AutoNation Reports - Fourth-Quarter Earnings
FORT LAUDERDALE, Fla., Feb. 3, 2005 -- AutoNation, Inc. , America's largest automotive retailer, today reported 2004 fourth- quarter net income from continuing operations of $116 million or $0.43 per share, compared to year-ago net income from continuing operations of $87 million or $0.31 per share. Excluding certain items disclosed in the attached financial tables, the Company's fourth-quarter EPS from continuing operations of $0.34 increased 17% on a comparable basis from $0.29 in 2003, primarily as a result of strong revenue growth, continued leverage of the Company's cost structure, acquisitions and the repurchase of outstanding shares.
Fourth-quarter 2004 revenue totaled $4.8 billion, an increase of $0.4 billion compared to the year-ago period resulting from revenue growth in new vehicles of 8%, retail used vehicles of 10%, parts and service of 7% and finance and insurance of 12%. Selling, general and administrative expense (SG&A) in the quarter was $534 million or 70.8% of total gross profit. Operating income for the fourth quarter was $193 million, a fourth quarter record. Excluding certain items for 2003 disclosed in the attached financial tables, operating income for the fourth quarter was up 21%.
Commenting on fourth-quarter 2004 performance AutoNation Chairman and Chief Executive Officer Mike Jackson said, "AutoNation's performance in the fourth quarter was driven by strong revenue growth resulting from ongoing operational enhancements and an improved industry environment, along with continued improvements in our industry-leading cost structure and the benefit of a streamlined regional management structure. In addition, our Florida and Southeast markets performed extremely well as they recovered from four hurricanes that affected third-quarter results."
At the end of the fourth-quarter 2004, AutoNation's new vehicle inventory level was 53 days versus 71 days at the end of the fourth-quarter 2003, representing a decline of 17,000 units, or 18%.
The Company's fourth-quarter results reflect the resolution of various tax matters under audit from prior years, resulting in a $0.09 per share benefit in continuing operations and a $0.19 per share benefit in discontinued operations for the quarter.
For full-year 2004, the Company reported net income from continuing operations of $396 million or $1.45 per share, compared to $515 million or $1.80 per share in 2003, which included a $0.44 per share benefit from the first-quarter 2003 IRS tax settlement. Excluding the effect of this and certain other items disclosed in the attached financial tables, the Company's 2004 EPS from continuing operations of $1.36 increased 2% on a comparable basis from $1.33 in 2003. The Company's revenue for the full year totaled $19.4 billion, an increase of 4% versus the prior year.
The Company's 2004 accomplishments included:
* Named America's Most Admired Automotive Retailer by Fortune magazine for the third year in a row.
* Implemented a streamlined regional management structure that is expected to generate approximately $30 million in incremental annual cost savings.
* Launched "The AutoNation Pledge," which is the industry-leading disclosure regarding the financing process that AutoNation provides to every customer.
* Completed acquisitions representing eight franchises with annual revenue run rate of approximately $465 million.
Commenting on the Company's 2004 performance and the year ahead, Jackson said, "In a highly competitive and volatile environment, AutoNation was able to grow top-line revenue. Looking ahead, we believe that in 2005 industry sales of new vehicles will be nearly 17 million units for the seventh year in a row."
AutoNation will discuss these results and information regarding the Company's business and operating environment during a conference call and audio webcast this morning at 9:00 a.m. Eastern Time. To listen to the live conference call, dial (800) 288-8961 or listen to the audio webcast via the Internet at http://www.autonation.com/ by clicking on the "About Us" link, then clicking on "Investors" and then "Webcasts." A playback of the conference call will be available after 12:30 p.m. Eastern Time through February 10, 2005 by calling (800) 475-6701 (access code #765878) or via the Internet as outlined above.
About AutoNation, Inc.
AutoNation, Inc., headquartered in Fort Lauderdale, Fla., is America's largest automotive retailer. Ranked No. 97 on the 2004 Fortune 500 and a component of the Standard and Poor's 500 Index, AutoNation employs approximately 28,000 people and owns and operates 358 new vehicle franchises in 17 states. For additional information, please visit http://corp.autonation.com/ or http://www.autonation.com/ , where more than 100,000 vehicles are available for sale.
AUTONATION, INC.
UNAUDITED CONSOLIDATED INCOME STATEMENTS
($ in millions, except per share data)
Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003
Revenue:
New vehicle $2,975.2 $2,756.2 $11,891.6 $11,488.7
Used vehicle 1,058.9 957.1 4,319.9 4,195.2
Parts and service 629.8 586.3 2,505.3 2,398.6
Finance and insurance 152.2 136.4 618.5 589.9
Other 21.5 8.2 89.4 39.0
Total revenue 4,837.6 4,444.2 19,424.7 18,711.4
Cost of sales:
New vehicle 2,757.5 2,557.7 11,045.3 10,649.8
Used vehicle 962.5 874.9 3,918.3 3,801.6
Parts and service 354.1 330.4 1,408.5 1,352.3
Other 9.4 0.9 39.9 5.1
Total cost of sales 4,083.5 3,763.9 16,412.0 15,808.8
Gross profit 754.1 680.3 3,012.7 2,902.6
Selling, general and
administrative expenses 533.8 505.9 2,158.7 2,096.9
Depreciation 23.9 17.7 81.9 67.7
Amortization 0.3 0.3 1.2 1.6
Loan and lease underwriting
income, net -- (0.2) -- (6.3)
Other losses 2.7 14.0 4.0 16.3
Operating income 193.4 142.6 766.9 726.4
Floorplan interest expense (22.7) (16.3) (81.8) (68.9)
Other interest expense (19.5) (17.1) (76.9) (71.8)
Interest income 1.2 0.6 3.5 3.4
Other (loss) income (1.9) 11.8 (5.1) 16.7
Income from continuing
operations before income
taxes 150.5 121.6 606.6 605.8
Provision for income taxes 34.4 34.8 210.2 218.1
Income tax benefit from IRS
settlement -- -- -- (127.5)
Net tax provision -
continuing operations 34.4 34.8 210.2 90.6
Net income from continuing
operations 116.1 86.8 396.4 515.2
Income (loss) from
discontinued operations,
net of income taxes 45.7 (7.7) 37.2 (21.4)
Net income before cumulative
effect of accounting change 161.8 79.1 433.6 493.8
Cumulative effect of
accounting change, net of
income taxes -- -- -- (14.6)
Net income $161.8 $79.1 $433.6 $479.2
Diluted earnings per share:
Continuing operations $0.43 $0.31 $1.45 $1.80
Discontinued operations $0.17 $(0.03) $0.14 $(0.07)
Cumulative effect of
accounting change $-- $-- $-- $(0.05)
Net income $0.60 $0.28 $1.59 $1.67
Weighted average common and
common equivalent shares
outstanding 270.3 282.2 272.5 287.0
Common shares outstanding 264.3 269.7 264.3 269.7
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA
($ in millions, except per vehicle data)
Operating Highlights Three Months Ended December 31,
2004 2003 $ Variance % Variance
Revenue:
New vehicle $2,975.2 $2,756.2 $219.0 7.9
Retail used vehicle 862.4 781.9 80.5 10.3
Wholesale 196.5 175.2 21.3 12.2
Used vehicle 1,058.9 957.1 101.8 10.6
Parts and service 629.8 586.3 43.5 7.4
Finance and insurance 152.2 136.4 15.8 11.6
Other 21.5 8.2 13.3
$4,837.6 $4,444.2 $393.4 8.9
Gross profit:
New vehicle $217.7 $198.5 $19.2 9.7
Retail used vehicle 96.8 81.7 15.1 18.5
Wholesale (0.4) 0.5 (0.9)
Used vehicle 96.4 82.2 14.2 17.3
Parts and service 275.7 255.9 19.8 7.7
Finance and insurance 152.2 136.4 15.8 11.6
Other 12.1 7.3 4.8
754.1 680.3 73.8 10.8
Selling, general and
administrative expenses 533.8 505.9 (27.9) (5.5)
Depreciation 23.9 17.7 (6.2)
Amortization 0.3 0.3 --
Loan and lease underwriting
income, net -- (0.2) (0.2)
Other losses (gains) 2.7 14.0 11.3
Operating income 193.4 142.6 50.8 35.6
Floorplan interest expense (22.7) (16.3) (6.4) (39.3)
Other interest expense (19.5) (17.1) (2.4) (14.0)
Interest income 1.2 0.6 0.6 100.0
Other income (1.9) 11.8 (13.7)
Income from continuing
operations before income
taxes $150.5 $121.6 $28.9 23.8
Retail vehicle unit sales:
New 98,904 93,156 5,748 6.2
Used 56,555 53,229 3,326 6.2
155,459 146,385 9,074 6.2
Revenue per vehicle retailed:
New $30,082 $29,587 $495 1.7
Used $15,249 $14,689 $560 3.8
Gross profit per vehicle
retailed:
New $2,201 $2,131 $70 3.3
Used $1,712 $1,535 $177 11.5
Finance and insurance $979 $932 $47 5.0
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA
($ in millions, except per vehicle data)
Operating Highlights
Year Ended December 31,
2004 2003 $ Variance % Variance
Revenue:
New vehicle $11,891.6 $11,488.7 $402.9 3.5
Retail used vehicle 3,520.1 3,425.6 94.5 2.8
Wholesale 799.8 769.6 30.2 3.9
Used vehicle 4,319.9 4,195.2 124.7 3.0
Parts and service 2,505.3 2,398.6 106.7 4.4
Finance and insurance 618.5 589.9 28.6 4.8
Other 89.4 39.0 50.4
$19,424.7 $18,711.4 $713.3 3.8
Gross profit:
New vehicle $846.3 $838.9 $7.4 0.9
Retail used vehicle 400.5 391.2 9.3 2.4
Wholesale 1.1 2.4 (1.3)
Used vehicle 401.6 393.6 8.0 2.0
Parts and service 1,096.8 1,046.3 50.5 4.8
Finance and insurance 618.5 589.9 28.6 4.8
Other 49.5 33.9 15.6
3,012.7 2,902.6 110.1 3.8
Selling, general and
administrative expenses 2,158.7 2,096.9 (61.8) (2.9)
Depreciation 81.9 67.7 (14.2)
Amortization 1.2 1.6 0.4
Loan and lease underwriting
income, net -- (6.3) (6.3)
Other losses (gains) 4.0 16.3 12.3
Operating income 766.9 726.4 40.5 5.6
Floorplan interest expense (81.8) (68.9) (12.9) (18.7)
Other interest expense (76.9) (71.8) (5.1) (7.1)
Interest income 3.5 3.4 0.1 2.9
Other income (5.1) 16.7 (21.8)
Income from continuing
operations before income
taxes $606.6 $605.8 $0.8 0.1
Retail vehicle unit sales:
New 410,621 406,675 3,946 1.0
Used 239,999 238,271 1,728 0.7
650,620 644,946 5,674 0.9
Revenue per vehicle retailed:
New $28,960 $28,250 $710 2.5
Used $14,667 $14,377 $290 2.0
Gross profit per vehicle
retailed:
New $2,061 $2,063 $(2) (0.1)
Used $1,669 $1,642 $27 1.6
Finance and insurance $951 $915 $36 3.9
Three Months Ended Year Ended
Operating Percentages December 31, December 31,
% 2004 % 2003 % 2004 % 2003
Revenue mix percentages:
New vehicle 61.5 62.0 61.2 61.4
Used vehicle 21.9 21.5 22.2 22.4
Parts and service 13.0 13.2 12.9 12.8
Finance and insurance 3.1 3.1 3.2 3.2
Other 0.5 0.2 0.5 0.2
100.0 100.0 100.0 100.0
Gross profit mix percentages:
New vehicle 28.9 29.2 28.1 28.9
Used vehicle 12.8 12.1 13.3 13.6
Parts and service 36.6 37.6 36.4 36.0
Finance and insurance 20.2 20.0 20.5 20.3
Other 1.5 1.1 1.7 1.2
100.0 100.0 100.0 100.0
Operating items as a percentage
of revenue:
Gross profit:
New vehicle 7.3 7.2 7.1 7.3
Used vehicle - retail 11.2 10.4 11.4 11.4
Parts and service 43.8 43.6 43.8 43.6
Total 15.6 15.3 15.5 15.5
Selling, general and
administrative expenses 11.0 11.4 11.1 11.2
Operating income 4.0 3.2 3.9 3.9
Operating items as a percentage
of total gross profit:
Selling, general and
administrative expenses 70.8 74.4 71.7 72.2
Operating income 25.6 21.0 25.5 25.0
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA, Continued
($ in millions, except per share data)
Three Months Ended Year ended
December 31, December 31,
Cash Flow Information
2004 2003 2004 2003
Capital expenditures, excluding
property operating lease
buy-outs $51.6 $47.4 $133.2 $122.7
Property operating lease
buy-outs $-- $-- $77.7 $9.8
Stock repurchases $46.0 $110.0 $236.8 $575.2
Acquisitions $43.6 $1.0 $197.9 $48.8
Proceeds from exercises of
stock options $26.1 $40.3 $94.2 $142.2
Floorplan Assistance and Three Months Ended Year Ended
Expense December 31, December 31,
2004 2003 Variance 2004 2003 Variance
Floorplan assistance
(included in cost of
operations) $27.4 $27.3 $0.1 $117.1 $113.7 $3.4
Floorplan interest
expense (22.7) (16.3) (6.4) (81.8) (68.9) (12.9)
Net floorplan benefit $4.7 $11.0 $(6.3) $35.3 $44.8 $(9.5)
Balance Sheet and Other Highlights
December 31, 2004 December 31, 2003
Cash and cash equivalents $107.2 $173.4
Inventory $2,640.5 $2,849.2
Floorplan notes payable $2,517.3 $2,741.9
Non-vehicle debt $812.6 $824.4
Equity $4,263.1 $3,949.7
New days supply (industry
standard of selling days,
including fleet) 53 days 71 days
Used days supply (trailing 30
days) 37 days 43 days
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA, Continued
($ in millions, except per share data)
Comparable Basis Reconciliations
Three Months Ended December 31,
Diluted Earnings
Operating Income Net Income Per Share
2004 2003 2004 2003 2004 2003
As reported $193.4 $142.6 $161.8 $79.1 $0.60 $0.28
Discontinued
operations - store
divestitures, net of
income taxes -- -- 6.5 7.7 $0.02 $0.03
Discontinued
operations - tax
adjustments -- -- (52.2) -- $(0.19) --
From continuing
operations, as
reported 193.4 142.6 116.1 86.8 $0.43 $0.31
Gain from income tax
adjustments -- -- (24.6) (10.3) $(0.09) $(0.04)
Gain on sale of non-
core equity
investment -- -- -- (6.2) -- $(0.02)
Impairment loss on
converted megastores -- 17.6 -- 10.9 -- $0.04
Adjusted $193.4 $160.2 $91.5 $81.2 $0.34 $0.29
Year ended December 31,
Diluted Earnings
Operating Income Net Income Per Share
2004 2003 2004 2003 2004 2003
As reported $766.9 $726.4 $433.6 $479.2 $1.59 $1.67
Discontinued
operations - store
divestitures, net of
income taxes -- -- 15.0 21.4 $0.06 $0.07
Discontinued
operations - tax
adjustments -- -- (52.2) -- $(0.19) --
Cumulative effect of
accounting change -- -- -- 14.6 -- $0.05
From continuing
operations, as
reported 766.9 726.4 396.4 515.2 $1.45 $1.80
Income tax benefit
from IRS settlement
- Q1 2003 -- -- -- (127.5) -- $(0.44)
Gain from income tax
adjustments - Q4
2004 & Q4 2003 -- -- (24.6) (10.3) $(0.09) $(0.04)
Gain on sale of non-
core equity
investment - Q4 2003 -- -- -- (6.2) -- $(0.02)
Impairment loss on
converted megastores
- Q4 2003 -- 17.6 -- 10.9 -- $0.04
Adjusted $766.9 $744.0 $371.8 $382.1 $1.36 $1.33
Business Assumptions Impacting Long-term Average EPS Growth Target of 10% to 12%:
U.S. light vehicle annual unit sales intensively competitive,
near 17 million units
SGA % reduction (over 2005 and 2006) approximately 110 bp
(SGA % of gross profit less
floorplan interest expense)
Continued opportunistic redeployment share repurchase, debt
of cash flow reduction, capital
expenditures and
acquisitions
Targeted return on incremental approximately 15% after-tax
invested capital
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 $19 million and $84 million for the three and twelve months ended December 31, 2004, respectively, and for used vehicles by $45 million and $195 million for the same periods, respectively. For 2003, the adjustment reduced both revenue and cost of sales for new vehicles by $20 million and $82 million for the three and twelve months ended December 31, 2003, respectively, and used vehicles by $46 million and $190 million for the same periods, respectively. Accordingly, the Company's revenue-based performance metrics, such as revenue per vehicle, gross profit as a percent of revenue, and SG&A as a percent of revenue, also have been revised. These revisions do not have a material impact on the amounts for any period or respective trends.
AUTONATION, INC.
UNAUDITED SAME STORE DATA
($ in millions, except per vehicle data)
Operating Highlights Three Months Ended December 31,
2004 2003 $ Variance % Variance
Revenue:
New vehicle $2,881.3 $2,751.1 $130.2 4.7
Retail used vehicle 838.6 780.6 58.0 7.4
Wholesale 188.3 174.3 14.0 8.0
Used vehicle 1,026.9 954.9 72.0 7.5
Parts and service 614.9 584.2 30.7 5.3
Finance and insurance 149.4 136.0 13.4 9.9
Other 8.8 6.9 1.9
$4,681.3 $4,433.1 $248.2 5.6
Gross profit:
New vehicle $210.2 $198.1 $12.1 6.1
Retail used vehicle 94.9 81.5 13.4 16.4
Wholesale (1.1) 0.5 (1.6)
Used vehicle 93.8 82.0 11.8 14.4
Parts and service 268.4 255.0 13.4 5.3
Finance and insurance 149.4 136.0 13.4 9.9
Other 7.4 6.1 1.3
$729.2 $677.2 $52.0 7.7
Retail vehicle unit sales:
New 96,385 92,996 3,389 3.6
Used 55,562 53,147 2,415 4.5
151,947 146,143 5,804 4.0
Revenue per vehicle retailed:
New $29,894 $29,583 $311 1.1
Used $15,093 $14,688 $405 2.8
Gross profit per vehicle
retailed:
New $2,181 $2,130 $51 2.4
Used $1,708 $1,533 $175 11.4
Finance and insurance $983 $931 $52 5.6
AUTONATION,INC.
UNAUDITED SAME STORE DATA
($ in millions, except per vehicle data)
Operating Highlights Year Ended December 31,
2004 2003 $ Variance % Variance
Revenue:
New vehicle $11,580.0 $11,440.1 $139.9 1.2
Retail used vehicle 3,440.1 3,408.0 32.1 0.9
Wholesale 764.6 764.3 0.3 0.0
Used vehicle 4,204.7 4,172.3 32.4 0.8
Parts and service 2,455.2 2,383.4 71.8 3.0
Finance and insurance 609.2 587.6 21.6 3.7
Other 35.1 29.3 5.8
$18,884.2 $18,612.7 $271.5 1.5
Gross profit:
New vehicle $821.8 $836.4 $(14.6) (1.7)
Retail used vehicle 393.9 389.3 4.6 1.2
Wholesale (1.5) 2.7 (4.2)
Used vehicle 392.4 392.0 0.4 0.1
Parts and service 1,072.2 1,039.8 32.4 3.1
Finance and insurance 609.2 587.6 21.6 3.7
Other 28.9 24.8 4.1
$2,924.5 $2,880.6 $43.9 1.5
Retail vehicle unit sales:
New 402,158 404,960 (2,802) (0.7)
Used 236,382 236,893 (511) (0.2)
638,540 641,853 (3,313) (0.5)
Revenue per vehicle retailed:
New $28,795 $28,250 $545 1.9
Used $14,553 $14,386 $167 1.2
Gross profit per vehicle
retailed:
New $2,043 $2,065 $(22) (1.1)
Used $1,666 $1,643 $23 1.4
Finance and insurance $954 $915 $39 4.3
Three Months Ended Year Ended
Operating Percentages December 31, December 31,
% 2004 % 2003 % 2004 % 2003
Revenue mix percentages:
New vehicle 61.5 62.1 61.3 61.5
Used vehicle 21.9 21.5 22.3 22.4
Parts and service 13.1 13.2 13.0 12.8
Finance and insurance 3.2 3.1 3.2 3.2
Other 0.3 0.1 0.2 0.1
100.0 100.0 100.0 100.0
Gross profit mix percentages:
New vehicle 28.8 29.3 28.1 29.0
Used vehicle 12.9 12.1 13.4 13.6
Parts and service 36.8 37.7 36.7 36.1
Finance and insurance 20.5 20.1 20.8 20.4
Other 1.0 0.8 1.0 0.9
100.0 100.0 100.0 100.0
Operating items as a
percentage of revenue:
Gross Profit:
New vehicle 7.3 7.2 7.1 7.3
Used vehicle - retail 11.3 10.4 11.5 11.4
Parts and service 43.6 43.6 43.7 43.6
Total 15.6 15.3 15.5 15.5