Penske Automotive Reports Second Quarter Results

July 21, 2011

Total Revenue Increases 10.5% to $2.9 Billion

Total Same-Store Retail Revenue Increases 9.8%

EPS from Continuing Operations Increases 27% to $0.43

Repurchased $87.3 Million in Convertible Debt

BLOOMFIELD HILLS, Mich.--(BUSINESS WIRE)-- Penske Automotive Group, Inc. (NYSE:PAG), an international automotive retailer, today reported 2011 second quarter income from continuing operations attributable to common shareholders of $39.9 million, or $0.43 per share, which compares to income from continuing operations of $31.0 million, or $0.34 per share for the second quarter last year.

Total revenue increased by $273.8 million, or 10.5%, to $2.9 billion on a 6.3% increase in total retail unit sales. The revenue increase was highlighted by higher average transaction prices on both new and used vehicles during the quarter, including a 13.8% increase in same-store retail revenue from the Company’s premium/luxury brands. The parts and service business remained resilient, increasing 7.5% in the quarter; 6.0% on a same-store basis.

Highlights of the Second Quarter

  • Total retail unit sales increased 6.3% to 70,873
    • +7.4% in the United States; +3.7% Internationally
    • New unit retail sales (1.1%); Used unit retail sales +16.1%
  • Same-store retail revenue increased 9.8%
    • New +6.2%; Used +17.6%; Finance & Insurance +10.8%; Service and Parts +6.0%
    • +7.5% in the United States; +13.6% Internationally
  • Average Gross Profit Per Unit
    • New $3,196/unit, +12.4%; Gross Margin 8.5%
    • Used $2,194/unit, +6.0%; Gross Margin 8.2%

“Although we faced a challenging inventory situation as a result of the Japan earthquake, our business model continued to prove its resiliency and delivered another solid quarter,” said Penske Automotive Group Chairman Roger Penske. “We offset the 1.1% decline in new retail unit sales with a 16.1% increase in used retail vehicle sales and higher gross profit per new and used retail unit sold. Additionally, the Company’s premium luxury brand mix in the U.K. continued to perform well, as same-store retail sales of new units outperformed overall U.K market registrations, which declined by 5.2% in the second quarter according to industry data.”

Commenting on the impact of the earthquake and tsunami that struck Japan, Penske said, “Our OEM partners have made substantial progress in their ability to increase production earlier than originally anticipated. We continue to expect supply challenges of certain brands during the third quarter; however, we expect the situation to continue improving and remain confident in our ability to manage through any continued supply disruption.”

Total revenue for the six months ended June 30, 2011 increased 12.8% to $5.7 billion. Income from continuing operations attributable to common shareholders increased 41.7%, to $78.0 million or $0.84 per share, which compares to income from continuing operations of $55.0 million, or $0.60 per share for the six months ended June 30, 2010.

Acquisition Activity

As previously announced, the Company recently completed the acquisition of Crevier BMW-MINI, in Santa Ana, California, and Mercedes-Benz of Greenwich in Connecticut. In total, the Company has acquired seven franchises in 2011, which are expected to generate approximately $525 million of annual revenue. These transactions were financed using working capital and availability under the Company’s U.S. revolving credit facility.

Securities Repurchase Activity

During the second quarter of 2011, the Company acquired 618,209 shares of its common stock at an average price of $20.06 per share. Also during the quarter, holders of the Company's 3.5% Senior Subordinated Convertible Notes Due 2026 (the "Notes") tendered $87.3 million of the $150.6 million outstanding principal amount of the Notes to the Company. The Company completed the purchase of the Notes using its revolving credit facility and available cash on hand. The remaining $63.3 million of the Notes may be redeemed by the Company at any time by paying par value and any applicable conversion premium.

The Company currently has authorization to repurchase up to $138.6 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 second quarter of 2011 on July 21, 2011, at 2:00 p.m.Eastern Daylight Time. To listen to the conference call, participants must dial (800) 230-1096 [International, please dial (612) 332-0107]. 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 327 retail automotive franchises, representing 42 different brands and 26 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 155 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 15,000 employees.

Non-GAAP Financial Measures

This release contains certain non-GAAP financial measures as defined under SEC rules, such as earnings before interest, taxes, depreciation and amortization (“EBITDA”). The Company has reconciled this measure to the most directly comparable GAAP measure in the release. The Company believes that this widely accepted measure of operating profitability improves the transparency of the Company's disclosures. This non-GAAP financial measure is not a substitute 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. Actual results may vary materially because of risks and uncertainties as well as external factors such as consumer credit conditions; adverse conditions affecting a particular manufacturer, including the adverse impact to the vehicle and parts supply chain due to the earthquake and tsunami that struck Japan in March 2011; 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, 2010, 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 Statements of Income
(Amounts In Thousands, Except Per Share Data)
(Unaudited)
 
  Three Months Ended
June 30,
2011   2010
Revenues:
New Vehicle $ 1,422,267 $ 1,314,904
Used Vehicle 879,907 736,336
Finance and Insurance, Net 69,202 61,666
Service and Parts 348,018 323,824
Fleet and Wholesale Vehicle   169,026     177,872  
Total Revenues   2,888,420     2,614,602  
Cost of Sales:
New Vehicle 1,301,352 1,206,216
Used Vehicle 807,425 677,382
Service and Parts 149,040 138,558
Fleet and Wholesale Vehicle   166,963     175,640  
Total Cost of Sales 2,424,780 2,197,796
Gross Profit 463,640 416,806
SG&A Expenses 380,350 339,676
Depreciation   12,093     11,516  
Operating Income 71,197 65,614
Floor Plan Interest Expense (7,113 ) (7,983 )
Other Interest Expense (10,575 ) (12,542 )
Debt Discount Amortization - (2,428 )
Equity in Earnings of Affiliates 7,882 4,784
Gain on Debt Repurchase   -     422  
Income from Continuing Operations Before Income Taxes 61,391 47,867
Income Taxes   (20,996 )   (16,628 )
Income from Continuing Operations 40,395 31,239
Loss from Discontinued Operations, Net of Tax   (336 )   (1,555 )
Net Income 40,059 29,684
Income Attributable to Non-Controlling Interests   (499 )   (243 )
Net Income Attributable to Common Shareholders $ 39,560   $ 29,441  
Income from Continuing Operations Per Share $ 0.43   $ 0.34  
Income Per Share $ 0.43   $ 0.32  
Weighted Average Shares Outstanding   92,570     92,206  
Amounts Attributable to Common Shareholders:
Reported Income from Continuing Operations $ 40,395 $ 31,239
Income Attributable to Non-Controlling Interests   (499 )   (243 )
Income from Continuing Operations, net of tax 39,896 30,996
Loss from Discontinued Operations, net of tax   (336 )   (1,555 )
Net Income $ 39,560   $ 29,441  
 
PENSKE AUTOMOTIVE GROUP, INC.
Consolidated Statements of Income
(Amounts In Thousands, Except Per Share Data)
(Unaudited)
 
  Six Months Ended
June 30,
2011   2010
Revenues:
New Vehicle $ 2,823,614 $ 2,516,795
Used Vehicle 1,692,501 1,421,466
Finance and Insurance, Net 135,676 119,550
Service and Parts 696,209 649,606
Fleet and Wholesale Vehicle   335,907     331,372  
Total Revenues   5,683,907     5,038,789  
Cost of Sales:
New Vehicle 2,591,388 2,308,806
Used Vehicle 1,554,114 1,306,620
Service and Parts 299,014 281,113
Fleet and Wholesale Vehicle   330,674     325,392  
Total Cost of Sales 4,775,190 4,221,931
Gross Profit 908,717 816,858
SG&A Expenses 738,462 666,039
Depreciation   24,031     23,374  
Operating Income 146,224 127,445
Floor Plan Interest Expense (14,131 ) (16,125 )
Other Interest Expense (21,976 ) (25,262 )
Debt Discount Amortization (1,718 ) (5,343 )
Equity in Earnings of Affiliates 7,904 4,355
Gain on Debt Repurchase   -     1,027  
Income from Continuing Operations Before Income Taxes 116,303 86,097
Income Taxes   (37,784 )   (30,878 )
Income from Continuing Operations 78,519 55,219
Loss from Discontinued Operations, Net of Tax   (4,463 )   (5,203 )
Net Income 74,056 50,016
Income Attributable to Non-Controlling Interests   (569 )   (221 )
Net Income Attributable to Common Shareholders $ 73,487   $ 49,795  
Income from Continuing Operations Per Share $ 0.84   $ 0.60  
Income Per Share $ 0.79   $ 0.54  
Weighted Average Shares Outstanding   92,514     92,086  
Amounts Attributable to Common Shareholders:
Reported Income from Continuing Operations $ 78,519 $ 55,219
Income Attributable to Non-Controlling Interests   (569 )   (221 )
Income from Continuing Operations, net of tax 77,950 54,998
Loss from Discontinued Operations, net of tax   (4,463 )   (5,203 )
Net Income $ 73,487   $ 49,795  
 
PENSKE AUTOMOTIVE GROUP, INC.
Consolidated Condensed Balance Sheets
(Amounts In Thousands)
(Unaudited)
   
June 30,December 31,
20112010
 
Assets
Cash and Cash Equivalents $ 3,346 $ 17,868
Accounts Receivable, Net 365,794 383,675
Inventories 1,456,409 1,453,546
Other Current Assets 91,772 68,457
Assets Held for Sale   56,826   110,485
Total Current Assets 1,974,147 2,034,031
Property and Equipment, Net 776,386 720,834
Intangibles 1,032,914 1,011,889
Other Long-Term Assets   303,432   303,078
Total Assets $ 4,086,879 $ 4,069,832
 
Liabilities and Equity
Floor Plan Notes Payable $ 854,224 $ 922,295
Floor Plan Notes Payable – Non-Trade 562,906 492,595
Accounts Payable 215,923 253,424
Accrued Expenses 232,431 202,644
Current Portion Long-Term Debt 10,285 10,593
Liabilities Held for Sale   52,480   79,455
Total Current Liabilities 1,928,249 1,961,006
Long-Term Debt 706,522 769,285
Other Long-Term Liabilities   331,877   293,688
Total Liabilities 2,966,648 3,023,979
Equity   1,120,231   1,045,853
Total Liabilities and Equity $ 4,086,879 $ 4,069,832
 
PENSKE AUTOMOTIVE GROUP, INC.
Selected Data
(Unaudited)
 
  Three Months Ended   Six Months Ended
June 30,June 30,
2011   20102011   2010
Total Retail Units:
New Retail 37,830 38,238 76,703 73,307
Used Retail   33,043   28,466   63,954   54,569
Total Retail   70,873   66,704   140,657   127,876
 
Same-Store Retail Units:
New Same-Store Retail 37,231 38,238 73,543 72,200
Used Same-Store Retail   32,524   28,466   61,131   53,825
Total Same-Store Retail   69,755   66,704   134,674   126,025
 
Same-Store Retail Revenue:
New Vehicles $ 1,396,807 $ 1,314,904 $ 2,701,047 $ 2,479,693
Used Vehicles 866,181 736,332 1,624,448 1,404,974
Finance and Insurance, Net 68,336 61,668 131,976 118,439
Service and Parts   343,327   323,821   670,260   642,733
Total Same-Store Retail $ 2,674,651 $ 2,436,725 $ 5,127,731 $ 4,645,839
 
Same-Store Retail Revenue Growth:
New Vehicles 6.2% 19.5% 8.9% 22.1%
Used Vehicles 17.6% 10.3% 15.6% 10.4%
Finance and Insurance, Net 10.8% 13.4% 11.4% 16.4%
Service and Parts 6.0% -2.2% 4.3% -0.3%
 
Revenue Mix:
New Vehicles 49.2% 50.3% 49.7% 49.9%
Used Vehicles 30.5% 28.2% 29.8% 28.2%
Finance and Insurance, Net 2.4% 2.4% 2.4% 2.4%
Service and Parts 12.0% 12.4% 12.2% 12.9%
Fleet and Wholesale 5.9% 6.7% 5.9% 6.6%
 
Average Retail Selling Price:
New Vehicles $ 37,596 $ 34,387 $ 36,812 $ 34,332
Used Vehicles 26,629 25,867 26,464 26,049
 
Operating items as a percentage of revenue:
New Vehicle Gross Profit 8.5% 8.3% 8.2% 8.3%
Used Vehicle Gross Profit 8.2% 8.0% 8.2% 8.1%
Service and Parts Gross Profit 57.2% 57.2% 57.1% 56.7%
Total Gross Profit 16.1% 15.9% 16.0% 16.2%
Selling, general and administrative expenses 13.2% 13.0% 13.0% 13.2%
Operating income 2.5% 2.5% 2.6% 2.5%
 
Operating items as a percentage of total gross profit:
Selling, general and administrative expenses 82.0% 81.5% 81.3% 81.5%
Operating income 15.4% 15.7% 16.1% 15.6%
 
PENSKE AUTOMOTIVE GROUP, INC.
Selected Data (Continued)
(Unaudited)
 
  Three Months Ended   Six Months Ended
June 30,June 30,
2011   20102011   2010
Gross Profit per Retail Transaction:
New Vehicles $ 3,196 $ 2,842 $ 3,028 $ 2,837
Used Vehicles 2,194 2,071 2,164 2,105
Finance and Insurance 976 924 965 935
 
Brand Mix:
BMW 24% 21% 23% 21%
Toyota / Lexus 15% 17% 15% 17%
Honda / Acura 13% 15% 13% 14%
Audi 12% 11% 12% 11%
Mercedes-Benz 9% 9% 9% 9%
Land Rover 4% 4% 5% 5%
General Motors / Chrysler / Ford 5% 5% 5% 5%
Porsche 5% 4% 5% 4%
Ferrari / Maserati 3% 3% 3% 3%
Nissan / Infiniti 2% 3% 2% 3%
Bentley / Aston Martin 2% 2% 2% 2%
Volkswagen 2% 2% 2% 2%
Other 4% 4% 4% 4%
 
 
Premium 68% 65% 68% 66%
Foreign 27% 30% 27% 29%
Domestic Big 3 5% 5% 5% 5%
 
 
Revenue Mix:
U.S. 62% 63% 61% 62%
International 38% 37% 39% 38%
 
EBITDA (Amounts in thousands) * $ 84,059 $ 74,353 $ 164,028 $ 140,076
 
Rent Expense (Amounts in thousands) $ 42,907 $ 40,117 $ 85,581 $ 80,095
 

* See the following Non-GAAP reconciliation tables

 
PENSKE AUTOMOTIVE GROUP, INC.
Selected Data (Concluded)
(Unaudited)
 
Reconciliation of 2011 and 2010 net income to EBITDA:
 
  Three Months Ended   Six Months Ended
June 30,June 30,
(Amounts in thousands) 2011   20102011   2010
 
Net income $ 40,059 $ 29,684 $ 74,056 $ 50,016
Depreciation 12,093 11,516 24,031 23,374
Other interest expense 10,575 12,542 21,976 25,262
Debt discount amortization - 2,428 1,718 5,343
Income taxes 20,996 16,628 37,784 30,878
Loss from discontinued operations, net of tax   336   1,555   4,463   5,203
EBITDA $ 84,059 $ 74,353 $ 164,028 $ 140,076
 

Source: Penske Automotive Group, Inc.

Contact:

Penske Automotive Group, Inc.

David K. Jones, 248-648-2800

Executive Vice President and

Chief Financial Officer

dave.jones@penskeautomotive.com

or

Anthony R. Pordon, 248-648-2540

Executive Vice President Investor Relations

and Corporate Development

tpordon@penskeautomotive.com