Penske Automotive Group, Inc. (PAG)

PAG 
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Industry: Consumer Durables
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Penske Automotive Group, Inc. (PAG)

Q4 2012 Results Earnings Call

February 6, 2013 2:00 PM ET

Executives

Tony Pordon - EVP, IR and Corporate Development

Roger Penske - Chairman and CEO

David Jones - Executive Vice President and CFO

Analysts

Matt Nemer - Wells Fargo Securities

Rick Nelson - Stephens

John Murphy - Bank of America/Merrill Lynch

Brett Hoselton -KeyBanc

James Albertine - Stifel Nicolaus

Simeon Gutman - Credit Suisse

Ravi Shanker - Morgan Stanley

Patrick Archambault - Goldman Sachs

Scott Stember - Sidoti & Company

Brian Sponheimer - Gabelli & Co.

Presentation

Operator

Good afternoon, ladies and gentlemen. Welcome to the Penske Automotive Group Fourth Quarter 2012 Earnings conference call. Today's call is being recorded and will be available for replay, approximately, one hour after completion through February 13, 2013. And audio file of today's call will be available on the company's website under the Investor Relations tab at www.penskeautomotive.com.

I would now like to introduce Mr. Tony Pordon, the company's Execute Vice President of Investor Relations and Corporate Development. Please go ahead.

Tony Pordon

Thank you, John. Good afternoon, everyone. Our press release detailing Penske Automotive Group's fourth quarter and 12 months result ended December 31st, 2012 was issued this morning and is posted on the company's Web site.

Joining me for today's call are Roger Penske, David Jones our Chief Financial Officer and J.D. Carlson, our Controller. Following today's call, I will be available by phone to address any additional questions that you may have. We have also posted the presentation to the company's website designed to assist you in understanding our financial results. We urge you to refer this presentation during our call today at www.penskeautomotive.com.

Before we begin, I would like to remind you that we will be discussing certain non-GAAP financial measures such as adjusted income from continuing operations attributable to common shareholders, adjusted income per share from continuing operations attributed to common shareholders and adjusted EBITDA on our call today. We have reconciled these items to the most directly comparable GAAP measures in our press release dated today. I refer you to that press release for additional information.

The company believes these widely accepted measures of operating profitability improved 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 on-going core business operations and improve the period-to-period comparability of the company's results from its core business.

Adjusted income from continuing operations and related earnings per share to common shareholders for 2012 excludes after tax cost of $13 million or approximately $0.14 per share associated with the redemption of the company's $375 million or 7.75% senior subordinated notes. Adjusted income for continuing operations in related earnings per share attributable to common shareholders for 2011 excludes $11 million or $0.12 per share of net income tax benefits as noted in our press release.

Additionally today, we may make forward looking statements on this call. Our actual results may vary because of risks and uncertainties including external factors such as consumer confidence, consumer credit conditions, vehicle availability relating to OEM and supplier operational issues, interest rates fluctuations, changes in consumer spending, macro economic factors and other factors over, which the company has no control. Any such forward looking statements should be evaluated together with the information in our public filing including our Form 10Q.

At this time I'd like to turn the call over to Roger Penske, who will take you to our fourth quarter and full year 2012 performance.

Roger Penske

Thank you, Tony, good afternoon, everyone and thank you for joining us today. I'm pleased to announce that Penske Automotive reported record fourth quarter results this morning from income from continuing operations in earnings per share. The record results were driven by 19% increase in total new and used retail unit sales and an 18% increase in total revenue to $3.4 billion.

For the fourth quarter income from continuing operations attributable to common shareholders increased 20% to $51 million and related earning per share increased 21% to $0.57. Our results include approximately $1.7 million in expenses or $0.01 per share for insurance deductibles and clean up cost associated with Superstorm Sandy.

Before discussing the details of the fourth quarter, I'd like to summarize that company's full year performance. In 2012 PAG achieved new performance record for retail unit sales, revenue, adjusted income from continuing operations and adjusted earnings per share. Total retail unit sales increased 20.6% to $326,000. Our new to used ratio ended the year at 0.81 to 1, total retail unit sales increased 17% in the U.S. and 29% in our international markets.

Revenue improved $2 billion or 18% to $13.2 billion, approximately $1.1 billion of the increase was attributed to the same store which grew by 10% last year while the balance of the increase or about $900 million was attributed to acquisitions.

We generated 130 basis points improvement in SG&A leverage improving to 79.2. On a same store basis SG&A gross profit was 79.1 and SG&A leverage improved by 150 basis points. Adjusted income from continuing operations increased 26% to $206 million our related earnings per share improve 27% to $2.28. We generated $407.6 million in adjusted EBITDA.

During 2012 we strengthened our balance sheet by issuing $550 million of ten year senior subordinated notes at 5.75% and used a portion of the proceeds to refinance our existing $375 million in senior subordinated notes.

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