AutoNation Reports Third Quarter Net Income From Continuing Operations of $0.35 Per Share
FORT LAUDERDALE, Fla., Oct. 28, 2004 -- AutoNation, Inc. , America's largest automotive retailer, today reported net income from continuing operations of $95.0 million, or $0.35 per share, on revenue of $5.1 billion for the third quarter ended September 30, 2004. The results compare with 2003 third-quarter net income from continuing operations of $109.5 million, or $0.38 per share, on revenue of $5.1 billion.
"A number of factors directly impacted our third-quarter earnings," said Mike Jackson, chairman and chief executive officer of AutoNation. "These factors included the four major hurricanes that caused store closings and substantial disruption of our business throughout Florida and the Southeast, and the challenging retail sales environment we continue to experience."
At the end of the third quarter, AutoNation's new vehicle inventory level was 53 days versus 75 days at the end of the second quarter - a decline of 25,000 units or 24%.
For the nine-month period ended September 30, 2004, the Company reported net income from continuing operations of $278.9 million or $1.02 per share. Net income from continuing operations for the nine-month period ended September 30, 2003 was $428.5 million or $1.48 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 nine-month period ended September 30, 2003 was $1.04. The Company's revenue for the nine-month period ended September 30, 2004 totaled $14.8 billion, up 2 percent versus the prior year.
Looking ahead, Mr. Jackson said, "We expect fourth-quarter EPS from continuing operations to be in the range of $0.30 to $0.33 per share. As previously announced, our full-year 2004 guidance for EPS from continuing operations is in the range of $1.32 to $1.35."
Following careful consideration, the Company has made a policy change with regard to providing future earnings guidance. In the future, the Company will no longer provide quarterly or annual earnings per share guidance. The Company will continue providing investors with long-term EPS growth targets along with information and insight into strategic initiatives, growth and value drivers, and trend and industry data critical to understanding the Company's businesses and operating environment.
"We believe that our Company and shareholders are best served with our approach of managing our business for the long-term," Mr. Jackson stated. "Our progress in executing our long-term strategy is best measured as we achieve it, rather than focusing on establishing and attaining short-term public forecasts. With our diversified business model, our goal continues to be EPS growth at a long-term average annual rate of 10%-12%."
Key assumptions and drivers related to our long-term EPS growth rate objective are set forth in the following financial tables and will be discussed on the earnings conference call.
Separately, the Company also announced today that its Board of Directors has authorized an additional $250 million for the repurchase of its common stock. The Board's decision extends the Company's previously authorized share repurchase programs.
AutoNation will discuss these results, the Company's outlook and supporting assumptions during a conference call and audio webcast this morning at 9:00 a.m., Eastern Time. To listen to the live conference call, dial (800) 762-4717, or listen to the audio webcast via the Internet at http://www.autonation.com/, by clicking on the "about us" link, then clicking on "investors," then "webcast." A playback of the conference call will be available after 12:30 p.m. Eastern Time through November 4, 2004, by calling (800) 475-6701, access code number #750554 or via the Internet as outlined above.
About AutoNation, Inc.
AutoNation, Inc., headquartered in Fort Lauderdale, Fla., is America's largest automotive retailer. Ranked No. 97 on the 2004 Fortune 500 and a component of the Standard and Poor's 500 Index, AutoNation employs approximately 28,000 people and owns and operates 360 new vehicle franchises in 18 states. For additional information, please visit http://corp.autonation.com/ or http://www.autonation.com/, where more than 100,000 vehicles are available for sale.
AUTONATION, INC.
UNAUDITED CONSOLIDATED INCOME STATEMENTS
($ in millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Revenue:
New vehicle $3,176.6 $3,218.6 $9,003.6 $8,826.9
Used vehicle 1,098.8 1,117.7 3,312.2 3,295.6
Parts and service 638.0 630.3 1,898.2 1,837.6
Finance and insurance 162.3 166.5 470.6 458.9
Other 21.7 9.5 68.1 30.9
Total revenue 5,097.4 5,142.6 14,752.7 14,449.9
Cost of sales:
New vehicle 2,956.5 2,989.6 8,369.8 8,180.5
Used vehicle 1,001.3 1,013.5 3,002.6 2,978.5
Parts and service 361.3 355.0 1,066.9 1,035.5
Other 10.0 1.2 30.6 4.3
Total cost of sales 4,329.1 4,359.3 12,469.9 12,198.8
Gross profit 768.3 783.3 2,282.8 2,251.1
Selling, general and
administrative expenses 551.7 558.7 1,649.6 1,617.8
Depreciation 20.2 17.3 58.5 50.8
Amortization 0.3 0.3 0.9 1.3
Loan and lease underwriting
income, net -- (0.1) -- (6.1)
Other losses (gains) 1.0 (0.1) 1.4 2.3
Operating income 195.1 207.2 572.4 585.0
Floorplan interest expense (21.4) (15.2) (60.1) (53.7)
Other interest expense (18.4) (18.5) (57.4) (54.7)
Interest income 0.9 0.8 2.3 2.8
Other (loss) income (1.9) (1.3) (3.3) 5.0
Income from continuing
operations before income
taxes 154.3 173.0 453.9 484.4
Provision for income taxes 59.3 63.5 175.0 183.4
Income tax benefit from IRS
settlement -- -- -- (127.5)
Net tax provision - continuing
operations 59.3 63.5 175.0 55.9
Net income from continuing
operations 95.0 109.5 278.9 428.5
Loss from discontinued
operations, net of income
taxes (2.6) (0.7) (7.1) (13.8)
Net income before cumulative
effect of accounting change 92.4 108.8 271.8 414.7
Cumulative effect of
accounting change, net of
income taxes -- -- -- (14.6)
Net income $92.4 $108.8 $271.8 $400.1
Diluted earnings per share:
Continuing operations $0.35 $0.38 $1.02 $1.48
Discontinued operations $(0.01) $ -- $(0.03) $(0.05)
Cumulative effect of
accounting change $ -- $ -- $ -- $(0.05)
Net income $0.34 $0.38 $0.99 $1.39
Weighted average common and
common equivalent shares
outstanding 270.6 286.6 273.2 288.6
Common shares outstanding 264.4 274.6 264.4 274.6
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA
($ in millions, except per vehicle data)
Operating Highlights Three Months Ended September 30,
2004 2003 $Variance %Variance
Revenue:
New vehicle $3,176.6 $3,218.6 $(42.0) (1.3)
Retail used vehicle 881.7 907.8 (26.1) (2.9)
Wholesale 217.1 209.9 7.2 3.4
Used vehicle 1,098.8 1,117.7 (18.9) (1.7)
Parts and service 638.0 630.3 7.7 1.2
Finance and insurance 162.3 166.5 (4.2) (2.5)
Other 21.7 9.5 12.2
$5,097.4 $5,142.6 $(45.2) (0.9)
Gross profit:
New vehicle $220.1 $229.0 $(8.9) (3.9)
Retail used vehicle 98.5 104.2 (5.7) (5.5)
Wholesale (1.0) -- (1.0)
Used vehicle 97.5 104.2 (6.7) (6.4)
Parts and service 276.7 275.3 1.4 0.5
Finance and insurance 162.3 166.5 (4.2) (2.5)
Other 11.7 8.3 3.4
768.3 783.3 (15.0) (1.9)
Selling, general and
administrative expenses 551.7 558.7 7.0 1.3
Depreciation 20.2 17.3 (2.9)
Amortization 0.3 0.3 --
Loan and lease underwriting
income, net -- (0.1) (0.1)
Other losses (gains) 1.0 (0.1) (1.1)
Operating income 195.1 207.2 (12.1) (5.8)
Floorplan interest expense (21.4) (15.2) (6.2) (40.8)
Other interest expense (18.4) (18.5) 0.1 0.5
Interest income 0.9 0.8 0.1 12.5
Other income (1.9) (1.3) (0.6)
Income from continuing
operations before income
taxes $154.3 $173.0 $(18.7) (10.8)
Retail vehicle unit sales:
New 110,634 115,434 (4,800) (4.2)
Used 60,731 64,175 (3,444) (5.4)
171,365 179,609 (8,244) (4.6)
Revenue per vehicle retailed:
New $28,713 $27,883 $830 3.0
Used $14,518 $14,146 $372 2.6
Gross profit per vehicle
retailed:
New $1,989 $1,984 $5 0.3
Used $1,622 $1,624 $(2) (0.1)
Finance and insurance $947 $927 $20 2.2
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA
($ in millions, except per vehicle data)
Operating Highlights Nine Months Ended September 30,
2004 2003 $Variance %Variance
Revenue:
New vehicle $9,003.6 $8,826.9 $176.7 2.0
Retail used vehicle 2,698.4 2,693.7 4.7 0.2
Wholesale 613.8 601.9 11.9 2.0
Used vehicle 3,312.2 3,295.6 16.6 0.5
Parts and service 1,898.2 1,837.6 60.6 3.3
Finance and insurance 470.6 458.9 11.7 2.5
Other 68.1 30.9 37.2
$14,752.7 $14,449.9 $302.8 2.1
Gross profit:
New vehicle $633.8 $646.4 $(12.6) (1.9)
Retail used vehicle 308.4 315.4 (7.0) (2.2)
Wholesale 1.2 1.7 (0.5)
Used vehicle 309.6 317.1 (7.5) (2.4)
Parts and service 831.3 802.1 29.2 3.6
Finance and insurance 470.6 458.9 11.7 2.5
Other 37.5 26.6 10.9
2,282.8 2,251.1 31.7 1.4
Selling, general and
administrative expenses 1,649.6 1,617.8 (31.8) (2.0)
Depreciation 58.5 50.8 (7.7)
Amortization 0.9 1.3 0.4
Loan and lease
underwriting income,
net -- (6.1) (6.1)
Other losses (gains) 1.4 2.3 0.9
Operating income 572.4 585.0 (12.6) (2.2)
Floorplan interest
expense (60.1) (53.7) (6.4) (11.9)
Other interest expense (57.4) (54.7) (2.7) (4.9)
Interest income 2.3 2.8 (0.5) (17.9)
Other income (3.3) 5.0 (8.3)
Income from continuing
operations before
income taxes $453.9 $484.4 $(30.5) (6.3)
Retail vehicle unit
sales:
New 314,869 316,920 (2,051) (0.6)
Used 186,411 188,585 (2,174) (1.2)
501,280 505,505 (4,225) (0.8)
Revenue per vehicle
retailed:
New $28,595 $27,852 $743 2.7
Used $14,476 $14,284 $192 1.3
Gross profit per vehicle
retailed:
New $2,013 $2,040 $(27) (1.3)
Used $1,654 $1,672 $(18) (1.1)
Finance and
insurance $939 $908 $31 3.4
Operating Percentages Three Months Ended Nine Months Ended
September 30, September 30,
% 2004 % 2003 % 2004 % 2003
Revenue mix percentages:
New vehicle 62.3 62.6 61.0 61.1
Used vehicle 21.6 21.7 22.5 22.8
Parts and service 12.5 12.3 12.9 12.7
Finance and insurance 3.2 3.2 3.2 3.2
Other 0.4 0.2 0.4 0.2
100.0 100.0 100.0 100.0
Gross profit mix percentages:
New vehicle 28.6 29.2 27.8 28.7
Used vehicle 12.7 13.3 13.6 14.1
Parts and service 36.0 35.1 36.4 35.6
Finance and insurance 21.1 21.3 20.6 20.4
Other 1.6 1.1 1.6 1.2
100.0 100.0 100.0 100.0
Operating items as a percentage
of revenue:
Gross profit:
New vehicle 6.9 7.1 7.0 7.3
Used vehicle - retail 11.2 11.5 11.4 11.7
Parts and service 43.4 43.7 43.8 43.6
Total 15.1 15.2 15.5 15.6
Selling, general and
administrative expenses 10.8 10.9 11.2 11.2
Operating income 3.8 4.0 3.9 4.0
Operating items as a percentage
of total gross profit:
Selling, general and
administrative expenses 71.8 71.3 72.3 71.9
Operating income 25.4 26.5 25.1 26.0
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA, Continued
($ in millions, except per share data)
Cash Flow Information Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Capital expenditures, excluding
property operating lease
buy-outs $26.9 $30.1 $81.6 $75.3
Property operating lease buy-
outs $ -- $ -- $77.7 $9.8
Stock repurchases $82.9 $111.8 $190.8 $465.2
Acquisitions $(0.1) $3.0 $154.3 $47.8
Proceeds from exercises of
stock options $18.2 $63.2 $68.1 $101.9
Floorplan Assistance Three Months Ended Nine Months Ended
and Expense September 30, September 30,
2004 2003 Variance 2004 2003 Variance
Floorplan assistance
(included in cost of
operations) $32.8 $29.3 $3.5 $90.6 $87.5 $3.1
Floorplan interest expense (21.4) (15.2) (6.2) (60.1) (53.7) (6.4)
Net floorplan benefit $11.4 $14.1 $(2.7) $30.5 $33.8 $(3.3)
Balance Sheet and Other Highlights
September 30, December 31, September 30,
2004 2003 2003
Cash and cash equivalents $90.8 $172.1 $35.6
Inventory $2,647.1 $2,889.4 $2,339.4
Vehicle floorplan
payable $2,457.4 $2,780.7 $2,202.6
Non-vehicle debt $817.4 $824.4 $738.5
Equity $4,113.0 $3,949.7 $3,958.7
New days supply
(industry standard of
selling days,
including fleet) 53 days 71 days 53 days
Used days supply
(trailing 30 days) 41 days 41 days 38 days
Comparable Basis Diluted Earnings
Reconciliations Net Income Per Share
Nine Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Net income, as reported $271.8 $400.1 $0.99 $1.39
Discontinued operations 7.1 13.8 $0.03 $0.05
Cumulative effect of
accounting change -- 14.6 -- $0.05
Net income from continuing
operations, as reported 278.9 428.5 $1.02 $1.48
Income tax benefit from IRS
settlement -- (127.5) -- $(0.44)
Net income, excluding income
tax benefit from IRS
Settlement $278.9 $301.0 $1.02 $1.04
Business Assumptions Impacting Long-term EPS Growth Target:
U.S. light vehicle annual unit sales-stable in the high 16 million range
SGA % reduction (next 3 years) (SGA % of gross profit less floorplan
interest expense)-approximately 200 bp (including the previously
announced 100 basis point reduction resulting from the organizational
realignment.)
Continued opportunistic redeployment of cash flow-share repurchase, debt
reduction, after-tax capital expenditures and acquisitions
Targeted return on incremental invested capital-approximately 15%
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 total 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 $21 million and $65 million for the three and nine months ended September 30, 2004, respectively, and for used vehicles by $49 million and $151 million for the same periods, respectively. For 2003, the adjustment reduced both revenue and cost of sales for new vehicles by $21 million and $61 million for the three and nine months ended September 30, 2003, respectively, and used vehicles by $50 million and $143 million for the same periods, respectively. Accordingly, the Company's revenue-based performance metrics, such as revenue per vehicle, gross profit as a percent of revenue, and SG&A as a percent of revenue, also have been revised. These revisions do not have a material impact on the amounts for any period or respective trends.
AUTONATION, INC.
UNAUDITED SAME STORE DATA
($ in millions, except per vehicle data)
Operating Highlights Three Months Ended September 30,
2004 2003 $Variance %Variance
Revenue:
New vehicle $3,091.3 $3,207.0 $(115.7) (3.6)
Retail used vehicle 858.5 903.3 (44.8) (5.0)
Wholesale 206.1 208.7 (2.6) (1.2)
Used vehicle 1,064.6 1,112.0 (47.4) (4.3)
Parts and service 624.3 626.7 (2.4) (0.4)
Finance and insurance 159.8 166.1 (6.3) (3.8)
Other 9.0 6.7 2.3
$4,949.0 $5,118.5 $(169.5) (3.3)
Gross profit:
New vehicle $213.2 $228.2 $(15.0) (6.6)
Retail used vehicle 96.7 103.9 (7.2) (6.9)
Wholesale (1.9) -- (1.9)
Used vehicle 94.8 103.9 (9.1) (8.8)
Parts and service 270.1 273.8 (3.7) (1.4)
Finance and insurance 159.8 166.1 (6.3) (3.8)
Other 7.1 5.5 1.6
$745.0 $777.5 $(32.5) (4.2)
Retail vehicle unit sales:
New 108,371 115,043 (6,672) (5.8)
Used 59,716 63,837 (4,121) (6.5)
168,087 178,880 (10,793) (6.0)
Revenue per vehicle retailed:
New $28,525 $27,877 $648 2.3
Used $14,376 $14,150 $226 1.6
Gross profit per vehicle
retailed:
New $1,967 $1,984 $(17) (0.9)
Used $1,619 $1,628 $(9) (0.6)
Finance and insurance $951 $929 $22 2.4
AUTONATION, INC.
UNAUDITED SAME STORE DATA
($ in millions, except per vehicle data)
Operating Highlights Nine Months Ended September 30,
2004 2003 $Variance %Variance
Revenue:
New vehicle $8,786.0 $8,783.5 $2.5 --
Retail used vehicle 2,642.1 2,677.3 (35.2) (1.3)
Wholesale 586.9 597.5 (10.6) (1.8)
Used vehicle 3,229.0 3,274.8 (45.8) (1.4)
Parts and service 1,863.0 1,824.5 38.5 2.1
Finance and insurance 464.1 457.1 7.0 1.5
Other 26.6 22.5 4.1
$14,368.7 $14,362.4 $6.3 --
Gross profit:
New vehicle $616.8 $644.2 $(27.4) (4.3)
Retail used vehicle 303.6 313.6 (10.0) (3.2)
Wholesale (0.8) 2.0 (2.8)
Used vehicle 302.8 315.6 (12.8) (4.1)
Parts and service 814.1 796.5 17.6 2.2
Finance and insurance 464.1 457.1 7.0 1.5
Other 21.6 18.9 2.7
$2,219.4 $2,232.3 $(12.9) (0.6)
Retail vehicle unit sales:
New 308,925 315,365 (6,440) (2.0)
Used 183,787 187,289 (3,502) (1.9)
492,712 502,654 (9,942) (2.0)
Revenue per vehicle
retailed:
New $28,441 $27,852 $589 2.1
Used $14,376 $14,295 $81 0.6
Gross profit per vehicle
retailed:
New $1,997 $2,043 $(46) (2.3)
Used $1,652 $1,674 $(22) (1.3)
Finance and
insurance $942 $909 $33 3.6
Operating Percentages Three Months Ended Nine Months Ended
September 30, September 30,
% 2004 % 2003 % 2004 % 2003
Revenue mix percentages:
New vehicle 62.5 62.7 61.1 61.2
Used vehicle 21.5 21.7 22.5 22.8
Parts and service 12.6 12.2 13.0 12.7
Finance and insurance 3.2 3.2 3.2 3.2
Other 0.2 0.2 0.2 0.1
100.0 100.0 100.0 100.0
Gross profit mix percentages:
New vehicle 28.6 29.4 27.8 28.9
Used vehicle 12.7 13.4 13.6 14.1
Parts and service 36.3 35.2 36.7 35.7
Finance and insurance 21.4 21.4 20.9 20.5
Other 1.0 0.6 1.0 0.8
100.0 100.0 100.0 100.0
Operating items as a percentage
of revenue:
Gross Profit:
New vehicle 6.9 7.1 7.0 7.3
Used vehicle - retail 11.3 11.5 11.5 11.7
Parts and service 43.3 43.7 43.7 43.7
Total 15.1 15.2 15.4 15.5