Penske Automotive Reports Most Profitable Year in Company History

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February 15, 2012

Penske Automotive Reports Most Profitable Year in Company History

BLOOMFIELD HILLS, Mich. — Penske Automotive Group, Inc. announced this week that fourth quarter 2011 income from continuing operations attributable to common shareholders increased 22% to $42.5 million and related earnings per share increased 24% to $0.47 per share. This compares to income from continuing operations attributable to common shareholders of $34.9 million, or $0.38 per share in the same period last year.

Fourth Quarter 2011

Revenue Increases 11% to $3.0 Billion
Same-store Retail Revenue Increases 5.9%
Operating Income Increases 16% to $76.6 mil
Income from Continuing Operations Increases 22% to $42.5 Million
EPS from Continuing Operations Increases 24% to $0.47 per share
EBITDA Increases 16% to $89.7 Million

Full Year 2011

Revenue Increases 12% to $11.6 Billion
Same-store Retail Revenue Increases 8.2%
Operating Income Increases 15% to $298.2 mil
Income from Continuing Operations Increases 42% to $175.1 Million
EPS from Continuing Operations Increases 43% to $1.92 per share
EBITDA Increases 17% to $344.0 Million

Total revenue increased by 10.8%, to $3.0 billion, driven largely by an increase in total retail unit sales of 10.6%. The increase in retail unit sales was highlighted by a 20.0% increase in used retail unit sales, which drove the Company’s used-to-new ratio to 0.82 to 1. Same-store retail revenue increased 5.9% in the fourth quarter. Total gross profit for the Company improved 9.3% to $455.8 million and operating income increased 16.1% to $76.6 million.

Highlights of the Fourth Quarter

Total retail unit sales increased 10.6% to 71,453

+14.1% in the United States; +2.6% Internationally
New unit retail sales +4.0%
Used unit retail sales +20.0%

Same-store retail revenue increased 5.9%

New +2.7%; Used +14.1%; Finance & Insurance +11.4%; Service and Parts +0.7%
+9.3% in the United States; (0.1%) Internationally

Average Transaction Price Per Unit

New $38,816, +4.4%
Used $26,034, (1.3%)

Average Gross Profit Per Unit

New $3,251, +2.8%; Gross Margin 8.4%
Used $1,852, (2.6%); Gross Margin 7.1%
Finance & Insurance $965, +3.8%

Inventory Days’ Supply

New 49 days; Used 52 days

Chairman Roger Penske said, “Our fourth quarter results continue to demonstrate the strength of the automotive retail model and the benefit from our premium/luxury brand mix in both the U.S. and international markets. We produced another outstanding quarter of profitability while generating same-store revenue increases in each area of our business. I am extremely pleased with the continued strong performance of our used vehicle business, which increased same-store retail unit sales by 16% and same-store retail revenue by 14%, and our service and parts operations gross margin which added 120 basis points to 57.3%.”

For the year ended December 31, 2011, total revenue increased 11.9% to $11.6 billion. Income from continuing operations attributable to common shareholders was an all-time company record, increasing 41.7% to $175.1 million and related earnings per share increased 43.3% to $1.92. This compares to income from continuing operations attributable to common shareholders of $123.6 million, and related earnings per share of $1.34 per share in the same period last year. During 2011, the Company recognized a net income tax benefit of $11.0 million, or $0.12 per share, 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. After adjusting for these items, adjusted income from continuing operations attributable to common shareholders was $164.0 million, or $1.80 per share, representing an increase of 34.3% on a per share basis compared to last year.

Penske added, “The performance of our business in 2011 exceeded our expectations. We completed the most profitable year in the history of our Company, generating a same-store retail revenue increase of 8.2% and $344 million in EBITDA. Further, we continued to grow the business through opportunistic acquisitions of approximately $1 billion in estimated annualized revenue, which includes the January 2012 Agnew Group acquisition in the U.K. We also discontinued non-strategic dealerships during 2011 with annualized revenues of approximately $300 million. These acquisitions, coupled with the continued recovery in the retail automotive market, are expected to drive our business to higher levels in 2012.”

Securities Repurchase Activity

For the year ended December 31, 2011, the Company acquired 2,449,768 shares of its common stock for an aggregate purchase price of $44.3 million, or an average price of $18.07 per share. The Company currently has remaining authorization from its Board of Directors to repurchase up to $106.8 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.

About Penske Automotive

Penske Automotive Group, Inc., headquartered in Bloomfield Hills, Michigan, operates 332 retail automotive franchises, representing 42 different brands and 29 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 166 franchises in 17 states and Puerto Rico and 166 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 income from continuing operations per share and earnings before interest, taxes, depreciation and amortization (“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. 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 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 such as the earthquake and tsunami that struck Japan in March 2011; 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, 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 Condensed Statements of Income
(Amounts In Thousands, Except Per Share Data)
(Unaudited)

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2011			2010			2011			2010
Revenues:
New Vehicle	$	1,524,309		$	1,404,398		$	5,811,084		$	5,276,371
Used Vehicle		837,857			707,809			3,399,981			2,857,922
Finance and Insurance, Net		68,940			60,033			278,027			244,687
Service and Parts		349,214			331,452			1,394,990			1,301,811
Fleet and Wholesale Vehicle		178,797			166,612			672,150			647,594
Total Revenues		2,959,117			2,670,304			11,556,232		$	10,328,385
Cost of Sales:
New Vehicle		1,396,639			1,285,004			5,328,053			4,841,556
Used Vehicle		778,262			656,803			3,136,474			2,637,356
Service and Parts		149,153			145,591			599,651			564,494
Fleet and Wholesale Vehicle		179,243			165,978			666,664			640,864
Total Cost of Sales		2,503,297			2,253,376			9,730,842		$	8,684,270
Gross Profit		455,820			416,928			1,825,390			1,644,115
SG&A Expenses		366,676			339,587			1,478,297			1,339,125
Depreciation		12,588			11,379			48,903			46,253
Operating Income		76,556			65,962			298,190			258,737
Floor Plan Interest Expense		(7,398	)		(8,832	)		(28,515	)		(33,779	)
Other Interest Expense		(11,833	)		(11,751	)		(45,020	)		(49,176	)
Debt Discount Amortization		–			(1,647	)		(1,718	)		(8,637	)
Equity in Earnings of Affiliates		7,924			8,844			25,451			20,569
Other Income		–			–			–			1,634
Income from Continuing Operations Before Income Taxes		65,249			52,576			248,388			189,348
Income Taxes		(22,287	)		(17,131	)		(71,933	)		(64,732	)
Income from Continuing Operations		42,962			35,445			176,455			124,616
Income (Loss) from Discontinued Operations, Net of Tax		5,195			(6,374	)		1,803			(15,269	)
Net Income		48,157			29,071			178,258			109,347
Income Attributable to Non-Controlling Interests		(470	)		(562	)		(1,377	)		(1,066	)
Net Income Attributable to Common Shareholders	$	47,687		$	28,509		$	176,881		$	108,281
Income from Continuing Operations Per Share	$	0.47		$	0.38		$	1.92		$	1.34
Income Per Share	$	0.53		$	0.31		$	1.94		$	1.18
Weighted Average Shares Outstanding		90,553			92,214			91,274			92,091
Amounts Attributable to Common Shareholders:
Reported Income from Continuing Operations	$	42,962		$	35,445		$	176,455		$	124,616
Income Attributable to Non-Controlling Interests		(470	)		(562	)		(1,377	)		(1,066	)
Income from Continuing Operations, net of tax	$	42,492		$	34,883		$	175,078		$	123,550
Income (Loss) from Discontinued Operations, net of tax		5,195			(6,374	)		1,803			(15,269	)
Net Income	$	47,687		$	28,509		$	176,881		$	108,281


PENSKE AUTOMOTIVE GROUP, INC.
Consolidated Condensed Balance Sheets
(Amounts In Thousands)
(Unaudited)

	December 31,		December 31,
	2011		2010
Assets
Cash and Cash Equivalents	$	29,116	$	19,688
Accounts Receivable, Net		444,673		382,382
Inventories		1,605,280		1,443,284
Other Current Assets		80,307		68,225
Assets Held for Sale		33,224		133,019
Total Current Assets		2,192,600		2,046,598
Property and Equipment, Net		858,975		716,427
Intangibles		1,138,586		1,003,729
Other Long-Term Assets		312,138		303,078
Total Assets	$	4,502,299	$	4,069,832

Liabilities and Equity
Floor Plan Notes Payable	$	988,650	$	911,548
Floor Plan Notes Payable – Non-Trade		713,635		497,074
Accounts Payable		223,313		251,960
Accrued Expenses		202,761		201,714
Current Portion Long-Term Debt		3,414		10,593
Liabilities Held for Sale		17,899		88,117
Total Current Liabilities		2,149,672		1,961,006
Long-Term Debt		846,777		769,285
Other Long-Term Liabilities		365,437		293,688
Total Liabilities		3,361,886		3,023,979
Equity		1,140,413		1,045,853
Total Liabilities and Equity	$	4,502,299	$	4,069,832


PENSKE AUTOMOTIVE GROUP, INC.
Selected Data
(Unaudited)

	Three Months Ended								Twelve Months Ended
	December 31,						%		December 31,						%
	2011			2010			Change			2011			2010		Change
Total Retail Units:
New Retail		39,270			37,758		4.0	%		154,829			150,164		3.1	%
Used Retail		32,183			26,822		20.0	%		129,652			110,083		17.8	%
Total Retail		71,453			64,580		10.6	%		284,481			260,247		9.3	%

Fleet		1,462			1,603		-8.8	%		5,308			6,103		-13.0	%
Wholesale		14,523			14,686		-1.1	%		58,593			60,254		-2.8	%
Total		87,438			80,869		8.1	%		348,382			326,604		6.7	%

Same-Store Retail Units:
New Same-Store Retail		37,545			37,578		-0.1	%		146,004			146,419		-0.3	%
Used Same-Store Retail		31,006			26,738		16.0	%		122,515			107,500		14.0	%
Total Same-Store Retail		68,551			64,316		6.6	%		268,519			253,919		5.7	%

Same-Store Retail Revenue: (Amounts in thousands)
New Vehicles	$	1,435,999		$	1,397,966		2.7	%	$	5,429,084		$	5,143,261		5.6	%
Used Vehicles		804,823			705,593		14.1	%		3,219,762			2,800,631		15.0	%
Finance and Insurance, Net		66,544			59,746		11.4	%		266,477			240,375		10.9	%
Service and Parts		332,898			330,550		0.7	%		1,315,134			1,274,234		3.2	%
Total Same-Store Retail	$	2,640,264		$	2,493,855		5.9	%	$	10,230,457		$	9,458,501		8.2	%

Revenue Mix:
New Vehicles		51.5	%		52.6	%				50.3	%		51.1	%
Used Vehicles		28.3	%		26.5	%				29.4	%		27.7	%
Finance and Insurance, Net		2.4	%		2.2	%				2.4	%		2.4	%
Service and Parts		11.8	%		12.4	%				12.1	%		12.5	%
Fleet and Wholesale		6.0	%		6.3	%				5.8	%		6.3	%

Average Revenue per Vehicle Retailed:
New Vehicles	$	38,816		$	37,195		4.4	%	$	37,532		$	35,137		6.8	%
Used Vehicles		26,034			26,389		-1.3	%		26,224			25,962		1.0	%

Gross Profit per Vehicle Retailed:
New Vehicles	$	3,251		$	3,162		2.8	%	$	3,120		$	2,896		7.7	%
Used Vehicles		1,852			1,902		-2.6	%		2.032			2,003		1.4	%
Finance and Insurance		965			930		3.8	%		977			940		3.9	%

Operating items as a percentage of revenue:
New Vehicle Gross Profit		8.4	%		8.5	%				8.3	%		8.2	%
Used Vehicle Gross Profit		7.1	%		7.2	%				7.7	%		7.7	%
Service and Parts Gross Profit		57.3	%		56.1	%				57.0	%		56.6	%
Total Gross Profit		15.4	%		15.6	%				15.8	%		15.9	%
Selling, General and Admin. Expenses		12.4	%		12.7	%				12.8	%		13.0	%
Operating Income		2.6	%		2.5	%				2.6	%		2.5	%
Inc. From Cont. Ops. Before Inc. Taxes		2.2	%		2.0	%				2.1	%		1.8	%

Operating items as a percentage of total gross profit:
Selling, General and Administrative Expenses		80.4	%		81.4	%				81.0	%		81.4	%
Operating Income		16.8	%		15.8	%				16.3	%		15.7	%


PENSKE AUTOMOTIVE GROUP, INC.
Selected Data (Continued)
(Unaudited)

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2011			2010			2011			2010
Brand Revenue Mix:
Premium:
BMW		25	%		24	%		25	%		22	%
Audi		11	%		10	%		12	%		11	%
Mercedes-Benz		12	%		10	%		10	%		10	%
Lexus		4	%		5	%		4	%		5	%
Land Rover		5	%		4	%		4	%		4	%
Porsche		4	%		5	%		5	%		4	%
Ferrari / Maserati		3	%		3	%		3	%		3	%
Acura		2	%		2	%		2	%		2	%
Other		4	%		5	%		4	%		5	%
Total Premium		70	%		68	%		69	%		66	%
Foreign:
Toyota		10	%		11	%		11	%		12	%
Honda		11	%		12	%		11	%		12	%
Nissan		2	%		2	%		2	%		2	%
Volkswagen		2	%		1	%		2	%		1	%
Other		1	%		1	%		1	%		2	%
Total Foreign		26	%		27	%		27	%		29	%
Domestic Big 3
General Motors / Chrysler / Ford		4	%		5	%		4	%		5	%

Revenue Mix:
U.S.		67	%		64	%		63	%		63	%
International		33	%		36	%		37	%		37	%

Other (Amounts in Thousands):
EBITDA *	$	89,670		$	77,353		$	344,029		$	293,414
Rent Expense		43,207			42,925			171,328			163,234
Floorplan Credits		5,517			5,118			21,029			20,084

* See the following Non-GAAP reconciliation tables


PENSKE AUTOMOTIVE GROUP, INC.
Selected Data (Continued)
(Unaudited)

Reconciliation of 2011 and 2010 net income to EBITDA:

	Three Months Ended					Twelve Months Ended
	December 31,					December 31,
(Amounts in Thousands)	2011			2010		2011			2010

Net Income	$	48,157		$	29,071	$	178,258		$	109,347
Depreciation		12,588			11,379		48,903			46,253
Other Interest Expense		11,833			11,751		45,020			49,176
Debt Discount Amortization		—			1,647		1,718			8,637
Income Taxes		22,287			17,131		71,933			64,732
(Income)/Loss from Discontinued Operations, net		(5,195	)		6,374		(1,803	)		15,269
EBITDA	$	89,670		$	77,353	$	344,029		$	293,414

Reconciliation of twelve months ended December 31, 2011, income from continuing operations attributable to common shareholders and related earnings per share to adjusted income from continuing operations attributable to common shareholders and related earnings per share:


	Twelve Months Ended
	December 31, 2011
(Amounts in Thousands, Except per Share Amounts)	Income			EPS

Income From Continuing Operations Attributable to Common Shareholders	$	175,078		$	1.92
Net Tax Benefit		(11,046	)		(0.12	)
Adjusted Income From Continuing Operations Attributable to Common Shareholders	$	164,032		$	1.80