Penske Automotive (US:PAG)2023-07-27 20:19Financial Performance - Total revenue for the six months ended June 30, 2023, was $14.8 billion, with $12.7 billion from retail automotive dealerships, $1.8 billion from retail commercial truck dealerships, and $286.9 million from commercial vehicle distribution and other operations[105]. - Gross profit for the same period was $2.5 billion, comprising $2.1 billion from retail automotive dealerships, $293.8 million from retail commercial truck dealerships, and $83.0 million from commercial vehicle distribution and other operations[105]. - Aggregate revenue increased by 8.5% and gross profit increased by 3.6% for the three months ended June 30, 2023, compared to the same period in 2022[125]. - Earnings per share from continuing operations decreased by approximately $0.01 for the three months ended June 30, 2023, and by approximately $0.12 for the six months ended June 30, 2023[125]. - The company’s revenues for the six months ended June 30, 2023, were $8.0544 billion, with a gross profit of $1.4855 billion and net income of $426 million[231]. Sales Performance - Retail automotive dealerships accounted for 85.8% of total revenues and 85.1% of total gross profit during the six months ended June 30, 2023[108]. - New retail unit sales (excluding agency) increased by 4,047 units, or 8.9%, to 49,562 units for the three months ended June 30, 2023[138]. - Used retail unit sales decreased by 4,608 units, or 6.6%, to 65,386 units for the three months ended June 30, 2023[142]. - New retail unit sales of commercial trucks increased by 1,670 units (22.6%), with same-store new retail unit sales up by 1,435 units (20.0%)[188]. - Premium/luxury unit sales in the U.K. increased by 12.5%, with over 90% of new unit sales coming from this segment[113]. Inventory and Supply Chain - New vehicle days' supply was 32 as of June 30, 2023, compared to 25 as of December 31, 2022, indicating improved inventory levels[112]. - The company relies on the success and availability of vehicle manufacturers, and disruptions in the supply chain may negatively impact operations[258]. Profitability and Margins - Average gross profit per used vehicle retailed decreased by $331, or 14.9%, to $1,887 for the three months ended June 30, 2023[142]. - Retail gross profit from used vehicle sales fell by $32.5 million, or 21.1%, due to a decrease in same-store gross profit, which declined by 21.0%[145]. - Average gross profit per new vehicle (excluding agency) decreased by $563, or 8.2%, reflecting a decline in gross margin percentage from 12.8% to 11.6%[173]. - Same-store gross profit for service and parts increased by $36.4 million, or 10.3%, while gross margin percentage decreased by 0.2%[149]. Expenses and Costs - Total selling, general, and administrative (SG&A) expenses increased by $40.4 million, or 4.9%, with same-store SG&A expenses rising by $24.8 million, or 3.1%[166]. - Floor plan interest expense surged by $21.8 million, or 242.2%, due to increased rates and higher average amounts outstanding[169]. - Income taxes decreased by $26.0 million, or 21.0%, primarily due to a $99.3 million decrease in pre-tax income compared to the prior year[172]. Cash Flow and Liquidity - Net cash provided by operating activities decreased to $604.5 million in 2023 from $879.2 million in 2022, representing a decline of approximately 31.2%[235]. - The company’s current assets as of June 30, 2023, were $2.6664 billion, with current liabilities of $2.0796 billion, indicating a healthy liquidity position[232]. - The company had $119.6 million in cash available for operations and capital commitments, along with $1.2 billion in various credit agreements and additional borrowing capacity totaling approximately $254 million, CAD $60 million, and AU $25.9 million[216]. Market and Economic Conditions - Future business success is contingent on macro-economic conditions, consumer demand, and supply chain disruptions, among other factors[130]. - The automotive retail industry remains influenced by macroeconomic conditions, including consumer confidence and inflation rates, which could impact future performance[250]. - The company is exposed to adverse economic and geopolitical conditions, including changes in interest rates, foreign currency exchange rates, and customer demand, which may negatively impact revenues and profitability[258]. Shareholder Returns and Dividends - The company paid cash dividends of $0.61 and $0.66 per share in the first and second quarters of 2023, respectively, and announced a cash dividend of $0.72 per share payable on September 1, 2023[221]. - Cash dividends paid to stockholders increased to $87.2 million in 2023 from $74.4 million in 2022, representing a rise of approximately 17.8%[243]. Risks and Compliance - The company faces risks related to compliance with financial ratios and covenants under credit agreements, which may limit financing options[260]. - Increased tariffs and foreign trade risks may impair the company's ability to sell foreign vehicles profitably[260]. - The company is subject to new regulations regarding vehicle sales, including emissions standards, which may affect operations and profitability[260].