi, Jaguar, Land Rover, Volvo, Mercedes-Benz, smart, Lamborghini

84.10% (A)

Kerpen, Germany

Collision Center

66.67% (A)

Frankfurt, Germany

Lexus, Toyota, Volkswagen

50.00% (B)

Barcelona, Spain

BMW, MINI

50.00% (B)

__________________

(A) Entity is consolidated in our financial statements.

(B) Entity is accounted for using the equity method of accounting.

Additionally, we are party to non-automotive joint ventures representing our investments in PTS (28.9%) and Penske Commercial Leasing Australia (28%) that are accounted for under the equity method.

Cyclicality

Unit sales of motor vehicles, particularly new vehicles, have been cyclical historically, fluctuating with general economic cycles. During economic downturns, the automotive and truck retailing industries tend to experience periods of decline and recession similar to those experienced by the general economy. We believe that these industries are influenced by general economic conditions and particularly, by consumer confidence, the level of personal discretionary spending, the rate of inflation, including its impact on vehicle affordability, fuel prices, utility prices, interest rates, and credit availability.

Our business is dependent on a number of factors, including general economic conditions, the availability of vehicle inventory, fuel prices, utility prices, the rate of inflation, including its impact on vehicle affordability, interest rate fluctuations, credit availability, labor availability, environmental and other government regulations and incentives, and customer business cycles. U.S. light vehicle sales have ranged from a low of 10.4 million units in 2009 to a high of 17.5 million units in 2016. Unit sales of new commercial vehicles have historically been subject to substantial cyclical variation based on these general economic conditions. According to data published by ACT Research, in recent years, total U.S. retail sales of new Class 8 commercial vehicles have ranged from a low of approximately 97,000 in 2009 to a high of approximately 334,000 in 2019. Through geographic diversification, concentration on higher margin regular service and parts revenues, and diversification of our customer base, we have attempted to reduce the negative impact of adverse general economic conditions or cyclical trends affecting any one industry or geographic area on our earnings.

Seasonality

Retail Automotive Dealership. Our business is modestly seasonal overall. Our U.S. operations generally experience higher volumes of vehicle sales in the second and third quarters of each year due in part to consumer buying trends and the introduction of new vehicle models. Also, vehicle demand, and to a lesser extent demand for service and parts, is generally lower during the winter months than in other seasons, particularly in regions of the U.S. where dealerships may be subject to severe winters. Our U.K. operations generally experience higher volumes of new vehicle sales in the first and third quarters of each year, due primarily to new vehicle registration practices in the U.K.

Inflation

Many of the markets in which we operate continue to experience higher rates of inflation when compared to previous years. Inflation affects the price of vehicles, the price of parts, the rate of pay of our employees, consumer credit availability, and consumer demand. During 2022, used vehicle prices in particular experienced periods of high rates of inflation. Higher rates of inflation may adversely affect consumer demand and increase our costs, which may materially and adversely affect us.

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Forward-Looking Statements

Certain statements and information set forth herein, as well as other written or oral statements made from time to time by us or by our authorized officers on our behalf, constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "goal," "plan," "seek," "project," "continue," "will," "would," and variations of such words and similar expressions are intended to identify such forward-looking statements. We intend for our forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we set forth this statement in order to comply with such safe harbor provisions. You should note that our forward-looking statements speak only as of the date of this report or when made, and we undertake no duty or obligation to update or revise our forward-looking statements, whether as a result of new information, future events, or otherwise. Forward-looking statements include, without limitation, statements with respect to:

•the impact of macro-economic and geo-political conditions and events, including their impact on new and used vehicle sales, availability of consumer credit, changes in consumer demand, consumer confidence levels, fuel prices, the rate of inflation, personal discretionary spending levels, consumer credit availability, interest rates, and unemployment rates;

•our future financial and operating performance;

•future dealership openings, acquisitions, and dispositions;

•future potential capital expenditures and securities repurchases;

•our ability to realize cost savings and synergies;

•our ability to respond to economic cycles;

•trends and sales levels in the automotive retail industry, commercial vehicles industries, and in the general economy in the various countries in which we operate;

•our expectations regarding any pandemic and the resolution of vehicle production and supply issues;

•the rate of adoption of electric vehicles and their effect on our business;

•our ability to access the remaining availability under our credit agreements;

•our liquidity;

•the performance of our joint ventures, including PTS;

•future foreign currency exchange rates;

•the outcome of various regulatory matters and legal proceedings;

•results of self-insurance plans or other insured matters;

•trends affecting the automotive or trucking industries generally, such as changes to an agency model of distribution in the U.K. and other European countries, and our future financial condition or results of operations; and

•our business strategy.

Forward-looking statements involve known and unknown risks and uncertainties and are not assurances of future performance. Actual results may differ materially from anticipated results due to a variety of factors, including the factors identified 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 our other periodic reports filed with the Securities and Exchange Commission. Important factors that could also cause actual results to differ materially from our expectations include the following:

•our business and the automotive retail and commercial vehicles industries in general are susceptible to adverse economic and geo-political conditions, including changes in interest rates, foreign currency exchange rates,

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customer demand, customer confidence, the rate of inflation, including its impact on vehicle affordability, fuel and utility prices, unemployment rates and credit availability;

•we depend on the success, popularity and availability of the brands we sell, and adverse conditions affecting one or more of these vehicle manufacturers, including the adverse impact on the vehicle and parts supply chain due to natural disasters, the shortage of vehicle components, the war in Ukraine, challenges in sourcing labor, labor strikes, or work stoppages, or other disruptions that interrupt the supply of vehicles and parts to us may negatively impact our revenues and profitability;

•the number of new and used vehicles sold in our markets, which impacts our ability to generate new and used vehicle gross profit and future service and parts operations;

•the effect on our businesses of the changing retail environment due to certain manufacturers selling direct to consumers outside the franchise system, changes to an agency model of distribution in the U.K. and other European countries, and the growing number of electric vehicles;

•the effect on our businesses of mobility technologies, such as Uber and Lyft, and the eventual availability of driverless vehicles;

•vehicle manufacturers exercise significant control over our operations, and we depend on them and the continuation of our franchise and distribution agreements in order to operate our business;

•we are subject to the risk that a substantial number of our new or used inventory may be unavailable due to inventory shortages, recalls, or other reasons;

•the success of our commercial vehicle distribution operations and engine and power systems distribution operations depends upon continued availability of the vehicles, engines, power systems, and other parts we distribute, demand for those vehicles, engines, power systems, and parts and general economic conditions in those markets;

•a restructuring of any significant vehicle manufacturer or supplier;

•our operations may be affected by severe weather or other periodic business interruptions;

•with respect to PTS, changes in the financial health of its customers, compliance costs, labor strikes or work stoppages with respect to its employees, a reduction in PTS' asset utilization rates, continued availability from truck manufacturers and suppliers of vehicles and parts for its fleet, potential decreases in the resale value of used vehicles which may affect PTS' ability to sell its used vehicles after the expiration of its customers' leases or at the end of its holding period for rental vehicles, which may affect PTS' profitability, compliance costs in regard to its trucking fleet and truck drivers, its ability to retain qualified drivers and technicians, risks associated with its participation in multi-employer pension plans, conditions in the capital markets to assure PTS' continued availability of capital to purchase trucks, the effect of changes in lease accounting rules on PTS customers' purchase/lease decisions, industry competition, new or enhanced regulatory requirements, emissions standards, vehicle mandates, changes in consumer sentiment regarding the transportation industry, and vulnerabilities with respect to its centralized information systems, each of which could impact equity earnings and distributions to us;

•we have substantial risk of loss not covered by insurance;

•we may not be able to satisfy our capital requirements for acquisitions, facility renovation projects, financing the purchase of our inventory, or refinancing of our debt when it becomes due;

•our level of indebtedness and cash required for lease obligations may limit our ability to obtain financing generally and may require that a significant portion of our cash flow be used for debt service;

•non-compliance with the financial ratios and other covenants under our credit agreements and operating leases;

•higher interest rates may significantly increase our variable rate interest costs and because many customers finance their vehicle purchases, adversely impact vehicle affordability, and decrease vehicle sales;

•our operations outside of the U.S. subject our profitability to fluctuations relating to changes in foreign currency values;

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•we are dependent on continued security and availability of our information technology systems, which systems are increasingly threatened by ransomware and other cyber-attacks, and we may be subject to significant litigation, fines, penalties, and other costs under applicable privacy laws and regulations if we do not maintain our confidential customer and employee information properly;

•if we lose key personnel, especially our Chief Executive Officer, or are unable to attract additional qualified personnel;

•new or enhanced regulations in both our domestic and international markets relating to automobile dealerships and vehicle sales, including those enacted in certain European countries and various U.S. states banning or taking actions to ban the sale of new vehicles with gasoline engines (with regulations in Europe proposed to start as early as 2025, and California requiring 35% of all new consumer vehicles to be emission free in 2026, 68% to be emission free by 2030, and 100% to be emission free by 2035, with some allowances for plug-in hybrid vehicles);

•new or enhanced regulations, including those related to emissions standards, or changes in consumer sentiment relating to commercial truck sales that may hinder our or PTS' ability to maintain, acquire, sell, or operate trucks;

•increased tariffs, import product restrictions, and foreign trade risks that may impair our ability to sell foreign vehicles profitably;

•changes in tax, financial or regulatory rules, or requirements, including new regulations proposed by the Federal Trade Commission for automotive dealers that would change industry-accepted practices with regard to sales and advertising, require an extensive series of oral and written disclosures to consumers in regard to the sale price of vehicles, credit terms, and voluntary protection products, and impose burdensome recordkeeping requirements that may lead to additional transaction times for the sale of vehicles, complicate the transaction process, decrease customer satisfaction, and increase compliance costs and risk, among other effects;

•we could be subject to legal and administrative proceedings which, if the outcomes are adverse to us, could have a material adverse effect on our business, including the result of the U.K. Financial Conduct Authority’s investigation of discretionary commission arrangements and potential remediation measures amid concerns these arrangements were unfair to customers;

•if state dealer laws in the U.S. are repealed or weakened or new manufacturers such as those selling electric vehicles are able to conduct significant vehicle sales outside of the franchised automotive system, our automotive dealerships may be subject to increased competition and may be more susceptible to termination, non-renewal, or renegotiation of their franchise agreements;

•we are subject to a wide range of environmental laws and regulations governing the use, generation, and disposal of materials used in our ordinary course of operations, and we face potentially significant costs relating to claims, penalties, and remediation efforts in the event of non-compliance with existing and future laws and regulations which may become more stringent in the face of climate change;

•some of our directors and officers may have conflicts of interest with respect to certain related party transactions and other business interests; and

•shares of our common stock eligible for future sale may cause the market price of our common stock to drop significantly, even if our business is doing well.

We urge you to carefully consider these risk factors and further information identified 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 our other periodic reports filed with the Securities and Exchange Commission in evaluating all forward-looking statements regarding our business. Readers of this report are cautioned not to place undue reliance on the forward-looking statements contained in this report. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement. Except to the extent required by the federal securities laws and the Securities and Exchange Commission's rules and regulations, we have no intention or obligation to update publicly any forward-looking statements whether as a result of new information, future events, or otherwise.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rates. We are exposed to market risk from changes in the interest rates on a significant portion of our outstanding debt. Outstanding revolving balances under our credit agreements bear interest at variable rates based on a margin over the prime rate, SOFR, SONIA, the Bank of England Base Rate, the Canadian Prime Rate, the Tokyo Interbank Offered Rate, or the Australian Bank Bill Swap Rate. Based on an average of the aggregate amounts outstanding under these facilities during the three months ended March 31, 2024, a 100-basis-point change in interest rates would result in an approximate $3.9 million change to our annual other interest expense.

Similarly, amounts outstanding under floor plan financing arrangements bear interest at a variable rate based on a margin over the prime rate, SOFR, SONIA, the Bank of England Base Rate, the Finance House Base Rate, the Euro Interbank Offered Rate, the Canadian Prime Rate, the Australian Bank Bill Swap Rate, or the New Zealand Bank Bill Benchmark Rate. Based on an average of the aggregate amounts outstanding under our floor plan financing arrangements subject to variable interest payments during the three months ended March 31, 2024, a 100-basis-point change in interest rates would result in an approximate $36.3 million change to our annual floor plan interest expense.

We evaluate our exposure to interest rate fluctuations and follow established policies and procedures to implement strategies designed to manage the amount of variable rate indebtedness outstanding at any point in time in an effort to mitigate the effect of interest rate fluctuations on our earnings and cash flows. These policies include:

•the maintenance of our overall debt portfolio with fixed and variable rate components;

•the use of authorized derivative instruments;

•the prohibition of using derivatives for trading or other speculative purposes; and

•the prohibition of highly leveraged derivatives, derivatives which we are unable to reliably value, or derivatives which we are unable to obtain a market quotation.

Interest rate fluctuations affect the fair market value of our fixed rate debt, including our swaps, mortgages, and certain seller financed promissory notes but with respect to such fixed rate debt instruments, do not impact our earnings or cash flows.

Foreign Currency Exchange Rates. As of March 31, 2024, we had consolidated operations in the U.K., Germany, Italy, Japan, Canada, Australia, and New Zealand. In each of these markets, the local currency is the functional currency. In the event we change our intent with respect to the investment in any of our international operations, we would expect to implement strategies designed to manage those risks in an effort to mitigate the effect of foreign currency fluctuations on our earnings and cash flows. A ten percent change in average exchange rates versus the U.S. Dollar would have resulted in an approximate $337.2 million change to our revenues for the three months ended March 31, 2024.

We purchase certain of our new vehicles, parts, and other products from non-U.S. manufacturers. Although we purchase the majority of our inventories in the local functional currency, our business is subject to certain risks, including, but not limited to, differing economic conditions, changes in political climate, differing tax structures, changes in tax and tariff rates, other regulations and restrictions, and foreign currency exchange rate volatility, which may influence such manufacturers' ability to provide their products at competitive prices in the local jurisdictions. Our future results could be materially and adversely impacted by changes in these or other factors.

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including the principal executive and financial officers, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to management, including our principal executive and financial officers, to allow timely discussions regarding required disclosure.

Based upon this evaluation, our principal executive and financial officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, we maintain internal controls

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designed to provide us with the information required for accounting and financial reporting purposes. There were no changes in our internal control over financial reporting that occurred during the most recent quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are a party to litigation and other legal proceedings, including class action claims and purported class action claims, in the ordinary course of business. Such claims may be brought by governmental authorities, customers, vendors, stockholders, or employees. We are not a party to any legal proceedings, including class action lawsuits, that individually or in the aggregate are reasonably expected to have a material effect on us. 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.

Item 1A. Risk Factors

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, along with our other periodic reports filed with the Securities and Exchange Commission, which could materially affect our business, financial condition, or future results. The following disclosure further updates the risk factors included in our 2023 Annual Report on Form 10-K and the risk factors included in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024:

Adverse conditions affecting one or more significant automotive manufacturers or suppliers will affect us. Our success depends on the overall success of the automotive industry generally and in particular, on the success of the brands of vehicles that each of our dealerships sell. In 2023, revenue generated at our BMW/MINI, Audi/Volkswagen/Porsche/Bentley, Toyota/Lexus, and Mercedes-Benz/Sprinter/smart dealerships represented 26%, 22%, 13%, and 9%, respectively, or 70% in aggregate, of our total automotive dealership revenues. In addition, our retail commercial truck operations rely principally on Freightliner and Western Star trucks (both Daimler brands).

Significant adverse geo-political events, weather-related events, supply chain issues, or other events that interrupt vehicle or parts supply to our dealerships would likely have a significant and adverse impact on the industry as a whole, including us, particularly if the events impact any of the manufacturers whose franchises generate a significant percentage of our revenue. In the first quarter of 2024, vehicle shipments of certain brands were delayed as a sub-component was determined to be violative of certain legal requirements relating to its place of origin. In March 2024, a cargo ship crashed into the Francis Scott Key Bridge in the Port of Baltimore resulting in closure of that port, which was the largest U.S. port by volume for deliveries of automotive vehicles and components. In April 2024, a Freightliner truck supplier experienced a fire at its facility. These events affected the timing of new vehicles deliveries to our dealerships and similar events may materially and adversely affect us.

Other events such as a pandemic and the war in Ukraine may impact the supply of vehicles or parts to the markets in which we operate, and our business could be materially adversely affected. The supply chain required to manufacture and supply parts for the vehicles we sell is highly complex and integrated. Any failure of that supply chain could materially and adversely affect us. Our new vehicle days' supply is 40 as of March 31, 2024, compared to 39 as of December 31, 2023. While we expect to continue to have normal levels of used vehicles for sale (our used vehicle days' supply is 36 as of March 31, 2024, compared to 48 as of December 31, 2023), the lower supply of new vehicles has contributed to higher vehicle gross profit on new vehicles sold, which contributed to our higher overall profitability in recent years. While we expect increased new vehicle availability, continued 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 and may adversely affect us. As the supply of new vehicles has improved, we have experienced, and may continue to experience, reduced new and used vehicle gross profit together with higher sales volumes.

Additional risks relating to PTS. PTS' business has additional risks to those in the retail business, including:

Regulatory Requirements and Vehicle Mandates. Increasing efforts to control emissions of carbon dioxide and certain other gases, referred to as greenhouse gases (“GHGs”), are likely to have an effect on PTS' (and PTG's) business and results of operations. In particular, President Biden and Congressional leaders, as well as California, New Jersey, and other states, have expressed support for policies limiting GHG emissions from vehicles through new regulations that require moving to zero-emission formats and/or the implementation of more stringent emissions controls. For example, original equipment manufacturers may be required to install additional engine components, additional aerodynamic features, or low-rolling resistance tires to comply with fuel economy regulations, which may result in higher costs associated with more complex components and a shorter useful tread life for tires, increasing operating costs for customers, suppliers, and PTS. Additionally, the Advanced Clean Trucks rule, as adopted by the California Air Resources Board ("CARB") and several other states, will require that certain truck manufacturers sell zero-emission trucks as an increasing

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percentage of their annual sales in these states from 2024 to 2035 (and likely beyond). Furthermore, the Advanced Clean Fleet rule, issued by CARB in April 2023, and which may be adopted in other jurisdictions, will require certain larger fleets, including PTS', to purchase zero-emission trucks to comprise an increasing percentage of their fleets from 2025 to 2042. On December 28, 2023, CARB announced that it would defer enforcement of the rule, which was scheduled to become effective on January 1, 2024, while its request for a waiver from the EPA to authorize the rule is pending.

On March 29, 2024, the U.S. Environmental Protection Agency ("EPA") announced its Phase 3 Rule regarding GHG emissions standards for heavy duty vehicles which, along with EPA’s other rules, requires market shifts to zero-emission technologies in certain segments of the heavy-duty vehicle sector and new, more stringent GHG emissions standards for heavy-duty engines and vehicles beginning as soon as model year 2027. The EPA initiated the first phase of the Clean Trucks Plan by issuing a final rule on December 20, 2022, which focuses on reducing emissions that form smog and soot and will apply to heavy-duty engines and vehicles beginning in model year 2027 through 2032. The Phase 3 Rule requires significant reductions in truck emissions through 2032 which may require the development of a significant volume of zero emission vehicles ("ZEV"). The current level of ZEV commercial vehicle sales is below 1%. In addition, foreign, federal, state, provincial, and local lawmakers also are considering a variety of other climate change proposals, including prohibiting the use of certain substances with high “global warming potential.” These and any other future requirements could result in higher prices for vehicles, diesel engines, materials, and fuel, as well as higher maintenance costs and uncertainty as to reliability and range of the new engines. Any of these factors could increase operating costs in the transportation industry, which would directly affect PTS' and PTG's customers and could reduce demand for vehicles. The new technology and legal requirements may also affect the resale values of these vehicles when PTS or PTG attempts to sell them in the future.

Regulatory Issues. We are subject to a wide variety of regulatory activities and oversight, including:

Vehicle requirements. Federal and state governments and regulators in both our domestic and international markets have increasingly placed restrictions and limitations on the vehicles sold in the market in an effort to combat perceived negative environmental effects. For example, in the U.S., automotive manufacturers are subject to federally mandated corporate average fuel economy standards, which will increase substantially through 2026. Moreover, on March 20, 2024, the EPA issued new emissions limits for light-duty and medium-duty model year 2027 through 2023 vehicles which are significantly more restrictive than existing requirements which are designed to incent an increased adoption of electric vehicles. For example, GHG emission in light-duty vehicles are required to decrease 49% for model year 2032 as compared to model year 2026. Moreover, the EPA is requiring electric batteries and related components to have at least an 8-year, 80,000-mile warranty.

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. The European Parliament recently approved a law requiring most automakers to reduce the emissions of new cars sold by 55% in 2030 and achieve a zero carbon-emission standard by 2035, effectively banning the sale of new gasoline and diesel cars and vans by 2035. Similar legislation in various states across the United States would ban the sale of new vehicles with gasoline-only engines in cars as early as 2035. The California legislation requires 35% of all new vehicles sold to meet a zero emissions standard by 2026 (with certain allowances for hybrid gas/electric vehicles), which percentage requirement increases until 2035, after which 100% of new vehicles sold must comply. Significant increases in fuel economy requirements, the new battery warranty standards, and new restrictions on emissions on vehicles and fuels could adversely affect prices, availability, and demand for the vehicles that we sell, which could materially adversely affect us.

Commercial trucks are subject to similar regulatory risks related to emissions standards and other regulatory requirements discussed above. The EPA has also recently issued revised standards to reduce GHG emissions from heavy-duty vehicles beginning in model year 2027 which is also discussed above. PTG sells new and used heavy- and medium-duty commercial trucks, parts and service, and offers collision repair services. PTS, with its broad product offering including full-service truck leasing, contract maintenance, and truck rental, along with logistics services, is one of the largest purchasers of commercial trucks in North America. Should future regulations or consumer sentiment hinder our or PTS' ability to maintain, acquire, sell, or operate trucks, we may be adversely affected.

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

During the three months ended March 31, 2024, we repurchased 221,329 shares of our common stock for $32.9 million, or an average of $148.72 per share, under our securities repurchase program approved by our Board of Directors, of which $182.6 million remained outstanding as of March 31, 2024.


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Program (in millions)
January 1 to January 31, 2024	72,638	$	149.36	72,638	$204.7
February 1 to February 29, 2024	148,691	$	148.41	148,691	$182.6
March 1 to March 31, 2024	—	$	—	—	$182.6
	221,329			221,329

Item 5. Other Information

During the three months ended March 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

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Item 6. Exhibits

EXHIBIT INDEX


Exhibit No.						Description

*10.1						Form of Restricted Stock Unit Agreement (incorporated by reference to exhibit 10.3 to our Form 10-K filed February 16, 2024).

10.2						Voting Agreement by and between us and Penske Corporation dated January 23, 2024 (incorporated by reference to exhibit 10.1 to our Form 8-K filed January 24, 2024).

22.1						List of Guarantor Subsidiaries under the Company’s Senior Subordinated Notes

31.1						Rule 13(a)-14(a)/15(d)-14(a) Certification

31.2						Rule 13(a)-14(a)/15(d)-14(a) Certification

32						Section 1350 Certification

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH						XBRL Taxonomy Extension Schema

101.CAL						XBRL Taxonomy Extension Calculation Linkbase

101.DEF						XBRL Taxonomy Extension Definition Linkbase

101.LAB						XBRL Taxonomy Extension Label Linkbase

101.PRE						XBRL Taxonomy Extension Presentation Linkbase

104						Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

________________________

* Compensatory plans or contracts

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	PENSKE AUTOMOTIVE GROUP, INC.

	By:	/s/ Roger Penske
		Roger Penske
Date: April 30, 2024		Chief Executive Officer

	By:	/s/ Michelle Hulgrave
		Michelle Hulgrave
Date: April 30, 2024		Chief Financial Officer