PENSKE AUTOMOTIVE GROUP, INC. Form 10-K Annual Report
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SECURITIES AND EXCHANGE COMMISSION FORM 10-K Annual report pursuant to section 13 and 15(d) Filing Date: 2019-02-22 | Period of Report: 2018-12-31 SEC Accession No. 0001558370-19-000917 (HTML Version on secdatabase.com) FILER PENSKE AUTOMOTIVE GROUP, INC. Mailing Address Business Address 2555 TELEGRAPH RD 2555 TELEGRAPH RD CIK:1019849| IRS No.: 223086739 | State of Incorp.:DE | Fiscal Year End: 1231 BLOOMFIELD HILLS MI BLOOMFIELD HILLS MI Type: 10-K | Act: 34 | File No.: 001-12297 | Film No.: 19625994 48302-0954 48302-0954 SIC: 5500 Auto dealers & gasoline stations 248-648-2500 Copyright © 2019 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10‑K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1‑12297 Penske Automotive Group, Inc. (Exact name of registrant as specified in its charter) Delaware 22‑3086739 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2555 Telegraph Road Bloomfield Hills, Michigan 48302‑0954 (Address of principal executive offices) (Zip Code) (248) 648‑2500 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Voting Common Stock, par value $0.0001 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒ 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 ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K. ☒ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non‑accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Copyright © 2019 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of the voting common stock held by non‑affiliates as of June 30, 2018 was $1,677,606,861. As of February 15, 2019, there were 84,911,298 shares of voting common stock outstanding. Documents Incorporated by Reference Certain portions, as expressly described in this report, of the registrant’s proxy statement for the 2019 Annual Meeting of the Stockholders to be held May 9, 2019 are incorporated by reference into Part III, Items 10‑14. Copyright © 2019 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents TABLE OF CONTENTS Item Page PART I 1 Business 1 1A. Risk Factors 22 1B. Unresolved Staff Comments 30 2 Properties 30 3 Legal Proceedings 30 4 Mine Safety Disclosures 30 PART II 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 31 6 Selected Financial Data 33 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 7A. Quantitative and Qualitative Disclosures About Market Risk 59 8 Financial Statements and Supplementary Data 59 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 59 9A. Controls and Procedures 60 9B. Other Information 60 PART III 10 Directors, Executive Officers and Corporate Governance 61 11 Executive Compensation 61 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 61 13 Certain Relationships and Related Transactions, and Director Independence 61 14 Principal Accounting Fees and Services 61 PART IV 15 Exhibits, Financial Statement Schedules 61 16 Form 10-K Summary 61 Copyright © 2019 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents PART I Item 1. Business We are a diversified international transportation services company that operates automotive and commercial truck dealerships principally in the United States, Canada and Western Europe, and distributes commercial vehicles, diesel engines, gas engines, power systems and related parts and services principally in Australia and New Zealand. We employ nearly 27,000 people worldwide. In 2018, our business generated $22.8 billion in total revenue, which is comprised of approximately $20.8 billion from retail automotive dealerships, $1.4 billion from retail commercial truck dealerships and $0.6 billion from commercial vehicle distribution and other operations. We generated $3.4 billion in gross profit, which is comprised of $3.1 billion from retail automotive dealerships, $211.5 million from retail commercial truck dealerships and $144.8 million from commercial vehicle distribution and other operations. Retail Automotive Dealership. We believe we are the second largest automotive retailer headquartered in the U.S. as measured by the $20.8 billion in total retail automotive dealership revenue we generated in 2018. As of December 31, 2018, we operated 345 retail automotive franchises, of which 154 franchises are located in the U.S. and 191 franchises are located outside of the U.S. The franchises outside the U.S. are located primarily in the U.K. In 2018, we retailed and wholesaled more than 644,000 vehicles. We are diversified geographically, with 55% of our total retail automotive dealership revenues in 2018 generated in the U.S. and Puerto Rico and 45% generated outside the U.S. We offer over 40 vehicle brands, with 70% of our retail automotive dealership revenue in 2018 generated from premium brands, such as Audi, BMW, Land Rover, Mercedes-Benz and Porsche. Each of our dealerships offers a wide selection of new and used vehicles for sale. In addition to selling new and used vehicles, we generate higher-margin revenue at each of our dealerships through maintenance and repair services and the sale and placement of third-party finance and insurance products, third-party extended service and maintenance contracts, and replacement and aftermarket automotive products. We operate our franchised dealerships under franchise agreements with a number of automotive manufacturers and distributors that are subject to certain rights and restrictions typical of the industry. We also operate fourteen stand-alone used vehicle supercenters in the U.S. and the U.K. which retail and wholesale previously owned vehicles under a one price, “no-haggle” methodology. We acquired CarSense in the U.S. and CarShop in the U.K. in the first quarter of 2017 and acquired The Car People in the U.K. in January 2018. Our CarSense operations in the U.S. consist of five locations operating in the Philadelphia and Pittsburgh, Pennsylvania market areas, including southern New Jersey. Our CarShop operations in the U.K. consist of five retail locations and a vehicle preparation center operating principally throughout Southern England. The Car People operations in the U.K. consist of four retail locations operating across Northern England, which complement CarShop’s Southern England locations. CarShop and The Car People currently operate as one reportable segment (“Stand-Alone Used International”) and we anticipate that both will begin to operate under the CarShop name in 2019. During the year ended December 31, 2018, we acquired six retail automotive franchises, were awarded three retail automotive franchises, and disposed of seven retail automotive franchises. Of the retail automotive franchises acquired, four are located in Italy and represent the Mercedes-Benz and smart brands, and two are located in Texas and represent the Lexus brand. Of the franchises disposed of, five represented franchises in the U.S., and two represented franchises in the U.K. Retail automotive dealerships represented 91.5% of our total revenues and 89.6% of our total gross profit in 2018. 1 Copyright © 2019 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents We believe our diversified retail automotive income streams help to mitigate the historical cyclicality found in some elements of the automotive sector.