Company Announces $150 Million Share Repurchase Authority
smartWholesale Distribution and Retail Networks In Place; Retail Deliveries Began In January ‘08 ____________________________________________________________
BLOOMFIELD HILLS, MI, February 19, 2008 – Penske Automotive Group, Inc. (NYSE: PAG), an international automotive retailer, reported adjusted fourth quarter income from continuing operations of $31.8 million, or $0.34 per share, compared to income from continuing operations of $32.5 million, or $0.34 per share, in the fourth quarter last year. Adjusted fourth quarter net income was $33.9 million, or $0.36 per share, compared to net income of $30.3 million, or $0.32 per share in the fourth quarter last year. Adjusted earnings exclude the impact of $4.5 million of after-tax impairment losses recorded during the fourth quarter of 2007. Fourth quarter income from continuing operations was $27.4 million, or $0.29 per share, and fourth quarter net income was $29.4 million, or $0.31 per share. Revenues in the quarter increased 7.7% to $3.1 billion, including same-store retail revenue growth of 4.0%.
“Our fourth quarter results reflect the strength of the Penske Automotive business model,” said Penske Automotive Group Chairman Roger Penske. “While the new vehicle sales environment in the U.S. was challenging, the other areas of our business performed very well. In particular, we are pleased to see the continued growth of pre-owned vehicle sales and the sustained strength of our service and parts operations, which have served to partially offset the soft new vehicle sales market.” Penske continued, “We continue to see the benefits of our geographic diversification. Overall, same-store retail revenue increased 4.0%, including 10.5% growth in our international markets. As we look at 2008, we look forward to the opportunity presented by the launch of our smart distribution business, and we are confident in the ability of our business model to continue to perform in these challenging economic times.”
For the year ended December 31, 2007, revenues increased 16.5% to $13.0 billion. Income from continuing operations and related earnings per share for the year were $127.8 million and $1.35 per share, respectively. Excluding $12.3 million ($0.13 per share) of after-tax costs resulting from the March 2007 redemption of the Company’s 9.625% Senior Subordinated Notes and the impairment losses in the fourth quarter noted above, adjusted income from continuing operations for the year increased 9.3% to $144.6 million and related earnings per share increased 9.3% to $1.53 per share. Net income and related earnings per share for the twelve months were $127.7 million and $1.35 per share, respectively. Adjusted net income increased 15.9% to $144.5 million, and related earnings per share increased 15.9% to $1.53 per share.
The Company currently estimates earnings from continuing operations to be in the range of $1.63 to $1.71 per share for the year ended December 31, 2008. First quarter 2008 earnings from continuing operations are estimated to be in the range of $0.32 to $0.34 per share. Earnings per share information in 2008 is based on an estimated average of 95.0 million shares outstanding.
The Company also announced that its Board of Directors has authorized the Company to repurchase up to $150.0 million of its outstanding common stock, depending on market conditions, share price and other factors. Shares may be acquired from time to time either through open market purchases, negotiated transactions or other means. The Company currently contemplates purchasing any shares under this program using cash flow from operations and credit availability in the U.S.
“We view the opportunity to purchase our shares at recent market prices as an outstanding investment, highlighting our belief in the long-term fundamentals and value of our business,” said Bob O’Shaughnessy, Penske Automotive’s Chief Financial Officer. “Based on our current financial position, we believe we can increase shareholder value by pursuing this share repurchase program while we continue our efforts to enhance the business through sustained organic growth and selective acquisition activity.”
smart USA Distributor LLC, the Company’s wholly-owned distribution entity for the smart fortwo in the U.S., has certified 68 dealers in 31 states, including 8 Company-owned franchises, as ready for business. smart USA has shipped vehicles to its dealers, and retail deliveries began in January 2008. “I would like to commend the smart USA team for establishing a first-class distribution operation and organizing the retail network in only 18 months,” said Penske Automotive Chairman Roger Penske. “We are encouraged by the positive reaction of the U.S. consumer towards this unique and exciting product, and are confident that the smart fortwo will be a retail success.”
Penske Automotive will host a conference call discussing financial results relating to the fourth quarter of 2007 on February 19, 2008 at2:00 p.m. EDT. To listen to the conference call, participants must dial(866) 254-5942 [International, please dial (612) 332-0636]. The call will be simultaneously broadcast over the Internet through the Penske Automotive Group website atwww.penskeautomotive.com.
About Penske Automotive
Penske Automotive Group, Inc., headquartered in Bloomfield Hills, Michigan, operates 315 retail automotive franchises, representing 40 different brands, and 27 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 170 franchises in 19 states and Puerto Rico and 145 franchises located outside the United States, primarily in the United Kingdom. Penske Automotive is a member of the Fortune 500 and Russell 1000 and has approximately 16,000 employees. smart and fortwo are registered trademarks of Daimler AG.
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. 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 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, 2006, 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.
1
PENSKE AUTOMOTIVE GROUP, INC. Consolidated Statements of Income (Amounts In Thousands, Except Per Share Data) (Unaudited)
Fourth Quarter
2007
2006
Revenues:
New Vehicle
$
1,668,779
$
1,571,646
Used Vehicle
741,078
676,349
Finance and Insurance, Net
67,872
58,782
Service and Parts
351,731
323,711
Fleet and Wholesale Vehicle
251,678
230,285
Total Revenues
3,081,138
2,860,773
Cost of Sales:
New Vehicle
1,527,526
1,432,341
Used Vehicle
681,419
621,913
Service and Parts
154,269
145,700
Fleet and Wholesale Vehicle
253,966
231,660
Total Cost of Sales
2,617,180
2,431,614
Gross Profit
463,958
429,159
SG&A Expenses
380,619
345,714
Depreciation and Amortization
13,014
12,050
Operating Income
70,325
71,395
Floor Plan Interest Expense
(20,141
)
(15,446
)
Other Interest Expense
(12,014
)
(14,703
)
Equity in Earnings of Affiliates
901
2,695
Income from Continuing Operations Before Income Taxes and Minority Interests
39,071
43,941
Income Taxes
(11,244
)
(10,840
)
Minority Interests
(445
)
(636
)
Income from Continuing Operations
27,382
32,465
Income (Loss) from Discontinued Operations, Net of Tax
2,026
(2,142
)
Net Income
$
29,408
$
30,323
Income from Continuing Operations Per Diluted Share
$
0.29
$
0.34
Diluted EPS
$
0.31
$
0.32
Diluted Weighted Average Shares Outstanding
94,677
94,389
2
PENSKE AUTOMOTIVE GROUP, INC. Consolidated Statements of Income (Amounts In Thousands, Except Per Share Data) (Unaudited)
Twelve Months
2007
2006
Revenues:
New Vehicle
$
7,008,071
$
6,185,880
Used Vehicle
3,149,145
2,531,001
Finance and Insurance, Net
290,144
246,448
Service and Parts
1,413,986
1,228,876
Fleet and Wholesale Vehicle
1,096,393
934,514
Total Revenues
12,957,739
11,126,719
Cost of Sales:
New Vehicle
6,417,064
5,644,220
Used Vehicle
2,898,051
2,316,748
Service and Parts
623,585
550,520
Fleet and Wholesale Vehicle
1,093,830
930,967
Total Cost of Sales
11,032,530
9,442,455
Gross Profit
1,925,209
1,684,264
SG&A Expenses
1,531,628
1,337,019
Depreciation and Amortization
50,957
43,164
Operating Income
342,624
304,081
Floor Plan Interest Expense
(74,749
)
(59,806
)
Other Interest Expense
(56,245
)
(49,174
)
Equity in Earnings of Affiliates
4,084
8,201
Debt Redemption Charge
(18,634
)
—
Income from Continuing Operations Before Income Taxes and Minority Interests
197,080
203,302
Income Taxes
(67,310
)
(68,906
)
Minority Interests
(1,972
)
(2,172
)
Income from Continuing Operations
127,798
132,224
Income (Loss) from Discontinued Operations, Net of Tax
(59
)
(7,523
)
Net Income
$
127,739
$
124,701
Income from Continuing Operations Per Diluted Share
$
1.35
$
1.40
Diluted EPS
$
1.35
$
1.32
Diluted Weighted Average Shares Outstanding
94,558
94,178
3
PENSKE AUTOMOTIVE GROUP, INC. Consolidated Condensed Balance Sheets (Amounts In Thousands) (Unaudited)
12/31/07
12/31/06
Assets
Cash and Cash Equivalents
$
10,895
$
13,147
Accounts Receivable, Net
449,278
465,579
Inventories
1,688,286
1,506,237
Other Current Assets
66,312
71,398
Assets Held for Sale
86,838
193,026
Total Current Assets
2,301,609
2,249,387
Property and Equipment, Net
618,491
592,718
Intangibles
1,663,559
1,518,045
Other Assets
84,894
109,652
Total Assets
$
4,668,553
$
4,469,802
Liabilities and Stockholders’ Equity
Floor Plan Notes Payable
$
1,074,820
$
872,906
Floor Plan Notes Payable – Non-Trade
478,077
296,580
Accounts Payable
268,214
298,066
Accrued Expenses
212,601
213,957
Current Portion Long-Term Debt
14,522
13,385
Liabilities Held for Sale
47,805
56,972
Total Current Liabilities
2,096,039
1,751,866
Long-Term Debt
830,106
1,168,666
Other Long-Term Liabilities
320,949
253,617
Total Liabilities
3,247,094
3,174,149
Stockholders’ Equity
1,421,459
1,295,653
Total Liabilities and Stockholders’ Equity
$
4,668,553
$
4,469,802
4
PENSKE AUTOMOTIVE GROUP, INC. Selected Data
Fourth Quarter
Twelve Months
2007
2006
2007
2006
Total Retail Units
New Retail
45,377
43,232
195,160
181,544
Used Retail
23,804
22,350
102,214
88,262
Total Retail
69,181
65,582
297,374
269,806
Same-Store Retail Units
New Same-Store Retail
42,583
42,908
174,759
174,188
Used Same-Store Retail
23,008
21,304
87,262
80,810
Total Same-Store Retail
65,591
64,212
262,021
254,998
Same-Store Retail Revenue
New Vehicles
$
1,573,362
$
1,557,992
$
6,205,014
$
5,882,310
Used Vehicles
711,687
646,849
2,597,746
2,268,920
Finance and Insurance, Net
65,185
58,786
258,320
236,721
Service and Parts
336,302
318,765
1,242,260
1,157,014
Total Same-Store Retail
$
2,686,536
$
2,582,392
$
10,303,340
$
9,544,965
Same-Store Retail Revenue Growth
New Vehicles
1.0
%
6.3
%
5.5
%
2.3
%
Used Vehicles
10.0
%
14.3
%
14.5
%
8.9
%
Finance and Insurance, Net
10.9
%
(9.3
%)
9.1
%
0.4
%
Service and Parts
5.5
%
6.8
%
7.4
%
7.2
%
Revenue Mix
New Vehicles
54.2
%
54.9
%
54.1
%
55.6
%
Used Vehicles
24.1
%
23.6
%
24.3
%
22.8
%
Finance and Insurance, Net
2.2
%
2.1
%
2.3
%
2.2
%
Service and Parts
11.4
%
11.3
%
10.9
%
11.0
%
Fleet and Wholesale
8.1
%
8.1
%
8.4
%
8.4
%
Average Retail Selling Price
New Vehicles
$
36,776
$
36,354
$
35,909
$
34,074
Used Vehicles
31,132
30,262
30,809
28,676
Gross Margin
15.1
%
15.0
%
14.9
%
15.1
%
Retail Gross Margin – by Product
New Vehicles
8.5
%
8.9
%
8.4
%
8.8
%
Used Vehicles
8.1
%
8.0
%
8.0
%
8.5
%
Service and Parts
56.1
%
55.0
%
55.9
%
55.2
%
Gross Profit per Retail Transaction
New Vehicles
$
3,113
$
3,222
$
3,028
$
2,984
Used Vehicles
2,506
2,436
2,457
2,427
Finance and Insurance
981
896
976
913
5
PENSKE AUTOMOTIVE GROUP, INC. Selected Data (Continued)
Fourth Quarter
Twelve Months
2007
2006
2007
2006
Brand Mix:
BMW
22
%
21
%
22
%
18
%
Toyota / Lexus
20
%
20
%
20
%
21
%
Honda / Acura
14
%
14
%
15
%
16
%
Mercedes Benz
11
%
11
%
11
%
10
%
Audi
8
%
7
%
8
%
7
%
Land Rover
5
%
5
%
5
%
5
%
Ferrari / Maserati
4
%
3
%
3
%
3
%
Porsche
3
%
4
%
4
%
4
%
General Motors
3
%
3
%
3
%
3
%
Other
10
%
12
%
9
%
13
%
100
%
100
%
100
%
100
%
Premium
65
%
67
%
65
%
62
%
Foreign
29
%
28
%
29
%
32
%
Domestic Big 3
6
%
5
%
6
%
6
%
100
%
100
%
100
%
100
%
Revenue Mix:
U.S.
64
%
65
%
62
%
68
%
International
36
%
35
%
38
%
32
%
100
%
100
%
100
%
100
%
Debt to Total Capital Ratio
37
%
48
%
37
%
48
%
Rent Expense
$
39,764
$
34,890
$
152,267
$
132,569
6
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