AutoNation Reports Third-Quarter Earnings
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- Announces 4 acquisitions with annual revenue of approximately $200 million
FORT LAUDERDALE, Fla., Oct. 26 -- AutoNation, Inc. , America's largest automotive retailer, today reported 2006 third- quarter net income from continuing operations of $85 million or $0.40 per share on revenue of $5.0 billion, compared to year-ago net income from continuing operations of $121 million or $0.45 per share on revenue of $5.1 billion. Adjusting the prior-year earnings for certain items as disclosed in the attached tables, the Company's third-quarter EPS from continuing operations was $0.40 versus $0.41 in the prior year, a decline of 2%.
In the third quarter, industry new vehicle retail unit sales declined 11% in the U.S. and were down 16% in California according to CNW. AutoNation new vehicle retail unit sales were down 8% in total and 12% in California, which represents approximately 20% of the Company's new vehicle business. Chairman and Chief Executive Officer Mike Jackson commented, "The third quarter was a challenging economic environment for new vehicle sales. California's economic situation has been declining during 2006 due to the rise in interest rates and a soft housing market." Mr. Jackson also noted, "The employee discount programs offered by domestic manufacturers last year make year-over-year comparisons difficult."
In addition to the decline in new vehicle sales, results for the third quarter were impacted by increased floor plan interest expense due to higher interest rates and higher inventories, and higher other interest expense due to increased debt levels related to the Company's recapitalization earlier in 2006. The effect on EPS of higher other interest expense was more than offset by the 19% reduction in shares outstanding due to the 50 million share buyback in the second quarter.
For the nine-month period ended September 30, 2006, the Company reported net income from continuing operations of $257 million or $1.09 per share compared to $1.18 per share in the prior year. After adjusting for certain items as disclosed in the attached tables, EPS from continuing operations for the nine-month period on a comparable basis increased 5% to $1.18 from $1.12 in the prior year. The Company's revenue for the nine-month period ended September 30, 2006 totaled $14.6 billion, up 1% compared to $14.4 billion in the prior year.
Separately, the Company today announced that it has signed an agreement to acquire Harloff BMW in northern San Diego County, California. The acquisition, which is subject to certain conditions and approvals, is expected to close in the fourth quarter of 2006. During the quarter, AutoNation acquired Land Rover Fort Lauderdale and Fairbanks Dodge in the South Florida market and Fremont Jeep in Fremont, California. AutoNation estimates that the annual revenue from these acquisitions will be approximately $200 million.
The third quarter conference call may be accessed at 11:00 a.m. Eastern Time, today by phone at 888-781-3339 or via the Internet (audio webcast) at http://www.autonation.com/ by clicking on the "About Us" link then clicking on "Investors" and then "Webcasts." A playback of the conference call will be available after 2:30 p.m. Eastern Time October 26, 2006 through November 2, 2006 by calling 800-475-6701 (access code # 844682).
About AutoNation, Inc.
AutoNation, Inc., headquartered in Fort Lauderdale, Fla., is America's largest automotive retailer and a component of the Standard and Poor's 500 Index. AutoNation has approximately 27,000 full-time employees and owns and operates 335 new vehicle franchises in 16 states. For additional information, please visit http://corp.autonation.com/ or www.AutoNation.com, where more than 100,000 vehicles are available for sale.
NON-GAAP FINANCIAL MEASURES
AUTONATION, INC.
UNAUDITED CONSOLIDATED INCOME STATEMENTS
($ in millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Revenue:
New vehicle $2,942.5 $3,087.8 $8,540.8 $8,677.5
Used vehicle 1,180.7 1,144.8 3,507.2 3,314.4
Parts and service 656.2 653.5 1,976.1 1,916.9
Finance and insurance, net 165.5 164.1 487.1 465.0
Other 16.6 20.8 56.4 62.8
Total revenue 4,961.5 5,071.0 14,567.6 14,436.6
Cost of sales:
New vehicle 2,727.1 2,864.9 7,913.1 8,048.5
Used vehicle 1,077.3 1,038.3 3,184.8 2,990.9
Parts and service 367.3 369.3 1,104.4 1,083.1
Other 7.3 9.5 24.0 28.5
Total cost of sales 4,179.0 4,282.0 12,226.3 12,151.0
Gross profit 782.5 789.0 2,341.3 2,285.6
Selling, general and
administrative expenses 557.6 549.3 1,660.3 1,598.2
Depreciation and amortization 21.3 19.2 61.9 58.7
Other expenses (income) (0.4) 1.2 (0.3) 0.7
Operating income 204.0 219.3 619.4 628.0
Floorplan interest expense (37.2) (24.1) (106.2) (75.9)
Other interest expense (27.2) (15.9) (64.4) (48.9)
Other interest expense -
senior note repurchases - - (34.5) (15.1)
Interest income 0.9 1.5 7.6 4.4
Other income 0.5 0.1 1.2 (0.1)
Income from continuing
operations before income
taxes 141.0 180.9 423.1 492.4
Provision for income taxes 55.6 60.3 166.1 175.9
Net income from continuing
operations 85.4 120.6 257.0 316.5
Income (loss) from
discontinued operations, net
of income taxes (3.6) 8.7 (15.3) 104.7
Net income $81.8 $129.3 $241.7 $421.2
Diluted earnings per share:
Continuing operations $0.40 $0.45 $1.09 $1.18
Discontinued operations $(0.02) $0.03 $(0.07) $0.39
Net income $0.38 $0.48 $1.03 $1.57
Weighted average common and
common equivalent shares
outstanding 215.0 267.2 235.0 269.1
Common shares outstanding 207.7 261.4 207.7 261.4
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA
($ in millions, except per vehicle data)
Operating Highlights Three Months Ended September 30,
$ %
2006 2005 Variance Variance
Revenue:
New vehicle $2,942.5 $3,087.8 $(145.3) (4.7)
Retail used vehicle 947.8 913.6 34.2 3.7
Wholesale 232.9 231.2 1.7 0.7
Used vehicle 1,180.7 1,144.8 35.9 3.1
Parts and service 656.2 653.5 2.7 0.4
Finance and insurance, net 165.5 164.1 1.4 0.9
Other 16.6 20.8 (4.2)
Total revenue $4,961.5 $5,071.0 $(109.5) (2.2)
Gross profit:
New vehicle $215.4 $222.9 $(7.5) (3.4)
Retail used vehicle 105.5 107.9 (2.4) (2.2)
Wholesale (2.1) (1.4) (0.7)
Used vehicle 103.4 106.5 (3.1) (2.9)
Parts and service 288.9 284.2 4.7 1.7
Finance and insurance 165.5 164.1 1.4 0.9
Other 9.3 11.3 (2.0)
Total gross profit 782.5 789.0 (6.5) (0.8)
Selling, general and
administrative expenses 557.6 549.3 (8.3) (1.5)
Depreciation and amortization 21.3 19.2 (2.1)
Other expenses (income) (0.4) 1.2 1.6
Operating income 204.0 219.3 (15.3) (7.0)
Floorplan interest expense (37.2) (24.1) (13.1)
Other interest expense (27.2) (15.9) (11.3)
Other interest expense - senior
note repurchases - - -
Interest income 0.9 1.5 (0.6)
Other income 0.5 0.1 0.4
Income from continuing
operations before income
taxes $141.0 $180.9 $(39.9) (22.1)
Retail vehicle unit sales:
New 99,390 107,578 (8,188) (7.6)
Used 59,822 60,574 (752) (1.2)
159,212 168,152 (8,940) (5.3)
Revenue per vehicle retailed:
New $29,606 $28,703 $903 3.1
Used $15,844 $15,082 $762 5.1
Gross profit per vehicle
retailed:
New $2,167 $2,072 $95 4.6
Used $1,764 $1,781 $(17) (1.0)
Finance and insurance $1,039 $976 $63 6.5
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA
($ in millions, except per vehicle data)
Operating Highlights Nine Months Ended September 30,
$ %
2006 2005 Variance Variance
Revenue:
New vehicle $8,540.8 $8,677.5 $(136.7) (1.6)
Retail used vehicle 2,821.3 2,678.9 142.4 5.3
Wholesale 685.9 635.5 50.4 7.9
Used vehicle 3,507.2 3,314.4 192.8 5.8
Parts and service 1,976.1 1,916.9 59.2 3.1
Finance and insurance, net 487.1 465.0 22.1 4.8
Other 56.4 62.8 (6.4)
Total revenue $14,567.6 $14,436.6 $131.0 0.9
Gross profit:
New vehicle $627.7 $629.0 $(1.3) (0.2)
Retail used vehicle 322.0 321.2 0.8 0.2
Wholesale 0.4 2.3 (1.9)
Used vehicle 322.4 323.5 (1.1) (0.3)
Parts and service 871.7 833.8 37.9 4.5
Finance and insurance 487.1 465.0 22.1 4.8
Other 32.4 34.3 (1.9)
Total gross profit 2,341.3 2,285.6 55.7 2.4
Selling, general and
administrative expenses 1,660.3 1,598.2 (62.1) (3.9)
Depreciation and amortization 61.9 58.7 (3.2)
Other expenses (income) (0.3) 0.7 1.0
Operating income 619.4 628.0 (8.6) (1.4)
Floorplan interest expense (106.2) (75.9) (30.3)
Other interest expense (64.4) (48.9) (15.5)
Other interest expense -
senior note repurchases (34.5) (15.1) (19.4)
Interest income 7.6 4.4 3.2
Other income 1.2 (0.1) 1.3
Income from continuing
operations before income
taxes $423.1 $492.4 $(69.3) (14.1)
Retail vehicle unit sales:
New 286,396 298,022 (11,626) (3.9)
Used 176,388 177,371 (983) (0.6)
462,784 475,393 (12,609) (2.7)
Revenue per vehicle retailed:
New $29,822 $29,117 $705 2.4
Used $15,995 $15,103 $892 5.9
Gross profit per vehicle
retailed:
New $2,192 $2,111 $81 3.8
Used $1,826 $1,811 $15 0.8
Finance and insurance $1,053 $978 $75 7.7
Three Months Ended Nine Months Ended
Operating Percentages September 30, September 30,
% 2006 % 2005 % 2006 % 2005
Revenue mix percentages:
New vehicle 59.3 60.9 58.6 60.1
Used vehicle 23.8 22.6 24.1 23.0
Parts and service 13.2 12.9 13.6 13.3
Finance and insurance 3.3 3.2 3.3 3.2
Other 0.4 0.4 0.4 0.4
100.0 100.0 100.0 100.0
Gross profit mix percentages:
New vehicle 27.5 28.3 26.8 27.5
Used vehicle 13.2 13.5 13.8 14.2
Parts and service 36.9 36.0 37.2 36.5
Finance and insurance 21.2 20.8 20.8 20.3
Other 1.2 1.4 1.4 1.5
100.0 100.0 100.0 100.0
Operating items as a percentage
of revenue:
Gross profit:
New vehicle 7.3 7.2 7.3 7.2
Used vehicle - retail 11.1 11.8 11.4 12.0
Parts and service 44.0 43.5 44.1 43.5
Total 15.8 15.6 16.1 15.8
Selling, general and
administrative expenses 11.2 10.8 11.4 11.1
Operating income 4.1 4.3 4.3 4.4
Operating items as a percentage
of total gross profit:
Selling, general and
administrative expenses 71.3 69.6 70.9 69.9
Operating income 26.1 27.8 26.5 27.5
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA, Continued
($ in millions, except per share data)
Three Months Ended Nine Months Ended
Cash Flow Information September 30, September 30,
2006 2005 2006 2005
Capital expenditures, excluding
property operating lease
buy-outs $87.8 $34.4 $136.9 $91.5
Property operating lease buy-
outs $- $- $- $10.3
Stock repurchases $118.7 $38.7 $1,337.3 $187.2
Acquisitions $21.1 $5.4 $88.5 $13.4
Proceeds from exercises of
stock options $10.5 $24.0 $62.1 $76.7
Senior note repurchases $- $- $334.2 $112.4
Floorplan Assistance and Three Months Ended Nine Months Ended
Expense September 30, September 30,
2006 2005 Variance 2006 2005 Variance
Floorplan assistance
earned (included in cost
of sales) $28.4 $29.5 $(1.1) $85.4 $86.1 $(0.7)
Floorplan interest
expense (37.2) (24.1) (13.1) (106.2) (75.9) (30.3)
Net floorplan benefit
(cost) $(8.8) $5.4 $(14.2) $(20.8) $10.2 $(31.0)
Balance Sheet and Other Highlights
September 30, December 31, September 30,
2006 2005 2005
Cash and cash equivalents $29.7 $245.4 $280.0
Inventory $2,363.8 $2,601.8 $2,132.8
Total floorplan notes payable $2,121.0 $2,463.9 $1,885.5
Non-vehicle debt $1,501.9 $525.0 $675.1
Equity $3,660.4 $4,669.5 $4,599.3
New days supply (industry
standard of selling
days, including fleet) 51 days 55 days 43 days
Used days supply (trailing 30
days) 38 days 42 days 41 days
Brand Mix - New Vehicle Revenue %
Three Months Ended Nine Months Ended
September 30, September 30,
% 2006 % 2005 % 2006 % 2005
Detroit 3:
Ford, Lincoln-Mercury 17.4 19.5 17.0 18.5
Chevrolet, Pontiac, Buick,
Cadillac, GMC 15.2 15.1 14.7 16.3
Chrysler, Jeep, Dodge 7.3 9.5 7.7 9.1
Detroit 3 total 39.9 44.1 39.4 43.9
Premium Luxury:
Mercedes 10.9 8.8 11.1 9.0
BMW 4.4 4.6 4.7 4.7
Lexus 3.1 3.1 3.2 3.1
Other premium luxury (Land Rover,
Porsche, Rolls Royce) 2.1 2.2 2.3 1.9
Premium Luxury total 20.5 18.7 21.3 18.7
Imports:
Honda 8.5 8.2 8.5 8.0
Toyota 14.8 12.0 14.2 12.5
Nissan 9.7 10.0 10.0 10.1
Other imports 6.6 7.0 6.6 6.8
Import total 39.6 37.2 39.3 37.4
100.0 100.0 100.0 100.0
AUTONATION, INC.
UNAUDITED SUPPLEMENTARY DATA, Continued
($ in millions, except per share data)
Comparable Basis Reconciliations*
Three Months Ended September 30,
Diluted Earnings
Net Income Per Share
2006 2005 2006 2005
As reported $81.8 $129.3 $0.38 $0.48
Discontinued operations - store
divestitures, net of income
taxes 3.6 (5.7) $0.02 $(0.02)
Discontinued operations - tax
adjustments - (3.0) $- $(0.01)
From continuing operations, as
reported 85.4 120.6 $0.40 $0.45
Income tax adjustments - (9.4) $- $(0.04)
Proforma stock option
compensation expense (per 2005
disclosures) - (2.1) $- $(0.01)
Adjusted $85.4 $109.1 $0.40 $0.41
Nine Months Ended September 30,
Diluted Earnings
Net Income Per Share
2006 2005 2006 2005
As reported $241.7 $421.2 $1.03 $1.57
Discontinued operations - store
divestitures, net of income
taxes 15.3 5.7 $0.07 $0.02
Discontinued operations - tax
adjustments - (110.4) $- $(0.41)
From continuing operations, as
reported 257.0 316.5 $1.09 $1.18
Senior note repurchases 20.9 9.1 $0.09 $0.03
Income tax adjustments - (16.2) $- $(0.06)
Proforma stock option
compensation expense (per 2005
disclosures) - (7.2) $- $(0.03)
Adjusted $277.9 $302.2 $1.18 $1.12
* Please refer to the "Non-GAAP Financial Measures" section of the
Press Release.
Business Assumptions Impacting Long-term Average EPS Growth Target
of 10% to 12% Per Year:
U.S. light vehicle annual intensely competitive, nearly
unit sales 17 million units
SGA % reduction (over 2006, approximately 100 bp, excluding
2007 and 2008) stock option expense
(SGA % of gross profit less
floorplan interest expense)
Continued opportunistic share repurchase, capital
redeployment of cash flow expenditures and acquisitions
Targeted return on incremental approximately 15% after-tax
invested capital
AUTONATION, INC.
UNAUDITED SAME STORE DATA
($ in millions, except per vehicle data)
Operating Highlights Three Months Ended September 30,
$ %
2006 2005 Variance Variance
Revenue:
New vehicle $2,918.8 $3,087.7 $(168.9) (5.5)
Retail used vehicle 942.5 913.7 28.8 3.2
Wholesale 227.6 230.5 (2.9) (1.3)
Used vehicle 1,170.1 1,144.2 25.9 2.3
Parts and service 649.6 653.6 (4.0) (0.6)
Finance and insurance, net 165.4 164.2 1.2 0.7
Other 6.5 6.4 0.1 1.6
Total revenue $4,910.4 $5,056.1 $(145.7) (2.9)
Gross profit:
New vehicle $213.2 $222.9 $(9.7) (4.4)
Retail used vehicle 104.9 107.9 (3.0) (2.8)
Wholesale (2.6) (2.2) (0.4)
Used vehicle 102.3 105.7 (3.4) (3.2)
Parts and service 285.2 284.2 1.0 0.4
Finance and insurance 165.4 164.2 1.2 0.7
Other 6.1 6.5 (0.4) (6.2)
Total gross profit $772.2 $783.5 $(11.3) (1.4)
Retail vehicle unit sales:
New 98,982 107,578 (8,596) (8.0)
Used 59,691 60,574 (883) (1.5)
158,673 168,152 (9,479) (5.6)
Revenue per vehicle retailed:
New $29,488 $28,702 $786 2.7
Used $15,790 $15,084 $706 4.7
Gross profit per vehicle
retailed:
New $2,154 $2,072 $82 4.0
Used $1,757 $1,781 $(24) (1.3)
Finance and insurance $1,042 $976 $66 6.8
AUTONATION, INC.
UNAUDITED SAME STORE DATA
($ in millions, except per vehicle data)
Operating Highlights Nine Months Ended September 30,
$ %
2006 2005 Variance Variance
Revenue:
New vehicle $8,474.7 $8,677.5 $(202.8) (2.3)
Retail used vehicle 2,805.8 2,678.9 126.9 4.7
Wholesale 672.5 633.5 39.0 6.2
Used vehicle 3,478.3 3,312.4 165.9 5.0
Parts and service 1,957.8 1,916.9 40.9 2.1
Finance and insurance, net 486.1 464.6 21.5 4.6
Other 21.6 21.1 0.5 2.4
Total revenue $14,418.5 $14,392.5 $26.0 0.2
Gross profit:
New vehicle $621.4 $629.0 $(7.6) (1.2)
Retail used vehicle 320.3 321.1 (0.8) (0.2)
Wholesale (1.1) 0.3 (1.4)
Used vehicle 319.2 321.4 (2.2) (0.7)
Parts and service 861.1 833.9 27.2 3.3
Finance and insurance 486.1 464.6 21.5 4.6
Other 19.2 19.1 0.1 0.5
Total gross profit $2,307.0 $2,268.0 $39.0 1.7
Retail vehicle unit sales:
New 285,312 298,022 (12,710) (4.3)
Used 176,024 177,371 (1,347) (0.8)
461,336 475,393 (14,057) (3.0)
Revenue per vehicle retailed:
New $29,703 $29,117 $586 2.0
Used $15,940 $15,103 $837 5.5
Gross profit per vehicle
retailed:
New $2,178 $2,111 $67 3.2
Used $1,820 $1,810 $10 0.6
Finance and insurance $1,054 $977 $77 7.9
Three Months Ended Nine Months Ended
Operating Percentages September 30, September 30,
% 2006 % 2005 % 2006 % 2005
Revenue mix percentages:
New vehicle 59.4 61.1 58.8 60.3
Used vehicle 23.8 22.6 24.1 23.0
Parts and service 13.2 12.9 13.6 13.3
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 27.6 28.4 26.9 27.7
Used vehicle 13.2 13.5 13.8 14.2
Parts and service 36.9 36.3 37.3 36.8
Finance and insurance 21.4 21.0 21.1 20.5
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 7.2
Used vehicle - retail 11.1 11.8 11.4 12.0
Parts and service 43.9 43.5 44.0 43.5
Total 15.7 15.5 16.0 15.8