Penske Automotive (PAG) 8-K Results of Operations and Financial Condition

PENSKE AUTOMOTIVE REPORTS SECOND QUARTER RESULTS
____________________________________________________________

Income From Continuing Operations of $19.8 Million, or $0.22 Per Share

Total Debt Reduced by $368 Million Since Year-End

Same-Store Retail Sales Revenues Increase 8.1% vs. First Quarter 2009
___________________________________________________________

BLOOMFIELD HILLS, MI, July 29, 2009 – Penske Automotive Group, Inc. (NYSE: PAG), an international automotive retailer, today reported second quarter income from continuing operations attributable to PAG of $19.8 million, or $0.22 per share attributable to common shareowners, which compares to $39.0 million, or $0.41 per share, in the second quarter last year. Total revenue in the second quarter was $2.3 billion compared to $3.3 billion in the same period last year.

Total retail sales revenues decreased 28.1% versus the comparable prior year period, driven principally by continuing broad-based weakness in the new vehicle market in the U.S. and the U.K. Same-store total retail revenues declined 31.3%. Excluding changes relating to exchange rates, total retail revenues on a same-store basis declined 24.9%. Despite the challenging operating environment, same-store service and parts revenues declined only 4.4% excluding changes relating to exchange rates.

During the second quarter, the Company further reduced its inventories and debt. As of June 30, 2009, inventories were $1.3 billion and total debt, including floor plan debt, was $2.2 billion, which represent reductions of $324 million and $368 million, respectively, since December 31, 2008. As of June 30, 2009, the Company had availability of $361 million under its revolving credit agreements.

“The performance of our business in the second quarter improved over the first quarter,” said Penske Automotive Group Chairman Roger Penske. “While market conditions are difficult, the cost reduction initiatives we implemented helped us remain profitable this year despite our decreased revenues. I am encouraged that our sales levels continued to improve sequentially. In fact, same-store retail revenues in the second quarter increased 8.1% compared to the first quarter of this year, including increases of 11.9% and 5.9%, respectively, in new and used retail sales revenues.”

Total revenues for the six months ended June 30, 2009, decreased 31.2% to $4.5 billion. Income from continuing operations attributable to PAG for the six months was $36.0 million, or $0.39 per share attributable to common shareowners, which compares to $70.8 million and $0.74 per share, respectively, in the comparable period in the prior year. The 2009 results include $6.5 million, or $0.07 per share, of after-tax gain relating to the repurchase in the first quarter of $69 million principal amount of the Company’s 3.5% Senior Subordinated Convertible Notes due 2026. Excluding this gain, adjusted income from continuing operations attributable to PAG amounted to $29.5 million, or $0.32 per share attributable to common shareowners.

Securities Repurchase Authority

The Company’s Board of Directors previously approved repurchases of up to $150 million of the Company’s outstanding common stock, debt and convertible debt. During the second quarter, the Company did not repurchase any securities and has $44 million remaining under the program.

smart USA

During the second quarter, smart USA wholesaled 3,659 units. Consistent with other smaller, fuel efficient vehicles, lower gasoline prices and the challenging new vehicle sales environment in the U.S. are impacting smart fortwo vehicle sales. In response to the challenging retail environment, smart USA has launched finance and marketing campaigns to drive retail activity, and has implemented initiatives which it expects will result in annualized cost savings of approximately $3.5 million. During the quarter, smart USA also approved new retail centers in Nashville, TN, Oxnard, CA and New Orleans, LA, expanding the smart retail network in the U.S. to 78 franchises. For the year, smart USA now expects to wholesale approximately 18,000 units.

Saturn Memorandum of Understanding

In June 2009, the Company announced that it had entered into a Memorandum of Understanding (the “MOU”) with General Motors regarding the potential acquisition of certain assets relating to the Saturn automotive brand. Pursuant to the MOU, we would obtain the rights to the Saturn brand, acquire certain assets including the Saturn parts inventory, and have the right to distribute vehicles and parts through the Saturn dealership network. General Motors would continue to provide Saturn Aura, Vue and Outlook vehicles, on a contract basis, for an interim period. Due diligence and negotiations related to this transaction continue, and consummation of a transaction is subject to the completion of additional due diligence, regulatory and other approvals.

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Conference Call

Penske Automotive will host a conference call discussing financial results relating to the second quarter of 2009 on July 29, 2009, at2:00 p.m. EDT. To listen to the conference call, participants must dial(800) 230-1092 [International, please dial (612) 234-9959]. 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 310 retail automotive franchises, representing 40 different brands and 25 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 160 franchises in 17 states and Puerto Rico and 150 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 78 smart retail centers in the United States. Penske Automotive is a member of the Fortune 200 and Russell 1000 and has approximately 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, its ability to reduce its variable expenses, and the potential Saturn transaction noted above. Actual results may vary materially because of risks and uncertainties, including external factors such as consumer credit conditions, any potential restructuring of the U.S. automotive sector, macro-economic factors, interest rate fluctuations, changes in consumer spending and other factors over which management has no control and, with respect to the potential Saturn transaction, satisfaction of various conditions, such as required regulatory approvals, satisfactory completion of due diligence and other conditions, many of which are outside of our 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, 2008, 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.

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

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PENSKE AUTOMOTIVE GROUP, INC.
Consolidated Statements of Income
(Amounts In Thousands, Except Per Share Data)
(Unaudited)

	Second Quarter
		2009			2008
Revenues:
New Vehicle		$	1,091,374		$	1,726,632
Used Vehicle			657,464			806,864
Finance and Insurance, Net			54,572			75,262
Service and Parts			332,108			359,389
Distribution			53,152			98,421
Fleet and Wholesale Vehicle			130,747			264,486
Total Revenues			2,319,417			3,331,054
Cost of Sales:
New Vehicle			1,005,265			1,582,160
Used Vehicle			598,154			746,588
Service and Parts			149,143			157,749
Distribution			45,702			82,605
Fleet and Wholesale Vehicle			126,823			265,790
Total Cost of Sales			1,925,087			2,834,892
Gross Profit			394,330			496,162
SG&A Expenses			328,035			393,042
Depreciation and Amortization			13,789			13,396
Operating Income			52,506			89,724
Floor Plan Interest Expense			(9,009	)		(16,247	)
Other Interest Expense			(13,663	)		(12,423	)
Debt Discount Amortization			(3,135	)		(3,496	)
Equity in Earnings of Affiliates			3,466			3,011
Income from Continuing Operations Before			30,165			60,569
Income Taxes
Income Taxes			(10,316	)		(21,122	)
Income from Continuing Operations			19,849			39,447
Loss from Discontinued Operations, Net of Tax			(5,682	)		(1,189	)
Net Income			14,167			38,258
Income Attributable to Non-Controlling Interests			(88	)		(428	)
Net Income Attributable to Common Shareholders		$	14,079		$	37,830
Income from Continuing Operations Per Diluted Share		$	0.22		$	0.41
Income Per Diluted Share		$	0.15		$	0.40
Diluted Weighted Average Shares Outstanding			91,592			95,499
Amounts Attributable to Common Shareholders:
Reported Income from Continuing Operations		$	19,849		$	39,447
Income Attributable to Non-Controlling Interests			(88	)		(428	)
Income from Continuing Operations, net of tax			19,761			39,019
Loss from Discontinued Operations, net of tax			(5,682	)		(1,189	)
Net Income		$	14,079		$	37,830

PENSKE AUTOMOTIVE GROUP, INC.
Consolidated Statements of Income
(Amounts In Thousands, Except Per Share Data)
(Unaudited)

	Six Months
		2009			2008
Revenues:
New Vehicle		$	2,062,462		$	3,350,762
Used Vehicle			1,271,334			1,597,706
Finance and Insurance, Net			102,903			148,979
Service and Parts			659,143			717,715
Distribution			133,265			162,191
Fleet and Wholesale Vehicle			245,649			522,379
Total Revenues			4,474,756			6,499,732
Cost of Sales:
New Vehicle			1,905,050			3,069,868
Used Vehicle			1,156,115			1,471,903
Service and Parts			299,392			315,332
Distribution			114,016			136,222
Fleet and Wholesale Vehicle			238,134			522,843
Total Cost of Sales			3,712,707			5,516,168
Gross Profit			762,049			983,564
SG&A Expenses			640,554			786,268
Depreciation and Amortization			26,643			26,657
Operating Income			94,852			170,639
Floor Plan Interest Expense			(18,491	)		(33,200	)
Other Interest Expense			(28,142	)		(24,292	)
Debt Discount Amortization			(6,773	)		(6,992	)
Equity in Earnings of Affiliates			4,180			4,403
Gain on Debt Repurchase			10,429			—
Income from Continuing Operations Before			56,055			110,558
Income Taxes
Income Taxes			(20,026	)		(38,905	)
Income from Continuing Operations			36,029			71,653
Loss from Discontinued Operations, Net of Tax			(5,660	)		(1,065	)
Net Income			30,369			70,588
Income Attributable to Non-Controlling Interests			(8	)		(863	)
Net Income Attributable to Common Shareholders		$	30,361		$	69,725
Income from Continuing Operations Per Diluted Share		$	0.39		$	0.74
Income Per Diluted Share		$	0.33		$	0.73
Diluted Weighted Average Shares Outstanding			91,537			95,377
Amounts Attributable to Common Shareholders:
Reported Income from Continuing Operations		$	36,029		$	71,653
Income Attributable to Non-Controlling Interests			(8	)		(863	)
Income from Continuing Operations, net of tax			36,021			70,790
Loss from Discontinued Operations, net of tax			(5,660	)		(1,065	)
Net Income		$	30,361		$	69,725

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

	6/30/09		12/31/08
Assets
Cash and Cash Equivalents	$	21,871	$	20,108
Accounts Receivable, Net		321,654		294,048
Inventories		1,264,758		1,589,105
Other Current Assets		99,924		88,251
Assets Held for Sale		5,550		15,428
Total Current Assets		1,713,757		2,006,940
Property and Equipment, Net		710,853		662,121
Intangibles		1,021,473		974,141
Other Long-Term Assets		305,443		318,947
Total Assets	$	3,751,526	$	3,962,149
Liabilities and Equity
Floor Plan Notes Payable	$	777,803	$	964,783
Floor Plan Notes Payable – Non-Trade		427,731		506,688
Accounts Payable		215,643		178,282
Accrued Expenses		203,307		195,994
Current Portion Long-Term Debt		12,623		11,305
Liabilities Held for Sale		8,213		23,060
Total Current Liabilities		1,645,320		1,880,112
Long-Term Debt		949,043		1,052,060
Other Long-Term Liabilities		259,167		221,556
Total Liabilities		2,853,530		3,153,728
Equity		897,996		808,421
Total Liabilities and Equity	$	3,751,526	$	3,962,149

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PENSKE AUTOMOTIVE GROUP, INC.
Selected Data

	Second Quarter						Six Months
	2009			2008			2009			2008
Total Retail Units:
New Retail		33,126			50,072			63,760			95,225
Used Retail		26,004			27,624			52,789			53,957
Total Retail		59,130			77,696			116,549			149,182
smart Wholesale Units		3,659			7,731			9,373			12,644
Same-Store Retail Units:
New Same-Store Retail		31,547			49,224			60,293			93,616
Used Same-Store Retail		24,442			27,291			49,299			53,179
Total Same-Store Retail		55,989			76,515			109,592			146,795
Same-Store Retail Revenue:
New Vehicles	$	1,032,005		$	1,700,979		$	1,942,844		$	3,296,339
Used Vehicles		613,578			797,035			1,180,459			1,572,843
Finance and Insurance, Net		51,927			74,231			97,695			146,810
Service and Parts		312,656			352,979			621,356			704,167
Total Same-Store Retail	$	2,010,166		$	2,925,224		$	3,842,354		$	5,720,159
Same-Store Retail Revenue Growth:
New Vehicles		(39.3	%)		(8.4	%)		(41.1	%)		(6.9	%)
Used Vehicles		(23.0	%)		(2.8	%)		(24.9	%)		(0.5	%)
Finance and Insurance, Net		(30.0	%)		(3.4	%)		(33.5	%)		0.3	%
Service and Parts		(11.4	%)		0.7	%		(11.8	%)		0.8	%
Revenue Mix:
New Vehicles		47.1	%		51.8	%		46.1	%		51.6	%
Used Vehicles		28.3	%		24.2	%		28.4	%		24.6	%
Finance and Insurance, Net		2.4	%		2.3	%		2.3	%		2.3	%
Service and Parts		14.3	%		10.8	%		14.7	%		11.0	%
Distribution		2.3	%		3.0	%		3.0	%		2.5	%
Fleet and Wholesale		5.6	%		7.9	%		5.5	%		8.0	%
Average Retail Selling Price:
New Vehicles	$	32,946		$	34,483		$	32,347		$	35,188
Used Vehicles		25,283			29,209			24,083			29,611
Gross Margin		17.0	%		14.9	%		17.0	%		15.1	%
Retail Gross Margin – by Product:
New Vehicles		7.9	%		8.4	%		7.6	%		8.4	%
Used Vehicles		9.0	%		7.5	%		9.1	%		7.9	%
Service and Parts		55.1	%		56.1	%		54.6	%		56.1	%

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PENSKE AUTOMOTIVE GROUP, INC.
Selected Data (Continued)

	Second Quarter						Six Months
	2009			2008			2009			2008
Gross Profit per Retail Transaction:
New Vehicles	$	2,599		$	2,885		$	2,469		$	2,950
Used Vehicles		2,281			2,182			2,183			2,332
Finance and Insurance		923			969			883			999
Brand Mix:
BMW		21	%		21	%		22	%		21	%
Toyota / Lexus		18	%		19	%		18	%		19	%
Honda / Acura		15	%		15	%		15	%		15	%
Audi		11	%		9	%		10	%		9	%
Mercedes Benz		10	%		10	%		10	%		10	%
Porsche		4	%		3	%		4	%		3	%
Land Rover		3	%		4	%		4	%		5	%
Ferrari / Maserati		3	%		4	%		3	%		4	%
Other		15	%		15	%		14	%		14	%
		100	%		100	%		100	%		100	%
Premium		65	%		65	%		65	%		65	%
Foreign		30	%		30	%		30	%		30	%
Domestic Big 3		5	%		5	%		5	%		5	%
		100	%		100	%		100	%		100	%
Revenue Mix:
U.S.		64	%		64	%		64	%		62	%
International		36	%		36	%		36	%		38	%
		100	%		100	%		100	%		100	%
Rent Expense	$	42,699		$	39,808		$	82,281		$	79,617
								6/30/09			12/31/08
Debt to Total Capital Ratio								52	%		57	%
Debt Covenant Compliance (U.S.):
Current Ratio (min 1.00:1)								1.04:1			1.07:1
Fixed Charge Coverage Ratio (min 1.00:1)								1.18:1			1.24:1
Ratio of Non-Floorplan Debt to Stockholders’ Equity (max 1.30:1)								0.69:1			0.86:1
Funded Debt to EBITDA Ratio (max 2.50:1)								1.42:1			1.26:1
Debt Covenant Compliance (U.K.):
Capital Expenditures (max £50 million)							£	23.8		£	29.5
EBITAR to Fixed Charges (min 1.40:1)								1.91x			1.76x
Debt to EBITAR (max 3.25:1)								0.77x			1.45x

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