UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

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

Commission file number 1-12297

Penske Automotive Group, Inc.

Delaware		22-3086739
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
2555 Telegraph Road,		48302-0954
Bloomfield Hills, Michigan		(Zip Code)
(Address of principal executive offices)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company 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 þ

As of October 29, 2010, there were 92,096,032 shares of voting common stock outstanding.

 

 

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of September 30, 2010 and December 31, 2009			3
Consolidated Condensed Statements of Income for the three and nine months ended September 30, 2010 and 2009			4
Consolidated Condensed Statements of Cash Flows for the nine months ended September 30, 2010 and 2009			5
Consolidated Condensed Statement of Equity for the nine months ended September 30, 2010			6
Notes to Consolidated Condensed Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative & Qualitative Disclosures About Market Risk			45
Item 4. Controls and Procedures			45
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			46
Item 6. Exhibits			46
Exhibit 4.1
Exhibit 10.1
Exhibit 12
Exhibit 31.1
Exhibit 31.2
Exhibit 32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

		September 30,				December 31,
		2010				2009
		(Unaudited)
		(In thousands, except
		per share amounts)
ASSETS
Cash and cash equivalents		$	6,027			$	13,999
Accounts receivable, net of allowance for doubtful accounts of $1,619 and $1,689			367,888				321,226
Inventories			1,437,939				1,302,495
Other current assets			109,106				95,426
Assets held for sale			584				10,625
Total current assets			1,921,544				1,743,771
Property and equipment, net			731,813				726,808
Goodwill			813,626				810,047
Franchise value			203,507				201,756
Equity method investments			290,735				295,473
Other long-term assets			14,372				18,152
Total assets		$	3,975,597			$	3,796,007
LIABILITIES AND EQUITY
Floor plan notes payable		$	907,315			$	769,657
Floor plan notes payable — non-trade			474,805				423,316
Accounts payable			210,999				189,989
Accrued expenses			231,237				227,294
Current portion of long-term debt			15,409				12,442
Liabilities held for sale			548				7,675
Total current liabilities			1,840,313				1,630,373
Long-term debt			837,976				933,966
Deferred tax liabilities			161,424				157,500
Other long-term liabilities			113,103				128,129
Total liabilities			2,952,816				2,849,968
Commitments and contingent liabilities
Equity
Penske Automotive Group stockholders’ equity:
Preferred Stock, $0.0001 par value; 100 shares authorized; none issued and outstanding			—				—
Common Stock, $0.0001 par value, 240,000 shares authorized; 92,090 shares issued and outstanding at September 30, 2010; 91,618 shares issued and outstanding at December 31, 2009			9				9
Non-voting Common Stock, $0.0001 par value, 7,125 shares authorized; none issued and outstanding			—				—
Class C Common Stock, $0.0001 par value, 20,000 shares authorized; none issued and outstanding			—				—
Additional paid-in-capital			737,714				737,198
Retained earnings			275,977				196,205
Accumulated other comprehensive income			5,238				9,049
Total Penske Automotive Group stockholders’ equity			1,018,938				942,461
Non-controlling interest			3,843				3,578
Total equity			1,022,781				946,039
Total liabilities and equity		$	3,975,597			$	3,796,007

See Notes to Consolidated Condensed Financial Statements

PENSKE AUTOMOTIVE GROUP, INC.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
		(Unaudited)
		(In thousands, except per share amounts)
Revenue:
New vehicle		$	1,416,314			$	1,338,759			$	4,004,450			$	3,400,082
Used vehicle			765,555				674,228				2,211,892				1,949,514
Finance and insurance, net			67,149				60,872				190,141				164,009
Service and parts			335,250				335,571				1,001,433				993,580
Distribution			15,306				36,451				43,175				169,716
Fleet and wholesale vehicle			156,548				142,161				494,398				388,136
Total revenues			2,756,122				2,588,042				7,945,489				7,065,037
Cost of sales:
New vehicle			1,304,008				1,225,907				3,679,460				3,129,896
Used vehicle			708,593				614,867				2,038,092				1,774,877
Service and parts			143,197				150,083				430,472				448,950
Distribution			14,481				30,294				39,430				144,310
Fleet and wholesale			155,990				144,184				487,810				382,503
Total cost of sales			2,326,269				2,165,335				6,675,264				5,880,536
Gross profit			429,853				422,707				1,270,225				1,184,501
Selling, general and administrative expenses			355,920				347,550				1,051,611				987,605
Depreciation			12,403				14,019				36,831				40,711
Operating income			61,530				61,138				181,783				156,185
Floor plan interest expense			(9,048	)			(9,061	)			(25,890	)			(27,492	)
Other interest expense			(12,229	)			(13,490	)			(37,491	)			(41,677	)
Debt discount amortization			(1,647	)			(3,135	)			(6,990	)			(9,908	)
Equity in earnings of affiliates			7,370				7,536				11,725				11,716
Gain on debt repurchase			607				—				1,634				10,429
Income from continuing operations before income taxes			46,583				42,988				124,771				99,253
Income taxes			(15,279	)			(15,069	)			(43,339	)			(35,143	)
Income from continuing operations			31,304				27,919				81,432				64,110
Loss from discontinued operations, net of tax			(1,044	)			(257	)			(1,156	)			(6,079	)
Net income			30,260				27,662				80,276				58,031
Less: Income attributable to non-controlling interests			283				239				504				247
Net income attributable to Penske Automotive Group common stockholders		$	29,977			$	27,423			$	79,772			$	57,784
Basic earnings per share attributable to Penske Automotive Group common stockholders:
Continuing operations		$	0.34			$	0.30			$	0.88			$	0.70
Discontinued operations			(0.01	)			—				(0.01	)			(0.07	)
Net income		$	0.33			$	0.30			$	0.87			$	0.63
Shares used in determining basic earnings per share			92,081				91,528				92,097				91,504
Diluted earnings per share attributable to Penske Automotive Group common stockholders:
Continuing operations		$	0.34			$	0.30			$	0.88			$	0.70
Discontinued operations			(0.01	)			—				(0.01	)			(0.07	)
Net income		$	0.33			$	0.30			$	0.87			$	0.63
Shares used in determining diluted earnings per share			92,141				91,625				92,171				91,563
Amounts attributable to Penske Automotive Group common stockholders:
Income from continuing operations		$	31,304			$	27,919			$	81,432			$	64,110
Less: Income attributable to non-controlling interests			283				239				504				247
Income from continuing operations, net of tax			31,021				27,680				80,928				63,863
Loss from discontinued operations, net of tax			(1,044	)			(257	)			(1,156	)			(6,079	)
Net income		$	29,977			$	27,423			$	79,772			$	57,784

See Notes to Consolidated Condensed Financial Statements

PENSKE AUTOMOTIVE GROUP, INC.

		Nine Months Ended
		September 30,
		2010				2009
		(Unaudited)
		(In thousands)
Operating Activities:
Net income		$	80,276			$	58,031
Adjustments to reconcile net income to net cash from continuing operating activities:
Depreciation			36,831				40,711
Debt discount amortization			6,990				9,908
Earnings of equity method investments			(11,725	)			(11,716	)
Loss from discontinued operations, net of tax			1,156				6,079
Deferred income taxes			14,596				33,920
Gain on debt repurchase			(1,634	)			(10,733	)
Changes in operating assets and liabilities:
Accounts receivable			(42,196	)			(28,217	)
Inventories			(107,077	)			427,868
Floor plan notes payable			116,033				(255,993	)
Accounts payable and accrued expenses			27,298				58,606
Other			3,768				(14,011	)
Net cash from continuing operating activities			124,316				314,453
Investing Activities:
Purchase of equipment and improvements			(62,717	)			(70,049	)
Proceeds from sale-leaseback transactions			—				2,338
Dealership acquisitions net, including repayment of sellers’ floor plan notes payable of $7,231 and $5,784, respectively			(12,261	)			(8,517	)
Other			—				11,729
Net cash from continuing investing activities			(74,978	)			(64,499	)
Financing Activities:
Proceeds from borrowings under U.S. credit agreement revolving credit line			511,500				391,300
Repayments under U.S. credit agreement revolving credit line			(475,000	)			(391,300	)
Repayments under U.S. credit agreement term loan			(10,000	)			(50,000	)
Repurchase of 3.5% senior subordinated convertible notes			(156,604	)			(51,424	)
Net borrowings of other long-term debt			19,895				1,113
Net borrowings (repayments) of floor plan notes payable — non-trade			51,489				(125,996	)
Proceeds from exercises of options, including excess tax benefit			403				76
Repurchases of common stock			(751	)			—
Net cash from continuing financing activities			(59,068	)			(226,231	)
Discontinued operations:
Net cash from discontinued operating activities			(7,498	)			(3,983	)
Net cash from discontinued investing activities			9,463				(913	)
Net cash from discontinued financing activities			(207	)			(7,422	)
Net cash from discontinued operations			1,758				(12,318	)
Net change in cash and cash equivalents			(7,972	)			11,405
Cash and cash equivalents, beginning of period			13,999				17,108
Cash and cash equivalents, end of period		$	6,027			$	28,513
Supplemental disclosures of cash flow information:
Cash paid for:
Interest		$	56,456			$	62,017
Income taxes			22,839				10,228

See Notes to Consolidated Condensed Financial Statements

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENT OF EQUITY

																		Accumulated				Total
		Common Stock								Additional								Other				Stockholders’ Equity
		Issued								Paid-in				Retained				Comprehensive				Attributable to Penske				Non-controlling				Total
		Shares				Amount				Capital				Earnings				Income (Loss)				Automotive Group				Interest				Equity
		(Unaudited)
		(Dollars in thousands)
Balance, January 1, 2010			91,617,746			$	9			$	737,198			$	196,205			$	9,049			$	942,461			$	3,578			$	946,039
Equity compensation			498,626				—				8,017				—				—				8,017				—				8,017
Exercise of options, Including tax benefit of $121			42,000				—				403				—				—				403				—				403
Repurchase of common stock			(68,340	)							(751	)											(751	)							(751	)
Repurchase of 3.5% senior subordinated convertible notes			—				—				(7,153	)			—				—				(7,153	)			—				(7,153	)
Distributions to non-controlling interests			—				—				—				—				—				—				(239	)			(239	)
Foreign currency translation			—				—				—				—				(10,909	)			(10,909	)			—				(10,909	)
Other			—				—				—				—				7,098				7,098				—				7,098
Net income			—				—				—				79,772				—				79,772				504				80,276
Balance, September 30, 2010			92,090,032			$	9			$	737,714			$	275,977			$	5,238			$	1,018,938			$	3,843			$	1,022,781

See Notes to Consolidated Condensed Financial Statements

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except per share amounts)

1. Interim Financial Statements

Business Overview

Penske Automotive Group, Inc. (the “Company”) is the second largest automotive retailer headquartered in the U.S. as measured by total revenues. As of September 30, 2010, the Company owned and operated 173 franchises in the U.S. and 152 franchises outside of the U.S., primarily in the U.K. Each of the Company’s dealerships offers a wide selection of new and used vehicles for sale. In addition to selling new and used vehicles, the Company generates higher-margin revenue at each of its dealerships through maintenance and repair services and the sale and placement of higher-margin products, such as third party finance and insurance products, third-party extended service contracts and replacement and aftermarket automotive products.

During the nine months ended September 30, 2010, we acquired six franchises, including Volkswagen and Audi franchises in Santa Ana, California and a group of BMW franchises in Augsburg, Germany through the dissolution of a joint venture. We were awarded 15 franchises, including Audi and Mercedes franchises in Chantilly, Virginia, three Mini franchises in the western U.S., a Mitsubishi point in Arkansas, and five Mercedes Sprinter commercial van franchises in the U.S. We also disposed of three franchises, including Toyota/Scion franchises in Warren, Michigan and a Ford franchise in Goodyear, Arizona.

In addition, the Company’s wholly-owned subsidiary, smart USA Distributor, LLC (“smart USA”), is the exclusive distributor of the smart fortwo vehicle in the U.S. and Puerto Rico and the Company holds a 9.0% limited partnership interest in Penske Truck Leasing Co., L.P. (“PTL”), a leading global transportation services provider.

Basis of Presentation

The following unaudited consolidated condensed financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the SEC rules and regulations. The information presented as of September 30, 2010 and December 31, 2009 and for the three and nine month periods ended September 30, 2010 and 2009 is unaudited, but includes all adjustments which the management of the Company believes to be necessary for the fair presentation of results for the periods presented. The consolidated condensed financial statements for prior periods have been revised for entities which have been treated as discontinued operations through September 30, 2010, and the 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 the Company’s audited financial statements for the year ended December 31, 2009, which are included as part of the Company’s Annual Report on Form 10-K.

Results for three and nine months ended September 30, 2010 include $607 and $1,634 of pre-tax gain relating to the repurchase of $43,000 and $155,658 aggregate principal amount of the Company’s 3.5% senior subordinated convertible notes (“Convertible Notes”), respectively. Results for the nine months ended September 30, 2009 include $10,429 of pre-tax gain relating to the repurchase of $68,740 aggregate principal amount of the Convertible Notes.

Discontinued Operations

The Company accounts for dispositions as discontinued operations when the operations and cash flows of the business being disposed of will be eliminated from on-going operations and the Company will not have any significant continuing involvement in its operations.

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

In evaluating whether the cash flows of a dealership in its Retail reportable segment will be eliminated from ongoing operations, the Company considers whether it is likely that customers will migrate to similar franchises that it owns in the same geographic market. The Company’s consideration includes an evaluation of the brands sold at other dealerships it operates in the market and their proximity to the disposed dealership. When the Company disposes of franchises, it typically does not have continuing brand representation in that market. If the franchise being disposed of is located in a complex of Company owned dealerships, the Company does not treat the disposition as a discontinued operation if the Company believes that the cash flows previously generated by the disposed franchise will be replaced by expanded operations of the remaining franchises. The results of operations and net assets of dealerships accounted for as discontinued operations were immaterial for all periods presented.

Estimates

The preparation of financial statements in conformity 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 significant estimates include accounts receivable, inventories, income taxes, intangible assets and certain reserves.

Estimated Useful Lives of Assets

The Company changed the useful lives of certain fixed assets during the first quarter of 2010 as part of a review of assumptions related to the expected utilization of those assets by the Company. The Company accounted for the change in useful lives as a change in estimate prospectively effective January 1, 2010, which resulted in a reduction of depreciation expense of $1,410 and $4,230 for the three and nine month periods ended September 30, 2010, respectively.

Fair Value of Financial Instruments

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, debt, floor plan notes payable, and interest rate swaps used to hedge future cash flows. Other than our subordinated notes, 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. A summary of the fair value of the subordinated notes as of September 30, 2010, based on level one market data follows:

		Carrying Value				Fair Value
7.75% senior subordinated notes due 2016		$	375,000			$	366,563
3.5% senior subordinated convertible notes due 2026			147,236				148,708

2. Inventories

Inventories consisted of the following:

		September 30,				December 31,
		2010				2009
New vehicles		$	995,353			$	898,110
Used vehicles			363,710				325,707
Parts, accessories and other			78,876				78,678
Total inventories		$	1,437,939			$	1,302,495

The Company receives certain non-refundable floor plan interest credits and advertising assistance from certain vehicle manufacturers that reduce cost of sales when the vehicles are sold. These credits amounted to $20,357 and $22,653 during the nine months ended September 30, 2010 and 2009, respectively.

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

3. Business Combinations

The Company acquired three and five franchises during the nine months ended September 30, 2010 and 2009, respectively, in its retail operations (not including the German operations noted below). The Company’s financial statements include the results of operations of the acquired dealerships from the date of acquisition. The fair value of the assets acquired and liabilities assumed have been recorded in the Company’s consolidated condensed financial statements, and may be subject to adjustment pending completion of final valuation. A summary of the aggregate consideration paid and the aggregate amounts of the assets acquired and liabilities assumed in the nine months ended September 30, 2010 and 2009 follows:

		September 30,
		2010				2009
Inventory		$	8,595			$	2,935
Other current assets			17				129
Property and equipment			187				3,250
Goodwill			3,494				2,402
Current liabilities			(32	)			(199	)
Cash used in dealership acquisitions		$	12,261			$	8,517

In the first quarter of 2010, the Company exited one of its German joint ventures by exchanging its 50% interest in the joint venture for 100% ownership in three BMW franchises previously held by the joint venture. The Company recorded $13,331 of intangible assets in connection with this transaction.

4. Intangible Assets

The following is a summary of the changes in the carrying amount of goodwill and franchise value during the nine months ended September 30, 2010:

						Franchise
		Goodwill				Value
Balance, January 1, 2010		$	810,047			$	201,756
Additions			13,034				3,703
Foreign currency translation			(9,455	)			(1,952	)
Balance, September 30, 2010		$	813,626			$	203,507

5. Floor Plan Notes Payable — Trade and Non-trade

The Company finances substantially all of its new and a portion of its used vehicle inventories under revolving floor plan arrangements with various lenders, including a majority through captive finance companies associated with automotive manufacturers. In the U.S., the floor plan arrangements are due on demand; however, the Company has not historically been required to repay floor plan advances prior to the sale of the vehicles that have been financed. The Company typically makes monthly interest payments on the amount financed. Outside 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 the Company is 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 floor plan agreements typically grant a security interest in substantially all of the assets of the Company’s dealership subsidiaries, and in the U.S. are guaranteed by the Company. Interest rates under the floor plan arrangements are variable and increase or decrease based on changes in the prime rate, defined London Interbank Offered Rate (“LIBOR”), Finance House Base Rate, or Euro Interbank Offered Rate. The Company classifies 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 its consolidated condensed balance sheets, and classifies related cash flows as a financing activity on its consolidated condensed statements of cash flows.

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

6. Earnings Per Share

Basic earnings per share is computed using net income attributable to Penske Automotive Group common stockholders and the number of weighted average shares of voting common stock outstanding, including outstanding unvested restricted stock awards which contain non-forfeitable rights to dividends. Diluted earnings per share is computed using net income attributable to Penske Automotive Group common stockholders and the number of weighted average shares of voting common stock outstanding, adjusted for the dilutive effect of non-participatory equity compensation. A reconciliation of the number of shares used in the calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2010 and 2009 follows:

		September 30,								September 30,
		2010				2009				2010				2009
Weighted average number of common shares outstanding			92,081				91,528				92,097				91,504
Effect of non-participatory equity compensation			60				97				74				59
Weighted average number of common shares outstanding, including effect of dilutive securities			92,141				91,625				92,171				91,563

The Company has senior subordinated convertible notes outstanding which, under certain circumstances discussed in Note 7, may be converted to voting common stock. As of September 30, 2010 and 2009, no shares related to the senior subordinated convertible notes were included in the calculation of diluted earnings per share because the effect of such securities was anti-dilutive and there were no anti-dilutive stock options outstanding during the three and nine months ended September 30, 2010 and 2009.

7. Long-Term Debt

Long-term debt consisted of the following:

		September 30,				December 31,
		2010				2009
U.S. credit agreement — revolving credit line		$	36,500			$	—
U.S. credit agreement — term loan			139,000				149,000
U.K. credit agreement — revolving credit line			80,126				59,803
U.K. credit agreement — term loan			8,317				17,115
U.K. credit agreement — overdraft line of credit			12,368				12,048
7.75% senior subordinated notes due 2016			375,000				375,000
3.5% senior subordinated convertible notes due 2026, net of debt discount			147,236				289,344
Mortgage facilities			46,330				41,358
Other			8,508				2,740
Total long-term debt			853,385				946,408
Less: current portion			(15,409	)			(12,442	)
Net long-term debt		$	837,976			$	933,966

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

U.S. Credit Agreement

The Company is party to a credit agreement with DCFS USA LLC and Toyota Motor Credit Corporation, as amended (the “U.S. Credit Agreement”), which provides for up to $300,000 in revolving loans for working capital, acquisitions, capital expenditures, investments and other general corporate purposes, a non-amortizing term loan with a remaining balance of $139,000, and for an additional $10,000 of availability for letters of credit. The term of the credit agreement was extended on September 15, 2010, by one year through September 30, 2013. The revolving loans bear interest at a defined LIBOR plus 2.75%, subject to an incremental 0.75% for uncollateralized borrowings in excess of a defined borrowing base. The term loan, which bears interest at defined LIBOR plus 2.50%, may be prepaid at any time, but then may not be re-borrowed. The Company repaid $10,000 of this term loan in the third quarter of 2010.

The U.S. Credit Agreement is fully and unconditionally guaranteed on a joint and several basis by the Company’s domestic subsidiaries and contains a number of significant covenants that, among other things, restrict the Company’s ability to dispose of assets, incur additional indebtedness, repay other indebtedness, pay dividends, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. The Company is 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 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 any amounts owed. As of September 30, 2010, the Company was in compliance with all covenants under the U.S. Credit Agreement.

The U.S. Credit Agreement also contains typical events of default, including change of control, non-payment of obligations and cross-defaults to the Company’s other material indebtedness. Substantially all of the Company’s domestic assets are subject to security interests granted to lenders under the U.S. Credit Agreement. As of September 30, 2010, $139,000 of term loans, $1,250 of letters of credit, and $36,500 of revolver borrowings were outstanding under the U.S. Credit Agreement.

U.K. Credit Agreement

The Company’s subsidiaries in the U.K. (the “U.K. Subsidiaries”) are party to an agreement with the Royal Bank of Scotland plc, as agent for National Westminster Bank plc, which provides for a funded term loan, a revolving credit agreement, and a demand overdraft line of credit (collectively, the “U.K. Credit Agreement”) to be used for working capital, acquisitions, capital expenditures, investments and general corporate purposes. During the third quarter of 2010, the agreement was amended in connection with a reorganization of our European operations pursuant to which the maximum revolving borrowing capacity was reduced from £100,000 to £86,600, which maximum will be increased in the future by amounts equal to the required term loan repayments.

As amended, the U.K. Credit Agreement includes (1) up to £86,600 in revolving loans through August 31, 2013, which bears interest between a defined LIBOR plus 1.1% and defined LIBOR plus 3.0%, (2) a term loan which bears interest between 6.39% and 8.29% and is payable ratably in quarterly intervals until fully repaid on June 30, 2011, and (3) a demand overdraft line of credit for up to £10,000 that bears interest at the Bank of England Base Rate plus 1.75%.

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, restrict the ability of the 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, the U.K. Subsidiaries are required to comply with specified ratios and tests, each as defined in the U.K. Credit Agreement, including: a ratio of EBITDAR to interest plus rental payments (as defined), a measurement of maximum capital expenditures, and a debt to EBITDA ratio (as defined). 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 any amounts owed. As of September 30, 2010, our U.K. subsidiaries were in compliance with all covenants under the U.K. Credit Agreement.

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 the U.K. Subsidiaries’ assets are subject to security interests granted to lenders under the U.K. Credit Agreement. As of September 30, 2010, outstanding loans under the U.K. Credit Agreement amounted to £64,166 ($100,811), including £5,294 ($8,317) under the term loan.

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

7.75% Senior Subordinated Notes

In December 2006, the Company issued $375,000 aggregate principal amount of 7.75% senior subordinated notes due 2016 (the “7.75% Notes”). The 7.75% Notes are unsecured senior subordinated notes and are subordinate to all existing and future senior debt, including debt under the Company’s credit agreements, mortgages and floor plan indebtedness. The 7.75% Notes are guaranteed by substantially all of the Company’s wholly-owned domestic subsidiaries on an unsecured senior subordinated basis. Those guarantees are full and unconditional and joint and several. The Company can redeem all or some of the 7.75% Notes at its option beginning in December 2011 at specified redemption prices, or prior to December 2011 at 100% of the principal amount of the notes plus an applicable “make-whole” premium, as defined. Upon certain sales of assets or specific kinds of changes of control, the Company is required to make an offer to purchase the 7.75% Notes. The 7.75% Notes also contain customary negative covenants and events of default. As of September 30, 2010, the Company was in compliance with all negative covenants and there were no events of default.

Senior Subordinated Convertible Notes

In January 2006, the Company issued $375,000 aggregate principal amount of 3.50% senior subordinated convertible notes due 2026 (the “Convertible Notes”), of which $150,602 were outstanding at September 30, 2010. The Convertible Notes mature on April 1, 2026, unless earlier converted, redeemed or purchased by the Company, as discussed below. The Convertible Notes are unsecured senior subordinated obligations and are subordinate to all future and existing senior debt, including debt under the Company’s credit agreements, mortgages and floor plan indebtedness. The Convertible Notes are guaranteed on an unsecured senior subordinated basis by substantially all of the Company’s wholly-owned domestic subsidiaries. Those guarantees are full and unconditional and joint and several. The Convertible Notes also contain customary negative covenants and events of default. As of September 30, 2010, the Company was in compliance with all negative covenants and there were no events of default.

Holders of the Convertible Notes may convert them based on a conversion rate of 42.7796 shares of common stock per $1,000 principal amount of the Convertible Notes (which is equal to a conversion price of approximately $23.38 per share), subject to adjustment, only under the following circumstances: (1) in any quarterly period, if the closing price of the common stock for twenty of the last thirty trading days in the prior quarter exceeds $28.05 (subject to adjustment), (2) for specified periods, if the trading price of the Convertible Notes falls below specific thresholds, (3) if the Convertible Notes are called for redemption, (4) if specified distributions to holders of common stock are made or specified corporate transactions occur, (5) if a fundamental change (as defined) occurs, or (6) during the ten trading days prior to, but excluding, the maturity date.

Upon conversion of the Convertible Notes, for each $1,000 principal amount of the Convertible Notes, a holder will receive an amount in cash, equal to the lesser of (i) $1,000 or (ii) the conversion value, determined in the manner set forth in the related indenture covering the Convertible Notes, of the number of shares of common stock equal to the conversion rate. If the conversion value exceeds $1,000, the Company will also deliver, at its election, cash, common stock or a combination of cash and common stock with respect to the remaining value deliverable upon conversion.

In the event of a conversion due to a change of control on or before April 6, 2011, the Company will, in certain circumstances, pay a make-whole premium by increasing the conversion rate used in that conversion. In addition, the Company will pay additional cash interest, commencing with six-month periods beginning on April 1, 2011, if the average trading price of a Convertible Note for certain periods in the prior six-month period equals 120% or more of the principal amount of the Convertible Notes. On or after April 6, 2011, the Company may redeem the Convertible Notes, in whole at any time or in part from time to time, for cash at a redemption price of 100% of the principal amount of the Convertible Notes to be redeemed, plus any accrued and unpaid interest to the applicable redemption date.

Holders of the Convertible Notes may require the Company to purchase all or a portion of their Convertible Notes for cash on each of April 1, 2011, April 1, 2016 or April 1, 2021 at a purchase price equal to 100% of the principal amount of the Convertible Notes to be purchased, plus accrued and unpaid interest, if any, to the applicable purchase date. The Company expects to be required to redeem the Convertible Notes in April 2011. The Company currently expects to utilize cash flow from operations, working capital and availability under the U.S. Credit Agreement to redeem the Convertible Notes. Based on the ability and intent to refinance the redemption of the Convertible Notes, the Company has classified them as long-term in the Consolidated Condensed Balance Sheet as of September 30, 2010.

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

In the third quarter of 2010, the Company repurchased $43,000 principal amount of its outstanding Convertible Notes which had a book value, net of debt discount, of $41,570 for $43,323. The Company allocated $2,519 of the total consideration to the reacquisition of the equity component of the Convertible Notes. In connection with the transaction, the Company wrote off $158 of unamortized deferred financing costs. As a result, the Company recorded $607 of pre-tax gain. During the first nine months of 2010, the Company repurchased $155,658 principal amount of its outstanding Convertible Notes, which had a book value, net of debt discount, of $149,100 for $156,604. The Company allocated $10,186 of the total consideration to the reacquisition of the equity component of the Convertible Notes. In connection with these transactions, the Company wrote off $725 of unamortized deferred financing costs. As a result, the Company recorded $1,634 of pre-tax gain.

During the first nine months of 2009, the Company repurchased $68,740 principal amount of its outstanding Convertible Notes, which had a book value, net of debt discount, of $62,831 for $51,424. In connection with the transaction, the Company wrote off $672 of unamortized deferred financing costs and incurred $305 of transaction costs. No element of the consideration was allocated to the reacquisition of the equity component because the consideration paid was less than the fair value of the liability component prior to extinguishment. As a result, the Company recorded $10,429 of pre-tax gain.

The liability and equity components related to the Convertible Notes consist of the following:

		September 30,				December 31,
		2010				2009
Carrying amount of the equity component		$	35,940			$	43,093
Principal amount of the liability component		$	150,602			$	306,260
Unamortized debt discount			3,366				16,916
Net carrying amount of the liability component		$	147,236			$	289,344

The unamortized debt discount will be amortized as additional interest expense through April 1, 2011, the date the Company expects to be required to redeem the Convertible Notes. The annual effective interest rate on the liability component is 8.25%.

Mortgage Facilities

The Company is party to several mortgages which bear interest at defined rates and require monthly principal and interest payments. These mortgage facilities also contain typical events of default, including non-payment of obligations, cross-defaults to the Company’s other material indebtedness, certain change of control events, and the loss or sale of certain franchises 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 September 30, 2010, we owed $46,330 of principal under our mortgage facilities.

8. Interest Rate Swaps

The Company uses interest rate swaps to manage interest rate risk associated with the Company’s variable rate floor plan debt. The Company is party to interest rate swap agreements through January 2011, pursuant to which the LIBOR portion of $300,000 of the Company’s floating rate floor plan debt was fixed at 3.67%. We may terminate these arrangements at any time, subject to the settlement of the then current fair value of the swap arrangements.

The Company designated $290,000 of the swap agreements as cash flow hedges of future interest payments of LIBOR based U.S. floor plan borrowings. Any gain or loss related to changes in the fair value of that $290,000 of the swap agreements is reported as a component of other comprehensive income and will be reclassified into earnings when the hedged transaction affects earnings. Settlements and changes in the fair value related to the remaining $10,000 of the swap agreements are recorded as realized and unrealized gains/losses within interest expense.

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

The Company used Level 2 inputs to estimate the fair value of the interest rate swap agreements. As of September 30, 2010, the fair value of the swaps designated as hedging instruments was estimated to be a liability of $3,515, which is recorded in accrued expenses and the fair value of the swaps not designated as hedging instruments was estimated to be a liability of $121, which is recorded in accrued expenses. As of December 31, 2009, the fair value of the swaps designated as hedging instruments was estimated to be a liability of $9,963, of which $9,250 and $713 were recorded in accrued expenses and other long-term liabilities, respectively, and the fair value of the swaps not designated as hedging instruments was estimated to be a liability of $344, of which $319 and $25 were recorded in accrued expenses and other long-term liabilities, respectively.

During the nine months ended September 30, 2010, the Company recognized a net gain in accumulated other comprehensive income of $3,643 related to the effective portion of the interest rate swap agreements designated as hedging instruments, and reclassified $6,482 of the existing derivative losses from accumulated other comprehensive income into floor plan interest expense. During the nine months ended September 30, 2009, the Company recognized a net gain in accumulated other comprehensive income of $1,929 related to the effective portion of the interest rate swap agreements designated as hedging instruments, and reclassified $8,549 of existing derivative losses from accumulated other comprehensive income into floor plan interest expense. The Company expects approximately $2,278 associated with the swaps to be recognized as an increase of interest expense as the hedged interest payments become due through the swap agreement’s maturity in January 2011. During the nine months ended September 30, 2010 and 2009, the swaps increased the weighted average interest rate on the Company’s floor plan borrowings by approximately 0.8% and 0.6%, respectively.

9. Commitments and Contingent Liabilities

The Company is involved from time-to-time 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 September 30, 2010, the Company is 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 the Company’s 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 the Company’s results of operations, financial condition or cash flows.

The Company has historically structured its operations so as to minimize ownership of real property. As a result, the Company leases or subleases substantially all of its facilities. These leases are generally for a period between five and 20 years, and are typically structured to include renewal options at the Company’s election. Pursuant to the leases for some of the Company’s larger facilities, the Company is 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 the Company to post collateral in the form of a letter of credit. A breach of the other lease covenants give 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. As of September 30, 2010, the Company was in compliance with all covenants under these leases.

The Company has sold a number of dealerships to third parties and, as a condition to certain of those sales, remains liable for the lease payments relating to the properties on which those businesses operate in the event of non-payment by the buyer. The Company is also party to lease agreements on properties that it no longer uses in its retail operations that it has sublet to third parties. The Company relies on subtenants to pay the associated rent and maintain the property at these locations. In the event the subtenant does not perform as expected, the Company may not be able to recover amounts owed to it and the Company could be required to fulfill these obligations.

The Company is potentially subject to additional purchase commitments pursuant to its smart distribution agreement, smart franchise agreement and state franchise laws in the event of franchise terminations, none of which have historically had a material adverse effect on its results of operations, financial condition or cash flows. The Company does not anticipate that the purchase commitments will have a material adverse effect on its future results of operations, financial condition or cash flows, although such an outcome is possible.

The Company has $20,266 of letters of credit outstanding as of September 30, 2010, and has posted $14,384 of surety bonds in the ordinary course of business.

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

10. Equity

Comprehensive income (loss)

Other comprehensive income (loss) includes foreign currency translation gains and losses, as well as changes relating to other immaterial items, including certain defined benefit plans in the U.K. and changes in the fair value of interest rate swap agreements, each of which has been excluded from net income and reflected in equity. Total comprehensive income (loss) is summarized as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Attributable to Penske Automotive Group:
Net income		$	29,977			$	27,423			$	79,772			$	57,784
Other comprehensive income (loss):
Foreign currency translation			31,922				(9,167	)			(10,909	)			45,398
Other			(117	)			1,284				7,098				2,919
Total attributable to Penske Automotive Group			61,782				19,540				75,961				106,101
Attributable to the non-controlling interest:
Net income			283				239				504				247
Total comprehensive income		$	62,065			$	19,779			$	76,465			$	106,348

During the third quarter of 2010, the Company repurchased 68 shares at an average price of $10.97 for a total of $751.

11. Segment Information

The Company’s operations are organized by management into operating segments by line of business and geography. The Company has determined it has three reportable segments as defined in general accounting principles for segment reporting, including: (i) Retail, consisting of our automotive retail operations, (ii) Distribution, consisting of our distribution of the smart fortwo vehicle, parts and accessories in the U.S. and Puerto Rico and (iii) PAG Investments, consisting of our investments in non-retail automotive operations. The Retail reportable segment includes all automotive dealerships and all departments relevant to the operation of the dealerships and the retail automotive joint ventures. The individual dealership operations included in the Retail reportable segment have been grouped into four geographic operating segments, which 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 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 marketing practices (all distribute products and services through dealership facilities that market to customers in similar fashions).

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

The following table summarizes revenues and income from continuing operations before certain non-recurring items and income taxes, which is the measure by which management allocates resources to its segments, and which we refer to as adjusted segment income, for each of our reportable segments. Adjusted segment income excludes the item in the table below in order to enhance the comparability of segment income from period to period.

Three Months Ended September 30

										PAG				Intersegment
		Retail				Distribution				Investments				Elimination				Total
Revenues
2010		$	2,741,035			$	19,523			$	—			$	(4,436	)		$	2,756,122
2009			2,551,588				44,904				—				(8,450	)			2,588,042
Adjusted segment income
2010			45,190				(6,074	)			6,765				95				45,976
2009			42,353				(5,896	)			6,464				67				42,988

Nine Months Ended September 30

										PAG				Intersegment
		Retail				Distribution				Investments				Elimination				Total
Revenues
2010		$	7,903,158			$	66,710			$	—			$	(24,379	)		$	7,945,489
2009			6,895,400				192,413				—				(22,776	)			7,065,037
Adjusted segment income
2010			128,220				(15,276	)			10,362				(169	)			123,137
2009			78,013				1,376				9,590				(155	)			88,824

The following table reconciles total adjusted segment income to consolidated income from continuing operations before income taxes for the three and nine month periods ended September 30, 2010 and 2009.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Adjusted segment income		$	45,976			$	42,988			$	123,137			$	88,824
Gain on debt repurchase			607				—				1,634				10,429
Income from continuing operations before income taxes		$	46,583			$	42,988			$	124,771			$	99,253

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

12. Consolidating Condensed Financial Information

The following tables include consolidating condensed financial information as of September 30, 2010 and December 31, 2009 and for the three and nine month periods ended September 30, 2010 and 2009 for Penske Automotive Group, Inc. (as the issuer of the Convertible Notes and the 7.75% Notes), guarantor subsidiaries and non-guarantor subsidiaries (primarily representing foreign entities). The condensed consolidating financial information includes certain allocations of balance sheet, income statement and cash flow items which are not necessarily indicative of the financial position, results of operations or cash flows of these entities on a stand-alone basis.

CONSOLIDATING CONDENSED BALANCE SHEET
September 30, 2010

										Penske
		Total								Automotive				Guarantor				Non-Guarantor
		Company				Eliminations				Group				Subsidiaries				Subsidiaries
		(In thousands)
Cash and cash equivalents		$	6,027			$	—			$	—			$	5,029			$	998
Accounts receivable, net			367,888				(260,301	)			260,301				186,838				181,050
Inventories			1,437,939				—				—				881,349				556,590
Other current assets			109,106				—				863				65,467				42,776
Assets held for sale			584				—				—				584				—
Total current assets			1,921,544				(260,301	)			261,164				1,139,267				781,414
Property and equipment, net			731,813				—				4,809				458,854				268,150
Intangible assets			1,017,133				—				—				490,895				526,238
Equity method investments			290,735				—				236,678				—				54,057
Other long-term assets			14,372				(1,237,203	)			1,240,473				8,962				2,140
Total assets		$	3,975,597			$	(1,497,504	)		$	1,743,124			$	2,097,978			$	1,631,999
Floor plan notes payable		$	907,315			$	—			$	—			$	533,269			$	374,046
Floor plan notes payable — non-trade			474,805				—				20,300				262,925				191,580
Accounts payable			210,999				—				1,864				81,799				127,336
Accrued expenses			231,237				(260,301	)			442				131,250				359,846
Current portion of long-term debt			15,409				—				—				1,249				14,160
Liabilities held for sale			548				—				—				548				—
Total current liabilities			1,840,313				(260,301	)			22,606				1,011,040				1,066,968
Long-term debt			837,976				(76,798	)			697,737				47,743				169,294
Deferred tax liabilities			161,424				—				—				149,934				11,490
Other long-term liabilities			113,103				—				—				97,337				15,766
Total liabilities			2,952,816				(337,099	)			720,343				1,306,054				1,263,518
Total equity			1,022,781				(1,160,405	)			1,022,781				791,924				368,481
Total liabilities and equity		$	3,975,597			$	(1,497,504	)		$	1,743,124			$	2,097,978			$	1,631,999

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

CONSOLIDATING CONDENSED BALANCE SHEET
December 31, 2009

										Penske
		Total								Automotive				Guarantor				Non-Guarantor
		Company				Eliminations				Group				Subsidiaries				Subsidiaries
		(In thousands)
Cash and cash equivalents		$	13,999			$	—			$	—			$	12,344			$	1,655
Accounts receivable, net			321,226				(230,299	)			230,299				195,748				125,478
Inventories			1,302,495				—				—				776,887				525,608
Other current assets			95,426				—				1,725				61,640				32,061
Assets held for sale			10,625				—				—				10,625				—
Total current assets			1,743,771				(230,299	)			232,024				1,057,244				684,802
Property and equipment, net			726,808				—				6,007				450,116				270,685
Intangible assets			1,011,803				—				—				570,282				441,521
Equity method investments			295,473				—				231,897				—				63,576
Other long-term assets			18,152				(1,287,938	)			1,293,067				10,848				2,175
Total assets		$	3,796,007			$	(1,518,237	)		$	1,762,995			$	2,088,490			$	1,462,759
Floor plan notes payable		$	769,657			$	—			$	—			$	448,069			$	321,588
Floor plan notes payable — non-trade			423,316				—				—				254,807				168,509
Accounts payable			189,989				—				3,268				74,610				112,111
Accrued expenses			227,294				(230,299	)			344				111,800				345,449
Current portion of long-term debt			12,442				—				—				1,033				11,409
Liabilities held for sale			7,675				—				—				7,675				—
Total current liabilities			1,630,373				(230,299	)			3,612				897,994				959,066
Long-term debt			933,966				(59,706	)			813,344				43,066				137,262
Deferred tax liabilities			157,500				—				—				145,551				11,949
Other long-term liabilities			128,129				—				—				123,154				4,975
Total liabilities			2,849,968				(290,005	)			816,956				1,209,765				1,113,252
Total equity			946,039				(1,228,232	)			946,039				878,725				349,507
Total liabilities and equity		$	3,796,007			$	(1,518,237	)		$	1,762,995			$	2,088,490			$	1,462,759

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

CONSOLIDATING CONDENSED STATEMENT OF INCOME
Three Months Ended September 30, 2010

										Penske
		Total								Automotive				Guarantor				Non-Guarantor
		Company				Eliminations				Group				Subsidiaries				Subsidiaries
		(In thousands)
Revenues		$	2,756,122			$	—			$	—			$	1,605,210			$	1,150,912
Cost of sales			2,326,269				—				—				1,340,958				985,311
Gross profit			429,853				—				—				264,252				165,601
Selling, general, and administrative expenses			355,920				—				4,547				219,476				131,897
Depreciation			12,403				—				241				7,073				5,089
Operating income (loss)			61,530				—				(4,788	)			37,703				28,615
Floor plan interest expense			(9,048	)			—				(380	)			(6,218	)			(2,450	)
Other interest expense			(12,229	)			—				(7,471	)			(558	)			(4,200	)
Debt discount amortization			(1,647	)			—				(1,647	)			—				—
Equity in earnings of affiliates			7,370				—				6,441				—				929
Gain on debt repurchase			607				—				607				—				—
Equity in earnings of subsidiaries			—				(53,538	)			53,538				—				—
Income from continuing operations before income taxes			46,583				(53,538	)			46,300				30,927				22,894
Income taxes			(15,279	)			17,668				(15,279	)			(11,046	)			(6,622	)
Income from continuing operations			31,304				(35,870	)			31,021				19,881				16,272
Loss from discontinued operations, net of tax			(1,044	)			1,044				(1,044	)			(1,044	)			—
Net income			30,260				(34,826	)			29,977				18,837				16,272
Less: Income attributable to the non-controlling interests			283				—				—				—				283
Net income attributable to Penske Automotive Group common stockholders		$	29,977			$	(34,826	)		$	29,977			$	18,837			$	15,989