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Penske Automotive Group Inc. (PAG) filed Quarterly Report for the period ended 2011-09-30.
Penske Automotive Group has a market cap of $1.97 billion; its shares were traded at around $21.45 with a P/E ratio of 13.08 and P/S ratio of 0.18. The dividend yield of Penske Automotive Group stocks is 1.49%.
This is the annual revenues and earnings per share of PAG over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of PAG.
Highlight of Business Operations:
We are the second largest automotive retailer headquartered in the U.S. as measured by total revenue. As of September 30, 2011, we operated 327 retail automotive franchises, of which 172 franchises are located in the U.S. and 155 franchises are located outside of the U.S. The franchises outside the U.S. are located primarily in the U.K. We are diversified geographically, with 62% of our total revenues in 2011 generated in the U.S. and Puerto Rico and 38% generated outside the U.S. We offer a full range of vehicle brands with 95% of our total retail revenue for the nine months ended September 30, 2011 generated from brands of non-U.S. based manufacturers, and 69% generated from premium brands, such as Audi, BMW, Cadillac, Mercedes-Benz and Porsche. Each of our dealerships offers a wide selection of new and used vehicles for sale. In addition to selling new and used vehicles, we generate higher-margin revenue at each of our dealerships through maintenance and repair services and the sale and placement of higher-margin products, such as third-party finance and insurance products, third-party extended service contracts and replacement and aftermarket automotive products.Our gross profit tends to vary with the mix of revenues we derive from the sale of new vehicles, used vehicles, finance and insurance products, and service and parts transactions. Our gross profit varies across product lines, with vehicle sales usually resulting in lower gross profit margins and our other revenues resulting in higher gross profit margins. Factors such as inventory and vehicle availability, customer demand, consumer confidence, unemployment, general economic conditions, seasonality, weather, credit availability, fuel prices and manufacturers’ advertising and incentives also impact the mix of our revenues, and therefore influence our gross profit margin. Aggregate gross profit increased $48.9 million, or 11.7%, and $140.7 million, or 11.4%, during the three and nine months ended September 30, 2011 compared to the same periods in prior year. The increase in gross profit is largely attributable to same-store retail revenue increases of 6.4% for the three months and 8.8% for the nine months ended September 30, 2011. The same store revenue increases are attributable to a 3.0% increase for the three months and a 5.4% increase for the nine months ended September 30, 2011 in same-store retail unit volume. Our retail gross margin percentage increased to 16.7% during the three months ended September 30, 2011 as compared to 16.6% during the same period in 2010, and declined from 17.0% during the nine months ended September 30, 2010 to 16.8% during the nine months ended September 30, 2011 due primarily to an increase in the percentage of our revenues generated by used vehicle sales, which carry a lower gross margin than other parts of our business.
We record revenue when vehicles are delivered and title has passed to the customer, when vehicle service or repair work is completed 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, 2011 and 2010, we earned $300.8 million and $255.1 million, respectively, of rebates, incentives and reimbursements from manufacturers, of which $293.4 million and $248.8 million was recorded as a reduction of cost of sales.
Selling, general and administrative expenses (“SG&A”) increased $36.3 million, or 10.7%, from $339.1 million to $375.4 million. The aggregate increase is due to a $22.9 million, or 6.8%, increase in same store SG&A, coupled with a $13.4 million increase from net dealership acquisitions. The increase in same store SG&A is due to a net increase in variable selling expenses, including increases in variable compensation, as a result of a 7.1% increase in same store retail gross profit versus the prior year. SG&A expenses decreased as a percentage of gross profit from 81.1% during the three months ended September 30, 2010 to 80.4% during the same period in 2011.
In December 2006, we issued $375.0 million aggregate principal amount of 7.75% senior subordinated notes due 2016 (the “7.75% Notes”). The 7.75% Notes are unsecured senior subordinated notes and are subordinate to all existing and future senior debt, including debt under our credit agreements, mortgages and floor plan indebtedness. The 7.75% Notes are guaranteed by substantially all of our wholly-owned domestic subsidiaries on an unsecured senior subordinated basis. Those guarantees are full and unconditional and joint and several. We can redeem all or some of the 7.75% Notes at our option beginning in December 2011 at specified redemption prices, or prior to December 2011 at 100% of the principal amount of the notes plus a defined “make-whole” premium. Upon certain sales of assets or specific kinds of changes of control, we are required to make an offer to purchase the 7.75% Notes. The 7.75% Notes also contain customary negative covenants and events of default. As of September 30, 2011, we were in compliance with all negative covenants and there were no events of default. We expect to remain in compliance during the next twelve months.
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