AutoNation Reports First-Quarter Net Income from Continuing Operations of $0.72 Per Share
* Excluding Benefit from Recent IRS Settlement, Record First-Quarter EPS from Continuing Operations of $0.29 Compared to $0.28 for the Period a Year Ago * $0.29 Exceeds The Analysts' Consensus Estimate of $0.27 * Fifth Consecutive Quarter of Record EPS
FORT LAUDERDALE, Fla., April 28 -- AutoNation, Inc. , America's largest retailer of both new and used vehicles, today reported first-quarter net income from continuing operations of $211.9 million, or $0.72 per share, on revenue of $4.5 billion for the period ending March 31, 2003. The Company offset lower revenue and gross profit with a benefit resulting from the previously announced settlement with the Internal Revenue Service, continued share repurchases and lower operating expenses. The results compare with 2002 first-quarter net income from continuing operations of $91.7 million, or $0.28 per share, on revenue of $4.8 billion.
The 2003 first quarter results include a benefit of $127.5 million, or $0.43 per share, resulting from the settlement with the IRS of the tax treatment of certain Company transactions in 1997 and 1999. As a result of the tax settlement, the Company expects to incur pre-tax interest expense of $20 million or $0.04 per share for the full year, of which $1.9 million was incurred in the first quarter. The impact of the tax settlement is included in net income from continuing operations for the period. Excluding only the $127.5 million benefit, net income from continuing operations would have been $84.4 million, or a record first-quarter earnings per share from continuing operations of $0.29 per share, which exceeds first-quarter earnings per share of $0.28 for the period a year ago.
Mike Jackson, Chairman and Chief Executive Officer of AutoNation, stated, "AutoNation's scale, coupled with the resiliency of our business model, allowed our Company to perform despite a challenging economy."
The Company's first-quarter net income was impacted by two non-operating events. First, a loss from discontinued operations of $12.3 million after- tax, or $0.04 per share, due to a previously announced agreement with ANC Rental Corporation and its unsecured creditors' committee. As a result of the agreement, AutoNation's remaining after-tax exposure to ANC could be up to $12.0 million. Second, a charge of $14.6 million after-tax, or $0.05 per share, for the cumulative effect from an accounting change adopted in accordance with rules recently issued by the Emerging Issues Task Force (EITF). The accounting change relates primarily to floorplan assistance and took effect January 1, 2003. Including these items, the Company's 2003 first- quarter net income was $185.0 million, or $0.63 per share.
Other highlights in the first quarter included:
* The repurchase of over five percent of the Company's outstanding
shares, or 16.6 million shares, at a cost of $204.6 million.
* A five percent reduction in selling, general and administrative
expenses that contributed to a 10-basis point improvement in operating
margin to 3.8 percent.
* The acquisition of 12 new vehicle franchises representing collective
annual revenue of approximately $270 million. The closed acquisitions
include the previously announced Vista Automotive Group, with six
franchises in Corpus Christi, Texas, and Jim McNatt Honda of Dallas,
Texas. Also included is a Pontiac GMC dealership in Houston, Texas and
a Pontiac Buick GMC dealership in Hawthorne, California.
Looking ahead, Jackson said, "We believe that the automotive retail environment will continue to be challenging. We will continue to focus on cost reductions, operational improvements and efficient allocation of our capital. After considering all of these factors, we are maintaining our outlook for full-year earnings per share from continuing operations excluding the impact of the tax settlement."
The Company's earnings outlook, excluding the impact of the tax settlement, remains unchanged. However, in order to reflect the expected ongoing interest expense associated with the tax settlement of $0.04 per share for 2003, the Company is updating its full-year earnings guidance. As a result, the Company's previously announced estimate for full-year 2003 earnings per share from continuing operations of $1.25 to $1.30 (which did not reflect the impact of the tax settlement) is being adjusted to $1.21 to $1.26 per share. For the 2003 second quarter, the Company anticipates earnings per share of $0.29 to $0.31. On a GAAP basis for the full-year, the Company anticipates earnings per share from continuing operations of $1.64 to $1.69, which includes the impact of the Company's tax settlement. The reconciliation of the Company's earnings estimate is set forth in the table below:
Original full-year guidance $1.25 - $1.30 Full-year impact of interest related to IRS settlement ($0.04) Adjusted full-year guidance $1.21 - $1.26 Income tax benefit from IRS settlement $0.43 Expected 2003 full-year GAAP EPS from continuing operations $1.64 - $1.69
AutoNation will discuss its 2003 first-quarter results, its outlook and supporting assumptions later this morning during a 10 a.m., Eastern Time, conference call. To listen live to the conference call, dial 800-230-1766 or listen via the audio webcast offered at http://corp.autonation.com/ by clicking on its webcast link. A replay of the conference call will be available after 4:30 p.m., Eastern Time, through May 5, 2003. Replays can be accessed by calling 800-475-6701 (access code 681672) or by visiting the "Investors" section of http://corp.autonation.com/ .
ABOUT AUTONATION, INC.
AutoNation, Inc., headquartered in Fort Lauderdale, Fla., is America's largest retailer of both new and used vehicles. Ranked No. 93 on the 2003 Fortune 500 and a component of the Standard and Poor's 500 Index, AutoNation employs approximately 28,500 people and owns and operates 373 new vehicle franchises in 17 states. For additional information, please visit http://corp.autonation.com/ or www.AutoNation.com, where more than 100,000 vehicles are available for sale.
AUTONATION, INC.
UNAUDITED CONSOLIDATED INCOME STATEMENTS
($ in millions, except per share data)
Three Months Ended March 31,
2003 2002
Revenue:
New vehicle $2,609.5 $2,813.1
Used vehicle 906.7 947.0
Parts and service 599.4 611.9
Finance and insurance 122.2 121.1
Other 221.5 257.6
Total revenue 4,459.3 4,750.7
Cost of operations:
New vehicle 2,412.5 2,591.2
Used vehicle 803.1 838.5
Parts and service 338.7 347.1
Other 196.9 234.0
Total cost of operations 3,751.2 4,010.8
Gross profit 708.1 739.9
Selling, general and
administrative expenses 523.0 548.1
Depreciation 16.9 15.7
Amortization 0.6 0.6
Loan and lease underwriting
income, net (2.9) (0.2)
Other losses 0.3 0.4
Operating income 170.2 175.3
Floorplan interest expense (19.5) (18.2)
Interest expense - IRS
settlement (1.9) --
Other interest expense (13.7) (11.7)
Interest income 1.1 3.3
Other income (expense) 1.1 (0.2)
Income from continuing
operations before income taxes 137.3 148.5
Provision for income taxes 52.9 56.8
Income tax benefit from IRS
settlement (127.5) --
Net income from continuing
operations 211.9 91.7
Loss from discontinued
operations, net of income
taxes (12.3) --
Net income before cumulative
effect of accounting change 199.6 91.7
Cumulative effect of accounting
change, net of income taxes (14.6) --
Net income $185.0 $91.7
Diluted earnings per share:
Continuing operations $0.72 $0.28
Discontinued operations (0.04) --
Cumulative effect of
accounting change (0.05) --
Net income $0.63 $0.28
Weighted average common and
common equivalent shares
outstanding 294.2 325.9
Common shares outstanding 282.5 320.8
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA
($ in millions, except gross profit per vehicle data)
Operating Highlights Three Months Ended March 31,
2003 2002 $Variance %Variance
Revenue:
New vehicle $2,609.5 $2,813.1 $(203.6) (7.2)
Used vehicle 906.7 947.0 (40.3) (4.3)
Parts and service 599.4 611.9 (12.5) (2.0)
Finance and insurance 122.2 121.1 1.1 0.9
Other 221.5 257.6 (36.1) (14.0)
$4,459.3 $4,750.7 $(291.4) (6.1)
Gross profit:
New vehicle $197.0 $221.9 $(24.9) (11.2)
Used vehicle 103.6 108.5 (4.9) (4.5)
Parts and service 260.7 264.8 (4.1) (1.5)
Finance and insurance 122.2 121.1 1.1 0.9
Other 24.6 23.6 1.0 4.2
708.1 739.9 (31.8) (4.3)
Selling, general and
administrative expenses 523.0 548.1 25.1 4.6
Depreciation 16.9 15.7 (1.2)
Amortization 0.6 0.6 --
Loan and lease underwriting
income, net (2.9) (0.2) 2.7
Other losses 0.3 0.4 0.1
Operating income 170.2 175.3 (5.1) (2.9)
Floorplan interest expense (19.5) (18.2) (1.3) (7.1)
Interest expense - IRS
settlement (1.9) -- (1.9)
Other interest expense (13.7) (11.7) (2.0) (17.1)
Interest income 1.1 3.3 (2.2) (66.7)
Other income (expense) 1.1 (0.2) 1.3
Income from continuing
operations before income
taxes $137.3 $148.5 $(11.2) (7.5)
Retail vehicle sales:
New 93,782 103,807 (10,025) (9.7)
Used 59,716 62,825 (3,109) (4.9)
153,498 166,632 (13,134) (7.9)
Gross profit per vehicle
retailed:
New $2,101 $2,138 $(37) (1.7)
Used $1,735 $1,727 $8 0.5
Finance and insurance $796 $727 $69 9.5
Operating Percentages Three Months Ended March 31,
% 2003 % 2002
Revenue mix percentages:
New vehicle 58.5 59.2
Used vehicle 20.3 19.9
Parts and service 13.4 12.9
Finance and insurance 2.7 2.6
Other 5.1 5.4
100.0 100.0
Operating items as a percentage
of revenue:
Gross profit:
New vehicle 7.5 7.9
Used vehicle 11.4 11.5
Parts and service 43.5 43.3
Finance and insurance 100.0 100.0
Other 11.1 9.2
Total 15.9 15.6
Selling, general and
administrative expenses 11.7 11.5
Operating income 3.8 3.7
Operating items as a percentage
of total gross profit:
Selling, general and
administrative expenses 73.9 74.1
Operating income 24.0 23.7
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA, Continued
($ in millions)
Three Months Ended
Cash Flow Information March 31,
2003 2002
Capital expenditures,
excluding property
operating lease
buy-outs $23.9 $28.7
Property operating
lease buy-outs $8.8 $--
Stock repurchases $204.6 $35.9
Acquisitions $45.1 $127.7
Proceeds from exercises
of stock options $12.9 $20.2
Floorplan Assistance Three Months Ended March 31,
and Expense 2003 2002 Variance
Floorplan assistance
(included in cost of
operations) $28.4 $29.4 $(1.0)
Floorplan interest
expense (19.5) (18.2) (1.3)
Net inventory
carrying benefit (cost) $8.9 $11.2 $(2.3)
Balance Sheet and
Other Highlights
March 31, 2003 December 31, 2002 March 31,2002
Cash and cash
equivalents $185.7 $176.2 $105.5
Inventory $2,803.5 $2,598.4 $2,363.1
Floorplan notes
payable $2,563.2 $2,302.5 $2,031.0
Non-vehicle debt $712.0 $651.3 $653.5
Equity $3,901.4 $3,910.2 $3,903.0
Days supply
(trailing 30 days):
New 79 days 79 days 58 days
Used 33 days 40 days 37 days
Comparable Basis Net Income Diluted Earnings
Reconciliation Per Share
Three Months Ended Three Months Ended
March 31, March 31,
2003 2002 2003 2002
Net income, as reported $185.0 $91.7 $0.63 $0.28
Discontinued operations 12.3 -- 0.04 --
Cumulative effect of
accounting change 14.6 -- 0.05 --
Net income from continuing
operations, as reported 211.9 91.7 0.72 0.28
Income tax benefit
from IRS settlement (127.5) -- (0.43) --
Net income, excluding
income tax benefit
from IRS Settlement $84.4 $91.7 $0.29 $0.28
AUTONATION, INC.
UNAUDITED SAME STORE DATA
($ in millions, except gross margin per vehicle data)
Operating Highlights Three Months Ended March 31,
2003 2002 $Variance %Variance
Revenue:
New vehicle $2,547.0 $2,792.7 $(245.7) (8.8)
Used vehicle 884.6 937.4 (52.8) (5.6)
Parts and service 583.0 602.9 (19.9) (3.3)
Finance and insurance 119.5 119.8 (0.3) (0.3)
Other 208.5 249.7 (41.2) (16.5)
$4,342.6 $4,702.5 $(359.9) (7.7)
Gross profit:
New vehicle $192.3 $220.4 $(28.1) (12.7)
Used vehicle 101.5 107.7 (6.2) (5.8)
Parts and service 253.0 260.8 (7.8) (3.0)
Finance and insurance 119.5 119.8 (0.3) (0.3)
Other 19.9 20.9 (1.0) (4.8)
$686.2 $729.6 $(43.4) (5.9)
Store selling, general
and administrative
expenses $471.5 $503.9 $32.4 6.4
Retail vehicle sales:
New 91,957 102,998 (11,041) (10.7)
Used 58,511 62,031 (3,520) (5.7)
150,468 165,029 (14,561) (8.8)
Gross profit per vehicle
retailed:
New $2,091 $2,140 $(49) (2.3)
Used $1,735 $1,736 $(1) (0.1)
Finance and insurance $794 $726 $68 9.4
Operating Percentages Three Months Ended March 31,
% 2003 % 2002
Revenue mix percentages:
New vehicle 58.7 59.4
Used vehicle 20.4 19.9
Parts and service 13.4 12.8
Finance and insurance 2.8 2.5
Other 4.7 5.4
100.0 100.0
Operating items as a
percentage of revenue:
Gross Profit:
New vehicle 7.6 7.9
Used vehicle 11.5 11.5
Parts and service 43.4 43.3
Finance and insurance 100.0 100.0
Other 9.5 8.4
Total 15.8 15.5
Store selling, general
and administrative
expenses 10.9 10.7
Operating items as a
percentage of total gross
profit:
Store selling, general
and administrative
expenses 68.7 69.1