AutoNation Reports Second-Quarter Earnings
* Earnings from continuing operations of $0.33 per share; excluding $.09 per share one-time impact of the Company's recent recapitalization, second-quarter adjusted EPS from continuing operations was $0.42, up 5% from prior year
* Recapitalization delivered $1.15 billion of cash to stockholders
* Record second-quarter operating income of $213 million
* Premium luxury new vehicle revenue up 18%; premium luxury and volume imports accounted for 61% of new vehicle revenue versus 55% a year ago
FORT LAUDERDALE, Fla., July 27 -- AutoNation, Inc. , America's largest automotive retailer, today reported 2006 second- quarter net income from continuing operations of $74 million or $0.33 per share, compared to year-ago net income from continuing operations of $107 million or $0.40 per share. During the quarter, the Company repurchased $309 million in face value of its 9% senior notes for $334.2 million, incurring one-time repurchase costs of approximately $21 million after tax, or $.09 per share. Excluding this impact, the Company's second quarter adjusted net income from continuing operations was $95 million or $0.42 per share, up 5% versus the prior year. Second quarter results also include approximately $0.01 per share of non-cash compensation expense related to employee stock options, which is a component of selling, general and administrative (SG&A) expenses, that was not in the prior year results.
Second-quarter 2006 revenue totaled $5.0 billion, an increase of 1% compared to the year-ago period, with revenue growth in retail used vehicles of 7%, parts and service of 4%, and finance and insurance of 8%, more than offsetting a decline in new vehicle revenue. Premium luxury new vehicle revenue increased 18% over the prior year. Premium luxury and volume imports accounted for 61% of new vehicle revenue versus 55% a year ago. Total gross profit for the quarter increased 4%. Operating income was a second-quarter record of $213 million, up 1% versus the prior year.
During the quarter, the Company successfully completed a tender offer for 50 million shares of its stock and other related debt financing transactions, including the senior notes repurchase mentioned above. These transactions allowed the Company to deliver $1.15 billion of cash to stockholders while retaining financial flexibility.
Chairman and Chief Executive Officer Mike Jackson commented, "While the second quarter was a challenging economic environment for new vehicle sales, we were pleased with strong growth in our premium luxury new vehicle business, our high-margin parts and service business, used vehicles and finance & insurance."
Discontinued operations in the second quarter were nominal compared to net income of $.33 per share last year. Last year's net income included a benefit of $0.36 per share from the resolution of various tax matters.
AutoNation also announces that Executive Vice President and Chief Financial Officer Craig Monaghan will be leaving AutoNation effective August 31, 2006 to take the position of Chief Financial Officer for Sears Holdings. "Craig has been a highly valued member of our executive team since joining the organization in 2000, and has been instrumental in the successful development and execution of a number of our Company's most effective initiatives. All of us at AutoNation wish him well in his new duties," said Jackson. Beginning September 1, 2006, Alex McAllister, the Company's Vice President and Corporate Controller, will also serve as Interim CFO until December 31, 2006 when he will retire from the Company. Mr. McAllister had independently approached the Company about retiring for personal reasons unrelated to the Company. AutoNation will commence a national search for the CFO position immediately.
For the six-month period ended June 30, 2006, the Company reported net income from continuing operations of $172 million or $0.70 per share. Excluding senior note repurchase costs, earnings per share from continuing operations for the six-month period ended June 30, 2006 were $193 million or $0.78 per share, compared to $0.76 per share in the prior year. The Company's revenue for the six-month period ended June 30, 2006 totaled $9.7 billion, up 3% compared to $9.4 billion in the prior year.
About AutoNation, Inc.
AutoNation, Inc., headquartered in Fort Lauderdale, Fla., is America's largest automotive retailer and a component of the Standard and Poor's 500 Index. AutoNation has approximately 27,000 full-time employees and owns and operates 338 new vehicle franchises in 16 states. For additional information, please visit http://corp.autonation.com/ or http://www.autonation.com/ , where more than 100,000 vehicles are available for sale.
NON-GAAP FINANCIAL MEASURES
The attached financial tables contain certain non-GAAP financial measures as defined under SEC rules, such as net income and diluted earnings per share from continuing operations for the three-month and six-month periods ended June 30, 2006 and 2005, adjusted to exclude the effect of repurchases of the Company's 9% senior unsecured notes due 2008. As required by SEC rules, the Company has provided reconciliations of these measures to the most directly comparable GAAP measures, which are set forth in the attachments to this release. The Company believes that each of the foregoing non-GAAP financial measures improves the transparency of the Company's disclosure, provides a meaningful presentation of the Company's results from its core business operations excluding the impact of items not related to the Company's ongoing core business operations, and improves the period-to-period comparability of the Company's results from its core business operations.
AUTONATION, INC.
UNAUDITED CONSOLIDATED INCOME STATEMENTS
($ in millions, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Revenue:
New vehicle $2,944.9 $2,993.8 $5,629.2 $5,624.8
Used vehicle 1,203.9 1,124.4 2,345.3 2,186.7
Parts and service 670.0 645.2 1,334.4 1,278.0
Finance and insurance 171.1 158.1 322.9 302.2
Other 20.9 22.5 39.8 42.0
Total revenue 5,010.8 4,944.0 9,671.6 9,433.7
Cost of sales:
New vehicle 2,730.5 2,779.5 5,214.9 5,216.4
Used vehicle 1,097.8 1,018.2 2,124.7 1,967.9
Parts and service 372.8 363.3 745.3 722.0
Other 9.0 10.7 16.7 18.8
Total cost of sales 4,210.1 4,171.7 8,101.6 7,925.1
Gross profit 800.7 772.3 1,570.0 1,508.6
Selling, general and
administrative expenses 566.2 542.4 1,112.5 1,059.7
Depreciation and amortization 21.2 20.0 41.0 39.8
Other expenses (income) 0.1 (0.6) 0.1 (0.5)
Operating income 213.2 210.5 416.4 409.6
Floorplan interest expense (37.7) (28.1) (69.9) (52.6)
Other interest expense (25.2) (15.4) (37.2) (33.0)
Other interest expense -
senior note repurchases (34.5) (0.7) (34.5) (15.1)
Interest income 3.2 1.4 6.7 2.9
Other income 0.7 0.9 0.7 --
Income from continuing
operations before income
taxes 119.7 168.6 282.2 311.8
Provision for income taxes 46.0 61.7 110.5 115.8
Net income from continuing
operations 73.7 106.9 171.7 196.0
Income (loss) from
discontinued operations, net
of income taxes (1.0) 87.9 (11.8) 95.8
Net income $72.7 $194.8 $159.9 $291.8
Diluted earnings per share:
Continuing operations $0.33 $0.40 $0.70 $0.73
Discontinued operations $(0.00) $0.33 $(0.05) $0.36
Net income $0.32 $0.73 $0.65 $1.08
Weighted average common and
common equivalent shares
outstanding 225.2 267.8 246.5 269.0
Common shares outstanding 213.0 261.2 213.0 261.2
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA
($ in million, except per vehicle data)
Operating Highlights Three Months Ended June 30,
$ %
2006 2005 Variance Variance
Revenue:
New vehicle $2,944.9 $2,993.8 $(48.9) (1.6)
Retail used vehicle 965.5 903.2 62.3 6.9
Wholesale 238.4 221.2 17.2 7.8
Used vehicle 1,203.9 1,124.4 79.5 7.1
Parts and service 670.0 645.2 24.8 3.8
Finance and insurance 171.1 158.1 13.0 8.2
Other 20.9 22.5 (1.6)
Total revenue $5,010.8 $4,944.0 $66.8 1.4
Gross profit:
New vehicle $214.4 $214.3 $0.1 0.0
Retail used vehicle 106.2 105.7 0.5 0.5
Wholesale (0.1) 0.5 (0.6)
Used vehicle 106.1 106.2 (0.1) (0.1)
Parts and service 297.2 281.9 15.3 5.4
Finance and insurance 171.1 158.1 13.0 8.2
Other 11.9 11.8 0.1
Total gross profit 800.7 772.3 28.4 3.7
Selling, general and
administrative expenses 566.2 542.4 (23.8) (4.4)
Depreciation and
amortization 21.2 20.0 (1.2)
Other expenses (income) 0.1 (0.6) (0.7)
Operating income 213.2 210.5 2.7 1.3
Floorplan interest expense (37.7) (28.1) (9.6)
Other interest expense (25.2) (15.4) (9.8)
Other interest expense -
senior note repurchases (34.5) (0.7) (33.8)
Interest income 3.2 1.4 1.8
Other income 0.7 0.9 (0.2)
Income from continuing
operations before income
taxes $119.7 $168.6 $(48.9) (29.0)
Retail vehicle unit sales:
New 99,027 102,007 (2,980) (2.9)
Used 59,635 59,388 247 0.4
158,662 161,395 (2,733) (1.7)
Revenue per vehicle retailed:
New $29,738 $29,349 $389 1.3
Used $16,190 $15,208 $982 6.5
Gross profit per vehicle
retailed:
New $2,165 $2,101 $64 3.0
Used $1,781 $1,780 $1 0.1
Finance and insurance $1,078 $980 $98 10.0
Operating Highlights Six Months Ended June 30,
$ %
2006 2005 Variance Variance
Revenue:
New vehicle $5,629.2 $5,624.8 $4.4 0.1
Retail used vehicle 1,889.1 1,779.1 110.0 6.2
Wholesale 456.2 407.6 48.6 11.9
Used vehicle 2,345.3 2,186.7 158.6 7.3
Parts and service 1,334.4 1,278.0 56.4 4.4
Finance and insurance 322.9 302.2 20.7 6.8
Other 39.8 42.0 (2.2)
Total revenue $9,671.6 $9,433.7 $237.9 2.5
Gross profit:
New vehicle $414.3 $408.4 $5.9 1.4
Retail used vehicle 218.2 215.1 3.1 1.4
Wholesale 2.4 3.7 (1.3)
Used vehicle 220.6 218.8 1.8 0.8
Parts and service 589.1 556.0 33.1 6.0
Finance and insurance 322.9 302.2 20.7 6.8
Other 23.1 23.2 (0.1)
Total gross profit 1,570.0 1,508.6 61.4 4.1
Selling, general and
administrative expenses 1,112.5 1,059.7 (52.8) (5.0)
Depreciation and
amortization 41.0 39.8 (1.2)
Other expenses (income) 0.1 (0.5) (0.6)
Operating income 416.4 409.6 6.8 1.7
Floorplan interest expense (69.9) (52.6) (17.3)
Other interest expense (37.2) (33.0) (4.2)
Other interest expense -
senior note repurchases (34.5) (15.1) (19.4)
Interest income 6.7 2.9 3.8
Other income 0.7 -- 0.7
Income from continuing
operations before income
taxes $282.2 $311.8 $(29.6) (9.5)
Retail vehicle unit sales:
New 188,001 191,568 (3,567) (1.9)
Used 117,570 117,806 (236) (0.2)
305,571 309,374 (3,803) (1.2)
Revenue per vehicle retailed:
New $29,942 $29,362 $580 2.0
Used $16,068 $15,102 $966 6.4
Gross profit per vehicle
retailed:
New $2,204 $2,132 $72 3.4
Used $1,856 $1,826 $30 1.6
Finance and insurance $1,057 $977 $80 8.2
Three Months Six Months
Ended Ended
Operating Percentages June 30, June 30,
% 2006 % 2005 % 2006 % 2005
Revenue mix percentages:
New vehicle 58.8 60.6 58.2 59.6
Used vehicle 24.0 22.7 24.2 23.2
Parts and service 13.4 13.1 13.8 13.5
Finance and insurance 3.4 3.2 3.3 3.2
Other 0.4 0.4 0.5 0.5
100.0 100.0 100.0 100.0
Gross profit mix
percentages:
New vehicle 26.8 27.7 26.4 27.1
Used vehicle 13.3 13.8 14.1 14.5
Parts and service 37.1 36.5 37.5 36.9
Finance and insurance 21.4 20.5 20.6 20.0
Other 1.4 1.5 1.4 1.5
100.0 100.0 100.0 100.0
Operating items as a
percentage of revenue:
Gross profit:
New vehicle 7.3 7.2 7.4 7.3
Used vehicle - retail 11.0 11.7 11.6 12.1
Parts and service 44.4 43.7 44.1 43.5
Total 16.0 15.6 16.2 16.0
Selling, general and
administrative expenses 11.3 11.0 11.5 11.2
Operating income 4.3 4.3 4.3 4.3
Operating items as a
percentage of total gross
profit:
Selling, general and
administrative expenses 70.7 70.2 70.9 70.2
Operating income 26.6 27.3 26.5 27.2
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA, Continued
($ in millions, except per share data)
Three Months Six Months
Cash Flow Information Ended June 30, Ended June 30,
2006 2005 2006 2005
Capital expenditures, excluding
property operating lease buy-outs $29.2 $36.7 $49.1 $57.1
Property operating lease buy-outs $-- $10.3 $-- $10.3
Stock repurchases $1,218.6 $77.7 $1,218.6 $148.6
Acquisitions $-- $5.9 $67.4 $8.0
Proceeds from exercises of stock
options $19.3 $29.7 $51.6 $52.7
Senior note repurchases $334.2 $6.4 $334.2 $112.4
Floorplan Assistance Three Months Six Months
and Expense Ended Ended
June 30, June 30,
2006 2005 Variance 2006 2005 Variance
Floorplan assistance
earned (included in
cost of sales) $30.4 $30.7 $(0.3) $57.4 $57.0 $0.4
Floorplan interest
expense (37.7) (28.1) (9.6) (69.9) (52.6) (17.3)
Net floorplan benefit
(cost) $(7.3) $2.6 $(9.9) $(12.5) $4.4 $(16.9)
Balance Sheet and Other Highlights
June 30, December 31, June 30,
2006 2005 2005
Cash and cash equivalents $35.6 $245.2 $49.4
Inventory $2,795.7 $2,626.6 $2,554.1
Total floorplan notes payable $2,511.7 $2,486.9 $2,317.1
Non-vehicle debt $1,493.5 $525.0 $677.3
Equity $3,683.1 $4,669.5 $4,476.5
New days supply (industry
standard of selling days,
including fleet) 61 days 55 days 50 days
Used days supply (trailing
30 days) 43 days 42 days 42 days
Brand Mix - New Vehicle Revenue %
Three Months Ended Six Months Ended
June 30, June 30,
% 2006 % 2005 % 2006 % 2005
Detroit 3:
Ford, Lincoln-Mercury 16.7 17.8 17.1 18.2
Chevrolet, Pontiac,
Buick, Cadillac, GMC 14.6 18.2 14.5 17.1
Chrysler, Jeep, Dodge 7.5 8.7 7.9 8.8
Detroit 3 total 38.8 44.7 39.5 44.1
Premium Luxury:
Mercedes 11.8 9.0 11.1 9.0
BMW 4.8 4.7 4.9 4.7
Lexus 3.2 3.1 3.3 3.1
Other premium luxury
(Land Rover, Porsche,
Rolls Royce) 2.2 1.7 2.4 1.9
Premium Luxury total 22.0 18.5 21.7 18.7
Imports:
Honda 8.7 8.0 8.4 7.8
Toyota 14.4 12.6 13.8 12.7
Nissan 9.7 9.7 10.2 10.0
Other imports 6.4 6.5 6.4 6.7
Import total 39.2 36.8 38.8 37.2
100.0 100.0 100.0 100.0
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA, Continued
($ in millions, except per share data)
Comparable Basis Reconciliations*
Three Months Ended June 30,
Diluted Earnings
Net Income Per Share
2006 2005 2006 2005
As reported $72.7 $194.8 $0.32 $0.73
Discontinued operations -
store divestitures, net of
income taxes 1.0 7.8 $-- $0.03
Discontinued operations - tax
adjustments -- (95.7) $-- $(0.36)
From continuing operations, as
reported $73.7 $106.9 $0.33 $0.40
Senior note repurchases 21.3 -- 0.09 $--
Adjusted $95.0 $106.9 $0.42 $0.40
Six Months Ended June 30,
Diluted Earnings
Net Income Per Share
2006 2005 2006 2005
As reported $159.9 $291.8 $0.65 $1.08
Discontinued operations - store
divestitures, net of income
taxes 11.8 11.6 $0.05 $0.04
Discontinued operations - tax
adjustments -- (107.4) $-- $(0.40)
From continuing operations, as
reported 171.7 196.0 $0.70 $0.73
Senior note repurchases 21.0 9.1 0.09 $0.03
Adjusted $192.7 $205.1 $0.78 $0.76
* Please refer to the "Non-GAAP Financial Measures" section of the
Press Release.
Business Assumptions Impacting Long-term Average EPS Growth Target
of 10% to 12% Per Year:
U.S. light vehicle annual intensely competitive, nearly
unit sales 17 million units
SGA % reduction (over 2006, approximately 100 bp, excluding
2007 and 2008) stock option expense
(SGA % of gross profit less
floorplan interest expense)
Continued opportunistic share repurchase, capital
redeployment of cash flow expenditures and acquisitions
Targeted return on incremental approximately 15% after-tax
invested capital
AUTONATION, INC.
UNAUDITED SAME STORE DATA
($ in millions, except per vehicle data)
Operating Highlights Three Months Ended June 30,
2006 2005 $ Variance % Variance
Revenue:
New vehicle $2,915.8 $2,993.8 $(78.0) (2.6)
Retail used
vehicle 958.2 903.2 55.0 6.1
Wholesale 232.1 220.5 11.6 5.3
Used vehicle 1,190.3 1,123.7 66.6 5.9
Parts and service 661.8 645.2 16.6 2.6
Finance and insurance 170.5 158.0 12.5 7.9
Other 8.1 7.8 0.3 3.8
Total revenue $4,946.5 $4,928.5 $18.0 0.4
Gross profit:
New vehicle $211.5 $214.3 $(2.8) (1.3)
Retail used
vehicle 105.2 105.7 (0.5) (0.5)
Wholesale (0.6) (0.1) (0.5)
Used vehicle 104.6 105.6 (1.0) (0.9)
Parts and service 292.6 282.0 10.6 3.8
Finance and insurance 170.5 158.0 12.5 7.9
Other 6.7 6.5 0.2 3.1
Total gross profit $785.9 $766.4 $19.5 2.5
Retail vehicle unit
sales:
New 98,567 102,007 (3,440) (3.4)
Used 59,468 59,388 80 0.1
158,035 161,395 (3,360) (2.1)
Revenue per vehicle
retailed:
New $29,582 $29,349 $233 0.8
Used $16,113 $15,208 $905 6.0
Gross profit per
vehicle retailed:
New $2,146 $2,101 $45 2.1
Used $1,769 $1,780 $(11) (0.6)
Finance and insurance $1,079 $979 $100 10.2
Operating Highlights Six Months Ended June 30,
2006 2005 $ Variance % Variance
Revenue:
New vehicle $5,586.8 $5,624.8 $(38.0) (0.7)
Retail used
vehicle 1,878.9 1,779.1 99.8 5.6
Wholesale 448.0 406.3 41.7 10.3
Used vehicle 2,326.9 2,185.4 141.5 6.5
Parts and service 1,322.6 1,278.0 44.6 3.5
Finance and insurance 322.0 301.7 20.3 6.7
Other 15.2 14.7 0.5 3.4
Total revenue $9,573.5 $9,404.6 $168.9 1.8
Gross profit:
New vehicle $410.1 $408.4 $1.7 0.4
Retail used
vehicle 217.0 215.1 1.9 0.9
Wholesale 1.3 2.4 (1.1)
Used vehicle 218.3 217.5 0.8 0.4
Parts and service 582.2 556.0 26.2 4.7
Finance and insurance 322.0 301.7 20.3 6.7
Other 13.2 12.6 0.6 4.8
Total gross profit $1,545.8 $1,496.2 $49.6 3.3
Retail vehicle unit
sales:
New 187,325 191,568 (4,243) (2.2)
Used 117,337 117,806 (469) (0.4)
304,662 309,374 (4,712) (1.5)
Revenue per vehicle
retailed:
New $29,824 $29,362 $462 1.6
Used $16,013 $15,102 $911 6.0
Gross profit per
vehicle retailed:
New $2,189 $2,132 $57 2.7
Used $1,849 $1,826 $23 1.3
Finance and insurance $1,057 $975 $82 8.4
Operating Percentages Three Months Six Months
Ended Ended
June 30, June 30,
% 2006 % 2005 % 2006 % 2005
Revenue mix percentages:
New vehicle 58.9 60.7 58.4 59.8
Used vehicle 24.1 22.8 24.3 23.2
Parts and service 13.4 13.1 13.8 13.6
Finance and insurance 3.4 3.2 3.4 3.2
Other 0.2 0.2 0.1 0.2
100.0 100.0 100.0 100.0
Gross profit mix
percentages:
New vehicle 26.9 28.0 26.5 27.3
Used vehicle 13.3 13.8 14.1 14.5
Parts and service 37.2 36.8 37.7 37.2
Finance and insurance 21.7 20.6 20.8 20.2
Other 0.9 0.8 0.9 0.8
100.0 100.0 100.0 100.0
Operating items as a
percentage of revenue:
Gross Profit:
New vehicle 7.3 7.2 7.3 7.3
Used vehicle - retail 11.0 11.7 11.5 12.1
Parts and service 44.2 43.7 44.0 43.5
Total 15.9 15.6 16.1 15.9