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February 15, 2012

Penske Automotive Reports Most Profitable Year in Company History

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Dealer/GM News | Digital Dealer | Finance & Insurance News | Fixed Operations News | Sales & Marketing
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

 

Source: Penske Automotive Group, Inc.

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