Penske Automotive Group Inc PAG
Q1 2012 Earnings Call Transcript

Operator: John Murphy, Bank of America Merrill Lynch.

John Murphy - Bank of America Merrill Lynch: A couple of questions here. First, on the used vehicle business, given the strength there and getting to 0.89 to 1 across the board, I'm just curious, what you're doing in that business to drive the revenue there? I mean obviously there's not a lot of certified pre-owns because there weren't a lot of cars sold in last three years. Just curious, are you deep and lower in the spectrum, how is the focus really driving that business so strong?

Roger S. Penske - Chairman and CEO: I think, number one, if you looked at our inventory today, only 55% of our inventory are trades and 45% are purchased vehicles. So, we've really been on offense going out and purchasing vehicles. When you look at CarMax, they don't have a lot of new vehicle franchises. So, there are vehicles available. In the U.K. obviously, we have 21 buyers. I think the benefit that we have really is the Internet. When you think about it, it not only helps us on the used basis from a standpoint, the market is the entire world really on certain of our premium luxury brands, and it gives us also the access to vehicles who people have to sell. So to me, the way we present our vehicles online, I think we've gotten some real rigor around what's expected by our operators. I think this made a key part of our success. There's no question that penskecars.com is driving more customers to our brand. And to me, when we look at our mobile site usage, it's up 36%, over 500,000 visits, so there's a number of levers that we are pulling. But again, I think that the interesting thing is that we're looking at lower cost of sale vehicles sold is a premium luxury player with 68% of our business, typically on a worldwide basis. We've wholesaled a lot of those cars and I think today we're saying these are really retailable in certain levels with the use of the Internet. Again, as I said earlier, that when you look at our inventory, we have 55% which are trades and 45% purchases. It's ironic that when you look at overall inventory from the standpoint of what we are selling over 10,000 of our vehicles we sold in the past quarter were under $15,000, so to me those are all the things that make, I think make a difference.

John Murphy - Bank of America Merrill Lynch: Just a second on the gross profit for new vehicle unit, forgetting about percentages, just looking at the dollars. You said it was up about 7.9%, (GP) per unit. I'm just curious that's been running very strongly really for the better part of 2011, I think even in the end of 2010. I'm just curious, do you think there is room – forget about percentage margins, but on a dollar margin basis for that to continue to increase as we see sales recovery. I'm just trying to get a handle of this $3,000 to $3,100 range we should be using going forward or could it potentially go higher?

Roger S. Penske - Chairman and CEO: I think it's going to be consistent. You said don't talk about margin, but when I go back and look into the first quarter of even 2010, we were at 8%, we are at 8.1% now and to me, the fact that in the premium luxury side, they don't have the inter-brand competition. When you think about it, 300 Mercedes stores, about 300 BMWs, there is 200 Audis, so we don't have that inter-brand competition. Again, we have to get the margin because of what we offer the customer from a customer satisfaction perspective with (indiscernible) cars and some of the other things. So, we certainly from our end are not expecting to reduce margins. Obviously, it can be driven because of the competitive set, but at this particular time, both internationally and domestically we feel pretty good at the level where we are. I don't see them rapidly going up, but again, I think that we've had a nice change when you look at we are almost 10% in the U.S. and the U.K. was up almost 2% just in the previous quarter. So, that's good strength.