Thursday January 29, 6:45 am ET
- In the fourth quarter, AutoNation remained profitable in distressed industry environment
- AutoNation exceeds cost savings objectives by 100%, with an annualized reduction now of $200 million
- Full year debt reduction of approximately three-quarters of a billion dollars
- Announces manufacturer consent agreements relating to largest stockholder, ESL Investments, Inc.
FORT LAUDERDALE, Fla., Jan. 29 /PRNewswire-FirstCall/ -- AutoNation, Inc. (NYSE: AN - News), America's largest automotive retailer, today reported 2008 fourth quarter net income from continuing operations of $70 million, or $0.40 per share, compared to $51 million, or $0.28 per share, in the prior year. In the quarter, the Company had a net benefit from certain items of $48 million or $0.28 per share, including a net positive tax adjustment of $0.18 per share and a gain on the repurchase of the Company's senior notes of $0.14 per share. Additionally, other items had an unfavorable impact of $0.04 per share. After adjusting for these items as disclosed in the attached financial tables, net income from continuing operations for the 2008 fourth quarter was $22 million or $0.12 per share.
Fourth quarter 2008 revenue totaled $2.7 billion, compared to $4.1 billion in the year-ago period, driven primarily by lower vehicle sales. In the fourth quarter, total U.S. industry new vehicle retail unit sales declined 49%, based on CNW Research data. In comparison, in the fourth quarter AutoNation's new vehicle unit sales declined 40%.
Commenting on the fourth quarter, Mike Jackson, Chairman and Chief Executive Officer, said, "The fourth quarter was negatively impacted by the credit panic triggered on September 15 by the bankruptcy of Lehman Brothers. Automotive retail sales collapsed from one day to the next as credit for our customers was withdrawn from the market. This panic continued to erode consumer confidence and accelerated the decline in the U.S. economy and auto retail market. In the fourth quarter, AutoNation continued to remain profitable even with a U.S. SAAR near 10 million new vehicle units, a 27 year low." Jackson also stated, "When we saw the auto retail market deteriorate in the beginning of 2008, AutoNation began to identify cost reduction opportunities. In July we announced our plan to reduce cost by $100 million on an annual run rate basis and have successfully achieved this goal - a significant accomplishment in its own right. With the collapse of sales in the second half of September, additional actions became necessary in the fourth quarter to further reduce costs. We have successfully implemented additional cost reduction actions totaling approximately $100 million on an annualized run rate basis. Taken together, AutoNation's total annualized cost savings of $200 million demonstrates our Company's ability to effectively address the challenges created by the credit panic."
Jackson added, "Despite the severely depressed sales environment, AutoNation continues to generate solid cash flow which allowed the Company to reduce its non-vehicle debt by $155 million during the quarter and close the fourth quarter with a strong cash position of $110 million. Full-year debt reduction totals approximately three-quarters of a billion dollars, consisting of $517 million of non-vehicle debt and $195 million of vehicle floor plan debt. As a result, the Company remained in compliance with all financial covenants in its debt agreements as of December 31, 2008 with a leverage ratio of 2.45 versus 2.78 a year ago."
Looking forward, Jackson also stated, "We agree with industry projections that the 2009 SAAR will be in the range of 11 million new vehicle units with obvious weakness in the first half of the year. In this environment, we believe we will be able to manage within all financial covenants."
AutoNation provides additional detail on its 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 segment is comprised of stores that sell vehicles manufactured primarily by Toyota, Honda, and Nissan; and the Premium Luxury segment is comprised of stores that sell vehicles manufactured primarily by Mercedes, BMW, and Lexus.
Segment Results for the Quarter
-- Domestic -Domestic segment income (1) was $14 million compared to year-ago segment income of $36 million. Fourth quarter Domestic retail new vehicle unit sales declined 44%. In comparison, U.S. industry Domestic retail new vehicle unit sales declined 52% according to CNW Research.
-- Import -Import segment income was $20 million compared to year-ago segment income of $52 million. Fourth quarter Import retail new vehicle unit sales declined 39%. In comparison, U.S. industry Import new vehicle retail unit sales declined 44% according to CNW Research.
-- Premium Luxury -Premium Luxury segment income was $39 million compared to year-ago segment income of $59 million. Fourth quarter Premium Luxury retail new vehicle unit sales declined 35%. In comparison, U.S. industry Premium Luxury retail new vehicle unit sales declined 34% according to CNW Research.
(1) Segment income is defined as operating income less floor plan interest expense
For the full year ended December 31, 2008, the Company reported net loss from continuing operations of $1.23 billion or $6.89 per share, compared to net income from continuing operations of $289 million or $1.44 per share in the prior year. After adjusting for the impairment charges and certain other items as disclosed in the attached financial tables, net income from continuing operations for the full year ended December 31, 2008 was $181 million or $1.02 per share, compared to $277 million or $1.38 per share in the prior year. The Company's revenue for the year ended December 31, 2008 totaled $14.1 billion, down 19% compared to $17.3 billion in the prior year.
Manufacturer Consent Agreements Relating to Largest Stockholder, ESL Investments, Inc.
The Company also announced that it has obtained consents under its framework agreements with manufacturers in order to eliminate any potentially adverse consequences under such agreements in the event that ESL Investments, Inc. (with its affiliates, "ESL"), the Company's largest stockholder, were to acquire over 50% of the Company's common stock. ESL currently owns approximately 45% of the Company's outstanding common stock.
"ESL has been a long-term significant stockholder of the Company," said Mike Jackson. "We are pleased to have entered into the manufacturer consents that provide the flexibility for ESL to increase its economic stake in the Company without triggering any potentially adverse consequences under the framework agreements, while also providing for appropriate governance arrangements, including a commitment to maintain an independent Board of Directors. We appreciate ESL's belief in the Company and its management over the past nine years and look forward to ESL's continued involvement in helping us to build a great company and drive long-term stockholder value."
The consents contain various terms and conditions, including that should ESL's percentage ownership of Company common stock exceed 50%, ESL would vote its shares owned above 50% in the same proportion as shares unaffiliated with ESL are actually voted and that a majority of AutoNation's directors shall be independent of AutoNation and ESL. In addition, pursuant to a separate agreement between AutoNation and ESL (the "ESL Voting Agreement"), ESL agreed to further limit its vote to 45%, with shares owned by ESL in excess of 45% voted in the same proportion as shares unaffiliated with ESL are actually voted. The ESL Voting Agreement expires in one year, unless extended by mutual agreement of the parties. Additional details are included in the Current Report on Form 8-K filed with the Securities and Exchange Commission today.
The fourth quarter conference call may be accessed at 11:00 a.m. Eastern Time today by phone at 888-769-8515 (pass code: AutoNation) 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 12:00 (noon) p.m. Eastern Time January 29, 2009 through February 5, 2009 by calling 800-867-1926 (pass code: 75300).
About AutoNation, Inc.
AutoNation, Inc., headquartered in Fort Lauderdale, Fla., is America's largest automotive retailer and has been named America's Most Admired Automotive Retailer by FORTUNE Magazine in five of the last seven years. A component of the Standard and Poor's 500 Index, AutoNation owns and operates 302 new vehicle franchises in 15 states. For additional information, please visit http://corp.AutoNation.com or www.AutoNation.com, where more than 80,000 vehicles are available for sale along with AutoNation's E-Vehicle program.