$502.4 Million of After-Tax Charges, Including $493.1 Million of Non-Cash Goodwill and Franchise Impairment Charges
Adjusted Loss From Continuing Operations, Excluding Charges, of $2.0 Million, or $0.02 Per Share
Cost Saving Initiatives To Date Expected to Yield Approximately $100 Million in Annualized Savings
Company in Compliance with Debt Covenants ___________________________________________________________
BLOOMFIELD HILLS, MI, February 17, 2009 – Penske Automotive Group, Inc. (NYSE: PAG), an international automotive retailer, today reported an adjusted fourth quarter loss from continuing operations of $2.0 million, or $0.02 per share. This compares to adjusted income from continuing operations of $32.0 million, or $0.34 per share, in the fourth quarter last year.
As more fully described in the attached tables, the Company recorded after-tax charges of $502.4 million, or $5.52 per share, during the fourth quarter of 2008. These charges include: a $493.1 million, or $5.42 per share, non-cash intangible asset impairment charge recorded pursuant to SFAS No. 142; $5.8 million, or $0.06 per share, of dealership consolidation and relocation costs incurred in response to market conditions; $2.5 million, or $0.03 per share, of severance costs incurred in connection with workforce reductions; and $1.0 million, or $0.01 per share, of other asset impairment charges. As part of the Company’s ongoing cost saving and expense reduction initiatives, the Company’s worldwide workforce was reduced by approximately 10% during 2008.
Retail unit sales decreased 22.5% in the quarter. Total revenue was $2.2 billion compared to $3.0 billion in the same period last year. The decline in revenue was driven principally by lower vehicle sales and changes in foreign exchange rates. Same-store retail revenues decreased by 33.5%, with same-store new units declining 34% and used units declining 11%. Despite the broad weakness in the new and used vehicle market, the Company’s service and parts business performed well, declining 1.5% on a same-store basis in the fourth quarter excluding the impact of exchange rates.
Commenting on the fourth quarter, Penske Automotive Group Chairman Roger Penske said, “The fourth quarter was one of the most challenging periods on record in the automotive industry. The lack of liquidity in worldwide credit markets and resulting economic effects caused a decrease in consumer confidence, and impacted the willingness and ability of consumers to purchase automobiles. As a result, new vehicle industry sales declined 35% and 27%, respectively, during the quarter in the United States and United Kingdom.”
Mr. Penske continued, “As business conditions deteriorated during the fourth quarter, the Company accelerated its cost reduction program. To date, the Company has initiated actions which it expects will result in annualized cost savings of approximately $100 million. As of the end of the year, our liquidity remained strong, including cash and availability under our long-term credit agreements of approximately $330 million. In addition, we elected to pay down $10 million of debt incurred in connection with our June 2008 acquisition of 9% of Penske Truck Leasing. It is important to note that the Company is in compliance will all financial covenants under its debt agreements.”
For the year ended December 31, 2008, revenues were $11.6 billion, which compare to $12.8 billion in the prior year. The loss from continuing operations and net loss for the year ended December 31, 2008, were $403.6 million, or $4.32 per share, and $411.9 million, or $4.41 per share, respectively. Adjusted income from continuing operations for the year was $101.6 million, or $1.09 per share, compared to adjusted income from continuing operations of $143.7 million, or $1.52 per share, in the prior year. A reconciliation of adjusted income from continuing operations and adjusted net income can be found in the tables contained in this press release.
Stock Repurchase Authority
The Company has repurchased 450,000 shares of its stock for an aggregate $3.6 million during the fourth quarter, bringing aggregate expenditures under the Company’s $150 million authorization to $53.7 million. The Company currently has approximately 91.4 million shares outstanding, and has an additional $96.3 million of repurchase capacity outstanding under the program.
smart USA
The Company’s smart USA distribution business completed a successful first year, delivering 27,054 vehicles and generating more than $400 million in revenue. In 2008, smart fortwo sales in the United States ranked third globally, and represented 18% of smart’s worldwide sales.
1
Guidance
Based on the significant volatility in the automotive industry and worldwide credit markets and their impact on consumer confidence and the overall economy, management has determined that it is not feasible to provide reliable earnings guidance at this time.
Conference Call
Penske Automotive will host a conference call discussing financial results relating to the fourth quarter of 2008 on February 17, 2009, at2:00 p.m. EST. To listen to the conference call, participants must dial(800) 230-1096 [International, please dial (612) 332-0932]. 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 304 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 156 franchises in 19 states and Puerto Rico and 148 franchises located outside the United States, primarily in the United Kingdom. Penske Automotive is also the exclusive distributor of the smart fortwo through its wholly-owned subsidiary smart USA Distributor LLC. smart USA supports 75 smart retail centers in the United States. Penske Automotive is a member of the Fortune 200 and Russell 1000 and has more than 14,000 employees. smart and fortwo are registered trademarks of Daimler AG.
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 and earnings potential and its ability to reduce its variable expenses. Actual results may vary materially because of risks and uncertainties, including external factors such as consumer credit conditions, 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, 2007, 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 (loss) 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.
Contacts:
Bob O’Shaughnessy Chief Financial Officer 248-648-2800 boshaughnessy@penskeautomotive.com
or
Anthony R. Pordon Senior Vice President 248-648-2540 tpordon@penskeautomotive.com
2
PENSKE AUTOMOTIVE GROUP, INC. Consolidated Statements of Income (Amounts In Thousands, Except Per Share Data) (Unaudited)
Fourth Quarter
2008
2007
Revenues:
New Vehicle
$
1,043,877
$
1,658,626
Used Vehicle
528,499
729,327
Finance and Insurance, Net
42,459
67,165
Service and Parts
324,590
346,674
Distribution
101,051
- -
Fleet and Wholesale Vehicle
117,466
247,668
Total Revenues
2,157,942
3,049,460
Cost of Sales:
New Vehicle
964,688
1,518,649
Used Vehicle
492,836
672,088
Service and Parts
147,513
152,104
Distribution
85,951
- -
Fleet and Wholesale Vehicle
118,905
248,518
Total Cost of Sales
1,809,893
2,591,359
Gross Profit
348,049
458,101
SG&A Expenses
311,263
368,848
Depreciation and Amortization
13,113
12,789
Unusual Items
657,589
6,267
Operating Income (Loss)
(633,916
)
70,197
Floor Plan Interest Expense
(15,714
)
(19,806
)
Other Interest Expense
(14,004
)
(11,936
)
Equity in Earnings of Affiliates
3,191
901
Income (Loss) from Continuing Operations Before Income Taxes and Minority Interests
(660,443
)
39,356
Income Taxes
156,131
(11,334
)
Minority Interests
(81
)
(445
)
Income (Loss) from Continuing Operations
(504,393
)
27,577
Income (Loss) from Discontinued Operations, Net of Tax
(5,517
)
1,831
Net Income (Loss)
($509,910
)
$
29,408
Income (Loss) from Continuing Operations Per Diluted
($5.55
)
$
0.29
Share
Income (Loss) Per Diluted Share
($5.61
)
$
0.31
Diluted Weighted Average Shares Outstanding
90,961
94,677
3
PENSKE AUTOMOTIVE GROUP, INC. Consolidated Statements of Income (Amounts In Thousands, Except Per Share Data) (Unaudited)
Twelve Months
2008
2007
Revenues:
New Vehicle
$
5,947,809
$
6,941,663
Used Vehicle
2,846,929
3,096,557
Finance and Insurance, Net
259,478
286,797
Service and Parts
1,403,785
1,393,153
Distribution
348,809
- -
Fleet and Wholesale Vehicle
839,535
1,073,939
Total Revenues
11,646,345
12,792,109
Cost of Sales:
New Vehicle
5,460,656
6,357,716
Used Vehicle
2,632,959
2,854,294
Service and Parts
623,258
614,396
Distribution
294,535
- -
Fleet and Wholesale Vehicle
843,159
1,066,823
Total Cost of Sales
9,854,567
10,893,229
Gross Profit
1,791,778
1,898,880
SG&A Expenses
1,475,648
1,502,824
Depreciation and Amortization
53,822
50,027
Unusual Items
661,968
6,267
Operating Income (Loss)
(399,660
)
339,762
Floor Plan Interest Expense
(64,495
)
(73,432
)
Other Interest Expense
(54,870
)
(55,900
)
Equity in Earnings of Affiliates
16,513
4,084
Debt Redemption Charge
- -
(18,634
)
Income (Loss) from Continuing Operations Before Income Taxes and Minority Interests
(502,512
)
195,880
Income Taxes
100,020
(66,943
)
Minority Interests
(1,133
)
(1,972
)
Income (Loss) from Continuing Operations
(403,625
)
126,965
Income (Loss) from Discontinued Operations, Net of Tax
(8,276
)
774
Net Income (Loss)
($411,901
)
$
127,739
Income (Loss) from Continuing Operations Per Diluted
($4.32
)
$
1.34
Share
Diluted EPS
($4.41
)
$
1.35
Diluted Weighted Average Shares Outstanding
93,398
94,558
4
PENSKE AUTOMOTIVE GROUP, INC. Consolidated Condensed Balance Sheets (Amounts In Thousands) (Unaudited)
12/31/08
12/31/07
Assets
Cash and Cash Equivalents
$
20,109
$
14,798
Accounts Receivable, Net
294,567
445,772
Inventories
1,593,267
1,667,522
Other Current Assets
88,828
65,655
Assets Held for Sale
9,739
106,983
Total Current Assets
2,006,510
2,300,730
Property and Equipment, Net
662,493
616,201
Intangibles
974,649
1,666,741
Other Assets
319,509
84,881
Total Assets
$
3,963.161
$
4,668,553
Liabilities and Stockholders’ Equity
Floor Plan Notes Payable
$
968,873
$
1,060,503
Floor Plan Notes Payable – Non-Trade
511,357
475,188
Accounts Payable
178,811
264,473
Accrued Expenses
196,274
210,049
Current Portion Long-Term Debt
11,305
14,522
Liabilities Held for Sale
13,492
71,304
Total Current Liabilities
1,880,112
2,096,039
Long-Term Debt
1,087,932
830,106
Other Long-Term Liabilities
211,391
320,949
Total Liabilities
3,179,435
3,247,094
Stockholders’ Equity
783,726
1,421,459
Total Liabilities and Stockholders’ Equity
$
3,963,161
$
4,668,553
5
PENSKE AUTOMOTIVE GROUP, INC. Selected Data
Fourth Quarter
Twelve Months
2008
2007
2008
2007
Total Retail Units:
New Retail
31,387
45,074
171,872
193,232
Used Retail
21,622
23,306
101,769
100,120
Total Retail
53,009
68,380
273,641
293,352
smart Wholesale Units
7,725
- -
27,054
- -
Same-Store Retail Units:
New Same-Store Retail
29,172
44,454
151,964
181,940
Used Same-Store Retail
20,618
23,054
95,187
95,240
Total Same-Store Retail
49,790
67,508
247,151
277,180
Same-Store Retail Revenue:
New Vehicles
$
983,462
$
1,631,736
$
5,366,317
$
6,567,806
Used Vehicles
502,163
722,198
2,645,535
2,958,901
Finance and Insurance, Net
40,680
66,389
240,325
276,069
Service and Parts
308,486
340,155
1,295,768
1,330,112
Total Same-Store Retail
$
1,834,791
$
2,760,478
$
9,547,945
$
11,132,888
Same-Store Retail Revenue Growth:
New Vehicles
(39.7
%)
1.1
%
(18.3
%)
5.4
%
Used Vehicles
(30.5
%)
9.9
%
(10.6
%)
14.6
%
Finance and Insurance, Net
(38.7
%)
10.8
%
(12.9
%)
9.2
%
Service and Parts
(9.3
%)
5.5
%
(2.6
%)
7.3
%
Revenue Mix:
New Vehicles
48.4
%
54.4
%
51.1
%
54.3
%
Used Vehicles
24.5
%
23.9
%
24.4
%
24.2
%
Finance and Insurance, Net
2.0
%
2.2
%
2.2
%
2.2
%
Service and Parts
15.0
%
11.4
%
12.1
%
10.9
%
Distribution
4.7
%
—
%
3.0
%
—
%
Fleet and Wholesale
5.4
%
8.1
%
7.2
%
8.4
%
Average Retail Selling Price:
New Vehicles
$
33,258
$
36,798
$
34,606
$
35,924
Used Vehicles
24,443
31,294
27,974
30,929
Gross Margin
16.1
%
15.0
%
15.4
%
14.8
%
Retail Gross Margin – by Product:
New Vehicles
7.6
%
8.4
%
8.2
%
8.4
%
Used Vehicles
6.7
%
7.8
%
7.5
%
7.8
%
Service and Parts
54.6
%
56.0
%
55.6
%
55.9
%
6
PENSKE AUTOMOTIVE GROUP, INC. Selected Data (Continued)
Fourth Quarter
Twelve Months
2008
2007
2008
2007
Gross Profit per Retail Transaction:
New Vehicles
$
2,523
$
3,106
$
2,834
$
3,022
Used Vehicles
1,649
2,456
2,102
2,420
Finance and Insurance
801
982
948
978
Brand Mix:
BMW
23
%
22
%
22
%
22
%
Toyota / Lexus
19
%
20
%
19
%
20
%
Honda / Acura
15
%
14
%
15
%
15
%
Mercedes Benz
10
%
10
%
10
%
11
%
Audi
9
%
8
%
9
%
8
%
Land Rover
3
%
5
%
4
%
5
%
Ferrari / Maserati
3
%
4
%
3
%
3
%
Porsche
3
%
3
%
3
%
4
%
Other
15
%
14
%
15
%
12
%
100
%
100
%
100
%
100
%
Premium
65
%
66
%
65
%
66
%
Foreign
31
%
29
%
30
%
29
%
Domestic Big 3
4
%
5
%
5
%
5
%
100
%
100
%
100
%
100
%
Revenue Mix:
U.S.
69
%
64
%
64
%
63
%
International
31
%
36
%
36
%
37
%
100
%
100
%
100
%
100
%
Rent Expense
$
39,673
$
39,321
$
160,100
$
150,573
12/31/08
12/31/07
Debt to Total Capital Ratio
58
%
37
%
Adjusted Debt to Total Capital Ratio (excl. intangible impairment charge)
46
%
37
%
Debt Covenant Compliance (U.S.):
Current Ratio (min 1.00:1)
1.07:1
1.10:1
Fixed Charge Coverage Ratio (min 1.00:1)
1.24:1
1.57:1
Ratio of Non-Floorplan Debt to Stockholders’ Equity (max 1.30:1)
0.86:1
0.61:1
Funded Debt to EBITDA Ratio (max 2.50:1)
1.26:1
0.34:1
Debt Covenant Compliance (U.K.):
Capital Expenditures (max £50 million)
£
29.5
£
6.2
EBITAR to Fixed Charges (min 1.40:1)
1.76x
2.02x
Debt to EBITAR (max 3.25:1)
1.45x
0.80x
PENSKE AUTOMOTIVE GROUP, INC. Non-GAAP Reconciliation ($’s in Millions)
Adjusted Income from Continuing Operations:
2008
Fourth Quarter
Twelve Months
Net
EPS
Net
EPS
Loss from Continuing Operations
($504.4
)
($5.55
)
($403.6
)
($4.32
)
SFAS No. 142 Intangible Impairment
493.1
5.42
493.1
5.28
Dealership Consolidation Costs
5.8
0.06
5.8
0.06
Severance
2.5
0.03
3.8
0.04
Other
1.0
0.01
2.5
0.03
Adjusted Income (Loss) from Continuing Operations
($2.0
)
($0.02
)
$
101.6
$
1.09
2007
Fourth Quarter
Twelve Months
Net
EPS
Net
EPS
Income from Continuing Operations
$
27.6
$
0.29
$
127.0
$
1.34
Impairments
4.4
0.05
4.4
0.05
Senior Subordinated Note
—
—
12.3
0.13
Redemption
Adjusted Income from Continuing Operations
$
32.0
$
0.34
$
143.7
$
1.52
Components of Adjusted Debt to Total Capital Ratio:
12/31/08
12/31/07
Reported Debt
$
1,099.2
$
844.6
Reported Stockholders’ Equity
$
783.7
$
1,421.5
Equity Impact of Intangible
493.1
—
Impairment
Adjusted Stockholders’ Equity
$
1,276.8
$
1,421.5
Reported Total Capital
$
1,882.9
$
2,266.1
Equity Impact of Intangible
493.1
—
Impairment
Adjusted Total Capital
$
2,376.0
$
2,266.1
7
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