Penske Overcomes 1Q Obstacles to Post Strong Income Jump
BLOOMFIELD HILLS, Mich. — Penske Automotive Group executives credited their company for overcoming weather-related issues and the struggles of the smart USA brand to still post a handsome year-over-year quarterly income increase.
The company detailed late last week that its 2010 first quarter income from continuing operations totaled $20.8 million, or $0.23 per share. It's a jump from last year's first-quarter income figure which was $16.5 million, or $0.18 per share
Penske also noted after-tax gains of $0.4 million and $6.5 million ($0.07 per share) in the first quarter of 2010 and 2009, respectively. The company said these gains are related to purchases of its 3.5-precent senior subordinated convertible notes due in 2026.
Excluding these gains, executives reported that adjusted first-quarter income from continuing operations of 2010 and 2009 amounted to $20.4 million, or $0.22 per share, and $10.0 million, or $0.11 per share, respectively.
Furthermore, Penske mentioned that net income attributable to common shareholders in the first quarter of 2010 was $20.4 million, or $0.22 per share.
Taking a look at total revenue, the company enjoyed a 15.4-percent increase of $332 million to $2.5 billion in the first quarter of the year. Executives attributed the revenue increase to a 9.2-percent increase in total retail unit sales.
On a same-store basis, Penske said total retail revenue jumped 16.4 percent, including increases of 14.0 percent in the United States and 20.4 percent internationally.
Also during the first quarter, the company's selling, general and administrative expenses as a percentage of gross profit declined 182 basis points to 83.1 percent.
Moving on to a discussion about the first-quarter performance of smart USA, Penske wholesaled 956 units, compared to 5,714 units during the same quarter in 2009.
In response to the continuing slow selling environment, brand executives explained they further enhanced their efforts to reduce vehicle stock and offered increased incentives on certain 2009 smart fortwos. They found that strategy resulted in an after-tax expense of $0.7 million, or $0.01 per share and added the conditions contributed to a loss of $0.04 per share in the distribution segment in the first quarter.
Wrapping up the first-quarter financial breakdown, Penske also pointed out that it repurchased $71.1 million in principal amount of its 3.5-percent senior subordinated convertible notes due 2026 in open market transactions for $71.7 million in cash. Executives revealed the transaction left approximately $235 million principal amount of these securities outstanding.
Also, the company mentioned that it has $123 million remaining under its previously announced authority. That power can be used to repurchase its outstanding common stock, debt and convertible debt, depending on market conditions, price and other factors.
Penske reiterated that securities may be acquired from time to time either through open market purchases, negotiated transactions or other means.
Chairman Roger Penske shared his upbeat assessment about how the company performed during the opening quarter of the year.
"I am extremely pleased with the performance of our business in the first quarter," Penske emphasized.
"Despite difficult weather conditions in many of our markets and the challenging market dynamics facing the smart brand, an improving overall retail environment and the continued strong performance of our premium/luxury brands in all of our markets contributed to our strong operating results," he went on to say.
"On an adjusted basis, income from continuing operations increased 105 percent and earnings per share doubled compared to the first quarter last year," Penske added.