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Penske Automotive Reports Fourth Quarter Results

Same-Store Retail Revenues Increase 9.1%
Adjusted Income From Continuing Operations Increases 52% to $29.5 Million
Adjusted Earnings Per Share From Continuing Operations Increases 52% to $0.32 Per Share

BLOOMFIELD HILLS, Mich., Feb 16, 2011 (BUSINESS WIRE) -- Penske Automotive Group, Inc. (NYSE: PAG), an international automotive retailer, today reported adjusted fourth quarter income from continuing operations attributable to common shareholders of $29.5 million, or $0.32 per share, which compares to income from continuing operations attributable to common shareholders of $19.4 million, or $0.21 per share, in the fourth quarter last year. Adjusted fourth quarter 2010 income from continuing operations attributable to common shareholders excludes a net after-tax gain of $0.8 million, or $0.01 per share, relating to the items highlighted in the reconciliation in the attached selected data tables. Total revenue in the fourth quarter increased 13.5% to $2.8 billion.

Fourth Quarter Highlights

  • Total retail unit sales increase 13.9%
    • 18.9% in the United States
    • 3.7% Internationally
  • Total same-store retail revenues increase 9.1%
    • 13.5% in the United States
    • 2.0% Internationally
  • Long-term debt reduced by $167 million since the beginning of the year, including $74 million during the fourth quarter
  • Days supply of vehicle inventories as of December 31, 2010
    • 55 days for new
    • 43 days for used

"Our results exceeded my expectations," said Penske Automotive Group Chairman Roger Penske. "An improving retail environment in the U.S. drove our business in the fourth quarter, including a 13.8% increase in same-store total retail unit sales and a 7.0% increase in same-store service and parts revenues. In the U.K., our execution and our brand mix helped us to outperform the market and provide a strong contribution of profits despite difficult comparisons due to the government incentive programs in place last year."

Total revenues for the year ended December 31, 2010 increased 12.7% to $10.7 billion. Adjusted income from continuing operations attributable to common shareholders for the year ended December 31, 2010 amounted to $109.3 million, or $1.19 per share, which compares to adjusted income from continuing operations attributable to common shareholders of $80.2 million, or $0.87 per share, in the year ended December 31, 2009. Adjusted income from continuing operations attributable to common shareholders in the years ended December 31, 2010 and 2009 exclude net after-tax gains of $1.8 million ($0.02 per share) and $3.1 million ($0.03 per share), respectively, relating to the items highlighted in the reconciliations in the attached selected data tables.

smart USA

The distribution business generated after-tax losses of $5.8 million ($0.06 per share) and $15.9 million ($0.17 per share) in the three and twelve months ended December 31, 2010, respectively. Results for the fourth quarter and full year include after-tax expenses of $2.7 million ($0.03 per share) and $3.6 million in ($0.04), respectively, relating to the development of the five-door vehicle previously designed for distribution through the smart USA dealer network.

As previously announced, Mercedes-Benz USA and the Company have initiated discussions to transfer distribution of the smart fortwo to Mercedes-Benz USA. As a result, smart USA cancelled the project relating to the five-door vehicle.

Acquisition Activity

During 2010, the Company acquired 8 franchises and commenced operations at 16 franchises awarded by manufacturers. These 24 franchises are expected to generate approximately $400 million of revenue on an annualized basis.

Financing Activity

During 2010, the Company repurchased $155.7 million principal amount of its outstanding 3.5% Senior Subordinated Convertible Notes due 2026 (the "Convertible Notes") for $156.6 million in cash. The Company currently expects to use cash flow from operations, existing working capital, and borrowings under its U.S. revolving credit facility to fund the expected April 2011 redemption of the remaining $150.6 million principal amount of outstanding Convertible Notes. As of December 31, 2010, the Company had $300.0 million of revolving credit available under its U.S. credit facility.

The Company also has authorization to repurchase up to $150.0 million of its outstanding common stock, debt or convertible 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 fourth quarter of 2010 on February 16, 2011, at 2:00 p.m.Eastern Standard Time. To listen to the conference call, participants must dial (800) 230-1074 [International, please dial (612) 234-9960]. The call will also be simultaneously broadcast over the Internet through the Penske Automotive Group website at www.penskeautomotive.com.

About Penske Automotive

Penske Automotive Group, Inc. (www.penskeautomotive.com), headquartered in Bloomfield Hills, Michigan, operates 325 retail automotive franchises, representing 39 different brands and 25 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 172 franchises in 17 states and Puerto Rico and 153 franchises located outside the United States, primarily in the United Kingdom.

Penske Automotive, through its wholly-owned subsidiary smart USA Distributor LLC (www.smartusa.com), is the exclusive distributor of the smart fortwo vehicle and related parts in the United States. smart USA supports approximately 75 smart retail centers in the United States.

Penske Automotive is a member of the Fortune 500 and Russell 1000 and has approximately 14,500 employees. smart and fortwo are registered trademarks of Daimler AG.

Non-GAAP Financial Measures

This release contains certain non-GAAP financial measures as defined under SEC rules, such as adjusted income from continuing operations attributable to common shareholders and related earnings per share, EBITDA and adjusted EBITDA. The Company has reconciled these measures to the most directly comparable GAAP measures in the release. The Company believes that these non-GAAP financial measures improve the transparency of the Company's disclosure by providing period-to-period comparability of the Company's results from operations.

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 expected revenue, ability to access amounts under its U.S. revolving credit facility, and efforts to transition the smart USA distributorship. Actual results may vary materially because of risks and uncertainties, including external factors such as consumer credit conditions, adverse conditions affecting a particular manufacturer, macro-economic factors, interest rate fluctuations, changes in consumer spending, and other factors over which management has no control. Availability of revolving credit under the Company's U.S. credit facility is predicated on continued covenant compliance and other factors. Successful transition of the smart USA distributorship will depend on negotiation and completion of definitive documentation, regulatory approvals, and other factors. 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, 2009, 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.

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

Fourth Quarter

2010

2009

Revenues:
New Vehicle $1,451,352 $1,254,487
Used Vehicle 728,404 647,641
Finance and Insurance, Net 61,813 58,272
Service and Parts 342,841 322,934
Distribution 8,226 9,443
Fleet and Wholesale Vehicle 175,460 146,342
Total Revenues 2,768,096 2,439,119
Cost of Sales:
New Vehicle 1,328,404 1,149,149
Used Vehicle 676,005 598,426
Service and Parts 150,129 142,209
Distribution 7,403 10,631
Fleet and Wholesale Vehicle 174,832 145,229
Total Cost of Sales 2,336,773 2,045,644
Gross Profit 431,323 393,475
SG&A Expenses 360,203 327,620
Depreciation 12,053 13,523
Operating Income 59,067 52,332
Floor Plan Interest Expense (9,091) (8,060)
Other Interest Expense (11,776) (13,524)
Debt Discount Amortization (1,647) (3,135)
Equity in Earnings of Affiliates 8,844 2,092
Income from Continuing Operations Before Income Taxes 45,397 29,705
Income Taxes (14,573) (10,057)
Income from Continuing Operations 30,824 19,648
Loss from Discontinued Operations, Net of Tax (1,753) (759)
Net Income 29,071 18,889
Income Attributable to Non-Controlling Interests (562) (212)
Net Income Attributable to Common Shareholders $28,509 $18,677
Income from Continuing Operations Per Share $0.33 $0.21
Income Per Share $0.31 $0.20
Weighted Average Shares Outstanding 92,214 91,780
Amounts Attributable to Common Shareholders:
Reported Income from Continuing Operations $30,824 $19,648
Income Attributable to Non-Controlling Interests (562) (212)
Income from Continuing Operations, Net of Tax 30,262 19,436
Loss from Discontinued Operations, Net of Tax (1,753) (759)
Net Income $28,509 $18,677
PENSKE AUTOMOTIVE GROUP, INC.
Consolidated Statements of Income
(Amounts In Thousands, Except Per Share Data)
(Unaudited)

Year

2010

2009

Revenues:
New Vehicle $5,455,802 $4,654,569
Used Vehicle 2,940,296 2,597,155
Finance and Insurance, Net 251,954 222,281
Service and Parts 1,344,274 1,316,514
Distribution 51,401 179,159
Fleet and Wholesale Vehicle 669,858 534,478
Total Revenues 10,713,585 9,504,156
Cost of Sales:
New Vehicle 5,007,864 4,279,046
Used Vehicle 2,714,097 2,373,303
Service and Parts 580,601 591,159
Distribution 46,833 161,000
Fleet and Wholesale Vehicle 662,642 521,672
Total Cost of Sales 9,012,037 7,926,180
Gross Profit 1,701,548 1,577,976
SG&A Expenses 1,411,814 1,315,225
Depreciation 48,884 54,234
Operating Income 240,850 208,517
Floor Plan Interest Expense (34,981) (35,552)
Other Interest Expense (49,267) (55,201)
Debt Discount Amortization (8,637) (13,043)
Equity in Earnings of Affiliates 20,569 13,808
Gain on Debt Repurchase 1,634 10,429
Income from Continuing Operations Before Income Taxes 170,168 128,958
Income Taxes (57,912) (45,200)
Income from Continuing Operations 112,256 83,758
Loss from Discontinued Operations, Net of Tax (2,909) (6,838)
Net Income 109,347 76,920
Income Attributable to Non-Controlling Interests (1,066) (459)
Net Income Attributable to Common Shareholders $108,281 $76,461
Income from Continuing Operations Per Share $1.21 $0.91
Income Per Share $1.18 $0.83
Weighted Average Shares Outstanding 92,091 91,653
Amounts Attributable to Common Shareholders:
Reported Income from Continuing Operations $112,256 $83,758
Income Attributable to Non-Controlling Interests (1,066) (459)
Income from Continuing Operations, Net of Tax 111,190 83,299
Loss from Discontinued Operations, Net of Tax (2,909) (6,838)
Net Income $108,281 $76,461
PENSKE AUTOMOTIVE GROUP, INC.
Consolidated Condensed Balance Sheets
(Amounts In Thousands)
(Unaudited)

12/31/10

12/31/09

Assets
Cash and Cash Equivalents $16,621 $13,999
Accounts Receivable, Net 397,255 321,226
Inventories 1,524,226 1,302,495
Other Current Assets 70,341 95,426
Assets Held for Sale -- 10,625
Total Current Assets 2,008,443 1,743,771
Property and Equipment, Net 739,847 726,808
Intangibles 1,018,316 1,011,803
Other Long-Term Assets 303,226 313,625
Total Assets $4,069,832 $3,796,007
Liabilities and Equity
Floor Plan Notes Payable $973,285 $769,657
Floor Plan Notes Payable - Non-Trade 505,430 423,316
Accounts Payable 261,986 189,989
Accrued Expenses 207,498 227,294
Current Portion Long-Term Debt 10,593 12,442
Liabilities Held for Sale -- 7,675
Total Current Liabilities 1,958,792 1,630,373
Long-Term Debt 769,285 933,966
Other Long-Term Liabilities 295,902 285,629
Total Liabilities 3,023,979 2,849,968
Equity 1,045,853 946,039
Total Liabilities and Equity $4,069,832 $3,796,007
PENSKE AUTOMOTIVE GROUP, INC.
Selected Data
(Unaudited)

Fourth Quarter

Year

2010

2009

2010

2009

Total Retail Units:
New Retail 39,033 35,176 155,352 140,661
Used Retail 27,705 23,395 113,676 102,208
Total 66,738 58,571 269,028 242,869
smart Wholesale Units 884 998 5,045 13,772
Same-Store Retail Units:
New Same-Store Retail 37,386 35,168 149,376 140,087
Used Same-Store Retail 26,657 23,380 109,813 101,578
Total 64,043 58,548 259,189 241,665
Same-Store Retail Revenue:
New Vehicles $1,392,903 $1,253,863 $5,221,327 $4,615,701
Used Vehicles 705,514 647,154 2,824,175 2,559,534
Finance and Insurance, Net 59,980 58,266 244,184 220,704
Service and Parts 329,720 321,525 1,300,007 1,304,400
Total $2,488,117 $2,280,808 $9,589,693 $8,700,339
Same-Store Retail Revenue Growth:
New Vehicles 11.1% 18.2% 13.1% (24.0%)
Used Vehicles 9.0% 19.1% 10.3% (12.9%)
Finance and Insurance, Net 2.9% 34.1% 10.6% (16.9%)
Service and Parts 2.5% (1.6%) (0.3%) (8.6%)
Total 9.1% 15.5% 10.2% (18.8%)
Revenue Mix:
New Vehicles 52.4% 51.4% 50.9% 49.0%
Used Vehicles 26.3% 26.6% 27.4% 27.3%
Finance and Insurance, Net 2.2% 2.4% 2.4% 2.3%
Service and Parts 12.4% 13.2% 12.5% 13.9%
Distribution 0.3% 0.4% 0.5% 1.9%
Fleet and Wholesale 6.4% 6.0% 6.3% 5.6%
Average Retail Selling Price:
New Vehicles $37,183 $35,663 $35,119 $33,091
Used Vehicles 26,291 27,683 25,866 25,410
Gross Margin 15.6% 16.1% 15.9% 16.6%
Retail Gross Margin - by Product:
New Vehicles 8.5% 8.4% 8.2% 8.1%
Used Vehicles 7.2% 7.6% 7.7% 8.6%
Service and Parts 56.2% 56.0% 56.8% 55.1%
PENSKE AUTOMOTIVE GROUP, INC.
Selected Data (Continued)
(Unaudited)

Fourth Quarter

Year

2010

2009

2010

2009

Gross Profit per Retail Transaction:
New Vehicles $3,150 $2,995 $2,883 $2,670
Used Vehicles 1,891 2,104 1,990 2,190
Finance and Insurance 926 995 937 915
Brand Mix:
BMW / MINI 23% 22% 21% 22%
Toyota / Lexus 17% 19% 18% 19%
Honda / Acura 13% 13% 14% 14%
Mercedes Benz / smart 11% 11% 10% 10%
Audi 10% 10% 10% 10%
Land Rover 4% 5% 5% 4%
Porsche 4% 4% 4% 4%
Ferrari / Maserati 3% 3% 3% 3%
Other 15% 13% 15% 14%
100% 100% 100% 100%
Premium 68% 67% 66% 65%
Foreign 27% 28% 29% 30%
Domestic Big 3 5% 5% 5% 5%
100% 100% 100% 100%
Revenue Mix:
U.S. 65% 62% 63% 63%
International 35% 38% 37% 37%
100% 100% 100% 100%
Rent Expense $44,479 $41,602 $169,342 $162,992
EBITDA* $70,873 $59,887 $276,956 $251,436
Adjusted EBITDA* $69,722 $59,887 $274,171 $246,231
* See the following Non-GAAP reconciliation tables

Reconciliation of 2010 and 2009 reported and adjusted income from continuing operations attributable to common shareholders of PAG and related earnings per share:

Fourth Quarter

2010

2009

Income

EPS

Income

EPS

Income from continuing operations attributable to common shareholders of PAG

$30,262

$0.33

$19,436

$0.21

Gain on sale of investment (3,595) (0.04) -- --
Franchise closure/relocation costs 2,814 0.03 -- --
Adjusted income from continuing operations attributable to PAG

$29,481

$0.32

$19,436

$0.21

Twelve Months

2010

2009

Income

EPS

Income

EPS

Income from continuing operations attributable to common shareholders of PAG

$111,190

$1.21

$83,299

$0.91

Gain on sale of investment (3,595) (0.04) -- --
Franchise closure/relocation costs 2,814 0.03 778 0.01
Gain on debt repurchase (1,062) (0.01) (6,518) (0.07)
Costs relating to Saturn transaction -- -- 1,926 0.02
Hedge de-designation costs -- -- 686 0.01
Adjusted income from continuing operations attributable to PAG

$109,347

$1.19

$80,171

$0.87

Reconciliation of 2010 and 2009 net income to EBITDA and adjusted EBITDA:

Fourth Quarter

Twelve Months

2010

2009

2010

2009

Net income $29,071 $18,889 $109,347 $76,920
Depreciation 12,053 13,523 48,884 54,234
Other interest expense 11,776 13,524 49,267 55,201
Debt discount amortization 1,647 3,135 8,637 13,043
Income taxes 14,573 10,057 57,912 45,200
Loss from discontinued operations, net of tax

1,753

759

2,909

6,838

EBITDA 70,873 59,887 276,956 251,436
Gain on sale of investment (5,295) -- (5,295) --
Franchise closure/relocation costs 4,144 -- 4,144 1,200
Gain on debt repurchase -- -- (1,634) (10,429)
Costs relating to Saturn transaction -- -- -- 2,967
Hedge de-designation costs -- -- -- 1,057
Adjusted EBITDA $69,722 $59,887 $274,171 $246,231

SOURCE: Penske Automotive Group, Inc.

Penske Automotive Group, Inc.
Bob O'Shaughnessy
Chief Financial Officer
248-648-2800
boshaughnessy@penskeautomotive.com
or
Anthony R. Pordon
Senior Vice President
248-648-2540
tpordon@penskeautomotive.com