Penske Automotive Group, Inc., a diversified international transportation services company based in Bloomfield Township, today announced record results for the third quarter, including the most profitable quarter in its history.
The dealership group reported third-quarter 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 the net benefit, adjusted income from continuing operations increased 99.1 percent to $231.1 million, and related earnings per share increased 102.1 percent to $2.87.
“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 as a percent of gross profit,” says Roger Penske, chairman of Penske Automotive Group.
“Through our cost cutting efforts, we estimate that approximately $125-150 million in annualized costs were eliminated across our various businesses. 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.”
3Q operational highlights:
- Retail automotive same-store revenue increased 3.6 percent.
- Retail automotive earnings before taxes increased 170 percent.
- Retail automotive same-store variable gross profit per unit retailed increased 29 percent.
- Retail automotive same-store service and parts gross margin increased 250 basis points
- Total gross margin increased 140 basis points to 16 percent.
- SG&A expenses declined $29 million and SG&A to gross profit declined 1,010 basis points to 67.3 percent.
For the nine months ended Sept. 30, 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 percent to $327.7 million, and related earnings per share increased 1.5 percent to $4.08.
During the third quarter of 2020, Penske Automotive repaid in full its $300 million 3.75 percent senior subordinated notes at scheduled maturity using availability under our U.S. revolving credit facility. Additionally, during the quarter the company issued $550 million in senior subordinated notes at 3.5 percent due 2025.
The proceeds of these notes were used to redeem its $550 million in aggregate principal amount of 5.75 percent senior subordinated notes due 2022 on Oct. 1. In the interim, Penske utilized the proceeds from the new 3.5 percent senior subordinated notes to temporarily pay down floorplan, U.S. revolver, and mortgage revolver balances.
Profitability at Penske Automotive Group’s 16 Used Vehicle SuperCenters more than tripled in the third quarter to $16 million compared to $4.8 million last year driven by a 36 percent increase in same-store variable gross profit per unit retailed. Retail unit sales decreased by 6.9 percent to 18,372 while revenue increased by 7.6 percent to $352.5 million.
For the nine months ended Sept. 30, SuperCenter retail unit sales decreased by 25.7 percent to 41,284 and revenue decreased by 17.1 percent 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 percent.
Penske’s 25 medium and heavy-duty truck dealership locations in the U.S. and Canada, which offer primarily Freightliner and Western Star brands, brought in $23.4 million before taxes in the third quarter, compared to $30.7 million in the same period last year. Total unit sales declined 5.3 percent and revenue declined 14.6 percent.
On a same-store basis, new units declined 15.5 percent compared to North American Class 6-8 retail sales, which declined 31 percent during the period. Same-store revenue declined 4.5 percent. For the year so far, earnings before taxes were $51.7 million compared to $65.5 million in the same period last year. Total units retailed increased 6.9 percent, and revenue increased 2.1 percent. On a same-store basis, new units retailed declined 25.9 percent and same-store revenue declined 16.9 percent.
Penske Automotive owns 28.9 percent interest in Penske Transportation Solutions, a provider of full-service truck leasing, truck rental, contract maintenance, and logistics services. 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 Sept. 30, the company recorded $64.5 million and $108 million in earnings compared to $42.2 million and $106 million for the same period last year. The 53 percent increase in the third quarter was principally driven by improved operating results in full-service leasing and logistics and a reduction in operating expenses.
On Oct. 14, Penske Automotive announced the reinstatement of its cash dividend in the amount of $0.42 per share payable Dec. 1 to shareholders of record as of Nov. 10. So far this year, 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