UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K10‑K

Commission file number 1-122971‑12297

Penske Automotive Group, Inc.

(Exact name of registrant as specified in its charter)

(248) 648-2500648‑2500

Registrant's(Registrant’s telephone number, including area codecode) 

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:None.

Indicate by check mark if the registrant is a well-knownwell‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý☒   No o☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o☐   No ý☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý☒  No o☐

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-KS‑K is not contained herein, and will not be contained, to the best of the registrant'sregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K10‑K or any amendment to this Form 10-K. ý10‑K. ☒

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-212b‑2 of the Exchange Act). Yes o☐  No ý☒

The aggregate market value of the voting common stock held by non-affiliatesnon‑affiliates as of June 30, 20142017 was $2,100,466,715.$1,573,072,588. As of February 17, 2015,16, 2018, there were 90,245,48685,787,007 shares of voting common stock outstanding.

Documents Incorporated by Reference

Certain portions, as expressly described in this report, of the registrant'sregistrant’s proxy statement for the 20152018 Annual Meeting of the Stockholders to be held May 5, 201510, 2018 are incorporated by reference into Part III, Items 10-14.10‑14.

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PART I

Item 1.    Business

Item 1.  Business

We are ana diversified international transportation services company that operates automotive and commercial vehicletruck dealerships principally in the United States, Canada and Western Europe, and distributes commercial vehicles, diesel engines, gas engines, power systems and related parts and services principally in Australia and New Zealand. We employ approximately 22,100more than 26,000 people worldwide.

In 2014,2017, our business generated $17.2$21.4 billion in total revenue, which is comprised of $16.6approximately $19.8 billion from retail automotive dealerships, $125.6$1.0 billion from retail commercial truck dealerships and $0.5 billion from commercial vehicle distribution and other operations. We generated $3.2 billion in gross profit, which is comprised of $2.9 billion from retail automotive dealerships, $165.8 million from retail commercial vehicletruck dealerships and $448.9$131.9 million from commercial vehicle distribution and other operations.

Retail Automotive Dealership. We believe we are the second largest automotive retailer headquartered in the U.S. as measured by the $16.6$19.8 billion in total retail automotive dealership revenue we generated in 2014.2017. As of December 31, 2014,2017, we operated 327343 retail automotive retail franchises, of which 179155 franchises are located in the U.S. and 148188 franchises are located outside of the U.S. The franchises outside the U.S. are located primarily in the U.K. In 2014,2017, we retailed and wholesaled more than 479,000618,900 vehicles. We are diversified geographically, with 62%59% of our total retail automotive dealership revenues in 20142017 generated in the U.S. and Puerto Rico and 38%41% generated outside the U.S. We offer over 40 vehicle brands, with 72%70% of our totalretail automotive dealership revenue in 20142017 generated from premium brands, such as Audi, BMW, Mercedes-Benz and Porsche. Each of our dealerships offeroffers a wide selection of new and used vehicles for sale. In addition to selling new and used vehicles, we generate higher-margin revenue at each of our dealerships through maintenance and repair services and the sale and placement of third-party finance and insurance products, third-party extended service and maintenance contracts, and replacement and aftermarket automotive products. Automotive

In the first quarter of 2017, we acquired CarSense in the U.S. and CarShop in the U.K., both businesses representing stand-alone used vehicle dealerships, which we believe complement our existing franchised retail automotive dealership operations and provide scalable opportunities across our market areas. Our CarSense operations consist of five locations operating in the Philadelphia and Pittsburgh, Pennsylvania market areas, including southern New Jersey. Our CarShop operations consist of five retail locations and a vehicle preparation center operating principally throughout Southern England. In January 2018, we expanded our U.K. stand-alone used vehicle dealerships by acquiring The Car People, one of the U.K.’s leading retailers of used vehicles. The Car People has four retail locations operating across Northern England, which complements CarShop’s locations principally in Southern England.

Retail automotive dealerships represented 97%92.7% of our total revenues and 96%90.8% of our total gross profit in 2014.2017.

We believe our diversified retail automotive income streams help to mitigate the historical cyclicality found in some elements of the automotive sector. Revenues from higher margin service and parts sales include warranty work, customer paid work, collision repair services, and wholesale parts sales. Service and parts sales and are typically less cyclical than retail vehicle sales and generate the largest part of our retail automotive retail gross profit. The following graphic showsgraphics show the percentage of our total retail automotive dealership revenues by product area and their respective contribution to our overallretail automotive gross profit:

Revenue Mix		Gross Profit Mix

Retail Commercial VehicleTruck Dealership.    In November 2014, we acquired a controlling interest in The Around The Clock Freightliner Group,We operate a heavy and medium dutymedium-duty truck dealership group locatedknown as Premier Truck Group (“PTG”) with locations in Texas, Oklahoma, Tennessee, Georgia, and New Mexico, and now own 91%Canada. As of that business which we have renamed Penske Commercial Vehicles US ("PCV US"). PCV US operates sixteenDecember 31, 2017, PTG operated twenty locations, including tenfourteen full-service dealerships and six collision centers, offering principallyprimarily Freightliner and Western Star and Sprinter-brandedbranded trucks.

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Two Four of these locations Freightliner of Chattanooga and Freightliner of Knoxville, were acquired in February 2015. PCV USApril 2016 in the greater Toronto, Canada market area, and two of these locations were acquired in December 2016 in the Niagara Falls, Canada market area. PTG also offers a full range of used trucks available for sale as well as service and parts departments, manyproviding a full range of which are open 24 hours a day, seven days a week. Frommaintenance and repair services.

This business represented 4.9% of our acquisition on November 1, 2014 through December 31, 2014, thistotal revenues and 5.1% of our total gross profit in 2017.  

Our retail commercial truck business generated $125.6 millionalso benefits from diversified income streams similar to those of revenue.the retail automotive sector. The following graphics show the percentage of our total retail commercial truck dealership revenues by product area and their respective contribution to our retail commercial truck gross profit:

Commercial Vehicle Distribution. Since August 30, 2013, we have beenWe are the exclusive importer and distributor of Western Star heavy dutyheavy-duty trucks (a Daimler brand), MAN heavy and medium dutymedium-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. TheThis business, known as Penske Commercial Vehicles Australia (“PCV Australia”), distributes commercial vehicles and parts to a network of more than 70 dealership locations, including threeeight company-owned retail commercial vehicle dealerships. This business represented 2.3% of our total revenues and 2.4% of our total gross profit in 2014.

 On October 1, 2014, we acquired MTU Detroit Diesel Australia Pty Ltd. ("MTU-DDA"),

We are also a leading distributor of diesel and gas engines and power systems, principally representing MTU, Detroit Diesel, Mercedes-Benz Industrial, Allison Transmission and MTU Onsite Energy. MTU-DDAThis business, known as Penske Power Systems (“PPS”), offers products across the on- and off-highway markets in Australia, New Zealand and portions of the Pacific including trucking, mining, power generation, construction, industrial, rail, marine, agriculture, oil & gas and defense and supports full parts and aftersales service through a network of branches, field locations and dealers across the region. The on-highway portion of this business complements our existing Penske Commercial VehiclesPCV Australia distribution business. Frombusiness, including integrated operations at retail locations selling PCV brands. 

These businesses represented 2.4% of our acquisition on October 1, 2014 through December 31, 2014, this business generated $52.5 milliontotal revenues and 4.1% of revenue.our total gross profit in 2017.

Penske Truck Leasing. We currently hold a 9.0%28.9% ownership interest in Penske Truck Leasing Co., L.P. ("PTL"(“PTL”), a leading provider of transportation services and supply chain services.management. PTL operates and maintains approximately 207,000 vehicles and serves customers in North America, South America, Europe and Asia and is onecapable of meeting customers’ needs across the largest purchasers of commercial trucks in North America. Product lines includesupply chain with a broad product offering that includes full-service truck leasing, truck rental and contract maintenance, logisticsalong with logistic services such as dedicated contract carriage, distribution center management, transportation management and acting as lead logistics provider. On July 27, 2016, we acquired an additional 14.4% ownership interest in PTL from subsidiaries of GE Capital Global Holdings, LLC (collectively, “GE Capital”) for approximately $498.5 million in cash to bring our ownership interest to 23.4%. Prior to this acquisition, we held a 9.0% ownership interest in PTL. On September 7, 2017, we acquired an additional 5.5% ownership interest from GE Capital for approximately $239.1 million in cash. At the same time, affiliates of Mitsui & Co., Ltd. (“Mitsui”), our second largest shareholder, acquired an additional 10.0% ownership interest in PTL at the same valuation.PTL is currently owned 41.1% by Penske Corporation, 9.0%28.9% by us, and the remaining 49.9% of PTL is owned30.0% by direct and indirect subsidiaries of General ElectricMitsui. GE Capital Corporation ("GECC").no longer owns any ownership interests in PTL. We account for our investment in PTL under the equity method, and we therefore record our share of PTL'sPTL’s earnings on our statements of income under the caption "Equity“Equity in earnings of affiliates",affiliates,” which also includes the results of our other equity method investments.

2014

2017 & 2018 Key Developments

Retail Automotive Franchised Dealership Acquisitions and Dispositions. In 2014,2017,  we acquired or were granted open points (new franchises awarded from the automotive manufacturer) representing eight thirteenautomotive franchises. We expect that these franchises, will representwhich represented approximately $275.0$500.0 million in annualized revenue. These acquisitions include VW SkiptonOf the retail automotive franchises acquired, two are located in New Jersey and represent the Jaguar and Land Rover brands, two are located in Arizona and represent the Mercedes-Benz and Sprinter brands, two are located in the U.K. and represent the BMW and MINI brands, and two are located in Germany and represent the Audi and Volkswagen brands. In 2017, we disposed of Greenwichtwenty-five retail automotive franchises, which represented approximately $270.0 million in Connecticut, which complements ourannualized revenue. Of the franchises disposed of, nine represented franchises in DanburyPuerto Rico, five represented smart franchises in the U.S. and Fairfield, Connecticutfive represented BMW, MINI, and Lexus franchises in the U.K.

Acquisition of Stand-Alone Used Vehicle Dealerships.  In the first quarter of 2017, we acquired CarSense in the U.S. and CarShop in the U.K., both businesses representing stand-alone used vehicle dealerships, which we believe complement our Mercedes-Benzexisting franchised retail automotive dealership operations and provide scalable opportunities across our market areas. Our CarSense operations consist of five locations operating in Greenwich, Connecticut. We also disposedthe Philadelphia and Pittsburgh, Pennsylvania market areas, including southern New Jersey. Our CarShop operations consist of seven franchises, representingfive retail locations and a vehicle preparation center operating principally throughout Southern England. These businesses generated approximately $148.0$710.0 million in annual revenue principally consisting of four franchises in Bremen, Germany which were consolidated with our Hamburg operations. Additionally, in 2014,2017.

In January 2018, we acquired a 50%The Car People, which has four large-scale retail locations operating across Northern England. Prior to our acquisition, The Car People sold approximately 18,000 vehicles per year and is expected to represent approximately $300.0 million in annualized revenue, which would bring our total projected annualized revenues from our fourteen stand-alone used vehicle locations to approximately $1.0 billion.

Investment in PTL. In September 2017, we acquired an additional 5.5% ownership interest in PTL, a groupleading provider of eight BMWtransportation services and MINI franchisessupply chain management, from GE Capital for approximately $239.1 million in Barcelona, Spain,cash. Prior to this acquisition, we held a new market for us.

        Retail Commercial Vehicle Dealership.    In November 2014, we acquired a controlling23.4% ownership interest in PCV US, a heavyPTL. PTL is currently owned 41.1% by Penske Corporation, 28.9% by us, and medium duty truck dealership group located30.0% by Mitsui.  GE Capital no longer owns any ownership interests in Texas, Oklahoma and New Mexico, as discussed on the preceding page.PTL. We believe this business represents a strategic opportunityaccount for our company to build scale asinvestment in PTL under the heavy-duty truck dealership industry is highly fragmented.

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        Commercial Vehicle Distribution.    On October 1, 2014, we acquired MTU-DDA, a leading distributor of diesel and gas engines and power systems, as discussed on the preceding page. We believe this business, coupled with our existing commercial vehicle distribution business, presents our company with the opportunity to provide a full range of products and services to customers across Australia, New Zealand and the Pacific.

Issuance of 5.375%3.75% Senior Subordinated Notes.In November 2014,August 2017, we issued $300.0 million of 5.375%3.75% senior subordinated notes due 2024.2020. We used the proceeds of the 5.375%3.75% notes to repay amounts outstanding under our U.S. credit agreement and floor plan credit agreements, leaving us with additional flexibility to continue our acquisition strategy.

Shareholder Dividends and Stock Repurchases. We increased our quarterly stock dividend each quarter in 2014.2017. Our latest declared dividend is $0.22$0.34 per share payable March 2, 2015,1, 2018, which represents a dividend yield of 1.8%2.6% using our January 30, 201531, 2018 closing stock price. We also repurchased 175,000302,000 shares of our common stock in 20142017 for $8.0$12.7 million, which, together with the quarterly dividends, represents a return to shareholders of approximately $78.5$121.1 million.

        Named "Best Dealerships To Work For".Company and Dealership Awards.     TwelveTwenty of our dealerships in the U.S. were named by Automotive News as among the 100 "Best“Best Dealerships to Work For"For” in 2014.2017. In addition, our U.K. dealerships, collectively known as the Sytner Group, were ranked as one of the "Best Big Companies to Work for in the U.K." by the London Sunday Times.Times as the “Best Big Company to Work For” in 2017. We believe these awards reflect our ongoing commitment to our valuable dealership employees, which enhances customer satisfaction and may result in improved sales over time. Additionally, in January 2018, PAG was named one of the “World’s Most Admired Companies” by Fortune Magazine.

Outlook

OutlookRetail Automotive Dealership.

In 2014, the2017, U.S. light vehicle retail automotivesales declined 1.8%, as compared to last year, to 17.2 million units, with passenger car sales declining 11.2%, while sales of trucks, crossovers and sport utility vehicles increased 4.4%. We believe the sales of trucks, crossovers and sport utility vehicles will continue to outperform passenger car sales, largely due to consumer preference. We believe the U.S. market grew 5.9% to 16.5 million units. Duringfor new light vehicle sales has plateaued and will be impacted by the last several years the new vehicle market and the amountlevel of customer traffic visiting our dealerships has continued to improve. Based upon the current economic environment,OEM incentives, increasing lease returns, generally low interest rates, strong credit availability, low levels of unemployment, the age of vehicles on the road, newvehicle innovation, and tax reform, although actual sales may differ materially. We also expect to see strength across the used vehicle market into 2018, as the number of lease returns increases providing customers with an additional supply of affordable late model, introductions planned by many different OEM's, and the drop in oil prices contributinglow mileage vehicles from which to lower consumer fuel costs, there are expectations for continued improvement in the new light vehicle sales market in 2015.choose.

        During 2014, In 2017, U.K. new vehicle registrations increased 9.3% from 2013declined 5.7%, as compared to last year, to 2.5 million registrations. BasedThe U.K. market is represented 44% by the private market and 56% by business/fleet. Private market registrations decreased 6.8%, while business/fleet registrations decreased 4.7%. Although new vehicle sales declined in 2017, sales of the premium brands we represent outperformed these figures. U.K. sales are being negatively affected by the uncertainty of residual values and future tax rates on industry forecasts from entities suchdiesel powered vehicles, as the SocietyU.K. and Western European countries consider the ramifications of Motor Manufacturersdiesel engines on the environment. Sales of diesel powered vehicles experienced a 17% decline in sales in 2017. The March 2019 planned exit from the European Union (“Brexit”) may be causing and Traders (www.smmt.co.uk), we believemay continue to cause economic and political uncertainty, potentially impacting the economic environment, which may lead to further declines in new vehicle registrations in future periods. Since no country has previously left the European Union, the outcome of any future negotiations between the U.K. market will maintain current registration levels as a resultand the European Union is uncertain and may affect the timing, terms of continued positive conditionstrade, and the level of new vehicle registrations in the U.K. economy, U.K. motorists responding positively to new products, improving new car efficiency, the latest technologically advanced vehicles, particularly in the area of premium brand sales, and attractive financing offers.those markets.

Retail Commercial Truck Dealership. In 2014, 2017, North AmericaAmerican sales of Class 5-8 mediumheavy and heavy-dutymedium-duty trucks, the principal vehicles for our PCV USPTG business, were approximately 498,000499,932 units, an increase of 12.4%.3.3% from 2016. The Class 5-7 medium-duty truck market increased 6.0% to 248,138 units from 234,163 units in 2016. The largest North American market, Class 8 heavy-duty trucks, increased 13.2%0.7% to 286,000251,794 units from 252,600249,952 units in 2013. The backlog2016. According to ACT Research (“ACT”), retail sales of orders for Class 5-8 medium and heavy-duty trucks increased from approximately 138,000 units at the end of 2013 to more than 227,000 at the end of 2014, an increase of 64.8%. The backlog of orders for Class 8 heavy-duty trucks increased 83.1%were generally expected to decline in 2014 to approximately 172,500 units from approximately 94,200 units2017; however, generally strong economic conditions, the stabilization in 2013. Based on a growing economy, the strengthvalues of the order backlog, strongused trucks, improved freight metrics, and increased utilization pushed the

market to a stronger than expected performance in 2017. These conditions are expected to continue in 2018 with the dropmarket expected to increase with stronger Class 8 retail unit sales in oil prices which may help trucking profitability and boost discretionary spending, there are expectations for continued strength in the Class 5-8 medium and heavy-duty truck market in 2015.North America.  

Commercial Vehicle Distribution. Our commercial vehiclePCV Australia distribution business includingand the on-highway portion of our MTU-DDAPPS business operateseach operate principally in the Australian and New Zealand heavy and medium dutymedium-duty truck markets. In 2014,2017, the Australian heavy and medium dutyheavy-duty truck market reported sales of 17,29912,002 units,

representing a decrease of 2.7%21.5% from 2013.2016. The New Zealand market reported sales of 3,2113,294 units in 2014,2017, representing an increase of 28.3%23.0% from 2013.2016. The brands we represent in Australia and New Zealand hold a 5.7% and 8.7%an 8.3% market share respectively, in the combined heavyAustralian heavy-duty truck market, and medium duty truck markets. We expect thea 5.3% market share in New Zealand. The Australian heavy-duty commercial vehicle market to laghad lagged behind historical sales levels in part becauserecent years partly due to difficult macroeconomic conditions and the relative weak price of difficult macro-economic conditions resulting in part from lower commodity pricescommodities in these markets. The commercial parts distribution portionHowever, recent improvements in the heavy-duty truck market and overall market conditions, as well as a moderate strengthening of our business has beenthe Australian Dollar, have led to increasing andindustry sales which we expect to continue into 2018. We also expect continued new order growth from the partsoff-highway engine distribution business will continue to be resilient.as a result of improving market conditions.

Penske Truck Leasing.We expect PTL to benefit from continued strong demand for its full-service truck leasing, truck rental and contract maintenance, and logistics services resulting from continued positive economic conditions in the United States. States and customers’ desire to increase efficiency and lower costs by outsourcing non-core responsibilities such as fleet ownership. As a global logistics services provider, we also expect PTL to experience increased demand for its logistics supply chain solutions based primarily on optimizing the use of drivers, trucks, warehouses, and other services within the supply chain. As a result of recent improvements in the truck market, in 2017 we saw modest freight growth and improved conditions within PTL’s commercial truck rental business, an increase in the utilization rate of its fleet, and stabilization of used truck prices. We anticipate that these improvements will continue into 2018.

As discussed in "Item“Item 1A. Risk Factors,"” there are a number of factors that could cause actual results to differ materially from our expectations. For a detailed discussion of our financial and operating results, see "Item“Item 7. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations."”

Long-Term Business Strategy

Our long-term business strategy focuses on several key areas in an effort to foster long-term relationships with our customers.customers and our associates. The key areas of our long-term strategy follow:

•

Attract, develop, and empower associates to grow our business;



•

Maintain diversification;



•

Expand revenues at existing locations and increase higher-margin businesses;



•

Offer outstanding brands in premium facilities and superior customer service;



•

Grow through strategic acquisitions;



•

Enhance customer satisfaction;



•

Leverage scale and implement "best practices"; and



•

Leverage Internet marketing.

·Attract, develop, and empower associates to grow our business;

·Diversification;

·Offer outstanding brands in premium facilities and superior customer service;

·Expand revenues at existing locations and increase higher-margin businesses;

·Grow through strategic acquisitions;

·Enhance customer satisfaction;

·Leverage scale and implement “best practices”; and

·Embrace digital marketing.

Attract, Develop, and Empower Associates to Grow our Business

We view our local managers and associates as one of our most important assets. We operate in a decentralized manner that fosters an entrepreneurial spirit where each dealership or business unit has independent operational and financial management responsible for day-to-day operations. We believe experienced local managers are better qualified to make day-to-day decisions concerning the successful operation of a business unit and can be more responsive to our customers'customers’ needs. We seek local management that not only has relevant industry experience, but is also familiar with the local market. We also have regional management that oversees operations and supports the local unit operationally and administratively. We invest for future growth and offer outstanding brands and facilities which we believe attract outstanding talent. We believe attracting the best talent and allowing our associates to make business decisions at the local level helps to foster long-term growth through increased repeat and referral business.

Maintain Diversification

Diversification

Our business benefits from our diversified revenue mix, including the multiple revenue streams in a traditional dealership (new vehicles, used vehicles, finance and insurance, and service and parts operations), revenues from our retail commercial vehicletruck dealership operations, our commercial vehicle distribution 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 are further diversified within our retail automotive retail operations due to revenues generated from franchised dealerships and stand-alone used vehicle dealerships, due to our brand mix where we represent more than 40 brands, and geographical

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dispersion. For example, the following table shows our revenues by state in the U.S. as a percentage of our total global revenue:

        Diversification Outside the U.S.geographically where we operate across more than 15 states and internationally. One of the unique attributes of our operations versus our peers is our diversification outside the U.S., with operations across nine countries.

The following table shows our consolidated revenues by country:country, and by state in the U.S., as a percentage of our total revenue:

The U.K. is thesecond largest automotive retail market in Western Europe as measured by new units sold. We generated 95%88% of our revenue in the U.K. through the sale and service of premium brands in 2014. 2017.We believe we are among the largest Audi, Bentley, BMW, Ferrari, Jaguar, Land Rover, Lexus, Maserati, Mercedes-Benz, MINI, and Porsche dealers in the U.K. based on new unit sales. Additionally, we operate a number of dealerships in Germany, Western Europe'sEurope’s largest automotive retail market, including through joint ventures with experienced local partners, which sell and service Audi, Lexus, Porsche, Toyota, Volkswagen and other brands. We also operate BMW/BMW, MINI, Maserati, Porsche, Audi, Land Rover and MaseratiVolvo dealerships in Northern Italy, as well as BMW and BMW/MINI dealerships in Spain, through joint ventures with local partners. Our non-consolidated joint venture in Japan operates BMW, MINI, Rolls-Royce, Ferrari, and ALPINA dealerships.

Diversification Through Penske Truck Leasing.Stand-Alone Used Vehicle Dealerships. We hold a 9.0% ownership interestOur acquisitions of CarSense in PTL, a leading providerthe U.S. and CarShop and The Car People in the U.K., each representing stand-alone used vehicle dealerships, complement and

provide more diversification to our retail automotive operations and supply chain services, which further diversifiesprovide scalable opportunities across our total results of operations. Our share of PTL's earnings in 2014 was $28.2 million and is shown on our statement of income under the caption "Equity in earnings of affiliates."market areas.

Expand Revenues at Existing Locations and Increase Higher-Margin Businesses

Diversification Through Retail Commercial VehicleTruck Dealership. We acquired a controlling interest in PCV US, our U.S. retail commercial vehicle dealership operations, in November 2014. ThisOur PTG business provides more diversification to our overall business model and allows us to bring our automotive dealership expertise to the retail commercial vehicletruck market. SimilarRecently acquired operations in Canada, in addition to our U.S. locations, further diversifies our revenue stream.

Diversification Through Penske Truck Leasing. We currently hold a 28.9% ownership interest in PTL, a leading provider of transportation services and supply chain management, which further diversifies our total results of operations. In September 2017, we increased our ownership interest in PTL from 23.4% to 28.9% as a result of our acquisition of an additional 5.5% ownership interest, as discussed previously, which further diversifies our earnings potential. We also expect to realize significant cash tax savings as a result of our investment in PTL in addition to the diversification offered by earnings from PTL.

Offer Outstanding Brands in Premium Facilities and Superior Customer Service

We offer outstanding brands in premium facilities and believe offering our customers a superior customer service experience will generate repeat and referral business and will help to foster a loyal and dedicated customer base. Customer satisfaction is measured at each of our automotive dealerships on a monthly, quarterly, and/or yearly basis by the manufacturers we represent, and we compensate our employees, in part, based on their performance in such rankings.

We sell over 40 brands in our markets and our automotive dealership revenue mix consists of 70% related to premium brands, 23% related to volume non-U.S. brands, 3% related to brands of U.S. based manufacturers, and 4% related to our stand-alone used vehicle dealerships. We believe our largely premium and non-U.S. brand mix will continue to offer us the opportunity to generate same-store growth, including higher margin service and parts businesssales. The following chart reflects our percentage of total retail automotive dealership revenue by brand:

We sell and service outstanding automotive brands in our premium facilities, in attractive geographic markets. Where advantageous, we aggregate our automotive dealerships in a campus setting in order to build a destination location for our customers, which we believe helps to drive increased customer traffic to each of the commercial vehicle dealerships provides higher-margin revenues. Additionally, we believe this business representsbrands at the location. This strategy also creates an opportunity to reduce personnel expenses, consolidate advertising and administrative expenses and leverage operating expenses over a strategic acquisition opportunity for our company to build scale as the heavy-duty truck dealership industry is highly fragmented.larger base of dealerships.

        Commercial Vehicle Distribution.    We acquired our commercial vehicle distribution operations on August 30, 2013 and our engine, power systems and parts distribution operations on October 1, 2014. We believe these businesses provide us with higher-margin revenues and offer a platform to potentially expand our operations in those markets. To the extent we can grow our revenues in these operations, our overall margins should increase.

Our PTG dealerships provide a similar suite of services as our automotive dealerships, and similar to our retail automotive business, our retail commercial truck business is committed to providing outstanding brands and superior customer service in premium facilities.  The necessity of repairing trucks for our customers is a key area of differentiation for our commercial truck dealerships, and we provide around-the-clock service in certain locations to get our customers’ commercial trucks back on the road so they can complete their routes.

Expand Revenues at Existing Locations and Increase Higher-Margin Businesses

Increase Same-Store Sales. We believe our emphasis on superior customer service and premium facilities will contribute to increases in same-store sales over time. We have added a significant number of incremental automotive service bays in recent years in order to better accommodate our customers and further enhance our higher-margin service and parts revenues. We have employed a strategy called "Retail First" to increase our same-store used vehicle sales. With this strategy, we have increased our efforts to retail a used vehicle to a consumer before attempting to dispose of it through the traditional wholesale process. We believe this strategy has helped to increase the number of used retail vehicle sales in 2014.

Grow Finance, Insurance, and Other Aftermarket Revenues. Each sale of a vehicle provides us the opportunity to assist in arranging financing for the sale of a vehicle, to sell the customer an extended service contract or other insurance product, and to sell aftermarket products, such as security systems and protective coatings. Where possible, we attempt to vertically integrate with the captive finance companies of the manufacturers we represent and to supplement these offerings with preferred lenders as necessary. In order to improve our finance and insurance business, we focus on enhancing training programs and implementing process improvements which we believe will improve our overall revenues.

Expand Service and Parts and Collision Repair Revenues. Today'sToday’s vehicles are increasingly complex and require sophisticated equipment and specially trained technicians to perform certain services. Additionally, many manufacturers today are offering maintenance programs packaged with the vehicle sale. These programs require customers to have the service work performed at a factory-authorized dealership. Unlike independent service shops, our dealerships are authorized to perform this work under warranties provided by manufacturers. Additionally, we offer maintenance programs for sale through our dealerships. We believe that our brand mix and the complexity of today'stoday’s vehicles, combined with our investment in expanded service facilities, including the addition of a significant number of incremental service bays in recent years, and our focus on customer service, will contribute to increases in our service and parts revenue. We also operate 2738automotive collision repair centers and six commercial truck collision centers which are integrated with local dealership operations. We offer rapid repair services such as paint-less dent repair, headlight reconditioning, wheel repairs, tire sales, seat sales for our retail commercial truck operations, and windshield replacement at most of our facilities in order to offer our customers the convenience of one-stop shopping for all of their automotivevehicle requirements.

Offer Outstanding Brands in Premium Facilities and Superior Customer Service

 We offer outstanding brands in premium facilities and believe offering our customers a superior customer service experience will generate repeat and referral business and will help to foster a loyal and dedicated customer base. Customer satisfaction is measured at each of our automotive dealerships on a monthly, quarterly, and/or yearly basis by the manufacturers we represent, and we compensate our employees, in part, based on their performance in such rankings.

        Our automotive dealership revenue mix consists of 72% related to premium brands, 24% related to volume non-U.S. brands, and 4% related to brands of U.S. based manufacturers. We believe our largely premium and non-U.S. brand mix will continue to offer us the opportunity to generate

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same-store growth, including higher margin service and parts sales. The following chart reflects our percentage of total retail automotive dealership revenue by brand:

        We sell and service outstanding automotive brands in our premium facilities, in attractive geographic markets. Where advantageous, we aggregate our automotive dealerships in a campus setting in order to build a destination location for our customers, which we believe helps to drive increased customer traffic to each of the brands at the location. This strategy also creates an opportunity to reduce personnel expenses, consolidate advertising and administrative expenses and leverage operating expenses over a larger base of dealerships. Our U.S. based dealerships have generally achieved new unit vehicle sales that are higher than industry averages for the brands we sell.

Grow Through Strategic Acquisitions

We believe that attractive retail automotive retail acquisition opportunities exist for well-capitalized dealership groups with experience in identifying, acquiring and integrating dealerships. The fragmented automotive retail market provides us with significant growth opportunities in our markets. We generally seek to acquire dealerships with high-growth automotive brands in highly concentrated or growing demographic areas that will benefit from our management expertise, manufacturer relations and scale of operations, as well as smaller, single location dealerships that can be effectively integrated into our existing operations. Over time, we have also been awarded new franchises from various manufacturers. In 2014,2017, we acquired or were granted open points representing eightthirteen franchises, which we expect will generategenerated approximately $275.0 $500.0million in annualized revenue. We also disposed of seven franchises that generated approximately $148.0 million of revenue on an annualized basis in 2014.

 We also believe there are acquisition opportunities for our retail commercial vehicle dealership operations

In 2017, we acquired CarSense in the U.S. and CarShop in the U.K., both businesses representing stand-alone used vehicle dealerships, which we believe complement our commercial vehicle distributionretail automotive dealership operations and provide scalable opportunities across our market areas. These businesses generated approximately $710.0 million in revenue in 2017. We believe there are attractive acquisition opportunities to grow these operations in Australiaboth the U.S. and New Zealand. We have a seasoned local management teamthe U.K., and in Australia thatJanuary 2018, we have complemented with additional personnel familiar with our automotive retail operations and we will endeavoracquired The Car People in the U.K., as discussed previously, which is expected to utilize local management to identify additional retail and distribution opportunities.represent approximately $300.0 million in annualized revenue.

We believe there are attractive retail commercial truck acquisition opportunities. We see continued growth in the brands we represent at our existing retail commercial truck dealerships and believe there are opportunities for us to continue to make strategic acquisitions over time.

Enhance Customer Satisfaction

We strive for superior customer satisfaction. By offering outstanding brands in premium facilities, "one-stop"“one-stop” shopping convenience in our aggregated facilities, and a well-trained and knowledgeable sales staff, we aim to forge lasting relationships with our customers, enhance our reputation in the community, and create the opportunity for significant repeat and referral business. We monitor customer satisfaction data accumulated by manufacturers to track the performance of operations, and incent our personnel to provide exceptional customer service, thereby driving increased customer loyalty. In addition, weloyalty and enhancing our reputation.  

Reputation management is an extremely important and powerful business tool. Our reputation management strategy, which includes encouraging, monitoring, and responding to customer reviews, is crucial for generating and maintaining trust and customer loyalty in a competitive market. We proactively monitor online reputation management sites, such as Yelp.com,including Google reviews and Yelp, among others, to proactively monitorenhance our online presence, build loyalty, assess customer comments, to ensure we are offering a superior customer satisfactionservice experience, and ultimately drive sales and profitability. We encourage customer reviews and have automated tools in place that make it easy for customers to review our dealerships.business. Analysis of online reviews provides us valuable operational insights that we leverage to foster customer loyalty, stay ahead of the competition, and drive new sales.

Leverage Scale and Implement "Best Practices"“Best Practices”

We seek to build scale in many of the markets where we have operations. Our desire is to reduce or eliminate redundant administrative costs such as accounting, payroll, information technology systems and other general administrative costs. In addition, we seek to leverage our industry knowledge and experience to foster communication and cooperation between like brand dealerships throughout our organization. Corporate management and local management meet regularly to review operating performance, examine industry trends, and implement operating improvements. Key financial information is discussed and compared across all markets. This frequent interaction facilitates implementation of successful strategies throughout the organization.

Leverage Internet

Embrace Digital Marketing

With consumers becoming increasingly immersed in the digital space, we have adopted a comprehensive digital marketing strategy that encompasses all avenues of customer engagement including websites, social media, video, mobile, email marketing, online advertising, search engine optimization, branding, and content. We leveragestrive to build and optimize our presence across all digital platforms to deliver a seamless and transparent experience for our customers.

To attract customers and enhance our customer service, each of our dealerships uses a custom content management system (CMS) to maintain its own website. All of our dealership websites have consistent functionality and responsive formats, except where otherwise required by original equipment manufacturers, which helps to minimize costs and provide a consistent image across dealerships.

To drive high quality traffic to our web properties, we primarily focus on search engine optimization and search engine marketing, and employ some third-party lead providers in key markets to augment our traffic. Most importantly, we have invested heavily in our own websites so we can retain traffic and deliver a quality experience. We operate with a “mobile first” mentality and have ensured that the Internetcontent we serve our customers is tailored to attracttheir method of engagement with us, the device they are using, and retain customers, as wetheir specific requests, where applicable. We believe the majority of our customers consult the Internet for information when shopping for a vehicle. Our internet marketing strategy leverages our individual dealership websites, as well as corporate websites such asPenskeCars.com,PenskeAutomotive.com andSytner.co.uk. In addition, manufacturers supplement our advertising efforts through advertising and financing campaigns promoting their brands. We focus on common marketing metrics and business practices across our dealerships, as well as negotiating enterprise arrangements for key marketing providers. We utilize a single customer relationship management tool in the U.S. in order to enhance customer communication, lead nurturing and track return on investment.

        We also endeavor to optimize our websites to improve search engine rankings and drive more organic website traffic. Our digital focus areas also include social media, search engine management, video, reputation management and online chat. These areas assist in creating high visibility for our websites and relevance on sites like Google, Yahoo, Bing and others. Importantly, when customers access our dealership websites withweb traffic comes from mobile devices, suchmaking this approach important as a smartphone or a tablet, we present these websites in a format that allows for a successful customer experience through optimizationkey driver of our sites regardless of the device.success.

We advertisepromote our U.S. and U.K. automotive retail new and pre-owned vehicle inventory online throughPenskeCars.com andSytner.co.uk,, respectively. TheseThe websites are designed to make it easy forstreamline the car-buying process and allow consumers employees and partners to view and compare on average over 55,00050,000 new, certified and pre-owned vehicles. These sites, together with our dealership websites, provide consumers a simple methodway to schedule maintenanceservice appointments online 24/7 and repair services at their local Penske Automotive dealership and

view extensive vehicle information, including photos, prices, promotions, videos, and third partythird-party vehicle history reports for pre-owned vehicles. CustomersAdditionally, customers may also download oura PenskeCars.com app to access our vehicle inventory, locate or contact dealersa dealership, explore payments, and schedule serviceget instant trade offers at their convenience.

To help us continue to develop the online experience, we research consumer behavior and survey our customers to validate our approach and help guide our site design. Customers, now more than ever, are interested in a transparent and quick process, and use the web as a way to educate themselves about their potential purchase and save time during the purchase process. To further our digital strategy, and respond to changing consumer preferences, we created a digital retailing experience, called Preferred Purchase, for our U.S. dealerships that incorporates new online functionality to streamline the sales process in our traditional business model. Preferred Purchase allows customers to value trade-in vehicles, review pricing, leasing and financing options, manufacturer incentive programs, and pre-qualify for credit,  all online without visiting the dealership. This functionality is integrated and automated on a single platform that resides on both our individual dealership sites as well as our corporate sites. Preferred Purchase promotes transparency and is intended to speed up customer transaction times and give our customers the flexibility to choose the path or sales process most comfortable to them. We continue to assess consumers’ purchasing habits, opinions, and preferences to ensure we are meeting consumer needs and making the right investments in new technology.

Social media is an optimal platform to proactively communicate with our customers and receive input on our service, branding, and online engagement. Our dealerships maintain social media pages, including Facebook, Instagram and Twitter, among others, to attract new customers, build stronger relationships with current customers, and help grow the business. Using a social media mobile app, our dealerships can easily capture customer photos, send review invitations, record videos, and submit content for their social media sites. Social media is an ever-increasing and critical part of our digital strategy, and one of the most powerful and cost-effective ways to engage with our customers, enhance brand visibility, and generate customer leads. By choosing a specific audience using a range of demographic tools, our dealerships are able to reach targeted potential customers effectively and efficiently.

Retail Automotive Dealership Operations

Retail Automotive Franchises. We routinely acquire and dispose of retail automotive retail franchises. Our financial statements include the results of operations of acquired dealerships from the date of acquisition. The following table sets forth information with respect to our current dealerships that were acquired or opened from January 1, 2012 to December 31, 2014:

        In 2014, 2013 and 2012, we disposed of seven, thirty and eleven franchises, respectively, that we believe were not integral to our strategy or operations. The dispositions in 2014 principally consisted of

consistent high sales volume at our dealerships. Our dealerships finance the purchase of most new vehicles from the manufacturers through floor plan financing provided primarily by various manufacturers'manufacturers’ captive finance companies.

Used Vehicle Retail Sales. In 2014,2017, we retailed 181,894252,922 used vehicles, which generated 29.8%32.2% of our retail automotive dealership revenue and 13.6%12.2% of our retail automotive dealership gross profit. We acquire used vehicles from various sources including auctions open only to authorized new vehicle dealers, public auctions, trade-ins from consumers in connection with their purchase of a new vehicle from us, and lease expirations or terminations. To improve customer confidence in our used vehicle inventory, eachwe provide vehicle history reports for all used vehicles and virtually all of our franchised new vehicle dealerships participatesparticipate in all available manufacturer certification processes for

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used vehicles. 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. Most of our dealerships have implemented software tools which assist in procuring and selling used vehicles. In the U.K., we offer used vehicles to wholesalers and other dealers via online auction.

We have employed a strategy called "Retail First" to increase our same-storecurrently operate fourteen stand-alone used vehicle sales. Under this strategy,dealerships in the U.S. and U.K. While we have increasedoperate these dealerships under separate names (CarSense, CarShop and The Car People), each of these dealerships are committed to offering high quality “like-new” used vehicles at “no-haggle” prices. These businesses typically sell low mileage, high quality vehicles in a friendly and transparent buying experience. We acquired these businesses in 2017 and 2018, but each has a long history of serving their local communities. We include the results of our efforts to retail astand-alone used vehicle to a consumer before attempting to dispose of it through the traditional wholesale process. We believe this strategy has helped to increase the number ofdealerships within used vehicle retail vehicle sales in 2014. We believe these strategies have resulted in greater operating efficiency and helped to reduce costs associated with maintaining optimal inventories.sales.

Vehicle Finance, Extended Service and Insurance Sales. Finance, extended service and insurance sales represented 2.6%2.9% of our retail automotive dealership revenue and 17.6%19.9% of our retail automotive dealership gross profit in 2014.2017. At our customers'customers’ option, our dealerships can arrange third-party financing or leasing in connection with vehicle purchases. We typically receive a portion of the cost of the financing or leasing paid by the customer for each transaction as a fee. While these services are generally non-recourse to us, we are subject to chargebacks in certain circumstances, such as default under a financing arrangement or prepayment. These chargebacks vary by finance product, but typically are limited to the fee we receive. As further discussed in "Item 1A. Risk Factors," the Consumer Finance Protection Bureau has instituted regulatory proceedings which may change the way we are compensated for assisting our customers in obtaining financing, which could result in lower related revenues.

We also offer our customers various vehicle warranty and extended protection products, including extended service contracts, maintenance programs, guaranteed auto protection (known as "GAP,"“GAP,” this protection covers the shortfall between a customer'scustomer’s loan balance and insurance payoff in the event of a total loss), lease "wear“wear and tear"tear” insurance 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'manufacturers’ captive finance companies. Similar to finance transactions, we are subject to chargebacks relating to fees earned in connection with the sale of certain extended protection products. We also offer for sale other aftermarket products, including security systems and protective coatings.

We offer finance and insurance products using a "menu"“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 provide training to our finance and insurance personnel to help assureensure compliance with internal policies and procedures, as well as applicable state regulations.

Service and Parts Sales. Service and parts sales represented 10.3%10.4% of our retail automotive dealership revenue and 41.2%41.7% of our retail automotive dealership gross profit in 2014.2017. We generate service and parts sales in connection with warranty and non-warranty work performed at each of our dealerships. We believe our service and parts revenues benefit from the increasingly complex technology used in vehicles that makes it difficult for independent repair facilities to maintain and repair today'stoday’s automobiles.

A goal of each of our dealerships is to make each vehicle purchaser a customer of our service and parts department. Our dealerships keep detailed records of our customers'customers’ maintenance and service histories, and many dealerships send reminders to customers when vehicles are due for periodic maintenance or service. Many of our dealerships have extended evening and weekend service hours for the convenience of our customers. We also offer rapid repair services such as paint-less dent repair, headlight reconditioning, wheel repairs, 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 2738 automotive collision repair centers, each of which is operated as an integral part of our dealership operations.

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Fleet and Wholesale Sales.Fleet and wholesale sales represented 5.0%5.7% of our retail automotive dealership revenue and 0.4%0.7% of our retail automotive dealership gross profit in 2014.2017. 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. 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.

PAG

Retail AutomotiveCommercial Truck Dealership LocationsOperations

 The following is

We operate a list of all of our automotive dealershipsheavy and medium-duty truck dealership group known as Premier Truck Group (“PTG”) with locations in Texas, Oklahoma, Tennessee, Georgia, and Canada. As of December 31, 2014:

U.S. DEALERSHIPS

        In November 2014, we acquired a controlling interest in The Around The Clock Freightliner Group ("PCV US"), a heavy and medium duty truck dealership group located in Texas, Oklahoma and New Mexico, and now own 91% of that business. PCV US operates sixteen2017, PTG operated twenty locations, including tenfourteen full-service dealerships and six collision centers, offering principallyprimarily Freightliner and Western Star and Sprinter-brandedbranded trucks. Two of these locations, Freightliner of Chattanooga and Freightliner of Knoxville, were acquired in February 2015. PCV USPTG also offers a full range of used trucks available for sale as well as service and parts departments, manyproviding a full range of which are open 24 hours a day, seven days a week. From our acquisition on November 1, 2014 through December 31, 2014, thismaintenance and repair services.  This business generated $125.6 million$1,048.0 million of revenue.revenue in 2017.

 The following table sets forth the locations of our retail commercial vehicle dealerships:

        Headquartered in Dallas, Texas, PCV US serves thousands of customers, both in and traveling through the southwest, through its dealerships principally located in Oklahoma and North Central Texas. ThesePTG dealerships provide the samea similar suite of services as our automotive dealerships, offering new trucks and vans, a large selection of used trucks for sale, a full range of parts, maintenance and repair services, and finance and insurance options for its customers by facilitating truck and trailer financing and leasing, extended maintenance plans, physical damage insurance, gapGAP insurance, roadside relief and other programs.

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The necessity of repairing trucks for our customers is a key area of differentiation for our commercial vehicletruck dealerships, and we provide around-the-clock service in certain locations to our customers to get our customers'customers’ commercial trucks back on the road so they can complete their routes. Many of the service and parts departments are conveniently open 24 hours every day and 7 days each week to better serve our customers. PCV USPTG also carries an extensive inventory of parts for the new and used trucks they sell and service, including for FUSO trucks and Thomas buses,Built Buses, and other makes of medium and heavy dutyheavy-duty trucks. The service and parts business of our PTG commercial truck dealerships represents approximately 73% of our retail commercial truck dealership gross profit.

Similar to our retail automotive retail business, PCV USPTG is committed to providing outstanding brands and superior customer service in premium facilities. For example, our Dallas Freightliner location offers a state-of-the-art facility with over 200,000 square feet of climate controlled office space, service shops, customer amenities, parts inventory storage, and a 4,000 square foot parts showroom. This facility sits on almost 24 acres of property and is equipped with 80 full servicefull-service truck bays open 24 hours a day 7 days a week, with a full suite of on-hand parts inventory. Guests of Dallas Freightliner enjoy a television lounge with HDTV theater seating, a large comfortable customer lounge with lockers, laundry and shower facilities, on-site trailer parking, and free recreational vehicle electrical hook-up.

Commercial Vehicle Distribution Operations

 On August 30, 2013, we acquired Western Star Trucks Australia,

Penske Commercial Vehicles Australia. We are the exclusive importer and distributor of Western Star heavy dutyheavy-duty trucks (a Daimler brand), MAN heavy and medium dutymedium-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. This business, generated $387.0 million of revenue in 2014 through the distribution and retail sale ofknown as Penske Commercial Vehicles Australia (“PCV Australia”), distributes commercial vehicles and parts to a network of more than 70 dealership locations.locations, including eight company-owned retail commercial vehicle dealerships. This business generated $250.3 million of revenue in 2017.

Our local headquarters is located outsidein Brisbane, Australia, which is the country'scountry’s third largest city. Our headquarters includes administrative facilities as well as a 167,000 square foot parts distribution center and an 85,000 square foota production center. We also have a 13,000 square foot parts distribution center in Auckland, New Zealand.

Western Star trucks are manufactured by Daimler Trucks North America in Portland, Oregon. These technologically advanced, custom-built vehicles are ordered by customers to meet their particular needs for hauling,line haul, long distance road train, mining, logging and other heavy-duty applications. We are also the exclusive importer of MAN trucks and buses. MAN Truck and Bus, a VW Group company, is a leading producer of medium and heavy dutyheavy-duty trucks as well as city and coach buses. These cab-forward, fuel efficient vehicles are principally produced in several sites in Germany.Germany and are

ordered by customers for line haul, local distribution, mining and other off-road applications. Dennis Eagle refuse collection vehicles are manufactured by Ros Roca in Warwick, England. Together these brands represented 8.4%8.3% of heavy dutyheavy-duty truck units sold in Australia and 5.3% in New Zealand during 2014.2017.

Our commercial vehicle distribution operations include threesix company-owned retail commercial vehicle distribution points. The Brisbane Truck Centredealerships in Australia and two company-owned retail commercial vehicle dealerships in New Zealand. Our dealership in Brisbane, Australia is the second largest retailer of Western Star Trucks in Australia by volume. The remaining two points are in Auckland, New Zealand and Tauranga, New Zealand, which together represent the largest retailer of Western Star Trucks by volume in New Zealand. We finance our purchases of these vehicles under a floor plan agreementagreements with a local Daimler affiliate and a local Volkswagen affiliate with terms similar to our other floor plan agreements.

        MTU-DDA.Penske Power Systems. On October 1, 2014, we acquired MTU Detroit Diesel Australia Pty Ltd. ("MTU-DDA"),We are also a leading distributor of diesel and gas engines and power systems, includingprincipally representing MTU, Detroit Diesel, Mercedes-Benz Industrial, Allison Transmission and MTU Onsite Energy. MTU-DDAThis business, known as Penske Power Systems (“PPS”), offers products across the on- and off-highway markets in Australia, New Zealand and portions of the Pacific, including trucking, mining, power generation, construction, industrial, rail, marine, agriculture, oil & gas, and defense, and supports full parts and aftersales service through a network of 15 branches, 13remote field service locations, and 78 dealers across the region. The on-highway portion of this business complements our existing Penske Commercial Vehicles Australia distribution business. From our acquisition on October 1, 2014 through December 31, 2014, thisThis business generated $52.5$260.7 million of revenue in 2014.

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 MTU-DDA's

Penske Power Systems’ principal headquarters is located at its Melbourne branch, a 17,000 square foot workshop/office facility. In addition to sales, distribution and full product repair capability, this facility includes the offices for national sales, engineering and marketing, a regional training facility, and a regional engineering center. In addition, MTU-DDAPPS operates a corporate office based at its Sydney (Chipping Norton) branch an 18,000 square foot facilitywhich is dedicated to corporate activities,  and distribution and product repair capability. MTU-DDAcapability, and retail truck sales. PPS operates additional14 branch facilities across Australia and in Auckland, New Zealand.Zealand, and utilizes mobile remote field service units travelling directly to customer premises.

 MTU-DDA's 78

Penske Power Systems’ 79 dealers are strategically located throughout Australia, New Zealand and the Pacific. Most of the dealers (70)(67) represent the Detroit Diesel brand, with the majority aligned to Western Star and/or Freightliner Trucktruck manufacturers. The remaining dealers represent the MTU (4)(1) and Allison Transmission (4)(11) brands. The "off-highway"“off-highway” business of MTU-DDAPPS principally includes the sale of power systems by MTU-DDAPPS directly to customers in the commercial, defense and maritime sectors, and to several dealers. MTU-DDA conducts the business through its 15 branch locations and utilizes mobile field service units travelling directly to customer premises.

Penske Truck Leasing

We currently hold a 9.0%28.9% ownership interest in PTL, a leading provider of transportation services and supply chain services.management. PTL operates and serves customers in North America, South America, Europe, Asia and Australia. Product lines includeis 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, in North America andalong with logistics services such as dedicated contract carriage, distribution center management, transportation management and acting as lead logistics provider. Globally, PTL has a highly diversified customer base ranging from individual consumers tothat includes multi-national corporations across industries such as food and beverage, transportation, manufacturing, transportation, automotive, retail and healthcare, with whom they have long-term contracts, as well as individual consumers renting a single truck on a daily basis.

PTL operates one of the leading full-service truck leasing, truck rental and retail.contract maintenance businesses in North America, and an international logistics business in North America, South America, Europe and Asia. PTL also operates its truck leasing and truck rental business in Australia through a joint venture with us.

Full-service truck leasing, truck rental and contract maintenance.maintenance.Full-service truck leasing, truck rental and contract maintenance of commercial trucks, constitutes PTL'stractors and trailers is PTL’s largest business. PTL one of the largest purchasers of commercial trucks in North America, manages a fleet of approximately  207,000269,000 trucks, tractors and trailers, consisting of approximately 144,000185,500 vehicles owned by PTL and operated by itsleased to customers under full-service leases andlease or rental agreements and approximately 63,00083,500 customer-owned and operated-operated vehicles for which PTL providesthey provided contract maintenance services. PTL'sTerms under its full-service leases generally range from four to seven years for tractors and trucks and six to ten years for trailers. Its commercial and consumer rental fleet consistsas of December 31, 2017 consisted of approximately 58,00066,400 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. Most of its leased vehicles are configured according to customer specifications, including custom painting and lettering, while its rental trucks bear Penske branding.

Commercial customers often outsource to PTL in order to reduce the complexity, cost and cost oftotal capital associated with vehicle ownership. Under a full-service lease, PTL integrates most aspects of fleet management, includingprovides and fully maintains the provision of customvehicle, which is generally specifically configured equipment andfor the delivery of a package of support and maintenance services, as well as making additional short-term rental vehicles available to its contract customers. Its broad service offering has enabled its customers to reduce the large number of vendors that an in-house fleet manager must coordinate.customer. The services provided under its full-service lease and contract maintenance agreements generally include preventive and regular maintenance, advanced diagnostics, emergency road service, fleet services, safety programs, and nationwide fuel services through its network of approximately 680 locations across the United Statescompany-operated facilities and Canada. Its commerciala nationwide network of independent truck stops. In addition, PTL makes available to its full-service leasing and contract maintenance customers additional vehicles on a rental operations offerbasis. This short-term availability of tractors, trucks and trailers typically to accommodateaccommodates seasonal, emergency and other temporary needs. A significant portion of these rentals are to existing full-service leasing and contract maintenance customers thatwho are seeking flexibility in their fleet management. PTL has established a network of approximately 700 locations to provide full-service truck leasing, truck rental and contract maintenance services to customers. This network enables PTL to meet multi-location customer requirements. PTL’s commercial rental business generated 20% of its operating revenue for 2017 and its full-service lease and contract maintenance business generated 50% of its operating revenue in 2017.

For consumer customers, PTL provides short-term rental of light-light and medium-duty trucksvehicles on a one-way and local basis, typically to transport household goods. Customers typically include local small businesses and individuals seeking a do-it-yourself solution to their moving needs. Its consumerPTL’s fleet consists generally of late model vehicles ranging in size from small vans to 26-foot trucks. Itstrucks, and its consumer

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rentals are conducted through approximately 1,8001,860 independent rental agents and 330approximately 360 of its PTL-operatedcompany-operated leasing and rental facilities. PTL’s consumer business generated 7% of its operating revenue for 2017.

        Logistics.Logistics    PTL's. PTL’s logistics business offers an extensivea broad variety of services, includingsuch as dedicated contract carriage, distribution center management, transportation management, freight brokerage and lead logistics provider. PTL coordinates and provides 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 servicesofferings are available individually or on a combined basis and often involve its associates performing services at the customer'scustomer’s location. By offering a scalable series of productsservices to its customers, PTL can manage the customer'scustomer’s entire supply chain or any stand-alone service. ItPTL also utilizes specialized software that enables real-time fleet visibility and provides reporting metrics, giving customers detailed information on fuel economy and other critical supply chain costs. PTL'sPTL’s international logistics business has approximately 350380 locations in North America, South America, Europe and Asia, with recently expandedAsia. PTL’s logistics operations in India.

Industry Informationbusiness generated 23% of its operating revenue for 2017.

Industry Information

Retail Automotive Dealership.Approximately 62%59% of our retail automotive dealership revenues are generated in the U.S., which in 20142017 was the world'sworld’s second largest automotive retail market as measured by units sold. In 2014,2017, sales of new cars and light trucks were approximately 16.517.2 million units, an increasea decrease of 5.9%1.8% from 2013,2016, and were generated at approximately 17,95318,200 franchised new-car dealerships as of January 1, 2015.dealerships. According to the latest available data from the National Automobile Dealers Association, dealership revenue is derived as follows: 57%58% from new vehicle sales, 31%30% from used vehicle sales, and 12% 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. 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.

 We also operate in Germany, the U.K., Italy, and Spain, which represented the first, second, fourth, and fifth largest automotive retail markets, respectively, in Western Europe in 2014, and accounted for approximately 64% of the total vehicle sales in Western Europe. Unit sales of automobiles in Western Europe were approximately 12.1 million in 2014, a 4.8% increase compared to 2013. In Germany, the U.K., Italy, and Spain, new car sales were approximately 3.0 million, 2.5 million, 1.4 million and 0.9 million units, respectively, in 2014.

In the U.S., publiclythe franchised automotive dealer industry is the largest retail business by revenue, with virtually all new cars and light trucks bought in the U.S. through franchised dealers in a market in excess of $1.0 trillion. Publicly held automotive retail groups account for less than 10% of total industry revenue. Although significant consolidation has already taken place, the industry remains highly fragmented, with more than 90% of the U.S. industry'sindustry’s market share remaining in the hands of smaller regional and independent players. The Western European automotive retail market isOur other markets are similarly fragmented. We believe that further consolidation in these markets is probable due to the significant capital requirements of maintaining manufacturer facility standards and the limited number of viable alternative exit strategies for dealership owners.

Our European markets consist of Germany, the U.K., Italy, and Spain, which represented the first, second, fourth, and fifth largest automotive retail markets, respectively, in Western Europe in 2017, and accounted for approximately 64% of the total vehicle sales in Western Europe. Unit sales of automobiles in Western Europe were approximately 14.3

million in 2017, a 2.5% increase compared to 2016. In 2014,Germany, the U.K., Italy, and Spain, new car sales were approximately 3.4 million, 2.5 million, 2.0 million and 1.2 million units, respectively, in 2017.

We also own a 49% interest in a Japanese joint venture. Unit sales in Japan were 5.2 million in 2017, an increase of 5.6% from 2016.

We also operate fourteen stand-alone used vehicle dealerships in the U.S. and the U.K. Used vehicle sales are even more fragmented than new vehicle sales and are generated by new car dealerships, used vehicle “superstores,” individual small lot sellers, as well as individual to individual sales. Used vehicle sales were approximately 40 million units in the U.S. and approximately 8 million units in the U.K. in 2017.

Retail Commercial Truck Dealership. In 2017, North America sales of Class 5-8 medium and heavy-duty trucks, the principal vehicles for our PCV USPTG business, were approximately 498,000499,932 units, an increase of 12.4%3.3% from 2013.2016. The Class 5-7 medium-duty truck market increased 6.0% to 248,138 units from 234,163 units in the same period in 2016. The largest market, Class 8 heavy-duty trucks, increased 13.2%0.7% to 286,000approximately 251,794 units from 252,600approximately 249,952 units in 2013 and2016. In this market, our principal brands, Freightliner and Western Star, represent approximately 35.7%39.7% of that market.

Commercial Vehicle Distribution. Our commercial vehicle distribution business operates principally in Australia and New Zealand. In 2014, medium and heavy duty2017, heavy-duty truck sales in Australia and New Zealand combined were 20,51015,296 units, representing an increase of 1.0%21.8% from 2013.2016. The productsbrands we distribute (and sellrepresent in Australia hold an 8.3% market share in the Australian heavy-duty truck market, and a 5.3% market share in New Zealand.

Penske Truck Leasing. PTL participates broadly in the global supply chain, estimated at three retail outlets) represent approximately 6.2%$8.2 trillion annually, and particularly in the U.S. supply chain, estimated at $1.5 trillion annually. Only 11% of the combined mediumtotal U.S. supply chain function is outsourced to third parties, such as PTL. We estimate, based on R. L. Polk registration data, that there are approximately 8.1 million commercial trucks operating in the United States, of which up to 4.0 million could be potential opportunities for PTL’s full-service leasing and heavy duty truck market in Australia and New Zealand.

assist us in maintaining the privacy of the information we receive from customers that we collect, process, and retain in the normal course of our business. We have adopted rigorous customer information safeguard programs and "red flag"“red flag” policies to assist us in maintaining customer privacy.

As part of our business model, we receive personal information regarding customers, associates and vendors, from various online and offline channels. Our internal and third-party systems are under a moderate level of risk from hackers or other individuals with malicious intent to gain unauthorized access to our systems. Cyber-attacks are growing in number and sophistication thus presenting an ongoing threat to systems, whether internal or external, used to operate the business on a day to day basis. We perform periodic control testing and audits on our systems. Despite these measures, our facilities and systems, and those of our third-party service providers, could be vulnerable to security breaches, computer viruses, or other events. Any security breach or event resulting in the unauthorized disclosure of confidential information, or degradation of services provided by critical business systems, whether by us directly or our third-party service providers, could adversely affect our business operations, sales, reputation with current and potential customers, associates or vendors, as well as other operational and financial impacts derived from investigations, litigation, imposition of penalties, or other means.

Marketing

        Our dealership advertising and marketing efforts are focused at the local market level with support from corporate marketing. Retail Automotive Dealership.  Our marketing strategy employs various media forfocuses on our dealership marketing activities, focusing increasinglyindividual businesses to capitalize on the Internet and other digital media, including individual dealership websites,local branding, as well as corporate websites such asPenskeCars.com,PenskeAutomotive.comprograms and

strong sense of community. Online reputation management sites, such as Google and Yelp, are proactively monitored to ensure we are offering a superior customer experience.

 In Australia

Through our marketing strategy, we aim to forge lasting relationships with our customers, enhance our reputation, and New Zealand, wecreate the opportunity for significant repeat and referral business.

Retail Commercial Truck Dealership and Commercial Vehicle Distribution. We market ourcommercial trucks in the U.S. and Canada and commercial vehicles and other products in Australia and New Zealand principally through oura network of dealership and service locations, supported by corporate level marketing efforts. We separate ourOur digital marketing leverages manufacturer websites supplemented by brand specific websites to promote our brands. We also employ local sponsorships to generate brand awareness in Australia. Weour markets and market to customers at various trade shows and other industry events in Australia and New Zealand, which presents the opportunity to approach fleet managers with new products and offerings. We also employ racing and other local sponsorships to generate brand awareness in our markets. Our internet marketing leverages manufacturer websites supplemented by our brand specific websites to promote our brands. Weevents. While we rely on our dealerships and service locations to market to local customers, though we typically assign a regional sales manager to oversee local dealer marketing efforts.

sale of a material amount of assets) or a change of control of our board of directors, General Motors has the right to acquire all assets, properties and business of any General Motors dealership owned by us for fair value. Some of our agreements with other major manufacturers, including Honda and Toyota, contain provisions similar to the General Motors provisions.

With respect to our commercial vehicle distribution operations in Australia and New Zealand, we are party to distributor agreements with each manufacturer of products we distribute pursuant to which

Commercial Vehicle Distribution.With respect to our commercial vehicle distribution operations in Australia and New Zealand, we compete with manufacturers, distributors, and retailers of other

PTL’s logistics business competes with other dedicated logistics providers, transportation management businesses, freight brokers, warehouse providers and truckload carriers on a national, regional and local level, as well as with the internal supply chain functions of prospective customers who rely on their own resources for logistics management. Competitive factors include price, efficient logistical design offerings, equipment, maintenance, service, technology and geographic coverage, and driver and operations expertise. PTL seeks to combine its logistics services with its existing full-service truck leasing and truck rental business to create an integrated transportation solution for its customers.

Employees and Labor Relations

As of December 31, 2014,2017, we employed approximately 22,100more than 26,000 people, approximately 670750 of whom were covered by collective bargaining agreements with labor unions. We consider our relations with our employees to be satisfactory. Our policy is to motivate our key managers through, among other things, variable compensation programs tied principally to local profitability. Due to our reliance on vehicle manufacturers, we may be adversely affected by labor strikes or work stoppages at the manufacturers'manufacturers’ facilities.

Regulation

We operate in a highly regulated industry and a number of regulations affect the marketing, selling, financing, servicing, and distribution of vehicles. Under the laws of the jurisdictions in which we currently operate, we typically must obtain a license in order to establish, operate or relocate a dealership, or operate a repair facility. These laws also regulate our conduct of business, including our advertising, operating, financing, employment, distribution and sales practices. Other laws and regulations include franchise laws and regulations, environmental laws and regulations (see "Environmental Matters"“Environmental Matters” below), laws and regulations applicable to new and used motor vehicle dealers, as well as privacy, identity theft prevention, wage-hour, anti-discrimination and other employment practices laws.

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. In recent years, private plaintiffs, state attorneys general and federal agencies in the U.S. have increased their scrutiny of advertising, sales, and finance and insurance activities in the sale and leasing of motor vehicles. As further discussed in "Item 1A. Risk Factors," the Consumer Finance Protection Bureau has instituted regulatory proceedings which may change the way we are compensated for assisting our customers in obtaining financing, which could result in lower related revenues.

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. Some state franchise laws allow dealers to file protests or petitions or to attempt to comply with the manufacturer'smanufacturer’s criteria within the notice period to avoid the termination or

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non-renewal. EuropeOur international locations generally doesdo not have these laws and, as a result, our European dealershipsinternational operations operate without these types of protections.

Environmental Matters

We are subject to a wide range of environmental laws and regulations, including those governing discharges into the air and water, the operation and removal of aboveground and underground storage tanks, the use, handling, storage and disposal of hazardous substances and other materials and the investigation and remediation of environmental contamination. Our business involves the generation, use, handling and contracting for recycling or disposal of hazardous or toxic substances or wastes, including environmentally sensitive materials such as motor oil, filters, transmission fluid, antifreeze, refrigerant, batteries, solvents, lubricants, tires, and fuel. We have incurred, and will continue to incur, capital and operating expenditures and other costs in complying with such laws and regulations.

Our operations involving the management of hazardous and other environmentally sensitive materials are subject to numerous requirements. Our business also involves the operation of storage tanks containing such materials. Storage tanks are subject to periodic testing, containment, upgrading and removal under applicable law. Furthermore, investigation or remediation may be necessary in the event of leaks or other discharges from current or former underground or aboveground storage tanks. In addition, water quality protection programs govern certain discharges from some of our operations. Similarly, certain air emissions from our operations, such as auto body painting, may be subject to relevant laws. Various health and safety standards also apply to our operations.

We may have liability in connection with materials that are sent to third-party recycling, treatment, and/or disposal facilities under the U.S. Comprehensive Environmental Response, Compensation and Liability Act and comparable statutes. These statutes impose liability for investigation and remediation of contamination without regard to fault or the legality of the conduct that contributed to the contamination. Responsible parties under these statutes may include the owner or operator of the site where the contamination occurred and companies that disposed or arranged for the disposal of the hazardous substances released at these sites.

An expanding trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment. Vehicle manufacturers are subject to federally mandated corporate average fuel economy standards, which will increase substantially through 2025. Furthermore, in response to concerns that emissions of carbon dioxide and certain other gases, referred to as "greenhouse“greenhouse gases,"” may be contributing to warming of the Earth'sEarth’s atmosphere, climate change-related legislation and policy changes to restrict greenhouse gas emissions are being considered, or have been implemented, at state and federal levels. Furthermore, numerous states, including California, have adopted or are considering requiring the sale of specified numbers of zero-emission vehicles. Significant increases in fuel economy requirements or new federal and state restrictions on emissions of carbon dioxide on vehicles and automobile fuels in the U.S. could adversely affect prices of and demand for the vehicles that we sell.

We have a proactive strategy related to environmental, health and safety compliance, which includes contracting with third-partiesthird parties to inspect our facilities periodically. We believe that we do not have any material environmental liabilities and that compliance with environmental laws and regulations will not, individually or in the aggregate, have a material effect on us. However, soil and groundwater contamination is known to exist at certain of our current or former properties. Further, environmental laws and regulations are complex and subject to change. In addition, in connection with our acquisitions, it is possible that we will assume or become subject to new or unforeseen environmental costs or liabilities, some of which may be material. Compliance with current, amended, new or more stringent laws or regulations, stricter interpretations of existing laws or the future discovery of environmental conditions could require additional expenditures by us, and such expenditures could be material.

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Insurance

Our business is subject to substantial risk of loss due to significant concentrations of property value, including vehicles and parts at our locations. In addition, we are exposed to liabilities arising out of our operations such as employee claims, customer claims and claims for personal injury or property damage, and potential fines and penalties in

connection with alleged violations of regulatory requirements. We attempt to manage such risks through loss control and risk transfer utilizing insurance programs which are subject to specified deductibles and significant retentions. Certain insurers have limited available property coverage in response to the natural catastrophes experienced in recent years. As a result, we are exposed to uninsured and underinsured losses that could have a material adverse effect on us.

Available Information

For selected financial information concerning our various operating and geographic segments, see Note 17 to our consolidated financial statements included in Item 8 of this report. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge through our website, www.penskeautomotive.com, under the tab "Investor Relations"“Investor Relations” as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission ("SEC"(“SEC”). You may read or copy any materials we filed with the SEC at the SEC'sSEC’s Public Reference Room at 100F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 800-732-0330. Additionally, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information. The address of the SEC'sSEC’s website iswww.sec.gov. www.sec.gov. 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; and the charters relating to the committees of our Board of Directors. You may obtain a printed copy of any of the foregoing materials by sending a written request to: Investor Relations, Penske Automotive Group, Inc., 2555 Telegraph Road, Bloomfield Hills, MI 48302 or by calling toll-free 866-715-5289. 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 are incorporated in the state of Delaware and began dealership operations in October 1992.

Seasonality

Seasonality

Dealership.Our business is modestly seasonal overall. Our U.S. operations generally experience higher volumes of vehicle sales in the second and third quarters of each year due in part to consumer buying trends and the introduction of new vehicle models. Also, vehicle demand, and to a lesser extent demand for service and parts, is generally lower during the winter months than in other seasons, particularly in regions of the U.S. where dealerships may be subject to severe winters. Our U.K. operations generally experience higher volumes of vehicle sales in the first and third quarters of each year, due primarily to vehicle registration practices in the U.K.

Commercial Vehicle Distribution.Our commercial vehicle distribution business in Australia and New Zealand generally experiences higher sales volumes during the second quarter of the year, which is primarily attributable to commercial vehicle customers completing annual capital expenditures before their fiscal year-end, which is typically June 30 in Australia and New Zealand.

Australia.

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Item 1A.  Risk Factors

Our business, financial condition, results of operations, cash flows, prospects, and the prevailing market price and performance of our common stock may be affected by a number of factors, including the matters discussed below. 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"“forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "goal," "plan," "seek," "project," "continue," "will," "would,"“anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “goal,” “plan,” “seek,” “project,” “continue,” “will,” “would,” and variations of such words and similar expressions are intended to identify such forward-looking statements. We intend for our forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we set forth this statement in order to comply with such safe harbor provisions. 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.

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.

The risks, uncertainties, and other factors that our stockholders and prospective investors should consider include the following:

Macro-economic conditions.conditions. Our performance is impacted by general economic conditions overall, and in particular by economic conditions in the markets in which we operate. These economic conditions include: levels of new and used vehicle sales; availability of consumer credit; changes in consumer demand; consumer confidence levels; fuel prices; personal discretionary spending levels; interest rates; and unemployment rates. When the worldwide economy faltered and the worldwide automotive industry experienced significant operational and financial difficulties in 2008 and 2009, we were adversely affected, and we expect a similar relationship between general economic and industry conditions and our performance in the future. The intended departure of the United Kingdom from the European Union (“Brexit”) noted below has generated significant macroeconomic challenges for the global economy. We cannot predict the future effect of Brexit on macroeconomic conditions or the automotive industry in particular, although any sustained drop in vehicle sales would adversely affect our operating results.

Vehicle manufacturers exercise significant control over us.Each of our new vehicle dealerships and distributor operations operate under franchise and other agreements with automotive manufacturers, commercial vehicle manufacturers, or related distributors. These agreements govern almost every aspect of the operation of our dealerships, and give manufacturers the discretion to terminate or not renew our franchise agreements for a variety of reasons, including certain events outside our control such as accumulation of our stock by third parties. 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 or are not renewed, or, with respect to our distributor operations, a competing distributor were introduced, we would be materially affected.

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'consumers’ perception of the quality of those brands. A decline in the quality and brand reputation of the vehicles or other products we sell or distribute, as a result of events such as manufacturer recalls or legal proceedings, may adversely affect our business. If such events were to occur, the profitability of our business related to those manufacturers'manufacturers could be adversely affected. Beginning in 2015, Volkswagen AG received notice informing them that governmental agencies determined that certain Volkswagen and Audi diesel vehicles do not comply with applicable emissions regulations. There have been conflicting reports whether similar issues are present in other manufacturers’ vehicles. While the Volkswagen and Audi diesel vehicles at issue represent a small portion of our total vehicle sales, should such non-compliance by the automotive manufacturers prove widespread or be present in a substantial number of vehicles we sell, our business could be adversely affected.

Restructuring, bankruptcy or other adverse conditions affecting a significant automotive manufacturer or supplier.Our success depends on the overall success of the automotive industry generally, and in

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particular on the success of the brands of vehicles that each of our dealerships sell. In 2014,2017, revenue generated at our BMW/MINI, Audi/Volkswagen/Porsche/Bentley, BMW/MINI, Toyota/Lexus/Scion,Lexus, and Mercedes-Benz/Sprinter/smart dealerships represented 27%24%, 22%23%,  15%13%, and 11%10%, respectively, of our total automotive dealership revenues. Significant adverse events, such as the reduced 2011 new vehicle production by Japanese automotive manufacturers caused by the significant production and supply chain disruptions resulting from the earthquake and tsunami that struck Japan in March 2011 and resulted in reduced new vehicle production by Japanese automotive manufacturers in 2011, or other future events that interrupt vehicle or parts supply to our dealerships, would likely have a significant and adverse impact on the industry as a whole, including us, particularly if the events relate toimpact any of the manufacturers whose franchises generate a significant percentage of our revenue.

Manufacturer incentive programs.Vehicle manufacturers offer incentive programs intended to promote and support vehicle sales. These incentive programs include but are not limited to customer rebates, dealer incentives on new vehicles, manufacturer floor plan interest and advertising assistance, and warranties on new and used vehicles. A discontinuation of or change to the manufacturers'manufacturers’ incentive programs may adversely impact vehicle demand, the value of new and used vehicles, and may materially affect our results of operations.

Our business is very competitive.We generally compete with: other franchised dealerships in our markets; used vehicle superstores, private market buyers and sellers of used vehicles; Internet-based vehicle brokers;sellers; national and local service and repair shops and parts retailers; with respect to commercial vehicles, distributors of similar products; and manufacturers in certain markets. Purchase decisions by consumers when shopping for a vehicle are extremely price sensitive. The level of competition in the market generally, coupled with increasing price transparency resulting from increasedthe use of the Internet by consumers, and pricing discounts to customers, can lead to lower selling prices and related profits. If there is a prolonged drop in retail prices, new vehicle sales are allowed to be made over the Internet without the involvement of franchised dealers, or if dealerships are able to effectively use the Internet to sell outside of their markets, our business could be materially adversely affected.

Evolving automotive and trucking industries. The automotive and trucking industries are predicted to experience rapid change. Shared vehicle services such as Uber and Lyft provide consumers with increased choice in their personal mobility options. The effect of these and similar mobility options on the retail automotive industry is uncertain, and may include lower levels of new vehicles sales, but with increasing miles driven, which could require additional demand for vehicle maintenance. In part due to regulatory requirements to limit vehicle emissions, many automotive manufacturers have announced plans to further electrify their vehicle offerings. We expect to continue to sell electric and hybrid gas/electric vehicles through our franchised dealerships, though if pure electric vehicles were widely accepted by customers, our service revenues may decline, as these vehicles may require less physical maintenance than gas and hybrid vehicles. In addition, technological advances are facilitating the development of driverless vehicles. The eventual timing of availability of driverless vehicles is uncertain due to regulatory requirements, additional technological requirements, and uncertain consumer acceptance of these vehicles. 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 vehicles, and the role of franchised dealers, any of which could materially and adversely affect our business.

Property loss, business interruption or other liabilities.Our business is subject to substantial risk of loss due to: the significant concentration of property values, including vehicle and parts inventories, at our operating locations; claims by employees, customers and third parties for personal injury or property damage; and fines and penalties in connection with alleged violations of regulatory requirements. While we have insurance for many of these risks, we retain risk relating to certain of these perils and certain perils are not covered by our insurance.insurance, including due to the hurricanes noted below. Certain insurers have limited available property coverage in response to the natural catastrophes experienced in recent years. If we experience significant losses that are not covered by our insurance, whether due to adverse weather conditions or otherwise, or we are required to retain a significant portion of a loss, it could have a significant and adverse effect on us.

Recent hurricanes impacted our operations. Hurricane Maria significantly impacted the island of Puerto Rico during the third quarter of 2017, as the power grid and communication systems on the island were severely damaged. As a result, certain of the Company’s operations were suspended and operations were adversely impacted into the fourth quarter of 2017 and remain impacted in the first quarter of 2018. Hurricanes Irma and Harvey disrupted our operations in Florida, Georgia (Atlanta market), and Texas (Houston market) during the third quarter of 2017. Operations in Florida and Texas were impacted for nearly one week, while Georgia experienced a disruption in operations for 1-2 days. We estimate that storm-related losses, expenses, and business interruption, net of expected insurance proceeds, were approximately $3.0 million in 2017.

Leverage. Our significant debt and other commitments expose us to a number of risks, including:

Cash requirements for debt and lease obligations.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 $2.7$3.8 billion of floor plan notes payable, $1.4$2.2 billion of non-vehicle long-term debt and $4.9 $5.1billion of future lease commitments (including(including extension periods that are reasonably assured of being exercised and assuming constant consumer price indices). 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. If this were to occur, it may lead to a default under one or more of our commitments and potentially the acceleration of amounts due, which could have a significant and adverse effect on us.us.  

Availability.Because we finance the majority of our operating and strategic initiatives using a variety of commitments, including floor plan notes payable and revolving credit facilities, we are

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dependent on continued availability of these sources of funds. If these agreements are terminated or we are unable to access them because of a breach of financial or operating covenants or otherwise, we will likely be materially affected.

Interest rate variability.The interest rates we are charged on a substantial portion of our debt, including the floor plan notes payable we issue to purchase the majority of our inventory, are variable, increasing or decreasing based on changes in certain published interest rates. Increases to such interest rates would likely result in significantly higher interest expense for us, which would negatively affect our operating results. Because many of our customers finance their vehicle purchases, increased interest rates may also decrease vehicle sales, which would negatively affect our operating results.

        International and foreign currency risk.    We have significant operations outside the U.S. that expose us to changes in foreign exchange rates and to the impactImpairment of economic and political conditionsour goodwill or other indefinite-lived intangible assets has in the markets wherepast had, and in the future could have, a material adverse impact on our earnings. We evaluate goodwill and other indefinite-lived intangible assets for impairment annually and upon the occurrence of an indicator of impairment. 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. If we operate. As exchange rates fluctuate,determine that the amount of our goodwill or other indefinite-lived intangible assets are impaired at any point in time, we would be required to reduce the value of these assets on our balance sheet, which would also result in a material non-cash impairment charge that could also have a material adverse effect on our results of operations as reportedfor the period in U.S. dollars fluctuate. For example, ifwhich the U.S. dollar were to strengthen against the U.K. pound, our U.K. results of operations would translate into less U.S. dollar reported results. Any significant or prolonged increase in the value of the U.S. dollar, particularly as compared to the U.K. pound, could result in a significant and adverse effect on our reported results.impairment occurs.

        Joint ventures.    We have significant investments in a variety of joint ventures, including automotive retail operations in Germany and Spain, and a 9.0% ownership interest in PTL. We expect to receive annual operating distributions from each such venture, and, in the case of PTL, to realize U.S. tax savings as a result of our investment. These benefits may not be realized if the joint ventures do not perform as expected, or if changes in tax, financial or regulatory requirements negatively impact the results of the joint venture operations. Our ability to dispose of these investments may be limited. In addition, because PTL is engaged in different businesses than we are, its performance may vary significantly from ours.

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 20142017 totaled approximately $25.6$20.6 million. In the aggregate, we remain ultimately liable for approximately $258.6$200.1 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 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.

Information Technology.technology. Our information systems are fully integrated into our operations and we rely on them to operate effectively, including with respect to: electronic communications and data transfer protocols with manufacturers and other vendors; customer relationship management; sales and service scheduling; data storage; and financial and operational reporting. The majority of our systems are licensed from third parties, the most significant of which are provided by a limited number of suppliers in the U.S., U.K. and Australia. The failure of our information systems to perform as designed, or the failure to protect the integrity of these systems, or the interruption of these systems due to natural disasters, power loss or other reasons, could disrupt our business operations, impact sales and results of operations, expose us to customer or third-party claims, or result in adverse publicity.

Cyber-security.As part of our business model, we receive personal information regarding customers, associates and vendors, from various online and offline channels. We collect, process, and retain this information in the normal course of our business. Our internal and third-party systems are under a moderate level of risk from hackers or other individuals with malicious intent to gain unauthorized access to our systems. Cyber-attacks are growing in number and sophistication thus presenting an ongoing threat to systems, whether internal or external, used to operate the business on a

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day to day basis. Despite the security measures we have in place, our facilities and systems, and those of our third-party service providers, could be vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, human errors, acts of vandalism, or other events. Any security breach or event resulting in the misappropriation, loss, or other unauthorized disclosure of confidential information, or degradation of services provided by critical business systems, whether by us directly or our third-party service providers, could adversely affect our business operations, sales, reputation with current and potential customers, associates or vendors, as well as other operational and financial impacts derived from investigations, litigation, imposition of penalties or other means.