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Press Release

Penske Automotive Reports First Quarter Results

  • Income From Continuing Operations of $16.2 Million, or $0.18 Per Share
  • Reduces Inventory by $233 Million, or 15%
  • Repurchases $69 Million of 3.5% Convertible Notes

BLOOMFIELD HILLS, Mich., May 05, 2009 (BUSINESS WIRE) -- Penske Automotive Group, Inc. (NYSE: PAG), an international automotive retailer, today reported first quarter income from continuing operations of $16.2 million, or $0.18 per share. This compares to income from continuing operations of $32.3 million, or $0.33 per share, in the first quarter last year. In the quarter, the Company recorded a $6.5 million, or $0.07 per share, after-tax gain relating to the repurchase of $69 million principal amount of the Company's 3.5% Senior Subordinated Convertible Notes due 2026. Excluding this gain, adjusted income from continuing operations amounted to $9.7 million, or $0.11 per share.

Total revenue was $2.2 billion compared to $3.2 billion in the same period last year. The decline in revenue versus the comparable prior year period was driven principally by a 31.2% decrease in total retail sales. The retail sales decline included a 34.5% same-store retail revenue decrease, due largely to a 35.1% decrease in same-store new vehicle unit sales and changes in exchange rates. Despite broad weakness in the new vehicle market in the U.S. and the U.K., the Company's used vehicle business performed relatively well. Retail used units sold increased 1.6%, despite a 4.2% decrease on a same-store basis, as customers looked for value-priced alternatives to meet their transportation needs. The service and parts business also performed well, declining 8.8% in total, but only 2.6% on a same-store basis excluding changes relating to exchange rates.

"In light of the challenging economic conditions in all of our markets, we are pleased with the performance of our business in the first quarter," said Penske Automotive Group Chairman Roger Penske. "Despite new vehicle sales approaching a 30 year low in the U.S. and a 30% decline in new vehicle registrations in the U.K. in the March registration period, our ability to reduce costs and inventory levels helped us achieve profitability in the first quarter. In total, we reduced our inventories by $233 million and improved our days supply of new vehicles to 69 days from 105 days at the end of 2008. I am particularly pleased to note that the cost reduction initiatives implemented by the Company have resulted in a decrease in SG&A as a percentage of gross profit to 85.0% in the first quarter, compared to 89.4% on an adjusted basis in the fourth quarter of 2008."

Mr. Penske continued, "We continue to evaluate ways to operate more efficiently, and remain focused on maintaining liquidity and flexibility. I am pleased to report that we are in compliance with all of our debt covenants, and expect to remain in compliance over the next twelve months."

Securities Repurchase Authority

The Company's Board of Directors previously approved repurchases of up to $150 million of our outstanding common stock, debt and convertible debt. During the first quarter, the Company repurchased $69 million principal amount of its 3.5% Senior Subordinated Convertible Notes due 2026 for $52 million in cash. After these purchases, the Company has an additional $44 million remaining under its securities repurchase authority. As of March 31, 2009, approximately $306 million principal amount of the 3.5% Senior Subordinated Convertible Notes due 2026 remained outstanding.

smart USA

During the first quarter, smart USA wholesaled 5,714 units, and for the year expects to wholesale approximately 20,000 units. In addition, smart USA's distribution of parts is increasing due to the growing number of smart units in operation. During the quarter, smart USA approved two new retail centers, expanding the smart retail network in the U.S. to 75 franchises.

Conference Call

Penske Automotive will host a conference call discussing financial results relating to the first quarter of 2009 on May 5, 2009, at 2:00 p.m.EDT. To listen to the conference call, participants must dial (800) 230-1096 [International, please dial (612) 332-7515]. The call will be simultaneously broadcast over the Internet through the Penske Automotive Group website at www.penskeautomotive.com.

About Penske Automotive

Penske Automotive Group, Inc., headquartered in Bloomfield Hills, Michigan, operates 310 retail automotive franchises, representing 40 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 158 franchises in 19 states and Puerto Rico and 152 franchises located outside the United States, primarily in the United Kingdom. Penske Automotive is also the exclusive distributor of the smart fortwo through its wholly-owned subsidiary smart USA Distributor LLC. smart USA supports 75 smart retail centers in the United States. Penske Automotive is a member of the Fortune 200 and Russell 1000 and has approximately 14,000 employees. smart and fortwo are registered trademarks of Daimler AG.

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 and earnings potential and its ability to reduce its variable expenses. Actual results may vary materially because of risks and uncertainties, including external factors such as consumer credit conditions, any potential restructuring of the U.S. automotive sector, macro-economic factors, 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 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, 2008, 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.

This release contains certain non-GAAP financial measures as defined under SEC rules, such as adjusted income from continuing operations and related earnings per share, which exclude certain items disclosed in the release. 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 and the period-to-period comparability of the Company's results from operations.

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

First Quarter

   

2009

 

2008

Revenues:        
New Vehicle   $972,127     $1,625,950  
Used Vehicle   614,630     794,063  
Finance and Insurance, Net   48,409     73,877  
Service and Parts   327,554     359,142  
Distribution   80,113     63,770  
Fleet and Wholesale Vehicle   115,043     258,535  
Total Revenues   2,157,876     3,175,337  
Cost of Sales:        
New Vehicle   900,750     1,489,357  
Used Vehicle   558,650     728,295  
Service and Parts   150,453     157,885  
Distribution   68,314     53,617  
Fleet and Wholesale Vehicle   111,418     257,696  
Total Cost of Sales   1,789,585     2,686,850  
Gross Profit   368,291     488,487  
SG&A Expenses   313,002     394,072  
Depreciation and Amortization   12,872     13,291  
Operating Income   42,417     81,124  
Floor Plan Interest Expense   (9,515 )   (17,026 )
Other Interest Expense   (14,494 )   (11,911 )
Debt Discount Amortization   (3,638 )   (3,496 )
Equity in Earnings of Affiliates   714     1,392  
Gain on Debt Repurchase   10,429     - -  
Income from Continuing Operations Before            
Income Taxes   25,913     50,083  
Income Taxes   (9,717 )   (17,809 )
Income from Continuing Operations   16,196     32,274  
Income from Discontinued Operations, Net of Tax   6     57  
Net Income   16,202     32,331  
Income (Loss) Attributable to Non-Controlling Interests   80     (435 )
Net Income Attributable to Penske Automotive Group Common Shareholders   $16,282     $31,896  
Income from Continuing Operations Per Diluted Share   $0.18     $0.33  
Income Per Diluted Share   $0.18     $0.33  
Diluted Weighted Average Shares Outstanding   91,501     95,252  
Amounts Attributable to Penske Automotive Group Common Shareholders:        
Reported Income from Continuing Operations   $16,196     $32,274  
Income (Loss) Attributable to Non-Controlling Interests   80     (435 )
Income from Continuing Operations, net of tax   16,276     31,839  
Income from Discontinued Operations, net of tax   6     57  
Net Income   $16,282     $31,896  
         
PENSKE AUTOMOTIVE GROUP, INC.
Consolidated Condensed Balance Sheets
(Amounts In Thousands)
(Unaudited)
         
   

3/31/09

 

12/31/08

Assets        
Cash and Cash Equivalents   $11,458   $20,109
Accounts Receivable, Net   312,039   294,567
Inventories   1,360,239   1,593,267
Other Current Assets   91,193   88,378
Assets Held for Sale   8,411   9,739
Total Current Assets   1,783,340   2,006,060
Property and Equipment, Net   666,602   662,493
Intangibles   970,681   974,649
Other Long-Term Assets   304,492   318,947
Total Assets   $3,725,115   $3,962,149
         
Liabilities and Stockholders' Equity        
Floor Plan Notes Payable   $847,711   $968,873
Floor Plan Notes Payable - Non-Trade   389,491   511,357
Accounts Payable   201,798   178,811
Accrued Expenses   199,085   196,274
Current Portion Long-Term Debt   11,132   11,305
Liabilities Held for Sale   10,592   13,492
Total Current Liabilities   1,659,809   1,880,112
Long-Term Debt   1,008,093   1,052,060
Other Long-Term Liabilities   228,743   221,556
Total Liabilities   2,896,645   3,153,728
Stockholders' Equity   828,470   808,421
Total Liabilities and Stockholders' Equity   $3,725,115   $3,962,149
     
PENSKE AUTOMOTIVE GROUP, INC.
Selected Data
     
   

Three Months

   

2009

 

2008

Total Retail Units:        
New Retail   30,668     45,188  
Used Retail   26,811     26,402  
Total Retail   57,479     71,590  
         
smart Wholesale Units   5,714     4,913  
         
Same-Store Retail Units:        
New Same-Store Retail   28,963     44,645  
Used Same-Store Retail   25,113     26,208  
Total Same-Store Retail   54,076     70,853  
         
Same-Store Retail Revenue:        
New Vehicles   $918,217     $1,606,962  
Used Vehicles   574,653     788,940  
Finance and Insurance, Net   46,331     73,215  
Service and Parts   310,381     353,380  
Total Same-Store Retail   $1,849,582     $2,822,497  
         
Same-Store Retail Revenue Growth:        
New Vehicles   (42.9 %)   (5.4 %)
Used Vehicles   (27.2 %)   2.1 %
Finance and Insurance, Net   (36.7 %)   5.3 %
Service and Parts   (12.2 %)   1.0 %
         
Revenue Mix:        
New Vehicles   45.1 %   51.2 %
Used Vehicles   28.5 %   25.0 %
Finance and Insurance, Net   2.2 %   2.3 %
Service and Parts   15.2 %   11.3 %
Distribution   3.7 %   2.0 %
Fleet and Wholesale   5.3 %   8.2 %
         
Average Retail Selling Price:        
New Vehicles   $31,698     $35,982  
Used Vehicles   22,925     30,076  
         
Gross Margin   17.1 %   15.4 %
         
Retail Gross Margin - by Product:        
New Vehicles   7.3 %   8.4 %
Used Vehicles   9.1 %   8.3 %
Service and Parts   54.1 %   56.0 %
         
PENSKE AUTOMOTIVE GROUP, INC.
Selected Data (Continued)
         
   

Three Months

   

2009

 

2008

Gross Profit per Retail Transaction:        
New Vehicles   $2,327     $3,023  
Used Vehicles   2,088     2,491  
Finance and Insurance   842     1,032  
         
Brand Mix:        
BMW   23 %   22 %
Toyota / Lexus   19 %   19 %
Honda / Acura   14 %   14 %
Mercedes Benz   10 %   10 %
Audi   10 %   8 %
Land Rover   4 %   5 %
Ferrari / Maserati   3 %   4 %
Porsche   3 %   3 %
Other   14 %   15 %
    100 %   100 %
         
Premium   65 %   66 %
Foreign   30 %   29 %
Domestic Big 3   5 %   5 %
    100 %   100 %
         
Revenue Mix:        
U.S.   64 %   61 %
International   36 %   39 %
    100 %   100 %
         
Rent Expense   $39,642     $39,896  
         
   

3/31/09

 

12/31/08

Debt to Total Capital Ratio   55 %   57 %
         
Debt Covenant Compliance (U.S.):        
Current Ratio (min 1.00:1)   1.07:1     1.07:1  
Fixed Charge Coverage Ratio (min 1.00:1)   1.17:1     1.24:1  
Ratio of Non-Floorplan Debt to Stockholders' Equity (max 1.30:1)  

0.77:1

    0.86:1  
Funded Debt to EBITDA Ratio (max 2.50:1)   1.48:1     1.26:1  
         
Debt Covenant Compliance (U.K.):        
Capital Expenditures (max £50 million)   £28.3   £29.5
EBITAR to Fixed Charges (min 1.40:1)   1.75x   1.76x
Debt to EBITAR (max 3.25:1)   0.82x   1.45x

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

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