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Press release from PR Newswire

AutoNation Reports Record Third Quarter EPS from Continuing Operations

Thursday, October 25, 2012

AutoNation Reports Record Third Quarter EPS from Continuing Operations06:48 EDT Thursday, October 25, 2012- EPS from continuing operations was $0.66, a record for third quarter results and an increase of 38% compared to prior year period - Operating income of $163.7 million, an increase of 14% compared to prior year period - Total revenue of $3.93 billion, up 12% compared to the year-ago period; revenue for all major business sectors - new vehicles, used vehicles, parts and service, and finance and insurance - improved compared to the third quarter of 2011FORT LAUDERDALE, Fla., Oct. 25, 2012 /PRNewswire/ -- AutoNation, Inc. (NYSE: AN), America's largest automotive retailer, today reported 2012 third quarter net income from continuing operations of $82 million, or $0.66 per share, compared to net income from continuing operations of $71 million, or $0.48 per share, for the same period in the prior year, a 38% improvement on a per-share basis.  (Logo:  http://photos.prnewswire.com/prnh/20001017/AUTONATIONLOGO )2012 third quarter revenue totaled $3.93 billion, compared to $3.51 billion in the year-ago period, an increase of 12%, driven primarily by stronger retail new vehicle unit sales.  AutoNation's retail new vehicle unit sales increased 21%.  Based on CNW Research data, in the third quarter, total U.S. industry retail new vehicle unit sales increased 15%.Mike Jackson, Chairman and Chief Executive Officer, said, "We delivered solid double-digit growth in operating income and EPS from continuing operations in the third quarter of 2012, as we drove increased profitability in each of our business sectors."Commenting on the automotive retail environment, Mr. Jackson added, "We continued to see a strong new vehicle selling environment in the third quarter, reflected in a seasonally adjusted U.S. industry annual selling rate of 14.5 million units.  We are expecting industry new vehicle sales to be mid-14 million units in 2012."AutoNation has three operating segments: Domestic, Import, and Premium Luxury. The Domestic segment is comprised of stores that sell vehicles manufactured by General Motors, Ford, and Chrysler; the Import(1) segment is comprised of stores that sell vehicles manufactured primarily by Toyota, Honda, Hyundai, and Nissan; and the Premium Luxury(1) segment is comprised of stores that sell vehicles manufactured primarily by Mercedes-Benz, BMW, Audi, and Lexus. Segment results for the third quarter of 2012 were as follows: Domestic - Domestic segment income(2) was $52 million compared to year-ago segment income of $47 million.  Third quarter Domestic retail new vehicle unit sales increased 9%. Import - Import segment income(2) was $69 million compared to year-ago segment income of $61 million.  Third quarter Import retail new vehicle unit sales increased 35% as sales normalized from the tsunami effects from the prior year. Premium Luxury - Premium Luxury segment income(2) was $63 million compared to year-ago segment income of $53 million.  Third quarter Premium Luxury retail new vehicle unit sales increased 11%.For the nine-month period ended September 30, 2012, the Company reported adjusted net income from continuing operations of $237 million, or $1.88 per share, compared to net income from continuing operations of $214 million, or $1.43 per share for the same period in the prior year, an improvement of 31% on a per-share basis.  On a GAAP basis, net income from continuing operations for the nine-month period ended September 30, 2012 was $234 million, or $1.85 per share. Reconciliations of non-GAAP financial measures are included in the attached financial tables. The Company's revenue for the nine-month period ended September 30, 2012, totaled $11.50 billion, up 13% compared to $10.15 billion for the same period in the prior year.The third quarter conference call may be accessed by telephone at (888) 769-8515 (password: AutoNation) at 11:00 a.m. eastern time or on AutoNation's investor relations website at http://investors.autonation.com.  The webcast will also be available on AutoNation's website under "Events & Presentations" following the call. A playback of the conference call will be available after 1:00 p.m. Eastern Time on October 25, 2012 through November 2, 2012 by calling (800) 518-0083 (password 75300).(1) As of March 31, 2012, we revised the basis of segmentation for our Import and Premium Luxury segments to reclassify our Audi franchises from the Import segment to the Premium Luxury segment. In connection with this change, we have reclassified historical amounts to conform to our current segment presentation.(2) Segment income is defined as operating income less floorplan interest expense.About AutoNation, Inc.AutoNation is transforming the automotive retail industry through bold leadership.  We deliver a superior automotive retail experience through our customer-focused sales and service processes.  Owning and operating 261 new vehicle franchises, which sell 32 brands across 15 states, AutoNation is America's largest automotive retailer, with state-of-the-art operations and the ability to leverage economies of scale that benefit the customer.  As an indication of our leadership position in our industry, AutoNation is a component of the S&P 500 Index.  AutoNation is driven to be the best-run, most profitable automotive retailer.  Follow us at www.facebook.com/autonation and www.twitter.com/autonation.For additional information about AutoNation, please visit http://investors.autonation.com or www.autonation.com. FORWARD-LOOKING STATEMENTS This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Words such as "anticipates," "expects," "intends," "goals," "plans," "believes," "continues," "may," "will," and variations of such words and similar expressions are intended to identify such forward-looking statements. Statements regarding our expectations for the automotive retail industry, as well as statements that describe our objectives, goals, or plans, are forward-looking statements. Our forward-looking statements reflect our current expectations concerning future results and events, and they involve known and unknown risks, uncertainties and other factors that are difficult to predict and may cause our actual results, performance or achievements to be materially different from any future results, performance and achievements expressed or implied by these statements. These risks, uncertainties and other factors include, among others: economic conditions generally; conditions in the credit markets and changes in interest rates; the success and financial viability of vehicle manufacturers and distributors with which we hold franchises; factors affecting our goodwill and other intangible asset impairment testing; natural disasters and other adverse weather events; restrictions imposed by vehicle manufacturers; the resolution of legal and administrative proceedings; regulatory factors affecting our business; and other factors described in our news releases and filings made under the securities laws, including, among others, our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.  Forward-looking statements contained in this news release speak only as of the date of this news release, and we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances.NON-GAAP FINANCIAL MEASURES This press release and the attached financial tables contain certain non-GAAP financial measures as defined under SEC rules, such as adjusted net income and earnings per share from continuing operations, which exclude certain items disclosed in the attached financial tables. As required by SEC rules, the Company provides reconciliations of these measures to the most directly comparable GAAP measures. The Company believes that these non-GAAP financial measures improve the transparency of the Company's disclosure, provide 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 improve the period-to-period comparability of the Company's results from its core business operations.   AUTONATION, INC. UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS($ in millions, except per share data)Three Months Ended September 30,Nine Months Ended September 30,2012201120122011Revenue:New vehicle$           2,240.5$           1,881.6$           6,430.9$           5,413.3Used vehicle936.4911.92,802.62,630.6Parts and service596.8578.01,799.21,720.0Finance and insurance, net147.0121.9422.3349.6Other13.113.140.340.4Total revenue3,933.83,506.511,495.310,153.9Cost of sales:New vehicle2,095.81,743.46,006.75,013.1Used vehicle863.7845.42,571.72,407.4Parts and service345.0336.11,043.8988.4Other6.76.419.520.2Total cost of sales3,311.22,931.39,641.78,429.1Gross profit622.6575.21,853.61,724.8Selling, general and administrative expenses435.8411.41,307.31,236.7Depreciation and amortization22.920.964.962.7Franchise rights impairment--4.2-Other expenses (income), net0.2(1.2)0.6(3.1)Operating income163.7144.1476.6428.5Non-operating income (expense) items:Floorplan interest expense(11.4)(9.7)(32.9)(31.8)Other interest expense(22.2)(16.4)(65.2)(48.6)Interest income--0.20.6Other income (loss), net2.5(2.4)3.1(0.2)Income from continuing operations before income taxes132.6115.6381.8348.5Income tax provision50.744.9147.4134.2Net income from continuing operations81.970.7234.4214.3Loss from discontinued operations, net of income taxes(0.3)-(1.2)(2.3)Net income$                81.6$                70.7$              233.2$              212.0Diluted earnings (loss) per share*:Continuing operations$                0.66$                0.48$                1.85$                1.43Discontinued operations$                     -$                     -$               (0.01)$               (0.02)Net income$                0.66$                0.48$                1.84$                1.42Weighted average common shares outstanding123.4147.0126.4149.5Common shares outstanding, net of treasury stock, at September 30121.7141.4121.7141.4* Earnings per share amounts are calculated discretely and therefore may not add up to the total.  AUTONATION, INC.  UNAUDITED SUPPLEMENTARY DATA  ($ in millions, except per vehicle data) Operating HighlightsThree Months Ended September 30, Nine Months Ended September 30, 20122011$ Variance% Variance20122011$ Variance% VarianceRevenue:New vehicle$            2,240.5$        1,881.6$              358.919.1$     6,430.9$      5,413.3$       1,017.618.8  Retail used vehicle811.5780.531.04.02,442.12,293.9148.26.5  Wholesale124.9131.4(6.5)(4.9)360.5336.723.87.1Used vehicle936.4911.924.52.72,802.62,630.6172.06.5Parts and service596.8578.018.83.31,799.21,720.079.24.6Finance and insurance, net147.0121.925.120.6422.3349.672.720.8Other13.113.1-40.340.4(0.1)Total revenue$            3,933.8$        3,506.5$              427.312.2$   11,495.3$    10,153.9$       1,341.413.2Gross profit:New vehicle$               144.7$           138.2$                 6.54.7$       424.2$        400.2$           24.06.0  Retail used vehicle72.567.45.17.6226.1218.37.83.6  Wholesale0.2(0.9)1.14.84.9(0.1)Used vehicle72.766.56.29.3230.9223.27.73.4Parts and service251.8241.99.94.1755.4731.623.83.3Finance and insurance147.0121.925.120.6422.3349.672.720.8Other6.46.7(0.3)20.820.20.6Total gross profit622.6575.247.48.21,853.61,724.8128.87.5Selling, general and administrative expenses435.8411.4(24.4)(5.9)1,307.31,236.7(70.6)(5.7)Depreciation and amortization22.920.9(2.0)64.962.7(2.2)Franchise rights impairment---4.2-(4.2)Other expenses (income), net0.2(1.2)(1.4)0.6(3.1)(3.7) Operating income 163.7144.119.613.6476.6428.548.111.2Non-operating income (expense) items:Floorplan interest expense(11.4)(9.7)(1.7)(32.9)(31.8)(1.1)Other interest expense(22.2)(16.4)(5.8)(65.2)(48.6)(16.6)Interest income---0.20.6(0.4)Other income (loss), net2.5(2.4)4.93.1(0.2)3.3Income from continuing operations before income taxes$               132.6$           115.6$                17.014.7$       381.8$        348.5$           33.39.6Retail vehicle unit sales:   New 68,35056,30912,04121.4196,853163,84333,01020.1   Used45,64344,2261,4173.2137,995129,1488,8476.9113,993100,53513,45813.4334,848292,99141,85714.3Revenue per vehicle retailed:   New $             32,780$         33,416$                (636)(1.9)$      32,669$       33,040$           (371)(1.1)   Used$             17,779$         17,648$                 1310.7$      17,697$       17,762$             (65)(0.4)Gross profit per vehicle retailed:   New $               2,117$           2,454$                (337)(13.7)$       2,155$        2,443$           (288)(11.8)   Used$               1,588$           1,524$                  644.2$       1,638$        1,690$             (52)(3.1)   Finance and insurance$               1,290$           1,213$                  776.3$       1,261$        1,193$              685.7Operating Percentages Three Months Ended September 30,  Nine Months Ended September 30, 2012 (%)2011 (%)2012 (%)2011 (%)Revenue mix percentages:New vehicle57.053.755.953.3Used vehicle23.826.024.425.9Parts and service15.216.515.716.9Finance and insurance, net3.73.53.73.4Other0.30.30.30.5100.0100.0100.0100.0Gross profit mix percentages:New vehicle23.224.022.923.2Used vehicle11.711.612.512.9Parts and service40.442.140.842.4Finance and insurance23.621.222.820.3Other1.11.11.01.2100.0100.0100.0100.0Operating items as a percentage of revenue:Gross profit:   New vehicle6.57.36.67.4   Used vehicle - retail8.98.69.39.5   Parts and service42.241.942.042.5   Total15.816.416.117.0Selling, general and administrative expenses11.111.711.412.2Operating income4.24.14.14.2Operating items as a percentage of total gross profit:Selling, general and administrative expenses70.071.570.571.7Operating income26.325.125.724.8 AUTONATION, INC.  UNAUDITED SUPPLEMENTARY DATA  ($ in millions, except per vehicle data) Segment Operating HighlightsThree Months Ended September 30, Nine Months Ended September 30, 20122011$ Variance% Variance20122011$ Variance% VarianceRevenue:Domestic$           1,285.0$          1,204.4$                 80.66.7$          3,809.2$          3,445.5$            363.710.6Import1,523.31,268.8254.520.14,365.73,692.1673.618.2Premium luxury1,086.4998.288.28.83,202.02,905.4296.610.2    Total segment revenue$           3,894.7$          3,471.4$               423.312.2$        11,376.9$        10,043.0$          1,333.913.3Corporate and other39.135.14.011.4118.4110.97.56.8    Total consolidated revenue$           3,933.8$          3,506.5$               427.312.2$        11,495.3$        10,153.9$          1,341.413.2*Segment incomeDomestic$                51.9$              46.7$                   5.211.1$            155.2$            135.8$              19.414.3Import69.061.17.912.9198.1178.419.711.0Premium luxury62.953.49.517.8190.0170.819.211.2    Total segment income183.8161.222.614.0543.3485.058.312.0Corporate and other(31.5)(26.8)(4.7)(99.6)(88.3)(11.3)Add:  Floorplan interest expense11.49.71.732.931.81.1Operating income$              163.7$            144.1$                 19.613.6$            476.6$            428.5$              48.111.2* Segment income is defined as operating income less floorplan interest expenseRetail new vehicle unit sales:Domestic21,57919,7891,7909.064,08556,2767,80913.9Import35,57826,4049,17434.7100,33179,00021,33127.0Premium luxury11,19310,1161,07710.632,43728,5673,87013.568,35056,30912,04121.4196,853163,84333,01020.1Brand Mix - New Vehicle Retail Units Sold Three Months Ended September 30,  Nine Months Ended September 30, 2012 (%)2011 (%)2012 (%)2011 (%)Domestic:   Ford, Lincoln17.219.417.718.7   Chevrolet, Buick, Cadillac, GMC10.512.211.112.4   Chrysler, Jeep, Dodge3.93.53.83.2     Domestic total31.635.132.634.3Import:   Honda11.69.111.611.1   Toyota21.218.120.818.2   Nissan12.012.711.611.9   Other imports(1)7.27.06.97.1     Import total52.046.950.948.3Premium Luxury:   Mercedes-Benz7.08.17.37.7   BMW4.65.24.34.9   Lexus2.12.02.01.9   Other premium luxury (Audi, Land Rover, Porsche)(1)2.72.72.92.9     Premium Luxury total16.418.016.517.4100.0100.0100.0100.0(1)    As of March 31, 2012, we revised the basis of segmentation for our Import and Premium Luxury segments to reclassify our Audi franchises from the Import segment to the Premium Luxury segment. In connection with this change, we have reclassified historical amounts to conform to our current segment presentation. We have five Audi franchises for which we reclassified revenue of $49.5 million and segment income of $3.9 million during the three months ended September 30, 2011, and revenue of $136.9 million and segment income of $9.5 million during the nine months ended September 30, 2011. AUTONATION, INC.  UNAUDITED SUPPLEMENTARY DATA, Continued  ($ in millions, except per share data) Capital Expenditures / Stock Repurchases Three Months Ended September 30,  Nine Months Ended September 30, 2012201120122011Capital expenditures (1)$                 45.8$                    50.0$               122.8$              113.6Acquisitions$                       -$                          -$                       -$                64.2Proceeds from exercises of stock options$                 20.3$                    26.3$                 22.1$                66.3Stock repurchases:        Aggregate purchase price$                       -$                  195.9$               531.6$              365.6        Shares repurchased (in millions)-5.715.410.8Floorplan Assistance and Expense Three Months Ended September 30,  Nine Months Ended September 30, 20122011 Variance 20122011 Variance Floorplan assistance earned (included in cost of sales)$                  18.8$                    15.7$                   3.1$                54.5$              44.7$            9.8Floorplan interest expense (new vehicles)(10.9)(9.1)(1.8)(31.6)(30.0)(1.6)        Net new vehicle inventory carrying benefit$                    7.9$                      6.6$                   1.3$                22.9$              14.7$            8.2Balance Sheet and Other HighlightsSeptember 30, 2012December 31, 2011September 30, 2011Cash and cash equivalents$                   98.6$                     86.6$                 67.3Inventory$              2,142.1$                1,809.2$            1,601.7Total floorplan notes payable$              2,200.8$                1,898.8$            1,511.3Non-vehicle debt$              1,892.3$                1,647.0$            1,487.4Equity$              1,638.5$                1,894.6$            2,024.9New days supply (industry standard of selling  days, including fleet) 58 days  50 days  45 days Used days supply (trailing calendar month days) (2) 29 days  31 days  30 days Key Credit Agreement Covenant Compliance CalculationsRatio of funded indebtedness/Adjusted EBITDA 2.74x Covenantless than 3.75x Ratio of funded indebtedness including floorplan/Total capitalization including floorplan56.4%Covenantless than65.0%(1) Includes accrued construction in progress and excludes property acquired under capital leases.(2) As of December 31, 2011, we have revised our method of calculating used vehicle days supply from a dollar day supply to a unit day supply (including wholesale units). We have revised prior periods to conform to our revised method of calculation. AUTONATION, INC.  UNAUDITED SUPPLEMENTARY DATA, Continued  ($ in millions, except per share data) Comparable Basis Reconciliations*Three Months Ended September 30, Net Income  Diluted Earnings Per Share** 2012201120122011As reported$           81.6$          70.7$               0.66$              0.48Discontinued operations, net of income taxes0.3-$                     -$                   -From continuing operations, as reported81.970.7$               0.66$              0.48Adjusted $           81.9$          70.7$               0.66$              0.48Nine Months Ended September 30, Net Income  Diluted Earnings Per Share** 2012201120122011As reported$          233.2$        212.0$               1.84$              1.42Discontinued operations, net of income taxes1.22.3$               0.01$              0.02From continuing operations, as reported234.4214.3$               1.85$              1.43Franchise rights impairment2.6-$               0.02$                    -Adjusted $          237.0$        214.3$               1.88$              1.43*Please refer to the "Non-GAAP Financial Measures" section of the Press Release.**Earnings per share amounts are calculated discretely and therefore may not add up to the total. AUTONATION, INC.  UNAUDITED SAME STORE DATA  ($ in millions, except per vehicle data) Operating HighlightsThree Months Ended September 30, Nine Months Ended September 30, 20122011$ Variance% Variance20122011$ Variance% VarianceRevenue:New vehicle$           2,238.5$           1,881.6$              356.919.0$        6,390.0$        5,413.3$           976.718.0  Retail used vehicle809.1780.528.63.72,425.52,293.9131.65.7  Wholesale123.5131.4(7.9)(6.0)351.1336.714.44.3Used vehicle932.6911.920.72.32,776.62,630.6146.05.6Parts and service595.3578.017.33.01,789.41,720.069.44.0Finance and insurance, net146.7121.924.820.3419.9349.670.320.1Other13.013.1(0.1)40.040.4(0.4)Total revenue$           3,926.1$           3,506.5$              419.612.0$       11,415.9$       10,153.9$        1,262.012.4Gross profit:New vehicle$              144.6$              138.2$                 6.44.6$           421.5$           400.2$             21.35.3  Retail used vehicle72.267.44.87.1224.5218.36.22.8  Wholesale0.2(0.9)1.14.84.9(0.1)Used vehicle72.466.55.98.9229.3223.26.12.7Parts and service251.2241.99.33.8751.1731.619.52.7Finance and insurance146.7121.924.820.3419.9349.670.320.1Other6.36.7(0.4)20.620.20.4Total gross profit$              621.2$              575.2$               46.08.0$        1,842.4$        1,724.8$           117.66.8Retail vehicle unit sales:   New 68,25156,30911,94221.2195,406163,84331,56319.3   Used45,43444,2261,2082.7136,958129,1487,8106.0113,685100,53513,15013.1332,364292,99139,37313.4Revenue per vehicle retailed:   New $            32,798$            33,416$                (618)(1.8)$         32,701$         33,040$             (339)(1.0)   Used$            17,808$            17,648$                 1600.9$         17,710$         17,762$               (52)(0.3)Gross profit per vehicle retailed:   New $              2,119$              2,454$               (335)(13.7)$           2,157$           2,443$             (286)(11.7)   Used$              1,589$              1,524$                  654.3$           1,639$           1,690$               (51)(3.0)   Finance and insurance$              1,290$              1,213$                  776.3$           1,263$           1,193$                705.9Operating Percentages Three Months Ended September 30,  Nine Months Ended September 30, 2012 (%)2011 (%)2012 (%)2011 (%)Revenue mix percentages:New vehicle57.053.756.053.3Used vehicle23.826.024.325.9Parts and service15.216.515.716.9Finance and insurance, net3.73.53.73.4Other0.30.30.30.5100.0100.0100.0100.0Gross profit mix percentages:New vehicle23.324.022.923.2Used vehicle11.711.612.412.9Parts and service40.442.140.842.4Finance and insurance23.621.222.820.3Other1.01.11.11.2100.0100.0100.0100.0Operating items as a percentage of revenue:Gross Profit:   New vehicle6.57.36.67.4   Used vehicle - retail8.98.69.39.5   Parts and service42.241.942.042.5   Total15.816.416.117.0 SOURCE AutoNation, Inc.For further information: Marc Cannon, +1-954-769-3146, cannonm@autonation.com; or Investor contacts: Cheryl Scully, +1-954-769-7734, scullyc@autonation.com; or Kate Keyser-Pearlman, +1-954-769-7342, keyserk1@autonation.com