AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31,
2020
|
ASSETS
|
|
|
|
CURRENT ASSETS:
|
|
|
|
Cash and cash equivalents
|
$
|
350.0
|
|
|
$
|
569.6
|
|
Receivables, net
|
883.5
|
|
|
845.2
|
|
Inventory
|
2,254.6
|
|
|
2,598.5
|
|
Other current assets
|
178.7
|
|
|
139.4
|
|
Total Current Assets
|
3,666.8
|
|
|
4,152.7
|
|
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $1.7 billion and $1.7 billion, respectively
|
3,107.1
|
|
|
3,138.1
|
|
OPERATING LEASE ASSETS
|
302.5
|
|
|
309.5
|
|
GOODWILL
|
1,184.8
|
|
|
1,185.0
|
|
OTHER INTANGIBLE ASSETS, NET
|
521.2
|
|
|
521.5
|
|
OTHER ASSETS
|
485.1
|
|
|
580.4
|
|
Total Assets
|
$
|
9,267.5
|
|
|
$
|
9,887.2
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
Vehicle floorplan payable - trade
|
$
|
1,285.2
|
|
|
$
|
1,541.7
|
|
Vehicle floorplan payable - non-trade
|
1,012.8
|
|
|
1,218.2
|
|
Accounts payable
|
413.2
|
|
|
335.2
|
|
|
|
|
|
Current maturities of long-term debt
|
7.1
|
|
|
309.2
|
|
Accrued payroll and benefits
|
231.4
|
|
|
225.8
|
|
Other current liabilities
|
659.5
|
|
|
535.8
|
|
Total Current Liabilities
|
3,609.2
|
|
|
4,165.9
|
|
LONG-TERM DEBT, NET OF CURRENT MATURITIES
|
1,791.3
|
|
|
1,792.6
|
|
NONCURRENT OPERATING LEASE LIABILITIES
|
279.1
|
|
|
286.5
|
|
DEFERRED INCOME TAXES
|
76.3
|
|
|
95.9
|
|
OTHER LIABILITIES
|
317.7
|
|
|
310.6
|
|
COMMITMENTS AND CONTINGENCIES (Note 12)
|
|
|
|
SHAREHOLDERS’ EQUITY:
|
|
|
|
|
|
|
|
Common stock, par value $0.01 per share; 1,500,000,000 shares authorized; 102,562,149 shares issued at March 31, 2021, and December 31, 2020, including shares held in treasury
|
1.0
|
|
|
1.0
|
|
Additional paid-in capital
|
41.0
|
|
|
53.1
|
|
Retained earnings
|
4,308.8
|
|
|
4,069.4
|
|
Treasury stock, at cost; 22,088,073 and 19,078,620 shares held, respectively
|
(1,156.9)
|
|
|
(887.8)
|
|
Total Shareholders’ Equity
|
3,193.9
|
|
|
3,235.7
|
|
Total Liabilities and Shareholders’ Equity
|
$
|
9,267.5
|
|
|
$
|
9,887.2
|
|
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
2020
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
New vehicle
|
$
|
2,982.3
|
|
|
$
|
2,281.9
|
|
|
|
|
|
Used vehicle
|
1,749.1
|
|
|
1,248.7
|
|
|
|
|
|
Parts and service
|
851.0
|
|
|
876.3
|
|
|
|
|
|
Finance and insurance, net
|
313.0
|
|
|
235.8
|
|
|
|
|
|
Other
|
8.4
|
|
|
24.3
|
|
|
|
|
|
TOTAL REVENUE
|
5,903.8
|
|
|
4,667.0
|
|
|
|
|
|
Cost of sales:
|
|
|
|
|
|
|
|
New vehicle
|
2,792.3
|
|
|
2,185.5
|
|
|
|
|
|
Used vehicle
|
1,608.9
|
|
|
1,157.7
|
|
|
|
|
|
Parts and service
|
462.0
|
|
|
487.5
|
|
|
|
|
|
Other
|
7.8
|
|
|
23.1
|
|
|
|
|
|
TOTAL COST OF SALES (excluding depreciation shown below)
|
4,871.0
|
|
|
3,853.8
|
|
|
|
|
|
Gross profit:
|
|
|
|
|
|
|
|
New vehicle
|
190.0
|
|
|
96.4
|
|
|
|
|
|
Used vehicle
|
140.2
|
|
|
91.0
|
|
|
|
|
|
Parts and service
|
389.0
|
|
|
388.8
|
|
|
|
|
|
Finance and insurance
|
313.0
|
|
|
235.8
|
|
|
|
|
|
Other
|
0.6
|
|
|
1.2
|
|
|
|
|
|
TOTAL GROSS PROFIT
|
1,032.8
|
|
|
813.2
|
|
|
|
|
|
Selling, general, and administrative expenses
|
647.9
|
|
|
600.7
|
|
|
|
|
|
Depreciation and amortization
|
47.9
|
|
|
48.1
|
|
|
|
|
|
Goodwill impairment
|
—
|
|
|
318.3
|
|
|
|
|
|
Franchise rights impairment
|
—
|
|
|
57.5
|
|
|
|
|
|
Other expense, net
|
0.1
|
|
|
7.9
|
|
|
|
|
|
OPERATING INCOME (LOSS)
|
336.9
|
|
|
(219.3)
|
|
|
|
|
|
Non-operating income (expense) items:
|
|
|
|
|
|
|
|
Floorplan interest expense
|
(9.4)
|
|
|
(25.5)
|
|
|
|
|
|
Other interest expense
|
(21.2)
|
|
|
(23.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss), net
|
11.0
|
|
|
(2.9)
|
|
|
|
|
|
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
317.3
|
|
|
(271.2)
|
|
|
|
|
|
Income tax provision (benefit)
|
77.8
|
|
|
(39.0)
|
|
|
|
|
|
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
|
239.5
|
|
|
(232.2)
|
|
|
|
|
|
Loss from discontinued operations, net of income taxes
|
(0.1)
|
|
|
(0.1)
|
|
|
|
|
|
NET INCOME (LOSS)
|
$
|
239.4
|
|
|
$
|
(232.3)
|
|
|
|
|
|
BASIC EARNINGS (LOSS) PER SHARE:
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
2.88
|
|
|
$
|
(2.58)
|
|
|
|
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Net income (loss)
|
$
|
2.88
|
|
|
$
|
(2.58)
|
|
|
|
|
|
Weighted average common shares outstanding
|
83.1
|
|
|
90.0
|
|
|
|
|
|
DILUTED EARNINGS (LOSS) PER SHARE:
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
2.85
|
|
|
$
|
(2.58)
|
|
|
|
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Net income (loss)
|
$
|
2.85
|
|
|
$
|
(2.58)
|
|
|
|
|
|
Weighted average common shares outstanding
|
83.9
|
|
|
90.0
|
|
|
|
|
|
COMMON SHARES OUTSTANDING, net of treasury stock, at period end
|
80.5
|
|
|
87.2
|
|
|
|
|
|
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In millions, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Treasury
Stock
|
|
Total
|
|
Shares
|
|
Amount
|
|
|
|
|
BALANCE AT DECEMBER 31, 2020
|
102,562,149
|
|
|
$
|
1.0
|
|
|
$
|
53.1
|
|
|
$
|
4,069.4
|
|
|
$
|
(887.8)
|
|
|
$
|
3,235.7
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
239.4
|
|
|
—
|
|
|
239.4
|
|
Repurchases of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(306.1)
|
|
|
(306.1)
|
|
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
20.8
|
|
|
—
|
|
|
—
|
|
|
20.8
|
|
Shares awarded under stock-based compensation plans, net of shares withheld for taxes
|
—
|
|
|
—
|
|
|
(32.9)
|
|
|
—
|
|
|
37.0
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT MARCH 31, 2021
|
102,562,149
|
|
|
$
|
1.0
|
|
|
$
|
41.0
|
|
|
$
|
4,308.8
|
|
|
$
|
(1,156.9)
|
|
|
$
|
3,193.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Treasury
Stock
|
|
Total
|
|
Shares
|
|
Amount
|
|
|
|
|
BALANCE AT DECEMBER 31, 2019
|
102,562,149
|
|
|
$
|
1.0
|
|
|
$
|
35.9
|
|
|
$
|
3,688.3
|
|
|
$
|
(563.1)
|
|
|
$
|
3,162.1
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(232.3)
|
|
|
—
|
|
|
(232.3)
|
|
Repurchases of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(80.0)
|
|
|
(80.0)
|
|
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
4.5
|
|
|
—
|
|
|
—
|
|
|
4.5
|
|
Shares awarded under stock-based compensation plans, net of shares withheld for taxes
|
—
|
|
|
—
|
|
|
(21.7)
|
|
|
—
|
|
|
14.8
|
|
|
(6.9)
|
|
Cumulative effect of change in accounting principle - current expected credit losses
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.5)
|
|
|
—
|
|
|
(0.5)
|
|
BALANCE AT MARCH 31, 2020
|
102,562,149
|
|
|
$
|
1.0
|
|
|
$
|
18.7
|
|
|
$
|
3,455.5
|
|
|
$
|
(628.3)
|
|
|
$
|
2,846.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
|
2021
|
|
2020
|
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
|
|
|
|
Net income (loss)
|
$
|
239.4
|
|
|
$
|
(232.3)
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
Loss from discontinued operations
|
0.1
|
|
|
0.1
|
|
Depreciation and amortization
|
47.9
|
|
|
48.1
|
|
Amortization of debt issuance costs and accretion of debt discounts
|
1.1
|
|
|
1.2
|
|
Stock-based compensation expense
|
20.8
|
|
|
4.5
|
|
Deferred income tax benefit
|
(19.6)
|
|
|
(68.6)
|
|
Net gain related to business/property dispositions
|
(0.7)
|
|
|
—
|
|
Goodwill impairment
|
—
|
|
|
318.3
|
|
Franchise rights impairment
|
—
|
|
|
57.5
|
|
Non-cash impairment charges
|
1.0
|
|
|
8.5
|
|
Gain on equity investment
|
(7.5)
|
|
|
—
|
|
Other
|
(3.1)
|
|
|
3.6
|
|
(Increase) decrease, net of effects from business acquisitions and divestitures:
|
|
|
|
Receivables
|
(38.3)
|
|
|
403.4
|
|
Inventory
|
343.9
|
|
|
(371.3)
|
|
Other assets
|
(8.2)
|
|
|
(3.5)
|
|
Increase (decrease), net of effects from business acquisitions and divestitures:
|
|
|
|
Vehicle floorplan payable - trade
|
(256.5)
|
|
|
76.6
|
|
Accounts payable
|
76.8
|
|
|
(64.1)
|
|
Other liabilities
|
129.3
|
|
|
(68.3)
|
|
Net cash provided by continuing operations
|
526.4
|
|
|
113.7
|
|
Net cash used in discontinued operations
|
(0.1)
|
|
|
—
|
|
Net cash provided by operating activities
|
526.3
|
|
|
113.7
|
|
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
|
|
|
|
Purchases of property and equipment
|
(41.3)
|
|
|
(42.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance recoveries on property and equipment
|
—
|
|
|
1.2
|
|
Cash received from business divestitures, net of cash relinquished
|
1.9
|
|
|
—
|
|
Cash used in business acquisitions, net of cash acquired
|
—
|
|
|
(0.4)
|
|
Proceeds from the sale of equity securities
|
109.4
|
|
|
—
|
|
Investment in equity securities
|
—
|
|
|
(50.0)
|
|
Other
|
0.6
|
|
|
(0.8)
|
|
Net cash provided by (used in) continuing operations
|
70.6
|
|
|
(92.2)
|
|
Net cash used in discontinued operations
|
—
|
|
|
—
|
|
Net cash provided by (used in) investing activities
|
70.6
|
|
|
(92.2)
|
|
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
|
2021
|
|
2020
|
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
|
|
|
|
Repurchases of common stock
|
(310.7)
|
|
|
(78.9)
|
|
Payment of 3.35% Senior Notes due 2021
|
(300.0)
|
|
|
—
|
|
Payment of 5.5% Senior Notes due 2020
|
—
|
|
|
(350.0)
|
|
Proceeds from revolving credit facility
|
—
|
|
|
790.0
|
|
|
|
|
|
Net payments of commercial paper
|
—
|
|
|
(30.0)
|
|
Payment of debt issuance costs
|
—
|
|
|
(6.1)
|
|
Net proceeds from (payments of) vehicle floorplan payable - non-trade
|
(206.1)
|
|
|
30.1
|
|
Payments of other debt obligations
|
(3.8)
|
|
|
(1.1)
|
|
Proceeds from the exercise of stock options
|
21.2
|
|
|
1.0
|
|
Payments of tax withholdings for stock-based awards
|
(17.1)
|
|
|
(7.9)
|
|
|
|
|
|
Net cash provided by (used in) continuing operations
|
(816.5)
|
|
|
347.1
|
|
Net cash used in discontinued operations
|
—
|
|
|
—
|
|
Net cash provided by (used in) financing activities
|
(816.5)
|
|
|
347.1
|
|
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
(219.6)
|
|
|
368.6
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at beginning of period
|
569.7
|
|
|
42.5
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at end of period
|
$
|
350.1
|
|
|
$
|
411.1
|
|
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share data)
1.INTERIM FINANCIAL STATEMENTS
Business and Basis of Presentation
AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of March 31, 2021, we owned and operated 315 new vehicle franchises from 230 stores located in the United States, predominantly in major metropolitan markets in the Sunbelt region. Our stores, which we believe include some of the most recognizable and well-known in our key markets, sell 32 different new vehicle brands. The core brands of new vehicles that we sell, representing approximately 90% of the new vehicles that we sold during the three months ended March 31, 2021, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, Mercedes-Benz, FCA US, BMW, and Volkswagen (including Audi and Porsche). As of March 31, 2021, we also owned and operated 73 AutoNation-branded collision centers, 5 AutoNation USA used vehicle stores, 4 automotive auction operations, and 3 parts distribution centers.
We offer a diversified range of automotive products and services, including new vehicles, used vehicles, “parts and service,” which includes automotive repair and maintenance services as well as wholesale parts and collision businesses, and automotive “finance and insurance” products, which include vehicle service and other protection products, as well as the arranging of financing for vehicle purchases through third-party finance sources. For convenience, the terms “AutoNation,” “Company,” and “we” are used to refer collectively to AutoNation, Inc. and its subsidiaries, unless otherwise required by the context. Our dealership operations are conducted by our subsidiaries.
The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of AutoNation, Inc. and its subsidiaries; intercompany accounts and transactions have been eliminated. The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Additionally, operating results for interim periods are not necessarily indicative of the results that can be expected for a full year. The Unaudited Condensed Consolidated Financial Statements herein should be read in conjunction with our audited Consolidated Financial Statements and notes thereto included within our most recent Annual Report on Form 10-K. These Unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to fairly state, in all material respects, our financial position and results of operations for the periods presented.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ materially from these estimates. We periodically evaluate estimates and assumptions used in the preparation of the financial statements and make changes on a prospective basis when adjustments are necessary. Such estimates and assumptions affect, among other things, our goodwill, indefinite-lived intangible asset, and long-lived asset valuations; inventory valuation; equity investment valuation; assets held for sale; accruals for chargebacks against revenue recognized from the sale of finance and insurance products; accruals related to self-insurance programs; certain legal proceedings; assessment of the annual income tax expense; valuation of deferred income taxes and income tax contingencies; the allowance for expected credit losses; and measurement of performance-based compensation costs.
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. REVENUE RECOGNITION
Disaggregation of Revenue
The significant majority of our revenue is from contracts with customers. Taxes assessed by governmental authorities that are directly imposed on revenue transactions are excluded from revenue. In the following tables, revenue is disaggregated by major lines of goods and services and timing of transfer of goods and services. We have determined that these categories depict how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors. The tables below also include a reconciliation of the disaggregated revenue to reportable segment revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
|
Domestic
|
|
Import
|
|
Premium Luxury
|
|
Corporate and other(1)
|
|
Total
|
Major Goods/Service Lines
|
|
|
|
|
|
|
|
|
|
|
New vehicle
|
|
$
|
935.4
|
|
|
$
|
958.0
|
|
|
$
|
1,088.9
|
|
|
$
|
—
|
|
|
$
|
2,982.3
|
|
Used vehicle
|
|
563.7
|
|
|
484.7
|
|
|
642.3
|
|
|
58.4
|
|
|
1,749.1
|
|
Parts and service
|
|
234.1
|
|
|
214.1
|
|
|
285.2
|
|
|
117.6
|
|
|
851.0
|
|
Finance and insurance, net
|
|
109.3
|
|
|
109.1
|
|
|
86.8
|
|
|
7.8
|
|
|
313.0
|
|
Other
|
|
4.2
|
|
|
3.7
|
|
|
0.3
|
|
|
0.2
|
|
|
8.4
|
|
|
|
$
|
1,846.7
|
|
|
$
|
1,769.6
|
|
|
$
|
2,103.5
|
|
|
$
|
184.0
|
|
|
$
|
5,903.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Revenue Recognition
|
|
|
|
|
|
|
|
|
|
|
Goods and services transferred at a point in time
|
|
$
|
1,681.6
|
|
|
$
|
1,604.1
|
|
|
$
|
1,863.6
|
|
|
$
|
107.3
|
|
|
$
|
5,256.6
|
|
Goods and services transferred over time(2)
|
|
165.1
|
|
|
165.5
|
|
|
239.9
|
|
|
76.7
|
|
|
647.2
|
|
|
|
$
|
1,846.7
|
|
|
$
|
1,769.6
|
|
|
$
|
2,103.5
|
|
|
$
|
184.0
|
|
|
$
|
5,903.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
|
Domestic
|
|
Import
|
|
Premium Luxury
|
|
Corporate and other(1)
|
|
Total
|
Major Goods/Service Lines
|
|
|
|
|
|
|
|
|
|
|
New vehicle
|
|
$
|
738.9
|
|
|
$
|
733.9
|
|
|
$
|
809.1
|
|
|
$
|
—
|
|
|
$
|
2,281.9
|
|
Used vehicle
|
|
404.6
|
|
|
334.5
|
|
|
467.3
|
|
|
42.3
|
|
|
1,248.7
|
|
Parts and service
|
|
235.6
|
|
|
207.5
|
|
|
277.4
|
|
|
155.8
|
|
|
876.3
|
|
Finance and insurance, net
|
|
83.1
|
|
|
84.0
|
|
|
63.0
|
|
|
5.7
|
|
|
235.8
|
|
Other
|
|
21.3
|
|
|
2.2
|
|
|
—
|
|
|
0.8
|
|
|
24.3
|
|
|
|
$
|
1,483.5
|
|
|
$
|
1,362.1
|
|
|
$
|
1,616.8
|
|
|
$
|
204.6
|
|
|
$
|
4,667.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Revenue Recognition
|
|
|
|
|
|
|
|
|
|
|
Goods and services transferred at a point in time
|
|
$
|
1,311.4
|
|
|
$
|
1,200.5
|
|
|
$
|
1,380.2
|
|
|
$
|
109.4
|
|
|
$
|
4,001.5
|
|
Goods and services transferred over time(2)
|
|
172.1
|
|
|
161.6
|
|
|
236.6
|
|
|
95.2
|
|
|
665.5
|
|
|
|
$
|
1,483.5
|
|
|
$
|
1,362.1
|
|
|
$
|
1,616.8
|
|
|
$
|
204.6
|
|
|
$
|
4,667.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) “Corporate and other” is comprised of our other businesses, including collision centers, auction operations, AutoNation USA used vehicle stores, and parts distribution centers.
|
(2) Represents revenue recognized during the period for automotive repair and maintenance services.
|
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Transaction Price Allocated to Remaining Performance Obligations
We sell a vehicle maintenance program (the AutoNation Vehicle Care Program or “VCP”) under which a customer purchases a specific number of maintenance services to be redeemed at an AutoNation location over a five-year term from the date of purchase. We satisfy our performance obligations related to this program and recognize revenue as the maintenance services are rendered, since the customer benefits when we have completed the maintenance service.
The following table includes estimated revenue expected to be recognized in the future related to VCP performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Expected to Be Recognized by Period
|
|
|
Total
|
|
Next 12 Months
|
|
13 - 36 Months
|
|
37 - 60 Months
|
Revenue expected to be recognized on VCP contracts sold as of period end
|
|
$
|
88.5
|
|
|
$
|
32.3
|
|
|
$
|
42.3
|
|
|
$
|
13.9
|
|
As a practical expedient, since automotive repair and maintenance services are performed within one year or less, we do not disclose estimated revenue expected to be recognized in the future for automotive repair and maintenance performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period or when we expect to recognize such revenue.
Contract Assets and Liabilities
When the timing of our provision of goods or services is different from the timing of payments made by our customers, we recognize either a contract asset (performance precedes contractual due date) or a contract liability (customer payment precedes performance). Contract assets primarily relate to our right to consideration for work in process not yet billed at the reporting date associated with automotive repair and maintenance services, as well as our estimate of variable consideration that has been included in the transaction price for certain finance and insurance products (retrospective commissions). These contract assets are reclassified to receivables when the right to consideration becomes unconditional. Contract liabilities primarily relate to upfront payments received from customers for the sale of VCP contracts for which our performance obligations are satisfied, and revenue is recognized, as each underlying service of the multi-year contract is complete during the contract term.
Our receivables from contracts with customers are included in Receivables, net, our current contract asset is included in Other Current Assets, our long-term contract asset is included in Other Assets, our current contract liability is included in Other Current Liabilities, and our long-term contract liability is included in Other Liabilities in our Unaudited Condensed Consolidated Balance Sheets.
The following table provides the balances of our receivables from contracts with customers and our current and long-term contract assets and contract liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
Receivables from contracts with customers, net
|
$
|
650.3
|
|
|
$
|
595.0
|
|
Contract Asset (Current)
|
$
|
18.6
|
|
|
$
|
25.7
|
|
Contract Asset (Long-Term)
|
$
|
5.3
|
|
|
$
|
10.2
|
|
Contract Liability (Current)
|
$
|
32.6
|
|
|
$
|
32.5
|
|
Contract Liability (Long-Term)
|
$
|
56.3
|
|
|
$
|
56.0
|
|
The change in the balances of our contract assets and contract liabilities primarily result from the timing differences between our performance and the customer’s payment, as well as changes in the estimated transaction price related to variable consideration that was constrained for performance obligations satisfied in previous periods. The following table presents
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
revenue recognized during the period from amounts included in the contract liability balance at the beginning of the period and performance obligations satisfied in previous periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
2020
|
|
|
|
|
Amounts included in contract liability at the beginning of the period
|
$
|
8.7
|
|
|
$
|
8.5
|
|
|
|
|
|
Performance obligations satisfied in previous periods
|
$
|
5.4
|
|
|
$
|
—
|
|
|
|
|
|
Other significant changes include contract assets reclassified to receivables of $17.6 million for the three months ended March 31, 2021, and $14.5 million for the three months ended March 31, 2020.
3.EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period, including vested restricted stock unit (“RSU”) awards. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding, noted above, adjusted for the dilutive effect of stock options and unvested RSU awards. For the three months ended March 31, 2020, stock options and unvested RSU awards were not included in the computation of diluted loss per share because we reported a net loss from continuing operations for this period, and the effect of their inclusion would be anti-dilutive.
The following table presents the calculation of basic and diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
2020
|
|
|
|
|
Net income (loss) from continuing operations
|
$
|
239.5
|
|
|
$
|
(232.2)
|
|
|
|
|
|
Loss from discontinued operations, net of income taxes
|
(0.1)
|
|
|
(0.1)
|
|
|
|
|
|
Net income (loss)
|
$
|
239.4
|
|
|
$
|
(232.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding
|
83.1
|
|
|
90.0
|
|
|
|
|
|
Dilutive effect of stock options and unvested RSUs
|
0.8
|
|
|
—
|
|
|
|
|
|
Diluted weighted average common shares outstanding
|
83.9
|
|
|
90.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share amounts(1):
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
2.88
|
|
|
$
|
(2.58)
|
|
|
|
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Net income (loss)
|
$
|
2.88
|
|
|
$
|
(2.58)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share amounts(1):
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
2.85
|
|
|
$
|
(2.58)
|
|
|
|
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Net income (loss)
|
$
|
2.85
|
|
|
$
|
(2.58)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Earnings (loss) per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding.
|
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
A summary of anti-dilutive equity instruments excluded from the computation of diluted earnings (loss) per share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
2020
|
|
|
|
|
Anti-dilutive equity instruments excluded from the computation of diluted earnings (loss) per share
|
—
|
|
|
3.0
|
|
|
|
|
|
4.RECEIVABLES, NET
The components of receivables, net of allowances for expected credit losses, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31,
2020
|
Contracts-in-transit and vehicle receivables
|
$
|
495.5
|
|
|
$
|
445.8
|
|
Trade receivables
|
147.7
|
|
|
138.0
|
|
Manufacturer receivables
|
186.7
|
|
|
210.0
|
|
|
|
|
|
Other
|
57.3
|
|
|
55.1
|
|
|
887.2
|
|
|
848.9
|
|
Less: allowances for expected credit losses
|
(3.7)
|
|
|
(3.7)
|
|
Receivables, net
|
$
|
883.5
|
|
|
$
|
845.2
|
|
Contracts-in-transit and vehicle receivables primarily represent receivables from financial institutions for the portion of the vehicle sales price financed by our customers. Trade receivables represent amounts due for parts and services that have been delivered or sold, excluding amounts due from manufacturers, as well as receivables from finance organizations for commissions on the sale of finance and insurance products. Manufacturer receivables represent amounts due from manufacturers for holdbacks, rebates, incentives, floorplan assistance, and warranty claims. We evaluate our receivables for collectability based on past collection experience, current information, and reasonable and supportable forecasts.
5.INVENTORY AND VEHICLE FLOORPLAN PAYABLE
The components of inventory are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31,
2020
|
New vehicles
|
$
|
1,363.6
|
|
|
$
|
1,761.9
|
|
Used vehicles
|
698.8
|
|
|
648.4
|
|
Parts, accessories, and other
|
192.2
|
|
|
188.2
|
|
Inventory
|
$
|
2,254.6
|
|
|
$
|
2,598.5
|
|
The components of vehicle floorplan payable are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31,
2020
|
Vehicle floorplan payable - trade
|
$
|
1,285.2
|
|
|
$
|
1,541.7
|
|
Vehicle floorplan payable - non-trade
|
1,012.8
|
|
|
1,218.2
|
|
Vehicle floorplan payable
|
$
|
2,298.0
|
|
|
$
|
2,759.9
|
|
Vehicle floorplan payable-trade reflects amounts borrowed to finance the purchase of specific new and, to a lesser extent, used vehicle inventories with the corresponding manufacturers’ captive finance subsidiaries (“trade lenders”). Vehicle floorplan payable-non-trade represents amounts borrowed to finance the purchase of specific new and, to a lesser extent, used vehicle inventories with non-trade lenders, as well as amounts borrowed under our secured used vehicle floorplan facilities. Changes in
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
vehicle floorplan payable-trade are reported as operating cash flows and changes in vehicle floorplan payable-non-trade are reported as financing cash flows in the accompanying Unaudited Condensed Consolidated Statements of Cash Flows.
Our inventory costs are generally reduced by manufacturer holdbacks, incentives, floorplan assistance, and non-reimbursement-based manufacturer advertising rebates, while the related vehicle floorplan payables are reflective of the gross cost of the vehicle. The vehicle floorplan payables, as shown in the above table, will generally also be higher than the inventory cost due to the timing of the sale of a vehicle and payment of the related liability.
Vehicle floorplan facilities are due on demand, but in the case of new vehicle inventories, are generally paid within several business days after the related vehicles are sold. Vehicle floorplan facilities are primarily collateralized by vehicle inventories and related receivables.
Our new vehicle floorplan facilities utilize LIBOR-based interest rates, which averaged 1.7% for the three months ended March 31, 2021, and 2.8% for the three months ended March 31, 2020. At March 31, 2021, the aggregate capacity under our new vehicle floorplan facilities to finance our new vehicle inventory was approximately $4.7 billion, of which $1.9 billion had been borrowed.
Our used vehicle floorplan facilities utilize LIBOR-based interest rates, which averaged 1.7% for the three months ended March 31, 2021, and 3.1% for the three months ended March 31, 2020. At March 31, 2021, the aggregate capacity under our used vehicle floorplan facilities with various lenders to finance a portion of our used vehicle inventory was $482.0 million, of which $423.6 million had been borrowed. The remaining borrowing capacity of $58.4 million was limited to $0.5 million based on the eligible used vehicle inventory that could have been pledged as collateral.
6.GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill and intangible assets, net, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31,
2020
|
Goodwill
|
$
|
1,184.8
|
|
|
$
|
1,185.0
|
|
|
|
|
|
Franchise rights - indefinite-lived
|
$
|
509.0
|
|
|
$
|
509.0
|
|
Other intangibles
|
19.6
|
|
|
19.6
|
|
|
528.6
|
|
|
528.6
|
|
Less: accumulated amortization
|
(7.4)
|
|
|
(7.1)
|
|
Other intangible assets, net
|
$
|
521.2
|
|
|
$
|
521.5
|
|
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7.LONG-TERM DEBT AND COMMERCIAL PAPER
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Description
|
|
Maturity Date
|
|
Interest Payable
|
|
March 31,
2021
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
|
3.35% Senior Notes
|
|
January 15, 2021
|
|
January 15 and July 15
|
|
$
|
—
|
|
|
$
|
300.0
|
|
3.5% Senior Notes
|
|
November 15, 2024
|
|
May 15 and November 15
|
|
450.0
|
|
|
450.0
|
|
4.5% Senior Notes
|
|
October 1, 2025
|
|
April 1 and October 1
|
|
450.0
|
|
|
450.0
|
|
3.8% Senior Notes
|
|
November 15, 2027
|
|
May 15 and November 15
|
|
300.0
|
|
|
300.0
|
|
4.75% Senior Notes
|
|
June 1, 2030
|
|
June 1 and December 1
|
|
500.0
|
|
|
500.0
|
|
Revolving credit facility
|
|
March 26, 2025
|
|
Monthly
|
|
—
|
|
|
—
|
|
Finance leases and other debt
|
|
Various dates through 2040
|
|
Monthly
|
|
112.8
|
|
|
116.6
|
|
|
|
|
|
|
|
1,812.8
|
|
|
2,116.6
|
|
Less: unamortized debt discounts and debt issuance costs
|
|
(14.4)
|
|
|
(14.8)
|
|
Less: current maturities
|
|
|
|
|
|
(7.1)
|
|
|
(309.2)
|
|
Long-term debt, net of current maturities
|
|
|
|
$
|
1,791.3
|
|
|
$
|
1,792.6
|
|
Senior Unsecured Notes and Credit Agreement
In January 2021, we repaid the outstanding $300.0 million of 3.35% Senior Notes due 2021.
The interest rates payable on our outstanding senior unsecured notes are subject to adjustment upon the occurrence of certain credit rating events as provided in the indentures for these senior unsecured notes.
Under our amended and restated credit agreement, we have a $1.8 billion revolving credit facility that matures on March 26, 2025. The credit agreement also contains an accordion feature that allows us, subject to credit availability and certain other conditions, to increase the amount of the revolving credit facility, together with any added term loans, by up to $500.0 million in the aggregate. As of March 31, 2021, we had no borrowings outstanding under our revolving credit facility. We have a $200.0 million letter of credit sublimit as part of our revolving credit facility. The amount available to be borrowed under the revolving credit facility is reduced on a dollar-for-dollar basis by the cumulative amount of any outstanding letters of credit, which was $39.7 million at March 31, 2021, leaving a borrowing capacity under the revolving credit facility of $1.8 billion at March 31, 2021.
Our revolving credit facility under the amended credit agreement provides for a commitment fee on undrawn amounts ranging from 0.125% to 0.20% and interest on borrowings at LIBOR or the base rate, in each case plus an applicable margin. The applicable margin ranges from 1.125% to 1.50% for LIBOR borrowings and 0.125% to 0.50% for base rate borrowings. The interest rate charged for our revolving credit facility is affected by our leverage ratio. For instance, an increase in our leverage ratio from greater than or equal to 2.0x but less than 3.25x to greater than or equal to 3.25x would result in a 12.5 basis point increase in the applicable margin.
Within the meaning of Regulation S-X, Rule 3-10, AutoNation, Inc. (the parent company) has no independent assets or operations. If the guarantees of our subsidiaries were to be issued under our existing registration statement, we expect that such guarantees would be full and unconditional and joint and several, and any subsidiaries other than the guarantor subsidiaries would be minor.
Other Long-Term Debt
At March 31, 2021, we had finance leases and other debt obligations of $112.8 million, which are due at various dates through 2040.
Commercial Paper
We have a commercial paper program pursuant to which we may issue short-term, unsecured commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $1.0 billion. The interest rate for the commercial paper notes varies based on duration and market conditions. The maturities of the commercial paper notes may vary, but may not exceed 397 days from the date of issuance. Proceeds from the issuance of commercial paper notes are used to
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
repay borrowings under the revolving credit facility, to finance acquisitions and for working capital, capital expenditures, share repurchases, and/or other general corporate purposes. We plan to use the revolving credit facility under our credit agreement as a liquidity backstop for borrowings under the commercial paper program. A downgrade in our credit ratings could negatively impact our ability to issue, or the interest rates for, commercial paper notes.
We had no commercial paper notes outstanding at March 31, 2021 and no commercial paper notes outstanding at December 31, 2020.
8.INCOME TAXES
Income taxes payable included in Other Current Liabilities totaled $110.4 million at March 31, 2021, and $13.3 million at December 31, 2020.
We file income tax returns in the U.S. federal jurisdiction and various states. As a matter of course, various taxing authorities, including the IRS, regularly audit us. Currently, no tax years are under examination by the IRS, and tax years from 2014 to 2019 are under examination by certain U.S. state jurisdictions. These audits may result in proposed assessments where the ultimate resolution may result in our owing additional taxes.
It is our policy to account for interest and penalties associated with income tax obligations as a component of Income Tax Provision (Benefit) in the accompanying Unaudited Condensed Consolidated Statements of Operations.
9.SHAREHOLDERS’ EQUITY
A summary of shares repurchased under our stock repurchase program authorized by our Board of Directors follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
2020
|
|
|
|
|
Shares repurchased
|
3.8
|
|
|
2.5
|
|
|
|
|
|
Aggregate purchase price
|
$
|
306.1
|
|
|
$
|
80.0
|
|
|
|
|
|
Average purchase price per share
|
$
|
79.76
|
|
|
$
|
31.95
|
|
|
|
|
|
As of March 31, 2021, $891.7 million remained available for share repurchases under the program.
We have 5.0 million authorized shares of preferred stock, par value $0.01 per share, none of which are issued or outstanding. The Board of Directors has the authority to issue the preferred stock in one or more series and to establish the rights, preferences, and dividends of such preferred stock.
A summary of shares of common stock issued in connection with the exercise of stock options follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
2020
|
|
|
|
|
Shares issued
|
0.4
|
|
|
0.1
|
|
|
|
|
|
Proceeds from the exercise of stock options
|
$
|
21.2
|
|
|
$
|
1.0
|
|
|
|
|
|
Average exercise price per share
|
$
|
50.57
|
|
|
$
|
18.12
|
|
|
|
|
|
The following table presents a summary of shares of common stock issued in connection with the settlement of RSUs, as well as shares surrendered to AutoNation to satisfy tax withholding obligations in connection with the vesting of restricted stock and settlement of RSUs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
2020
|
|
|
|
|
Shares issued
|
0.6
|
|
|
0.5
|
|
|
|
|
|
Shares surrendered to AutoNation to satisfy tax withholding obligations
|
0.2
|
|
|
0.2
|
|
|
|
|
|
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10.CASH FLOW INFORMATION
Cash, Cash Equivalents, and Restricted Cash
The following table provides a reconciliation of cash and cash equivalents reported on our Unaudited Condensed Consolidated Balance Sheets to the total amounts, which include cash, cash equivalents, and restricted cash, reported on our Unaudited Condensed Consolidated Statements of Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31,
2020
|
Cash and cash equivalents
|
$
|
350.0
|
|
|
$
|
569.6
|
|
Restricted cash included in Other Current Assets
|
0.1
|
|
|
0.1
|
|
Total cash, cash equivalents, and restricted cash
|
$
|
350.1
|
|
|
$
|
569.7
|
|
Non-Cash Investing and Financing Activities
We had accrued purchases of property and equipment of $12.7 million at March 31, 2021, and $17.2 million at March 31, 2020. We had non-cash investing and financing activities related to increases in property and equipment acquired under financing arrangements of $0.4 million during the three months ended March 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2021
|
|
2020
|
Supplemental noncash information on adjustments to right-of-use assets, including right-of-use assets obtained in exchange for new:
|
|
|
|
|
Operating lease liabilities
|
|
$
|
2.8
|
|
|
$
|
11.3
|
|
Finance lease liabilities
|
|
$
|
7.7
|
|
|
$
|
15.7
|
|
Interest and Income Taxes Paid
We made interest payments, net of amounts capitalized and including interest on vehicle inventory financing, of $17.9 million during the three months ended March 31, 2021, and $47.6 million during the three months ended March 31, 2020. We made income tax payments, net of income tax refunds, of $0.1 million during the three months ended March 31, 2021, and $0.5 million during the three months ended March 31, 2020.
11.FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of judgment, and therefore cannot be determined with precision.
Accounting standards define fair value as the price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and also establishes the following three levels of inputs that may be used to measure fair value:
|
|
|
|
|
|
Level 1
|
Quoted prices in active markets for identical assets or liabilities
|
|
|
Level 2
|
Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted market prices in markets that are not active; or model-derived valuations or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
|
|
|
Level 3
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
|
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following methods and assumptions were used by us in estimating fair value disclosures for financial instruments:
•Cash and cash equivalents, receivables, other current assets, vehicle floorplan payable, accounts payable, other current liabilities, commercial paper, and variable rate debt: The amounts reported in the accompanying Unaudited Condensed Consolidated Balance Sheets approximate fair value due to their short-term nature or the existence of variable interest rates that approximate prevailing market rates.
•Investments in Equity Securities: In the first quarter of 2021, we sold the remaining shares of our Vroom equity investment for total proceeds of $109.4 million. In March 2020, we invested $50.0 million in the equity securities of Waymo LLC, which do not have a readily determinable fair value. We elected to measure this investment at its cost using the measurement alternative as permitted by accounting standards. We have considered all relevant transactions since the date of our investment through March 31, 2021, and we have not recorded any impairments or upward or downward adjustments to the carrying amount of our Waymo investment as of March 31, 2021, as there have not been any indications of impairment or observable price changes in orderly transactions for the identical or a similar investment of the same issuer as of such date. Investments in equity securities are reported in Other Assets in the accompanying Unaudited Condensed Consolidated Balance Sheets. Realized and unrealized gains and losses are reported in Other Income, Net (non-operating) in the Unaudited Condensed Consolidated Statements of Operations and in the “Corporate and other” category of our segment information.
The following is information on gains recognized during the three months ended March 31 related to equity investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Net gains recognized during the period on equity securities
|
$
|
7.5
|
|
|
$
|
—
|
|
Less: Net gains recognized during the period on equity securities sold during the period
|
7.5
|
|
|
—
|
|
Unrealized gains recognized during the reporting period on equity securities still held at the reporting date
|
$
|
—
|
|
|
$
|
—
|
|
•Fixed rate long-term debt: Our fixed rate long-term debt primarily consists of amounts outstanding under our senior unsecured notes. We estimate the fair value of our senior unsecured notes using quoted prices for the identical liability (Level 1). A summary of the aggregate carrying values and fair values of our fixed rate long-term debt is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31,
2020
|
Carrying value
|
$
|
1,798.4
|
|
|
$
|
2,101.8
|
|
Fair value
|
$
|
1,999.8
|
|
|
$
|
2,341.1
|
|
Nonfinancial assets such as goodwill, other intangible assets, long-lived assets held and used, and right-of-use assets are measured at fair value when there is an indicator of impairment and recorded at fair value only when impairment is recognized or for a business combination. The fair values less costs to sell of long-lived assets held for sale are assessed each reporting period they remain classified as held for sale. Subsequent changes in the held for sale long-lived asset’s fair value less cost to sell (increase or decrease) is reported as an adjustment to its carrying amount, except that the adjusted carrying amount cannot exceed the carrying amount of the long-lived asset at the time it was initially classified as held for sale.
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following table presents assets measured and recorded at fair value on a nonrecurring basis during the three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Description
|
|
Fair Value
Measurements Using Significant
Unobservable Inputs
(Level 3)
|
|
Gain/(Loss)
|
|
Fair Value
Measurements Using Significant
Unobservable Inputs
(Level 3)
|
|
Gain/(Loss)
|
Goodwill
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
457.5
|
|
|
$
|
(318.3)
|
|
Franchise rights and other
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26.2
|
|
|
$
|
(59.9)
|
|
|
|
|
|
|
|
|
|
|
Right-of-use assets
|
|
$
|
—
|
|
|
$
|
(0.1)
|
|
|
$
|
1.4
|
|
|
$
|
(0.4)
|
|
Long-lived assets held and used
|
|
$
|
6.0
|
|
|
$
|
(0.9)
|
|
|
$
|
1.8
|
|
|
$
|
(5.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and Other Intangible Assets
Goodwill for our reporting units is tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that the carrying value of a reporting unit more likely than not exceeds its fair value.
During the first quarter of 2020, due to the impact of the COVID-19 pandemic on our results and the decrease in our market capitalization as of March 31, 2020, we recorded goodwill impairment charges of $318.3 million, of which $257.4 million related to our Premium Luxury reporting unit, $41.6 million related to our Collision Centers reporting unit, and $19.3 million related to our Parts Centers reporting unit. We also recorded franchise rights impairment charges of $57.5 million during the first quarter of 2020. The non-cash impairment charges are reflected as Goodwill Impairment and Franchise Rights Impairment, respectively, in the accompanying Unaudited Condensed Consolidated Statements of Operations and in the “Corporate and other” category of our segment information.
The quantitative goodwill impairment test requires a determination of whether the fair value of a reporting unit is less than its carrying value. We estimate the fair value of our reporting units using an “income” valuation approach, which discounts projected free cash flows of the reporting unit at a computed weighted average cost of capital as the discount rate. The income valuation approach requires the use of significant estimates and assumptions, which include revenue growth rates and future operating margins used to calculate projected future cash flows, weighted average costs of capital, and future economic and market conditions. In connection with this process, we also reconcile the estimated aggregate fair values of our reporting units to our market capitalization, including consideration of a control premium, based upon our stock price and/or average stock price over a reasonable period as of the measurement date. We base our cash flow forecasts on our knowledge of the automotive industry, our recent performance, our expectations of our future performance, and other assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. We also make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units.
The quantitative impairment test for franchise rights requires the comparison of the franchise rights’ estimated fair value to carrying value by store. Fair values of rights under franchise agreements are estimated using Level 3 inputs by discounting expected future cash flows of the store. The forecasted cash flows contain inherent uncertainties, including significant estimates and assumptions related to growth rates, margins, working capital requirements, capital expenditures, and cost of capital, for which we utilize certain market participant-based assumptions, using third-party industry projections, economic projections, and other marketplace data we believe to be reasonable.
We also recorded non-cash impairment charges of $2.4 million to reduce the carrying value of certain finite-lived intangible assets to estimated fair value during the three months ended March 31, 2020, which are included in Other Expense, Net in our Unaudited Condensed Consolidated Statements of Operations and in the “Corporate and other” category of our segment information.
Long-Lived Assets and Right-of-Use Assets
Fair value measurements for our long-lived assets and right-of-use assets are based on Level 3 inputs. Changes in fair value measurements are reviewed and assessed each quarter for long-lived assets classified as held for sale, or when an
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
indicator of impairment exists for long-lived assets classified as held and used or for right-of-use assets. The valuation process is generally based on a combination of the market and replacement cost approaches.
In a market approach, we use transaction prices for comparable properties that have recently been sold. These transaction prices are adjusted for factors related to a specific property. We evaluate changes in local real estate markets, and/or recent market interest or negotiations related to a specific property. In a replacement cost approach, the cost to replace a specific long-lived asset is considered, which is adjusted for depreciation from physical deterioration, as well as functional and economic obsolescence, if present and measurable.
To validate the fair values determined under the valuation process noted above, we also obtain independent third-party appraisals for our properties and/or third-party brokers’ opinions of value, which are generally developed using the same valuation approaches described above, and we evaluate any recent negotiations or discussions with third-party real estate brokers related to a specific long-lived asset or market.
We had assets held for sale in continuing operations of $56.3 million as of March 31, 2021, and $25.5 million as of December 31, 2020, primarily related to property held for sale, as well as inventory, goodwill, and property of disposal groups held for sale. We had assets held for sale in discontinued operations of $1.1 million as of March 31, 2021, and $8.0 million as of December 31, 2020, related to property held for sale. Assets held for sale are included in Other Current Assets in our Unaudited Condensed Consolidated Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantitative Information about Level 3 Fair Value Measurements
|
Description
|
|
Fair Value at March 31, 2020
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Range (Average)
|
Franchise rights
|
|
$
|
24.6
|
|
|
Discounted cash flow
|
|
Weighted average cost of capital
|
|
8.5
|
%
|
|
|
|
|
|
|
Discount rate
|
|
11.1% - 14.3% (12.1%)
|
|
|
|
|
|
|
Long-term revenue growth rate
|
|
2.0
|
%
|
|
|
|
|
|
|
Long-term pretax income margin
|
|
0.6% - 2.8% (1.4%)
|
|
|
|
|
|
|
Contributory asset charges
|
|
4.2% - 12.1% (6.2%)
|
12.COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are involved, and will continue to be involved, in numerous legal proceedings arising out of the conduct of our business, including litigation with customers, wage and hour and other employment-related lawsuits, and actions brought by governmental authorities. Some of these lawsuits purport or may be determined to be class or collective actions and seek substantial damages or injunctive relief, or both, and some may remain unresolved for several years. We establish accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Our accruals for loss contingencies are reviewed quarterly and adjusted as additional information becomes available. We disclose the amount accrued if material or if such disclosure is necessary for our financial statements to not be misleading. If a loss is not both probable and reasonably estimable, or if an exposure to loss exists in excess of the amount accrued, we assess whether there is at least a reasonable possibility that a loss, or additional loss, may have been incurred. If there is a reasonable possibility that a loss, or additional loss, may have been incurred, we disclose the estimate of the possible loss or range of loss if it is material or a statement that such an estimate cannot be made. Our evaluation of whether a loss is reasonably possible or probable is based on our assessment and consultation with legal counsel regarding the ultimate outcome of the matter.
As of March 31, 2021 and 2020, we have accrued for the potential impact of loss contingencies that are probable and reasonably estimable, and there was no indication of a reasonable possibility that a material loss, or additional material loss, may have been incurred. We do not believe that the ultimate resolution of these matters will have a material adverse effect on our results of operations, financial condition, or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on our results of operations, financial condition, or cash flows.
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Other Matters
AutoNation, acting through its subsidiaries, is the lessee under many real estate leases that provide for the use by our subsidiaries of their respective store premises. Pursuant to these leases, our subsidiaries generally agree to indemnify the lessor and other related parties from certain liabilities arising as a result of the use of the leased premises, including environmental liabilities, or a breach of the lease by the lessee. Additionally, from time to time, we enter into agreements with third parties in connection with the sale of assets or businesses in which we agree to indemnify the purchaser or related parties from certain liabilities or costs arising in connection with the assets or business. Also, in the ordinary course of business in connection with purchases or sales of goods and services, we enter into agreements that may contain indemnification provisions. In the event that an indemnification claim is asserted, our liability would be limited by the terms of the applicable agreement.
From time to time, primarily in connection with dispositions of automotive stores, our subsidiaries assign or sublet to the store purchaser the subsidiaries’ interests in any real property leases associated with such stores. In general, our subsidiaries retain responsibility for the performance of certain obligations under such leases to the extent that the assignee or sublessee does not perform, whether such performance is required prior to or following the assignment or subletting of the lease. Additionally, AutoNation and its subsidiaries generally remain subject to the terms of any guarantees made by us and our subsidiaries in connection with such leases. Although we generally have indemnification rights against the assignee or sublessee in the event of non-performance under these leases, as well as certain defenses, we estimate that lessee rental payment obligations during the remaining terms of these leases with expirations ranging from 2022 to 2034 are approximately $11 million at March 31, 2021. We do not have any material known commitments that we or our subsidiaries will be called on to perform under any such assigned leases or subleases at March 31, 2021. There can be no assurance that any performance by AutoNation or its subsidiaries required under these leases would not have a material adverse effect on our business, financial condition, and cash flows.
At March 31, 2021, surety bonds, letters of credit, and cash deposits totaled $100.0 million, of which $39.7 million were letters of credit. In the ordinary course of business, we are required to post performance and surety bonds, letters of credit, and/or cash deposits as financial guarantees of our performance. We do not currently provide cash collateral for outstanding letters of credit.
In the ordinary course of business, we are subject to numerous laws and regulations, including automotive, environmental, health and safety, and other laws and regulations. We do not anticipate that the costs of compliance with such laws will have a material adverse effect on our business, results of operations, cash flows, or financial condition, although such outcome is possible given the nature of our operations and the extensive legal and regulatory framework applicable to our business. We do not have any material known environmental commitments or contingencies.
13.BUSINESS AND CREDIT CONCENTRATIONS
We own and operate franchised automotive stores in the United States pursuant to franchise agreements with vehicle manufacturers. During the three months ended March 31, 2021, approximately 64% of our total retail new vehicle unit sales was generated by our stores in Florida, Texas, and California. We are subject to a concentration of risk in the event of financial distress of or other adverse event related to a major vehicle manufacturer or related lender or supplier. The core brands of vehicles that we sell, representing approximately 90% of the new vehicles sold during the three months ended March 31, 2021, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, Mercedes-Benz, FCA US, BMW, and Volkswagen (including Audi and Porsche). Our business could be materially adversely impacted by a bankruptcy of or other adverse event related to a major vehicle manufacturer or related lender or supplier.
We had receivables from manufacturers or distributors of $186.7 million at March 31, 2021, and $210.0 million at December 31, 2020. Additionally, a large portion of our contracts-in-transit included in Receivables, net, in the accompanying Unaudited Condensed Consolidated Balance Sheets, are due from automotive manufacturers’ captive finance subsidiaries, which provide financing directly to our new and used vehicle customers. Concentrations of credit risk with respect to non-manufacturer trade receivables are limited due to the wide variety of customers and markets in which our products are sold as well as their dispersion across many different geographic areas in the United States. Consequently, at March 31, 2021, we do not consider AutoNation to have any significant non-manufacturer concentrations of credit risk.
14.SEGMENT INFORMATION
At March 31, 2021 and 2020, we had three reportable segments: (1) Domestic, (2) Import, and (3) Premium Luxury. Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by Ford, General Motors,
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
and FCA US. Our Import segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda, Subaru, and Nissan. Our Premium Luxury segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Mercedes-Benz, BMW, Audi, Lexus, and Jaguar Land Rover. The franchises in each segment also sell used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products.
“Corporate and other” is comprised of our other businesses, including collision centers, auction operations, AutoNation USA used vehicle stores, and parts distribution centers, all of which generate revenues but do not meet the quantitative thresholds for reportable segments, as well as unallocated corporate overhead expenses and other income items.
The reportable segments identified above are the business activities of the Company for which discrete financial information is available and for which operating results are regularly reviewed by our chief operating decision maker to allocate resources and assess performance. Our chief operating decision maker is our Chief Executive Officer.
The following table provides information on revenues from external customers and segment income of our reportable segments:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2021
|
|
|
|
Domestic
|
|
Import
|
|
Premium Luxury
|
|
|
|
|
|
|
Revenues from external customers
|
$
|
1,846.7
|
|
|
$
|
1,769.6
|
|
|
$
|
2,103.5
|
|
|
|
|
|
|
|
Segment income (1)
|
$
|
118.5
|
|
|
$
|
125.9
|
|
|
$
|
158.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2020
|
|
|
|
Domestic
|
|
Import
|
|
Premium Luxury
|
|
|
|
|
|
|
Revenues from external customers
|
$
|
1,483.5
|
|
|
$
|
1,362.1
|
|
|
$
|
1,616.8
|
|
|
|
|
|
|
|
Segment income (1)
|
$
|
54.1
|
|
|
$
|
65.9
|
|
|
$
|
80.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Segment income represents income for each of our reportable segments and is defined as operating income less floorplan interest expense.
|
The following is a reconciliation of total segment income for reportable segments to our consolidated income (loss) from continuing operations before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
Total segment income for reportable segments
|
|
$
|
402.9
|
|
|
$
|
200.2
|
|
|
|
|
|
Corporate and other
|
|
(75.4)
|
|
|
(445.0)
|
|
|
|
|
|
Other interest expense
|
|
(21.2)
|
|
|
(23.5)
|
|
|
|
|
|
Other income (loss), net
|
|
11.0
|
|
|
(2.9)
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
317.3
|
|
|
$
|
(271.2)
|
|
|
|
|
|
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
15.EXIT OR DISPOSAL COST OBLIGATIONS
On August 17, 2020, we determined to close our aftermarket collision parts (“ACP”) business by the end of 2020. In connection with the closing of the ACP business, we incurred total charges of $36.7 million in 2020. The following is a rollforward of liability balances for exit or disposal cost obligations associated with the closing of the ACP business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Termination Charges
|
|
Other Associated Closing Costs
|
|
Involuntary Termination Benefits
|
|
Total
|
Balance at December 31, 2020
|
$
|
0.2
|
|
|
$
|
2.4
|
|
|
$
|
0.8
|
|
|
$
|
3.4
|
|
Costs incurred
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Costs paid or otherwise settled
|
(0.2)
|
|
|
(2.4)
|
|
|
(0.7)
|
|
|
(3.3)
|
|
Balance at March 31, 2021
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
|
|
|
|
|
|
|