Exhibit 99.4

Item 8.  Financial Statements and Supplementary Data

The consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements are incorporated by reference into this Item 8.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PENSKE AUTOMOTIVE GROUP, INC
As of December 31, 2008 and 2007 and For the Years Ended
December 31, 2008, 2007 and 2006

Management Reports on Internal Control Over Financial Reporting			F-2
Reports of Independent Registered Public Accounting Firms			F-3
Consolidated Balance Sheets			F-6
Consolidated Statements of Operations			F-7
Consolidated Statements of Equity and Comprehensive Income			F-8
Consolidated Statements of Cash Flows			F-9
Notes to Consolidated Financial Statements			F-10

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Penske Automotive Group, Inc. and subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors that the Company’s internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation and presentation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Based on our assessment we believe that, as of December 31, 2008, the Company’s internal control over financial reporting is effective based on those criteria.

The Company’s independent registered public accounting firm that audited the consolidated financial statements included in the Company’s Annual Report on Form 10-K has issued an audit report on the effectiveness of the Company’s internal control over financial reporting. This report appears on page F-3.

Penske Automotive Group, Inc.
March 10, 2009

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of UAG UK Holdings Limited and subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors that the Company’s internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation and presentation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Based on our assessment we believe that, as of December 31, 2008, the Company’s internal control over financial reporting is effective based on those criteria.

The Company’s independent registered public accounting firm that audited the consolidated financial statements of UAG UK Holdings Limited has issued an audit report on the effectiveness of the Company’s internal control over financial reporting. This report appears on page F-5.

UAG UK Holdings Limited
March 10, 2009

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Penske Automotive Group, Inc.
Bloomfield Hills, Michigan

We have audited the accompanying consolidated balance sheets of Penske Automotive Group, Inc. and subsidiaries (the “Company”) as of December 31, 2008 and 2007, and the related consolidated statements of operations, equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedule listed in the Index at Item 15.  We also have audited the Company’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  The Company’s management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and financial statement schedules and an opinion on the Company’s internal control over financial reporting based on our audits. We did not audit the financial statements or the effectiveness of internal control over financial reporting of UAG UK Holdings Limited and subsidiaries (a consolidated subsidiary), which statements reflect total assets constituting 29% and 31% of consolidated total assets as of December 31, 2008 and 2007, respectively, and total revenues constituting 35%, 36%, and 30% of consolidated total revenues for the years ended December 31, 2008, 2007 and 2006, respectively. Those financial statements and the effectiveness of UAG UK Holdings Limited and subsidiaries’ internal control over financial reporting were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts and to the effectiveness of UAG UK Holdings Limited and subsidiaries’ internal control over financial reporting, is based solely on the report of the other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances.  We believe that our audits and the report of the other auditors provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.  Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, based on our audits and (as to the amounts included for UAG UK Holdings Limited and subsidiaries) the report of the other auditors, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.  Also, in our opinion, based on our audit and the report of the other auditors, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

As discussed in Note 1, the financial statements have been retrospectively adjusted to conform to FSP APB 14-1, FSP EITF 03-6-1, and SFAS No. 160, and for the effects of discontinued operations.

/s/  Deloitte & Touche LLP

Detroit, Michigan
March 10, 2009, except as to the effects of discontinued operations and retrospective adjustments discussed in Note 1, as to which the date is January 21, 2010

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
UAG UK Holdings Limited:

We have audited the accompanying consolidated balance sheets of UAG UK Holdings Limited and subsidiaries (the “Company”) as of December 31, 2008 and 2007, and the related consolidated statements of income, stockholders equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2008. In connection with our audits of the consolidated financial statements, we also have audited the related financial statement schedule. We also have audited UAG UK Holdings Limited’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these consolidated financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

As discussed in Note 1, the financial statements have been retrospectively adjusted for the effects of discontinued operations.

/s/  KPMG Audit Plc

Birmingham, United Kingdom
March 10, 2009, except for Note 1, as to which the date is January 21, 2010

PENSKE AUTOMOTIVE GROUP, INC.
CONSOLIDATED BALANCE SHEETS

		December 31,
		2008				2007
		(In thousands, except
		per share amounts)
ASSETS
Cash and cash equivalents		$	20,108			$	14,797
Accounts receivable, net of allowance for doubtful accounts of $2,075 and $2,869, as of December 31, 2008 and 2007, respectively			294,048				445,248
Inventories			1,589,105				1,662,003
Other current assets			88,251				64,998
Assets held for sale			15,534				114,697
Total current assets			2,007,046				2,301,743
Property and equipment, net			662,121				615,581
Goodwill			777,677				1,430,393
Franchise value			196,358				235,505
Equity method investments			296,487				62,752
Other assets			22,460				21,117
Total assets		$	3,962,149			$	4,667,091
LIABILITIES AND EQUITY
Floor plan notes payable		$	964,783			$	1,056,120
Floor plan notes payable — non-trade			506,688				468,830
Accounts payable			178,282				264,134
Accrued expenses			195,994				205,432
Current portion of long-term debt			11,305				14,522
Liabilities held for sale			23,060				82,578
Total current liabilities			1,880,112				2,091,616
Long-term debt			1,052,060				780,252
Other long-term liabilities			221,556				329,287
Total liabilities			3,153,728				3,201,155
Commitments and contingent liabilities
Equity
Penske Automotive Group stockholders’ equity:
Preferred Stock, $0.0001 par value; 100 shares authorized; none issued and outstanding			—				—
Common Stock, $0.0001 par value, 240,000 shares authorized; 91,431 shares issued and outstanding at December 31, 2008; 95,020 shares issued and outstanding at December 31, 2007			9				9
Non-voting Common Stock, $0.0001 par value, 7,125 shares authorized; none issued and outstanding			—				—
Class C Common Stock, $0.0001 par value, 20,000 shares authorized; none issued and outstanding			—				—
Additional paid-in-capital			731,037				776,989
Retained earnings			119,745				573,682
Accumulated other comprehensive (loss) income			(45,990	)			99,988
Total Penske Automotive Group stockholders’ equity			804,801				1,450,668
Non-controlling interest			3,620				15,268
Total equity			808,421				1,465,936
Total liabilities and equity		$	3,962,149			$	4,667,091

See Notes to Consolidated Financial Statements.

PENSKE AUTOMOTIVE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

		Year Ended December 31,
		2008				2007				2006
		(In thousands, except per share amounts)
Revenue:
New vehicle		$	5,942,667			$	6,933,349			$	6,116,762
Used vehicle			2,836,447				3,087,059				2,472,863
Finance and insurance, net			258,955				286,363				243,006
Service and parts			1,400,922				1,389,654				1,206,581
Distribution			348,809				—				—
Fleet and wholesale			837,459				1,071,777				893,745
Total revenues			11,625,259				12,768,202				10,932,957
Cost of sales:
New vehicle			5,456,032				6,350,401				5,581,562
Used vehicle			2,623,127				2,845,368				2,266,573
Service and parts			622,176				612,918				540,873
Distribution			294,535				—				—
Fleet and wholesale			841,042				1,064,673				888,485
Total cost of sales			9,836,912				10,873,360				9,277,493
Gross profit			1,788,347				1,894,842				1,655,464
Selling, general and administrative expenses			1,491,164				1,505,794				1,312,467
Intangible impairments			643,459				—				—
Depreciation and amortization			53,715				49,868				42,306
Operating (loss) income			(399,991	)			339,180				300,691
Floor plan interest expense			(64,164	)			(73,148	)			(58,311	)
Other interest expense			(54,322	)			(55,184	)			(48,286	)
Debt discount amortization			(13,983	)			(12,896	)			(11,080	)
Equity in earnings of affiliates			16,513				4,084				8,201
Loss on debt redemption			—				(18,634	)			—
(Loss) income from continuing operations before income taxes			(515,947	)			183,402				191,215
Income tax benefit (provision)			105,393				(61,965	)			(64,198	)
(Loss) income from continuing operations			(410,554	)			121,437				127,017
(Loss) income from discontinued operations, net of tax			(8,348	)			796				(6,550	)
Net (loss) income			(418,902	)			122,233				120,467
Less: Income attributable to non-controlling interests			1,133				1,972				2,172
Net (loss) income attributable to Penske Automotive Group common stockholders		$	(420,035	)		$	120,261			$	118,295
Basic earnings per share attributable to Penske Automotive Group common stockholders:
Continuing operations		$	(4.38	)		$	1.26			$	1.33
Discontinued operations			(0.09	)			0.01				(0.07	)
Net (loss) income		$	(4.47	)		$	1.27			$	1.26
Shares used in determining basic earnings per share			93,958				94,854				94,165
Diluted earnings per share attributable to Penske Automotive Group common stockholders:
Continuing operations		$	(4.38	)		$	1.26			$	1.32
Discontinued operations			(0.09	)			0.01				(0.07	)
Net (loss) income		$	(4.47	)		$	1.27			$	1.25
Shares used in determining diluted earnings per share			93,958				95,046				94,590
Amounts attributable to Penske Automotive Group common stockholders:
(Loss) income from continuing operations		$	(410,554	)		$	121,437			$	127,017
Less: Income attributable to non-controlling interests			1,133				1,972				2,172
(Loss) income from continuing operations, net of tax			(411,687	)			119,465				124,845
(Loss) income from discontinued operations, net of tax			(8,348	)			796				(6,550	)
Net (loss) income		$	(420,035	)		$	120,261			$	118,295
Cash dividends per share		$	0.36			$	0.30			$	0.27

See Notes to Consolidated Financial Statements.

PENSKE AUTOMOTIVE GROUP, INC.
CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME

		Voting and
		Non-voting																Accumulated								Total
		Common Stock								Additional								Other								Stockholders’ Equity												Comprehensive Income
		Issued								Paid-in				Retained				Comprehensive				Treasury				Attributable to Penske				Non-controlling				Total				Attributable to Penske				Non-controlling
		Shares				Amount				Capital				Earnings				Income (Loss)				Stock				Automotive Group				Interest				Equity				Automotive Group				Interest				Total
Balance, January 1, 2006			93,767,468			$	9			$	746,161			$	404,010			$	21,830			$	(26,278	)		$	1,145,732			$	14,409			$	1,160,141
Adjustment (note 1)			—				—				—				(10,792	)			—				—				(10,792	)			—				(10,792	)
Adoption of FSP APB 14-1			—				—				43,093				—				—				—				43,093				—				43,093
Equity compensation			226,797				—				4,564				—				—				—				4,564				—				4,564
Exercise of options, including tax benefit of $8,695			1,473,748				—				18,069				—				—				—				18,069				—				18,069
Repurchase of common stock			(1,000,000	)			—				—				—				—				(18,955	)			(18,955	)			—				(18,955	)
Dividends			—				—				—				(25,215	)			—				—				(25,215	)			—				(25,215	)
Distributions to non-controlling interests			—				—				—				—				—				—				—				(1,934	)			(1,934	)
Sale of subsidiary shares to non-controlling interest			—				—				—				—				—				—				—				132				132
Foreign currency translation			—				—				—				—				53,420				—				53,420				—				53,420			$	53,420			$	—			$	53,420
Other			—				—				—				—				4,129				—				4,129				252				4,381				4,129				—				4,129
Net income			—				—				—				118,295				—				—				118,295				2,172				120,467				118,295				2,172				120,467
Balance, December 31, 2006			94,468,013				9				811,887				486,298				79,379				(45,233	)			1,332,340				15,031				1,347,371			$	175,844			$	2,172			$	178,016
Adoption of Fin 48 (note 16)			—				—				—				(4,430	)			—				—				(4,430	)			—				(4,430	)
Equity compensation			346,265				—				7,721				—				—				—				7,721				—				7,721
Exercise of options, including tax benefit of $1,113			205,485				—				2,614				—				—				—				2,614				—				2,614
Dividends			—				—				—				(28,447	)			—				—				(28,447	)			—				(28,447	)
Distributions to non-controlling interests			—				—				—				—				—				—				—				(3,230	)			(3,230	)
Sale of subsidiary shares to non-controlling interest			—				—				—				—				—				—				—				465				465
Foreign currency translation			—				—				—				—				12,745				—				12,745				—				12,745			$	12,745			$	—			$	12,745
Other			—				—				—				—				7,864				—				7,864				1,030				8,894				7,864				—				7,864
Retirement of treasury stock			—				—				(45,233	)			—				—				45,233				—				—				—
Net income			—				—				—				120,261				—				—				120,261				1,972				122,233				120,261				1,972				122,233
Balance, December 31, 2007			95,019,763				9				776,989				573,682				99,988				—				1,450,668				15,268				1,465,936			$	140,870			$	1,972			$	142,842
Equity compensation			365,825				—				6,884				—				—				—				6,884				—				6,884
Exercise of options, including tax benefit of $245			60,336				—				825				—				—				—				825				—				825
Repurchase of common stock			(4,015,143	)			—				(53,661	)			—				—				—				(53,661	)			—				(53,661	)
Dividends			—				—				—				(33,902	)			—				—				(33,902	)			—				(33,902	)
Distributions to non-controlling interests			—				—				—				—				—				—				—				(1,565	)			(1,565	)
Purchase of subsidiary shares from non-conrolling interests			—				—				—				—				—				—				—				(12,389	)			(12,389	)
Sale of subsidiary shares to non-controlling interest			—				—				—				—				—				—				—				402				402
Foreign currency translation			—				—				—				—				(134,088	)			—				(134,088	)			—				(134,088	)		$	(134,088	)		$	—			$	(134,088	)
Other			—				—				—				—				(11,890	)			—				(11,890	)			771				(11,119	)			(11,890	)			—				(11,890	)
Net (loss) income			—				—				—				(420,035	)			—				—				(420,035	)			1,133				(418,902	)			(420,035	)			1,133				(418,902	)
Balance, December 31, 2008			91,430,781			$	9			$	731,037			$	119,745			$	(45,990	)		$	—			$	804,801			$	3,620			$	808,421			$	(566,013	)		$	1,133			$	(564,880	)

See Notes to Consolidated Financial Statements.

PENSKE AUTOMOTIVE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

		Year Ended December 31,
		2008				2007				2006
		(In thousands)
Operating Activities:
Net (loss) income		$	(418,902	)		$	122,233			$	120,467
Adjustments to reconcile net (loss) income to net cash from continuing operating activities:
Intangible impairments			643,459				—				—
Depreciation and amortization			53,715				49,868				42,306
Debt discount amortization			13,983				12,896				11,080
Undistributed earnings of equity method investments			(13,821	)			(4,084	)			(7,951	)
Loss (income) from discontinued operations, net of tax			8,348				(796	)			6,550
Loss on debt redemption			—				18,634				—
Deferred income taxes			(106,431	)			24,782				25,685
Changes in operating assets and liabilities:
Accounts receivable			145,282				22,877				(49,985	)
Inventories			143,028				(145,542	)			(208,961	)
Floor plan notes payable			(916	)			208,422				139,739
Accounts payable and accrued expenses			(121,309	)			(34,168	)			61,492
Other			58,942				25,605				(15,298	)
Net cash from continuing operating activities			405,378				300,727				125,124
Investing Activities:
Purchase of equipment and improvements			(211,115	)			(194,425	)			(222,198	)
Proceeds from sale-leaseback transactions			37,422				131,793				106,167
Dealership acquisitions, net, including repayment of sellers floor plan notes payable of $30,711, $51,904 and $111,347, respectively			(147,089	)			(180,721	)			(368,193	)
Purchase of Penske Truck Leasing Co., L.P. partnership interest			(219,000	)			—				—
Other			(1,500	)			15,518				—
Net cash from continuing investing activities			(541,282	)			(227,835	)			(484,224	)
Financing Activities:
Proceeds from borrowings under U.S. Credit Agreement			550,900				426,900				441,500
Repayments under U.S. Credit Agreement			(550,900	)			(426,900	)			(713,500	)
Proceeds from U.S. Credit Agreement term loan			219,000				—				—
Repayments under U.S. Credit Agreement term loan			(10,000	)			—				—
Proceeds from mortgage facility			42,400				—				—
Issuance of subordinated debt			—				—				750,000
Net (repayments) borrowings of other long-term debt			(1,520	)			(34,190	)			60,925
Net borrowings (repayments) of floor plan notes payable — non-trade			(52,563	)			189,028				(57,245	)
Payment of deferred financing costs			(661	)			—				(17,210	)
Redemption 9 5/8% senior subordinated debt			—				(314,439	)			—
Proceeds from exercises of options, including excess tax benefit			825				2,614				18,069
Repurchase of common stock			(53,661	)			—				(18,955	)
Dividends			(33,902	)			(28,447	)			(25,215	)
Net cash from continuing financing activities			109,918				(185,434	)			438,369
Discontinued operations:
Net cash from discontinued operating activities			(2,753	)			16,279				(65,857	)
Net cash from discontinued investing activities			64,635				69,616				51,899
Net cash from discontinued financing activities			(30,585	)			21,415				(52,931	)
Net cash from discontinued operations			31,297				107,310				(66,889	)
Net change in cash and cash equivalents			5,311				(5,232	)			12,380
Cash and cash equivalents, beginning of period			14,797				20,029				7,649
Cash and cash equivalents, end of period		$	20,108			$	14,797			$	20,029
Supplemental disclosures of cash flow information:
Cash paid for:
Interest		$	125,184			$	138,941			$	105,787
Income taxes			8,862				35,054				35,230
Seller financed/assumed debt			4,728				2,992				64,168

See Notes to Consolidated Financial Statements.

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)

1. Organization and Summary of Significant Accounting Policies

Business Overview and Concentrations

Penske Automotive Group, Inc. (the “Company”) is engaged in the sale of new and used motor vehicles and related products and services, including vehicle service, parts, collision repair, finance and lease contracts, third-party insurance products and other aftermarket products. The Company operates dealerships under franchise agreements with a number of automotive manufacturers. In accordance with individual franchise agreements, each dealership is subject to certain rights and restrictions typical of the industry. The ability of the manufacturers to influence the operations of the dealerships, or the loss of a significant number of franchise agreements, could have a material impact on the Company’s results of operations, financial position and cash flows. For the year ended December 31, 2008, BMW/MINI franchises accounted for 22% of the Company’s total revenues, Toyota/Lexus franchises accounted for 19%, Honda/Acura franchises accounted for 15% and Daimler franchises accounted for 10%. No other manufacturers’ franchises accounted for more than 10% of our total revenue. At December 31, 2008 and 2007, the Company had receivables from manufacturers of $72,150 and $87,663, respectively. In addition, a large portion of the Company’s contracts in transit, which are included in accounts receivable, are due from manufacturers’ captive finance subsidiaries. In 2007, the Company established a wholly-owned subsidiary, smart USA Distributor LLC (“smart USA”), which is the exclusive distributor of the smart fortwo vehicle in the U.S. and Puerto Rico.

Basis of Presentation

Results for the year ended December 31, 2008 include charges of $661,880, including $643,459 relating to goodwill and franchise asset impairments, as well as, an additional $18,421 of dealership consolidation and relocation costs, severance costs, other asset impairment charges, costs associated with the termination of an acquisition agreement, and insurance deductibles relating to damage sustained at our dealerships in the Houston market during Hurricane Ike. Results for the year ended December 31, 2007 include charges of $18,634 relating to the redemption of the $300.0 million aggregate principal amount of 9.625% Senior Subordinated Notes and $6,267 relating to impairment losses.

The consolidated financial statements include all majority-owned subsidiaries. Investments in affiliated companies, representing an ownership interest in the voting stock of the affiliate of between 20% and 50% or an investment in a limited partnership or a limited liability corporation for which the Company’s investment is more than minor, are stated at cost of acquisition plus the Company’s equity in undistributed earnings since acquisition. All intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements have been adjusted for entities that have been treated as discontinued operations through December 31, 2008 in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. In addition, the consolidated financial statements have been adjusted for an entity which met the criteria to be classified as a discontinued operation during the second quarter of 2009.

In June 2008, the Company acquired a 9% limited partnership interest in Penske Truck Leasing Co., L.P. (“PTL”), a leading global transportation services provider, from subsidiaries of General Electric Capital Corporation (collectively, “GE Capital”) in exchange for $219,000. PTL operates and maintains more than 200,000 vehicles and serves customers in North America, South America, Europe and Asia. Product lines include full-service leasing, contract maintenance, commercial and consumer truck rental and logistics services, including, transportation and distribution center management and supply chain management.

In September 2006, the SEC released Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”), which permitted the Company to adjust for the cumulative effect of prior period immaterial errors in the carrying amount of assets and liabilities as of the beginning of 2006, with an offsetting adjustment to the opening balance of retained earnings in that year. SAB 108 required the adjustment of any prior quarterly financial statements within the fiscal year of adoption for the effects of such errors on the quarters when that information was next presented. Such adjustments did not require previously filed reports with the SEC to be amended. Pursuant to SAB 108, the Company adjusted its opening retained earnings for fiscal 2006 and its financial results for the first three quarters of fiscal 2006 to correct errors related to operating leases with scheduled rent increases which were not accounted for on a straight line basis over the rental period. A summary of the errors, which were previously determined to be immaterial on a quantitative and qualitative basis under the Company’s assessment methodology for each individual period, follows:

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

		2006
Cumulative effect on Penske Automotive Group stockholders’ equity as of January 1,		$	(10,792	)
Effect on:
Net income attributable to Penske Automotive Group common stockholders for the three months ended March 31,		$	(138	)
Net income attributable to Penske Automotive Group common stockholders for the three months ended June 30,		$	(143	)
Net income attributable to Penske Automotive Group common stockholders for the three months ended September 30,		$	(143	)

Adoption of New Accounting Pronouncements

The Company adopted FASB Staff Position (“FSP”) APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” effective January 1, 2009. Pursuant to FSP APB 14-1, the Company was required to account separately for the debt and equity components of its 3.5% Senior Subordinated Convertible Notes. The value ascribed to the debt component was determined using a fair value methodology, with the residual representing the equity component. The equity component was recorded as an increase in equity, with the debt discount being amortized as additional interest expense over the expected life of the instrument. The Company has applied the provisions of this standard retrospectively to all periods presented herein in accordance with SFAS No. 154, “Accounting Changes and Error Corrections.”

The Company adopted FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” effective January 1, 2009, which requires that unvested share-based payment awards with non-forfeitable rights to dividends or dividend equivalents be considered participating securities that must be included in the computation of EPS pursuant to the two-class method.  The Company has applied the provisions of this standard retrospectively to all periods presented herein in accordance with SFAS No. 154.

The following tables summarize the effect of the accounting changes resulting from the adoption of FSP APB 14-1 and FSP EITF 03-6-1, which required retrospective application, on our consolidated condensed financial statements.

		2008												2007												2006
		As												As												As
		calculated												calculated												calculated
		under				Effect								under				Effect								under				Effect
		previous				of				As				previous				of				As				previous				of				As
		accounting				changes				reported				accounting				changes				reported				accounting				changes				reported
Statement of Income for the year ended December 31:
Other interest expense			54,771				(449	)			54,322				55,633				(449	)			55,184				48,698				(412	)			48,286
Debt discount amortization			—				13,983				13,983				—				12,896				12,896				—				11,080				11,080
Income tax (benefit) expense			(99,993	)			(5,400	)			(105,393	)			66,934				(4,969	)			61,965				68,460				(4,262	)			64,198
(Loss) income from continuing operations (*)			(403,553	)			(8,134	)			(411,687	)			126,943				(7,478	)			119,465				131,251				(6,406	)			124,845
Net (loss) income (*)			(411,901	)			(8,134	)			(420,035	)			127,739				(7,478	)			120,261				124,701				(6,406	)			118,295
(Loss) income from continuing operations (*) per basic common share			(4.33	)			(0.05	)			(4.38	)			1.35				(0.09	)			1.26				1.41				(0.08	)			1.33
Net (loss) income (*) per basic common share			(4.42	)			(0.05	)			(4.47	)			1.36				(0.09	)			1.27				1.34				(0.08	)			1.26
Shares used in determining basic earnings per share			93,210				748				93,958				94,104				750				94,854				93,393				772				94,165
(Loss) income from continuing operations (*) per diluted common share			(4.33	)			(0.05	)			(4.38	)			1.34				(0.08	)			1.26				1.39				(0.07	)			1.32
Net (loss) income (*) per diluted common share			(4.42	)			(0.05	)			(4.47	)			1.35				(0.08	)			1.27				1.32				(0.07	)			1.25
Shares used in determining diluted earnings per share			93,210				748				93,958				94,558				488				95,046				94,178				412				94,590

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

		2008												2007
		As												As
		calculated												calculated
		under				Effect								under				Effect
		previous				of				As				previous				of				As
		accounting				changes				reported				accounting				changes				reported
Balance Sheet as of December 31:
Other current assets			88,701				(450	)			88,251				65,448				(450	)			64,998
Other long-term assets			23,022				(562	)			22,460				22,129				(1,012	)			21,117
Long-term debt			1,087,932				(35,872	)			1,052,060				830,106				(49,854	)			780,252
Other long-term liabilities			207,771				13,785				221,556				310,104				19,183				329,287
Additional paid-in capital			687,944				43,093				731,037				733,896				43,093				776,989
Retained earnings			141,763				(22,018	)			119,745				587,566				(13,884	)			573,682

		2008												2007												2006
		As												As												As
		calculated												calculated												calculated
		under				Effect								under				Effect								under				Effect
		previous				of				As				previous				of				As				previous				of				As
		accounting				changes				reported				accounting				changes				reported				accounting				changes				reported
Statement of Cash Flows for the year ended December 31:
Net (loss) income			(410,768	)			(8,134	)			(418,902	)			129,711				(7,478	)			122,233				126,873				(6,406	)			120,467
Debt discount amortization			—				13,983				13,983				—				12,896				12,896				—				11,080				11,080
Deferred income taxes			(101,031	)			(5,400	)			(106,431	)			29,751				(4,969	)			24,782				29,947				(4,262	)			25,685
Other			59,391				(449	)			58,942				26,054				(449	)			25,605				(14,886	)			(412	)			(15,298	)
Net cash from continuing operating activities			405,378				—				405,378				300,727				—				300,727				125,124				—				125,124

The Company also adopted SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements an Amendment of ARB No. 51,” effective January 1, 2009, pursuant to which the Company reclassified its minority interest liabilities to equity relating to the Company’s non-wholly owned consolidated subsidiaries and amended the presentation of income attributable to non-controlling interests on the income statement. The Company has applied the presentation and disclosure provisions of this standard retrospectively to all periods presented herein.

Reclassification

The 2007 balance sheet has been reclassified to conform to the current year presentation.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accounts requiring the use of significant estimates include accounts receivable, inventories, income taxes, intangible assets and certain reserves.

Cash and Cash Equivalents

Cash and cash equivalents include all highly-liquid investments that have an original maturity of three months or less at the date of purchase.

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

Contracts in Transit

Contracts in transit represent receivables from unaffiliated finance companies relating to the sale of customers’ installment sales contracts arising in connection with the sale of a vehicle by us. Contracts in transit, included in accounts receivable, net in the Company’s consolidated balance sheets, amounted to $106,058 and $181,410 as of December 31, 2008 and 2007, respectively.

Inventory Valuation

Inventories are stated at the lower of cost or market. Cost for new and used vehicle inventories is determined using the specific identification method. Cost for parts and accessories are based on factory list prices.

Property and Equipment

Property and equipment are recorded at cost and depreciated over estimated useful lives using the straight-line method. Useful lives for purposes of computing depreciation for assets, other than leasehold improvements, range between 3 and 15 years. Leasehold improvements and equipment under capital lease are depreciated over the shorter of the term of the lease or the estimated useful life of the asset, not to exceed 40 years.

Expenditures relating to recurring repair and maintenance are expensed as incurred. Expenditures that increase the useful life or substantially increase the serviceability of an existing asset are capitalized.

When equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the balance sheet, with any resulting gain or loss being reflected in income.

Income Taxes

Tax regulations may require items to be included in our tax return at different times than the items are reflected in our financial statements. Some of these differences are permanent, such as expenses that are not deductible on our tax return, and some are temporary differences, such as the timing of depreciation expense. Temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that will be used as a tax deduction or credit in our tax return in future years which we have already recorded in our financial statements. Deferred tax liabilities generally represent deductions taken on our tax return that have not yet been recognized as expense in our financial statements. We establish valuation allowances for our deferred tax assets if the amount of expected future taxable income is not more likely than not to allow for the use of the deduction or credit.

Intangible Assets

The Company’s principal intangible assets relate to its franchise agreements with vehicle manufacturers, which represent the estimated value of franchises acquired in business combinations, and goodwill, which represents the excess of cost over the fair value of tangible and identified intangible assets acquired in business combinations. Intangible assets are required to be amortized over their estimated useful lives. The Company believes the franchise values of its dealerships have an indefinite useful life based on the following facts:

	•		Automotive retailing is a mature industry and is based on franchise agreements with the vehicle manufacturers;
	•		There are no known changes or events that would alter the automotive retailing franchise environment;
	•		Certain franchise agreement terms are indefinite;
	•		Franchise agreements that have limited terms have historically been renewed by us without substantial cost; and
	•		The Company’s history shows that manufacturers have not terminated our franchise agreements.

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

Impairment Testing

Franchise value impairment is assessed as of October 1 every year and upon the occurrence of an indicator of impairment through a comparison of its carrying amounts and estimated fair values. An indicator of impairment exists if the carrying value of a franchise exceeds its estimated fair value and an impairment loss may be recognized up to that excess. The fair value of franchise value is determined using a discounted cash flow approach, which includes assumptions that include revenue and profitability growth, franchise profit margins, residual values and the Company’s cost of capital. The Company also evaluates its franchises in connection with the annual impairment testing to determine whether events and circumstances continue to support its assessment that the franchise has an indefinite life. As discussed in Note 7, the Company determined that the carrying value as of December 31, 2008 relating to certain of its franchise value was impaired and recorded a pre-tax non-cash impairment charge of $37,110.

Goodwill impairment is assessed at the reporting unit level as of October 1 every year and upon the occurrence of an indicator of impairment. The Company has determined that the dealerships in each of its operating segments within the Retail reportable segment, which are organized by geography, are components that are aggregated into five reporting units as they (A) have similar economic characteristics (all are automotive dealerships having similar margins), (B) offer similar products and services (all sell new and used vehicles, service, parts and third-party finance and insurance products), (C) have similar target markets and customers (generally individuals) and (D) have similar distribution and marketing practices (all distribute products and services through dealership facilities that market to customers in similar fashions). Accordingly, our operating segments are also considered our reporting units for the purpose of goodwill impairment testing relating to the Company’s Retail segment. There is no goodwill recorded in the Distribution or PAG Investments reportable segments. An indicator of goodwill impairment exists if the carrying amount of the reporting unit, including goodwill, is determined to exceed the estimated fair value.  The fair value of goodwill is determined using a discounted cash flow approach, which includes assumptions that include revenue and profitability growth, franchise profit margins, residual values and the Company’s cost of capital. If an indication of goodwill impairment exists, an analysis reflecting the allocation of the fair value of the reporting unit to all assets and liabilities, including previously unrecognized intangible assets, is performed.  The impairment is measured by comparing the implied fair value of the reporting unit goodwill with its carrying amount and an impairment loss may be recognized up to that excess. As discussed in Note 7, the Company determined that the carrying value of goodwill as of December 31, 2008 relating to certain reporting units was impaired and recorded a pre-tax non-cash impairment charge of $606,349.

Investments

Investments include marketable securities and investments in businesses accounted for under the equity method. A majority of the Company’s investments are in joint venture relationships. Such joint venture relationships are accounted for under the equity method, pursuant to which the Company records its proportionate share of the joint ventures’ income each period. In June 2008, the Company acquired the 9% limited partnership interest in PTL for $219,000 from GE Capital.

Under an arrangement which terminated at the end of 2008, the Company and Sirius Satellite Radio Inc. (“Sirius”) agreed to jointly promote Sirius Satellite Radio service. Pursuant to the terms of the arrangement with Sirius, the Company’s dealerships in the U.S. endeavored to order a significant percentage of eligible vehicles with a factory installed Sirius radio. The Company’s costs relating to such marketing initiatives are expensed as incurred. As compensation for its efforts, the Company received warrants to purchase ten million shares of Sirius common stock at $2.392 per share in 2004 that were earned ratably on an annual basis through January 2009. The Company measured the fair value of the warrants earned ratably on the date they were earned as there were no significant disincentives for non-performance. Since the Company could reasonably estimate the number of warrants being earned pursuant to the ratable schedule, the estimated fair value (based on current fair value) of these warrants was recognized ratably during each annual period. The Company also received the right to earn additional warrants to purchase Sirius common stock at $2.392 per share based upon the sale of certain units of specified vehicle brands through December 31, 2007. The Company earned warrants for 189,300 and 1,269,700 shares during the years ended December 31, 2007 and 2006, respectively. Since the Company could not reasonably estimate the number of warrants earned subject to the sale of units, the fair value of these warrants was recognized when they were earned. Based on the value of Sirius stock on December 31, 2008, the Company does not expect to receive any further value for the unexercised warrants it has achieved, which expire on July 5, 2009, under this arrangement.

The remaining marketable securities held by the Company are classified as available for sale and are stated at fair value, determined by the use of Level 1 inputs as described under SFAS No. 157, on our balance sheet and related unrealized gains and losses are included in other comprehensive income (loss), a separate component of equity.

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

Investments for which there is not a liquid, actively traded market are reviewed periodically by management for indicators of impairment. If an indicator of impairment was identified, management would estimate the fair value of the investment using a discounted cash flow approach, which would include assumptions relating to revenue and profitability growth, profit margins, residual values and the Company’s cost of capital. Declines in investment values that are deemed to be other than temporary may result in an impairment charge reducing the investments’ carrying value to fair value. During 2007, the Company recorded an adjustment to the carrying value of its investment in Internet Brands to recognize an other than temporary impairment of $3,360 which became apparent upon its initial public offering. As a result of continued deterioration in the value of the stock, the Company recorded an additional other than temporary impairment charge of $506 relating to Internet Brands during the fourth quarter of 2008.

Foreign Currency Translation

For all of the Company’s foreign operations, the functional currency is the local currency. The revenue and expense accounts of the Company’s foreign operations are translated into U.S. dollars using the average exchange rates that prevailed during the period. Assets and liabilities of foreign operations are translated into U.S. dollars using period end exchange rates. Cumulative translation adjustments relating to foreign functional currency assets and liabilities are recorded in accumulated other comprehensive income (loss), a separate component of equity.

Fair Value of Financial Instruments

Financial instruments consist of cash and cash equivalents, accounts receivable, available for sale investments, accounts payable, debt, floor plan notes payable, and interest rate swaps used to hedge future cash flows. Other than our subordinated notes, the carrying amount of all significant financial instruments approximates fair value due either to length of maturity, the existence of variable interest rates that approximate prevailing market rates, or as a result of mark to market accounting. A summary of the fair value of the subordinated notes, based on quoted, level one market data, follows:

		December 31, 2008								December 31, 2007
		Carrying Value				Fair Value				Carrying Value				Fair Value
7.75% Senior Subordinated Notes due 2016		$	375,000			$	150,938			$	375,000			$	361,875
3.5% Senior Subordinated Convertible Notes due 2026			339,128				206,250				325,146				373,650

Revenue Recognition

Vehicle, Parts and Service Sales

The Company records revenue when vehicles are delivered and title has passed to the customer, when vehicle service or repair work is completed, and when parts are delivered to our customers. Sales promotions that we offer to customers are accounted for as a reduction of revenues at the time of sale. Rebates and other incentives offered directly to us by manufacturers are recognized as a reduction of cost of sales. Reimbursement of qualified advertising expenses are treated as a reduction of selling, general and administrative expenses. The amounts received under various manufacturer rebate and incentive programs are based on the attainment of program objectives, and such earnings are recognized either upon the sale of the vehicle for which the award is received, or upon attainment of the particular program goals if not associated with individual vehicles.

Finance and Insurance Sales

Subsequent to the sale of a vehicle to a customer, the Company sells its installment sale contracts to various financial institutions on a non-recourse basis (with specified exceptions) to mitigate the risk of default. The Company receives a commission from the lender equal to either the difference between the interest rate charged to the customer and the interest rate set by the financing institution or a flat fee. The Company also receives commissions for facilitating the sale of various third-party insurance products to customers, including credit and life insurance policies and extended service contracts. These commissions are recorded as revenue at the time the customer enters into the contract. In the case of finance contracts, a customer may prepay or fail to pay their contract, thereby terminating the contract. Customers may also terminate extended service contracts and other insurance products, which are fully paid at purchase, and become eligible for refunds of unused premiums. In these circumstances, a portion of the commissions the Company received may be charged back based on the terms of the contracts. The revenue the Company records relating to these transactions is net of an estimate of the amount of chargebacks the Company will be required to pay. The Company’s estimate is based upon the Company’s historical experience with similar contracts, including the impact of refinance and default rates on retail finance contracts and cancellation rates on extended service contracts and other insurance products. Aggregate reserves relating to chargeback activity were $20,420 and $19,400 as of December 31, 2008 and 2007, respectively. Changes in reserve estimates relate primarily to an increase in the level of chargeback activity.

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

Defined Contribution Plans

The Company sponsors a number of defined contribution plans covering a significant majority of the Company’s employees. Company contributions to such plans are discretionary and are based on the level of compensation and contributions by plan participants. The Company suspended its contributions to its U.S. 401(K) plan beginning in the fourth quarter 2008. The Company incurred expense of $10,424, $11,053 and $9,596 relating to such plans during the years ended December 31, 2008, 2007 and 2006, respectively.

Advertising

Advertising costs are expensed as incurred or when such advertising takes place. The Company incurred net advertising costs of $81,127, $87,032 and $83,571 during the years ended December 31, 2008, 2007 and 2006, respectively. Qualified advertising expenditures reimbursed by manufacturers, which are treated as a reduction of advertising expense, were $7,696, $15,524 and $6,940 during the years ended December 31, 2008, 2007 and 2006, respectively.

Self Insurance

We retain risk relating to certain of our general liability insurance, workers’ compensation insurance, auto physical damage insurance, property insurance, employment practices liability insurance, directors and officers insurance, and employee medical benefits in the U.S. As a result, we are likely to be responsible for a majority of the claims and losses incurred under these programs. The amount of risk we retain varies by program, and, for certain exposures, we have pre-determined maximum loss limits for certain individual claims and/or insurance periods. Losses, if any, above the pre-determined exposure limits are paid by third-party insurance carriers. Our estimate of future losses is prepared by management using our historical loss experience and industry-based development factors.

Earnings Per Share

Basic earnings per share is computed using net income attributable to Penske Automotive Group common stockholders and the weighted average shares of voting common stock outstanding. Diluted earnings per share is computed using net income attributable to Penske Automotive Group common stockholders and the weighted average shares of voting common stock outstanding, adjusted for the dilutive effect of stock options. For the year ended December 31, 2008, no stock options were included in the computation of diluted loss per share because the Company reported a net loss from continuing operations and the effect of their inclusion would be anti-dilutive. A reconciliation of the number of shares used in the calculation of basic and diluted earnings per share for the years ended December 31, 2008, 2007 and 2006 follows:

		Year Ended December 31,
		2008				2007				2006
Weighted average number of common shares outstanding			93,958				94,854				94,165
Effect of stock options			—				192				425
Weighted average number of common shares outstanding, including effect of dilutive securities			93,958				95,046				94,590

As of December 31, 2008, 3 stock options have been excluded from the calculation of diluted earnings per share because the effect of such securities was anti-dilutive. There were no anti-dilutive stock options in 2007 or 2006. In addition, the Company has senior subordinated convertible notes outstanding which, under certain circumstances discussed in Note 9, may be converted to voting common stock. As of December 31, 2008 2007, and 2006, no shares related to the senior subordinated convertible notes were included in the calculation of diluted earnings per share because the effect of such securities was not dilutive.

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

Hedging

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. Under SFAS No. 133, all derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. SFAS No. 133 defines requirements for designation and documentation of hedging relationships, as well as ongoing effectiveness assessments, which must be met in order to qualify for hedge accounting. For a derivative that does not qualify as a hedge, changes in fair value are recorded in earnings immediately. If the derivative is designated in a fair-value hedge, the changes in the fair value of the derivative and the hedged item are recorded in earnings. If the derivative is designated in a cash-flow hedge, effective changes in the fair value of the derivative are recorded in accumulated other comprehensive income (loss), a separate component of equity, and recorded in the income statement only when the hedged item affects earnings. Changes in the fair value of the derivative attributable to hedge ineffectiveness are recorded in earnings immediately.

Stock-Based Compensation

SFAS No. 123(R), “Share-Based Payment,” as amended and interpreted, requires the Company to record compensation expense for all awards based on their grant-date fair value. The Company’s share-based payments have generally been in the form of “non-vested shares,” the fair value of which are measured as if they were vested and issued on the grant date.

New Accounting Pronouncements

SFAS No. 157, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure requirements relating to fair value measurements. The FASB provided a one year deferral of the provisions of this pronouncement for non-financial assets and liabilities, however, the relevant provisions of SFAS No. 157 required by SFAS No. 159 were adopted as of January 1, 2008. SFAS No. 157 thus became effective for the Company’s non-financial assets and liabilities on January 1, 2009. The Company continues to evaluate the impact of this pronouncement on its non-financial assets and liabilities, including but not limited to, the valuation of reporting units for the purpose of assessing goodwill impairment, the valuation of franchise rights in connection with assessing franchise value impairments, the valuation of property and equipment in connection with assessing long-lived asset impairment, the valuation of liabilities in connection with exit or disposal activities, and the valuation of assets acquired and liabilities assumed in business combinations.

SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115” permits entities to choose to measure many financial instruments and certain other items at fair value and consequently report unrealized gains and losses on such items in earnings. The Company did not elect the fair value option with respect to any of its current financial assets or financial liabilities when the provisions of this statement became effective on January 1, 2008. As a result, there was no impact upon adoption.

SFAS No. 141(R) “Business Combinations” requires almost all assets acquired and liabilities assumed in connection with a business combination to be recorded at fair value as of the acquisition date, liabilities related to contingent consideration to be remeasured at fair value in each subsequent reporting period, and all acquisition related costs to be expensed as incurred. The pronouncement also clarifies the accounting under various scenarios such as step purchases or situations in which the fair value of assets and liabilities acquired exceeds the total consideration. SFAS No. 141(R) became effective for the Company on January 1, 2009.

SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” amends and expands the disclosure requirements of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” to explain why and how an entity uses derivative instruments, how the hedged items are accounted for under the relevant literature and how the derivative instruments affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 became effective for the Company on January 1, 2009. This pronouncement will have no impact on the Company’s accounting, and the Company will include the additional disclosure requirements beginning with it’s first quarter 2009 10-Q filing.

FASB Staff Position (“FSP”) FAS 142-3, “Determination of the Useful Life of Intangible Assets” amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142,“Goodwill and Other Intangible Assets.”  FSP FAS 142-3 became effective for the Company on January 1, 2009.  The guidance in FSP 142-3 for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after adoption, and the disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, adoption.  The FSP will impact the Company’s assignment of franchise value in the U.K. for future acquisitions.

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

2. Equity Method Investees

In June 2008, the Company acquired the 9% limited partnership interest in PTL, a leading global transportation services provider, from subsidiaries of General Electric Capital Corporation (collectively, “GE Capital”) in exchange for $219,000. PTL operates and maintains more than 200,000 vehicles and serves customers in North America, South America, Europe and Asia. Product lines include full-service leasing, contract maintenance, commercial and consumer truck rental and logistics services, including, transportation and distribution center management and supply chain management.

The Company’s other investments in companies that are accounted for under the equity method consist of the following: the Jacobs Group (50%), the Nix Group (50%), the Reisacher Group (50%), Penske Wynn Ferrari Maserati (50%), Max Cycles (50%), Toyota de Monterrey (48.7%), Toyota de Aguascalientes (45%), QEK Global Solutions (22.5%), Cycle Express, LP (9.4%), and Fleetwash, LLC (7%). All of these operations except QEK, Fleetwash, Cycle Express, and Max Cycles are engaged in the sale and servicing of automobiles. QEK is an automotive fleet management company, Fleetwash provides vehicle fleet washing services, Cycle Express provides auction services to the motorcycle, ATV and other recreational vehicle market, and Max Cycles is engaged in the sale and servicing of BMW motorcycles. The Company’s investment in entities accounted for under the equity method amounted to $296,487 and $62,752 at December 31, 2008 and 2007, respectively.

The combined results of operations and financial position of the Company’s equity basis investments are summarized as follows:

Condensed income statement information:

		Year Ended December 31,
		2008				2007				2006
Revenues		$	5,220,893			$	1,074,144			$	927,158
Gross margin			2,003,977				199,033				172,089
Net income			242,001				7,079				17,372
Equity in net income of affiliates			16,513				4,084				8,201

Condensed balance sheet information:

		December 31,				December 31,
		2008				2007
Current assets		$	1,097,773			$	318,965
Noncurrent assets			6,725,220				284,184
Total assets		$	7,822,993			$	603,149
Current liabilities		$	1,028,494			$	305,607
Noncurrent liabilities			5,739,895				124,368
Equity			1,054,604				173,174
Total liabilities and equity		$	7,822,993			$	603,149

3.  Business Combinations

The Company’s retail operations acquired thirteen and eleven franchises during 2008 and 2007, respectively. The Company’s financial statements include the results of operations of the acquired dealerships from the date of acquisition. Purchase price allocations may be subject to final adjustment. Of the total amount allocated to intangible assets, approximately $22,523 and $4,250 is deductible for tax purposes as of December 31, 2008 and 2007, respectively. A summary of the aggregate purchase price allocations in each year follows:

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

		December 31,
		2008				2007
Accounts receivable		$	4,845			$	16,198
Inventory			70,130				68,449
Other current assets			962				2,979
Property and equipment			4,734				6,152
Goodwill			57,729				104,846
Franchise value			23,894				41,917
Other assets			1,084				6,921
Current liabilities			(11,561	)			(19,219	)
Non-current liabilities			—				(44,530	)
Total purchase price			151,817				183,713
Seller financed/assumed debt			(4,728	)			(2,992	)
Cash used in dealership acquisitions		$	147,089			$	180,721

The following unaudited consolidated pro forma results of operations of the Company for the years ended December 31, 2008 and 2007 give effect to acquisitions consummated during 2008 and 2007 as if they had occurred on January 1, 2007.

		December 31,
		2008				2007
Revenues		$	12,016,289			$	13,719,620
(Loss) income from continuing operations attributable to Penske Automotive Group common stockholders			(409,472	)			123,610
Net (loss) income attributable to Penske Automotive Group common stockholders			(417,820	)			124,406
(Loss) income from continuing operations per diluted common share attributable to Penske Automotive Group common stockholders			(4.36	)			1.30
Net (loss) income per diluted common share attributable to Penske Automotive Group common stockholders		$	(4.45	)		$	1.31

4. Discontinued Operations

The Company accounts for dispositions of its retail operations as discontinued operations when it is evident that the operations and cash flows of a franchise being disposed of will be eliminated from on-going operations and that the Company will not have any significant continuing involvement in its operations. In reaching the determination as to whether the cash flows of a dealership will be eliminated from ongoing operations, the Company considers whether it is likely that customers will migrate to similar franchises that it owns in the same geographic market. The Company’s consideration includes an evaluation of the brands sold at other dealerships it operates in the market and their proximity to the disposed dealership. When the Company disposes of franchises, it typically does not have continuing brand representation in that market. If the franchise being disposed of is located in a complex of Company owned dealerships, the Company does not treat the disposition as a discontinued operation if the Company believes that the cash flows previously generated by the disposed franchise will be replaced by expanded operations of the remaining franchises. The net assets of dealerships accounted for as discontinued operations in the accompanying balance sheets were immaterial. Combined income statement information regarding dealerships accounted for as discontinued operations follows:

		Year Ended December 31,
		2008				2007				2006
Revenues		$	292,487			$	680,412			$	1,176,895
Pre-tax (loss) income			(8,667	)			375				(7,239	)
(Loss) gain on disposal			(7,391	)			1,276				(2,995	)

5. Inventories

Inventories consisted of the following:

		December 31,				December 31,
		2008				2007
New vehicles		$	1,247,897			$	1,205,582
Used vehicles			259,274				373,578
Parts, accessories and other			81,934				82,843
Total inventories, net		$	1,589,105			$	1,662,003

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

The Company receives non-refundable credits from certain of its vehicle manufacturers that reduce cost of sales when the vehicles are sold. Such credits amounted to $24,884, $31,031 and $29,443 during the years ended December 31, 2008, 2007 and 2006, respectively.

6. Property and Equipment

Property and equipment consisted of the following:

		December 31,
		2008				2007
Buildings and leasehold improvements		$	583,110			$	528,517
Furniture, fixtures and equipment			291,602				288,051
Total			874,712				816,568
Less: Accumulated depreciation and amortization			(212,591	)			(200,987	)
Property and equipment, net		$	662,121			$	615,581