Adjusted Income From Continuing Operations Increases 52% to $29.5 Million
Adjusted Earnings Per Share From Continuing Operations Increases 52% to $0.32 Per Share ___________________________________________________________
BLOOMFIELD HILLS, MI, February 16, 2011 –Penske Automotive Group, Inc. (NYSE: PAG), an international automotive retailer, today reported adjusted fourth quarter income from continuing operations attributable to common shareholders of $29.5 million, or $0.32 per share, which compares to income from continuing operations attributable to common shareholders of $19.4 million, or $0.21 per share, in the fourth quarter last year. Adjusted fourth quarter 2010 income from continuing operations attributable to common shareholders excludes a net after-tax gain of $0.8 million, or $0.01 per share, relating to the items highlighted in the reconciliation in the attached selected data tables. Total revenue in the fourth quarter increased 13.5% to $2.8 billion.
Fourth Quarter Highlights
•
Total retail unit sales increase 13.9%
•
18.9% in the United States
•
3.7% Internationally
•
Total same-store retail revenues increase 9.1%
•
13.5% in the United States
•
2.0% Internationally
•
Long-term debt reduced by $167 million since the beginning of the year, including $74 million during the fourth quarter
•
Days supply of vehicle inventories as of December 31, 2010
•
55 days for new
•
43 days for used
“Our results exceeded my expectations,” said Penske Automotive Group Chairman Roger Penske. “An improving retail environment in the U.S. drove our business in the fourth quarter, including a 13.8% increase in same-store total retail unit sales and a 7.0% increase in same-store service and parts revenues. In the U.K., our execution and our brand mix helped us to outperform the market and provide a strong contribution of profits despite difficult comparisons due to the government incentive programs in place last year.”
Total revenues for the year ended December 31, 2010 increased 12.7% to $10.7 billion. Adjusted income from continuing operations attributable to common shareholders for the year ended December 31, 2010 amounted to $109.3 million, or $1.19 per share, which compares to adjusted income from continuing operations attributable to common shareholders of $80.2 million, or $0.87 per share, in the year ended December 31, 2009. Adjusted income from continuing operations attributable to common shareholders in the years ended December 31, 2010 and 2009 exclude net after-tax gains of $1.8 million ($0.02 per share) and $3.1 million ($0.03 per share), respectively, relating to the items highlighted in the reconciliations in the attached selected data tables.
smart USA
The distribution business generated after-tax losses of $5.8 million ($0.06 per share) and $15.9 million ($0.17 per share) in the three and twelve months ended December 31, 2010, respectively. Results for the fourth quarter and full year include after-tax expenses of $2.7 million ($0.03 per share) and $3.6 million in ($0.04), respectively, relating to the development of the five-door vehicle previously designed for distribution through the smart USA dealer network.
As previously announced, Mercedes-Benz USA and the Company have initiated discussions to transfer distribution of the smart fortwo to Mercedes-Benz USA. As a result, smart USA cancelled the project relating to the five-door vehicle.
Acquisition Activity
During 2010, the Company acquired 8 franchises and commenced operations at 16 franchises awarded by manufacturers. These 24 franchises are expected to generate approximately $400 million of revenue on an annualized basis.
Financing Activity
During 2010, the Company repurchased $155.7 million principal amount of its outstanding 3.5% Senior Subordinated Convertible Notes due 2026 (the “Convertible Notes”) for $156.6 million in cash. The Company currently expects to use cash flow from operations, existing working capital, and borrowings under its U.S. revolving credit facilty to fund the expected April 2011 redemption of the remaining $150.6 million principal amount of outstanding Convertible Notes. As of December 31, 2010, the Company had $300.0 million of revolving credit available under its U.S. credit facility.
The Company also has authorization to repurchase up to $150.0 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.
Conference Call
Penske Automotive will host a conference call discussing financial results relating to the fourth quarter of 2010 onFebruary 16, 2011, at2:00 p.m. Eastern Standard Time. To listen to the conference call, participants must dial(800) 230-1074 [International, please dial (612) 234-9960]. The call will also be simultaneously broadcast over the Internet through the Penske Automotive Group website atwww.penskeautomotive.com.
About Penske Automotive
Penske Automotive Group, Inc. (www.penskeautomotive.com), headquartered in Bloomfield Hills, Michigan, operates 325 retail automotive franchises, representing 39 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 172 franchises in 17 states and Puerto Rico and 153 franchises located outside the United States, primarily in the United Kingdom.
Penske Automotive, through its wholly-owned subsidiary smart USA Distributor LLC (www.smartusa.com), is the exclusive distributor of the smart fortwo vehicle and related parts in the United States. smart USA supports approximately 75 smart retail centers in the United States.
Penske Automotive is a member of the Fortune 500 and Russell 1000 and has approximately 14,500 employees. smart and fortwo are registered trademarks of Daimler AG.
Non-GAAP Financial Measures
This release contains certain non-GAAP financial measures as defined under SEC rules, such as adjusted income from continuing operations attributable to common shareholders and related earnings per share, EBITDA and adjusted EBITDA. 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 by providing period-to-period comparability of the Company’s results from operations.
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 expected revenue, ability to access amounts under its U.S. revolving credit facility, and efforts to transition the smart USA distributorship. Actual results may vary materially because of risks and uncertainties, including external factors such as consumer credit conditions, adverse conditions affecting a particular manufacturer, macro-economic factors, interest rate fluctuations, changes in consumer spending, and other factors over which management has no control. Availability of revolving credit under the Company’s U.S. credit facility is predicated on continued covenant compliance and other factors. Successful transition of the smart USA distributorship will depend on negotiation and completion of definitive documentation, regulatory approvals, and other factors. 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, 2009, 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.
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
1
PENSKE AUTOMOTIVE GROUP, INC. Consolidated Statements of Income (Amounts In Thousands, Except Per Share Data) (Unaudited)
Fourth Quarter
2010
2009
Revenues:
New Vehicle
$
1,451,352
$
1,254,487
Used Vehicle
728,404
647,641
Finance and Insurance, Net
61,813
58,272
Service and Parts
342,841
322,934
Distribution
8,226
9,443
Fleet and Wholesale Vehicle
175,460
146,342
Total Revenues
2,768,096
2,439,119
Cost of Sales:
New Vehicle
1,328,404
��
1,149,149
Used Vehicle
676,005
598,426
Service and Parts
150,129
142,209
Distribution
7,403
10,631
Fleet and Wholesale Vehicle
174,832
145,229
Total Cost of Sales
2,336,773
2,045,644
Gross Profit
431,323
393,475
SG&A Expenses
360,203
327,620
Depreciation
12,053
13,523
Operating Income
59,067
52,332
Floor Plan Interest Expense
(9,091
)
(8,060
)
Other Interest Expense
(11,776
)
(13,524
)
Debt Discount Amortization
(1,647
)
(3,135
)
Equity in Earnings of Affiliates
8,844
2,092
Income from Continuing Operations Before Income Taxes
45,397
29,705
Income Taxes
(14,573
)
(10,057
)
Income from Continuing Operations
30,824
19,648
Loss from Discontinued Operations, Net of Tax
(1,753
)
(759
)
Net Income
29,071
18,889
Income Attributable to Non-Controlling Interests
(562
)
(212
)
Net Income Attributable to Common Shareholders
$
28,509
$
18,677
Income from Continuing Operations Per Share
$
0.33
$
0.21
Income Per Share
$
0.31
$
0.20
Weighted Average Shares Outstanding
92,214
91,780
Amounts Attributable to Common Shareholders:
Reported Income from Continuing Operations
$
30,824
$
19,648
Income Attributable to Non-Controlling Interests
(562
)
(212
)
Income from Continuing Operations, Net of Tax
30,262
19,436
Loss from Discontinued Operations, Net of Tax
(1,753
)
(759
)
Net Income
$
28,509
$
18,677
PENSKE AUTOMOTIVE GROUP, INC. Consolidated Statements of Income (Amounts In Thousands, Except Per Share Data) (Unaudited)
Year
2010
2009
Revenues:
New Vehicle
$
5,455,802
$
4,654,569
Used Vehicle
2,940,296
2,597,155
Finance and Insurance, Net
251,954
222,281
Service and Parts
1,344,274
1,316,514
Distribution
51,401
179,159
Fleet and Wholesale Vehicle
669,858
534,478
Total Revenues
10,713,585
9,504,156
Cost of Sales:
New Vehicle
5,007,864
4,279,046
Used Vehicle
2,714,097
2,373,303
Service and Parts
580,601
591,159
Distribution
46,833
161,000
Fleet and Wholesale Vehicle
662,642
521,672
Total Cost of Sales
9,012,037
7,926,180
Gross Profit
1,701,548
1,577,976
SG&A Expenses
1,411,814
1,315,225
Depreciation
48,884
54,234
Operating Income
240,850
208,517
Floor Plan Interest Expense
(34,981
)
(35,552
)
Other Interest Expense
(49,267
)
(55,201
)
Debt Discount Amortization
(8,637
)
(13,043
)
Equity in Earnings of Affiliates
20,569
13,808
Gain on Debt Repurchase
1,634
10,429
Income from Continuing Operations Before Income Taxes
170,168
128,958
Income Taxes
(57,912
)
(45,200
)
Income from Continuing Operations
112,256
83,758
Loss from Discontinued Operations, Net of Tax
(2,909
)
(6,838
)
Net Income
109,347
76,920
Income Attributable to Non-Controlling Interests
(1,066
)
(459
)
Net Income Attributable to Common Shareholders
$
108,281
$
76,461
Income from Continuing Operations Per Share
$
1.21
$
0.91
Income Per Share
$
1.18
$
0.83
Weighted Average Shares Outstanding
92,091
91,653
Amounts Attributable to Common Shareholders:
Reported Income from Continuing Operations
$
112,256
$
83,758
Income Attributable to Non-Controlling Interests
(1,066
)
(459
)
Income from Continuing Operations, Net of Tax
111,190
83,299
Loss from Discontinued Operations, Net of Tax
(2,909
)
(6,838
)
Net Income
$
108,281
$
76,461
PENSKE AUTOMOTIVE GROUP, INC. Consolidated Condensed Balance Sheets (Amounts In Thousands) (Unaudited)
12/31/10
12/31/09
Assets
Cash and Cash Equivalents
$
16,621
$
13,999
Accounts Receivable, Net
397,255
321,226
Inventories
1,524,226
1,302,495
Other Current Assets
70,341
95,426
Assets Held for Sale
—
10,625
Total Current Assets
2,008,443
1,743,771
Property and Equipment, Net
739,847
726,808
Intangibles
1,018,316
1,011,803
Other Long-Term Assets
303,226
313,625
Total Assets
$
4,069,832
$
3,796,007
Liabilities and Equity
Floor Plan Notes Payable
$
973,285
$
769,657
Floor Plan Notes Payable – Non-Trade
505,430
423,316
Accounts Payable
261,986
189,989
Accrued Expenses
207,498
227,294
Current Portion Long-Term Debt
10,593
12,442
Liabilities Held for Sale
—
7,675
Total Current Liabilities
1,958,792
1,630,373
Long-Term Debt
769,285
933,966
Other Long-Term Liabilities
295,902
285,629
Total Liabilities
3,023,979
2,849,968
Equity
1,045,853
946,039
Total Liabilities and Equity
$
4,069,832
$
3,796,007
PENSKE AUTOMOTIVE GROUP, INC. Selected Data (Unaudited)
Fourth Quarter
Year
2010
2009
2010
2009
Total Retail Units:
New Retail
39,033
35,176
155,352
140,661
Used Retail
27,705
23,395
113,676
102,208
Total
66,738
58,571
269,028
242,869
smart Wholesale Units
884
998
5,045
13,772
Same-Store Retail Units:
New Same-Store Retail
37,386
35,168
149,376
140,087
Used Same-Store Retail
26,657
23,380
109,813
101,578
Total
64,043
58,548
259,189
241,665
Same-Store Retail Revenue:
New Vehicles
$
1,392,903
$
1,253,863
$
5,221,327
$
4,615,701
Used Vehicles
705,514
647,154
2,824,175
2,559,534
Finance and Insurance, Net
59,980
58,266
244,184
220,704
Service and Parts
329,720
321,525
1,300,007
1,304,400
Total
$
2,488,117
$
2,280,808
$
9,589,693
$
8,700,339
Same-Store Retail Revenue Growth:
New Vehicles
11.1
%
18.2
%
13.1
%
(24.0
%)
Used Vehicles
9.0
%
19.1
%
10.3
%
(12.9
%)
Finance and Insurance, Net
2.9
%
34.1
%
10.6
%
(16.9
%)
Service and Parts
2.5
%
(1.6
%)
(0.3
%)
(8.6
%)
Total
9.1
%
15.5
%
10.2
%
(18.8
%)
Revenue Mix:
New Vehicles
52.4
%
51.4
%
50.9
%
49.0
%
Used Vehicles
26.3
%
26.6
%
27.4
%
27.3
%
Finance and Insurance, Net
2.2
%
2.4
%
2.4
%
2.3
%
Service and Parts
12.4
%
13.2
%
12.5
%
13.9
%
Distribution
0.3
%
0.4
%
0.5
%
1.9
%
Fleet and Wholesale
6.4
%
6.0
%
6.3
%
5.6
%
Average Retail Selling Price:
New Vehicles
$
37,183
$
35,663
$
35,119
$
33,091
Used Vehicles
26,291
27,683
25,866
25,410
Gross Margin
15.6
%
16.1
%
15.9
%
16.6
%
Retail Gross Margin – by Product:
New Vehicles
8.5
%
8.4
%
8.2
%
8.1
%
Used Vehicles
7.2
%
7.6
%
7.7
%
8.6
%
Service and Parts
56.2
%
56.0
%
56.8
%
55.1
%
2
PENSKE AUTOMOTIVE GROUP, INC. Selected Data (Continued) (Unaudited)
Fourth Quarter
Year
2010
2009
2010
2009
Gross Profit per Retail Transaction:
New Vehicles
$
3,150
$
2,995
$
2,883
$
2,670
Used Vehicles
1,891
2,104
1,990
2,190
Finance and Insurance
926
995
937
915
Brand Mix:
BMW / MINI
23
%
22
%
21
%
22
%
Toyota / Lexus
17
%
19
%
18
%
19
%
Honda / Acura
13
%
13
%
14
%
14
%
Mercedes Benz / smart
11
%
11
%
10
%
10
%
Audi
10
%
10
%
10
%
10
%
Land Rover
4
%
5
%
5
%
4
%
Porsche
4
%
4
%
4
%
4
%
Ferrari / Maserati
3
%
3
%
3
%
3
%
Other
15
%
13
%
15
%
14
%
100
%
100
%
100
%
100
%
Premium
68
%
67
%
66
%
65
%
Foreign
27
%
28
%
29
%
30
%
Domestic Big 3
5
%
5
%
5
%
5
%
100
%
100
%
100
%
100
%
Revenue Mix:
U.S.
65
%
62
%
63
%
63
%
International
35
%
38
%
37
%
37
%
100
%
100
%
100
%
100
%
Rent Expense
$
44,479
$
41,602
$
169,342
$
162,992
EBITDA*
$
70,873
$
59,887
$
276,956
$
251,436
Adjusted EBITDA*
$
69,722
$
59,887
$
274,171
$
246,231
* See the following Non-GAAP reconciliation tables
3
Reconciliation of 2010 and 2009 reported and adjusted income from continuing operations attributable tocommon shareholders ofPAG and related earnings per share:
Fourth Quarter
2010
2009
Income
EPS
Income
EPS
Income from continuing operations attributable tocommon shareholders ofPAG
$
30,262
$
0.33
$
19,436
$
0.21
Gain on sale of investment
(3,595
)
(0.04
)
—
—
Franchise closure/relocation costs
2,814
0.03
—
—
Adjusted income from continuing operations attributable to PAG
$
29,481
$
0.32
$
19,436
$
0.21
Twelve Months
2010
2009
Income
EPS
Income
EPS
Income from continuing operations attributable tocommon shareholders ofPAG
$
111,190
$
1.21
$
83,299
$
0.91
Gain on sale of investment
(3,595
)
(0.04
)
—
—
Franchise closure/relocation costs
2,814
0.03
778
0.01
Gain on debt repurchase
(1,062
)
(0.01
)
(6,518
)
(0.07
)
Costs relating to Saturn transaction
—
—
1,926
0.02
Hedge de-designation costs
—
—
686
0.01
Adjusted income from continuing operations attributable to PAG
$
109,347
$
1.19
$
80,171
$
0.87
Reconciliation of 2010 and 2009 net income to EBITDA and adjusted EBITDA:
Fourth Quarter
Twelve Months
2010
2009
2010
2009
Net income
$
29,071
$
18,889
$
109,347
$76,920
Depreciation
12,053
13,523
48,884
54,234
Other interest expense
11,776
13,524
49,267
55,201
Debt discount amortization
1,647
3,135
8,637
13,043
Income taxes
14,573
10,057
57,912
45,200
Loss from discontinued operations, net of tax
1,753
759
2,909
6,838
EBITDA
70,873
59,887
276,956
251,436
Gain on sale of investment
(5,295
)
—
(5,295
)
—
Franchise closure/relocation costs
4,144
—
4,144
1,200
Gain on debt repurchase
—
—
(1,634
)
(10,429)
Costs relating to Saturn transaction
—
—
—
2,967
Hedge de-designation costs
—
—
—
1,057
Adjusted EBITDA
$
69,722
$
59,887
$
274,171
$246,231
4
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