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What changed in PENSKE AUTOMOTIVE GROUP, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PENSKE AUTOMOTIVE GROUP, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+512 added−484 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-21)

Top changes in PENSKE AUTOMOTIVE GROUP, INC.'s 2023 10-K

512 paragraphs added · 484 removed · 394 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

156 edited+38 added−43 removed80 unchanged
Biggest changeThe report aligns with the Sustainability Accounting Standards Board (SASB) Multiline & Specialty Distributors sector standard and includes additional disclosures responsive to the framework established by the Task Force on Climate-Related Financial Disclosures. We are committed to regular, transparent communication of our progress and look forward to bringing our stakeholders along with us on this journey.
Biggest changeWe are pleased to have published our 2023 Corporate Responsibility Report, which highlights the Company's strategies, activities, progress, metrics, and performance for 2022, which is available on our website under the tab “Corporate Responsibility.” The report is responsive to the Sustainability Accounting Standards Board ("SASB") Multiline & Specialty Distributors sector standard and includes additional disclosures responsive to the framework established by the Task Force on Climate-related Financial Disclosures ("TCFD").
The most important investments we make are in our people. Everything we aspire to be as a company builds on our ability to come together as one team. We provide our team members a supportive work environment that empowers them to do meaningful work while fulfilling their passions and balancing work goals with life goals.
The most important investments we make are in our people. Everything we aspire to be as a company builds on our ability to come together as one team. We provide our team members with a supportive work environment that empowers them to do meaningful work while fulfilling their passions and balancing work goals with life goals.
Penske Australia is the exclusive importer and distributor of Western Star heavy-duty trucks (a Daimler brand), MAN heavy- and medium-duty trucks and buses (a VW Group brand), and Dennis Eagle refuse collection vehicles, together with associated parts, across Australia, New Zealand, and portions of the Pacific.
Penske Australia is the exclusive importer and distributor of Western Star heavy-duty trucks (a Daimler brand), MAN heavy- and medium-duty trucks and buses (a VW Group brand), and Dennis Eagle refuse collection vehicles, together with associated parts, across Australia, New Zealand, and portions of the Pacific.
Full-service truck leasing, truck rental, and contract maintenance . Full-service truck leasing, truck rental, and contract maintenance of commercial trucks, tractors, and trailers constitutes PTS' largest business.
Full-service truck leasing, truck rental, and contract maintenance of commercial trucks, tractors, and trailers constitutes PTS' largest business.
Some state franchise laws allow dealers to file protests or petitions or to attempt to comply with the manufacturer's criteria within the notice period to avoid the termination or non-renewal. Our international locations generally do not have these laws, and as a result, our international operations operate without these types of protections. See Item 1.
Some state franchise laws allow dealers to file protests or petitions or to attempt to comply with the manufacturer's criteria within the notice period to avoid termination or non-renewal. Our international locations generally do not have these laws, and as a result, our international operations operate without these types of protections. See Item 1.
These franchise agreements are typical throughout the industry and may contain provisions and standards governing almost every aspect of the dealership including ownership, management, personnel, training, maintenance of a minimum of working capital, net worth requirements, maintenance of minimum lines of credit, advertising and marketing activities, facilities, signs, products and services, maintenance of minimum amounts of insurance, achievement of minimum customer service standards, and monthly financial reporting.
These agreements are typical throughout the industry and may contain provisions and standards governing almost every aspect of the dealership including ownership, management, personnel, training, maintenance of a minimum of working capital, net worth requirements, maintenance of minimum lines of credit, advertising and marketing activities, facilities, signs, products and services, maintenance of minimum amounts of insurance, achievement of minimum customer service standards, and monthly financial reporting.
We also offer our customers various vehicle warranty and extended protection products, including extended service contracts, maintenance programs, voluntary vehicle protection products, and theft protection products. The extended service contracts and other products that our dealerships currently offer to customers are underwritten by independent third parties, including the vehicle manufacturers' captive finance companies.
We also offer our customers various vehicle warranty and extended protection products, including extended service contracts, maintenance programs, and voluntary vehicle protection products. The extended service contracts and other products that our dealerships currently offer to customers are underwritten by independent third parties, including the vehicle manufacturers' captive finance companies.
Dennis Eagle refuse collection vehicles are manufactured by Ros Roca in Warwick, England. These brands represented 3.8% of heavy-duty truck units sold in Australia and 3.2% in New Zealand during 2022. We also distribute diesel gas engines and power systems to over 100 dealer locations that are strategically located throughout Australia, New Zealand, and portions of the Pacific.
Dennis Eagle refuse collection vehicles are manufactured by Ros Roca in Warwick, England. These brands represented 3.2% of heavy-duty truck units sold in Australia and 2.8% in New Zealand during 2023. We also distribute diesel gas engines and power systems to over 100 dealer locations that are strategically located throughout Australia, New Zealand, and portions of the Pacific.
We also offer rapid repair services, such as paintless dent repair, tire sales, and windshield replacement at most of our facilities in order to offer our customers the convenience of one-stop shopping for all of their automotive requirements. We also operate 33 automotive collision repair centers, each of which is operated as an integral part of our dealership operations.
We also offer rapid repair services, such as paintless dent repair, tire sales, and windshield replacement at most of our facilities in order to offer our customers the convenience of one-stop shopping for all of their automotive requirements. We also operate 34 automotive collision repair centers, each of which is operated as an integral part of our dealership operations.
Other factors include customer preference for particular brands of vehicles and warranties. We believe that our dealerships are competitive in all of these areas. The automotive and truck retail industry is currently served by franchised dealerships, automotive manufacturers that sell direct to consumers, independent used vehicle dealerships, and individual consumers who sell used vehicles in private transactions.
Other factors include customer preference for particular brands of vehicles and warranties. We believe that our dealerships are competitive in all of these areas. The automotive and truck retail industry is currently served by franchised or agency dealerships, automotive manufacturers that sell direct to consumers, independent used vehicle dealerships, and individual consumers who sell used vehicles in private transactions.
This mission is supported by a set of values embedded in our philosophy to exceed, excel, and encourage. • Exceed : Provide a superior customer experience that exceeds expectations, and establishes trust and loyalty through honesty, transparency, and accountability • Excel : Deliver long-term value for our stakeholders through continuous improvement, organic growth, and strategic acquisitions • Encourage : Provide opportunities for team members to succeed in our organization by cultivating talent, rewarding achievement, and maintaining the highest standards of respect for each other We employ the following set of strategies to achieve these objectives: Growing our Business We operate in the highly fragmented automotive retail and commercial truck dealership markets and believe there are attractive opportunities to grow our business, both organically and by acquisition.
This mission is supported by a set of values embedded in our philosophy to exceed, excel, and encourage. • Exceed : Provide a superior customer experience that exceeds expectations, and establishes trust and loyalty through honesty, transparency, and accountability • Excel : Deliver long-term value for our stakeholders through continuous improvement, organic growth, and strategic acquisitions • Encourage : Provide opportunities for team members to succeed by cultivating talent, rewarding achievement, and maintaining the highest standards of respect for each other We employ the following set of strategies to achieve these objectives: 4 Table of Contents Growing our Business We operate in the highly fragmented automotive retail and commercial truck dealership markets and believe there are attractive opportunities to grow our business, both organically and by acquisition.
Similar to the U.S., the manufacturers in the U.K. have not historically terminated our franchise agreements, and our franchise agreements with fixed terms have typically been renewed.
Similar to the U.S., the manufacturers in the U.K. have not historically terminated our agreements, and our agreements with fixed terms have typically been renewed.
A significant portion of these rentals are to existing full-service leasing and contract maintenance customers who are seeking flexibility in their fleet management. PTS has established a network of approximately 850 locations to provide full-service truck leasing, truck rental, and contract maintenance services to customers. This network enables PTS to meet multi-location customer requirements.
A significant portion of these rentals are to existing full-service leasing and contract maintenance customers who are seeking flexibility in their fleet management. PTS has established a network of approximately 920 locations to provide full-service truck leasing, truck rental, and contract maintenance services to customers. This network enables PTS to meet multi-location customer requirements.
We also employ local sponsorships to generate brand awareness in our markets and market to customers at various trade shows and other industry events. Agreements with Vehicle and Equipment Manufacturers We operate our franchised new vehicle dealerships under separate franchise agreements with the manufacturers or distributors of each brand of vehicle sold at that dealership.
We also employ local sponsorships to generate brand awareness in our markets and market to customers at various trade shows and other industry events. Agreements with Vehicle and Equipment Manufacturers We operate our new vehicle dealerships under separate agreements with the manufacturers or distributors of each brand of vehicle sold at that dealership.
We have partnered with environmental and safety consulting firms to assist in compliance with specific local and federal laws and regulations relating to environmental and safety issues and to promote best safety practices. Audits are regularly performed to assure and maintain compliance. We believe our employee turnover of approximately 21% is below our industry's average.
We have partnered with environmental and safety consulting firms to assist in compliance with specific local and federal laws and regulations relating to environmental and safety issues and to promote best safety practices. Audits are regularly performed to assure and maintain compliance. We believe our employee turnover of approximately 20% is below our industry's average.
Risk Factors , "Agency" and "Regulatory Issues." In addition, we are subject to certain framework agreements with U.S. manufacturers that allow us as a multi-point, public company to own and operate multiple franchises in exchange for us agreeing, among other things, to limit the total 15 Table of Contents number of dealerships of that brand that we may own in a particular geographic area and in some cases, limit the total number of their vehicles that we may sell as a percentage of a particular manufacturer's overall sales.
Risk Factors , "Agency" and "Regulatory Issues." In addition, we are subject to certain framework agreements with U.S. manufacturers that allow us as a multi-point, public company to own and operate multiple franchises in exchange for us agreeing, among other things, to limit the total number of dealerships of that brand that we may own in a particular geographic area and in some cases, limit the total number of their vehicles that we may sell as a percentage of a particular manufacturer's overall sales.
Many of these franchise agreements also grant the manufacturer or distributor a security interest in the vehicles and/or parts sold by them to the dealership as well as other dealership assets and permit them to terminate or not renew the agreement for a variety of causes, including failure to adequately operate the dealership, insolvency or bankruptcy, impairment of the dealer's reputation or financial standing, changes in the dealership's management, owners, or location without consent, sales of the dealership's assets without consent, failure to maintain adequate working capital or floor plan financing, changes in the dealership's financial or other condition, failure to submit required information to them on a timely basis, failure to have any permit or license necessary to operate the dealership, and material breaches of other provisions of the agreement.
Many of these agreements also grant the manufacturer or distributor a security interest in the vehicles and/or parts sold by them to the dealership as well as other dealership assets and permit them to terminate or not renew the agreement for a variety of causes, including failure to adequately operate the dealership, insolvency or bankruptcy, impairment of the dealer's reputation or financial standing, changes in the dealership's management, owners, or location without consent, sales 14 Table of Contents of the dealership's assets without consent, failure to maintain adequate working capital or floor plan financing, changes in the dealership's financial or other condition, failure to submit required information to them on a timely basis, failure to have any permit or license necessary to operate the dealership, and material breaches of other provisions of the agreement.
We represent over 35 brands in our markets and our automotive dealership revenue mix consists of 71% related to premium brands, 21% related to volume non-U.S. 5 Table of Contents brands, 1% related to brands of U.S. based manufacturers, and 7% related to our CarShop used vehicle dealerships as further detailed in the chart below: Digital Strategy/Omnichannel We are focused on executing a comprehensive omnichannel digital strategy with emphasis on customization, personalization, and creating a connection with our customers.
We represent over 35 brands in our markets and our automotive dealership revenue mix consists of 71% related to premium brands, 21% related to volume non-U.S. brands, 1% related to brands of U.S. based manufacturers, and 7% related to our CarShop used vehicle dealerships as further detailed in the chart below: Digital Strategy/Omnichannel We are focused on executing a comprehensive omnichannel digital strategy with emphasis on customization, personalization, and creating a connection with our customers.
We believe that the principal factors consumers consider when determining where to purchase a vehicle are vehicle pricing (including manufacturer rebates and other special offers), marketing campaigns conducted by manufacturers, the ability of dealerships to offer a wide selection of the most popular vehicles, offering a multi-channel experience to customers so they may purchase a vehicle on site or remotely, the location of dealerships, and the quality of the customer experience.
We believe that the principal factors consumers consider when determining where to purchase a vehicle are vehicle pricing (including manufacturer rebates and other special offers), marketing campaigns conducted by 15 Table of Contents manufacturers, the ability of dealerships to offer a wide selection of the most popular vehicles, offering a multi-channel experience to customers so they may purchase a vehicle on site or remotely, the location of dealerships, and the quality of the customer experience.
The European Parliament provisionally approved a law requiring most automakers to reduce the emissions of new cars sold by 55% in 2030 and achieve a zero carbon-emission standard by 2035, effectively banning the sale of new gasoline and diesel cars and vans by 2035.
The European Parliament recently approved a law requiring most automakers to reduce the emissions of new cars sold by 55% in 2030 and achieve a zero carbon-emission standard by 2035, effectively banning the sale of new gasoline and diesel cars and vans by 2035.
Penske Australia offers products across the on- and off-highway markets, including in the trucking, mining, power generation, defense, marine, rail, and construction sectors and supports full parts and aftersales service through a network of branches, field service locations, and dealers across the region. These businesses represented 2.1% of our total revenues and 3.2% of our total gross profit in 2022.
Penske Australia offers products across the on- and off-highway markets, including in the trucking, mining, power generation, defense, marine, rail, and construction sectors and supports full parts and aftersales service through a network of branches, field service locations, and dealers across the region. These businesses represented 2.1% of our total revenues and 3.4% of our total gross profit in 2023.
MAN Truck and Bus, a VW Group company, is a leading producer of medium- and heavy-duty trucks as well as city and coach buses. These cab-forward, fuel efficient vehicles are principally produced in several sites in Germany and are 10 Table of Contents ordered by customers for line haul, local distribution, mining, and other off-road applications.
MAN Truck and Bus, a VW Group company, is a leading producer of medium- and heavy-duty trucks as well as city and coach buses. These cab-forward, fuel efficient vehicles are principally produced in several sites in Germany and are ordered by customers for line haul, local distribution, mining, and other off-road applications.
Penske Transportation Solutions. We hold a 28.9% ownership interest in Penske Truck Leasing Co., L.P. (“PTL”). PTL is owned 41.1% by Penske Corporation, 28.9% by us, and 30.0% by Mitsui & Co., Ltd. (“Mitsui”).
Penske Transportation Solutions. We hold a 28.9% ownership interest in Penske Truck Leasing Co., L.P. ("PTL"). PTL is owned 41.1% by Penske Corporation, 28.9% by us, and 30.0% by Mitsui & Co., Ltd. ("Mitsui").
We account for our investment in PTL under the equity method, and we therefore record our share of PTL's earnings on our statements of income under the caption “Equity in earnings of affiliates,” which also includes the results of our other equity method investments.
We account for our investment in PTL under the equity method, and we therefore record our share of PTL's earnings on our statements of income under the caption "Equity in earnings of affiliates," which also includes the results of our other equity method investments.
Fleet and Wholesale Sales. Fleet and wholesale sales represented 5.8% of our retail automotive dealership revenue and 1.1% of our retail automotive dealership gross profit in 2022. Fleet activities represent the sale of new units to customers that are deemed to not be retail customers, such as cities, municipalities, or rental car companies and are generally sold at contracted amounts.
Fleet and Wholesale Sales. Fleet and wholesale sales represented 5.8% of our retail automotive dealership revenue and 1.4% of our retail automotive dealership gross profit in 2023. Fleet activities represent the sale of new units to customers that are deemed to not be retail customers, such as cities, municipalities, or rental car companies and are generally sold at contracted amounts.
PTS 11 Table of Contents coordinates services for its customers across the supply chain, including inbound material flow, handling and packaging, inventory management, distribution and technologies, and sourcing of third-party carriers. These services are available individually or on a combined basis and often involve its associates performing services at the customer's location.
PTS coordinates services for its customers across the supply chain, including inbound material flow, handling and packaging, inventory management, distribution and technologies, and sourcing of third-party carriers. These services are available individually or on a combined basis and often involve its associates performing services at the customer's location.
Penske Transportation Solutions (“PTS”) is the universal brand name for PTL's various business lines through which it is capable of meeting customers' needs across the supply chain with a broad product offering that includes full-service truck leasing, truck rental, and contract maintenance along with logistic services, such as dedicated contract carriage, distribution center management, transportation management, lead logistics provider services, and dry van truckload carrier services.
Penske Transportation Solutions (“PTS”) is the universal brand name for PTL's various business lines through which it is capable of meeting customers' needs across the supply chain with a broad product offering that includes full-service truck leasing, truck rental, and contract maintenance along with logistics services, such as dedicated contract carriage, distribution center management, freight management, and dry van truckload carrier services.
We monitor customer satisfaction data to gain insight into our business performance and enhance the areas of our business that drive customer referral and loyalty. Social media is a highly valued element of our marketing strategy that enables us to engage with customers, increase dealership awareness, improve customer satisfaction, and enhance repeat and 14 Table of Contents referral business.
We monitor customer satisfaction data to gain insight into our business performance and enhance the areas of our business that drive customer referral and loyalty. Social media is a highly valued element of our marketing strategy that enables us to engage with customers, increase dealership awareness, improve customer satisfaction, and enhance repeat and referral business.
Representatives of the U.K. government have proposed a ban on the sale of gasoline engines in new cars and new vans that would take effect as early as 2030 and a ban on the sale of gasoline hybrid engines in new cars and new vans as early as 2035 while also providing government incentives on certain electric vehicles to entice consumers to transition from internal combustion vehicles to electric vehicles.
Representatives of the U.K. government have proposed a ban on the sale of gasoline engines and gasoline hybrid engines in new cars and new vans that would take effect in 2035 while also providing government incentives on certain electric vehicles to entice consumers to transition from internal combustion vehicles to electric vehicles.
We offer finance and insurance products using a “menu” process, which is designed to ensure that we offer our customers a complete range of finance, insurance, protection, and other aftermarket products in a transparent manner.
We offer finance and insurance products using a "menu" process, which is designed to ensure that we offer our customers a complete range of finance, insurance, protection, and other aftermarket products in a transparent manner.
The information on or linked to our website is not part of this document. We plan to disclose changes to our Code of Business Ethics or waivers, if any, for our executive officers or directors on our website. We incorporated in the state of Delaware in 1990 and began dealership operations in October 1992. 19 Table of Contents
The information on or linked to our website is not part of this document. We plan to disclose changes to our Code of Business Ethics or waivers, if any, for our executive officers or directors on our website. We incorporated in the state of Delaware in 1990 and began dealership operations in October 1992.
We strive to maintain outstanding relationships with the automotive manufacturers based in part on our long-term presence in the retail automotive market, our commitment to providing premium facilities, our commitment to drive customer satisfaction, the reputation of our management team, and the consistent sales volume at our dealerships.
We strive to maintain outstanding relationships with the automotive manufacturers based in part on our long-term presence in the retail automotive market, our commitment to providing premium facilities, our commitment to drive customer satisfaction, the reputation of our 9 Table of Contents management team, and the consistent sales volume at our dealerships.
Risk Factors , "Regulatory Issues." In the U.S., we benefit from the protection of numerous state franchise laws that generally provide that a manufacturer or distributor may not terminate or refuse to renew a franchise agreement unless it has first provided the dealer with written notice setting forth good cause and stating the grounds for termination or non-renewal.
In the U.S., we benefit from the protection of numerous state franchise laws that generally provide that a manufacturer or distributor may not terminate or refuse to renew a franchise agreement unless it has first provided the dealer with written notice setting forth good cause and stating the grounds for termination or non-renewal.
Approximately 642 of our employees were covered by collective bargaining agreements with labor unions, and we believe our relations with our employees, including those represented by collective bargaining agreements, are generally good.
Approximately 630 of our employees were covered by collective bargaining agreements with labor unions, and we believe our relations with our employees, including those represented by collective bargaining agreements, are generally good.
For used vehicle sales, we compete in a highly fragmented market which sells approximately 36.2 million units in the U.S. and approximately 6.9 million units in the U.K. annually through other franchised dealers, independent used vehicle dealers, automobile rental agencies, purchasing services, private parties, online retailers, and used vehicle “superstores” for the procurement and resale of used vehicles.
For used vehicle sales, we compete in a highly fragmented market which sells approximately 35.9 million units in the U.S. and approximately 7.2 million units in the U.K. annually through other franchised dealers, independent used vehicle dealers, automobile rental agencies, purchasing services, private parties, online retailers, and used vehicle “superstores” for the procurement and resale of used vehicles.
A goal of each of our dealerships is to make each vehicle purchaser a customer of our service and parts department. Our dealerships keep records of our customers' maintenance and service histories, and many dealerships send reminders to 9 Table of Contents customers when vehicles are due for periodic maintenance or service.
A goal of each of our dealerships is to make each vehicle purchaser a customer of our service and parts department. Our dealerships keep records of our customers' maintenance and service histories, and many dealerships send reminders to customers when vehicles are due for periodic maintenance or service.
Of these dealership locations, ten are company-owned retail commercial vehicle and/or service and parts dealerships in Australia and three are company-owned retail commercial vehicle dealerships in New Zealand.
Of these dealership locations, 11 are company-owned retail commercial vehicle and/or service and parts dealerships in Australia and three are company-owned retail commercial vehicle dealerships in New Zealand.
The following table exhibits our retail automotive franchises by location and manufacturer as of December 31, 2022: Location Franchises Franchises U.S. Non-U.S.
The following table exhibits our retail automotive franchises by location and manufacturer as of December 31, 2023: Location Franchises Franchises U.S. Non-U.S.
Many jurisdictions in which we operate have placed additional restrictions and limitations on activities that may affect the environment. U.S. vehicle manufacturers are subject to federally mandated corporate average fuel economy standards, 18 Table of Contents which are expected to increase substantially through 2026.
Many jurisdictions in which we operate have placed additional restrictions and limitations on activities that may affect the environment. U.S. vehicle manufacturers are subject to federally mandated corporate average fuel economy standards, which are expected to increase substantially through 2026.
In most of these same markets, we are also a leading distributor of diesel and gas engines and power systems, principally representing MTU (a 2 Table of Contents Rolls-Royce solution), Detroit Diesel, Allison Transmission, and Bergen Engines.
In most of these same markets, we are also a leading distributor of diesel and gas engines and power systems, principally representing MTU (a Rolls-Royce solution), Detroit Diesel, Allison Transmission, and Bergen Engines.
If certification is obtained, the used vehicle owner is typically provided benefits and warranties similar to those offered to new vehicle owners by the applicable manufacturer. Vehicle Finance and Insurance Sales. Finance and insurance sales represented 3.6% of our retail automotive dealership revenue and 20.6% of our retail automotive dealership gross profit in 2022.
If certification is obtained, the used vehicle owner is typically provided benefits and warranties similar to those offered to new vehicle owners by the applicable manufacturer. Vehicle Finance and Insurance Sales. Finance and insurance sales represented 3.3% of our retail automotive dealership revenue and 20.1% of our retail automotive dealership gross profit in 2023.
These websites also support our “Sell Us Your Car” initiative, offered in the U.S. and U.K., which allows customers to sell their vehicles to us without a requirement to purchase a vehicle.
These websites also support our "Sell Us Your Car" initiative, offered in the U.S. and U.K., which allows customers to sell their vehicles to us without a requirement to purchase a vehicle.
Penske Transportation Solutions (“PTS”) is the universal brand name for PTL's various business lines through which it is capable of meeting customers' needs across the supply chain with a broad product offering that includes full-service truck leasing, truck rental, and contract maintenance along with logistic services, such as dedicated contract carriage, distribution center management, transportation management, lead logistics provider services, and dry van truckload carrier services.
Penske Transportation Solutions ("PTS") is the universal brand name for PTL's various business lines through which it is capable of meeting customers' needs across the supply chain with a broad product offering that includes full-service truck leasing, truck rental, and contract maintenance along with logistic services, such as dedicated contract carriage, distribution center management, freight management, and dry van truckload carrier services.
The following graphics show the percentage of our total retail commercial truck dealership revenues by product type and their respective contribution to our retail commercial truck gross profit: Penske Australia .
The following graphics 2 Table of Contents show the percentage of our total retail commercial truck dealership revenues by product type and their respective contribution to our retail commercial truck gross profit: Penske Australia .
Customers typically include local small businesses and individuals seeking a do-it-yourself solution to their moving needs. PTS' consumer fleet generally consists of late model vehicles ranging in size from small vans to 26-foot trucks, and its consumer rentals are conducted through approximately 1,930 independent rental agents and approximately 410 of its company-operated leasing and rental facilities.
Customers typically include local small businesses and individuals seeking a do-it-yourself solution to their moving needs. PTS' consumer fleet generally consists of late model vehicles ranging in size from small vans to 26-foot trucks, and its consumer rentals are conducted through approximately 2,050 independent rental agents and approximately 430 of its company-operated leasing and rental facilities.
Additionally, we own 28.9% of Penske Transportation Solutions, a business that employs over 41,500 people worldwide, manages one of the largest, most comprehensive and modern trucking fleets in North America with over 414,500 trucks, tractors, and trailers under lease, rental, and/or maintenance contracts, and provides innovative transportation, supply chain, and technology solutions to its customers.
Additionally, we own 28.9% of Penske Transportation Solutions, a business that employs over 44,000 people worldwide, manages one of the largest, most comprehensive and modern trucking fleets in North America with over 439,000 trucks, tractors, and trailers under lease, rental, and/or maintenance contracts, and provides innovative transportation, supply chain, and technology solutions to its customers.
PTS' consumer business generated 5% of its revenue for 2022. Logistics . PTS' logistics business offers an extensive variety of services, including dedicated contract carriage, distribution center management, freight management, lead logistics provider, and dry van truckload carrier services.
PTS' consumer business generated 4% of its revenue for 2023. Logistics . PTS' logistics business offers an extensive variety of services, including dedicated contract carriage, distribution center management, freight management, lead logistics provider, and dry van truckload carrier services.
We also make available on our website copies of materials regarding our corporate governance, policies, and practices, including our Corporate Governance Guidelines, our Code of Business Ethics, our 2022 ESG Report, and the charters relating to the committees of our Board of Directors.
We also make available on our website copies of materials regarding our corporate governance, policies, and practices, including our Corporate Governance Guidelines, our Code of Business Ethics, our 2023 Corporate Responsibility Report, and the charters relating to the committees of our Board of Directors.
Moreover, while increasing consumer adoption of electric vehicles may present new service opportunities, including with respect to range maintenance and optimization, cooling protection, torque protection, battery replacement, and warranty on newly released models, our service revenues may decline over time as these electric vehicles may require less physical maintenance than gas and hybrid vehicles due to the absence of certain parts systems.
Moreover, while increasing consumer adoption of Electric Vehicles may present new service opportunities, including with respect to 18 Table of Contents range maintenance and optimization, cooling protection, torque protection, battery replacement, and warranty on newly released models, our service revenue per vehicle may decline over time as these electric vehicles may require less physical maintenance than gas and hybrid vehicles due to the absence of certain parts systems.
Approximately 58% of our retail automotive dealership revenues are generated in the U.S. and Puerto Rico, which in 2022 was one of the world's largest automotive retail markets as measured by units sold.
Approximately 56% of our retail automotive dealership revenues are generated in the U.S. and Puerto Rico, which in 2023 was one of the world's largest automotive retail markets as measured by units sold.
Our European Union markets consist of Germany, Italy, and Spain, which represented the first, third, and fourth largest automotive retail markets, respectively, in the European Union in 2022 and accounted for approximately 52% of the total vehicle sales in the European Union markets.
Our European Union markets consist of Germany, Italy, and Spain, which represented the first, third, and fourth largest automotive retail markets, respectively, in the European Union in 2023 and accounted for approximately 51% of the total vehicle sales in the European Union markets.
The National Automobile Dealers Association figures noted above include finance and insurance revenues within either new or used vehicle sales, as sales of these products are usually incremental to the sale of a vehicle. In the U.S., the franchised automotive dealer industry is one of the largest retail business by revenue in a market of approximately $1.2 trillion.
The NADA figures noted above include finance and insurance revenues within either new or used vehicle sales, as sales of these products are usually incremental to the sale of a vehicle. In the U.S., the franchised automotive dealer industry is one of the largest retail businesses by revenue in a market of approximately $1.2 trillion.
PTS' commercial rental business generated 24% of its revenue for 2022 and its full-service lease and contract maintenance business generated 43% of its revenue in 2022. For consumer customers, PTS provides short-term rental of light- and medium-duty vehicles on a one-way and local basis, typically to transport household goods.
PTS' commercial rental business generated 21% of its revenue for 2023 and its full-service lease and contract maintenance business generated 46% of its revenue in 2023. For consumer customers, PTS provides short-term rental of light- and medium-duty vehicles on a one-way and local basis, typically to transport household goods.
According to data from the National Automobile Dealers Association, dealership revenue is generally derived as follows: 49% from new vehicle sales, 40% from used vehicle sales, and 11% from service and parts sales. Dealerships also offer a wide range of higher-margin products and services, including extended service contracts, financing arrangements, and credit insurance.
According to data from the National Automobile Dealers Association ("NADA"), dealership revenue is generally derived as follows: 52% from new vehicle sales, 35% from used vehicle sales, and 13% from service and parts sales. Dealerships also offer a wide range of higher-margin products and services, including extended service contracts, financing arrangements, and credit insurance.
Our financing activities with customers are subject to truth-in-lending, consumer leasing, equal credit opportunity, and similar regulations as well as motor vehicle finance laws, installment finance laws, insurance laws, usury laws, and other installment sales laws. Some jurisdictions regulate finance fees that may be paid as a result of vehicle sales.
See Item 1A. Risk Factors , "Regulatory Issues". Our financing activities with customers are subject to truth-in-lending, consumer leasing, equal credit opportunity, and similar regulations as well as motor vehicle finance laws, installment finance laws, insurance laws, usury laws, and other installment sales laws. Some jurisdictions regulate finance fees that may be paid as a result of vehicle sales.
Its commercial and consumer rental fleet as of December 31, 2022, consisted of approximately 109,000 vehicles for use by its full-service truck leasing, small business, and consumer customers for periods generally ranging from less than a day to 12 months.
Its commercial and consumer rental fleet as of December 31, 2023, consisted of approximately 106,800 vehicles for use by its full-service truck leasing, small business, and consumer customers for periods generally ranging from less than a day to 12 months.
We utilize docuPAD® at our U.S. dealerships, an interactive electronic interface designed to improve document processing and menu presentation of finance and insurance options during the purchase or lease transaction. Service and Parts Sales. Service and parts sales represented 10.2% of our retail automotive dealership revenue and 34.9% of our retail automotive dealership gross profit in 2022.
We utilize docuPAD® at our U.S. dealerships, an interactive electronic interface designed to improve document processing and menu presentation of finance and insurance options during the purchase or lease transaction. Service and Parts Sales. Service and parts sales represented 10.8% of our retail automotive dealership revenue and 38.4% of our retail automotive dealership gross profit in 2023.
We offer over 35 vehicle brands with 71% of our retail automotive franchised dealership revenue in 2022 generated from premium brands, such as Audi, BMW, Land Rover, Mercedes-Benz, and Porsche. As of December 31, 2022, we operated 338 retail automotive franchised dealerships, of which 151 are located in the U.S. and 187 are located outside of the U.S.
We offer over 35 vehicle brands with 71% of our retail automotive franchised dealership revenue in 2023 generated from premium brands, such as Audi, BMW, Land Rover, Mercedes-Benz, and Porsche. As of December 31, 2023, we operated 336 retail automotive franchised dealerships, of which 147 are located in the U.S. and 189 are located outside of the U.S.
PTS participates broadly in the global supply chain, estimated at $10.4 trillion annually, and particularly, in the U.S. supply chain, estimated at $1.8 trillion annually. Only 18.6% of the total U.S. supply chain function is outsourced to third parties, such as PTS. We estimate, based on R. L.
PTS participates broadly in the global supply chain, estimated at $11.4 trillion annually, and particularly, in the U.S. supply chain, estimated at $2.4 trillion annually. Only 16.6% of the total U.S. supply chain function is outsourced to third parties, such as PTS. We estimate, based on R. L.
When the supply of commercial trucks improves, we may experience reduced new and used commercial truck gross profit per unit together with higher sales volumes. 3 Table of Contents Commercial Vehicle Distribution and Other.
When the supply of commercial trucks improves to historical levels, we may experience reduced new and used commercial truck gross profit per unit together with higher sales volumes. Commercial Vehicle Distribution and Other.
We continue to provide new vehicle customer service at our Mercedes-Benz U.K. dealerships, and the Mercedes-Benz U.K. agency model is not expected to structurally change our used vehicle sales operations or service and parts operations, although the impact of the agency model at these dealerships as well as other agency models proposed by our manufacturer partners is uncertain.
We continue to provide new vehicle customer service at our Mercedes-Benz U.K. dealerships, and the Mercedes-Benz U.K. agency model at this time has not changed our used vehicle sales operations or service and parts operations, although the long-term impact of the agency model at these dealerships as well as other agency models proposed by our manufacturer partners is uncertain.
The franchised dealerships outside of the U.S. are located primarily in the U.K. As of December 31, 2022, we also operated 21 used vehicle dealerships, with eight dealerships in the U.S. and 13 dealerships in the U.K., which retailed used vehicles under a one price, "no-haggle" methodology under the CarShop brand.
The franchised dealerships outside of the U.S. are located primarily in the U.K. As of December 31, 2023, we also operated 19 used vehicle dealerships, with seven dealerships in the U.S. and 12 dealerships in the U.K., which retailed used vehicles under a one price, "no-haggle" methodology under the CarShop brand.
We are also diversified geographically as established by the following table, which shows our consolidated revenue and gross profit by country as a percentage of our total revenue and total gross profit: Country % of Total 2022 Revenue % of Total 2022 Gross Profit United States 60 % 66 % United Kingdom 30 % 25 % Germany/Italy 5 % 4 % Japan 1 % 1 % Canada 2 % 1 % Australia/New Zealand 2 % 3 % We are also diversified within our automotive retail operations by brand.
We are also diversified geographically as established by the following table, which shows our consolidated revenue and gross profit by country as a percentage of our total revenue and total gross profit: Country % of Total 2023 Revenue % of Total 2023 Gross Profit United States 59 % 63 % United Kingdom 31 % 26 % Germany/Italy 5 % 5 % Japan 1 % 1 % Canada 2 % 2 % Australia/New Zealand 2 % 3 % We are also diversified within our automotive retail operations by brand.
We also distribute and retail commercial vehicles, diesel and gas engines, power systems, and related parts and services principally in Australia and New Zealand. We employ over 26,500 people worldwide.
We also distribute and retail commercial vehicles, diesel and gas engines, power systems, and related parts and services principally in Australia and New Zealand. We employ approximately 28,000 people worldwide.
With respect to online sales, many laws and regulations applicable to our business were adopted prior to the introduction of the Internet, certain digital technologies, and e-commerce, generally. As a result, we are tasked with maintaining compliance in an uncertain regulatory environment. See Item 1A. Risk Factors , "Regulatory Issues".
With respect to online sales, many laws and regulations applicable to our business were adopted prior to the introduction of the Internet, certain digital technologies, and e-commerce, generally. As a result, we are tasked with maintaining compliance in an uncertain regulatory environment. In December 2023, the U.S.
Wholesale activities relate to the sale of used vehicles generally to other dealers and occur at auction. Vehicles sold through this channel generally include units acquired by trade-in that do not meet certain standards or aged units. In the U.K., we offer used vehicles to wholesalers and other dealers via a proprietary online auction.
Wholesale activities relate to the sale of used vehicles generally to other dealers and occur at auction. Vehicles sold through this channel generally include units acquired by trade-in that do not meet certain standards or aged units.
In 2022, used vehicle sales were approximately 36.2 million units in the U.S. according to data from Cox Automotive and approximately 6.9 million units in the U.K. according to data from the Society of Motor Manufacturers and Traders ("SMMT"). Dealership.
In 2023, used vehicle sales were approximately 35.9 million units in the U.S. according to data from Cox Automotive, compared to 36.2 million in the prior year, and approximately 7.2 million units in the U.K. according to data from the Society of Motor Manufacturers and Traders, compared to 6.9 million in the prior year. Dealership.
PTS manages a fleet of over 414,500 trucks, tractors, and trailers, consisting of over 271,300 vehicles owned by PTS and leased to customers under full-service lease or rental agreements and over 143,200 customer-owned and -operated vehicles for which they provided contract maintenance services.
PTS manages a fleet of over 439,000 trucks, tractors, and trailers, consisting of over 289,100 vehicles owned by PTS and leased to customers under full-service lease or rental agreements and over 150,500 customer-owned and -operated vehicles for which they provided contract maintenance services.
We estimate that approximately 23.4% of our new vehicles sold in the U.S. and U.K. for 2022 were either pure electric or hybrid electric vehicles. 7 Table of Contents Managing our Energy Use and Reducing Waste . We are committed to monitoring and managing our energy use and the environmental impacts of our business.
We estimate that approximately 26.7% of our new vehicles sold in 2023 in the U.S. and U.K. combined were either Electric Vehicles or hybrid electric vehicles. Managing our Energy Use and Reducing Waste . We are committed to monitoring and managing our energy use and the environmental impacts of our business.
PTS' international logistics business has approximately 525 locations in North America, South America, and Europe. PTS' logistics business generated 28% of its revenue for 2022. Industry Information Retail Automotive.
PTS' international logistics business has approximately 520 locations in North America, South America, and Europe. PTS' logistics business generated 28% of its revenue for 2023. 12 Table of Contents Industry Information Retail Automotive.
In 2022, North American sales of Class 6-8 medium- and heavy-duty trucks, the principal vehicles sold by our PTG business, increased 12.1% from last year to 448,723 units and were generated at 12 Table of Contents approximately 2,200 new-truck dealerships.
In 2023, North American sales of Class 6-8 medium- and heavy-duty trucks, the principal vehicles sold by our PTG business, increased 8.7% from last year to 487,771 units and were generated at approximately 2,200 new-truck dealerships.
In our retail truck business, we acquired four full-service dealerships in Ontario, Canada. In 2023, we expect to continue to devote capital resources to acquire and build premium retail automotive and commercial truck dealerships. Returning Value to Shareholders We believe in returning value to our shareholders through a combination of dividends and share repurchases.
In 2024, we expect to continue to devote capital resources to acquire and build premium retail automotive and commercial truck dealerships. Returning Value to Shareholders We believe in returning value to our shareholders through a combination of dividends and share repurchases.
ESG Highlights As a leading international, diversified transportation services company, we recognize it is our responsibility to ensure we manage our environmental impact and promote economic opportunity and social equity in the communities where we operate around the world. We recognize we are accountable to key stakeholders and the communities in which we do business.
Corporate Responsibility As a leading international, diversified transportation services company, we recognize it is our responsibility to ensure that we contribute to a healthy environment, economic opportunity, and social equity in the communities where we operate around the world. We recognize we are accountable to key stakeholders and the communities in which we do business.
Diversification Our business benefits from a diversified revenue and gross profit mix, including multiple revenue and gross profit streams in our traditional vehicle and commercial truck dealerships (new vehicles, used vehicles, finance and insurance, and service and parts operations) across many geographies, our commercial vehicle distribution and power systems operations, and returns relating to our joint venture investments, which we believe helps to mitigate the cyclicality that has historically impacted some elements of the automotive sector.
Our reputation management strategy of actively monitoring and responding quickly to customer reviews is crucial for maintaining a positive online reputation. 5 Table of Contents Diversification Our business benefits from a diversified revenue and gross profit mix, including multiple revenue and gross profit streams in our traditional vehicle and commercial truck dealerships (new vehicles, used vehicles, finance and insurance, and service and parts operations) across many geographies, our commercial vehicle distribution and power systems operations, and returns relating to our joint venture investments, which we believe helps to mitigate the cyclicality that has historically impacted some elements of the automotive sector.
We retailed and wholesaled more than 539,000 vehicles in 2022. Each of our franchised dealerships offers a wide selection of new and used vehicles for sale.
We retailed and wholesaled, including agency units, more than 587,000 vehicles in 2023. Each of our franchised dealerships offers a wide selection of new and used vehicles for sale.
The “off-highway” business principally includes the sale and servicing of power systems directly to customers in the commercial, defense, mining, maritime, and power generation sectors from 20 facilities we operate across Australia and New Zealand. We also utilize mobile remote field service units to travel directly to customer premises.
The “off-highway” business principally includes the sale and servicing of power systems directly to customers in the commercial, defense, mining, maritime, and power generation sectors from 20 facilities we operate across Australia and New Zealand.
We are one of the largest global automotive retailers as measured by the $23.7 billion in total retail automotive dealership revenue we generated in 2022. We are diversified geographically with 58% of our total retail automotive dealership revenues in 2022 generated in the U.S. and Puerto Rico and 42% generated outside of the U.S.
We are one of the largest global automotive retailers as measured by the $25.2 billion in total retail automotive dealership revenue we generated in 2023. We are diversified geographically with 56% of our total retail automotive dealership revenues in 2023 generated in the U.S. and Puerto Rico and 44% generated outside of the U.S.
Unit sales of automobiles in the European Union were approximately 9.3 million in 2022, a 4.6% decrease compared to 2021. In Germany, Italy, and Spain, new car sales were approximately 2.7 million, 1.3 million, and 0.8 million units, respectively, in 2022.
Unit sales of automobiles in the European Union were approximately 10.5 million in 2023, a 13.9% increase compared to 2022. In Germany, Italy, and Spain, new car sales were approximately 2.8 million, 1.6 million, and 0.9 million units, respectively, in 2023, and new car sales in Japan were approximately 4.8 million in 2023.
Total Arizona 26 BMW/MINI 25 54 79 Arkansas 4 Toyota/Lexus 24 — 24 California 30 Mercedes-Benz/Sprinter/smart 18 31 49 Connecticut 9 Audi/Volkswagen/Bentley 17 38 55 Florida 3 Chrysler/Jeep/Dodge 3 — 3 Georgia 4 Honda/Acura 19 — 19 Indiana 4 Ferrari/Maserati 2 13 15 Maryland 2 Porsche 9 11 20 Michigan 1 Jaguar/Land Rover 14 18 32 Minnesota 2 Lamborghini 1 5 6 New Jersey 24 Nissan/Infiniti 3 — 3 North Carolina 2 Cadillac/Chevrolet 4 — 4 Ohio 7 Others 12 17 29 Puerto Rico 4 Total 151 187 338 Rhode Island 8 Tennessee 1 Texas 11 Virginia 7 Wisconsin 2 Total U.S. 151 U.K. 135 Germany 21 Italy 21 Japan 10 Total Non-U.S. 187 Total Worldwide 338 8 Table of Contents Retail Automotive CarShop Used Vehicle Dealerships.
Total Arizona 24 BMW/MINI 26 58 84 Arkansas 4 Toyota/Lexus 24 — 24 California 30 Mercedes-Benz/Sprinter/smart 18 30 48 Connecticut 8 Audi/Volkswagen/Bentley 17 36 53 Florida 3 Chrysler/Jeep/Dodge 3 — 3 Georgia 4 Honda/Acura 19 — 19 Indiana 4 Ferrari/Maserati 2 12 14 Maryland 1 Porsche 10 11 21 Michigan 1 Jaguar/Land Rover 8 18 26 Minnesota 2 Lamborghini 1 5 6 New Jersey 22 Nissan/Infiniti 3 — 3 North Carolina 4 Cadillac/Chevrolet 4 — 4 Ohio 7 Others 12 19 31 Puerto Rico 4 Total 147 189 336 Rhode Island 8 Tennessee 1 Texas 11 Virginia 7 Wisconsin 2 Total U.S. 147 U.K. 131 Germany 22 Italy 24 Japan 12 Total Non-U.S. 189 Total Worldwide 336 Retail Automotive CarShop Used Vehicle Dealerships.
Our commercial vehicle distribution and other business operates principally in Australia and New Zealand. In 2022, heavy-duty truck sales in Australia and New Zealand combined were 18,553 units, representing an increase of 15.1% from 2021. Penske Transportation Solutions .
Our commercial vehicle distribution and other business operates principally in Australia and New Zealand. In 2023, heavy-duty truck sales in Australia and New Zealand combined were 21,562 units, representing an increase of 16.2% from 2022. Penske Transportation Solutions .

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

64 edited+20 added−17 removed86 unchanged
Biggest changeAlthough we believe that the expectations, plans, intentions, and projections reflected in our forward-looking statements are reasonable, such statements are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.
Biggest changeYou should note that our forward-looking statements speak only as of the date of this Annual Report on Form 10-K or when made, and we undertake no duty or obligation to update or revise our forward-looking statements, whether as a result of new information, future events, or otherwise. 19 Table of Contents Although we believe that the expectations, plans, intentions, and projections reflected in our forward-looking statements are reasonable, such statements are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.
We cannot be sure that our initiatives will be successful or that the amount we invest in these initiatives will result in our maintaining or enhancing market share and continued or improved financial performance. Sales outside the franchise system.
We cannot be sure that our initiatives will be successful or that the amount we invest in these initiatives will result in our maintaining or enhancing our market share and continued or improved financial performance. Sales outside the franchise system.
Key personnel. We believe that our success depends to a significant extent upon the efforts and abilities of our senior management and in particular, upon Roger Penske who is our Chair and Chief Executive Officer. To the extent Mr. Penske, or other key personnel, were to depart from our Company unexpectedly, our business could be significantly disrupted. Financial Risks Leverage.
We believe that our success depends to a significant extent upon the efforts and abilities of our senior management and in particular, upon Roger Penske who is our Chair and Chief Executive Officer. To the extent Mr. Penske, or other key personnel, were to depart from our Company unexpectedly, our business could be significantly disrupted. Financial Risks Leverage.
Our process for impairment testing of these assets is described further under “Impairment Testing” in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates.
Our process and results for impairment testing of these assets is described further under “Impairment Testing” in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates.
While we expect increased new vehicle availability in 2023, continued production disruptions and supply shortages could result in suppressed new and used vehicle sales volumes which would impact the availability and affordability of new and used vehicles and may adversely affect us.
While we expect increased new vehicle availability, continued production disruptions and supply shortages could result in suppressed new and used vehicle sales volumes which would impact the availability and affordability of new and used vehicles and may adversely affect us.
PTS contributes to several U.S. multi-employer pension plans that provide defined benefits to approximately 2,590 associates covered by collective bargaining agreements. If they withdraw or are deemed to withdraw from participation in any of these plans, then applicable law could require them to make withdrawal liability payments to the plan.
PTS contributes to several U.S. multi-employer pension plans that provide defined benefits to approximately 2,540 associates covered by collective bargaining agreements. If they withdraw or are deemed to withdraw from participation in any of these plans, then applicable law could require them to make withdrawal liability payments to the plan.
Adverse pricing concerns of those, and other commodities, may have a material adverse effect on our ability to distribute, and/or retail, commercial vehicles and other products profitably. These same conditions may also negatively impact the value of the Australian Dollar versus the U.S. Dollar, which negatively impacts our U.S.
Adverse pricing concerns of those, and other commodities, may have a material adverse effect on our ability to distribute, and/or retail, commercial vehicles and other products profitably. These same conditions may also negatively impact the value of the Australian and New Zealand Dollar versus the U.S. Dollar, which negatively impacts our U.S.
Claims arising out of actual or alleged violations of law which may be asserted against us or any of our dealers by individuals, through class actions, or by governmental entities in civil or criminal investigations and proceedings, may expose us to substantial monetary damages which may adversely affect us. Privacy Regulation.
Claims arising out of actual or alleged violations of law which may be asserted against us or any of our dealers by individuals, through class actions, or by governmental entities in civil or criminal investigations and proceedings, may expose us to substantial monetary damages which may adversely affect us.
Significant increases in fuel economy requirements and new restrictions on emissions on vehicles and fuels could adversely affect prices of and demand for the vehicles that we sell, which could materially adversely affect us. Commercial trucks are subject to similar regulatory risks related to emissions standards and other regulatory requirements.
Significant increases in fuel economy requirements and new restrictions on emissions on vehicles and fuels could adversely affect prices of and demand for the vehicles that we sell, which could materially adversely affect us. Commercial trucks are subject to similar regulatory risks related to emissions standards and other regulatory requirements discussed above.
Penske Corporation and Mitsui own approximately 70% of our common stock, and each has two demand registration rights that could result in a substantial number of shares being introduced for sale in the market. We also have a significant amount of authorized but unissued shares.
Penske Corporation and Mitsui own approximately 71% of our common stock, and each has two demand registration rights that could result in a substantial number of shares being introduced for sale in the market. We also have a significant amount of authorized but unissued shares.
Increases to such interest rates has resulted and may continue to result in higher interest expense for us, which negatively affects our operating results. Because many of our customers finance their vehicle purchases, increased interest rates may also decrease vehicle sales due to affordability, which would negatively affect our operating results.
Increases to such interest rates have resulted and may continue to result in higher interest expense for us, which negatively affects our operating results. Because many of our customers finance their vehicle purchases, increased interest rates may also decrease vehicle sales due to affordability, which would negatively affect our operating results.
Our two largest stockholders, Penske Corporation and its affiliates (“Penske Corporation”) and Mitsui & Co., Ltd. and its affiliates (“Mitsui”), together beneficially own approximately 70% of our outstanding common stock. The presence of such significant stockholders results in several risks, including: Our principal stockholders have substantial influence.
Our two largest stockholders, Penske Corporation and its affiliates (“Penske Corporation”) and Mitsui & Co., Ltd. and its affiliates (“Mitsui”), together beneficially own approximately 71% of our outstanding common stock. The presence of such significant stockholders results in several risks, including: Our principal stockholders have substantial influence.
A significant portion of the cash flow we generate must be used to service the interest and principal payments relating to our various financial commitments, including $3.0 billion of floor plan notes payable, $1.6 billion of non-vehicle long-term debt, and $5.4 billion of future lease commitments (including extension periods that are reasonably assured of being exercised and assuming constant consumer price indices).
A significant portion of the cash flow we generate must be used to service the interest and principal payments relating to our various financial commitments, including $3.8 billion of floor plan notes payable, $1.6 billion of non-vehicle long-term debt, and $5.3 billion of future lease commitments (including extension periods that are reasonably assured of being exercised and assuming constant consumer price indices).
The European Parliament provisionally approved a law requiring most automakers to reduce the emissions of new cars sold by 55% in 2030 and achieve a zero carbon-emission standard by 2035, effectively banning the sale of new gasoline and diesel cars and vans by 2035.
The European Parliament recently approved a law requiring most automakers to reduce the emissions of new cars sold by 55% in 2030 and achieve a zero carbon-emission standard by 2035, effectively banning the sale of new gasoline and diesel cars and vans by 2035.
The profitability of these businesses depends upon the number of vehicles, engines, power systems, and parts we distribute, which in turn is impacted by demand for these products. We believe demand is subject to general economic conditions, exchange rate fluctuations, regulatory changes, competitiveness of the products, and other factors over which we have limited control.
The profitability of these businesses depends upon the number of vehicles, engines, power systems, and parts we distribute, which in turn is impacted by demand for these products. We believe demand is subject to general economic conditions, exchange rate fluctuations, regulatory changes, competitiveness of the products, and other 20 Table of Contents factors over which we have limited control.
Moreover, geo-political conditions can affect the vehicle supply chain as has recently happened with the war in Ukraine. Certain vehicle manufacturers and suppliers are experiencing difficulty sourcing certain parts which is further exacerbating the supply chain difficulties resulting from the COVID-19 pandemic, demand for labor, and the shortage of microchips and other components.
Moreover, geo-political conditions can affect the vehicle supply chain as has recently happened with the war in Ukraine. Certain vehicle manufacturers and suppliers are experiencing difficulty sourcing certain parts which is further exacerbating the supply chain difficulties resulting from the demand for labor and the shortage of microchips and other components.
Moreover, while increasing consumer adoption of electric vehicles may present new service opportunities, including with respect to range maintenance and optimization, cooling protection, torque protection, battery replacement, and warranty on newly released models. The effects of the eventual adoption of driverless vehicles are uncertain. Technological advances are facilitating the evolution of driverless vehicles.
Conversely, increasing consumer adoption of electric vehicles may present new service opportunities, including with respect to range maintenance and optimization, cooling protection, torque protection, battery replacement, and warranty on newly released models. The effects of the eventual adoption of driverless vehicles are uncertain. Technological advances are facilitating the evolution of driverless vehicles.
Without franchise or distributor agreements, we would be unable to sell or distribute new vehicles or perform manufacturer authorized warranty service. If a significant number of our franchise agreements are terminated, not renewed, or, with respect to our distributor operations, a competing distributor were introduced, we would be materially affected. Regulatory Issues.
Without franchise or distributor agreements, we would be unable to sell or distribute new vehicles or perform manufacturer authorized warranty service. If a significant number of our franchise agreements are terminated, not renewed, or, with respect to our distributor operations, a competing distributor were introduced, we would be materially affected. 24 Table of Contents Regulatory Issues.
Penske Corporation has pledged a substantial portion of its shares of our common stock as collateral to secure a loan facility. A default by Penske Corporation could result in the foreclosure on those shares by the lenders, after 27 Table of Contents which the lenders could attempt to sell those shares on the open market or to a third party.
Penske Corporation has pledged a substantial portion of its shares of our common stock as collateral to secure a loan facility. A default by Penske Corporation could result in the foreclosure on those shares by the lenders, after which the lenders could attempt to sell those shares on the open market or to a third party.
This impact could include changes in customer demand, our relationship with, and the financial and operational capacities of, vehicle manufacturers, captive finance companies and other suppliers, workforce availability, risks associated with our indebtedness (including available borrowing capacity, compliance with financial covenants, and ability to refinance or repay indebtedness on favorable terms), the adequacy of our cash flow and earnings and other conditions which may affect our liquidity, and disruptions to our technology network and other critical systems, including our dealer management systems and software or other facilities or equipment.
Potential pandemic impacts could include changes in customer demand, our relationship with, and the financial and operational capacities of, vehicle manufacturers, captive finance companies and other suppliers, workforce availability, risks associated with our indebtedness (including available borrowing capacity, compliance with financial covenants, and ability to refinance or repay indebtedness on favorable terms), the adequacy of our cash flow and earnings and other conditions which may affect our liquidity, and disruptions to our technology network and other critical systems, including our dealer management systems and software or other facilities or equipment.
In the event a subtenant does not perform under the terms of their lease with us, we could be required to fulfill such obligations, which could have a significant and adverse effect on us. 24 Table of Contents International and foreign currency exchange risk.
In the event a subtenant does not perform under the terms of their lease with us, we could be required to fulfill such obligations, which could have a significant and adverse effect on us. International and foreign currency exchange risk.
If there is a prolonged drop in retail prices or if new vehicle sales are 22 Table of Contents allowed to be made over the internet or otherwise without the involvement of franchised dealers, our business could be materially adversely affected.
If there is a prolonged drop in retail prices or if new vehicle sales are allowed to be made over the internet or otherwise without the involvement of franchised dealers, our business could be materially adversely affected.
For an overview of certain of our efforts related to cybersecurity risk management, strategy, and governance and our written Information Security Program, see Item 1.
For an overview of certain of our efforts related to cybersecurity risk management, strategy, and governance and our written Information Security Program, see Item 1C. Cybersecurity .
Significant changes to GAAP in the U.S. could significantly affect our reported financial position, earnings, and cash flows upon adoption and effectiveness. In addition, any changes to lease accounting could affect PTS customers' decisions to purchase or lease trucks, which could adversely affect their business if leasing becomes a less favorable option.
("GAAP") could significantly affect our reported financial position, earnings, and cash flows upon adoption and effectiveness. In addition, any changes to lease accounting could affect PTS customers' decisions to purchase or lease trucks, which could adversely affect their business if leasing becomes a less favorable option.
Our businesses and our commercial vehicle operations, in particular, as those are more concentrated with a particular manufacturer, are impacted by consumer demand and brand preference, including consumers' perception of the quality of those brands.
Strategic Risks Brand reputation. Our businesses and our commercial vehicle operations, in particular, as those are more concentrated with a particular manufacturer, are impacted by consumer demand and brand preference, including consumers' perception of the quality of those brands.
A sustained or significant decrease in our operating cash flows could lead to an inability to meet our debt service or lease requirements or to a failure to meet specified financial and operating covenants included in certain of our agreements.
A sustained or significant decrease in our operating cash flows could lead to an inability to meet our debt 23 Table of Contents service or lease requirements or to a failure to meet specified financial and operating covenants included in certain of our agreements.
Used vehicle prices in particular have experienced periods of a high rate of inflation during 2022, and continued high rates of inflation may adversely affect consumer demand and increase our costs, which may materially and adversely affect us. Similarly, periods of rapid deflation in vehicle prices may materially and adversely affect our ability to profitably sell the affected vehicles.
Used vehicle prices in particular have experienced periods of a high rate of inflation in recent years, and continued high rates of inflation may adversely affect consumer demand and increase our costs, which may materially and adversely affect us. Similarly, periods of rapid deflation in vehicle prices may materially and adversely affect our ability to profitably sell the affected vehicles.
Performance of sublessees. In connection with the sale, relocation, and closure of certain of our franchises, we have entered into a number of third-party sublease agreements. The rent paid by our sub-tenants on such properties in 2022 totaled approximately $17.9 million.
Performance of sublessees. In connection with the sale, relocation, and closure of certain of our franchises, we have entered into a number of third-party sublease agreements. The rent paid by our sub-tenants on such properties in 2023 totaled approximately $17.0 million.
The introduction of any of these shares into the market could have a material adverse effect on our stock price. General Risks Property loss, business interruption, or other liabilities.
The introduction of any of these shares into the market could have a material adverse effect on our stock price. 27 Table of Contents General Risks Property loss, business interruption, or other liabilities.
In the aggregate, we remain ultimately liable for approximately $112.4 million of such lease payments including payments relating to all available renewal periods. We rely on our sub-tenants to pay the rent and maintain the properties covered by these leases.
In the aggregate, we remain ultimately liable for approximately $95.2 million of such lease payments including payments relating to all available renewal periods. We rely on our sub-tenants to pay the rent and maintain the properties covered by these leases.
For 25 Table of Contents example, a failure to comply with the UKGDPR could result in fines up to the greater of £17.5 million or 4% of annual global revenues. Recalls.
For example, a failure to comply with the UKGDPR could result in fines up to the greater of £17.5 million or 4% of annual global revenues. Recalls.
The effect of driverless vehicles on the automotive retail and trucking industries is uncertain and could include changes in the level of new and used 23 Table of Contents vehicles sales, the price of new and used vehicles, the levels of service required by driverless vehicles and the role of franchised dealers, any of which could materially and adversely affect our business.
The effect of driverless vehicles on the automotive retail and trucking industries is uncertain and could include changes in the level of new and used vehicles sales, the price of new and used vehicles, the levels of service required by driverless vehicles and the role of franchised dealers, any of which could materially and adversely affect our business. Key personnel.
Changes to the retail delivery model, including increased digital retailer competition, efforts to sell vehicles direct outside the franchise system, and transition to an “agency model” of distribution each could adversely affect our business, results of operations, financial condition, and cash flows.
Changes to the retail delivery model, including increased digital retailer competition, efforts to sell vehicles direct outside the franchise system, and transition to an agency model of distribution each could adversely affect our business, results of operations, financial condition, and cash flows. Competition from online retailers.
Roger Penske, our Chair and Chief Executive Officer and a director, holds the same offices at Penske Corporation. Robert Kurnick, Jr., our President and a director, is also the Vice Chair and a director of Penske Corporation. Bud Denker, our Executive Vice President, Human Resources, is also the President of Penske Corporation.
Roger Penske, our Chair and Chief Executive Officer and a director, holds the same offices at Penske Corporation. Robert Kurnick, Jr., our President and a director, is also the Vice Chair and a director of Penske Corporation and an Advisory Board member of PTS. Bud Denker, our Executive Vice President, Human Resources, is also the President of Penske Corporation.
While the sales levels of these new entrants was approximately 4% of new vehicles in the U.S. and approximately 3% of new vehicles in the U.K. for the year ended December 31, 2022, continued market share gains by manufacturers operating outside the franchise system may materially and adversely affect us.
While the sales levels of these new entrants were approximately 4.6% of new vehicles in the U.S. and approximately 2.6% of new vehicles in the U.K. for the year ended December 31, 2023, continued market share gains by manufacturers operating outside the franchise system may materially and adversely affect us.
Business — Business Description — "Information Technology, Data Security, Cybersecurity, and Customer Privacy." Despite the security measures we have in place, we may be unable to fully detect, mitigate, or protect against cyber-attacks, ransomware attacks, security breaches, social engineering, malicious software, lost or misplaced data, programming errors, human errors, acts of vandalism, or other events.
Despite the security measures we have in place, we may be unable to fully detect, mitigate, or protect against cyber-attacks, ransomware attacks, security breaches, social engineering, malicious software, lost or misplaced data, programming errors, human errors, acts of vandalism, or other events.
Connecticut, Utah, and Virginia, have also enacted comprehensive consumer privacy laws, and other states may follow. These laws pose increasingly complex and rigorous compliance challenges, which may increase our compliance costs and related risk.
Other U.S. states have also enacted comprehensive consumer privacy laws, and additional states may follow. These laws pose increasingly complex and rigorous compliance challenges, which may increase our compliance costs and related risk.
In 2022, revenue generated at our BMW/MINI, Audi/Volkswagen/Porsche/Bentley, Toyota/Lexus, and Mercedes-Benz/Sprinter/smart dealerships represented 26%, 21%, 14%, and 10%, respectively, of our total automotive dealership revenues. In addition, our retail commercial truck operations rely principally on Freightliner and Western Star trucks (both Daimler brands).
In 2023, revenue generated at our BMW/MINI, Audi/Volkswagen/Porsche/Bentley, Toyota/Lexus, and Mercedes-Benz/Sprinter/smart dealerships represented 26%, 22%, 13%, and 9%, respectively, or 70% in aggregate, of our total automotive dealership revenues. In addition, our retail commercial truck operations rely principally on Freightliner and Western Star trucks (both Daimler brands).
When the supply of vehicles improves, we may experience reduced new and used vehicle gross profit together with higher sales volumes. The success of our commercial vehicle distribution and other business is directly impacted by availability and demand for the vehicles and other products we distribute.
As the supply of new vehicles has improved, we have experienced, and may continue to experience, reduced new and used vehicle gross profit together with higher sales volumes. The success of our commercial vehicle distribution and other business is directly impacted by availability and demand for the vehicles and other products we distribute.
PTS had a significant amount of total indebtedness at December 31, 2022, which it uses in part to purchase its vehicle fleet and therefore, is subject to changes in, and continued access to, capital markets. Regulatory Requirements, Vehicle Mandates, and Consumer Sentiment.
PTS has a significant amount of total indebtedness, which it uses in part to purchase its vehicle fleet and therefore, is subject to changes in, and continued access to, capital markets. Regulatory Requirements and Vehicle Mandates.
These economic conditions include levels of new and used vehicle sales, availability of consumer credit, changes in consumer demand, consumer confidence levels, fuel prices, the rate of inflation, personal discretionary spending levels, interest rates, and unemployment rates.
These economic conditions include levels of new and used vehicle sales, availability of consumer credit, changes in consumer demand, consumer confidence levels, fuel prices, demand for trucks to move freight with respect to PTS and PTG, the rate of inflation, personal discretionary spending levels, interest rates, and unemployment rates.
Furthermore, should climate change continue, we expect further regulation of internal combustion engines and vehicle emissions which may affect the types of vehicles we sell and service. We cannot predict the future costs to our businesses for these developments. Accounting rules and regulations.
Furthermore, should climate change continue, we expect further regulation of internal combustion engines and vehicle 26 Table of Contents emissions which may affect the types of vehicles we sell and service. We cannot predict the future costs to our businesses for these developments. Accounting and disclosure rules and regulations. Significant changes to generally accepted accounting principles in the U.S.
Business disruption relating to the COVID-19 pandemic may continue to negatively impact the global economy and may materially affect our businesses as outlined above, or in other manners including global supply chain disruptions resulting in lower levels of vehicles and parts available for sale, all of which would adversely impact our business and results of operations. Strategic Risks Brand reputation.
Business disruption as a result of a future pandemic could also negatively impact the global economy and may materially affect our businesses as outlined above, or in other manners including global supply chain disruptions resulting in lower levels of vehicles and parts available for sale, all of which would adversely impact our business and results of operations.
In August 2021, the Environmental Protection Agency announced the Clean Trucks Plan, which includes pledges to update current greenhouse gas (GHG) emission standards to reflect market shifts to zero-emission technologies in certain segments of the heavy-duty vehicle sector and new more stringent GHG emissions standards for heavy-duty engines and vehicles starting as soon as model year 2027.
The EPA's three phase Clean Trucks Plan includes pledges to update current GHG standards to reflect market shifts to zero-emission technologies in certain segments of the heavy-duty vehicle sector and new, more stringent GHG emissions standards for heavy-duty engines and vehicles beginning as soon as model year 2027.
Furthermore, the Advanced Clean Fleet rule, currently being developed by the state of California, and which may be adopted in other jurisdictions, will require certain larger fleets, including the fleet of PTS, to purchase zero-emission trucks to comprise over time an increasing percentage of their fleets from 2025 to 2042.
Furthermore, the Advanced Clean Fleet rule, issued by CARB in April 2023, and which may be adopted in other jurisdictions, will require certain larger fleets, including PTS', to purchase zero-emission trucks to comprise an increasing percentage of their fleets from 2025 to 2042.
The COVID-19 pandemic has disrupted, and may continue to disrupt, our business, which could adversely affect our financial performance. The outbreak of the COVID-19 pandemic across the globe has adversely impacted each of our markets and the global economy, leading to disruptions to our business.
The COVID-19 pandemic disrupted our business, and any future pandemic could adversely affect us. The outbreak of the COVID-19 pandemic across the globe has adversely impacted each of our markets and the global economy, leading to disruptions to our business.
See the disclosure provided under “Recent Accounting Pronouncements” in Part II, Item 8, Note 1 of the Notes to our Consolidated Financial Statements for additional detail on accounting standard updates that could have an impact on us. Related parties.
See the disclosure provided under “Recent Accounting Pronouncements” in Part II, Item 8, Note 1 of the Notes to our Consolidated Financial Statements for additional detail on accounting standard updates that could have an impact on us. In addition, we are subject to various reporting regimes in the U.S. and internationally.
The Vice Chair of our Board of Directors, Greg Penske, is the son of our Chair and also serves as a director of Penske Corporation. Michael Eisenson, one of our directors, is also a director of Penske Corporation. Kota Odagiri, one of our directors, is also an employee of Mitsui.
The Vice Chair of our Board of Directors, Greg Penske, is the son of our Chair and also serves as a director of Penske Corporation. Michael Eisenson, one of our directors, is also a director of Penske Corporation and an Advisory Board member of PTS. Lisa Davis, one of our directors, is also an Advisory Board member of PTS.
Any failure of that supply chain could materially and adversely affect us. Our new vehicle days' supply is 25 as of December 31, 2022, compared to 17 as of December 31, 20 Table of Contents 2021, and 50 as of December 30, 2020.
Any failure of that supply chain could materially and adversely affect us. Our new vehicle days' supply is 39 as of December 31, 2023, compared to 25 as of December 31, 2022.
Should tariffs increase, we expect the price of many new vehicles we sell to increase which may adversely affect our new vehicle sales and related finance and insurance sales.
Increased tariffs, import product restrictions, and foreign trade risks may impair our ability to sell foreign vehicles profitably. Should tariffs increase, we expect the price of many new vehicles we sell to increase, which may adversely affect our new vehicle sales and related finance and insurance sales.
Roger Penske also serves as Chairman of Penske Transportation Solutions, for which he is compensated by PTS. Penske Corporation ownership levels.
Kota Odagiri, one of our directors, is also an employee of Mitsui. Roger Penske also serves as Chairman of Penske Transportation Solutions, for which he is compensated by PTS. Penske Corporation ownership levels.
We may face increased competition for market share with these non-traditional delivery models and digital retailers over time which could materially and adversely affect our results of operations.
We also continue to develop technology solutions to improve the online buying experience. We may face increased competition for market share with these non-traditional delivery models and digital retailers over time which could materially and adversely affect our results of 22 Table of Contents operations.
The Mercedes-Benz U.K. agency model is not expected to structurally change our used vehicle sales operations or service and parts operations, although the impact of the agency model implemented by Mercedes-Benz U.K. as well as other agency models proposed by our manufacturer partners is uncertain.
We continue to provide new vehicle customer service at our Mercedes-Benz U.K. dealerships, and the Mercedes-Benz U.K. agency model at this time has not changed our used vehicle sales operations or service and parts operations, although the long-term impact of the agency model at these dealerships as well as other agency models proposed by our manufacturer partners is uncertain.
Representatives of the U.K. government have proposed a ban on the sale of gasoline engines in new cars and new vans that would take effect as early as 2030 and a ban on the sale of gasoline hybrid engines in new cars and new vans as early as 2035.
Representatives of the U.K. government have proposed a ban on the sale of gasoline engines and gasoline hybrid engines in new cars and new vans that would take effect in 2035 while also providing government incentives on certain electric vehicles to entice consumers to transition from internal combustion vehicles to electric vehicles.
Under an agency model, our dealerships receive a fee for facilitating the sale by the manufacturer of a new vehicle but do not hold the vehicle in inventory. We will continue to provide new vehicle customer service at our dealerships.
Agency. Beginning in 2023, we transitioned our Mercedes-Benz U.K. dealerships to an agency model under which these dealerships, and a limited number of our other dealerships in Europe, receive a fee for facilitating the sale by the manufacturer of a new vehicle but do not hold the vehicle in inventory.
While we expect to continue to have normal levels of used vehicles for sale (our used vehicle days' supply is 53 as of December 31, 2022, compared to 60 as of December 31, 2021, and 48 as of December 31, 2020).
While we expect to continue to have normal levels of used vehicles for sale (our used vehicle days' supply is 48 as of December 31, 2023, compared to 53 as of December 31, 2022), the lower supply of new vehicles has contributed to higher vehicle gross profit on new vehicles sold, which contributed to our higher overall profitability in recent years.
Scientific evidence suggests that the globe is warming potentially resulting in an environment more prone to natural disasters, such as flooding. To date, we have seen increases in our cost to insure against such risks, which costs could continue to increase should this trend continue.
To date, we have seen increases in our cost to insure against such risks, which costs could continue to increase should this trend continue.
Similar legislation has been announced in Washington, California, Massachusetts, and New York, which would ban the sale of new vehicles with gasoline-only engines in cars in 2035.
Similar legislation in various states across the United States would ban the sale of new vehicles with gasoline-only engines in cars as early as 2035.
The retail automotive industry is experiencing a period of unprecedented change and disruption in several respects: Competition from online retailers. The automotive retail industry is experiencing growing competition in the used vehicle market from companies with a primarily online business model, including companies such as Carvana, Vroom, Shift, Cazoo, and others.
The automotive retail industry is experiencing competition in the used vehicle market from companies with a primarily online business model, including companies such as Carvana and others. We and the other traditional automotive retailers are implementing digital retail strategies, providing consumers with online vehicle purchasing experiences, including at-home delivery.
These and any other future requirements could result in higher prices for vehicles, diesel engines, materials, and fuel as well as higher maintenance costs and uncertainty as to reliability of the new engines.
Foreign, federal, state, provincial, and local lawmakers also are considering a variety of other climate change proposals, including prohibiting the use of certain substances with high “global warming potential.” These and any other future requirements could result in higher prices for vehicles, diesel engines, materials, and fuel, as well as higher maintenance costs and uncertainty as to reliability and range of the new engines.
Changes in law. New laws and regulations at the state and federal level may be enacted which could materially adversely impact our business.
Changes in law. New laws and regulations at the state and federal level may be enacted which could materially adversely impact our business. For example, in December 2023, the U.S. Federal Trade Commission (the "FTC") announced its new Combating Auto Retail Scams ("CARS") Rule, which would change the way vehicles are advertised and sold in the U.S.
The COVID-19 pandemic remains highly fluid and continues to, among other things, impact production levels from our manufacturing partners and impose other unintended consequences, and while we continue to adjust our operations to conform to regulatory changes and consumer preferences in the evolving environment, we cannot anticipate with any certainty the length, scope, or severity of the business impact from the COVID-19 pandemic in each of the jurisdictions that we operate.
Any future pandemic could impact production levels from our manufacturing partners, impose other unintended consequences, and require us to adjust our operations to conform to regulatory changes and consumer preferences in the evolving environment.
PTG sells new and used heavy- and medium-duty commercial trucks, parts and service, and offers collision repair services. PTS, with its broad product offering including full-service truck leasing, contract maintenance, and truck rental, along with logistic services, is one of the largest purchasers of commercial trucks in North America.
PTS, with its broad product offering including full-service truck leasing, contract maintenance, and truck rental, along with logistics services, is one of the largest purchasers of commercial trucks in North America. Should future regulations or consumer sentiment hinder our or PTS' ability to maintain, acquire, sell, or operate trucks, we may be adversely affected. Tariff and trade risk.
For example, in 2022, the Federal Trade Commission proposed new regulations for automotive dealers that would change industry-accepted practices with regard to sales and advertising, require an extensive series of oral and written disclosures to consumers in regard to the sale price of vehicles, credit terms, and 26 Table of Contents voluntary protection products, mandate the posting of certain pricing and other information on dealer websites, and impose burdensome recordkeeping requirements.
Once effective, the rules are expected to change industry-accepted practices with regard to sales and advertising, require a series of oral and written disclosures to consumers in regard to the sale price of vehicles, credit terms, and voluntary protection products, and impose burdensome recordkeeping requirements, all of which may lead to additional transaction times for the sale of vehicles, complicate the transaction process, decrease customer satisfaction, and increase compliance costs and risk, among other effects.
Removed
You should note that our forward-looking statements speak only as of the date of this Annual Report on Form 10-K or when made, and we undertake no duty or obligation to update or revise our forward-looking statements, whether as a result of new information, future events, or otherwise.
Added
Increasing efforts to control emissions of carbon dioxide and certain other gases, referred to as greenhouse gases (“GHGs”), are likely to have an effect on PTS' (and PTG's) business and results of operations.
Removed
The lower supply of new vehicles contributed to higher vehicle gross profit on new vehicles sold, which contributed to our higher overall profitability in 2022.
Added
In particular, President Biden and Congressional leaders, as well as California, New Jersey, and other states, have expressed support for policies limiting GHG emissions from vehicles through new regulations that require moving to zero-emission formats and/or the implementation of more stringent emissions controls.
Removed
Global, federal, state, and local legislative and regulatory efforts to address the effects of global warming and climate change have affected and will likely continue to affect PTS' businesses and may require restrictions on PTS' activities or require PTS to take certain actions, 21 Table of Contents all of which may, over time, increase PTS' costs and adversely affect its business and results of operations.
Added
For example, original equipment manufacturers may be required to install additional engine components, additional aerodynamic features, or low-rolling resistance tires to comply with fuel economy regulations, which may result in higher costs associated with more complex components and a shorter useful tread life for tires, increasing operating costs for customers, suppliers, and PTS.
Removed
For instance, a regulatory mandate for the use of zero-emission vehicles or ban of diesel or gasoline powered vehicles could reduce the resale value and demand for PTS' vehicles as well as the demand for leasing, truck rental, and contract maintenance services and offerings in its logistics business.
Added
Additionally, the Advanced Clean Trucks rule, as adopted by the California Air Resources Board ("CARB") and several other states, will require that certain truck manufacturers sell zero-emission trucks as an increasing percentage of their annual sales in these states from 2024 to 2035 (and likely beyond).
Removed
A decrease in demand due to higher costs for PTS' customers to operate vehicles leased or rented from PTS could adversely affect its business and results of operations. In addition, increased operating costs in the industry would directly and adversely affect PTS' logistics business in the same manner as it would affect its customers.
Added
On December 28, 2023, CARB announced that it would defer enforcement of the rule, which was scheduled to become effective on January 1, 2024, while its request for a waiver from the EPA to authorize the rule is pending.
Removed
Even absent any such regulations, increased awareness on the impact of climate change and any adverse publicity about emissions by the transportation industries could accelerate the adoption of new technology and potentially decrease customer demands for some of PTS' services and used vehicles if consumers change their purchasing behaviors in response to the effects of climate change. Centralized Information Systems.
Added
The EPA initiated the first phase of the Clean Trucks Plan by issuing a final rule on 21 Table of Contents December 20, 2022, which focuses on reducing emissions that form smog and soot and will apply to heavy-duty engines and vehicles beginning in model year 2027.
Removed
If shelter-in-place orders are re-enacted or other restrictions are placed on our business, we may be adversely impacted.
Added
Any of these factors could increase operating costs in the transportation industry, which would directly affect PTS' and PTG's customers and could reduce demand for vehicles. The new technology and legal requirements may also affect the resale values of these vehicles when PTS or PTG attempts to sell them in the future. Centralized Information Systems.
Removed
We and the other traditional automotive retailers are implementing digital retail strategies, providing consumers with online vehicle purchasing experiences, including at-home delivery. We also continue to develop technology solutions to improve the online buying experience.
Added
Vehicles sold under this agency model are counted as new agency units sold instead of new retail units sold by us, and only the fee we receive from the manufacturer, not the price of the vehicle, is reported as new revenue (as opposed to previously recording all of the vehicle sale price as new revenue) with no corresponding cost of sale.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease office space in Leicester, 28 Table of Contents England; Melbourne, Australia; and other regions for administrative and other corporate-related activities. We believe that our facilities are sufficient for our needs and are in good repair.
Biggest changeWe lease office space in Leicester, England and other regions for administrative and other corporate-related activities. We believe that our facilities are sufficient for our needs and are in good repair.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings We are involved in litigation which may relate to claims brought by governmental authorities, customers, vendors, or employees, including class action claims and purported class action claims. We are not a party to any legal proceedings, including class action lawsuits, that individually or in the aggregate are reasonably expected to have a material effect on us.
Biggest changeIn addition to the matters discussed above, from time to time we are a party to litigation and other legal proceedings, including class action claims and purported class action claims, in the ordinary course of business. Such claims may be brought by governmental authorities, customers, vendors, stockholders, or employees.
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.
We are not a party to any legal proceedings, including class action lawsuits, that individually or in the aggregate are reasonably expected to have a material effect on us. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect.
Added
Item 3. Legal Proceedings On December 27, 2023, Plaintiff Jeffrey Edelman (“Plaintiff”), a purported stockholder of ours, filed a putative class action and stockholder derivative complaint (the “Complaint”) in the Court of Chancery of the State of Delaware (the “Court”) against all of our directors, a former director, and Penske Corporation (“PC”) (together, the “Defendants”) under the caption Edelman v.
Added
Penske, et al., C.A. No. 2023-1291-JTL (the “Action”). The claims in the Complaint related to our securities repurchase programs in 2021, 2022, and 2023. Among other allegations, the Plaintiff claimed that Board members breached their fiduciary duties in approving these securities repurchase programs and that PC and Roger S.
Added
Penske as controllers of the Company also breached their fiduciary duties because the repurchase programs allegedly permitted the controllers to attain majority voting control of the Company without paying a control premium. The Defendants believe that the allegations of the Complaint were meritless, deny those allegations, and deny that any violation of applicable law has occurred.
Added
However, solely to minimize expenses and distraction and to avoid the uncertainty of any litigation, we entered into the Voting Agreement defined and described in the Company's prior Form 8-K, filed with the SEC on January 24, 2024, and below.
Added
On January 24, 2024, the parties entered into a Stipulation and Proposed Order Voluntarily Dismissing The Action As Moot (the “Stipulation and Proposed Order”), pursuant to which the Court would retain jurisdiction regarding any application Plaintiff may make for an award of attorney’s fees.
Added
The Court entered the Stipulation and Proposed Order on January 24, 2024, and retained jurisdiction to approve a form of notice concerning attorneys’ fees payable to Plaintiff in connection with the Voting Agreement and the Action.
Added
The Company subsequently agreed to pay $995,000 in attorneys’ fees and expenses in full satisfaction of any and all claims by Plaintiff and all of his counsel for fees and expenses in the Action.
Added
On February 8, 2024, the Court entered an order closing the Action, subject to the Company filing an affidavit with the Court confirming that this notice has been issued. In entering the order, the Court was not asked to review, and did not pass judgment on, the payment of the attorneys’ fees and expenses or their reasonableness.
Added
Plaintiff’s counsel are Stephen E. Jenkins and Tiffany Geyer Lydon of Ashby & Geddes, P.A., (302) 654-1888, and Gregory Mark Nespole, Daniel Tepper, Correy A. Suk, and Cinar Oney of Levi & Korsinsky, LLP, (212) 363-7500. Counsel to the Company and the individual defendants except for Roger S. Penske are Raymond J.
Added
DiCamillo and Blake Rohrbacher of Richards, Layton & Finger, P.A., (302) 651-7700. Counsel to Roger S. Penske and PC is John P. DiTomo of Morris, Nichols, Arsht, & Tunnell LLP, (302) 351-9329. PC currently beneficially owns 34,181,121 shares of our Voting Common Stock, representing 51% of our outstanding Voting Common Stock.
Added
On January 23, 2024, we entered into a voting agreement (the “Voting Agreement”) with PC pursuant to which PC agreed, on each matter brought to a vote at any annual or special meeting of our stockholders and in 30 Table of Contents connection with any action proposed to be taken by consent of our stockholders in lieu of a meeting, to vote all shares of Voting Common Stock, or other voting or equity securities of ours which could be issued (together with the Voting Common Stock, the “Voting Securities”) beneficially owned by PC, that, together with the Voting Securities held by Roger S.
Added
Penske, our Chair and Chief Executive Officer, and any entity that Roger S. Penske controls, exceed 43.57% of the outstanding Voting Securities (the “Excess Voting Securities”), in the same proportion as all votes cast by stockholders other than PC, Roger S. Penske or any entity that Roger S.
Added
Penske controls (except as otherwise required by the existing PM Shareholders Agreement as defined and described below). Any Voting Securities that are not Excess Voting Securities may be voted at the discretion of PC. The Voting Agreement will terminate per its terms at the time that PC ceases to beneficially own 30% or more of the Voting Securities then outstanding.
Added
Notwithstanding the foregoing, the Voting Agreement does not impact the provisions of that certain stockholders agreement (the “PM Shareholders Agreement”) by and among PC, Penske Automotive Holdings Corp.
Added
(the “Penske companies”) and Mitsui pursuant to which, in connection with any stockholder election of directors of the Company, (i) the Penske companies have agreed to vote their shares for two directors who are representatives of Mitsui as long as Mitsui owns in excess of 20% of our outstanding common stock, and for one director as long as Mitsui owns in excess of 10% of our outstanding common stock, and (ii) Mitsui in turn has agreed to vote its shares for up to fourteen directors voted for by the Penske companies.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Program (in millions) October 1 to October 31, 2022 949,396 $ 100.91 949,396 $ 262.8 November 1 to November 30, 2022 809,246 $ 118.83 809,246 $ 166.6 December 1 to December 31, 2022 777,603 $ 119.08 777,603 $ 74.0 2,536,245 2,536,245 29 Table of Contents SHARE INVESTMENT PERFORMANCE The following graph compares the cumulative total stockholder returns on our common stock based on an investment of $100 on December 31, 2017, and the close of the market on December 31 of each year thereafter against (i) the Standard & Poor's 500 Index and (ii) an industry/peer group consisting of Asbury Automotive Group, Inc., AutoNation, Inc., Group 1 Automotive, Inc., Lithia Motors, Inc., and Sonic Automotive, Inc (the "Peer Group").
Biggest changeManagement's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — "Securities Repurchases" and Part II, Item 8, Note 14 of the Notes to our Consolidated Financial Statements. 31 Table of Contents Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Program (in millions) October 1 to October 31, 2023 — $ — — $ 233.1 November 1 to November 30, 2023 — $ — — $ 233.1 December 1 to December 31, 2023 117,875 (1) $ 149.31 117,514 $ 215.5 117,875 117,514 (1) Includes 361 shares acquired from employees in connection with a net share settlement feature of employee equity awards SHARE INVESTMENT PERFORMANCE The following graph compares the cumulative total stockholder returns on our common stock based on an investment of $100 on December 31, 2018, and the close of the market on December 31 of each year thereafter against (i) the Standard & Poor's 500 Index and (ii) an industry/peer group consisting of Asbury Automotive Group, Inc., AutoNation, Inc., Group 1 Automotive, Inc., Lithia Motors, Inc., and Sonic Automotive, Inc (the "Peer Group").
While future quarterly or other cash dividends will depend upon a variety of factors considered relevant by our Board of Directors, which may include our expectations regarding vehicle production issues, the rate of inflation, including its impact on vehicle affordability, earnings, cash flow, capital requirements, restrictions relating to any then-existing indebtedness, financial condition, alternative uses of capital, the severity and duration of the COVID-19 pandemic, and other factors, we currently expect to continue to pay comparable dividends in the future.
While future quarterly or other cash dividends will depend upon a variety of factors considered relevant by our Board of Directors, which may include our expectations regarding the severity and duration of vehicle production issues, the rate of inflation, including its impact on vehicle affordability, earnings, cash flow, capital requirements, restrictions relating to any then-existing indebtedness, financial condition, alternative uses of capital, and other factors, we currently expect to continue to pay comparable dividends in the future .
The graph assumes the reinvestment of all dividends. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Penske Automotive Group, Inc., the S&P 500 Index, and a Peer Group ________________________ * $100 invested on 12/31/17 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
The graph assumes the reinvestment of all dividends. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Penske Automotive Group, Inc., the S&P 500 Index, and a Peer Group ________________________ * $100 invested on 12/31/18 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange under the symbol “PAG.” As of February 14, 2023, there were 221 holders of record of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange under the symbol “PAG.” As of February 13, 2024, there were 225 holders of record of our common stock.
Dividends We have announced a cash dividend of $0.61 per share payable on March 1, 2023, to stockholders of record as of February 10, 2023.
Dividends We have announced a cash dividend of $0.87 per share payable on March 1, 2024, to stockholders of record as of February 15, 2024.
On February 16, 2023, our Board of Directors delegated to management an additional $250 million in authority to repurchase our outstanding securities, resulting in $253.6 million of authority outstanding and available for repurchases. This authority has no expiration. For further information with respect to repurchases of our shares by us, see Item 7.
Securities Repurchases As of December 31, 2023, $215.5 million remained outstanding and available for repurchases under our securities repurchase program approved by our Board of Directors. This authority has no expiration. For further information with respect to repurchases of our shares by us, see Item 7.
Removed
Securities Repurchases In October 2022, our Board of Directors increased the authority delegated to management to repurchase our outstanding securities by $250 million. As of February 7, 2023, $3.6 million of that authority remained outstanding and available for repurchases.
Added
Cumulative Total Return 12/18 12/19 12/20 12/21 12/22 12/23 Penske Automotive Group, Inc. 100.00 128.95 154.82 285.43 311.76 443.63 S&P 500 100.00 131.49 155.68 200.37 164.08 207.21 Peer Group 100.00 168.51 257.59 338.09 293.84 427.05 32 Table of Contents
Removed
Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — "Securities Repurchases" and Part II, Item 8, Note 14 of the Notes to our Consolidated Financial Statements.
Removed
Cumulative Total Return 12/17 12/18 12/19 12/20 12/21 12/22 Penske Automotive Group, Inc. 100.00 86.78 111.91 134.36 247.71 270.55 S&P 500 100.00 95.62 125.72 148.85 191.58 156.89 Peer Group 100.00 74.52 125.57 191.96 251.94 218.97

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

158 edited+44 added−27 removed70 unchanged
Biggest changeRisk Factors and the following: • our business and the automotive retail and commercial vehicles industries in general are susceptible to adverse economic and geo-political conditions, including changes in interest rates, foreign currency exchange rates, customer demand, customer confidence, the rate of inflation, including its impact on vehicle affordability, fuel prices, unemployment rates and credit availability; • we depend on the success, popularity and availability of the brands we sell, and adverse conditions affecting one or more of these vehicle manufacturers, including the adverse impact on the vehicle and parts supply chain due to natural disasters, the shortage of microchips or other components, the COVID-19 pandemic, the war in Ukraine, challenges in sourcing labor, or other disruptions that interrupt the supply of vehicles and parts to us may negatively impact our revenues and profitability; • the number of new and used vehicles sold in our markets, which impacts our ability to generate new and used vehicle gross profit and future service and parts operations; • the effect on our businesses of the changing retail environment due to certain manufacturers selling direct to consumers outside the franchise system, changes to an agency model of distribution in the U.K. and other European countries which will reduce reported revenues, reduce SG&A expenses, and reduce floor plan interest expense (although other impacts to our results of operations remain uncertain), and the growing number of electric vehicles; 53 Table of Contents • the effect on our businesses of the new mobility technologies such as shared vehicle services, such as Uber and Lyft, and the eventual availability of driverless vehicles; • vehicle manufacturers exercise significant control over our operations, and we depend on them and the continuation of our franchise and distribution agreements in order to operate our business; • we are subject to the risk that a substantial number of our new or used inventory may be unavailable due to recall or other reasons; • the success of our commercial vehicle distribution operations and engine and power systems distribution operations depends upon continued availability of the vehicles, engines, power systems, and other parts we distribute, demand for those vehicles, engines, power systems, and parts and general economic conditions in those markets; • a restructuring of any significant vehicle manufacturer or supplier; • our operations may be affected by severe weather or other periodic business interruptions; • with respect to PTS, changes in the financial health of its customers, labor strikes or work stoppages by its employees, a reduction in PTS' asset utilization rates, continued availability from truck manufacturers and suppliers of vehicles and parts for its fleet, changes in values of used trucks which affects PTS' profitability on truck sales, compliance costs in regard to its trucking fleet and truck drivers, its ability to retain qualified drivers and technicians, risks associated with its participation in multi-employer pension plans, conditions in the capital markets to assure PTS' continued availability of capital to purchase trucks, the effect of changes in lease accounting rules on PTS customers' purchase/lease decisions, industry competition, new or enhanced regulatory requirements or vehicle mandates, changes in consumer sentiment regarding the transportation industry, and vulnerabilities with respect to its centralized information systems, each of which could impact distributions to us; • we have substantial risk of loss not covered by insurance; • we may not be able to satisfy our capital requirements for acquisitions, facility renovation projects, financing the purchase of our inventory, or refinancing of our debt when it becomes due; • our level of indebtedness and cash required for lease obligations may limit our ability to obtain financing generally and may require that a significant portion of our cash flow be used for debt service; • non-compliance with the financial ratios and other covenants under our credit agreements and operating leases; • higher interest rates may significantly increase our variable rate interest costs and because many customers finance their vehicle purchases, adversely impact vehicle affordability, and decrease vehicle sales; • our operations outside of the U.S. subject our profitability to fluctuations relating to changes in foreign currency values; • we are dependent on continued security and availability of our information technology systems, which systems are increasingly threatened by ransomware and other cyber-attacks, and we may be subject to significant litigation, fines, penalties, and other costs under applicable privacy laws and regulations if we do not maintain our confidential customer and employee information properly; • if we lose key personnel, especially our Chief Executive Officer, or are unable to attract additional qualified personnel; • new or enhanced regulations in both our domestic and international markets relating to automobile dealerships and vehicle sales, including those enacted in certain European countries, Washington, California, Massachusetts, and New York banning the sale of new vehicles with gasoline engines (with regulations in Europe proposed to start as early as 2025, and California requiring 35% of all new consumer vehicles to be emission free in 2026, 68% to be emission free by 2030, and 100% to be emission free by 2035, with some allowances for plug-in hybrid vehicles); • new or enhanced regulations, including those related to emissions standards, or changes in consumer sentiment relating to commercial truck sales that may hinder our or PTS' ability to maintain, acquire, sell, or operate trucks; 54 Table of Contents • increased tariffs, import product restrictions, and foreign trade risks that may impair our ability to sell foreign vehicles profitably; • changes in tax, financial or regulatory rules, or requirements, including new regulations proposed by the Federal Trade Commission for automotive dealers that would change industry-accepted practices with regard to sales and advertising, require an extensive series of oral and written disclosures to consumers in regard to the sale price of vehicles, credit terms, and voluntary protection products, mandate the posting of certain pricing and other information on dealer websites, and impose burdensome recordkeeping requirements that, if adopted as proposed, may lead to additional transaction times for the sale of vehicles, complicate the transaction process, and decrease customer satisfaction and enhance compliance risk, among other effects; • we could be subject to legal and administrative proceedings which, if the outcomes are adverse to us, could have a material adverse effect on our business; • if state dealer laws in the U.S. are repealed or weakened or new manufacturers such as those selling electric vehicles are able to conduct significant vehicle sales outside of the franchised automotive system, our automotive dealerships may be subject to increased competition and may be more susceptible to termination, non-renewal, or renegotiation of their franchise agreements; • we are subject to a wide range of environmental laws and regulations governing the use, generation, and disposal of materials used in our ordinary course of operations, and we face potentially significant costs relating to claims, penalties, and remediation efforts in the event of non-compliance with existing and future laws and regulations which may become more stringent in the face of climate change; • some of our directors and officers may have conflicts of interest with respect to certain related party transactions and other business interests; and • shares of our common stock eligible for future sale may cause the market price of our common stock to drop significantly, even if our business is doing well.
Biggest changeRisk Factors and the following: • our business and the automotive retail and commercial vehicles industries in general are susceptible to adverse economic and geo-political conditions, including changes in interest rates, foreign currency exchange rates, customer demand, customer confidence, the rate of inflation, including its impact on vehicle affordability, fuel and utility prices, unemployment rates and credit availability; • we depend on the success, popularity and availability of the brands we sell, and adverse conditions affecting one or more of these vehicle manufacturers, including the adverse impact on the vehicle and parts supply chain due to natural disasters, the shortage of vehicle components, the war in Ukraine, challenges in sourcing labor, labor 56 Table of Contents strikes, or work stoppages, or other disruptions that interrupt the supply of vehicles and parts to us may negatively impact our revenues and profitability; • the number of new and used vehicles sold in our markets, which impacts our ability to generate new and used vehicle gross profit and future service and parts operations; • the effect on our businesses of the changing retail environment due to certain manufacturers selling direct to consumers outside the franchise system, changes to an agency model of distribution in the U.K. and other European countries which will reduce reported revenues, reduce SG&A expenses, and reduce floor plan interest expense (although other impacts to our results of operations remain uncertain), and the growing number of electric vehicles; • the effect on our businesses of mobility technologies, such as Uber and Lyft, and the eventual availability of driverless vehicles; • vehicle manufacturers exercise significant control over our operations, and we depend on them and the continuation of our franchise and distribution agreements in order to operate our business; • we are subject to the risk that a substantial number of our new or used inventory may be unavailable due to inventory shortages, recalls, or other reasons; • the success of our commercial vehicle distribution operations and engine and power systems distribution operations depends upon continued availability of the vehicles, engines, power systems, and other parts we distribute, demand for those vehicles, engines, power systems, and parts and general economic conditions in those markets; • a restructuring of any significant vehicle manufacturer or supplier; • our operations may be affected by severe weather or other periodic business interruptions; • with respect to PTS, changes in the financial health of its customers, compliance costs, labor strikes or work stoppages with respect to its employees, a reduction in PTS' asset utilization rates, continued availability from truck manufacturers and suppliers of vehicles and parts for its fleet, potential decreases in the resale value of used vehicles which may affect PTS' ability to sell its used vehicles after the expiration of its customers' leases or at the end of its holding period for rental vehicles, which may affect PTS' profitability, compliance costs in regard to its trucking fleet and truck drivers, its ability to retain qualified drivers and technicians, risks associated with its participation in multi-employer pension plans, conditions in the capital markets to assure PTS' continued availability of capital to purchase trucks, the effect of changes in lease accounting rules on PTS customers' purchase/lease decisions, industry competition, new or enhanced regulatory requirements, emissions standards, vehicle mandates, changes in consumer sentiment regarding the transportation industry, and vulnerabilities with respect to its centralized information systems, each of which could impact equity earnings and distributions to us; • we have substantial risk of loss not covered by insurance; • we may not be able to satisfy our capital requirements for acquisitions, facility renovation projects, financing the purchase of our inventory, or refinancing of our debt when it becomes due; • our level of indebtedness and cash required for lease obligations may limit our ability to obtain financing generally and may require that a significant portion of our cash flow be used for debt service; • non-compliance with the financial ratios and other covenants under our credit agreements and operating leases; • higher interest rates may significantly increase our variable rate interest costs and because many customers finance their vehicle purchases, adversely impact vehicle affordability, and decrease vehicle sales; • our operations outside of the U.S. subject our profitability to fluctuations relating to changes in foreign currency values; • we are dependent on continued security and availability of our information technology systems, which systems are increasingly threatened by ransomware and other cyber-attacks, and we may be subject to significant litigation, 57 Table of Contents fines, penalties, and other costs under applicable privacy laws and regulations if we do not maintain our confidential customer and employee information properly; • if we lose key personnel, especially our Chief Executive Officer, or are unable to attract additional qualified personnel; • new or enhanced regulations in both our domestic and international markets relating to automobile dealerships and vehicle sales, including those enacted in certain European countries and various U.S. states banning or taking actions to ban the sale of new vehicles with gasoline engines (with regulations in Europe proposed to start as early as 2025, and California requiring 35% of all new consumer vehicles to be emission free in 2026, 68% to be emission free by 2030, and 100% to be emission free by 2035, with some allowances for plug-in hybrid vehicles); • new or enhanced regulations, including those related to emissions standards, or changes in consumer sentiment relating to commercial truck sales that may hinder our or PTS' ability to maintain, acquire, sell, or operate trucks; • increased tariffs, import product restrictions, and foreign trade risks that may impair our ability to sell foreign vehicles profitably; • changes in tax, financial or regulatory rules, or requirements, including new regulations proposed by the Federal Trade Commission for automotive dealers that would change industry-accepted practices with regard to sales and advertising, require an extensive series of oral and written disclosures to consumers in regard to the sale price of vehicles, credit terms, and voluntary protection products, and impose burdensome recordkeeping requirements that may lead to additional transaction times for the sale of vehicles, complicate the transaction process, decrease customer satisfaction, and increase compliance costs and risk, among other effects; • we could be subject to legal and administrative proceedings which, if the outcomes are adverse to us, could have a material adverse effect on our business, including the result of the U.K.
These indefinite-lived intangible assets relate to franchise agreements with vehicle manufacturers and distributors, which represent the estimated value of franchises acquired in business combinations, and distribution agreements with commercial vehicle manufacturers and other manufacturers, which represent the estimated value for distribution rights acquired in business combinations.
These indefinite-lived intangible assets relate to franchise agreements with manufacturers and distributors, which represent the estimated value of franchises acquired in business combinations, and distribution agreements with commercial vehicle manufacturers and other manufacturers, which represent the estimated value for distribution rights acquired in business combinations.
Currently, the majority of our non-trade vehicle financing is with other manufacturer captive lenders. To date, we have not experienced any material limitation with respect to the amount or availability of financing from any institution providing us vehicle financing.
Currently, the majority of our non-trade vehicle financing is with other manufacturer captive lenders. To date, we have not experienced any material limitation with respect to the amount or availability of financing from any institution providing us with vehicle financing.
The decision to make repurchases will be based on factors such as general economic and industry conditions, the market price of the relevant security versus our view of its intrinsic value, the potential impact of such repurchases on our capital structure, and our consideration of any alternative uses of our capital, such as for acquisitions, the repayment of our existing indebtedness, and strategic investments in our current businesses, in addition to any then-existing limits imposed by our finance agreements and securities trading policy.
The decision to make repurchases will be based on factors such as general economic and industry conditions, the market price of the relevant security versus our view of its intrinsic value, the potential impact of such repurchases on our capital structure, and our consideration of any alternative uses of our capital, such as for acquisitions, dividends, the repayment of our existing indebtedness, and strategic investments in our current businesses, in addition to any then-existing limits imposed by our finance agreements and securities trading policy.
Information about the Company, its business, and its results of operations may also be announced by posts on the following social media channels: • Penske Automotive Group's Twitter feed (www.twitter.com/penskecars) • Penske Automotive Group's Facebook page (www.facebook.com/penskecars) • Penske Automotive Group's Instagram page (www.instagram.com/penskecars) • Penske Automotive Group's Social website (www.penskesocial.com) The information that we post on these social media channels could be deemed to be material information.
Information about the Company, its business, and its results of operations may also be announced by posts on the following social media channels: • Penske Automotive Group's X feed (www.twitter.com/penskecars) • Penske Automotive Group's Facebook page (www.facebook.com/penskecars) • Penske Automotive Group's Instagram page (www.instagram.com/penskecars) • Penske Automotive Group's Social website (www.penskesocial.com) The information that we post on these social media channels could be deemed to be material information.
We continue to have the right to pro rata quarterly distributions equal to at least 50% of PTS' consolidated net income, as well as specified minority rights which require our and/or Mitsui's consent for certain actions taken by PTS as specified in the PTS partnership agreement.
We have the right to pro rata quarterly distributions equal to at least 50% of PTS' consolidated net income, as well as specified minority rights which require our and/or Mitsui's consent for certain actions taken by PTS as specified in the PTS partnership agreement.
We believe that these industries are influenced by general economic conditions and particularly, by consumer confidence, the level of personal discretionary spending, the rate of inflation, including its impact on vehicle affordability, fuel prices, interest rates, and credit availability.
We believe that these industries are influenced by general economic conditions and particularly, by consumer confidence, the level of personal discretionary spending, the rate of inflation, including its impact on vehicle affordability, fuel prices, utility prices, interest rates, and credit availability.
Roger Penske, our Chair of the Board and Chief Executive Officer, is also Chair of the Board and Chief Executive Officer of Penske Corporation and through entities affiliated with Penske Corporation is our largest stockholder owning approximately 51% of our outstanding common stock. Mitsui & Co., Ltd. and Mitsui & Co. (USA), Inc.
Roger Penske, our Chair of the Board and Chief Executive Officer, is also Chair of the Board and Chief Executive Officer of Penske Corporation and through entities affiliated with Penske Corporation is our largest stockholder owning approximately 51.4% of our outstanding common stock. Mitsui & Co., Ltd. and Mitsui & Co. (USA), Inc.
Refer to the disclosures provided in Part II, Item 8, Note 2 of the Notes to our Consolidated Financial Statements for additional detail on revenue recognition. Impairment Testing Other indefinite-lived intangible assets are assessed for impairment annually on October 1 and upon the occurrence of an indicator of impairment through a comparison of its carrying amount and estimated fair value.
Refer to the disclosures provided in Part II, Item 8, Note 2 of the Notes to our Consolidated Financial Statements for additional detail on revenue recognition. Impairment Testing Other indefinite-lived intangible assets are assessed for impairment annually on October 1 and upon the occurrence of an indicator of impairment through a comparison of its fair value to its carrying value.
Historically, these cash requirements have been met through cash flow from operations, borrowings under our credit agreements and floor plan arrangements, the issuance of debt securities, sale-leaseback transactions, real estate financings, and dividends and distributions from joint venture investments. 45 Table of Contents We have historically expanded our operations through organic growth and the acquisition of dealerships and other businesses.
Historically, these cash requirements have been met through cash flow from operations, borrowings under our credit agreements and floor plan arrangements, the issuance of debt securities, sale-leaseback transactions, real estate financings, and dividends and distributions from joint venture investments. 48 Table of Contents We have historically expanded our operations through organic growth and the acquisition of dealerships and other businesses.
In the event that economic conditions are more severely impacted than we expect due to geo-political conditions, the COVID-19 pandemic or vehicle shortages resulting from supply chain difficulties, we pursue significant acquisitions or other expansion opportunities, pursue significant repurchases of our outstanding securities, or refinance or repay existing debt, we may need to raise additional capital either through the public or private issuance of equity or debt securities or through additional borrowings, which sources of funds may not necessarily be available on terms acceptable to us, if at all.
In the event that economic conditions are more severely impacted than we expect due to geo-political conditions, any pandemic or vehicle shortages resulting from supply chain difficulties, we pursue significant acquisitions or other expansion opportunities, pursue significant repurchases of our outstanding securities, or refinance or repay existing debt, we may need to raise additional capital either through the public or private issuance of equity or debt securities or through additional borrowings, which sources of funds may not necessarily be available on terms acceptable to us, if at all.
Refer to the disclosures provided in Part II, Item 8, Note 3 and Note 11 of the Notes to our Consolidated Financial Statements for a description of our operating leases. Discontinued Operations We had no entities newly classified as held for sale in 2022, 2021, or 2020 that met the criteria to be classified as discontinued operations.
Refer to the disclosures provided in Part II, Item 8, Note 3 and Note 11 of the Notes to our Consolidated Financial Statements for a description of our operating leases. Discontinued Operations We had no entities newly classified as held for sale in 2023, 2022, or 2021 that met the criteria to be classified as discontinued operations.
Refer to the disclosures provided in Part II, Item 8, Note 11 of the Notes to our Consolidated Financial Statements for a description of our off-balance sheet arrangements which includes a repurchase commitment related to our floor plan credit agreement with Mercedes-Benz Financial Services Australia and Mercedes-Benz Financial Services New Zealand.
Refer to the disclosures provided in Part II, Item 8, Note 11 of the Notes to our Consolidated Financial Statements for a description of our off-balance sheet arrangements which includes a repurchase commitment related to our floor plan credit agreement with Daimler Truck Financial Services Australia and Mercedes-Benz Financial Services New Zealand.
While future quarterly or other cash dividends will depend upon a variety of factors considered relevant by our Board of Directors, which may include our expectations regarding the severity and duration of the COVID-19 pandemic, vehicle production issues, the rate of inflation, including its impact on vehicle affordability, earnings, cash flow, capital requirements, restrictions relating to any then-existing indebtedness, financial condition, alternative uses of capital, and other factors, we currently expect to continue to pay comparable dividends in the future .
While future quarterly or other cash dividends will depend upon a variety of factors considered relevant by our Board of Directors, which may include our expectations regarding the severity and duration of vehicle production issues, the rate of inflation, including its impact on vehicle affordability, earnings, cash flow, capital requirements, restrictions relating to any then-existing indebtedness, financial condition, alternative uses of capital, and other factors, we currently expect to continue to pay comparable dividends in the future .
Forward-Looking Statements Certain statements and information set forth herein, as well as other written or oral statements made from time to time by us or by our authorized officers on our behalf, constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995.
Forward-Looking Statements Certain statements and information set forth herein, as well as other written or oral statements made from time to time by us or by our authorized officers on our behalf, constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995.
As an example, if a dealership were acquired on January 15, 2020, the results of the acquired entity would be included in annual same-store comparisons beginning with the year ended December 31, 2022, and in quarterly same-store comparisons beginning with the quarter ended June 30, 2021.
As an example, if a dealership were acquired on January 15, 2021, the results of the acquired entity would be included in annual same-store comparisons beginning with the year ended December 31, 2023, and in quarterly same-store comparisons beginning with the quarter ended June 30, 2022.
Our business is dependent on a number of factors, including general economic conditions, the availability of vehicle inventory, fuel prices, the rate of inflation, including its impact on vehicle affordability, interest rate fluctuations, credit availability, labor availability, environmental and other government regulations, and customer business cycles.
Our business is dependent on a number of factors, including general economic conditions, the availability of vehicle inventory, fuel prices, utility prices, the rate of inflation, including its impact on vehicle affordability, interest rate fluctuations, credit availability, labor availability, environmental and other government regulations and incentives, and customer business cycles.
The reporting units are Eastern, Central, and Western United States, Used Vehicle Dealerships United States, International, and Used Vehicle Dealerships International. Our Retail Commercial Truck reportable segment has been determined to represent one operating segment and reporting unit. The goodwill included in our Other reportable segment relates primarily to our commercial vehicle distribution operating segment.
The reporting units were Eastern, Central, and Western United States, Used Vehicle Dealerships United States, International, and Used Vehicle Dealerships International. Our Retail Commercial Truck reportable segment has been determined to represent one operating segment and reporting unit. The goodwill included in our Other reportable segment relates primarily to our commercial vehicle distribution operating segment.
Penske Australia offers products across the on- and off-highway markets, including in the trucking, mining, power generation, defense, marine, rail, and construction sectors and supports full parts and aftersales service through a network of branches, field service locations, and dealers across the region. These businesses represented 2.1% of our total revenues and 3.2% of our total gross profit in 2022.
Penske Australia offers products across the on- and off-highway markets, including in the trucking, mining, power generation, defense, marine, rail, and construction sectors and supports full parts and aftersales service through a network of branches, field service locations, and dealers across the region. These businesses represented 2.1% of our total revenues and 3.4% of our total gross profit in 2023.
Operating Leases We estimate the total rent obligations under our operating leases, including any extension periods that we are reasonably certain to exercise at our discretion and assuming constant consumer price indices, to be $5.4 billion.
Operating Leases We estimate the total rent obligations under our operating leases, including any extension periods that we are reasonably certain to exercise at our discretion and assuming constant consumer price indices, to be $5.3 billion.
As of December 31, 2022, we were in compliance with all financial covenants under these leases consisting principally of leases for dealership and other properties, and we believe we will remain in compliance with such covenants for the next twelve months.
As of December 31, 2023, we were in compliance with all financial covenants under these leases consisting principally of leases for dealership and other properties, and we believe we will remain in compliance with such covenants for the next twelve months.
Cash Flows from Continuing Financing Activities Cash flows from continuing financing activities include net borrowings or repayments of long-term debt, net repayments or borrowings of floor plan notes payable non-trade, repurchases of common stock, dividends, payments for contingent consideration, and payments for debt issuance costs.
Cash Flows from Continuing Financing Activities Cash flows from continuing financing activities include net repayments or borrowings of long-term debt, net borrowings of floor plan notes payable non-trade, repurchases of common stock, dividends, and payments for debt issuance costs.
The future success of our business is dependent upon, among other things, macro-economic, geo-political, and industry conditions and events, including their impact on new and used vehicle sales, the availability of consumer credit, changes in consumer demand, consumer confidence levels, fuel prices, personal discretionary spending levels, interest rates, and unemployment rates; our ability to obtain vehicles and parts from our manufacturers, especially in light of supply chain disruptions due to natural disasters, the shortage of microchips or other components, the COVID-19 pandemic, the war in Ukraine, challenges in sourcing labor, or other disruptions; changes in the retail model either from direct sales by manufacturers, a transition to an agency model of sales, sales by online competitors, or from the expansion of electric vehicles; the continued effect of COVID-19 on the global economy, including our ability to react effectively to changing business conditions in light of the COVID-19 pandemic; the rate of inflation, including its impact on vehicle affordability; changes in interest rates and foreign currency exchange rates; our ability to consummate and integrate acquisitions; with respect to PTS, changes in the financial health of its customers, labor strikes, or work stoppages by its employees, a reduction in PTS' asset utilization rates, continued availability from truck manufacturers and suppliers of vehicles and parts for its fleet, changes in values of used trucks which affects PTS' profitability on truck sales and regulatory risks and related compliance costs; our ability to realize returns on our significant capital investment in new and upgraded dealership facilities; our ability to navigate a rapidly changing automotive and truck landscape; our ability to respond to new or enhanced regulations in both our domestic and international markets relating to automotive dealerships and vehicles sales, including those related to emissions standards, as well as changes in consumer sentiment relating to commercial truck sales that may hinder our or PTS' ability to maintain, acquire, sell, or operate trucks; the success of our distribution of commercial vehicles, engines, and power systems; natural disasters; recall initiatives or other disruptions that interrupt the supply of vehicles or parts to us; the outcome of legal and administrative matters, and other factors over which management has limited control.
The future success of our business is dependent upon, among other things, macro-economic, geo-political, and industry conditions and events, including their impact on new and used vehicle sales, the availability of consumer credit, changes in consumer demand, consumer confidence levels, fuel prices, demand for trucks to move freight with respect to PTS and PTG, personal discretionary spending levels, interest rates, and unemployment rates; our ability to obtain vehicles and parts from our manufacturers, especially in light of supply chain disruptions due to natural disasters, the shortage of vehicle components, the war in Ukraine, challenges in sourcing labor or labor strikes or work stoppages, or other disruptions; changes in the retail model either from direct sales by manufacturers, a transition to an agency model of sales, sales by online competitors, or from the expansion of electric vehicles; the effects of a pandemic on the global economy, including our ability to react effectively to changing business conditions in light of any pandemic; the rate of inflation, including its impact on vehicle affordability; changes in interest rates and foreign currency exchange rates; our ability to consummate, integrate, and realize returns on acquisitions; with respect to PTS, changes in the financial health of its customers, labor strikes, or work stoppages by its employees, a reduction in PTS' asset utilization rates, continued availability from truck manufacturers and suppliers of vehicles and parts for its fleet, changes in values of used trucks which affects PTS' profitability on truck sales and regulatory risks and related compliance costs; our ability to realize returns on our significant capital investments in new and upgraded dealership facilities; our ability to navigate a rapidly changing automotive and truck landscape; our ability to respond to new or enhanced regulations in both our domestic and international markets relating to dealerships and vehicles sales, including those related to the sales process or emissions standards, as well as changes in consumer sentiment relating to commercial truck sales that may hinder our or PTS' ability to maintain, acquire, sell, or operate trucks; the success of our distribution of commercial vehicles, engines, and power systems; natural disasters; recall initiatives or other disruptions that interrupt the supply of vehicles or parts to us; the outcome of legal and administrative matters, and other factors over which management has limited control.
Penske Transportation Solutions. We hold a 28.9% ownership interest in Penske Truck Leasing Co., L.P. (“PTL”). PTL is owned 41.1% by Penske Corporation, 28.9% by us, and 30.0% by Mitsui & Co., Ltd. (“Mitsui”).
Penske Transportation Solutions. We hold a 28.9% ownership interest in Penske Truck Leasing Co., L.P. ("PTL"). PTL is owned 41.1% by Penske Corporation, 28.9% by us, and 30.0% by Mitsui & Co., Ltd. ("Mitsui").
We account for our investment in PTL under the equity method, and we therefore record our share of PTL's earnings on our statements of income under the caption “Equity in earnings of affiliates,” which also includes the results of our other equity method investments.
We account for our investment in PTL under the equity method, and we therefore record our share of PTL's earnings on our statements of income under the caption "Equity in earnings of affiliates," which also includes the results of our other equity method investments.
We also evaluate in connection with the annual impairment testing whether events and circumstances continue to support our assessment that the other indefinite-lived intangible assets continue to have an indefinite life. Goodwill impairment is assessed at the reporting unit level annually on October 1 and upon the occurrence of an indicator of impairment.
We also evaluate in connection with the annual 36 Table of Contents impairment testing whether events and circumstances continue to support our assessment that the other indefinite-lived intangible assets continue to have an indefinite life. Goodwill impairment is assessed at the reporting unit level annually on October 1 and upon the occurrence of an indicator of impairment.
Non-wholly owned and foreign subsidiaries of PAG do not guarantee the Senior Subordinated Notes (“Non-Guarantor subsidiaries”). The following tables present summarized financial information for PAG and the Guarantor subsidiaries on a combined basis.
Non-wholly owned and foreign subsidiaries of PAG do not guarantee the Senior Subordinated Notes ("Non-Guarantor subsidiaries"). The following tables present summarized financial information for PAG and the Guarantor subsidiaries on a combined basis.
Penske Australia is the exclusive importer and distributor of Western Star heavy-duty trucks (a Daimler brand), MAN heavy- and medium-duty trucks and buses (a VW Group brand), and Dennis Eagle refuse collection 31 Table of Contents vehicles, together with associated parts, across Australia, New Zealand, and portions of the Pacific.
Penske Australia is the exclusive importer and distributor of Western Star heavy-duty trucks (a Daimler brand), MAN heavy- and medium-duty trucks and buses (a VW Group brand), and Dennis Eagle refuse collection vehicles, together with associated parts, across Australia, New Zealand, and portions of the Pacific.
Our 35 Table of Contents property leases are generally for an initial period between 5 and 20 years and are typically structured to include renewal options at our election. We include renewal options that we are reasonably certain to exercise in the measurement our lease liabilities and right-of-use assets.
Our property leases are generally for an initial period between 5 and 20 years and are typically structured to include renewal options at our election. We include renewal options that we are reasonably certain to exercise in the measurement of our lease liabilities and right-of-use assets.
Our period-to-period results of operations may vary depending on the dates of acquisitions or disposals. 30 Table of Contents Overview We are a diversified international transportation services company and one of the world's premier automotive and commercial truck retailers.
Our period-to-period results of operations may vary depending on the dates of acquisitions or disposals. Overview We are a diversified international transportation services company and one of the world's premier automotive and commercial truck retailers.
Forward-looking statements include, without limitation, statements with respect to: • the impact of macro-economic and geo-political conditions and events, including their impact on new and used vehicle sales, availability of consumer credit, changes in consumer demand, consumer confidence levels, fuel 52 Table of Contents prices, the rate of inflation, personal discretionary spending levels, consumer credit availability, interest rates, and unemployment rates; • our future financial and operating performance; • future dealership openings, acquisitions, and dispositions; • future potential capital expenditures and securities repurchases; • our ability to realize cost savings and synergies; • our ability to respond to economic cycles; • trends and sales levels in the automotive retail industry, commercial vehicles industries, and in the general economy in the various countries in which we operate; • our expectations regarding the COVID-19 pandemic and the resolution of vehicle production issues; • the rate of adoption of electric vehicles and its effect on our business; • our ability to access the remaining availability under our credit agreements; • our liquidity; • performance of joint ventures, including PTS; • future foreign currency exchange rates and geopolitical events; • the outcome of various legal proceedings; • results of self-insurance plans; • trends affecting the automotive or trucking industries generally, such as changes to an agency model of distribution in the U.K. and other European countries, and our future financial condition or results of operations; and • our business strategy.
Forward-looking statements include, without limitation, statements with respect to: • the impact of macro-economic and geo-political conditions and events, including their impact on new and used vehicle sales, availability of consumer credit, changes in consumer demand, consumer confidence levels, fuel prices, the rate of inflation, personal discretionary spending levels, consumer credit availability, interest rates, and unemployment rates; • our future financial and operating performance; • future dealership openings, acquisitions, and dispositions; • future potential capital expenditures and securities repurchases; • our ability to realize cost savings and synergies; • our ability to respond to economic cycles; • trends and sales levels in the automotive retail industry, commercial vehicles industries, and in the general economy in the various countries in which we operate; • our expectations regarding any pandemic and the resolution of vehicle production and supply issues; • the rate of adoption of electric vehicles and their effect on our business; • our ability to access the remaining availability under our credit agreements; • our liquidity; • the performance of our joint ventures, including PTS; • future foreign currency exchange rates; • the outcome of various regulatory matters and legal proceedings; • results of self-insurance plans or other insured matters; • trends affecting the automotive or trucking industries generally, such as changes to an agency model of distribution in the U.K. and other European countries, and our future financial condition or results of operations; and • our business strategy.
We have determined that the dealerships in each of our operating segments within the Retail Automotive reportable segment are components that are aggregated into six reporting units for the purpose of goodwill impairment testing as they (A) have similar economic characteristics (all are automotive dealerships having similar 34 Table of Contents margins), (B) offer similar products and services (all sell new and/or used vehicles, service, parts, and third-party finance and insurance products), (C) have similar target markets and customers (generally individuals), and (D) have similar distribution and marketing practices (all distribute products and services through dealership facilities that market to customers in similar fashions).
We have determined that the dealerships in each of our operating segments within the Retail Automotive reportable segment are components that were aggregated into six reporting units for the purpose of goodwill impairment testing as of October 1, 2023, as they (A) have similar economic characteristics (all are automotive dealerships having similar margins), (B) offer similar products and services (all sell new and/or used vehicles, service, parts, and third-party finance and insurance products), (C) have similar target markets and customers (generally individuals), and (D) have similar distribution and marketing practices (all distribute products and services through dealership facilities that market to customers in similar fashions).
The following are the accounting policies applied in the preparation of our financial statements that management believes are most dependent upon the use of estimates and assumptions. Revenue Recognition Dealership Vehicle, Parts, and Service Sales.
The following are the accounting policies applied in the preparation of our financial statements that management believes are most dependent upon the use of estimates and assumptions. 35 Table of Contents Revenue Recognition Dealership Vehicle, Parts, and Service Sales.
Penske Transportation Solutions (“PTS”) is the universal brand name for PTL's various business lines through which it is capable of meeting customers' needs across the supply chain with a broad product offering that includes full-service truck leasing, truck rental, and contract maintenance along with logistic services, such as dedicated contract carriage, distribution center management, transportation management, lead logistics provider services, and dry van truckload carrier services.
Penske Transportation Solutions ("PTS") is the universal brand name for PTL's various business lines through which it is capable of meeting customers' needs across the supply chain with a broad product offering that includes full-service truck leasing, truck rental, and contract maintenance along with logistics services, such as dedicated contract carriage, distribution center management, freight management, and dry van truckload carrier services.
Additionally, we own 28.9% of Penske Transportation Solutions, a business that employs over 41,500 people worldwide, manages one of the largest, most comprehensive and modern trucking fleets in North America with over 414,500 trucks, tractors, and trailers under lease, rental, and/or maintenance contracts, and provides innovative transportation, supply chain, and technology solutions to its customers.
Additionally, we own 28.9% of Penske Transportation Solutions, a business that employs over 44,000 people worldwide, manages one of the largest, most comprehensive and modern trucking fleets in North America with over 439,000 trucks, tractors, and trailers under lease, rental, and/or maintenance contracts, and provides innovative transportation, supply chain, and technology solutions to its customers.
Additional Information Investors and others should note that we may announce material financial information using our company website (www.penskeautomotive.com), our investor relations website (investors.penskeautomotive.com), SEC filings, press releases, public conference calls, and webcasts.
Additional Information Investors and others should note that we may announce material financial information using our company website (www.penskeautomotive.com), our investor relations website (investors.penskeautomotive.com), SEC filings, press 58 Table of Contents releases, public conference calls, and webcasts.
Capital expenditures were $282.5 million, $248.9 million, and $185.9 million during 2022, 2021, and 2020, respectively. Capital expenditures relate primarily to improvements to our existing dealership facilities, the construction of new facilities, the acquisition of the property or buildings associated with existing leased facilities, and the acquisition of land for future development.
Capital expenditures were $375.3 million, $282.5 million, and $248.9 million during 2023, 2022, and 2021, respectively. Capital expenditures relate primarily to improvements to our existing dealership facilities, the construction of new facilities, the acquisition of the property or buildings associated with existing leased facilities, and the acquisition of land for future development.
In 2022, 2021, and 2020, we acquired 0.15 million, 0.15 million, and 0.14 million shares from employees in connection with a net share settlement feature of employee equity awards for $17.2 million, $12.9 million, and $5.0 million, respectively. We also paid $154.1 million, $142.5 million, and $68.1 million of cash dividends to our stockholders during 2022, 2021, and 2020, respectively.
In 2023, 2022, and 2021, we acquired 0.17 million, 0.15 million, and 0.15 million shares from employees in connection with a net share settlement feature of employee equity awards for 23.5 million, $17.2 million, and $12.9 million, respectively. We also paid 189.1 million, $154.1 million, and $142.5 million of cash dividends to our stockholders during 2023, 2022, and 2021, respectively.
We own a 28.9% interest in PTS. PTS, discussed previously, is owned 41.1% by Penske Corporation, 28.9% by us, and 30.0% by Mitsui. The PTS partnership agreement, among other things, provides us with specified partner distribution and governance rights and restricts our ability to transfer our interest.
We own a 28.9% interest in PTS. PTS, discussed previously, is owned 41.1% by Penske Corporation, 28.9% by us, and 30.0% by Mitsui. The PTS partnership agreement, among other things, provides us with specified partner distribution and governance rights and restricts our ability to transfer our interest. The partnership has an eleven-member Advisory Board.
The cost of our variable rate indebtedness is based on the prime rate, the London Interbank Offered Rate ("LIBOR"), the Sterling Overnight Index Average ("SONIA"), the Bank of England Base Rate, the Finance House Base Rate, the Euro Interbank Offered Rate, the Canadian Prime Rate, the Tokyo Interbank Offered Rate, the Australian Bank Bill Swap Rate, and the New Zealand Bank Bill Benchmark Rate.
The cost of our variable rate indebtedness is based on the prime rate, the Secured Overnight Financing Rate ("SOFR"), the Sterling Overnight Index Average ("SONIA"), the Bank of England Base Rate, the Finance House Base Rate, the Euro Interbank Offered Rate, the Canadian Prime Rate, the Tokyo Interbank Offered Rate, the Australian Bank Bill Swap Rate, and the New Zealand Bank Bill Benchmark Rate.
Pursuant to the stockholders agreement, the Penske companies agreed to vote their shares for two directors who are representatives of Mitsui as long as Mitsui owns in excess of 20% of our outstanding common stock, and for one director as long as Mitsui owns in excess of 10% of our outstanding common stock.
Pursuant to the stockholders agreement, in connection with any shareholder election of directors, the Penske companies agreed to vote their shares for two directors who are representatives of Mitsui as long as Mitsui owns in excess of 20% of our outstanding common stock, and for one director as long as Mitsui owns in excess of 10% of our outstanding common stock.
(collectively, “Mitsui”) own approximately 19% of our outstanding common stock. Mitsui, Penske Corporation and Penske Automotive Holdings Corp. (together with Penske Corporation, the “Penske companies”) are parties to a stockholders agreement which expires March 26, 2030.
(collectively, "Mitsui") own approximately 19.9% of our outstanding common stock. Mitsui, Penske Corporation and Penske Automotive Holdings Corp. (together with Penske Corporation, the "Penske companies") are parties to a stockholders agreement which expires March 26, 2030.
If we experience certain “change of control” events specified in their respective indentures, holders of these Senior Subordinated Notes will have the option to require us to purchase for cash all or a portion of their Senior Subordinated Notes at a price equal to 101% of the principal amount of the Senior Subordinated Notes, plus accrued and unpaid interest.
If we experience certain "change of 51 Table of Contents control" events specified in their respective indentures, holders of these Senior Subordinated Notes will have the option to require us to purchase for cash all or a portion of their Senior Subordinated Notes at a price equal to 101% of the principal amount of the Senior Subordinated Notes, plus accrued and unpaid interest.
During the years ended December 31, 2022 , and 2021 , PAG received $77.9 million and $93.5 million, respectively, from Non-Guarantor subsidiaries. 49 Table of Contents Cash Flows The following table summarizes the changes in our cash provided by (used in) operating, investing, and financing activities. The major components of these changes are discussed below.
During the years ended December 31, 2023 , and 2022 , PAG received $142.9 million and $77.9 million, respectively, from Non-Guarantor subsidiaries. 52 Table of Contents Cash Flows The following table summarizes the changes in our cash provided by (used in) operating, investing, and financing activities. The major components of these changes are discussed below.
Aggregate reserves relating to chargeback activity were $38.4 million and $33.7 million as of December 31, 2022, and December 31, 2021, respectively. Commercial Vehicle Distribution and Other.
Aggregate reserves relating to chargeback activity were $42.7 million and $38.4 million as of December 31, 2023, and December 31, 2022, respectively. Commercial Vehicle Distribution and Other.
As a result, we prepare the following reconciliation to highlight our operating cash flows with all changes in vehicle floor plan being classified as an operating activity for informational purposes: Year Ended December 31, (In millions) 2022 2021 2020 Net cash from continuing operating activities as reported $ 1,459.0 $ 1,292.0 $ 1,201.5 Floor plan notes payable — non-trade as reported 82.9 38.9 (230.2) Net cash from continuing operating activities including all floor plan notes payable $ 1,541.9 $ 1,330.9 $ 971.3 Cash Flows from Continuing Investing Activities Cash flows from continuing investing activities consist primarily of cash used for capital expenditures, proceeds from the sale of dealerships, proceeds from the sale of property and equipment, and net expenditures for acquisitions and other investments.
As a result, we prepare the following reconciliation to highlight our operating cash flows with all changes in vehicle floor plan being classified as an operating activity for informational purposes: Year Ended December 31, (In millions) 2023 2022 2021 Net cash provided by continuing operating activities as reported $ 1,093.6 $ 1,459.0 $ 1,292.0 Floor plan notes payable — non-trade as reported 46.5 82.9 38.9 Net cash provided by continuing operating activities including all floor plan notes payable $ 1,140.1 $ 1,541.9 $ 1,330.9 Cash Flows from Continuing Investing Activities Cash flows from continuing investing activities consist primarily of cash used for capital expenditures, proceeds from the sale of dealerships, proceeds from the sale of property and equipment, and net expenditures for acquisitions and other investments.
Refer to the disclosures provided in Part II, Item 8, Note 10 of the Notes to our Consolidated Financial Statements set forth below for a detailed description of our long-term debt obligations. 47 Table of Contents Short-Term Borrowings We have five principal sources of short-term borrowings: the revolving portion of the U.S. credit agreement, the revolving portion of the U.K. credit agreement, our Australia credit agreement (which replaced our prior Australia working capital loan agreement), the revolving mortgage facility through Toyota Motor Credit Corporation, and the floor plan agreements that we utilize to finance our vehicle inventories.
Refer to the disclosures provided in Part II, Item 8, Note 10 of the Notes to our Consolidated Financial Statements set forth below for a detailed description of our long-term debt obligations. 50 Table of Contents Short-Term Borrowings We have six principal sources of short-term borrowings: the revolving portion of the U.S. credit agreement, the revolving portion of the U.K. credit agreement, our Canada credit agreement, our Australia credit agreement, the revolving mortgage facility through Toyota Motor Credit Corporation, and the floor plan agreements that we utilize to finance our vehicle inventories.
Taxes collected from customers and remitted to governmental authorities are recorded on a net basis (excluded from revenue). During 2022, 2021, and 2020, we earned $571.1 million, $635.7 million, and $588.7 million, respectively, of rebates, incentives, and reimbursements from manufacturers, of which $554.6 million, $620.3 million, and $575.4 million, respectively, was recorded as a reduction of cost of sales.
Taxes collected from customers and remitted to governmental authorities are recorded on a net basis (excluded from revenue). During 2023, 2022, and 2021, we earned $611.8 million, $571.1 million, and $635.7 million, respectively, of rebates, incentives, and reimbursements from manufacturers, of which $593.8 million, $554.6 million, and $620.3 million, respectively, was recorded as a reduction of cost of sales.
Income from our PTS investment represents over 25% of our earnings before taxes. New and used vehicle revenues typically include sales to retail customers, fleet customers, and leasing companies providing consumer leasing.
Income from our PTS investment represents approximately 20% of our earnings before taxes. New and used vehicle revenues typically include sales to retail customers, agency customers, fleet customers, and leasing companies providing consumer leasing.
We offer over 35 vehicle brands with 71% of our retail automotive franchised dealership revenue in 2022 generated from premium brands, such as Audi, BMW, Land Rover, Mercedes-Benz, and Porsche. As of December 31, 2022, we operated 338 retail automotive franchised dealerships, of which 151 are located in the U.S. and 187 are located outside of the U.S.
We offer over 35 vehicle brands with 71% of our retail automotive franchised dealership revenue in 2023 generated from premium brands, such as Audi, BMW, Land Rover, Mercedes-Benz, and Porsche. As of December 31, 2023, we operated 336 retail automotive franchised dealerships, of which 147 are located in the U.S. and 189 are located outside of the U.S.
Customer pay work represented approximately 81.0% of PTG's service and parts revenue, largely due to the significant amount of retail sales of parts and accessories.
Customer pay work represented approximately 79.8% of PTG's service and parts revenue, largely due to the significant amount of retail sales of parts and accessories.
We receive pro rata cash distributions relating to this investment, typically in April, May, August, and November of each year. During 2022, 2021, and 2020, we received $356.6 million, $165.5 million, and $72.2 million, respectively, of pro rata cash distributions relating to this investment.
We receive pro rata cash distributions relating to this investment, typically in April, May, August, and November of each year. During 2023, 2022, and 2021, we received $168.8 million, $356.6 million, and $165.5 million, respectively, of pro rata cash distributions relating to this investment.
Refer to the disclosures provided in Part II, Item 8, Note 14 of the Notes to our Consolidated Financial Statements for a summary of shares repurchased during 2022. 46 Table of Contents Dividends We paid the following cash dividends on our common stock in 2021 and 2022: Per Share Dividends 2021 First Quarter $ 0.43 Second Quarter $ 0.44 Third Quarter $ 0.45 Fourth Quarter $ 0.46 2022 First Quarter $ 0.47 Second Quarter $ 0.50 Third Quarter $ 0.53 Fourth Quarter $ 0.57 We also announced a cash dividend of $0.61 per share payable on March 1, 2023, to stockholders of record as of February 10, 2023.
Refer to the disclosures provided in Part II, Item 8, Note 14 of the Notes to our Consolidated Financial Statements for a summary of shares repurchased during 2023. 49 Table of Contents Dividends We paid the following cash dividends on our common stock in 2022 and 2023: Per Share Dividends 2022 First Quarter $ 0.47 Second Quarter $ 0.50 Third Quarter $ 0.53 Fourth Quarter $ 0.57 2023 First Quarter $ 0.61 Second Quarter $ 0.66 Third Quarter $ 0.72 Fourth Quarter $ 0.79 We also announced a cash dividend of $0.87 per share payable on March 1, 2024, to stockholders of record as of February 15, 2024.
The remaining $16.5 million, $15.4 million, and $13.3 million was recorded as a reduction of selling, general, and administrative expenses during 2022, 2021, and 2020, respectively. Dealership Finance and Insurance Sales.
The remaining $18.0 million, $16.5 million, and $15.4 million was recorded as a reduction of selling, general, and administrative expenses during 2023, 2022, and 2021, respectively. Dealership Finance and Insurance Sales.
The franchised dealerships outside of the U.S. are located primarily in the U.K. As of December 31, 2022, we also operated 21 used vehicle dealerships, with eight dealerships in the U.S. and 13 dealerships in the U.K., which retailed used vehicles under a one price, "no-haggle" methodology under the CarShop brand.
The franchised dealerships outside of the U.S. are located primarily in the U.K. As of December 31, 2023, we also operated 19 used vehicle dealerships, with seven dealerships in the U.S. and 12 dealerships in the U.K., which retailed used vehicles under a one price, "no-haggle" methodology under the CarShop brand.
Year Ended December 31, (In millions) 2022 2021 2020 Net cash provided by continuing operating activities $ 1,459.0 $ 1,292.0 $ 1,201.5 Net cash used in continuing investing activities (641.7) (623.1) (136.5) Net cash used in continuing financing activities (798.0) (615.5) (1,053.9) Net cash provided by discontinued operations — 1.3 0.3 Effect of exchange rate changes on cash and cash equivalents (13.5) (3.5) 10.0 Net change in cash and cash equivalents $ 5.8 $ 51.2 $ 21.4 Cash Flows from Continuing Operating Activities Cash flows from continuing operating activities includes net income, as adjusted for non-cash items and the effects of changes in working capital.
Year Ended December 31, (In millions) 2023 2022 2021 Net cash provided by continuing operating activities $ 1,093.6 $ 1,459.0 $ 1,292.0 Net cash used in continuing investing activities (572.3) (641.7) (623.1) Net cash used in continuing financing activities (531.1) (798.0) (615.5) Net cash provided by discontinued operations — — 1.3 Effect of exchange rate changes on cash and cash equivalents (0.3) (13.5) (3.5) Net change in cash and cash equivalents $ (10.1) $ 5.8 $ 51.2 Cash Flows from Continuing Operating Activities Cash flows from continuing operating activities include net income, as adjusted for non-cash items and the effects of changes in working capital.
Our U.K. operations generally experience higher volumes of new vehicle sales in the first and third quarters of each year, due primarily to new vehicle registration practices in the U.K. Inflation Many of the markets in which we operate are experiencing high rates of inflation.
Our U.K. operations generally experience higher volumes of new vehicle sales in the first and third quarters of each year, due primarily to new vehicle registration practices in the U.K. Inflation Many of the markets in which we operate continue to experience higher rates of inflation when compared to previous years.
We continue to provide new vehicle customer service at our Mercedes-Benz U.K. dealerships, and the Mercedes-Benz U.K. agency model is not expected to structurally change our used vehicle sales operations or service and parts operations, although the impact of the agency model at these dealerships as well as other agency models proposed by our manufacturer partners is uncertain.
We continue to provide new vehicle customer service under the agency model, and the Mercedes-Benz U.K. agency model at this time has not changed our used vehicle sales operations or service and parts operations, although the long-term impact of the agency model at these dealerships as well as other agency models proposed by our manufacturer partners is uncertain.
We currently expect to finance our capital expenditures with operating cash flows or borrowings under our credit agreements. Proceeds from the sale of dealerships were $13.1 million, $4.3 million, and $40.6 50 Table of Contents million during 2022, 2021, and 2020, respectively.
We currently expect to finance our capital expenditures with operating cash flows or borrowings under our credit agreements. We had no proceeds from the sale of dealerships during 2023 compared to 53 Table of Contents $13.1 million and $4.3 million during 2022 and 2021, respectively.
Our operating leases primarily consist of land and facilities, including certain dealerships and office space. We also have equipment leases that primarily relate to office and computer equipment, service and shop equipment, company vehicles, and other miscellaneous items. We do not have any material leases, individually or in the aggregate, classified as a finance leasing arrangement.
We also have equipment leases that primarily relate to office and computer equipment, service and shop equipment, company vehicles, and other miscellaneous items. We do not have any material leases, individually or in the aggregate, classified as a finance leasing arrangement.
We recorded $490.0 million and $365.8 million in equity earnings from this investment in 2022 and 2021, respectively. Outlook Please see “Outlook” in Part I, Item 1 for a discussion of our outlook in our markets. Operating Overview Automotive and commercial truck dealerships represent over 95% and 70% of our revenue and our earnings before taxes, respectively.
We recorded $289.5 million in equity earnings from this investment in 2023. Outlook Please see “Outlook” in Part I, Item 1 for a discussion of our outlook in our markets. Operating Overview Automotive and commercial truck dealerships represent over 95% and 75% of our revenue and our earnings before taxes, respectively.
We record revenue for vehicle sales at a point in time when vehicles are delivered, which is when the transfer of title, risks and rewards of ownership, and control are considered passed to the customer. We record revenue for vehicle service and collision work over time as work is completed and when parts are delivered to our customers.
We record revenue for vehicle sales at a point in time when vehicles are delivered, which is when the transfer of title, risks and rewards of ownership, and control are considered passed to the customer.
The results of our commercial vehicle distribution and other business in Australia and New Zealand are principally driven by the number and types of products and vehicles ordered by our customers. Aggregate revenue and gross profit increased $2,260.1 million, or 8.8%, and $398.0 million, or 9.0%, respectively, during 2022 compared to 2021.
The results of our commercial vehicle distribution and other business in Australia and New Zealand are principally driven by the number and types of products and vehicles 34 Table of Contents ordered by our customers. Aggregate revenue and gross profit increased $1,712.6 million, or 6.2%, and $95.0 million, or 2.0%, respectively, during 2023 compared to 2022.
(“PAG”) as the issuer of the 3.50% Notes and the 3.75% Notes (collectively the “Senior Subordinated Notes”). Each of the Senior Subordinated Notes are unsecured, senior subordinated obligations and are guaranteed on an unsecured senior subordinated basis by our 100% owned U.S. subsidiaries ("Guarantor subsidiaries"). Each of the Senior Subordinated Notes also contain customary negative covenants and events of default.
Each of the Senior Subordinated Notes are unsecured, senior subordinated obligations and are guaranteed on an unsecured senior subordinated basis by our 100% owned U.S. subsidiaries ("Guarantor subsidiaries"). Each of the Senior Subordinated Notes also contain customary negative covenants and events of default.
We had $393.4 million and $431.8 million of cash used in acquisitions and other investments, net of cash acquired, during 2022 and 2021, respectively, and included cash used to repay sellers' floor plan liabilities in such business acquisitions of $51.3 million and $43.0 million, respectively, compared to no cash used in acquisitions and other investments during 2020.
Cash used in acquisitions and other investments, net of cash acquired, was $214.9 million, $393.4 million, and $431.8 million during 2023, 2022, and 2021, respectively, and included cash used to repay sellers' floor plan liabilities in such business acquisitions of $24.3 million, $51.3 million, and $43.0 million, respectively.
Same-store units decreased 13.4% in the U.S. and decreased 2.1% internationally. Overall, new unit sales decreased 9.7% in the U.S. and increased 5.2% internationally.
Same-store retail units increased 7.9% in the U.S. and increased 3.4% internationally. Overall, new retail unit sales increased 8.1% in the U.S. and increased 2.3% internationally.
We retailed and wholesaled more than 539,000 vehicles in 2022. Each of our franchised dealerships offers a wide selection of new and used vehicles for sale.
We retailed and wholesaled, including agency units, more than 587,000 vehicles in 2023. Each of our franchised dealerships offers a wide selection of new and used vehicles for sale.
SG&A expenses as a percentage of total revenue were 11.6% each year in 2022, 2021, and 2020 and as a percentage of gross profit were 66.6%, 66.7%, and 74.3%, in 2022, 2021, and 2020, respectively.
SG&A expenses as a percentage of total revenue were 11.5% in 2023 and 11.6% each year in 2022 and 2021 and as a percentage of gross profit were 68.9%, 66.6%, and 66.7%, in 2023, 2022, and 2021, respectively.
The decrease in same-store gross profit is due to a $427 per unit decrease in same-store comparative average gross profit (including a $107 per unit decrease attributable to unfavorable foreign currency fluctuations), which decreased gross profit by $105.5 million, coupled with the decrease in same-store used retail unit sales, which decreased gross profit by $31.4 million.
The decrease in same-store gross profit is due to a $403 per unit decrease in same-store comparative average gross profit (including a $6 per unit decrease attributable to unfavorable foreign currency fluctuations), which decreased gross profit by $98.8 million, coupled with the decrease in same-store used retail unit sales, which decreased gross profit by $15.5 million.
We are one of the largest global automotive retailers as measured by the $23.7 billion in total retail automotive dealership revenue we generated in 2022. We are diversified geographically with 58% of our total retail automotive dealership revenues in 2022 generated in the U.S. and Puerto Rico and 42% generated outside of the U.S.
We are one of the largest global automotive retailers as measured by the $25.2 billion in total retail automotive dealership revenue we generated in 2023. We are diversified geographically with 56% of our total retail automotive dealership revenues in 2023 generated in the U.S. and Puerto Rico and 44% generated outside of the U.S.
Proceeds from the sale of property and equipment were $32.3 million, $54.9 million, and $19.8 million during 2022, 2021, and 2020, respectively.
Proceeds from the sale of property and equipment were $30.7 million, $32.3 million, and $54.9 million during 2023, 2022, and 2021, respectively.
Long-Term Debt Obligations As of December 31, 2022, we had the following long-term debt obligations outstanding: (In millions) December 31, 2022 U.S. credit agreement — revolving credit line $ — U.K. credit agreement — revolving credit line 24.2 U.K. credit agreement — overdraft line of credit — 3.50% senior subordinated notes due 2025 546.2 3.75% senior subordinated notes due 2029 495.1 Australia credit agreement 21.6 Mortgage facilities 494.3 Other 40.7 Total long-term debt $ 1,622.1 As of December 31, 2022, we were in compliance with all covenants under our credit agreements, and we believe we will remain in compliance with such covenants for the next twelve months.
Long-Term Debt Obligations As of December 31, 2023, we had the following long-term debt obligations outstanding: (In millions) December 31, 2023 U.S. credit agreement — revolving credit line $ — U.K. credit agreement — revolving credit line — 3.50% senior subordinated notes due 2025 547.7 3.75% senior subordinated notes due 2029 495.8 Canada credit agreement 81.5 Australia credit agreement 62.7 Mortgage facilities 402.1 Other 39.4 Total long-term debt $ 1,629.2 As of December 31, 2023, we were in compliance with all covenants under our credit agreements, and we believe we will remain in compliance with such covenants for the next twelve months.
The decrease in same-store revenue is due to the decrease in same-store used retail unit sales, which decreased revenue by $84.8 million, partially offset by a $34,306 per unit increase in same-store comparative average selling price, which increased revenue by $72.6 million.
The decrease in same-store revenue is due to a $39,823 per unit decrease in same-store comparative average selling price, which decreased revenue by $104.7 million, partially offset by the increase in same-store used retail unit sales, which increased revenue by $30.6 million.
Gross Profit Service and parts gross profit increased from 2021 to 2022 due to a $54.0 million increase from net dealership acquisitions, coupled with a $49.5 million, or 21.7%, increase in same-store gross profit. The increase in same-store gross profit is due to the increase in same-store revenues, which increased gross profit by $49.5 million.
Gross Profit Service and parts gross profit increased from 2022 to 2023 due to a $13.9 million increase from net dealership acquisitions, coupled with a $9.2 million, or 2.7%, increase in same-store gross profit. The increase in same-store gross profit is due to the increase in same-store revenues, which increased gross profit by $9.2 million.
We finance substantially all of the commercial vehicles we purchase for distribution, new vehicles for retail sale (however, see Item 1A. Risk Factors for a discussion of agency), and a portion of our used vehicle inventories for retail sale under floor plan and other revolving arrangements with various lenders, including the captive finance companies associated with automotive manufacturers.
Risk Factors for a discussion of the agency model of distribution), and a portion of our used vehicle inventories for retail sale under floor plan and other revolving arrangements with various lenders, including the captive finance companies associated with automotive manufacturers.
We retain the right to appoint one Advisory Board member and appointed Robert H. Kurnick, Jr., our President. Lisa Davis, one of our directors, was also appointed to the expanded Advisory Board.
We have the right to appoint one Advisory Board member and appointed Robert H. Kurnick, Jr., our President. Lisa Davis and Michael Eisenson, our directors, are also members of the Advisory Board.
Refer to the disclosures provided in Part II, Item 8, Note 16 of the Notes to our Consolidated Financial Statements for additional detail on our accounting for income taxes, including additional discussion on the enactment of the Act and the resulting impact on our financial statements. Leases We determine if an arrangement is a lease at inception.
Refer to the disclosures provided in Part II, Item 8, Note 16 of the Notes to our Consolidated Financial Statements for additional detail on our accounting for income taxes. Leases We determine if an arrangement is a lease at inception. Our operating leases primarily consist of land and facilities, including certain dealerships and office space.
Investments for which there is not a liquid, actively traded market are reviewed periodically by management for indicators of impairment. If an indicator of impairment is identified, management estimates the fair value of the investment using a discounted cash flow approach, which includes assumptions relating to revenue and profitability growth, profit margins, residual values, and our cost of capital.
If an indicator of impairment is identified, management estimates the fair value of the investment using a discounted cash flow approach, which includes assumptions relating to revenue and profitability growth, profit margins, residual values, and our cost of capital.
The increase in same-store gross profit is due to a $39.7 million, or 25.4%, increase in customer pay gross profit; an $8.0 million, or 16.0%, increase in warranty gross profit; and a $1.8 million, or 8.4%, increase in body shop gross profit.
The increase in same-store gross profit is due to a $5.7 million, or 8.0%, increase in warranty gross profit, a $2.2 million, or 0.9%, increase in customer pay gross profit, and a $1.3 million, or 4.6%, increase in body shop gross profit.
As of December 31, 2022, we had $106.5 million of cash available to fund our operations and capital commitments.
As of December 31, 2023, we had $96.4 million of cash available to fund our operations and capital commitments.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur future results could be materially and adversely impacted by changes in these or other factors. For a discussion of the risks associated with recent changes in LIBOR reporting practices, refer to Part I, Item 1A. Risk Factors .
Biggest changeOur future results could be materially and adversely impacted by changes in these or other factors. 59 Table of Contents
Similarly, amounts outstanding under floor plan financing arrangements bear interest at a variable rate based on a margin over the prime rate, LIBOR, SONIA, the Bank of England Base Rate, the Finance House Base Rate, the Euro Interbank Offered Rate, the Canadian Prime Rate, the Australian Bank Bill Swap Rate, or the New Zealand Bank Bill Benchmark Rate.
Similarly, amounts outstanding under floor plan financing arrangements bear interest at a variable rate based on a margin over the prime rate, SOFR, SONIA, the Bank of England Base Rate, the Finance House Base Rate, the Euro Interbank Offered Rate, the Canadian Prime Rate, the Australian Bank Bill Swap Rate, or the New Zealand Bank Bill Benchmark Rate.
As of December 31, 2022, we had consolidated operations in the U.K., Germany, Italy, Japan, Canada, Australia, and New Zealand. In each of these markets, the local currency is the functional currency.
As of December 31, 2023, we had consolidated operations in the U.K., Germany, Italy, Japan, Canada, Australia, and New Zealand. In each of these markets, the local currency is the functional currency.
Dollar would have resulted in an approximate $1.10 billion change to our revenues for the year ended December 31, 2022. We purchase certain of our new vehicles, parts, and other products from non-U.S. manufacturers.
Dollar would have resulted in an approximate $1.23 billion change to our revenues for the year ended December 31, 2023. We purchase certain of our new vehicles, parts, and other products from non-U.S. manufacturers.
Based on an average of the aggregate amounts outstanding under our floor plan financing arrangements subject to variable interest payments during the year ended December 31, 2022, a 100 basis point change in interest rates would result in an approximate $24.3 million change to our annual floor plan interest expense.
Based on an average of the aggregate amounts outstanding under our floor plan financing arrangements subject to variable interest payments during the year ended December 31, 2023, a 100 basis point change in interest rates would result in an approximate $29.2 million change to our annual floor plan interest expense.
Based on an average of the aggregate amounts outstanding under these facilities during the year ended December 31, 2022, a 100-basis-point change in interest rates would result in an approximate $2.9 million change to our annual other interest expense.
Based on an average of the aggregate amounts outstanding under these facilities during the year ended December 31, 2023, a 100-basis-point change in interest rates would result in an approximate $5.1 million change to our annual other interest expense.
Outstanding revolving balances under our credit agreements bear interest at variable rates based on a 55 Table of Contents margin over LIBOR, SONIA, the Bank of England Base Rate, Tokyo Interbank Offered Rate, or the Australian Bank Bill Swap Rate.
Outstanding revolving balances under our credit agreements bear interest at variable rates based on a margin over the prime rate, SOFR, SONIA, the Bank of England Base Rate, the Canadian Prime Rate, the Tokyo Interbank Offered Rate, or the Australian Bank Bill Swap Rate.

Other PAG 10-K year-over-year comparisons