Penske Automotive Reports All Time Record Results

BLOOMFIELD HILLS, Mich., Oct. 22, 2020 /PRNewswire/ -- 

Penske Automotive Group, Inc. (NYSE:PAG), a diversified international transportation services company, today announced record results for the third quarter, including the most profitable quarter in company history. For the three months ended September 30, 2020, the company reported income from continuing operations attributable to common shareholders of $246.5 million, or $3.07 per share, compared to $116.1 million, or $1.42 per share in the prior year. Foreign exchange positively impacted earnings per share by $0.05. Revenue was flat at $6 billion. Third quarter income from continuing operations and related earnings per share include a net income tax benefit of $15.4 million, or $0.19 per share, from various U.S. and foreign tax legislation changes. Excluding this net benefit, adjusted income from continuing operations increased 99.1% to $231.1 million, and related earnings per share increased 102.1% to $2.87.

Commenting on the company's results, Chairman Roger Penske said, "I am very pleased to report all time record results for Penske Automotive Group in the third quarter. These results were primarily driven by same-store retail automotive revenue and margin expansion, coupled with expense reductions which contributed to a 1,010 basis points decline in selling, general and administrative expenses ("SG&A") as a percent of gross profit. Through our cost cutting efforts, we estimate that approximately $125-150 million in annualized costs were eliminated across our various businesses." Penske continued, "I am particularly pleased that our strong cash flow has allowed us to significantly reduce long-term debt, lengthen maturities and reduce future annual interest expense by an estimated $17 million."

For the nine months ended September 30, 2020, the company reported income from continuing operations attributable to common shareholders of $343.1 million, or $4.27 per share, compared to $333.9 million, or $4.02 per share in the prior year. Foreign exchange positively impacted earnings per share by $0.01. Revenue was $14.6 billion compared to $17.3 billion in the same period last year. Excluding the tax benefit discussed above, adjusted income from continuing operations decreased 1.9% to $327.7 million, and related earnings per share increased 1.5% to $4.08.

Operational Highlights – Third Quarter 2020

• Retail automotive same-store revenue increased 3.6%
• Retail automotive earnings before taxes increased 170%
• Retail automotive same-store variable gross profit per unit retailed increased 29%
• Retail automotive same-store service and parts gross margin increased 250 basis points
• Total gross margin increased 140 basis points to 16.0%
• SG&A expenses declined $29 million and SG&A to gross profit declined 1,010 basis points to 67.3%

Long-Term Debt

During the third quarter of 2020, the company repaid in full our $300 million 3.75% senior subordinated notes at scheduled maturity using availability under our U.S. revolving credit facility. Additionally, during the quarter we issued $550 million in senior subordinated notes at 3.5% due 2025. The proceeds of these notes were used to redeem our $550 million in aggregate principal amount of 5.75% senior subordinated notes due 2022 on October 1^st. In the interim, we utilized the proceeds from the new 3.5% senior subordinated notes to temporarily pay down floorplan, U.S. revolver and mortgage revolver balances.

Used Vehicle SuperCenters

Penske Automotive Group operates sixteen Used Vehicle SuperCenters. For the three months ended September 30, 2020, profitability more than tripled to $16.0 million compared to $4.8 million last year driven by a 36% increase in same-store variable gross profit per unit retailed. Retail unit sales decreased by 6.9% to 18,372 while revenue increased by 7.6% to $352.5 million. For the nine months ended September 30, 2020, SuperCenter retail unit sales decreased by 25.7% to 41,284 and revenue decreased by 17.1% to $790.5 million. We expect to open two additional Used Vehicle SuperCenters in the next 90 days and have four additional sites under development which would increase the current footprint of SuperCenters by 40%.

Retail Commercial Truck Dealerships

Penske Automotive Group operates twenty-five medium and heavy-duty truck dealership locations in the U.S. and Canada offering primarily Freightliner and Western Star brands. For the three months ended September 30, 2020, earnings before taxes were $23.4 million compared to $30.7 million in the same period last year. Total units retailed declined 5.3% and revenue declined 14.6%. On a same-store basis new units declined 15.5% compared to North American Class 6-8 retail sales which declined 31.0% during the period. Same-store revenue declined 4.5%. For the nine months ended September 30, 2020, earnings before taxes were $51.7 million compared to $65.5 million in the same period last year. Total units retailed increased 6.9%, and revenue increased 2.1%. On a same-store basis new units retailed declined 25.9% and same-store revenue declined 16.9%.

Penske Transportation Solutions

Penske Transportation Solutions ("PTS"), is a leading provider of full-service truck leasing, truck rental, contract maintenance, and logistics services and is an integral part of the North American supply chain, providing supply chain and transportation services to its customers. The company has a 28.9% ownership interest in the PTS partnership and accounts for its ownership interest using the equity method of accounting. In addition to equity income, the company receives cash distributions and may recognize cash tax benefits from time to time. For the three and nine months ended September 30, 2020, the company recorded $64.5 million and $108.0 million in earnings compared to $42.2 million and $106.0 million for the same period last year. The 53% increase in the third quarter was principally driven by improved operating results in full-service leasing and logistics and a reduction in operating expenses.

Dividend and Share Repurchases

On October 14, 2020, we announced the reinstatement of our cash dividend in the amount of $0.42 per share payable December 1, 2020 to shareholders of record as of November 10, 2020.

For the nine months ended September 30, 2020, the company repurchased 1,027,736 shares for $34.4 million. Approximately $170.6 million remains available to repurchase shares under the company's existing share repurchase authorization.

Conference Call

Penske Automotive Group will host a conference call discussing financial results relating to the third quarter of 2020 on Thursday, October 22, 2020, at 2:00 p.m. Eastern Daylight Time. To listen to the conference call, participants must dial (866) 394-1455 – [International, please dial (516) 575-8644] using access code 6795577. The call will also be simultaneously broadcast over the Internet through the Investor's section of the Penske Automotive Group website. Additionally, an investor presentation relating to the third quarter 2020 financial results has been posted to the company's website. To access the presentation or to listen to the company's webcast, please refer to www.penskeautomotive.com.

About Penske Automotive

Penske Automotive Group, Inc., (NYSE:PAG) headquartered in Bloomfield Hills, Michigan, is an international transportation services company that operates automotive and commercial truck dealerships principally in the United States, the United Kingdom, Canada, and Western Europe, and distributes commercial vehicles, diesel engines, gas engines, power systems and related parts and services principally in Australia and New Zealand. PAG is a member of the Fortune 500 and Russell 1000 and 3000 indexes and is ranked among the World's Most Admired Companies by Fortune Magazine. For additional information, visit the company's website at www.penskeautomotive.com.

Non-GAAP Financial Measures

This release contains certain non-GAAP financial measures as defined under SEC rules, such as earnings before interest, taxes, depreciation, amortization ("EBITDA"). The company has reconciled these measures to the most  directly comparable GAAP measures in the release. The company believes that these widely accepted measures of operating profitability improve the transparency of the company's disclosures and provide a meaningful presentation of the company's results from its core business operations excluding the impact of items not related to the company's ongoing core business operations, and improve the period-to-period comparability of the company's results from its core business operations. These non-GAAP financial measures are not substitutes for GAAP financial results and should only be considered in conjunction with the company's financial information that is presented in accordance with GAAP.

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 liquidity and assessment of business conditions in light of the COVID-19 pandemic. Actual results may vary materially because of risks and uncertainties that are difficult to predict. These risks and uncertainties include, among others: the duration, severity and resolution of the COVID-19 pandemic, government imposed restrictions on our business in light of COVID-19 or otherwise, economic conditions generally, conditions in the credit markets, changes in interest rates and foreign currency exchange rates, changes in tariff rates, adverse impacts related to the outcome of the United Kingdom's departure from the European Union, adverse conditions affecting a particular manufacturer, including the adverse impact to the vehicle and parts supply chain due to limited vehicle availability due to the COVID-19 pandemic, Worldwide Light Vehicle Testing Protocol ("WLTP") and Real Driving Emissions ("RDE"), natural disasters, recall or other disruptions that interrupt the supply of vehicles or parts to us, changes in consumer credit availability, the outcome of legal and administrative matters, and other factors over which management has limited control. These forward-looking statements should be evaluated together with additional information about Penske Automotive Group's business, markets, conditions, and other uncertainties, which could affect Penske Automotive Group's future performance. These risks and uncertainties are addressed in Penske Automotive Group's Form 10-K for the year ended December 31, 2019 and its other filings with the Securities and Exchange Commission ("SEC"). This press release speaks only as of its date, and Penske Automotive Group disclaims any duty to update the information herein.

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