Gross Margin Increases 50 Basis Points to 14.7% ____________________________________________________________
BLOOMFIELD HILLS, MI, October 25, 2005 – United Auto Group, Inc. (NYSE: UAG), a worldwide automotive retailer, today reported a 10.8% increase in third quarter revenues to $2.8 billion. The revenue increase is driven by a 10.3% rise in retail vehicle revenues and a 14.3% growth in service and parts revenues, and includes a 7.0% increase in same-store retail sales. Gross margin in the third quarter increased 50 basis points to 14.7% due to margin increases in each of the Company’s product lines, coupled with a 43-basis-point increase in the relative contribution of higher margin service and parts and finance and insurance revenues to total revenues.
Third quarter net income was $32.8 million, or $0.70 per share. This represents a 19.0% increase compared to third quarter 2004 adjusted net income of $27.5 million, or $0.60 per share, which excludes $4.9 million ($0.10 per share) of net income resulting from the sale of an investment, a reduction of the Company’s estimated annual effective tax rate, a refund of UK consumption taxes, and costs associated with the relocation of certain franchises in the UK.
For the nine months ended September 30, 2005, revenues increased 14.6% to $8.0 billion. Net income for the nine months was $88.9 million, or $1.89 per share. This represents a 16.0% increase compared to prior year adjusted net income of $76.6 million, or $1.69 per share, which excludes the $4.9 million of items referenced above and an additional $4.1 million from the sale of an investment in the second quarter of 2004.
- Continued -
1
“We are pleased with the performance of our business in the third quarter,” said UAG Chairman Roger Penske. “During the quarter, we were challenged by higher interest rates, rising gasoline prices, product availability, and a shift in consumer buying patterns. Despite these obstacles, we achieved our 26th consecutive quarter of record revenue, including an 8.5% increase in same-store service and parts revenue, as well as improved gross margins in all areas of our operations.”
Penske continued, “Our service and parts operation continues to improve, including increases in volume and margins, as a result of increases in units in operation and the continuing maturity of our capital investments. In fact, service and parts revenues increased to 10.3% of our total revenue, an improvement of 31 basis points over the prior year. The performance of our service and parts operations, coupled with strong margins on both new and used vehicles, contributed to an increase in our operating margin to 2.8%.”
After considering the steady increase in interest rates, volatile energy prices and the challenging selling environment in the fourth quarter, the Company currently estimates earnings in the range of $0.51 to $0.56 per share for the fourth quarter and $2.40 to $2.45 per share for the full year 2005.
UnitedAuto will host a conference call discussing financial results relating to third quarter 2005 on Tuesday, October 25, 2005 at12:30 p.m. ET. To listen to the conference call, participants must dial(800) 230-1059 [International, please dial (612) 234-9959]. The call will be simultaneously broadcast live over the Internet through the UnitedAuto website atwww.unitedauto.com.
About UnitedAuto United Auto Group, Inc., headquartered in Bloomfield Hills, Michigan, operates 269 retail automotive franchises, representing 40 different brands, and 29 collision repair centers. UnitedAuto, 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 167 franchises in 19 states and Puerto Rico and 102 franchises located internationally, primarily in the United Kingdom. UnitedAuto is a member of the Fortune 500 and Russell 2000 and has approximately 14,000 employees.
Statements in this press release involve forward-looking statements, including forward-looking statements regarding UnitedAuto’s future sales and earnings growth potential. Actual results may vary materially because of risks and uncertainties, including external factors such as 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 UnitedAuto’s business, markets, conditions and other uncertainties which could affect UnitedAuto’s future performance, which is contained in UnitedAuto’s Form 10-K for the year ended December 31, 2004, and its other filings with the Securities and Exchange Commission, and which is incorporated into this press release by reference. This press release speaks only as of its date and UnitedAuto disclaims any duty to update the information herein.
This release contains certain non-GAAP financial measures as defined under SEC rules, such as adjusted net income, 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.
2
UNITED AUTO GROUP, INC. Consolidated Statements of Income (Amounts in Thousands, Except Per Share Data) (Unaudited)
Third Quarter
2005
2004
New Vehicles
$
1,641,443
$
1,475,564
Used Vehicles
577,209
536,063
Finance and Insurance
65,129
55,872
Service and Parts
287,357
251,416
Fleet
24,602
28,938
Wholesale
201,429
177,171
Total Revenues
2,797,169
2,525,024
Cost of Sales
2,385,418
2,166,022
Gross Profit
411,751
359,002
SG&A Expenses
323,021
277,811
Depreciation and Amortization
10,556
14,111
Operating Income
78,174
67,080
Floor Plan Interest Expense
(12,869
)
(11,538
)
Other Interest Expense
(12,349
)
(10,470
)
Other Income
—
4,858
Income from Continuing Operations Before Minority Interests and Income Tax Provision
52,956
49,930
Minority Interests
(486
)
(669
)
Income Tax Provision
(19,258
)
(17,154
)
Income from Continuing Operations
33,212
32,107
Income (Loss) from Discontinued Operations, Net of Tax
(448
)
258
Net Income
$
32,764
$
32,365
Income from Continuing Operations Per Diluted Share
$
0.70
$
0.69
Diluted EPS
$
0.70
$
0.70
Diluted Weighted Average Shares Outstanding
47,124
46,567
3
UNITED AUTO GROUP, INC. Consolidated Statements of Income (Amounts in Thousands, Except Per Share Data) (Unaudited)
Nine Months
2005
2004
New Vehicles
$
4,633,416
$
4,036,802
Used Vehicles
1,710,007
1,537,829
Finance and Insurance
182,468
155,352
Service and Parts
840,611
707,763
Fleet
79,260
75,245
Wholesale
587,337
498,221
Total Revenues
8,033,099
7,011,212
Cost of Sales
6,837,055
5,994,385
Gross Profit
1,196,044
1,016,827
SG&A Expenses
946,725
794,430
Depreciation and Amortization
31,233
30,893
Operating Income
218,086
191,504
Floor Plan Interest Expense
(40,350
)
(34,774
)
Other Interest Expense
(36,138
)
(31,287
)
Other Income
—
11,469
Income from Continuing Operations Before Minority Interests and Income Tax Provision
141,598
136,912
Minority Interests
(1,250
)
(1,491
)
Income Tax Provision
(51,965
)
(50,924
)
Income from Continuing Operations
88,383
84,497
Income from Discontinued Operations, Net of Tax
469
1,075
Net Income
$
88,852
$
85,572
Income from Continuing Operations Per Diluted Share
$
1.88
$
1.87
Diluted EPS
$
1.89
$
1.89
Diluted Weighted Average Shares Outstanding
47,005
45,198
4
UNITED AUTO GROUP, INC. Consolidated Condensed Balance Sheets (Amounts in Thousands) (Unaudited)
9/30/05
12/31/04
Assets
Cash and Cash Equivalents
$
2,694
$
15,187
Accounts Receivable, Net
379,922
356,625
Inventories
1,147,807
1,252,358
Other Current Assets
61,820
44,315
Total Current Assets
1,592,243
1,668,485
Property and Equipment, Net
463,084
406,783
Intangibles
1,225,092
1,221,731
Other Assets
77,934
86,881
Assets of Discontinued Operations
65,333
148,921
Total Assets
$
3,423,686
$
3,532,801
Liabilities and Stockholders’ Equity
Floor Plan Notes Payable
$
1,015,268
$
1,197,540
Accounts Payable and Accrued Expenses
437,847
402,232
Current Portion Long-Term Debt
3,556
11,367
Total Current Liabilities
1,456,671
1,611,139
Long-Term Debt
620,434
574,970
Other Long-Term Liabilities
191,096
179,104
Liabilities of Discontinued Operations
30,588
92,553
Total Liabilities
2,298,789
2,457,766
Stockholders’ Equity
1,124,897
1,075,035
Total Liabilities and Stockholders’ Equity
$
3,423,686
$
3,532,801
5
UNITED AUTO GROUP, INC. Selected Data ($ in thousands, except per transaction amounts)
Third Quarter
Nine Months
2005
2004
2005
2004
Units
New Retail Units
51,171
46,409
142,508
127,333
Used Retail Units
22,876
21,761
66,966
63,349
Total Retail Units
74,047
68,170
209,474
190,682
Same-Store Retail Revenue
New Vehicles
$
1,520,874
$
1,420,904
$
4,067,849
$
3,888,302
Used Vehicles
547,906
520,812
1,512,693
1,475,721
Finance and Insurance
61,919
53,993
168,967
151,597
Service and Parts
262,796
242,217
730,789
677,703
Total Same-Store Retail Revenue
$
2,393,495
$
2,237,926
$
6,480,298
$
6,193,323
Same-Store Retail Revenue Growth
New Vehicles
7.0
%
1.8
%
4.6
%
5.1
%
Used Vehicles
5.2
%
3.1
%
2.5
%
3.1
%
Finance and Insurance
14.7
%
(3.1
%)
11.5
%
(0.2
%)
Service and Parts
8.5
%
11.4
%
7.8
%
13.0
%
Revenue Mix
New Vehicles
58.7
%
58.4
%
57.7
%
57.6
%
Used Vehicles
20.6
%
21.2
%
21.3
%
21.9
%
Finance and Insurance
2.3
%
2.2
%
2.3
%
2.2
%
Service and Parts
10.3
%
10.0
%
10.4
%
10.1
%
Fleet
0.9
%
1.2
%
1.0
%
1.1
%
Wholesale
7.2
%
7.0
%
7.3
%
7.1
%
Retail Gross Margin — by Product
New Vehicles
8.5
%
8.4
%
8.6
%
8.5
%
Used Vehicles
9.1
%
8.5
%
9.2
%
8.8
%
Finance and Insurance
100.0
%
100.0
%
100.0
%
100.0
%
Service and Parts
54.2
%
53.2
%
54.3
%
53.9
%
Gross Profit per Transaction
New Vehicles
$
2,724
$
2,687
$
2,805
$
2,704
Used Vehicles
2,292
2,098
2,341
2,124
Finance and Insurance
880
820
871
815
6
UNITED AUTO GROUP, INC. Selected Data (Continued)
Third Quarter
Nine Months
2005
2004
2005
2004
Brand Mix:
Toyota/Lexus
21
%
22
%
21
%
23
%
BMW
15
%
15
%
14
%
15
%
Honda/Acura
15
%
12
%
14
%
11
%
Mercedes
9
%
11
%
10
%
11
%
Ford Premier Group
7
%
8
%
7
%
9
%
Audi
7
%
6
%
7
%
4
%
General Motors
7
%
8
%
7
%
8
%
Ford
3
%
3
%
3
%
3
%
Nissan/Infiniti
4
%
4
%
4
%
4
%
Chrysler
3
%
4
%
3
%
4
%
Porsche
3
%
3
%
4
%
3
%
Other
6
%
4
%
6
%
5
%
Debt to Total Capital Ratio
36
%
40
%
36
%
40
%
Rent Expense
$
29,274
$
25,230
$
86,999
$
68,759
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