Penske Automotive Group, Inc. (PAG)

PAG 
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Penske Automotive Group (PAG)

Q1 2013 Earnings Call

April 29, 2013 2:00 pm ET

Executives

Anthony R. Pordon - Executive Vice President of Investor Relations and Corporate Development

Roger S. Penske - Chairman, Chief Executive Officer, Chairman of Executive Committee, Chairman of Penske Corporation and Chief Executive Officer of Penske Corporation

Analysts

Matthew R. Nemer - Wells Fargo Securities, LLC, Research Division

John Murphy - BofA Merrill Lynch, Research Division

N. Richard Nelson - Stephens Inc., Research Division

Brian Sponheimer - Gabelli & Company, Inc.

Brett D. Hoselton - KeyBanc Capital Markets Inc., Research Division

Simeon Gutman - Crédit Suisse AG, Research Division

Patrick Archambault - Goldman Sachs Group Inc., Research Division

Scott L. Stember - Sidoti & Company, LLC

David Whiston - Morningstar Inc., Research Division

Presentation

Operator

Good afternoon, ladies and gentlemen. Welcome to the Penske Automotive Group First Quarter 2013 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately 1 hour after completion through May 6, 2013 on the company's website under the Investor Relations tab at www.penskeautomotive.com.

I'll now introduce Mr. Tony Pordon, the company's Executive Vice President of Investor Relations and Corporate Development. Please go ahead.

Anthony R. Pordon

Hey, John, thank you, and good afternoon, everyone. A press release detailing Penske Automotive Group's first quarter 2013 results was issued this morning and is posted on our website, along with the presentation designed to assist you in understanding our financial results.

Joining me for today's call are Roger Penske, our Chairman; David Jones, our Chief Financial Officer; and J.D. Carlson, our Controller.

On this call, we will be discussing certain non-GAAP financial measures, such as EBITDA. We have reconciled these items to the most directly comparable GAAP measures in this morning's press release, which is, again, available on our website. Also, we may make forward looking statements on this call. Our actual results may vary because of risks and uncertainties, which may cause the actual results to differ materially from expectations. Additional discussion and factors that could cause results to differ materially are contained in our public SEC filings, including our Form 10-K. I'll now turn the call over to Roger Penske, who will take you through our results.

Roger S. Penske

Thank you, Tony. Good afternoon, everyone, and thank you for joining us today.

Penske Automotive Group reported record results today. I'm pleased to report that our first quarter produced the highest income and earnings per share in our company's history. The record results were driven by a 9.9% increase in total retail unit sales and a 7.7% increase in total revenue to $3.4 billion, with each area of our business producing solid performance in the first quarter. Income from operations increased 13.9% to $56.9 million and earnings per share increased 14.5% to $0.63.

We generated $111.8 million in EBITDA in the first quarter, an increase of 9.5%, and we repurchased 410,000 shares during the quarter.

Let's now turn to the specifics of our first quarter. Total retail unit sales increased 9.9% to 85,800 units, and total revenues increased 7.7% to $3.4 billion. On a same-store basis, retail revenues increased 7.4%, including an 11.5% increase in the U.S. and 1.2% internationally.

Foreign exchange rates negatively affected our same store performance in Q1 by $25 million or approximately $0.01 per share. Excluding the effect of foreign exchange, same-store retail revenue increased 8.3%, including 3.3% for our international markets. Our total revenue mix during the quarter was U.S., 63%; and international, 37%. Brand revenue mix was consistent with last year. Premium/Luxury at 69%, volume foreign at 27%, and the Big Three at 4%.

Looking at new vehicles, we retailed 45,745 units, representing an increase of 9.7%, including 11.8% in the U.S. and 5.3% internationally. Our Premium/Luxury was up 12.4%, volume foreign up 8.1%, the Big Three up 2.4%, for a total of 9.7%. Same-store was up 6.9%, including 9% in the U.S. and 2.5% internationally. Total new vehicle revenue increased 12.9% to $1.7 billion. Our new vehicle average selling price has improved 2.9% to just over $38,000, and new vehicle gross profit per unit was $2,959, and our gross margin was 7.8% compared to 8.4% last year.

Looking at our days supply of new vehicles, it was 49 days at the end of March compared to 44 last year. Looking at used vehicles, we retailed 40,076 units in the quarter, an increase of 10.2%. The Premium/Luxury side on the used were up 7.5%, volume foreign up 14.3%, and the Big Three were up 11.7%, for a total of 10.2%.

Our used to new ratio was 0.88:1, an increase slightly from 0.87:1 in the first quarter of 2012.

Total same-store used units retailed increased 6.6%. U.S. was up 10% and international was flat. Impacting the international comparison were over 1,000 used executive cars we had purchased at the end of 2011 and subsequently sold in the first quarter of 2012. We did not have the same opportunity to purchase executive cars at the end of 2012.

Total used vehicle revenue increased 7.4% to $1 billion. Used vehicle average transition -- transaction price has declined 2.6% to $25,076, while used vehicle gross profit per unit was $1,958 and gross margin was 7.8% compared to 8.1% last year.

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