AutoNation Reports Second-Quarter Net Income From Continuing Operations of $0.35 Per Share
FORT LAUDERDALE, Fla., July 20 -- AutoNation, Inc. , America's largest automotive retailer, today reported net income from continuing operations of $96 million, or $0.35 per share, on revenue of $5.0 billion for the second quarter ended June 30, 2004. The results compare with 2003 second-quarter net income from continuing operations of $107 million, or $0.37 per share, on revenue of $5.0 billion. Including the impact of $4 million net of tax or $0.01 per share of loss from discontinued operations, primarily due to store divestitures, net income for the second quarter 2004 was $92 million, or $0.34 per share.
"As previously announced, a number of factors directly impacted the company's second-quarter earnings," said Mike Jackson, chairman and chief executive officer of AutoNation. "Our cost structure was targeted for vehicle sales volume levels that did not materialize, particularly in June, with significant declines in sales of Ford and General Motors products. Low volume when combined with high inventories also caused a gross margin decline in our new vehicle business." The decline in new and used vehicle gross profit was partially offset by improved gross profit performances in parts and service and finance and insurance.
"The economic environment for American retailers in the month of June was particularly challenging, led by a 1.1% decline in retail sales, the largest drop in 16 months," said Jackson. "The automotive retail component of that decline was significant; the industry reported a 4.3% decrease, a notable falloff when compared to May's 3.2% gain."
For the six-month period ended June 30, 2004, the Company earned net income from continuing operations of $184 million or $0.67 per share. Net income from continuing operations for the six-month period ended June 30, 2003 was $1.10 per share. Excluding the $0.44 per share benefit of the first- quarter 2003 IRS tax settlement, earnings per share from continuing operations for the six-month period ended June 30, 2003 was $0.66. The Company's revenue for the six-month period ended June 30, 2004 totaled $9.7 billion, up 4 percent versus the prior year.
Looking ahead, Mr. Jackson said, "Although the second-quarter earnings were disappointing, our cash flow is strong and our strategy sound. We expect to report third-quarter EPS from continuing operations in the range of $0.36 to $0.38 per share. As previously announced, in light of the second-quarter results and the difficult new vehicle environment that we are operating in, our full-year 2004 guidance for EPS from continuing operations is in the range of $1.35 to $1.40."
AutoNation will discuss these results, the Company's outlook and supporting assumptions during a conference call and audio webcast this morning at 10:00 a.m. Eastern Time. To listen to the live conference call, dial 800-288-8961, or listen to the audio webcast via the Internet at http://www.autonation.com/, by clicking on the "about us" link, then clicking on "investors," then "webcast." A playback of the conference call will be available after 12:30 p.m. Eastern Time through July 27, 2004, by calling 800-475-6701, access code number 738524 or via the Internet as outlined above.
About AutoNation, Inc.
AutoNation, Inc., headquartered in Fort Lauderdale, Fla., is America's largest automotive retailer. Ranked No. 97 on the 2004 Fortune 500 and a component of the Standard and Poor's 500 Index, AutoNation employs approximately 28,000 people and owns and operates 365 new vehicle franchises in 18 states. For additional information, please visit http://corp.autonation.com/ or http://www.autonation.com/, where more than 100,000 vehicles are available for sale.
FORWARD-LOOKING STATEMENTS
Certain statements and information included in this release constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. Additional discussion of factors that could cause actual results to differ materially from management's projections, estimates and expectations is contained in the Company's SEC filings. The Company undertakes no duty to update its forward- looking statements, including its earnings outlook. This release contains certain non-GAAP financial measures as defined under SEC rules, including earnings per share from continuing operations for the six-month period ended June 30, 2003 excluding the benefit of the first-quarter 2003 IRS tax settlement. The Company believes such non-GAAP financial measure improves the transparency of the Company's disclosure, provides a meaningful presentation of the Company's results from its core business operations excluding the impact of items not related to the Company's ongoing core business operations, and improves the period-to-period comparability of the Company's results from its core business operations. As required by SEC rules, the Company has provided a reconciliation of this measure to the most directly comparable GAAP measures, which is set forth in the attachments to this release.
AUTONATION, INC.
UNAUDITED CONSOLIDATED INCOME STATEMENTS
($ in millions, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Revenue:
New vehicle $3,055.1 $3,057.3 $5,849.3 $5,636.6
Used vehicle 1,119.8 1,132.8 2,219.0 2,186.0
Parts and service 632.9 617.5 1,265.4 1,213.1
Finance and insurance 158.4 157.8 309.3 293.7
Other 22.7 10.0 46.3 21.3
Total revenue 4,988.9 4,975.4 9,689.3 9,350.7
Cost of sales:
New vehicle 2,840.5 2,834.6 5,434.1 5,217.5
Used vehicle 1,014.7 1,023.3 2,006.5 1,972.6
Parts and service 352.9 347.4 708.7 684.0
Other 10.7 1.4 20.5 3.0
Total cost of sales 4,218.8 4,206.7 8,169.8 7,877.1
Gross profit 770.1 768.7 1,519.5 1,473.6
Selling, general and
administrative expenses 556.4 545.3 1,103.2 1,064.9
Depreciation 19.7 16.9 38.5 33.7
Amortization 0.3 0.4 0.6 1.0
Loan and lease underwriting
income, net -- (3.1) -- (6.0)
Other losses (gains) (1.4) 2.1 0.5 2.4
Operating income 195.1 207.1 376.7 377.6
Floorplan interest expense (21.4) (19.4) (38.9) (38.8)
Other interest expense (19.7) (20.6) (39.0) (36.2)
Interest income 0.7 0.9 1.4 2.0
Other (loss) income (1.0) 5.3 (1.3) 6.3
Income from continuing
operations before income
taxes 153.7 173.3 298.9 310.9
Provision for income taxes 58.1 66.7 115.4 119.6
Income tax benefit from IRS
settlement -- -- -- (127.5)
Net tax provision - continuing
operations 58.1 66.7 115.4 (7.9)
Net income from continuing
operations 95.6 106.6 183.5 318.8
Loss from discontinued
operations, net of income
taxes (3.5) (0.3) (4.1) (12.9)
Net income before cumulative
effect of accounting change 92.1 106.3 179.4 305.9
Cumulative effect of
accounting change, net of
income taxes -- -- -- (14.6)
Net income $92.1 $106.3 $179.4 $291.3
Diluted earnings per share:
Continuing operations $0.35 $0.37 $0.67 $1.10
Discontinued operations $(0.01) -- $(0.01) $(0.04)
Cumulative effect of
accounting change -- -- -- $(0.05)
Net income $0.34 $0.37 $0.65 $1.01
Weighted average common and
common equivalent shares
outstanding 273.2 285.2 274.5 289.6
Common shares outstanding 267.7 274.6 267.7 274.6
See accompanying note.
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA
($ in millions, except per vehicle data)
Operating Highlights Three Months Ended June 30,
$ %
2004 2003 Variance Variance
Revenue:
New vehicle $3,055.1 $3,057.3 $(2.2) (0.1)
Retail used vehicle 913.0 934.2 (21.2) (2.3)
Wholesale 206.8 198.6 8.2 4.1
Used vehicle 1,119.8 1,132.8 (13.0) (1.1)
Parts and service 632.9 617.5 15.4 2.5
Finance and insurance 158.4 157.8 0.6 0.4
Other 22.7 10.0 12.7
$4,988.9 $4,975.4 $13.5 0.3
Gross profit:
New vehicle $214.6 $222.7 $(8.1) (3.6)
Retail used vehicle 103.6 108.5 (4.9) (4.5)
Wholesale 1.5 1.0 0.5
Used vehicle 105.1 109.5 (4.4) (4.0)
Parts and service 280.0 270.1 9.9 3.7
Finance and insurance 158.4 157.8 0.6 0.4
Other 12.0 8.6 3.4
770.1 768.7 1.4 0.2
Selling, general and
administrative expenses 556.4 545.3 (11.1) (2.0)
Depreciation 19.7 16.9 (2.8)
Amortization 0.3 0.4 0.1
Loan and lease underwriting
income, net -- (3.1) (3.1)
Other losses (gains) (1.4) 2.1 3.5
Operating income 195.1 207.1 (12.0) (5.8)
Floorplan interest expense (21.4) (19.4) (2.0) (10.3)
Other interest expense (19.7) (20.6) 0.9 4.4
Interest income 0.7 0.9 (0.2) (22.2)
Other income (1.0) 5.3 (6.3)
Income from continuing
operations before income
taxes $153.7 $173.3 $(19.6) (11.3)
Retail vehicle unit sales:
New 107,535 109,186 (1,651) (1.5)
Used 62,884 65,498 (2,614) (4.0)
170,419 174,684 (4,265) (2.4)
Revenue per vehicle retailed:
New $28,410 $28,001 $409 1.5
Used $14,519 $14,263 $256 1.8
Gross profit per vehicle
retailed:
New $1,996 $2,040 $(44) (2.2)
Used $1,647 $1,657 $(10) (0.6)
Finance and insurance $929 $903 $26 2.9
Operating Highlights Six Months Ended June 30,
$ %
2004 2003 Variance Variance
Revenue:
New vehicle $5,849.3 $5,636.6 $212.7 3.8
Retail used vehicle 1,820.5 1,792.2 28.3 1.6
Wholesale 398.5 393.8 4.7 1.2
Used vehicle 2,219.0 2,186.0 33.0 1.5
Parts and service 1,265.4 1,213.1 52.3 4.3
Finance and insurance 309.3 293.7 15.6 5.3
Other 46.3 21.3 25.0
$9,689.3 $9,350.7 $338.6 3.6
Gross profit:
New vehicle $415.2 $419.1 $(3.9) (0.9)
Retail used vehicle 210.3 211.6 (1.3) (0.6)
Wholesale 2.2 1.8 0.4
Used vehicle 212.5 213.4 (0.9) (0.4)
Parts and service 556.7 529.1 27.6 5.2
Finance and insurance 309.3 293.7 15.6 5.3
Other 25.8 18.3 7.5
1,519.5 1,473.6 45.9 3.1
Selling, general and
administrative expenses 1,103.2 1,064.9 (38.3) (3.6)
Depreciation 38.5 33.7 (4.8)
Amortization 0.6 1.0 0.4
Loan and lease underwriting
income, net -- (6.0) (6.0)
Other losses (gains) 0.5 2.4 1.9
Operating income 376.7 377.6 (0.9) (0.2)
Floorplan interest expense (38.9) (38.8) (0.1) (0.3)
Other interest expense (39.0) (36.2) (2.8) (7.7)
Interest income 1.4 2.0 (0.6) (30.0)
Other income (1.3) 6.3 (7.6)
Income from continuing
operations before income
taxes $298.9 $310.9 $(12.0) (3.9)
Retail vehicle unit sales:
New 205,081 202,522 2,559 1.3
Used 126,027 124,891 1,136 0.9
331,108 327,413 3,695 1.1
Revenue per vehicle retailed:
New $28,522 $27,832 $690 2.5
Used $14,445 $14,350 $95 0.7
Gross profit per vehicle
retailed:
New $2,025 $2,069 $(44) (2.1)
Used $1,669 $1,694 $(25) (1.5)
Finance and insurance $934 $897 $37 4.1
Operating Percentages Three Months Ended Six Months Ended
June 30, June 30,
% 2004 % 2003 % 2004 % 2003
Revenue mix percentages:
New vehicle 61.2 61.4 60.4 60.3
Used vehicle 22.4 22.8 22.9 23.4
Parts and service 12.7 12.4 13.1 13.0
Finance and insurance 3.2 3.2 3.2 3.1
Other 0.5 0.2 0.4 0.2
100.0 100.0 100.0 100.0
Gross profit mix percentages:
New vehicle 27.9 29.0 27.3 28.4
Used vehicle 13.6 14.2 14.0 14.5
Parts and service 36.4 35.1 36.6 35.9
Finance and insurance 20.6 20.5 20.4 19.9
Other 1.5 1.2 1.7 1.3
100.0 100.0 100.0 100.0
Operating items as a percentage
of revenue:
Gross profit:
New vehicle 7.0 7.3 7.1 7.4
Used vehicle - retail 11.3 11.6 11.6 11.8
Parts and service 44.2 43.7 44.0 43.6
Total 15.4 15.5 15.7 15.8
Selling, general and
administrative expenses 11.2 11.0 11.4 11.4
Operating income 3.9 4.2 3.9 4.0
Operating items as a percentage
of total gross profit:
Selling, general and
administrative expenses 72.3 70.9 72.6 72.3
Operating income 25.3 26.9 24.8 25.6
See accompanying note.
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA, Continued
($ in millions, except per share data)
Cash Flow Three Months Ended June 30, Six Months Ended June 30,
Information 2004 2003 2004 2003
Capital
expenditures,
excluding
property
operating
lease buy-outs $33.1 $25.4 $54.7 $49.3
Property
operating
lease buy-outs $-- $1.0 $77.7 $9.8
Stock
repurchases $49.8 $148.8 $107.9 $353.4
Acquisitions $66.5 $-- $154.4 $45.1
Proceeds from
exercises of
stock options $37.2 $25.8 $49.9 $38.7
Floorplan
Assistance Three Months Ended June 30, Six Months Ended June 30,
and Expense 2004 2003 Variance 2004 2003 Variance
Floorplan
assistance
(included in
cost of
operations) $31.0 $30.3 $0.7 $58.2 $58.5 $(0.3)
Floorplan
interest
expense (21.4) (19.4) (2.0) (38.9) (38.8) (0.1)
Net inventory
carrying
benefit $9.6 $10.9 $(1.3) $19.3 $19.7 $(0.4)
Balance Sheet
and Other
Highlights
June December June
30, 2004 31, 2003 30, 2003
Cash and cash
equivalents $56.8 $171.8 $236.8
Inventory $3,357.6 $2,904.8 $2,791.5
Floorplan notes
payable $3,175.7 $2,796.0 $2,587.9
Non-vehicle debt $819.9 $824.4 $740.9
Equity $4,083.0 $3,949.7 $3,885.5
New days supply
(industry standard of
selling days,
including fleet) 75 days 71 days 65 days
Used days
supply (trailing
30 days) 41 days 41 days 34 days
Comparable
Basis
Reconciliations
Net Income Diluted Earnings Per Share
Six Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Net income, as
reported $179.4 $291.3 $0.65 $1.01
Discontinued
operations 4.1 12.9 $0.01 $0.04
Cumulative
effect of
accounting
change -- 14.6 -- $0.05
Net income from
continuing
operations, as
reported 183.5 318.8 $0.67 $1.10
Income tax
benefit
from IRS
settlement -- (127.5) -- $(0.44)
Net income,
excluding income
tax benefit from
IRS Settlement $183.5 $191.3 $0.67 $0.66
Note
The Company's parts and service departments provide reconditioning
repair work for used vehicles acquired by the used vehicle
department and minor preparatory work for new vehicles. The parts
and service departments charge the new and used departments as if
they were third parties in order to account for total activity
performed by that department. The Company has determined that the
revenue and related cost of sales of both new and used vehicles had
not been reduced by the intracompany charge for such work.
Commencing with the second quarter of 2004, the Company is making
the adjustment and has revised amounts previously reported by
reducing new and used vehicle revenue and cost of sales by the
amount of the intracompany charge. The adjustments have no impact
on gross profit, operating income, income from continuing
operations, net income, earnings per share, cash flows, or
financial position for any period or their respective trends.
The effect of the adjustments was to reduce both revenue and cost
of sales for new vehicles by $22 million and $44 million for the
three and six months ended June 30, 2004, respectively, and for
used vehicles by $52 million and $102 million for the same
periods, respectively. For 2003, the adjustment reduced both
revenue and cost of sales for new vehicles by $21 million and
$40 million for the three and six months ended June 30, 2003,
respectively, and used vehicles by $49 million and $94 million for
the same periods, respectively. Accordingly, the Company's
revenue-based performance metrics, such as revenue per vehicle,
gross profit as a percent of revenue, and SG&A as a percent of
revenue, also have been revised. These revisions do not have a
material impact on the amounts for any period or respective
trends.
AUTONATION, INC.
UNAUDITED SAME STORE DATA
($ in millions, except per vehicle data)
Operating Highlights Three Months Ended June 30,
$ %
2004 2003 Variance Variance
Revenue:
New vehicle $2,973.1 $3,042.6 $(69.5) (2.3)
Retail used vehicle 892.9 928.6 (35.7) (3.8)
Wholesale 196.0 197.2 (1.2) (0.6)
Used vehicle 1,088.9 1,125.8 (36.9) (3.3)
Parts and service 620.4 613.1 7.3 1.2
Finance and insurance 155.9 157.0 (1.1) (0.7)
Other 9.0 7.5 1.5
$4,847.3 $4,946.0 $(98.7) (2.0)
Gross profit:
New vehicle $208.2 $222.2 $(14.0) (6.3)
Retail used vehicle 102.0 107.8 (5.8) (5.4)
Wholesale 0.4 1.1 (0.7)
Used vehicle 102.4 108.9 (6.5) (6.0)
Parts and service 273.8 268.1 5.7 2.1
Finance and insurance 155.9 157.0 (1.1) (0.7)
Other 7.4 6.4 1.0
$747.7 $762.6 $(14.9) (2.0)
Retail vehicle unit sales:
New 105,366 108,675 (3,309) (3.0)
Used 62,031 65,072 (3,041) (4.7)
167,397 173,747 (6,350) (3.7)
Revenue per vehicle retailed:
New $28,217 $27,997 $220 0.8
Used $14,394 $14,270 $124 0.9
Gross profit per vehicle
retailed:
New $1,976 $2,045 $(69) (3.4)
Used $1,644 $1,657 $(13) (0.8)
Finance and insurance $931 $904 $27 3.0
Operating Highlights Six Months Ended June 30,
$ %
2004 2003 Variance Variance
Revenue:
New vehicle $5,717.1 $5,604.7 $112.4 2.0
Retail used vehicle 1,787.5 1,780.3 7.2 0.4
Wholesale 382.5 390.5 (8.0) (2.0)
Used vehicle 2,170.0 2,170.8 (0.8) (0.0)
Parts and service 1,243.9 1,203.6 40.3 3.3
Finance and insurance 305.3 292.3 13.0 4.4
Other 17.6 15.8 1.8
$9,453.9 $9,287.2 $166.7 1.8
Gross profit:
New vehicle $405.2 $417.6 $(12.4) (3.0)
Retail used vehicle 207.4 210.2 (2.8) (1.3)
Wholesale 1.1 1.8 (0.7)
Used vehicle 208.5 212.0 (3.5) (1.7)
Parts and service 546.1 525.0 21.1 4.0
Finance and insurance 305.3 292.3 13.0 4.4
Other 14.4 13.5 0.9
$1,479.5 $1,460.4 $19.1 1.3
Retail vehicle unit sales:
New 201,400 201,358 42 0.0
Used 124,418 123,933 485 0.4
325,818 325,291 527 0.2
Revenue per vehicle retailed:
New $28,387 $27,835 $552 2.0
Used $14,367 $14,365 $2 0.0
Gross profit per vehicle
retailed:
New $2,012 $2,074 $(62) (3.0)
Used $1,667 $1,696 $(29) (1.7)
Finance and insurance $937 $899 $38 4.2
Operating Percentages Three Months Ended Six Months Ended
June 30, June 30,
% 2004 % 2003 % 2004 % 2003
Revenue mix percentages:
New vehicle 61.3 61.5 60.5 60.3
Used vehicle 22.5 22.8 23.0 23.4
Parts and service 12.8 12.4 13.2 13.0
Finance and insurance 3.2 3.2 3.2 3.1
Other 0.2 0.1 0.1 0.2
100.0 100.0 100.0 100.0
Gross profit mix percentages:
New vehicle 27.8 29.1 27.4 28.6
Used vehicle 13.7 14.3 14.1 14.5
Parts and service 36.6 35.2 36.9 35.9
Finance and insurance 20.9 20.6 20.6 20.0
Other 1.0 0.8 1.0 1.0
100.0 100.0 100.0 100.0
Operating items as a percentage
of revenue:
Gross Profit:
New vehicle 7.0 7.3 7.1 7.5
Used vehicle - retail 11.4 11.6 11.6 11.8
Parts and service 44.1 43.7 43.9 43.6
Total 15.4 15.4 15.6 15.7
See accompanying note.
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