Penske Automotive Reports Third Quarter and Nine Month Results

Penske Automotive Reports Third Quarter and Nine Month Results

Reports Record Third Quarter Adjusted Income from Continuing Operations

Adjusted Earnings per Share from Continuing Operations Rises to $0.60


BLOOMFIELD HILLS, Mich.--(BUSINESS WIRE)-- Penske Automotive Group, Inc. (NYSE: PAG) :

Third Quarter 2012

Nine Months 2012

Penske Automotive Group, Inc. (NYS: PAG) , an international automotive retailer, announced today record third quarter adjusted income from continuing operations and related earnings per share. For the third quarter 2012, adjusted income from continuing operations attributable to common shareholders increased 19.1% to $54.3 million and related earnings per share increased 20.0% to $0.60 per share. This compares to adjusted income from continuing operations attributable to common shareholders of $45.6 million, or $0.50 per share in the same period last year.

Adjusted income from continuing operations attributable to common shareholders for the third quarter and nine months ended September 30, 2012, excludes after-tax costs of $13.0 million, or $0.14 per share, of debt redemption costs associated with the redemption of the Company's $375 million of 7.75% senior subordinated notes due 2016. Adjusted income from continuing operations attributable to common shareholders for the third quarter and nine months ended September 30, 2011 excludes $11.0 million, or $0.12 per share, of net income tax benefits reflecting a positive adjustment from the resolution of certain tax items in the U.K. of $17.0 million, or $0.19 per share, partially offset by a reduction in deferred tax assets of $6.0 million, or $0.07 per share. Actual third quarter 2012 income from continuing operations was $41.3 million, or $0.46 per share, compared to income from continuing operations of $56.6 million, or $0.62 per share in the same period last year.

Total revenue increased 17.4% to $3.4 billion, including a same-store retail revenue increase of 11.7% in the third quarter. The revenue increase was driven by a 23.6% increase in total retail unit sales, including 16.6% on a same-store basis. Gross profit improved 10.9% to $511.0 million while operating income increased 11.4% to $87.5 million.

Highlights of the Third Quarter

  • Total Retail Unit Sales increased 23.6% to 88,151

    • +21.1% in the United States; +29.1% Internationally

    • New unit retail sales +26.3%

    • Used unit retail sales +20.4%

  • Same-store Retail Revenue increased 11.7%

    • New +15.9%; Used +8.4%; Finance & Insurance +13.0%; Service and Parts +1.9%

    • +16.6% in the United States; +3.6% Internationally

  • Average Transaction Price Per Unit

    • New $36,497; -3.8%

    • Used $24,982; -4.8%

  • Average Gross Profit Per Unit

    • New $2,821; Gross Margin 7.7%; down 80 bps

    • Used $1,824; Gross Margin 7.3%; down 20 bps

    • Finance & Insurance $969; down $57/unit

Chairman Roger Penske said, "The Company's third quarter results continue to demonstrate the strength of the auto retail sales environment in both the U.S. and our international markets. We experienced strong new unit sales throughout the quarter, particularly through our volume foreign brands which increased 33.9%, including 30.7% on a same-store basis. Additionally, our retail used vehicle unit sales continue to be very strong, increasing 20.4%, including 13.3% on a same-store basis. I was particularly pleased to see service and parts gross margin improve by 80 basis points to 57.8% and a 1.9% improvement in same-store service and parts revenue."

Penske continued, "While new and used unit sales were strong, we experienced pricing pressure in our markets, especially when compared to the third quarter last year, when a lack of inventory at our Toyota, Honda and Nissan dealerships drove higher gross profits per unit."

For the nine months ended September 30, 2012, total revenue increased 18.2% to $10.0 billion. Adjusted income from continuing operations attributable to common shareholders increased 27.1% to $153.8 million and adjusted earnings per share attributable to common shareholders increased 29.8% to $1.70 per share. This compares to adjusted income from continuing operations attributable to common shareholders of $121.0 million, and related earnings per share of $1.31 per share in the same period last year. Actual income from continuing operations for the nine months ended September 30, 2012, was $140.8 million, or $1.56 per share, compared to income from continuing operations of $132.0 million, or $1.43 in the same period last year.

Securities Repurchase Activity

During the third quarter ended September 30, 2012, the Company completed the redemption of the remaining $25.5 million in outstanding 3.5% senior subordinated convertible notes. No shares of common stock were issued in the redemption. Additionally, the Company redeemed $375 million of 7.75% senior subordinated notes in connection with the issuance of $550 million of 5.75% senior subordinated notes.

The Company currently has remaining authorization from its Board of Directors to repurchase up to $98.3 million of its outstanding common stock or debt. Securities may be acquired from time to time either through open market purchases, negotiated transactions or other means.

Conference Call

Penske Automotive will host a conference call discussing financial results relating to the third quarter of 2012 on November 2, 2012, at 11:00 a.m.Eastern Daylight Time. To listen to the conference call, participants must dial (800) 230-1096 [International, please dial (612) 288-0337]. The call will also be simultaneously broadcast over the Internet through the Investors Relations section of the Penske Automotive Group website at www.penskeautomotive.com.

About Penske Automotive

Penske Automotive Group, Inc., headquartered in Bloomfield Hills, Michigan, operates 341 retail automotive franchises, representing 40 different brands and 30 collision repair centers. Penske Automotive, which sells new and previously owned vehicles, finance and insurance products and replacement parts, and offers maintenance and repair services on all brands it represents, has 171 franchises in 17 states and Puerto Rico and 170 franchises located outside the United States, primarily in the United Kingdom. Penske Automotive is a member of the Fortune 500 and Russell 2000 and has approximately 16,000 employees.

Non-GAAP Financial Measures

This release contains certain non-GAAP financial measures as defined under SEC rules, such as adjusted income from continuing operations, adjusted earnings per share from continuing operations, and adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA"). The Company has reconciled these measures to the most directly comparable GAAP measures in the release. The Company believes that these widely accepted measures of operating profitability improve the transparency of the Company's disclosures and provide a meaningful presentation of the Company's results from its core business operations excluding the impact of items not related to the Company's ongoing core business operations, and improve the period-to-period comparability of the Company's results from its core business operations. These non-GAAP financial measures are not substitutes for GAAP financial results, and should only be considered in conjunction with the Company's financial information that is presented in accordance with GAAP.

Caution Concerning Forward Looking Statements

Statements in this press release may involve forward-looking statements, including forward-looking statements regarding Penske Automotive Group, Inc.'s future sales potential and outlook. Actual results may vary materially because of risks and uncertainties that are difficult to predict. These risks and uncertainties include, among others: economic conditions generally, conditions in the credit markets and changes in interest rates, adverse conditions affecting a particular manufacturer, including the adverse impact to the vehicle and parts supply chain due to natural disasters or other disruptions that interrupt the supply of vehicles or parts to us; changes in consumer credit availability, the outcome of legal and administrative matters, and other factors over which management has limited control. These forward-looking statements should be evaluated together with additional information about Penske Automotive's business, markets, conditions and other uncertainties, which could affect Penske Automotive's future performance. These risks and uncertainties are addressed in Penske Automotive's Form 10-K for the year ended December 31, 2011, and its other filings with the Securities and Exchange Commission ("SEC"). This press release speaks only as of its date, and Penske Automotive disclaims any duty to update the information herein.

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PENSKE AUTOMOTIVE GROUP, INC.

Consolidated Condensed Statements of Income

(Amounts In Thousands, Except Per Share Data)


(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

Revenues:

New Vehicle

$

1,763,050

$

1,451,177

$

5,066,417

$

4,229,192

Used Vehicle

995,376

867,969

2,926,523

2,511,573

Finance and Insurance, Net

85,420

73,191

247,906

208,540

Service and Parts

372,032

347,432

1,109,122

1,027,120

Fleet and Wholesale

185,531

158,672

656,663

490,135

Total Revenues

3,401,409

2,898,441

10,006,631

8,466,560

Cost of Sales:

New Vehicle

1,626,759

1,327,968

4,659,490

3,877,615

Used Vehicle

922,703

802,542

2,701,645

2,310,147

Service and Parts

156,942

149,429

465,620

440,392

Fleet and Wholesale

184,009

157,739

650,302

484,222

Total Cost of Sales

2,890,413

2,437,678

8,477,057

7,112,376

Gross Profit

510,996

460,763

1,529,574

1,354,184

SG&A Expenses

409,432

369,783

1,216,231

1,098,132

Depreciation

14,037

12,427

41,013

36,132

Operating Income

87,527

78,553

272,330

219,920

Floor Plan Interest Expense

(10,055

)

(6,837

)

(29,675

)

(20,617

)

Other Interest Expense

(11,689

)

(11,153

)

(35,474

)

(32,889

)

Debt Discount Amortization

---

---

---

(1,718

)

Equity in Earnings of Affiliates

8,814

9,623

21,392

17,527

Debt Redemption Costs

(17,753

)

---

(17,753

)

---

Income from Continuing Operations Before Income Taxes

56,844

70,186

210,820

182,223

Income Taxes

(15,308

)

(13,246

)

(69,052

)

(49,289

)

Income from Continuing Operations

41,536

56,940

141,768

132,934

Loss from Discontinued Operations, Net of Tax

(223

)

(895

)

(3,837

)

(2,833

)

Net Income

41,313

56,045

137,931

130,101

Less: Income Attributable to Non-Controlling Interests

282

338

990

907

Net Income Attributable to Common Shareholders

$

41,031

$

55,707

$

136,941

$

129,194

Income from Continuing Operations Per Share

$

0.46

$

0.62

$

1.56

$

1.43

Income Per Share

$

0.45

$

0.61

$

1.52

$

1.40

Weighted Average Shares Outstanding

90,296

91,431

90,362

92,169

Amounts Attributable to Common Shareholders:

Reported Income from Continuing Operations

$

41,536

$

56,940

$

$

141,768

$

132,934

Less: Income Attributable to Non-Controlling Interests

282

338

990

907

Income from Continuing Operations, net of tax

$

41,254

$

56,602

$

140,778

$

132,027

Loss from Discontinued Operations, net of tax

(223

)

(895

)

(3,837

)

(2,833

)

Net Income

$

41,031

$

55,707

$

136,941

$

129,194

PENSKE AUTOMOTIVE GROUP, INC.

Consolidated Condensed Balance Sheets

(Amounts In Thousands)


(Unaudited)

September 30,

December 31,

2012

2011

Assets

Cash and Cash Equivalents

$

25,935

$

28,676

Accounts Receivable, Net

505,770

438,769

Inventories

1,864,773

1,572,568

Other Current Assets

91,204

80,179

Assets Held for Sale

38,005

81,122

Total Current Assets

2,525,687

2,201,314

Property and Equipment, Net

961,488

856,674

Intangibles

1,210,959

1,132,181

Other Long-Term Assets

326,046

312,130

Total Assets

$

5,024,180

$

4,502,299

Liabilities and Equity

Floor Plan Notes Payable

$

1,254,895

$

977,548

Floor Plan Notes Payable - Non-Trade

704,280

691,888

Accounts Payable

275,032

220,538

Accrued Expenses

259,146

201,179

Current Portion Long-Term Debt

14,929

3,414

Liabilities Held for Sale

34,124

55,820

Total Current Liabilities

2,542,406

2,150,387

Long-Term Debt

815,918

846,777

Other Long-Term Liabilities

397,465

364,722

Total Liabilities

3,755,789

3,361,886

Equity

1,268,391

1,140,413

Total Liabilities and Equity

$

5,024,180

$

4,502,299

PENSKE AUTOMOTIVE GROUP, INC.

Consolidated Condensed Statements of Income

(Amounts In Thousands, Except Per Share Data)