Penske Automotive (PAG) - 2022 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION This section presents Penske Automotive Group's consolidated financial statements and management's discussion and analysis of financial condition and operating results Item 1. Financial Statements This section includes Penske Automotive Group, Inc.'s consolidated condensed financial statements as of September 30, 2022, with detailed notes on business, accounting policies, and segment data Consolidated Condensed Balance Sheets The balance sheets show a slight increase in total assets and a decrease in cash and cash equivalents as of September 30, 2022 Consolidated Condensed Balance Sheets (As of September 30, in millions USD): | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $92.3 | $100.7 | | Inventory | $3,146.9 | $3,129.0 | | Total assets | $13,588.1 | $13,464.6 | | Liabilities and Equity | | | | Long-term debt | $1,561.9 | $1,392.0 | | Total liabilities | $9,500.1 | $9,369.6 | | Total equity attributable to Penske Automotive Group common stockholders | $4,063.5 | $4,070.0 | | Total equity | $4,088.0 | $4,095.0 | | Total liabilities and equity | $13,588.1 | $13,464.6 | - As of September 30, 2022, total company assets were $13.5881 billion, a slight increase from $13.4646 billion on December 31, 2021, while cash and cash equivalents decreased from $100.7 million to $92.3 million[11] Consolidated Condensed Statements of Income The income statements reflect revenue growth but a decline in net income for the three months ended September 30, 2022, with overall growth for the nine-month period Consolidated Condensed Statements of Income (In millions USD, except per share amounts): | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $6,920.7 | $6,497.3 | $20,803.0 | $19,258.6 | | Total cost of sales | $5,733.8 | $5,331.6 | $17,147.4 | $15,997.0 | | Gross profit | $1,186.9 | $1,165.7 | $3,655.6 | $3,261.6 | | Operating income | $362.7 | $377.8 | $1,152.3 | $1,000.1 | | Net income attributable to Penske Automotive Group common stockholders | $340.1 | $355.1 | $1,082.0 | $876.5 | | Basic earnings per share | $4.61 | $4.47 | $14.32 | $10.92 | | Diluted earnings per share | $4.61 | $4.47 | $14.31 | $10.92 | | Cash dividends per share | $0.53 | $0.45 | $1.50 | $1.32 | - For the three months ended September 30, 2022, total revenue increased by 6.5% to $6.9207 billion year-over-year, but net income attributable to common stockholders decreased by 4.2% to $340.1 million; basic earnings per share increased from $4.47 to $4.61[13] - For the nine months ended September 30, 2022, total revenue increased by 8.0% to $20.803 billion year-over-year, and net income attributable to common stockholders increased by 23.4% to $1.082 billion; basic earnings per share increased from $10.92 to $14.32[13] Consolidated Condensed Statements of Comprehensive Income The comprehensive income statements show a significant negative impact from foreign currency translation adjustments for both the three and nine months ended September 30, 2022 Consolidated Condensed Statements of Comprehensive Income (In millions USD): | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income | $341.5 | $356.3 | $1,086.9 | $879.8 | | Foreign currency translation adjustments | $(132.4) | $(42.6) | $(281.2) | $(40.7) | | Other comprehensive income (loss), net of tax | $(130.0) | $(42.8) | $(274.3) | $(30.3) | | Comprehensive income | $211.5 | $313.5 | $812.6 | $849.5 | | Comprehensive income attributable to Penske Automotive Group common stockholders | $211.0 | $312.7 | $809.8 | $846.9 | - For the three months ended September 30, 2022, foreign currency translation adjustments resulted in a $132.4 million loss in other comprehensive income, reducing comprehensive income from $313.5 million to $211.5 million[14] - For the nine months ended September 30, 2022, foreign currency translation adjustments resulted in a $281.2 million loss in other comprehensive income, reducing comprehensive income from $849.5 million to $812.6 million[14] Consolidated Condensed Statements of Cash Flows The cash flow statements indicate a decrease in net cash from operating activities and increased cash used in investing activities for the nine months ended September 30, 2022 Consolidated Condensed Statements of Cash Flows (Nine Months Ended September 30, in millions USD): | Activity Type | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by continuing operating activities | $1,208.2 | $1,330.4 | | Net cash used in continuing investing activities | $(584.3) | $(376.1) | | Net cash used in continuing financing activities | $(615.3) | $(881.5) | | Net change in cash and cash equivalents | $(8.4) | $69.7 | | Cash and cash equivalents at end of period | $92.3 | $119.2 | - For the nine months ended September 30, 2022, net cash provided by continuing operating activities was $1.2082 billion, a decrease from $1.3304 billion in the prior year period[16] - Net cash used in investing activities increased to $584.3 million, primarily due to acquisitions[16] - Net cash used in financing activities was $615.3 million, mainly for stock repurchases and dividend payments[16] Consolidated Condensed Statement of Equity The equity statement shows a slight decrease in total equity attributable to shareholders, with retained earnings growth offset by a significant increase in accumulated other comprehensive loss Consolidated Condensed Statement of Equity (Nine Months Ended September 30, in millions USD): | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total equity attributable to Penske Automotive Group stockholders | $4,063.5 | $4,070.0 | | Retained earnings | $4,504.5 | $4,196.6 | | Accumulated other comprehensive income (loss) | $(441.0) | $(168.8) | | Common stock repurchases | $(602.0) | N/A | | Dividends | $(113.6) | N/A | - As of September 30, 2022, total equity attributable to Penske Automotive Group stockholders was $4.0635 billion, a slight decrease from $4.0700 billion on December 31, 2021[22] - Retained earnings increased to $4.5045 billion, but accumulated other comprehensive loss significantly increased to $441.0 million due to foreign currency translation adjustments[22] Notes to Consolidated Condensed Financial Statements These notes provide detailed information on the company's business operations, accounting policies, segment performance, and financial instruments - The company is a diversified international transportation services company, operating dealerships primarily in the US, UK, Canada, Germany, Italy, and Japan, and is one of North America's largest Freightliner commercial truck retailers[27][108] - The company also distributes and retails commercial vehicles, diesel and gas engines, power systems, and related parts and services, primarily in Australia and New Zealand, and holds a 28.9% equity interest in Penske Transportation Solutions[27][108] - As of September 30, 2022, the company operated 340 retail automotive franchises and 21 CarShop used vehicle dealerships[28][110] - For the nine months ended September 30, 2022, 57% of retail automotive dealership revenue was from the US and Puerto Rico, with 43% from outside the US, and 70% of retail automotive franchise revenue came from premium brands like Audi, BMW, Land Rover, Mercedes-Benz, and Porsche[28][110] - In the first nine months of 2022, the company acquired 19 retail automotive franchises (15 in the UK, 4 in the US), opened two new franchises, and closed one UK franchise[30][31][73][112][114] - The company also acquired TEAM Truck Centres, adding 4 heavy and medium-duty Freightliner and Western Star commercial truck dealerships[30][31][73][112][114] - Penske Transportation Solutions (PTS) is the umbrella brand for Penske Truck Leasing Co., L.P. (PTL), offering full-service truck leasing, truck rental, contract maintenance, and logistics services, with the company holding a 28.9% equity interest accounted for using the equity method[34][116] - The fair value of the company's financial instruments approximates their carrying value, with fixed-rate debt fair values estimated using market prices or present value techniques based on current market rates[38][39] - Penske Transportation Solutions adopted ASU No. 2016-02, "Leases (Topic 842)," on January 1, 2022, resulting in a $121.6 million after-tax cumulative effect adjustment to the company's retained earnings[42] - The company is evaluating the impact of the LIBOR transition to alternative reference rates and does not expect a material impact on its consolidated financial position, results of operations, or cash flows[43][44] Retail Automotive Dealership Revenue by Product Type and Geography (Three Months Ended September 30, in millions USD): | Product Type | 2022 | 2021 | | :--- | :--- | :--- | | New vehicles | $2,395.2 | $2,275.2 | | Used vehicles | $2,208.8 | $2,302.3 | | Finance and insurance, net | $208.1 | $202.7 | | Service and parts | $609.8 | $555.3 | | Fleet and wholesale | $335.9 | $299.4 | | Total | $5,757.8 | $5,634.9 | Retail Automotive Dealership Revenue by Geography (Three Months Ended September 30, in millions USD): | Geography | 2022 | 2021 | | :--- | :--- | :--- | | United States | $3,400.8 | $3,271.2 | | United Kingdom | $2,002.0 | $2,055.2 | | Germany, Italy, and Japan | $355.0 | $308.5 | | Total | $5,757.8 | $5,634.9 | Retail Commercial Truck Dealership Revenue by Product Type (Three Months Ended September 30, in millions USD): | Product Type | 2022 | 2021 | | :--- | :--- | :--- | | New trucks | $704.8 | $464.1 | | Used trucks | $74.2 | $81.2 | | Finance and insurance, net | $5.5 | $4.8 | | Service and parts | $223.9 | $160.9 | | Other | $11.1 | $6.3 | | Total | $1,019.5 | $717.3 | - As of September 30, 2022, total accounts receivable was $831.3 million, including $255.0 million in contracts-in-transit, $211.9 million in vehicle receivables, $157.8 million in manufacturer receivables, and $184.7 million in trade receivables; unearned revenue was $267.4 million[60] Lease Costs (Three Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Operating lease costs | $63.1 | $62.8 | | Sublease income | $(4.4) | $(5.8) | | Total lease costs | $58.7 | $57.0 | Lease Costs (Nine Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Operating lease costs | $190.3 | $187.1 | | Sublease income | $(14.1) | $(18.8) | | Total lease costs | $176.2 | $168.3 | - As of September 30, 2022, the weighted-average remaining lease term for the company's operating lease liabilities was 25 years, with a weighted-average discount rate of 6.6%; total future minimum lease payments were $5.2409 billion[69] Inventory Composition (As of September 30, in millions USD): | Inventory Type | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Retail automotive dealership new vehicles | $1,080.8 | $869.1 | | Retail automotive dealership used vehicles | $1,173.7 | $1,420.0 | | Retail automotive parts, accessories, and other | $138.6 | $126.4 | | Retail commercial truck dealership vehicles and parts | $495.9 | $436.7 | | Commercial vehicle distribution vehicles, parts, and engines | $257.9 | $276.8 | | Total inventory | $3,146.9 | $3,129.0 | - As of September 30, 2022, total inventory was $3.1469 billion, a slight increase from $3.129 billion on December 31, 2021, with a significant increase in retail automotive dealership new vehicle inventory and a decrease in used vehicle inventory[72] Cash Used for Business Combinations (Nine Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Accounts receivable | $8.3 | $— | | Inventory | $111.4 | $37.0 | | Property and equipment | $134.1 | $62.8 | | Indefinite-lived intangible assets | $160.3 | $181.3 | | Total cash used for acquisitions | $393.4 | $278.0 | - In the first nine months of 2022, the company used $393.4 million in cash for acquisitions, higher than $278.0 million in the same period of 2021, primarily for retail automotive franchises and commercial truck dealerships[73] Changes in Intangible Assets (Nine Months Ended September 30, in millions USD): | Metric | Goodwill | Other Indefinite-Lived Intangible Assets | | :--- | :--- | :--- | | Balance as of January 1, 2022 | $2,124.1 | $641.5 | | Additions | $93.7 | $66.6 | | Foreign currency translation | $(104.9) | $(27.0) | | Balance as of September 30, 2022 | $2,112.9 | $681.1 | - As of September 30, 2022, goodwill balance was $2.1129 billion, and other indefinite-lived intangible assets were $681.1 million; increases in goodwill and intangible assets primarily resulted from acquisitions in the retail automotive and retail commercial truck segments[75] - The company finances most of its commercial vehicle and new and used vehicle inventory through floorplan financing and various revolving arrangements[76] - For the first nine months of 2022, the weighted-average interest rate for floorplan financing was 1.6%, up from 1.2% in the same period of 2021[78] Long-Term Debt Composition (As of September 30, in millions USD): | Debt Type | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | 3.50% Senior Subordinated Notes (due 2025) | $545.8 | $544.7 | | 3.75% Senior Subordinated Notes (due 2029) | $494.9 | $494.3 | | Mortgage loans | $530.1 | $353.8 | | Total long-term debt | $1,637.9 | $1,474.0 | | Less: Current portion | $(76.0) | $(82.0) | | Net long-term debt | $1,561.9 | $1,392.0 | - As of September 30, 2022, total long-term debt was $1.6379 billion, an increase from $1.474 billion on December 31, 2021, primarily due to increased mortgage loans[80] - The company has financial covenants and default provisions in its credit agreements and mortgage loan agreements in the US, UK, and Australia, and was in compliance with all covenants as of September 30, 2022[82][85][87][90][91] - As of September 30, 2022, the company had $27.6 million in outstanding letters of credit and $21.5 million in performance bonds[96] - In the first nine months of 2022, the company repurchased 5,529,462 shares of common stock for a total of $584.8 million, at an average price of $105.75 per share[97][98] - The Board of Directors increased the stock repurchase authorization by $250 million in July and October 2022, respectively[97][98] Changes in Accumulated Other Comprehensive Income (Loss) (Nine Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Balance as of December 31, 2021 | $(168.8) | $(160.6) | | Foreign currency translation adjustments | $(279.1) | $(40.0) | | Other | $6.9 | $6.6 | | Balance as of September 30, 2022 | $(441.0) | $(190.2) | - As of September 30, 2022, accumulated other comprehensive loss was $441.0 million, a significant increase from $168.8 million on December 31, 2021, primarily due to negative foreign currency translation adjustments[101] Segment Revenue and Segment Income (Three Months Ended September 30, in millions USD): | Segment | 2022 Revenue | 2021 Revenue | 2022 Segment Income | 2021 Segment Income | | :--- | :--- | :--- | :--- | :--- | | Retail Automotive | $5,757.8 | $5,634.9 | $269.2 | $299.6 | | Retail Commercial Truck | $1,019.5 | $717.3 | $52.8 | $48.3 | | Other | $143.4 | $145.1 | $9.6 | $9.8 | | Non-Automotive Investments | $— | $— | $135.6 | $118.4 | | Total | $6,920.7 | $6,497.3 | $467.2 | $476.1 | Segment Revenue and Segment Income (Nine Months Ended September 30, in millions USD): | Segment | 2022 Revenue | 2021 Revenue | 2022 Segment Income | 2021 Segment Income | | :--- | :--- | :--- | :--- | :--- | | Retail Automotive | $17,784.3 | $17,039.4 | $880.9 | $772.9 | | Retail Commercial Truck | $2,580.5 | $1,777.3 | $163.6 | $115.5 | | Other | $438.2 | $441.9 | $28.9 | $24.2 | | Non-Automotive Investments | $— | $— | $391.0 | $274.8 | | Total | $20,803.0 | $19,258.6 | $1,464.4 | $1,187.4 | - For the first nine months of 2022, the retail automotive segment contributed $17.7843 billion in revenue and $880.9 million in segment income, while the retail commercial truck segment contributed $2.5805 billion in revenue and $163.6 million in segment income[106] - The non-automotive investments segment (primarily PTS) contributed $391.0 million in segment income[106] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial performance, market outlook, and operational results, highlighting revenue growth, acquisition activities, and the impact of foreign currency fluctuations Overview Penske Automotive Group is a diversified international transportation services company, operating as a leading automotive and commercial truck retailer globally - Penske Automotive Group is a diversified international transportation services company, one of the world's leading automotive and commercial truck retailers, with operations in the US, UK, Canada, Germany, Italy, and Japan[108] - The company is also one of North America's largest Freightliner commercial truck retailers and distributes and retails commercial vehicles, diesel and gas engines, power systems, and related parts and services in Australia and New Zealand[108] - Additionally, the company holds a 28.9% equity interest in Penske Transportation Solutions[108] Business Overview The business overview highlights the company's revenue and gross profit contributions from its retail automotive, commercial truck, and non-automotive investment segments 2022 Nine-Month Business Revenue and Gross Profit (In billions USD): | Business Type | Revenue | Gross Profit | | :--- | :--- | :--- | | Retail automotive dealerships | $17.8 | $3.1 | | Retail commercial truck dealerships | $2.6 | $0.4169 | | Commercial vehicle distribution and other | $0.4382 | $0.1211 | | Total | $20.8 | $3.7 | - For the first nine months of 2022, the company's total revenue reached $20.8 billion, with a gross profit of $3.7 billion[109] - Retail automotive dealerships contributed 85.5% of total revenue and 85.3% of total gross profit[109][113][114][115] - Retail commercial truck dealerships contributed 12.4% of total revenue and 11.4% of total gross profit[109][113][114][115] - Penske Australia contributed 2.1% of total revenue and 3.3% of total gross profit[109][113][114][115] - In the first nine months of 2022, the company acquired 19 retail automotive franchises (15 in the UK, 4 in the US), opened two new franchises, and closed one UK franchise[112][114] - The company also acquired TEAM Truck Centres, adding 4 heavy and medium-duty Freightliner and Western Star commercial truck dealerships[112][114] - Equity earnings from Penske Transportation Solutions (PTS) significantly increased to $390.6 million in the first nine months of 2022, up from $274.5 million in the same period of 2021, driven by strong demand and profitability in commercial rental and full-service leasing, and favorable used truck remarketing performance[116] Outlook The outlook discusses market trends, inventory levels, regulatory changes impacting vehicle sales, and the performance expectations for commercial truck and transportation solutions segments - For the first nine months of 2022, US new light vehicle sales decreased by 13.0% year-over-year, and UK new vehicle registrations decreased by 8.2%, primarily due to supply chain disruptions from COVID-19, microchip shortages, and production interruptions from the war in Ukraine, leading to reduced new vehicle availability[117] - As of September 30, 2022, the company's new vehicle inventory was 23 days' supply, and used vehicle inventory was 44 days' supply[117] - New vehicle inventory and parts supply disruptions are expected to continue until certain component supplies improve, after which new and used vehicle gross profit margins may decline, but sales volume could increase[117] - The UK government proposed banning the sale of new gasoline engine cars and vans as early as 2030, and new gasoline hybrid engine cars and vans as early as 2035[119] - For the first nine months of 2022, electric vehicles (BEV, PHEV, HEV) accounted for 32.4% of new vehicle registrations in the UK, and 22.6% of the company's UK new vehicle sales[119] - For the first nine months of 2022, North American Class 6-8 medium and heavy-duty truck sales increased by 7.5% to 321,144 units year-over-year, with strong market demand but facing similar production and supply chain challenges as the automotive market[120] - Penske Australia saw a 16.3% increase in Australian heavy-duty truck market sales and a 23.6% increase in New Zealand market sales for the first nine months of 2022[121] - Penske Transportation Solutions (PTS) fleet size has exceeded 400,000 trucks, tractors, and trailers, and is expected to continue strong performance for the remainder of 2022, driven by robust demand and profitability in commercial rental and full-service leasing, and favorable used truck remarketing performance[122] Operating Overview This section details the company's operational performance, including revenue and gross profit growth, the impact of foreign currency fluctuations, and key expense categories - Automotive and commercial truck dealership operations account for over 95% of the company's revenue and over 70% of its income before taxes[124] - Equity earnings from the PTS investment account for over 25% of the company's income before taxes[124] - The company's gross profit is influenced by the sales mix of new vehicles, used vehicles, finance and insurance products, and service and parts, with vehicle sales generally having lower gross margins and other revenue streams having higher gross margins[125] - In the third quarter of 2022, total revenue increased by 6.5% ($423.4 million), and gross profit increased by 1.8% ($21.2 million)[127] - For the first nine months of 2022, total revenue increased by 8.0% ($1.5444 billion), and gross profit increased by 12.1% ($394.0 million)[127] - Foreign currency exchange rate fluctuations negatively impacted third-quarter 2022 revenue and gross profit by $349.4 million and $50.7 million, respectively, and diluted earnings per share by approximately $0.14[128] - For the first nine months of 2022, foreign currency exchange rate fluctuations negatively impacted revenue and gross profit by $629.2 million and $87.4 million, respectively, and diluted earnings per share by approximately $0.30[128] - Excluding the impact of foreign currency exchange rate fluctuations, third-quarter 2022 revenue and gross profit increased by 11.9% and 6.2%, respectively[128] - For the first nine months of 2022, excluding foreign currency impact, revenue and gross profit increased by 11.3% and 14.8%, respectively[128] - The company's selling expenses primarily include advertising and sales personnel compensation, while general and administrative expenses include administrative, finance, legal, and management personnel compensation, rent, insurance, and utilities[129] - The company believes its expenses can be adjusted in response to economic trends[129] - Floorplan interest expense relates to the financing of new and used vehicle inventory, while other interest expense includes interest on all interest-bearing debt other than floorplan financing[131] - US regulators plan to cease mandating banks to submit LIBOR rates after June 30, 2023; the company is evaluating the impact of the LIBOR transition but cannot predict the specific impact on its cost of capital[132] Critical Accounting Policies and Estimates This section identifies the key accounting policies and estimates that rely significantly on management's judgment and assumptions, with no major changes reported this quarter - The company considers its most critical accounting policies and estimates, which rely significantly on estimates and assumptions, to include revenue recognition, goodwill and other indefinite-lived intangible assets, investments, self-insurance reserves, lease recognition, and income taxes[136] - There were no significant changes to critical accounting policies and estimates during the quarter[136] Results of Operations This section provides a detailed comparison of the company's operating results for the three and nine months ended September 30, 2022, versus the prior year Three Months Ended September 30, 2022, Compared to Three Months Ended September 30, 2021 This sub-section compares the company's financial performance for the third quarter of 2022 against the same period in 2021, detailing segment-specific revenue and profit changes Retail Automotive Dealership New Vehicle Data (Three Months Ended September 30, in millions USD, except units and per unit amounts): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | New vehicle retail units sold | 44,446 | 44,373 | 73 | 0.2% | | Same-store new vehicle retail units sold | 41,542 | 44,372 | (2,830) | (6.4)% | | New vehicle retail sales revenue | $2,395.2 | $2,275.2 | $120.0 | 5.3% | | Same-store new vehicle retail sales revenue | $2,245.8 | $2,274.8 | $(29.0) | (1.3)% | | New vehicle retail sales revenue per unit | $53,890 | $51,273 | $2,617 | 5.1% | | New vehicle gross profit | $296.8 | $264.0 | $32.8 | 12.4% | | Same-store new vehicle gross profit | $279.6 | $263.9 | $15.7 | 5.9% | | New vehicle average gross profit per unit | $6,678 | $5,948 | $730 | 12.3% | | New vehicle gross margin | 12.4% | 11.6% | 0.8% | 6.9% | - New vehicle retail units sold slightly increased by 0.2%, but same-store units decreased by 6.4%, primarily due to ongoing new vehicle supply shortages[139] - New vehicle retail sales revenue grew by 5.3%, with revenue per unit increasing by 5.1%, mainly driven by higher average selling prices[139][140] - New vehicle gross profit increased by 12.4%, with average gross profit per unit up 12.3%, and gross margin improved by 0.8 percentage points, reflecting high margins due to supply shortages[141][142][143] Retail Automotive Dealership Used Vehicle Data (Three Months Ended September 30, in millions USD, except units and per unit amounts): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Used vehicle retail units sold | 65,523 | 70,450 | (4,927) | (7.0)% | | Same-store used vehicle retail units sold | 62,395 | 70,047 | (7,652) | (10.9)% | | Used vehicle retail sales revenue | $2,208.8 | $2,302.3 | $(93.5) | (4.1)% | | Same-store used vehicle retail sales revenue | $2,112.9 | $2,293.7 | $(180.8) | (7.9)% | | Used vehicle retail sales revenue per unit | $33,711 | $32,680 | $1,031 | 3.2% | | Used vehicle gross profit | $131.3 | $193.2 | $(61.9) | (32.0)% | | Same-store used vehicle gross profit | $126.5 | $192.8 | $(66.3) | (34.4)% | | Used vehicle average gross profit per unit | $2,004 | $2,743 | $(739) | (26.9)% | | Used vehicle gross margin | 5.9% | 8.4% | (2.5)% | (29.8)% | - Used vehicle retail units sold decreased by 7.0%, with same-store units down 10.9%, primarily due to higher used vehicle prices impacting customer affordability[144] - Used vehicle retail sales revenue decreased by 4.1%, but revenue per unit increased by 3.2%[144][145] - Used vehicle gross profit significantly declined by 32.0%, with average gross profit per unit down 26.9%, and gross margin decreased by 2.5 percentage points, reflecting a more challenging used vehicle market and increased acquisition costs[146][147] Retail Automotive Dealership Finance and Insurance Data (Three Months Ended September 30, in millions USD, except units and per unit amounts): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Total retail units sold | 109,969 | 114,823 | (4,854) | (4.2)% | | Finance and insurance income | $208.1 | $202.7 | $5.4 | 2.7% | | Same-store finance and insurance income | $199.8 | $202.3 | $(2.5) | (1.2)% | | Finance and insurance income per unit | $1,892 | $1,765 | $127 | 7.2% | | Same-store finance and insurance income per unit | $1,922 | $1,768 | $154 | 8.7% | - Finance and insurance income increased by 2.7%, but same-store income decreased by 1.2%[148] - Finance and insurance income per unit increased by 7.2%, and same-store income per unit increased by 8.7%, driven by changes in sales mix (fewer leases, more purchases), higher product penetration, and increased average selling prices for new and used vehicles[148] Retail Automotive Dealership Service and Parts Data (Three Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Service and parts revenue | $609.8 | $555.3 | $54.5 | 9.8% | | Same-store service and parts revenue | $577.2 | $554.4 | $22.8 | 4.1% | | Service and parts gross profit | $359.4 | $333.7 | $25.7 | 7.7% | | Same-store service and parts gross profit | $342.4 | $333.2 | $9.2 | 2.8% | | Service and parts gross margin | 58.9% | 60.1% | (1.2)% | (2.0)% | - Service and parts revenue increased by 9.8%, with same-store revenue up 4.1%, driven by growth in customer-pay, warranty, and vehicle preparation and body shop revenue[149][150][151][152] - This growth is associated with increased vehicle miles driven and greater reliance on older vehicles due to ongoing new vehicle supply shortages[149][150][151][152] - Service and parts gross profit increased by 7.7%, with same-store gross profit up 2.8%[149][150][151][152] Retail Commercial Truck Dealership New Truck Data (Three Months Ended September 30, in millions USD, except units and per unit amounts): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | New truck retail units sold | 5,365 | 3,892 | 1,473 | 37.8% | | Same-store new truck retail units sold | 4,881 | 3,892 | 989 | 25.4% | | New truck retail sales revenue | $704.8 | $464.1 | $240.7 | 51.9% | | New truck retail sales revenue per unit | $131,361 | $119,243 | $12,118 | 10.2% | | New truck gross profit | $36.4 | $22.2 | $14.2 | 64.0% | | New truck average gross profit per unit | $6,787 | $5,700 | $1,087 | 19.1% | | New truck gross margin | 5.2% | 4.8% | 0.4% | 8.3% | - New truck retail units sold increased by 37.8%, with same-store units up 25.4%, driven by increased demand for medium and heavy-duty truck replacements and recovery from 2021 production delays[153] - New truck retail sales revenue increased by 51.9%, with revenue per unit up 10.2%, primarily due to manufacturer surcharges and increased costs[153][154] - New truck gross profit increased by 64.0%, with average gross profit per unit up 19.1%, and gross margin improved by 0.4 percentage points, reflecting increased customer demand and limited new truck supply[155][156][157] Retail Commercial Truck Dealership Used Truck Data (Three Months Ended September 30, in millions USD, except units and per unit amounts): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Used truck retail units sold | 666 | 928 | (262) | (28.2)% | | Same-store used truck retail units sold | 592 | 928 | (336) | (36.2)% | | Used truck retail sales revenue | $74.2 | $81.2 | $(7.0) | (8.6)% | | Used truck retail sales revenue per unit | $111,451 | $87,552 | $23,899 | 27.3% | | Used truck gross profit | $(4.3) | $16.5 | $(20.8) | (126.1)% | | Used truck average gross profit per unit | $(6,396) | $17,762 | $(24,158) | (136.0)% | | Used truck gross margin | (5.8)% | 20.3% | (26.1)% | (128.6)% | - Used truck retail units sold decreased by 28.2%, with same-store units down 36.2%, primarily due to decreased freight service demand and increased used truck acquisition costs[158] - Used truck retail sales revenue decreased by 8.6%, but revenue per unit increased by 27.3%[158][159] - Used truck gross profit significantly declined by 126.1% to a negative value, with average gross profit per unit down 136.0%, and gross margin decreased by 26.1 percentage points, mainly due to decreased freight demand and higher acquisition costs[160][161] Retail Commercial Truck Dealership Service and Parts Data (Three Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Service and parts revenue | $223.9 | $160.9 | $63.0 | 39.2% | | Same-store service and parts revenue | $197.1 | $160.6 | $36.5 | 22.7% | | Service and parts gross profit | $95.3 | $67.8 | $27.5 | 40.6% | | Same-store service and parts gross profit | $84.5 | $67.7 | $16.8 | 24.8% | | Service and parts gross margin | 42.6% | 42.1% | 0.5% | 1.2% | - Service and parts revenue increased by 39.2%, with same-store revenue up 22.7%, driven by growth in customer-pay and warranty revenue, associated with continued limited new truck supply leading to greater reliance on older trucks[162][163][164] - Service and parts gross profit increased by 40.6%, with same-store gross profit up 24.8%[162][163][164] Penske Australia Data (Three Months Ended September 30, in millions USD, except units): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Commercial vehicle units (wholesale and retail) | 248 | 444 | (196) | (44.1)% | | Power systems units | 350 | 304 | 46 | 15.1% | | Sales revenue | $143.4 | $145.1 | $(1.7) | (1.2)% | | Gross profit | $40.3 | $39.5 | $0.8 | 2.0% | - Penske Australia sales revenue decreased by 1.2%, but gross profit increased by 2.0%[165] - Excluding foreign currency exchange rate fluctuations, revenue increased by 7.0%, driven by growth in energy solutions and mining product lines, and service and parts sales[166] - Gross profit increased by 10.1%, primarily due to higher gross profit per unit in commercial vehicle and power generation product lines[166] Selling, General and Administrative Expenses Data (Three Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Personnel expenses | $491.9 | $472.5 | $19.4 | 4.1% | | Advertising expenses | $29.5 | $31.7 | $(2.2) | (6.9)% | | Rent and related expenses | $92.4 | $88.3 | $4.1 | 4.6% | | Other expenses | $178.9 | $165.2 | $13.7 | 8.3% | | Total SG&A expenses | $792.7 | $757.7 | $35.0 | 4.6% | | Same-store SG&A expenses | $748.6 | $755.5 | $(6.9) | (0.9)% | | Total SG&A expenses as a percentage of gross profit | 66.8% | 65.0% | 1.8% | 2.8% | - Total selling, general and administrative (SG&A) expenses increased by 4.6%, but same-store SG&A expenses decreased by 0.9%[168] - SG&A as a percentage of gross profit increased from 65.0% to 66.8%, primarily due to inflationary effects on personnel, rent, and other expenses, and increased management compensation[168] Depreciation (Three Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Depreciation | $31.5 | $30.2 | $1.3 | 4.3% | - Depreciation expense increased by 4.3%, primarily due to a $2.0 million increase from net acquisitions, partially offset by a $0.7 million decrease in same-store depreciation[169] Floorplan Interest Expense (Three Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Floorplan interest expense | $13.8 | $6.0 | $7.8 | 130.0% | - Floorplan interest expense significantly increased by 130.0%, primarily due to higher applicable interest rates and increased outstanding floorplan financing amounts[170] Other Interest Expense (Three Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Other interest expense | $17.9 | $16.2 | $1.7 | 10.5% | - Other interest expense increased by 10.5%, primarily due to higher applicable interest rates[171] Equity in Earnings of Affiliates (Three Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Equity in earnings of affiliates | $136.2 | $120.5 | $15.7 | 13.0% | - Equity in earnings of affiliates increased by 13.0%, primarily driven by higher earnings from the PTS investment, partially offset by lower earnings from retail automotive joint ventures[172] Income Taxes (Three Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Income taxes | $125.7 | $120.1 | $5.6 | 4.7% | - Income taxes increased by 4.7%, despite a decrease in income before taxes, as the effective tax rate increased from 25.2% to 26.9%, primarily due to fluctuations in the mix of income before taxes by geographic region[173] Nine Months Ended September 30, 2022, Compared to Nine Months Ended September 30, 2021 This sub-section compares the company's financial performance for the nine months ended September 30, 2022, against the same period in 2021, detailing segment-specific revenue and profit changes Retail Automotive Dealership New Vehicle Data (Nine Months Ended September 30, in millions USD, except units and per unit amounts): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | New vehicle retail units sold | 135,489 | 152,571 | (17,082) | (11.2)% | | Same-store new vehicle retail units sold | 127,950 | 152,051 | (24,101) | (15.9)% | | New vehicle retail sales revenue | $7,286.7 | $7,507.9 | $(221.2) | (2.9)% | | Same-store new vehicle retail sales revenue | $6,860.1 | $7,464.4 | $(604.3) | (8.1)% | | New vehicle retail sales revenue per unit | $53,780 | $49,209 | $4,571 | 9.3% | | New vehicle gross profit | $920.5 | $745.6 | $174.9 | 23.5% | | Same-store new vehicle gross profit | $865.1 | $740.2 | $124.9 | 16.9% | | New vehicle average gross profit per unit | $6,793 | $4,887 | $1,906 | 39.0% | | New vehicle gross margin | 12.6% | 9.9% | 2.7% | 27.3% | - New vehicle retail units sold decreased by 11.2%, with same-store units down 15.9%, primarily due to ongoing new vehicle supply shortages[174] - New vehicle retail sales revenue decreased by 2.9%, but revenue per unit increased by 9.3%, mainly driven by higher average selling prices[174][175] - New vehicle gross profit increased by 23.5%, with average gross profit per unit up 39.0%, and gross margin improved by 2.7 percentage points, reflecting high margins due to supply shortages[176][177] Retail Automotive Dealership Used Vehicle Data (Nine Months Ended September 30, in millions USD, except units and per unit amounts): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Used vehicle retail units sold | 203,748 | 205,601 | (1,853) | (0.9)% | | Same-store used vehicle retail units sold | 193,597 | 203,791 | (10,194) | (5.0)% | | Used vehicle retail sales revenue | $7,019.5 | $6,437.9 | $581.6 | 9.0% | | Same-store used vehicle retail sales revenue | $6,691.7 | $6,379.9 | $311.8 | 4.9% | | Used vehicle retail sales revenue per unit | $34,452 | $31,312 | $3,140 | 10.0% | | Used vehicle gross profit | $442.3 | $496.7 | $(54.4) | (11.0)% | | Same-store used vehicle gross profit | $423.4 | $492.2 | $(68.8) | (14.0)% | | Used vehicle average gross profit per unit | $2,171 | $2,416 | $(245) | (10.1)% | | Used vehicle gross margin | 6.3% | 7.7% | (1.4)% | (18.2)% | - Used vehicle retail units sold decreased by 0.9%, with same-store units down 5.0%, primarily due to higher used vehicle prices impacting affordability in the US market, though UK sales increased due to eased COVID-19 restrictions[178] - Used vehicle retail sales revenue increased by 9.0%, with revenue per unit up 10.0%[178][179] - Used vehicle gross profit decreased by 11.0%, with average gross profit per unit down 10.1%, and gross margin decreased by 1.4 percentage points, reflecting a more challenging used vehicle market and increased acquisition costs[180][181][182] Retail Automotive Dealership Finance and Insurance Data (Nine Months Ended September 30, in millions USD, except units and per unit amounts): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Total retail units sold | 339,237 | 358,172 | (18,935) | (5.3)% | | Finance and insurance income | $646.8 | $583.8 | $63.0 | 10.8% | | Same-store finance and insurance income | $621.9 | $579.5 | $42.4 | 7.3% | | Finance and insurance income per unit | $1,907 | $1,630 | $277 | 17.0% | | Same-store finance and insurance income per unit | $1,934 | $1,629 | $305 | 18.7% | - Finance and insurance income increased by 10.8%, with same-store income up 7.3%[183] - Finance and insurance income per unit increased by 17.0%, and same-store income per unit increased by 18.7%, driven by changes in sales mix (fewer leases, more purchases), higher product penetration, and increased average selling prices for new and used vehicles[183] Retail Automotive Dealership Service and Parts Data (Nine Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Service and parts revenue | $1,793.0 | $1,604.7 | $188.3 | 11.7% | | Same-store service and parts revenue | $1,704.1 | $1,593.4 | $110.7 | 6.9% | | Service and parts gross profit | $1,069.1 | $976.1 | $93.0 | 9.5% | | Same-store service and parts gross profit | $1,019.8 | $968.4 | $51.4 | 5.3% | | Service and parts gross margin | 59.6% | 60.8% | (1.2)% | (2.0)% | - Service and parts revenue increased by 11.7%, with same-store revenue up 6.9%, driven by growth in customer-pay and vehicle preparation and body shop revenue, associated with increased vehicle miles driven and greater reliance on older vehicles due to ongoing new vehicle supply shortages[184][185][186] - Service and parts gross profit increased by 9.5%, with same-store gross profit up 5.3%[184][185][186] Retail Commercial Truck Dealership New Truck Data (Nine Months Ended September 30, in millions USD, except units and per unit amounts): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | New truck retail units sold | 12,751 | 9,371 | 3,380 | 36.1% | | Same-store new truck retail units sold | 10,018 | 8,013 | 2,005 | 25.0% | | New truck retail sales revenue | $1,623.8 | $1,110.8 | $513.0 | 46.2% | | New truck retail sales revenue per unit | $127,341 | $118,532 | $8,809 | 7.4% | | New truck gross profit | $91.9 | $56.0 | $35.9 | 64.1% | | New truck average gross profit per unit | $7,204 | $5,978 | $1,226 | 20.5% | | New truck gross margin | 5.7% | 5.0% | 0.7% | 14.0% | - New truck retail units sold increased by 36.1%, with same-store units up 25.0%, driven by increased demand for medium and heavy-duty truck replacements and recovery from 2021 production delays[187] - New truck retail sales revenue increased by 46.2%, with revenue per unit up 7.4%, primarily due to manufacturer surcharges and increased costs[187][188] - New truck gross profit increased by 64.1%, with average gross profit per unit up 20.5%, and gross margin improved by 0.7 percentage points, reflecting increased customer demand and limited new truck supply[189][190] Retail Commercial Truck Dealership Used Truck Data (Nine Months Ended September 30, in millions USD, except units and per unit amounts): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Used truck retail units sold | 2,146 | 2,601 | (455) | (17.5)% | | Same-store used truck retail units sold | 1,679 | 2,487 | (808) | (32.5)% | | Used truck retail sales revenue | $253.2 | $191.2 | $62.0 | 32.4% | | Used truck retail sales revenue per unit | $118,011 | $73,515 | $44,496 | 60.5% | | Used truck gross profit | $17.5 | $32.4 | $(14.9) | (46.0)% | | Used truck average gross profit per unit | $8,147 | $12,459 | $(4,312) | (34.6)% | | Used truck gross margin | 6.9% | 16.9% | (10.0)% | (59.2)% | - Used truck retail units sold decreased by 17.5%, with same-store units down 32.5%, primarily due to decreased freight service demand and increased used truck acquisition costs[191] - Used truck retail sales revenue increased by 32.4%, with revenue per unit up 60.5%[191][192] - Used truck gross profit decreased by 46.0%, with average gross profit per unit down 34.6%, and gross margin decreased by 10.0 percentage points, mainly due to decreased freight demand and higher acquisition costs[193][194][195] Retail Commercial Truck Dealership Service and Parts Data (Nine Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Service and parts revenue | $640.5 | $442.8 | $197.7 | 44.6% | | Same-store service and parts revenue | $493.1 | $398.3 | $94.8 | 23.8% | | Service and parts gross profit | $271.4 | $186.8 | $84.6 | 45.3% | | Same-store service and parts gross profit | $210.2 | $169.1 | $41.1 | 24.3% | | Service and parts gross margin | 42.4% | 42.2% | 0.2% | 0.5% | - Service and parts revenue increased by 44.6%, with same-store revenue up 23.8%, driven by growth in customer-pay and warranty revenue, associated with continued limited new truck supply leading to greater reliance on older trucks[196][197][198] - Service and parts gross profit increased by 45.3%, with same-store gross profit up 24.3%[196][197][198] Penske Australia Data (Nine Months Ended September 30, in millions USD, except units): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Commercial vehicle units (wholesale and retail) | 943 | 1,139 | (196) | (17.2)% | | Power systems units | 1,060 | 828 | 232 | 28.0% | | Sales revenue | $438.2 | $441.9 | $(3.7) | (0.8)% | | Gross profit | $121.1 | $112.4 | $8.7 | 7.7% | - Penske Australia sales revenue decreased by 0.8%, but gross profit increased by 7.7%[199] - Excluding foreign currency exchange rate fluctuations, revenue increased by 6.8%, driven by growth in energy solutions and mining product lines, and service and parts sales[200][201] - Gross profit increased by 15.8%, primarily due to higher gross profit per unit in commercial vehicle and power generation product lines[200][201] Selling, General and Administrative Expenses Data (Nine Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Personnel expenses | $1,503.6 | $1,349.5 | $154.1 | 11.4% | | Advertising expenses | $92.4 | $89.8 | $2.6 | 2.9% | | Rent and related expenses | $276.1 | $250.9 | $25.2 | 10.0% | | Other expenses | $536.1 | $481.6 | $54.5 | 11.3% | | Total SG&A expenses | $2,408.2 | $2,171.8 | $236.4 | 10.9% | | Same-store SG&A expenses | $2,254.6 | $2,141.8 | $112.8 | 5.3% | | Total SG&A expenses as a percentage of gross profit | 65.9% | 66.6% | (0.7)% | (1.1)% | - Total selling, general and administrative (SG&A) expenses increased by 10.9%, with same-store SG&A expenses up 5.3%, primarily due to inflationary effects on personnel, rent, and other expenses[202] - SG&A as a percentage of gross profit decreased from 66.6% to 65.9%, mainly due to increased gross profit across business lines, partially offset by inflationary effects and management compensation[202] Depreciation (Nine Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Depreciation | $95.1 | $89.7 | $5.4 | 6.0% | - Depreciation expense increased by 6.0%, primarily due to a $6.2 million increase from net acquisitions, partially offset by a $0.8 million decrease in same-store depreciation[203] Floorplan Interest Expense (Nine Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Floorplan interest expense | $30.3 | $23.4 | $6.9 | 29.5% | - Floorplan interest expense increased by 29.5%, primarily due to higher applicable interest rates and increased outstanding floorplan financing amounts[204] Other Interest Expense (Nine Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Other interest expense | $51.4 | $53.8 | $(2.4) | (4.5)% | - Other interest expense decreased by 4.5%, primarily due to reduced revolving borrowings under the US credit agreement and refinancing efforts, partially offset by higher applicable interest rates[205] Equity in Earnings of Affiliates (Nine Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Equity in earnings of affiliates | $393.8 | $281.5 | $112.3 | 39.9% | - Equity in earnings of affiliates increased by 39.9%, primarily driven by higher earnings from the PTS investment, partially offset by lower earnings from a Japanese joint venture[206] Income Taxes (Nine Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Income taxes | $377.5 | $308.0 | $69.5 | 22.6% | - Income taxes increased by 22.6%, primarily due to higher income before taxes[207] - The effective tax rate decreased from 25.9% to 25.8%, mainly due to fluctuations in the mix of income before taxes by geographic region[207] Liquidity and Capital Resources This section discusses the company's cash requirements, sources of liquidity, capital allocation strategies, and compliance with debt covenants - The company's cash requirements are primarily for working capital, inventory financing, new business acquisitions, improvements and expansions of existing facilities, debt repayment, dividends, and securities repurchases[208] - Historically, cash needs have been met through cash flow from operations, borrowings under credit agreements and floorplan financing arrangements, issuance of debt securities, sale-leaseback transactions, real estate financing, and dividends and distributions from joint venture investments[208] - The company expects cash flow from operations, dividends and distributions from its PTS and joint venture investments, and available capital resources (including liquidity provided by credit agreements and floorplan financing arrangements) to be sufficient to meet existing operations and commitments for at least the next twelve months[209] - As of September 30, 2022, the company had $92.3 million in cash, $800 million available under its US credit agreement, $180.9 million (GBP 162 million) available under its UK credit agreement, $26.2 million (AUD 41 million) available under its Australian working capital loan agreement, and $66.8 million available through its Toyota Motor Credit Corporation revolving mortgage facility[214] - The Board of Directors has authorized securities repurchase programs, with an additional $250 million authorized in July and October 2022, respectively[215] - As of October 25, 2022, $268.2 million remained available for repurchases[215] Dividends Per Share (In USD): | Quarter | 2021 | 2022 | | :--- | :--- | :--- | | First Quarter | $0.43 | $0.47 | | Second Quarter | $0.44 | $0.50 | | Third Quarter | $0.45 | $0.53 | | Fourth Quarter | $0.46 | N/A | - The company announced a cash dividend of $0.57 per share payable on December 1, 2022, and expects to continue paying comparable dividends in the future[219] Long-Term Debt Obligations (As of September 30, in millions USD): | Debt Type | 2022 | | :--- | :--- | | 3.50% Senior Subordinated Notes (due 2025) | $545.8 | | 3.75% Senior Subordinated Notes (due 2029) | $494.9 | | Australian Capital Loan Agreement | $20.8 | | Australian Working Capital Loan Agreement | $5.8 | | Mortgage loans | $530.1 | | Other | $40.5 | | Total long-term debt | $1,637.9 | - As of September 30, 2022, the company's total long-term debt was $1.6379 billion, and it was in compliance with all covenants under its credit agreements[220] - The company has five primary sources of short-term borrowings: the revolving portion of the US credit agreement, the revolving portion of the UK credit agreement, the Australian working capital loan agreement, the Toyota Motor Credit Corporation revolving mortgage facility, and floorplan financing agreements for vehicle inventory[221] - For the first nine months of 2022, outstanding revolving commitments under the US credit agreement fluctuated between $0 and $235 million, under the UK credit agreement between $0 and $106.1 million, under the Australian working capital loan agreement between $0 and $18.6 million, and under the Toyota Motor Credit Corporation revolving mortgage facility between $0 and $204.4 million[223] - The company previously used interest rate swaps to manage interest rate risk on floating-rate floorplan financing debt but terminated related arrangements in November 2021[224] - PTS's partnership agreement requires quarterly distributions, and the company received $173.2 million in pro-rata cash distributions in the first nine months of 2022, with expectations to continue receiving distributions in the future[225] - The company has historically and may in the future engage in sale-leaseback transactions to finance property acquisitions and capital expenditures[226] - As of September 30, 2022, the company's total operating lease obligations were estimated at $5.2 billion, and it was in compliance with all financial covenants[227] PAG and Guarantor Subsidiaries Condensed Statements of Income Information (Nine Months Ended September 30, in millions USD): | Metric | 2022 | | :--- | :--- | | Revenue | $11,899.4 | | Gross profit | $2,265.6 | | Equity in earnings of affiliates | $390.6 | | Income from continuing operations | $825.0 | | Net income | $825.0 | PAG and Guarantor Subsidiaries Condensed Balance Sheet Information (As of September 30, in millions USD): | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Current assets | $2,494.2 | $2,245.6 | | Property and equipment, net | $1,333.2 | $1,264.9 | | Equity method investments | $1,694.3 | $1,645.6 | | Other non-current assets | $3,610.8 | $3,524.0 | | Current liabilities | $2,073.9 | $1,843.9 | | Non-current liabilities | $4,031.4 | $3,858.9 | Cash Flow Summary (Nine Months Ended September 30, in millions USD): | Activity Type | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by continuing operating activities | $1,208.2 | $1,330.4 | | Net cash used in continuing investing activities | $(584.3) | $(376.1) | | Net cash used in continuing financing activities | $(615.3) | $(881.5) | | Net change in cash and cash equivalents | $(8.4) | $69.7 | - For the first nine months of 2022, net cash provided by continuing operating activities was $1.2082 billion, net cash used in continuing investing activities was $584.3 million, and net cash used in continuing financing activities was $615.3 million[234] - The net change in cash and cash equivalents was a negative $8.4 million[234] Net Cash Provided by Continuing Operating Activities Including All Floorplan Financing (Nine Months Ended September 30, in millions USD): | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Reported net cash provided by continuing operating activities | $1,208.2 | $1,330.4 | | Reported non-trade floorplan notes payable | $(85.5) | $(288.9) | | Net cash provided by continuing operating activities including all floorplan financing | $1,122.7 | $1,041.5 | - For the first nine months of 2022, capital expenditures were $195.7 million, and net acquisitions and other investments were $393.4 million[239][241][242] - The company repurchased 5.5 million shares of common stock and paid $113.6 million in cash dividends[239][241][242] Cyclicality This section addresses the cyclical nature of automotive and truck sales, influenced by economic conditions, and the company's strategies to mitigate these impacts - Automotive and truck sales are historically cyclical, influenced by overall economic conditions, consumer confidence, disposable income levels, inflation rates, fuel prices, interest rates, and credit availability[249] - The company mitigates the impact of adverse economic conditions through geographic diversification, focus on high-margin service and parts revenue, and a diversified customer base[250] Seasonality This section describes the moderate seasonality of the company's business, with higher vehicle sales typically occurring in specific quarters for its US and UK operations - The company's business generally experiences moderate seasonality[251] - US operations typically see higher vehicle sales in the second and third quarters, while UK operations generally experience higher new vehicle sales in the first and third quarters, influenced by new vehicle registration practices[251] Inflation This section discusses the impact of high inflation on vehicle and parts pric