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UnitedAuto Net Income Increases 28%; Revenues Increase 16%; Same-Store Retail Revenue Grows 4%; Earnings Per Share Rises 15% to $0.70 Per Share
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BLOOMFIELD HILLS, Mich.--(BUSINESS WIRE)--Oct. 28, 2004--United Auto Group, Inc. (NYSE: UAG), a FORTUNE 500 automotive specialty retailer, today announced a 28.2% rise in third quarter net income on the strength of a 16.2% increase in revenue and continued strong same-store retail revenue growth of 3.7%. The same-store growth was highlighted by a 10.7% increase in service and parts revenue, driven by increases in units in operation and capacity increases at many locations, and a 3.0% increase in new vehicle retail revenue due primarily to increases at the Company's premium and luxury franchises.

Revenue for the quarter increased to $2.7 billion and net income increased to $32.4 million, or $0.70 per share, from $25.3 million, or $0.61 per share, in the prior year. Third quarter 2004 results include a $3.1 million after tax gain ($0.07 per share) resulting from the sale of an investment, a $1.4 million benefit ($0.03 per share) from a reduction of the Company's estimated annual effective tax rate, and a $5.3 million after tax gain ($0.11 per share) resulting from a refund of UK consumption taxes. These gains were offset in part by $4.9 million of after tax non-cash charges ($0.11 per share) due primarily to the planned relocation of certain UK franchises as part of the Company's ongoing facility enhancement program. Earnings per share reflects an 11.8% increase in weighted average shares outstanding.

For the nine months ended September 30, 2004, revenues increased 17.4% to $7.5 billion. Net income for the nine months increased 36.1% to $85.6 million, or $1.89 per share, from $62.9 million, or $1.52 per share, in the prior year. Nine-month 2004 results include a $7.2 million after tax gain ($0.16 per share) resulting from the sale of an investment. Prior year results include the effect of $5.0 million of after tax non-recurring charges ($0.12 per share).

Commenting on third quarter results, Chairman Roger Penske said, "Our performance during a challenging third quarter showcases the strength of our business model and further validates our capital investment and international diversification strategies. Considering the impact on our operations from severe weather in Florida, Georgia and the Carolinas, a difficult selling environment for new and pre-owned vehicles, which I expect will continue in the fourth quarter, and the 75 basis point increase in interest rates since last year, our business performed exceptionally well."

After considering the challenging selling environment and increased interest rates, the Company currently estimates earnings in the range of $2.32 - $2.38 per share for 2004, which includes the $0.16 per share gain from the sale of an investment during the nine months ended September. Earnings per share in the fourth quarter are expected to be in the range of $0.43 - $0.49 per share. These estimates are based on an estimated average of 45.6 and 46.6 million shares outstanding for the year and the quarter, respectively, which represent increases of approximately 4.5 and 3.5 million shares, respectively, over the prior year periods.

UnitedAuto will host a conference call discussing financial results relating to third quarter 2004 on Thursday, October 28, 2004 at 2 p.m. ET. To listen to the conference call, participants must dial (800) 762-4887 (International, please dial (480) 629-9026). The call will also be simultaneously broadcast live over the Internet through the UnitedAuto website at www.unitedauto.com.

About UnitedAuto

UnitedAuto, which has pursued a strategy based on internal growth from its existing dealerships, as well as from strategic acquisitions, operates 145 franchises in the United States and 102 franchises internationally, primarily in the United Kingdom. UnitedAuto dealerships sell new and used vehicles, and market a complete line of aftermarket automotive products and services. Statements in this press release involve forward-looking statements, including forward-looking statements regarding UnitedAuto's future sales and earnings growth potential. Actual results may vary materially because of risks and uncertainties, including external factors such as interest rate fluctuations, changes in consumer spending and other factors over which management has no control. These forward-looking statements should be evaluated together with additional information about UnitedAuto's business, markets, conditions and other uncertainties which could affect UnitedAuto's future performance, which are contained in UnitedAuto's Form 10-K for the year ended December 31, 2003 and its other filings with the Securities and Exchange Commission, and which are incorporated into this press release by reference. This press release speaks only as of its date and UnitedAuto disclaims any duty to update the information herein.

                        UNITED AUTO GROUP, INC.
                   Consolidated Statements of Income
             (Amounts In Thousands, Except Per Share Data)
                              (Unaudited)

                                                    Third Quarter
                                               -----------------------
                                                     2004        2003
                                               ----------- -----------
New Vehicles                                   $1,567,701  $1,388,131
Used Vehicles                                     566,394     488,035
Finance and Insurance                              59,596      57,329
Service and Parts (a)                             265,883     217,489
Fleet                                              39,102      25,102
Wholesale                                         189,313     137,910
                                               ----------- -----------
     Total Revenues                             2,687,989   2,313,996
Cost of Sales                                   2,308,273   1,981,820
                                               ----------- -----------
     Gross Profit                                 379,716     332,176
SG&A Expenses                                     296,595     258,878
Depreciation and Amortization                      14,686       8,106
                                               ----------- -----------
     Operating Income                              68,435      65,192
Floor Plan Interest Expense                       (12,261)    (11,053)
Other Interest Expense                            (10,470)    (11,114)
Other Income                                        4,858          --
                                               ----------- -----------
     Income from Continuing Operations Before
      Minority
       Interests and Income Tax Provision          50,562      43,025
Minority Interests                                   (676)       (655)
Income Tax Provision                              (17,393)    (16,995)
                                               ----------- -----------
     Income from Continuing Operations             32,493      25,375
Loss from Discontinued Operations, Net of
 Tax                                                 (128)       (120)
                                               ----------- -----------
     Net Income                                   $32,365     $25,255
                                               =========== ===========
Income from Continuing Operations Per Diluted
 Share                                              $0.70       $0.61
                                               =========== ===========
Diluted EPS                                         $0.70       $0.61
                                               =========== ===========
Diluted Weighted Average Shares Outstanding        46,567      41,637
                                               =========== ===========

(a): The Company's parts and service departments provide preparation
    and reconditioning services for our dealerships' new and used
    vehicle departments, for which the new and used vehicle
    departments are charged as if they were third parties. The Company
    has determined that revenue and cost of sales has not been reduced
    by the intracompany charge for such work performed at certain of
    the Company's dealerships. Commencing with the third quarter of
    2004, the Company is reducing revenue and cost of sales for
    intracompany charges at the identified dealerships and has revised
    amounts previously reported to eliminate these intracompany
    charges. Service and parts revenue and cost of sales have been
    reduced by $18 million and $22 million for the three months ended
    September 30, 2004 and 2003, respectively. The eliminations do not
    have a material impact on service and parts revenue, gross profit,
    operating income, income from continuing operations, net income,
    earnings per share, cash flows, or financial position for any
    period.
                        UNITED AUTO GROUP, INC.
                   Consolidated Statements of Income
             (Amounts In Thousands, Except Per Share Data)
                              (Unaudited)

                                                     Nine Months
                                               -----------------------
                                                     2004        2003
                                               ----------- -----------
New Vehicles                                   $4,284,668  $3,745,448
Used Vehicles                                   1,623,136   1,386,581
Finance and Insurance                             165,961     156,557
Service and Parts (a)                             750,737     606,509
Fleet                                             106,007      87,523
Wholesale                                         534,266     376,661
                                               ----------- -----------
     Total Revenues                             7,464,775   6,359,279
Cost of Sales                                   6,388,234   5,439,118
                                               ----------- -----------
     Gross Profit                               1,076,541     920,161
SG&A Expenses                                     848,432     722,140
Depreciation and Amortization                      32,609      22,644
                                               ----------- -----------
     Operating Income                             195,500     175,377
Floor Plan Interest Expense                       (36,766)    (31,201)
Other Interest Expense                            (31,287)    (32,206)
Other Income                                       11,469          --
                                               ----------- -----------
     Income from Continuing Operations Before
      Minority
       Interests and Income Tax Provision         138,916     111,970
Minority Interests                                 (1,504)     (1,706)
Income Tax Provision                              (51,674)    (44,231)
                                               ----------- -----------
     Income from Continuing Operations             85,738      66,033
Loss from Discontinued Operations, Net of Tax        (166)       (123)
                                               ----------- -----------
     Income Before Cumulative Effect of
      Accounting Change                            85,572      65,910
Cumulative Effect of Accounting Change                 --      (3,058)
                                               ----------- -----------
     Net Income                                   $85,572     $62,852
                                               =========== ===========
Income from Continuing Operations Per Diluted
 Share                                              $1.90       $1.60
                                               =========== ===========
Diluted EPS before Cumulative Effect of
 Accounting Change                                  $1.89       $1.60
                                               =========== ===========
Cumulative Effect of Accounting Change on
 Diluted EPS                                           --      ($0.07)
                                               =========== ===========
Diluted EPS                                         $1.89       $1.52
                                               =========== ===========
Diluted Weighted Average Shares Outstanding        45,198      41,258
                                               =========== ===========

(a): The Company's parts and service departments provide preparation
    and reconditioning services for our dealerships' new and used
    vehicle departments, for which the new and used vehicle
    departments are charged as if they were third parties. The Company
    has determined that revenue and cost of sales has not been reduced
    by the intracompany charge for such work performed at certain of
    the Company's dealerships. Commencing with the third quarter of
    2004, the Company is reducing revenue and cost of sales for
    intracompany charges at the identified dealerships and has revised
    amounts previously reported to eliminate these intracompany
    charges. Service and parts revenue and cost of sales have been
    reduced by $57 million and $63 million for the nine months ended
    September 30, 2004 and 2003, respectively. The eliminations do not
    have a material impact on service and parts revenue, gross profit,
    operating income, income from continuing operations, net income,
    earnings per share, cash flows, or financial position for any
    period.
                        UNITED AUTO GROUP, INC.
                 Consolidated Condensed Balance Sheets
                        (Amounts In Thousands)
                              (Unaudited)

                                                  9/30/04    12/31/03
                                               ----------- -----------
Assets
Cash and Cash Equivalents                         $17,681     $13,439
Accounts Receivable, Net                          388,689     342,446
Inventories                                     1,196,659   1,166,756
Other Current Assets                               52,486      43,090
                                               ----------- -----------
     Total Current Assets                       1,655,515   1,565,731
Property and Equipment, Net                       453,865     368,504
Intangibles                                     1,233,984   1,085,034
Other Assets                                       78,250     117,912
                                               ----------- -----------
     Total Assets                              $3,421,614  $3,137,181
                                               =========== ===========

Liabilities and Stockholders' Equity
Floor Plan Notes Payable                       $1,090,476  $1,122,065
Accounts Payable and Accrued Expenses             439,729     347,098
Current Portion Long-Term Debt                        952       8,574
                                               ----------- -----------
     Total Current Liabilities                  1,531,157   1,477,737
Long-Term Debt                                    682,052     643,145
Other Long-Term Liabilities                       177,124     187,887
                                               ----------- -----------
     Total Liabilities                          2,390,333   2,308,769
Stockholders' Equity                            1,031,281     828,412
                                               ----------- -----------
     Total Liabilities and Stockholders'
      Equity                                   $3,421,614  $3,137,181
                                               =========== ===========
                        UNITED AUTO GROUP, INC.
                             Selected Data

                             Third Quarter             Nine Months
                       ----------------------- -----------------------
                             2004        2003        2004        2003
                       ----------- ----------- ----------- -----------
Units
     New Retail Units      50,099      47,486     137,360     128,791
     Used Retail Units     23,788      23,055      69,077      66,563
                       ----------- ----------- ----------- -----------
          Total Retail
           Units           73,887      70,541     206,437     195,354
                       =========== =========== =========== ===========

Same-Store Retail
 Revenue
     New Vehicles      $1,406,929  $1,366,191  $3,810,260  $3,594,199
     Used Vehicles        497,820     481,403   1,349,550   1,311,928
     Finance and
      Insurance            54,776      56,428     151,139     151,334
     Service and Parts    237,323     214,300     653,697     581,035
                       ----------- ----------- ----------- -----------
       Total Same-
        Store Retail
        Revenue        $2,196,848  $2,118,322  $5,964,646  $5,638,496
                       =========== =========== =========== ===========

Same-Store Retail
 Revenue Growth
     New Vehicles             3.0%        9.9%        6.0%        7.4%
     Used Vehicles            3.4%       13.1%        2.9%       10.8%
     Finance and
      Insurance             (2.9%)       17.2%      (0.1%)       16.2%
     Service and Parts       10.7%       11.7%       12.5%        9.3%

Revenue Mix
     New Vehicles            58.3%       60.0%       57.4%       58.9%
     Used Vehicles           21.1%       21.1%       21.7%       21.8%
     Finance and
      Insurance               2.2%        2.5%        2.2%        2.5%
     Service and Parts        9.9%        9.4%       10.1%        9.5%
     Fleet                    1.5%        1.1%        1.4%        1.4%
     Wholesale                7.0%        6.0%        7.2%        5.9%

Retail Gross Margin -
 by Product
     New Vehicles             8.4%        8.2%        8.5%        8.3%
     Used Vehicles            8.7%        9.3%        8.9%        9.3%
     Finance and
      Insurance             100.0%      100.0%      100.0%      100.0%
     Service and Parts       52.8%       52.9%       53.5%       53.0%

Gross Profit per
 Transaction
     New Vehicles          $2,630      $2,383      $2,645      $2,422
     Used Vehicles          2,061       1,962       2,091       1,932
     Finance and
      Insurance               807         813         804         801
                        UNITED AUTO GROUP, INC.
                       Selected Data (Continued)

                                   Third Quarter       Nine Months
                                 ----------------- -------------------
                                    2004     2003      2004      2003
                                 -------- -------- --------- ---------
Brand Mix:
     Toyota/Lexus                     21%      23%       22%       22%
     BMW                              14%      14%       15%       14%
     Mercedes                         10%      10%       10%       10%
     Honda/Acura                      12%      11%       11%       12%
     General Motors                   10%      10%        9%       11%
     Ford Premier Group                7%       8%        8%        8%
     Chrysler                          5%       6%        5%        6%
     Nissan/Infiniti                   4%       5%        4%        5%
     Ford                              4%       4%        4%        5%
     Other                            13%       9%       12%        7%

Debt to Total Capital Ratio           40%      50%       40%       50%

Adjusted EBITDA (a)              $75,716  $62,245  $202,810  $166,820
Rent Expense                     $27,150  $21,246   $74,432   $60,893
(a) Adjusted EBITDA is defined as income from continuing operations
    before minority interests, income tax provision, other interest
    expense, depreciation and amortization. While Adjusted EBITDA
    should not be construed as a substitute for income from continuing
    operations or as a better measure of liquidity than cash flows
    from operating activities, each of which is determined in
    accordance with U.S. GAAP, it is included in this press release to
    provide additional information regarding the amount of cash our
    business is generating. This measure may not be comparable to
    similarly titled measures reported by other companies. Following
    is a reconciliation of income from continuing operations before
    minority interests and income tax provision and Adjusted EBITDA:

                                     Third Quarter      Nine Months
                                                     -----------------
                                      2004     2003      2004    2003
                                   -------- -------- --------- -------
Income from continuing operations
  before minority interests and
   income  tax
  provision                         $ 50.6   $ 43.0   $ 138.9  $112.0
Other interest expense                10.5     11.1      31.3    32.2
Depreciation and amortization         14.7      8.1      32.6    22.6
                                   -------- -------- --------- -------
Adjusted EBITDA                      $75.7    $62.2    $202.8  $166.8
                                   ======== ======== ========= =======

    CONTACT: United Auto Group, Inc.
             Roger Penske, 248-648-2400
             or
             Finance
             Jim Davidson, 201-325-3303
             Email: jdavidson@unitedauto.com
             or
             Investor Relations
             Tony Pordon, 248-648-2540
             Email: tpordon@unitedauto.com

    SOURCE: United Auto Group, Inc.