Penske Automotive Group Inc. (PAG) filed Quarterly Report for the period ended 2009-09-30.
United Auto Group Inc. is a leading acquirer consolidator and operator of franchised automobile and light truck dealerships and related businesses. As an integral part of its dealership operations they also sells used vehicles. All of the franchised dealerships include integrated service and parts operations which are an important source of recurring revenues. In addition these dealerships market a complete line of aftermarket automotive products and services through its wholly owned subsidiaries United Auto Care Inc. and United Auto Care Products Inc. Penske Automotive Group Inc. has a market cap of $1.5 billion; its shares were traded at around $16.4 with a P/E ratio of 25.2 and P/S ratio of 0.1. Penske Automotive Group Inc. had an annual average earning growth of 6.6% over the past 5 years.
Highlight of Business Operations:
We record revenue when vehicles are delivered and title has passed to the customer, when vehicle service or repair work is performed and when parts are delivered to our customers. Sales promotions that we offer to customers are accounted for as a reduction of revenues at the time of sale. Rebates and other incentives offered directly to us by manufacturers are recognized as a reduction of cost of sales. Reimbursements of qualified advertising expenses are treated as a reduction of selling, general and administrative expenses. The amounts received under certain manufacturer rebate and incentive programs are based on the attainment of program objectives, and such earnings are recognized either upon the sale of the vehicle for which the award was received, or upon attainment of the particular program goals if not associated with individual vehicles. During the nine months ended September 30, 2009 and 2008, we earned $238.0 million and $259.9 million, respectively, of rebates, incentives and reimbursements from manufacturers, of which $234.3 million and $254.1 million was recorded as a reduction of cost of sales.
Our results for the three months ended September 30, 2008 include charges of $4.3 million ($2.7 million after-tax), or $0.03 per share, relating to severance costs, costs associated with the termination of an acquisition agreement and insurance deductibles relating to damage sustained in the Houston market during Hurricane Ike.
New vehicle retail sales revenue decreased $209.5 million, or 13.5%, from 2008 to 2009. The decrease is due to a $234.1 million, or 15.2%, decrease in same store revenues, offset by a $24.6 million increase from net dealership acquisitions. The same store revenue decrease is due primarily to the 9.8% decrease in retail unit sales, which reduced revenue by $151.2 million, coupled with a $2,053, or 6.0%, decrease in average selling price per unit which decreased revenue by $82.9 million.
Retail gross profit from new vehicle sales decreased $13.7 million, or 10.8%, from 2008 to 2009. The decrease is due to a $16.5 million, or 13.1%, decrease in same store gross profit, offset by a $2.8 million increase from net dealership acquisitions. The same store decrease is due primarily to the 9.8% decrease in retail unit sales, which reduced gross profit by $12.4 million, coupled with a $102, or 3.6%, decrease in the average gross profit per new vehicle retailed, which decreased gross profit by $4.1 million.
Used vehicle retail sales revenue decreased $39.0 million, or 5.5%, from 2008 to 2009. The decrease is due to a $61.0 million, or 8.6%, decrease in same store revenues, offset by a $22.0 million increase from net dealership acquisitions. The same store revenue decrease is due to a $1,236, or 4.5%, decrease in comparative average selling price per unit, which decreased revenue by $30.6 million, coupled with the 4.3% decrease in same store retail unit sales which decreased revenue by $30.4 million.
Retail gross profit from used vehicle sales increased $7.5 million, or 14.5%, from 2008 to 2009. The increase is due to a $5.7 million, or 11.0%, increase in same store gross profit, coupled with a $1.8 million increase from net dealership acquisitions. The increase in same store gross profit is due to the $321, or 16.0%, increase in average gross profit per used vehicle retailed, which increased retail gross profit by $7.9 million, offset by the 4.3% decrease in used retail unit sales, which decreased gross profit by $2.2 million. We believe used vehicle margins have increased as a result of customers electing to purchase used vehicles as a less expensive alternative to new vehicles due to the challenging economic climate.
PAG is in the portfolios of Ron Baron of Baron Funds.
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