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

For the quarterly period ended March 31, 2010

or

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.

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)

Registrant’s telephone number, including area code:
(248) 648-2500

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 o 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 May 1, 2010, there were 92,142,497 shares of voting common stock outstanding.

 

 

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of March 31, 2010 and December 31, 2009			3
Consolidated Condensed Statements of Income for the three months ended March 31, 2010 and 2009			4
Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2010 and 2009			5
Consolidated Condensed Statement of Equity for the three months ended March 31, 2010			6
Notes to Consolidated Condensed Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative & Qualitative Disclosures About Market Risk			36
Item 4. Controls and Procedures			36
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			37
Item 6. Exhibits			37
Exhibit 12
Exhibit 31.1
Exhibit 31.2
Exhibit 32

PENSKE AUTOMOTIVE GROUP, INC.

		March 31,				December 31,
		2010				2009
		(Unaudited)
		(In thousands, except
		per share amounts)
ASSETS
Cash and cash equivalents		$	23,543			$	13,769
Accounts receivable, net of allowance for doubtful accounts of $1,620 and $1,694			378,395				322,598
Inventories			1,384,231				1,306,532
Other current assets			103,821				95,560
Assets held for sale			6,302				5,005
Total current assets			1,896,292				1,743,464
Property and equipment, net			720,575				726,835
Goodwill			802,833				810,323
Franchise value			201,534				201,756
Equity method investments			276,055				295,473
Other long-term assets			18,886				18,156
Total assets		$	3,916,175			$	3,796,007
LIABILITIES AND EQUITY
Floor plan notes payable		$	868,226			$	772,926
Floor plan notes payable — non-trade			488,362				423,316
Accounts payable			213,541				190,325
Accrued expenses			235,114				227,725
Current portion of long-term debt			16,611				12,442
Liabilities held for sale			4,616				3,083
Total current liabilities			1,826,470				1,629,817
Long-term debt			862,785				933,966
Deferred tax liability			156,178				157,500
Other long-term liabilities			127,713				128,685
Total liabilities			2,973,146				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; 92,142 shares issued and outstanding at March 31, 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			738,449				737,198
Retained earnings			216,559				196,205
Accumulated other comprehensive (loss) income			(15,473	)			9,049
Total Penske Automotive Group stockholders’ equity			939,544				942,461
Non-controlling interest			3,485				3,578
Total equity			943,029				946,039
Total liabilities and equity		$	3,916,175			$	3,796,007

See Notes to Consolidated Condensed Financial Statements

PENSKE AUTOMOTIVE GROUP, INC.

		Three Months Ended March 31,
		2010				2009
		(Unaudited)
		(In thousands, except per share amounts)
Revenue:
New vehicle		$	1,234,705			$	971,814
Used vehicle			698,771				616,727
Finance and insurance, net			59,592				48,497
Service and parts			335,207				327,526
Distribution			7,936				80,113
Fleet and wholesale			156,163				115,222
Total revenues			2,492,374				2,159,899
Cost of sales:
New vehicle			1,132,996				900,409
Used vehicle			641,872				560,629
Service and parts			146,167				150,392
Distribution			7,722				68,314
Fleet and wholesale			152,387				111,547
Total cost of sales			2,081,144				1,791,291
Gross profit			411,230				368,608
Selling, general and administrative expenses			341,644				312,941
Depreciation and amortization			12,374				12,881
Operating income			57,212				42,786
Floor plan interest expense			(8,570	)			(9,474	)
Other interest expense			(12,720	)			(14,500	)
Debt discount amortization			(2,915	)			(3,638	)
Equity in earnings of affiliates			(429	)			714
Gain on debt repurchase			605				10,429
Income from continuing operations before income taxes			33,183				26,317
Income taxes			(12,444	)			(9,857	)
Income from continuing operations			20,739				16,460
Loss from discontinued operations, net of tax			(407	)			(258	)
Net income			20,332				16,202
Less: Loss attributable to non-controlling interests			(22	)			(80	)
Net income attributable to Penske Automotive Group common stockholders		$	20,354			$	16,282
Basic earnings per share attributable to Penske Automotive Group common stockholders:
Continuing operations		$	0.23			$	0.18
Discontinued operations			0.00				0.00
Net income		$	0.22			$	0.18
Shares used in determining basic earnings per share			91,890				91,481
Diluted earnings per share attributable to Penske Automotive Group common stockholders:
Continuing operations		$	0.23			$	0.18
Discontinued operations			0.00				0.00
Net income		$	0.22			$	0.18
Shares used in determining diluted earnings per share			91,961				91,501
Amounts attributable to Penske Automotive Group common stockholders:
Income from continuing operations		$	20,739			$	16,460
Less: Loss attributable to non-controlling interests			(22	)			(80	)
Income from continuing operations, net of tax			20,761				16,540
Loss from discontinued operations, net of tax			(407	)			(258	)
Net income		$	20,354			$	16,282
Cash dividends per share		$	—			$	—

See Notes to Consolidated Condensed Financial Statements

PENSKE AUTOMOTIVE GROUP, INC.

		Three Months Ended March 31,
		2010				2009
		(Unaudited)
		(In thousands)
Operating Activities:
Net income		$	20,332			$	16,202
Adjustments to reconcile net income to net cash from continuing operating activities:
Depreciation and amortization			12,374				12,881
Debt discount amortization			2,915				3,638
Undistributed earnings of equity method investments			429				(714	)
Loss from discontinued operations, net of tax			407				258
Deferred income taxes			8,325				12,191
Gain on debt repurchase			(605	)			(10,733	)
Changes in operating assets and liabilities:
Accounts receivable			(52,050	)			(18,202	)
Inventories			(49,332	)			248,938
Floor plan notes payable			73,675				(120,776	)
Accounts payable and accrued expenses			30,226				24,922
Other			3,126				7,452
Net cash from continuing operating activities			49,822				176,057
Investing Activities:
Purchase of equipment and improvements			(19,297	)			(27,555	)
Dealership acquisitions net, including repayment of sellers’ floor plan notes payable of $7,231 and $5,784, respectively			(12,277	)			(11,476	)
Other			—				12,679
Net cash from continuing investing activities			(31,574	)			(26,352	)
Financing Activities:
Proceeds from borrowings under U.S. credit agreement revolving credit line			164,000				147,000
Repayments under U.S. credit agreement revolving credit line			(164,000	)			(77,000	)
Repayments under U.S. credit agreement term loan			—				(10,000	)
Repurchase 3.5% senior subordinated convertible notes			(71,744	)			(51,425	)
Net repayments of other long-term debt			(1,816	)			(43,333	)
Net borrowings (repayments) of floor plan notes payable — non-trade			65,046				(117,201	)
Proceeds from exercises of options, including excess tax benefit			211				—
Net cash from continuing financing activities			(8,303	)			(151,959	)
Discontinued operations:
Net cash from discontinued operating activities			(150	)			3,082
Net cash from discontinued investing activities			—				(493	)
Net cash from discontinued financing activities			(21	)			(7,382	)
Net cash from discontinued operations			(171	)			(4,793	)
Net change in cash and cash equivalents			9,774				(7,047	)
Cash and cash equivalents, beginning of period			13,769				17,108
Cash and cash equivalents, end of period		$	23,543			$	10,061
Supplemental disclosures of cash flow information:
Cash paid for:
Interest		$	13,408			$	16,416
Income taxes			7,441				533

See Notes to Consolidated Condensed Financial Statements

PENSKE AUTOMOTIVE GROUP, INC.

																		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			499,751				—				4,200				—				—				4,200				—				4,200
Exercise of options, including tax benefit of $108			25,000				—				211				—				—				211				—				211
Repurchase of 3.5% senior subordinated convertible notes			—				—				(3,160	)			—				—				(3,160	)			—				(3,160	)
Distributions to non-controlling interests			—				—				—				—				—				—				(71	)			(71	)
Foreign currency translation			—				—				—				—				(27,708	)			(27,708	)			—				(27,708	)
Other			—				—				—				—				3,186				3,186				—				3,186
Net income			—				—				—				20,354				—				20,354				(22	)			20,332
Balance, March 31, 2010			92,142,497			$	9			$	738,449			$	216,559			$	(15,473	)		$	939,544			$	3,485			$	943,029

See Notes to Consolidated Condensed Financial Statements

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. Interim Financial Statements

Basis of Presentation

The following unaudited consolidated condensed financial statements of Penske Automotive Group, Inc. (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 March 31, 2010 and December 31, 2009 and for the three month periods ended March 31, 2010 and 2009 is unaudited, but includes all adjustments which 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 March 31, 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 the quarter ended March 31, 2010 include a $605 pre-tax gain relating to the repurchase of $71,110 aggregate principal amount of the Company’s 3.5% senior subordinated convertible notes. Results for the quarter ended March 31, 2009 include a $10,429 pre-tax gain relating to the repurchase of $68,740 aggregate principal amount of the Company’s 3.5% senior subordinated convertible notes.

Discontinued Operations

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

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 it 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 during the three months ended March 31, 2010 and 2009 and the net assets as of March 31, 2010 and December 31, 2009 of dealerships accounted for as discontinued operations were immaterial.

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 for the three months ended March 31, 2010.

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 March 31, 2010, based on quoted, level one market data, follows:

		Carrying Value				Fair Value
7.75% senior subordinated notes due 2016		$	375,000			$	361,875
3.5% senior subordinated convertible notes due 2026			224,742				236,032

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

New Accounting Pronouncement

The Company adopted a new accounting pronouncement amending the consolidation guidance relating to variable interest entities (“VIE”) on January 1, 2010. The new guidance replaced the quantitative model for determining the primary beneficiary of a variable interest entity with a qualitative approach that considers which entity has the power to direct activities that most significantly impact the variable interest entity’s performance and whether the entity has an obligation to absorb losses or the right to receive benefits that could potentially be significant to the variable interest entity. The new guidance also requires: an additional reconsideration event for determining whether an entity is a VIE when holders of an at risk equity investment lose voting or similar rights to direct the activities that most significantly impact the entities economic performance; ongoing assessments of whether an enterprise is the primary beneficiary of a VIE; separate presentation of the assets and liabilities of the VIE on the balance sheet; and additional disclosures about an entity’s involvement with a VIE. The adoption of the new accounting pronouncement did not have an effect on the Company’s operating results, financial position or cash flows during the period.

2. Inventories

Inventories consisted of the following:

		March 31,				December 31,
		2010				2009
New vehicles		$	966,724			$	901,222
Used vehicles			339,576				326,376
Parts, accessories and other			77,931				78,934
Total inventories		$	1,384,231			$	1,306,532

The Company receives non-refundable credits from certain vehicle manufacturers that reduce cost of sales when the vehicles are sold. Such credits amounted to $5,783 and $4,193 during the three months ended March 31, 2010 and 2009, respectively.

3. Business Combinations

The Company’s retail operations acquired three and five franchises during the three months ended March 31, 2010 and 2009, respectively. 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 for the three months ended March 31, 2010 and 2009 follows:

		March 31,
		2010				2009
Inventory		$	8,595			$	5,815
Other current assets			17				129
Property and equipment			187				4,367
Goodwill			3,510				1,657
Franchise value			—				749
Current liabilities			(32	)			(1,241	)
Cash used in dealership acquisitions		$	12,277			$	11,476

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 $13,615 of intangible assets in connection with this transaction.

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

4. Intangible Assets

The following is a summary of the changes in the carrying amount of goodwill and franchise value during the three months ended March 31, 2010:

						Franchise
		Goodwill				Value
Balance — January 1, 2010		$	810,323			$	201,756
Additions			13,397				3,703
Foreign currency translation			(20,887	)			(3,925	)
Balance — March 31, 2010		$	802,833			$	201,534

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, primarily 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. All of the floor plan agreements 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”), the Finance House Base Rate, or the 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.

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 rights to non-forfeitable 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 stock options. 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, 2010 and 2009 follows:

		Three Months Ended March 31,
		2010				2009
Weighted average number of common shares outstanding			91,890				91,481
Effect of non-participatory equity compensation			71				20
Weighted average number of common shares outstanding, including effect of dilutive securities			91,961				91,501

There were no anti-dilutive stock options outstanding during the three months ended March 31, 2010 which were excluded from the calculation of diluted earnings per share. As of March 31, 2009, 227 stock options were excluded from the calculation of diluted earnings per share because the effect of such securities was anti-dilutive. In addition, 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 March 31, 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.

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

7. Long-Term Debt

Long-term debt consisted of the following:

		March 31,				December 31,
		2010				2009
U.S. credit agreement — term loan		$	149,000			$	149,000
U.K. credit agreement — revolving credit line			59,175				59,803
U.K. credit agreement — term loan			13,389				17,115
U.K. credit agreement — overdraft line of credit			9,398				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			224,742				289,344
Mortgage facilities			41,121				41,358
Other			7,571				2,740
Total long-term debt			879,396				946,408
Less: current portion			(16,611	)			(12,442	)
Net long-term debt		$	862,785			$	933,966

U.S. Credit Agreement

The Company is party to a $409,000 credit agreement with DCFS USA LLC and Toyota Motor Credit Corporation, as amended (the “U.S. Credit Agreement”), which provides for up to $250,000 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 $149,000, and for an additional $10,000 of availability for letters of credit, through September 30, 2012. The revolving loans bear interest at a defined LIBOR plus 2.50%, subject to an incremental 0.50% 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 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 the amounts owed. As of March 31, 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 March 31, 2010, $149,000 of term loans, $1,250 of letters of credit, and no revolving 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, as amended, 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 seasonally adjusted overdraft line of credit (collectively, the “U.K. Credit Agreement”) to be used for working capital, acquisitions, capital expenditures, investments and other general corporate purposes. The U.K. Credit Agreement provides for (1) up to £100,000 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 seasonally adjusted overdraft line of credit for up to £20,000 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 the 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 the amounts owed. As of March 31, 2010, the U.K. subsidiaries were in compliance with all covenants under the U.K. Credit Agreement.

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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 the 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 March 31, 2010, outstanding loans under the U.K. Credit Agreement amounted to £54,018 ($81,962), including £8,824 ($13,389) under the term loan.

7.75% Senior Subordinated Notes

On December 7, 2006, the Company issued $375,000 aggregate principal amount of 7.75% senior subordinated notes (the “7.75% Notes”) due 2016. 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 March 31, 2010, the Company was in compliance with all negative covenants and there were no events of default.

Senior Subordinated Convertible Notes

On January 31, 2006, the Company issued $375,000 aggregate principal amount of 3.50% senior subordinated convertible notes due 2026 (the “Convertible Notes”), of which $235,150 were outstanding at March 31, 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 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 March 31, 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. Because the Company expects to be required to redeem the Convertible Notes in April 2011, it is reviewing alternatives to refinance the Convertible Notes, which may include the issuance of additional securities. In the absence of a refinancing of the Convertible Notes, the Company expects to utilize cash flow from operations, working capital and availability under the U.S. Credit Agreement to repay the Convertible Notes. Based on the ability and intent to refinance the redemption of the Convertible Notes, the Company expects to classify them as non-current in future Consolidated Balance Sheets; however, in the event the outstanding balance of the Convertible Notes exceeds the revolving capacity under the U.S. Credit Agreement, any such excess will be classified as current in future Consolidated Balance Sheets.

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

During the three months ended March 31, 2010, the Company repurchased $71,110 principal amount of its outstanding Convertible Notes, which had a book value, net of debt discount, of $67,517 for $71,744. The Company allocated $5,229 of the total consideration to the reacquisition of the equity component of the Convertible Notes. In connection with the transactions, the Company wrote off $397 of unamortized deferred financing costs. As a result, the Company recorded a $605 pre-tax gain in connection with the repurchases.

In the first quarter 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 $51,425. 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 a $10,429 pre-tax gain in connection with the repurchase.

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

		March 31,				December 31,
		2010				2009
Carrying amount of the equity component		$	39,933			$	43,093
Principal amount of the liability component		$	235,150			$	306,260
Unamortized debt discount			10,408				16,916
Net carrying amount of the liability component		$	224,742			$	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 a $42,400 mortgage facility with respect to certain of its dealership properties that matures on October 1, 2015. The facility bears interest at a defined rate, requires monthly principal and interest payments, and includes the option to extend the term for successive periods of five years up to a maximum term of twenty-five years. In the event the Company exercises its options to extend the term, the interest rate will be renegotiated at each renewal period. The mortgage facility also contains 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 property. Substantially all of the buildings, improvements, fixtures and personal property of the properties under the mortgage facility are subject to security interests granted to the lender. As of March 31, 2010, $41,121 was outstanding under this facility.

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 7, 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.

Prior to the third quarter of 2009, the swaps were designated as cash flow hedges of future interest payments of LIBOR based U.S. floor plan borrowings and the effective portion of the gain or loss on the derivative was reported as a component of other comprehensive income and reclassified into earnings when the hedged transaction affected earnings. During the quarter ended September 30, 2009, the Company experienced declines in outstanding floor plan debt balances related to certain floor plan lenders due to significant declines in vehicle inventory levels which caused hedged floor plan balances to fall below the notional value of the swap agreements. The Company elected to de-designate these cash flow hedges on September 30, 2009, and as a result, recorded a net loss of $1,057 in floor plan interest expense in the quarter ended September 30, 2009.

The Company re-designated $290,000 of the swap agreements as cash flow hedges of future interest payments of LIBOR based U.S. floor plan borrowings and the effective portion of the gain or loss on that $290,000 of the swap agreements is reported as a component of other comprehensive income and reclassified into earnings when the hedged transaction affects earnings. Future settlements and changes in the fair value related to the undesignated $10,000 of the swap agreements will be 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 March 31, 2010, the fair value of the swaps designated as hedging instruments was estimated to be a liability of $8,258, 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. As of March 31, 2010, the fair value of the swaps not designated as hedging instruments was estimated to be a liability of $285, which is recorded in accrued expenses. As of December 31, 2009, 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 three months ended March 31, 2010, the Company recognized a net gain of $924 related to the effective portion of the interest rate swap agreements designated as hedging instruments in accumulated other comprehensive income, and reclassified $2,306 of the existing derivative losses from accumulated other comprehensive income into floor plan interest expense. During the three months ended March 31, 2009, the Company recognized a net gain of $167 related to the effective portion of the interest rate swap agreements designated as hedging instruments in accumulated other comprehensive income, and reclassified $2,413 of existing derivative losses from accumulated other comprehensive income into floor plan interest expense. The Company expects approximately $6,451 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 three months ended March 31, 2010 and 2009, the swaps increased the weighted average interest rate on the Company’s floor plan borrowings by approximately 0.2%.

9. Commitments and Contingent Liabilities

The Company is 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, 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.

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.

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 March 31,
		2010				2009
Attributable to Penske Automotive Group:
Net income		$	20,354			$	16,282
Other comprehensive income (loss):
Foreign currency translation			(27,708	)			2,208
Other			3,186				163
Total attributable to Penske Automotive Group			(4,168	)			18,653
Attributable to the non-controlling interest:
Net loss			(22	)			(80	)
Total comprehensive income (loss)		$	(4,190	)		$	18,573

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-automotive retail operations. The Retail reportable segment includes all automotive dealerships and all departments relevant to the operation of the dealerships. The individual dealership operations included in the Retail reportable segment have been grouped into five 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).

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 items in the table below in order to enhance the comparability of segment income from period to period.

										PAG				Intersegment
Three Months Ended March 31		Retail				Distribution				Investments				Elimination				Total
Revenues -
2010		$	2,484,750			$	15,124			$	—			$	(7,500	)		$	2,492,374
2009			2,079,786				88,631				—				(8,518	)			2,159,899
Adjusted segment income -
2010		$	38,758			$	(5,592	)		$	(505	)		$	(83	)		$	32,578
2009			9,141				6,305				605				(163	)			15,888

The following table reconciles total adjusted segment income to consolidated income from continuing operations before income taxes.

		Three Months Ended March 31,
		2010				2009
Adjusted segment income		$	32,578			$	15,888
Gain on debt repurchase			605				10,429
Income from continuing operations before income taxes		$	33,183			$	26,317

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 March 31, 2010 and December 31, 2009 and for the three month periods ended March 31, 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
March 31, 2010

										Penske
		Total								Automotive				Guarantor				Non-Guarantor
		Company				Eliminations				Group, Inc.				Subsidiaries				Subsidiaries
		(In thousands)
Cash and cash equivalents		$	23,543			$	—			$	—			$	18,590			$	4,953
Accounts receivable, net			378,395				(240,860	)			240,860				203,805				174,590
Inventories			1,384,231				—				—				851,833				532,398
Other current assets			103,821				—				1,252				65,283				37,286
Assets held for sale			6,302				—				—				6,302				—
Total current assets			1,896,292				(240,860	)			242,112				1,145,813				749,227
Property and equipment, net			720,575				—				5,700				458,536				256,339
Intangible assets			1,004,367				—				—				574,086				430,281
Equity method investments			276,055				—				225,775				—				50,280
Other long-term assets			18,886				(1,237,618	)			1,241,905				9,252				5,347
Total assets		$	3,916,175			$	(1,478,478	)		$	1,715,492			$	2,187,687			$	1,491,474
Floor plan notes payable		$	868,226			$	—			$	—			$	513,760			$	354,466
Floor plan notes payable — non-trade			488,362				—				21,000				292,924				174,438
Accounts payable			213,541				—				1,732				80,757				131,052
Accrued expenses			235,114				(240,860	)			989				134,952				340,033
Current portion of long-term debt			16,611				—				—				1,045				15,566
Liabilities held for sale			4,616				—				—				4,616				—
Total current liabilities			1,826,470				(240,860	)			23,721				1,028,054				1,015,555
Long-term debt			862,785				(59,194	)			748,742				43,837				129,400
Deferred tax liability			156,178				—				—				144,843				11,335
Other long-term liabilities			127,713				—				—				123,575				4,138
Total liabilities			2,973,146				(300,054	)			772,463				1,340,309				1,160,428
Total equity			943,029				(1,178,424	)			943,029				847,378				331,046
Total liabilities and equity		$	3,916,175			$	(1,478,478	)		$	1,715,492			$	2,187,687			$	1,491,474

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, Inc.				Subsidiaries				Subsidiaries
		(In thousands)
Cash and cash equivalents		$	13,769			$	—			$	—			$	12,114			$	1,655
Accounts receivable, net			322,598				(230,299	)			230,299				197,120				125,478
Inventories			1,306,532				—				—				780,924				525,608
Other current assets			95,560				—				1,725				61,774				32,061
Assets held for sale			5,005				—				—				5,005				—
Total current assets			1,743,464				(230,299	)			232,024				1,056,937				684,802
Property and equipment, net			726,835				—				6,007				450,143				270,685
Intangible assets			1,012,079				—				—				570,558				441,521
Equity method investments			295,473				—				231,897				—				63,576
Other long-term assets			18,156				(1,287,938	)			1,293,067				10,852				2,175
Total assets		$	3,796,007			$	(1,518,237	)		$	1,762,995			$	2,088,490			$	1,462,759
Floor plan notes payable		$	772,926			$	—			$	—			$	451,338			$	321,588
Floor plan notes payable — non-trade			423,316				—				—				254,807				168,509
Accounts payable			190,325				—				3,268				74,946				112,111
Accrued expenses			227,725				(230,299	)			344				112,231				345,449
Current portion of long-term debt			12,442				—				—				1,033				11,409
Liabilities held for sale			3,083				—				—				3,083				—
Total current liabilities			1,629,817				(230,299	)			3,612				897,438				959,066
Long-term debt			933,966				(59,706	)			813,344				43,066				137,262
Deferred tax liability			157,500				—				—				145,551				11,949
Other long-term liabilities			128,685				—				—				123,710				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 March 31, 2010

										Penske
		Total								Automotive				Guarantor				Non-Guarantor
		Company				Eliminations				Group, Inc.				Subsidiaries				Subsidiaries
		(In thousands)
Revenues		$	2,492,374			$	—			$	—			$	1,395,160			$	1,097,214
Cost of sales			2,081,144				—				—				1,152,108				929,036
Gross profit			411,230				—				—				243,052				168,178
Selling, general, and administrative expenses			341,644				—				4,593				208,822				128,229
Depreciation and amortization			12,374				—				290				6,960				5,124
Operating income (loss)			57,212				—				(4,883	)			27,270				34,825
Floor plan interest expense			(8,570	)			—				—				(6,110	)			(2,460	)
Other interest expense			(12,720	)			—				(8,047	)			(555	)			(4,118	)
Debt discount amortization			(2,915	)			—				(2,915	)			—				—
Equity in earnings of affiliates			(429	)			—				347				—				(776	)
Gain on debt repurchase			605				—				605				—				—
Equity in earnings of subsidiaries			—				(48,098	)			48,098				—				—
Income from continuing operations before income taxes			33,183				(48,098	)			33,205				20,605				27,471
Income taxes			(12,444	)			18,025				(12,444	)			(10,519	)			(7,506	)
Income from continuing operations			20,739				(30,073	)			20,761				10,086				19,965
(Loss) from discontinued operations, net of tax			(407	)			407				(407	)			(407	)			—
Net income			20,332				(29,666	)			20,354				9,679				19,965
Less: Loss attributable to non-controlling interests			(22	)			—				—				—				(22	)
Net income attributable to Penske Automotive Group common stockholders		$	20,354			$	(29,666	)		$	20,354			$	9,679			$	19,987

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

CONSOLIDATING CONDENSED STATEMENT OF INCOME
Three Months Ended March 31, 2009

										Penske
		Total								Automotive				Guarantor				Non-Guarantor
		Company				Eliminations				Group, Inc.				Subsidiaries				Subsidiaries
		(In thousands)
Revenues		$	2,159,899			$	—			$	—			$	1,272,670			$	887,229
Cost of sales			1,791,291				—				—				1,047,316				743,975
Gross profit			368,608				—				—				225,354				143,254
Selling, general, and administrative expenses			312,941				—				3,318				197,317				112,306
Depreciation and amortization			12,881				—				290				8,288				4,303
Operating income (loss)			42,786				—				(3,608	)			19,749				26,645
Floor plan interest expense			(9,474	)			—				—				(6,249	)			(3,225	)
Other interest expense			(14,500	)			—				(11,472	)			(29	)			(2,999	)
Debt discount amortization			(3,638	)			—				(3,638	)			—				—
Equity in earnings of affiliates			714				—				583				—				131
Gain on debt repurchase			10,429				—				10,429				—				—
Equity in earnings of subsidiaries			—				(34,103	)			34,103				—				—
Income from continuing operations before income taxes			26,317				(34,103	)			26,397				13,471				20,552
Income taxes			(9,857	)			12,735				(9,857	)			(6,985	)			(5,750	)
Income from continuing operations			16,460				(21,368	)			16,540				6,486				14,802
(Loss) income from discontinued operations, net of tax			(258	)			258				(258	)			(267	)			9
Net income			16,202				(21,110	)			16,282				6,219				14,811
Less: Loss attributable to non-controlling interests			(80	)			—				—				—				(80	)
Net income attributable to Penske Automotive Group common stockholders		$	16,282			$	(21,110	)		$	16,282			$	6,219			$	14,891

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
Three Months Ended March 31, 2010

						Penske
		Total				Automotive				Guarantor				Non-Guarantor
		Company				Group, Inc.				Subsidiaries				Subsidiaries
		(In thousands)
Net cash from continuing operating activities		$	49,822			$	50,516			$	(14,296	)		$	13,602
Investing activities:
Purchase of property and equipment			(19,297	)			17				(15,000	)			(4,314	)
Dealership acquisitions, net			(12,277	)			—				(12,277	)			—
Net cash from continuing investing activities			(31,574	)			17				(27,277	)			(4,314	)
Financing activities:
Proceeds from borrowings under U.S. credit agreement revolving credit line			164,000				164,000				—				—
Repayments under U.S. credit agreement revolving credit line			(164,000	)			(164,000	)			—				—
Repurchase 3.5% senior subordinated convertible notes			(71,744	)			(71,744	)			—				—
Net (repayments) borrowings of other long-term debt			(1,816	)			—				1,296				(3,112	)
Net borrowings of floor plan notes payable — non-trade			65,046				21,000				46,641				(2,595	)
Proceeds from exercised of options, including excess tax benefit			211				211				—				—
Distributions from (to) parent			—				—				283				(283	)
Net cash from continuing financing activities			(8,303	)			(50,533	)			48,220				(5,990	)
Net cash from discontinued operations			(171	)			—				(171	)			—
Net change in cash and cash equivalents			9,774				—				6,476				3,298
Cash and cash equivalents, beginning of period			13,769				—				12,114				1,655
Cash and cash equivalents, end of period		$	23,543			$	—			$	18,590			$	4,953