<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For The Transition Period From _________ to ___________
Commission File Number: 1-13107
AutoNation, Inc.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 73-1105145
------------------------ ---------------------------------
(State of Incorporation) (IRS Employer Identification No.)
110 S.E. 6th Street
Ft. Lauderdale, Florida 33301
--------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (954) 769-6000
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
On August 2, 2000 the registrant had 361,141,829 outstanding shares of
common stock, par value $.01 per share.
<PAGE> 2
AUTONATION, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
Unaudited Condensed Consolidated Balance Sheets as
of June 30, 2000 and December 31, 1999.......................................... 3
Unaudited Condensed Consolidated Statements of Operations
for the Three and Six Months Ended June 30, 2000 and 1999....................... 4
Unaudited Condensed Consolidated Statement of Shareholders'
Equity for the Six Months Ended June 30, 2000................................... 5
Unaudited Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 2000 and 1999................................. 6
Notes to Unaudited Condensed Consolidated Financial Statements..................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS....................................................... 16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......................... 27
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................ 28
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................... 28
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
------------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................... $ 154.8 $ 218.6
Receivables, net.................................................... 1,191.7 1,179.5
Inventory........................................................... 2,799.1 2,706.8
Other current assets................................................ 173.2 165.6
---------- -----------
Total Current Assets.......................................... 4,318.8 4,270.5
INVESTMENTS............................................................ 99.9 175.8
PROPERTY AND EQUIPMENT, NET............................................ 1,404.7 1,360.4
INTANGIBLE ASSETS, NET................................................. 2,923.5 2,831.0
OTHER ASSETS........................................................... 169.4 218.8
NET ASSETS OF DISCONTINUED OPERATIONS.................................. -- 726.6
---------- -----------
$ 8,916.3 $ 9,583.1
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................................... $ 138.8 $ 163.1
Accrued liabilities................................................. 530.0 622.9
Notes payable and current maturities of
long-term debt.................................................... 2,380.1 2,218.3
Other current liabilities........................................... 190.9 129.9
---------- -----------
Total Current Liabilities..................................... 3,239.8 3,134.2
LONG-TERM DEBT, NET OF CURRENT MATURITIES.............................. 984.9 836.1
DEFERRED INCOME TAXES.................................................. 819.6 804.8
OTHER LIABILITIES ..................................................... 107.2 206.8
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, par value $.01 per share;
5,000,000 shares authorized; none issued......................... -- --
Common stock, par value $.01 per share;
1,500,000,000 shares authorized;
475,305,538 and 474,965,676 shares
issued including shares held in
treasury, respectively........................................... 4.8 4.7
Additional paid-in capital.......................................... 4,662.1 4,661.5
Retained earnings................................................... 482.6 1,213.8
Accumulated other comprehensive income.............................. 10.6 6.6
Treasury stock, at cost; 114,163,709 and
99,602,444 shares held, respectively............................. (1,395.3) (1,285.4)
---------- -----------
Total Shareholders' Equity........................... 3,764.8 4,601.2
---------- -----------
$ 8,916.3 $ 9,583.1
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- ---------------------------
2000 1999 2000 1999
-------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
REVENUE ........................... $ 5,339.5 $ 5,069.6 $ 10,569.7 $ 9,632.3
COST OF OPERATIONS ................ 4,633.6 4,362.8 9,186.7 8,315.3
---------- ---------- ---------- ----------
GROSS MARGIN ...................... 705.9 706.8 1,383.0 1,317.0
SELLING,GENERAL AND
ADMINISTRATIVE EXPENSES ......... 544.4 551.9 1,095.2 1,069.2
PROPERTY CARRYING COSTS ........... 9.1 -- 19.9 --
---------- ---------- ---------- ----------
OPERATING INCOME .................. 152.4 154.9 267.9 247.8
INTEREST INCOME ................... 4.9 5.3 8.7 8.7
INTEREST EXPENSE .................. (10.4) (9.9) (22.4) (16.6)
OTHER INCOME, NET ................. 7.6 1.4 3.8 3.1
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS..
BEFORE INCOME TAXES ............. 154.5 151.7 258.0 243.0
PROVISION FOR INCOME TAXES ........ 57.9 54.6 96.7 87.5
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS.. 96.6 97.1 161.3 155.5
---------- ---------- ---------- ----------
INCOME FROM DISCONTINUED
OPERATIONS, NET OF INCOME TAXES.. 4.2 404.1 1.8 425.8
---------- ---------- ---------- ----------
NET INCOME ........................ $ 100.8 $ 501.2 $ 163.1 $ 581.3
========== ========== ========== ==========
BASIC EARNINGS PER SHARE:
Continuing operations ....... $ .27 $ .22 $ .44 $ .35
Discontinued operations ..... .01 .91 .01 .94
---------- ---------- ---------- ----------
Net income .................. $ .28 $ 1.13 $ .45 $ 1.29
========== ========== ========== ==========
Weighted average common
shares outstanding ........ 361.1 444.3 364.2 450.2
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE:
Continuing operations ....... $ .27 $ .21 $ .44 $ .34
Discontinued operations ..... .01 .90 .01 .93
---------- ---------- ---------- ----------
Net income .................. $ .28 $ 1.11 $ .45 $ 1.27
========== ========== ========== ==========
Weighted average common
and common equivalent
shares outstanding ........ 361.3 453.1 364.4 459.0
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In millions)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN RETAINED COMPREHENSIVE TREASURY
STOCK CAPITAL EARNINGS INCOME STOCK TOTAL
---------- ------------- ------------ ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1999 ..... $ 4.7 $4,661.5 $1,213.8 $ 6.6 $(1,285.4) $4,601.2
Purchases of
treasury stock ... -- -- -- -- (106.9) (106.9)
Other comprehensive
income ........... -- -- -- 4.0 -- 4.0
Exercise of stock
options .......... .1 .6 -- -- -- .7
Spin-off of ANC
Rental Corporation -- -- (894.3) -- -- (894.3)
Other .............. -- -- -- -- (3.0) (3.0)
Net income ......... -- -- 163.1 -- -- 163.1
-------- -------- -------- -------- -------- --------
BALANCE AT
JUNE 30, 2000 ........ $ 4.8 $4,662.1 $ 482.6 $ 10.6 $(1,395.3) $3,764.8
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE> 6
AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
2000 1999
-------- --------
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income ....................................................... $ 163.1 $ 581.3
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................................. 66.1 55.9
Income from discontinued operations ........................... (1.8) (425.8)
Changes in assets and liabilities, net of effects from business
combinations:
Receivables ............................................. (3.2) (217.5)
Inventory ............................................... (72.2) (92.7)
Other assets ............................................ (43.8) 15.7
Accounts payable and accrued liabilities ................ (64.3) 78.8
Other liabilities ....................................... 105.9 14.2
-------- --------
149.8 9.9
-------- --------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property and equipment .............................. (52.9) (120.1)
Proceeds from sale of property and equipment
and assets held for sale ...................................... 70.8 37.3
Purchases of marketable securities ............................... -- (39.6)
Sales of marketable securities ................................... 53.2 40.3
Cash used in business acquisitions, net of
cash acquired ................................................. (192.3) (551.6)
Cash received from business divestitures ......................... 27.7 83.2
Cash received on disposal of solid waste services
segment ....................................................... -- 1,779.6
Other ............................................................ (47.0) (24.0)
-------- --------
(140.5) 1,205.1
-------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Net proceeds under vehicle inventory
financing facilities ........................................... 141.9 174.7
Net proceeds (payments) under revolving credit
facilities ..................................................... 196.0 (500.0)
Purchases of treasury stock ...................................... (106.9) (318.6)
Payments of notes payable and long-term debt ..................... (95.2) (85.7)
Other ............................................................ 0.7 2.8
-------- --------
136.5 (726.8)
-------- --------
CASH PROVIDED BY CONTINUING OPERATIONS .............................. 145.8 488.2
-------- --------
CASH USED IN DISCONTINUED OPERATIONS ................................ (227.0) (631.1)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS ............................... (81.2) (142.9)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD,
INCLUDING CASH AND CASH EQUIVALENTS OF
DISCONTINUED OPERATIONS OF $17.4 MILLION AND
$590.1 MILLION, RESPECTIVELY ..................................... 236.0 726.0
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD,
INCLUDING CASH AND CASH EQUIVALENTS OF
DISCONTINUED OPERATIONS OF $36.5 MILLION
AT JUNE 30, 1999 ................................................. $ 154.8 $ 583.1
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tables in Millions, Except Per Share Data)
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements
include the accounts of AutoNation, Inc. and its subsidiaries (the "Company" or
"AutoNation") and have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. All significant
intercompany accounts and transactions have been eliminated. Certain information
related to the Company's organization, significant accounting policies and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. 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 the financial position and the
results of operations for the periods presented and the disclosures herein are
adequate to make the information presented not misleading in any material
respects.
Operating results for interim periods are not necessarily indicative of
the results that can be expected for a full year. These interim financial
statements should be read in conjunction with the Company's audited consolidated
financial statements and notes thereto included in the Company's most recent
Annual Report on Form 10-K.
On June 30, 2000, the Company completed the spin-off of its former
automotive rental businesses, which have been organized under ANC Rental
Corporation ("ANC Rental"), by distributing 100% of ANC Rental's common stock to
AutoNation's stockholders as a tax-free dividend. As a result of the spin-off,
AutoNation stockholders received one share of ANC Rental common stock for every
eight shares of AutoNation common stock owned as of the June 16, 2000 record
date. As discussed in Note 18, Discontinued Operations, the Company's former
automotive rental segment has been accounted for as discontinued operations and
the accompanying unaudited condensed consolidated financial statements presented
herein have been restated to report separately the net assets and operating
results of these discontinued operations.
In order to maintain consistency and comparability between periods
presented, certain amounts have been reclassified from the previously reported
financial statements to conform with the financial statement presentation of the
current period.
2. BUSINESS COMBINATIONS
Businesses acquired through June 30, 2000 and accounted for under the
purchase method of accounting are included in the unaudited condensed
consolidated financial statements from the date of acquisition.
During the six months ended June 30, 2000, the Company acquired various
businesses which have been accounted for under the purchase method of
accounting. The Company paid approximately $78.1 million of cash for these
acquisitions. During the six months ended June 30, 2000 the Company also paid
approximately $114.2 million in purchase price for certain prior year automotive
retail acquisitions. As of June 30, 2000, the Company has accrued approximately
$27.5 million of additional purchase price due to former owners of acquired
businesses.
7
<PAGE> 8
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following summarizes the preliminary purchase price allocations for
business combinations accounted for under the purchase method of accounting
consummated during the six months ended June 30 related to continuing
operations:
2000 1999
------- -------
Property and equipment ........................ $ 2.1 $ 118.9
Intangible and other assets ................... 80.7 549.6
Working capital ............................... 34.1 256.8
Debt assumed .................................. (36.7) (344.5)
Other liabilities ............................. (2.1) (29.2)
------- -------
Cash used in acquisitions, net of cash acquired $ 78.1 $ 551.6
======= =======
The Company's unaudited pro forma consolidated results of continuing
operations assuming acquisitions accounted for under the purchase method of
accounting had occurred as of the beginning of each period presented are as
follows:
SIX MONTHS ENDED
JUNE 30,
-----------------------
2000 1999
---------- ----------
Revenue ....................................... $ 10,634.6 $ 11,014.2
Income from continuing operations ............. 161.2 172.7
Diluted earnings per share from continuing
operations .................................. .44 .38
The unaudited pro forma consolidated results of continuing operations
are presented for informational purposes only and may not necessarily reflect
the future results of operations of the Company or what the results of
operations would have been had the Company owned and operated these businesses
as of the beginning of each period presented.
3. RECEIVABLES
The components of receivables, net of allowance for doubtful accounts,
are as follows:
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
Vehicle receivables ........................... $ 508.2 $ 498.0
Finance receivables ........................... 409.5 441.5
Trade receivables ............................. 118.7 90.8
Manufacturer receivables ...................... 140.6 134.1
Other ......................................... 55.4 57.6
-------- --------
1,232.4 1,222.0
Less: allowance for doubtful accounts.......... (40.7) (42.5)
-------- --------
$1,191.7 $1,179.5
======== ========
Finance receivables consist of the following:
JUNE 30, DECEMBER 31,
2000 1999
---------- ------------
Finance leases ................................ $171.9 $196.3
Installment loans ............................. 61.5 83.8
Retained interests in securitized
installment loans ........................... 176.1 161.4
------ ------
$409.5 $441.5
====== ======
8
<PAGE> 9
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The Company securitizes installment loan receivables through a $1.7
billion commercial paper warehouse facility with unrelated financial
institutions. During the six months ended June 30, 2000, the Company securitized
approximately $324.8 million of receivables under this program, net of retained
interests. At June 30, 2000, $1.08 billion was outstanding under this program.
The Company also securitizes installment loan receivables through the
issuance of asset-backed notes through a non-consolidated special purpose entity
under a $2.0 billion shelf registration statement. Proceeds from these notes are
used to refinance installment loans previously securitized under the warehouse
facility and to securitize additional loans held by the Company. The Company
provides credit enhancement related to these notes in the form of 1%
overcollateralization, a reserve fund and a third party surety bond. At June 30,
2000, $580.1 million was outstanding under this program. In August 2000, a
non-consolidated subsidiary of the Company issued approximately $691.7 million
in additional asset-backed notes under this program. Following this transaction,
the Company had approximately $1.26 billion of capacity under its $1.7 billion
commercial paper warehouse facility.
4. INVENTORY
Inventory consists of the following:
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
New vehicles ................... $2,280.5 $2,085.0
Used vehicles .................. 367.5 470.1
Parts, accessories and other.... 151.1 151.7
-------- --------
$2,799.1 $2,706.8
======== ========
5. OTHER CURRENT ASSETS
Other current assets consists primarily of restricted cash deposits
related to insurance programs totaling $119.0 million and $91.9 million at June
30, 2000 and December 31, 1999, respectively.
6.INVESTMENTS
Investments consist of the following:
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
Marketable securities .......... $ 31.0 $ 106.2
Equity method investments....... 68.9 69.6
------- --------
$ 99.9 $ 175.8
======= ========
In June 2000, the Company sold 1.4 million shares of common stock of
the Company's former solid waste subsidiary, Republic Services, Inc., resulting
in a pre-tax gain of $9.9 million included in other income. As of June 30, 2000,
the Company had approximately 1.7 million remaining shares of Republic Services,
Inc. with a fair value of $27.5 million. These securities are classified as
available for sale and are stated at fair value with unrealized gains or losses
included in other comprehensive income.
9
<PAGE> 10
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
JUNE 30, DECEMBER 31,
2000 1999
-------- --------
Land ...................................... $ 545.4 $ 529.7
Buildings and improvements ................ 697.0 670.9
Furniture, fixtures and equipment ......... 327.9 310.5
-------- --------
1,570.3 1,511.1
Less: accumulated depreciation and
amortization...................... (165.6) (150.7)
-------- --------
$1,404.7 $1,360.4
======== ========
8. INTANGIBLE ASSETS
Intangible assets consist primarily of the cost of acquired businesses
in excess of the fair value of net assets acquired. The cost in excess of the
fair value of net assets acquired is amortized primarily over 40 years on a
straight-line basis. Accumulated amortization of intangible assets at June 30,
2000 and December 31, 1999 was $160.8 million and $122.5 million, respectively.
9. OTHER ASSETS
Other assets consist primarily of megastore and other properties held
for sale, net of impairment reserves, totaling approximately $161.8 million and
$212.0 million at June 30, 2000 and December 31, 1999, respectively. As
described in Note 13, Restructuring and Impairment Charges, in the fourth
quarter of 1999, the Company recorded asset impairment charges related to
exiting the used vehicle megastore business.
10. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------- --------
<S> <C> <C>
Vehicle inventory credit facilities; secured
by the Company's vehicle inventory ........ $2,375.3 $2,210.6
$1.5 billion revolving credit facilities;
interest payable using LIBOR based rates;
unsecured; $500.0 million matures March 2001;
$1.0 billion matures April 2002 ............. 865.0 669.0
Capital leases and other debt ................. 124.7 174.8
-------- --------
3,365.0 3,054.4
Less: current portion ........................ (2,380.1) (2,218.3)
-------- --------
$ 984.9 $ 836.1
======== ========
</TABLE>
Interest expense related to vehicle inventory credit facilities is
included in cost of operations.
10
<PAGE> 11
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11. SHAREHOLDERS' EQUITY
During the second quarter of 2000, the Company did not repurchase any
shares of its common stock, par value $.01 per share ("Common Stock"), under its
Board authorized share repurchase program. During the first quarter of 2000, the
Company repurchased 14.3 million shares of Common Stock for an aggregate
purchase price of $106.9 million. Through June 30, 2000, an aggregate of 114.4
million shares of Common Stock have been repurchased under the Company's share
repurchase program for an aggregate purchase price of $1.4 billion. Repurchases
are made pursuant to Rule 10b-18 of the Securities Exchange Act of 1934, as
amended.
As discussed in Note 18, Discontinued Operations, on June 30, 2000, the
Company completed the tax-free spin-off of ANC Rental. As a result of the
spin-off, the Company's retained earnings was reduced by the net assets of ANC
Rental totaling $894.3 million as of the June 30, 2000 distribution date. The
equity adjustment resulting from the spin-off is subject to further adjustment
resulting from changes in estimated shared assets and liabilities of AutoNation
and ANC Rental and certain other matters. However, such adjustments, if any, are
not expected to be significant.
12. OTHER COMPREHENSIVE INCOME
The changes in components of the other comprehensive income (loss) are
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income................................................ $ 100.8 $ 501.2 $ 163.1 $ 581.3
-------- -------- -------- ---------
Other comprehensive income (loss):
Unrealized gain (loss) on marketable
securities and interest-only strip
receivables, net of income taxes............... 7.8 35.7 .7 38.2
Foreign currency translation
adjustments, net of income
taxes.......................................... 1.8 (.7) 3.0 (1.1)
Reclassification of realized losses
(gains), net of income taxes................... (1.7) (.8) .3 (1.5)
-------- -------- ------- --------
7.9 34.2 4.0 35.6
-------- -------- ------- --------
Comprehensive income...................................... $ 108.7 $ 535.4 $167.1 $ 616.9
======== ======== ======= =========
</TABLE>
13. RESTRUCTURING AND IMPAIRMENT CHARGES
During the fourth quarter of 1999, the Company approved a plan to
restructure certain of its operations. The restructuring plan is comprised of
the following major components: (1) exiting the used vehicle megastore business;
and (2) reducing the corporate workforce. The restructuring plan also includes
divesting of certain non-core franchised automotive dealerships. Approximately
2,000 positions were eliminated as a result of the restructuring plan of which
1,800 were megastore positions and 200 were corporate positions. These
restructuring activities resulted in pre-tax charges of $443.7 million in the
fourth quarter of 1999. These pre-tax charges include $286.9 million of asset
impairment charges; $103.3 million of reserves for residual value guarantees for
closed leased properties; $26.2 million of severance and other exit costs; and
$27.3 million of inventory related costs. The $286.9 million asset impairment
charge consists of: $244.9 million of megastore and other property impairments;
$26.6 million of goodwill impairment reserves for the divestiture of certain
non-core franchised automotive dealerships; and $15.4 million for information
systems impairments.
11
<PAGE> 12
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The Company will dispose of its closed properties and non-core
dealerships through sale to third parties. Although the Company intends to
aggressively market these properties, the ultimate disposition could exceed one
year. During the six months ended June 30, 2000, the Company incurred $19.9
million in carrying costs related to closed properties which are charged to
expense as incurred. Revenue for the operations to be disposed was $208.3
million and $782.4 million during the six months ended June 30, 2000 and 1999,
respectively. Operating income (loss) for the operations to be disposed was $1.5
million and $(4.1) million for the six months ended June 30, 2000 and 1999,
respectively.
The following summarizes activity in the Company's restructuring and
impairment reserves for the six months ended June 30, 2000:
<TABLE>
<CAPTION>
DEDUCTIONS
BALANCE AMOUNTS CHARGED ------------------- BALANCE
RESERVE DECEMBER 31, 1999 (CREDITED) TO INCOME CASH NON-CASH JUNE 30, 2000
------- ----------------- -------------------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Asset reserves:
Asset impairment ...... $263.3 $ (2.7) $ -- $(63.1) $197.5
Inventory ............. 15.0 -- -- (15.0) --
Accrued liabilities:
Lease residual
value guarantees .... 103.3 (.3) (3.6) -- 99.4
Severance and other
exit costs .......... 17.3 3.0 (15.3) -- 5.0
------ ------ ------ ------ ------
$398.9 $ -- $(18.9) $(78.1) $301.9
====== ====== ====== ====== ======
</TABLE>
During the six months ended June 30, 2000, the Company recognized gross
gains of $4.6 million and gross losses of $1.6 million related to the
disposition of closed properties. In addition, the Company recorded $3.0 million
of additional charges related to exiting the used vehicle megastore business.
14. INCOME TAXES
Income taxes have been provided for based upon the Company's
anticipated annual effective income tax rate.
15. STOCK OPTIONS
The Company has various stock option plans under which options to
purchase shares of Common Stock may be granted to key employees and directors of
the Company. Options granted under the plans are non-qualified and are granted
at a price equal to the closing market price of the Common Stock on the trading
day immediately preceding the date of grant. Generally, options granted have a
term of ten years from the date of grant, and vest in increments of 25% per year
over a four year period on the yearly anniversary of the grant date.
A summary of stock option transactions for the six months ended June
30, 2000 is as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
------ --------------
<S> <C> <C>
Options outstanding at
beginning of year................................... 50.9 $ 15.84
Granted................................................ .5 9.13
Exercised.............................................. (.3) 2.08
Canceled............................................... (8.6) 14.34
------
Options outstanding at June 30, 2000................... 42.5 16.14
======
Options exercisable at June 30, 2000................... 29.3 16.69
Options available for future
grants at June 30, 2000........................... 32.2
</TABLE>
12
<PAGE> 13
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
On June 30, 2000, options to purchase approximately 2.8 million shares
of Common Stock held by employees of ANC Rental were canceled. In May 2000, in
accordance with the terms of the Company's stock option plans, the Company's
Board of Directors authorized the Company to adjust employee stock options to
take into account the market adjustments to AutoNation's Common Stock as a
result of the ANC Rental spin-off. The Company adjusted employee stock options
for the spin-off effective July 3, 2000, the first trading day following
completion of the spin-off. Following the adjustments, there were approximately
47.1 million outstanding options to purchase shares of Common Stock at a
weighted average exercise price of $14.57 per share.
The Company's Board of Directors authorized the grant of options to
purchase approximately 11.3 million shares of Common Stock to employees pursuant
to the Company's stock option plans on August 1, 2000 at an exercise price per
share equal to the closing market price of the Common Stock on July 31, 2000 of
$6.875 per share.
16. LEGAL MATTERS
The Company is a party to numerous legal proceedings which arose in the
ordinary course of business. The Company does not believe that the ultimate
resolution of these matters will have a material adverse effect on the Company's
consolidated results of operations, financial condition or cash flows. However,
the results of these matters cannot be predicted with certainty and unfavorable
resolution of one or more of these matters could have a material adverse effect
on the Company's consolidated results or operations, financial condition and/or
cash flows.
17. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share is based on the combined weighted average number of common
shares and common share equivalents outstanding which include, where
appropriate, the assumed exercise or conversion of options and warrants.
The computation of weighted average common and common equivalent shares
used in the calculation of basic and diluted earnings per share is shown below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- -------------------------
2000 1999 2000 1999
------ ------ -------- -------
<S> <C> <C> <C> <C>
Weighted average common
shares outstanding used in
calculating basic earnings
per share .................. 361.1 444.3 364.2 450.2
Effect of dilutive options
and warrants ............... .2 8.8 .2 8.8
----- ----- ----- -----
Weighted average common
and common equivalent shares
used in calculating diluted
earnings per share ......... 361.3 453.1 364.4 459.0
===== ===== ===== =====
</TABLE>
At June 30, 2000 and 1999, the Company had approximately 42.2 million
and 25.0 million stock options outstanding, respectively, which have been
excluded from the computation of diluted earnings per share since they are
anti-dilutive.
13
<PAGE> 14
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
18. DISCONTINUED OPERATIONS
On June 30, 2000, the Company completed the tax free spin-off of ANC
Rental. Accordingly, the net assets and operating results of ANC Rental have
been classified as discontinued operations for all periods presented in the
accompanying unaudited condensed consolidated financial statements. Income from
discontinued operations during the six months ended June 30, 2000 is net of
previously estimated losses of $22.1 million which were accrued in the fourth
quarter of 1999 and additional costs associated with the spin-off totaling $11.3
million recorded in the second quarter of 2000.
In connection with the spin-off, the Company made certain capital
contributions to ANC Rental during the six months ended June 30, 2000. These
contributions include cash of approximately $200.0 million and the net assets of
an insurance subsidiary. The Company also entered into various agreements with
ANC Rental which set forth the terms of the distribution and other agreements
governing the Company's relationship with ANC Rental after the spin-off. As a
result of the spin-off, the Company's equity as of June 30, 2000 was reduced by
the net assets of ANC Rental totaling $894.3 million.
In connection with the spin-off, the Company agreed to continue to
provide ANC Rental with guarantees and other credit enhancements with respect to
$60.0 million of letters of credit, $10.3 million of indebtedness owed to the
former owners of an acquired business and certain property and vehicle lease
obligations. The Company will receive fees for providing these guarantees
commensurate with market rates.
In July 1998, the Company's former solid waste services subsidiary,
Republic Services, Inc. ("RSG"), completed an initial public offering of 36.1%
of its outstanding common stock resulting in net proceeds of approximately $1.43
billion. In May 1999, the Company sold substantially all of its remaining
interest in RSG in a public offering resulting in net proceeds of approximately
$1.78 billion and an after tax gain of approximately $379.3 million in the
second quarter of 1999. Accordingly, operating results of RSG for the period
prior to disposition have been classified as discontinued operations in the
accompanying unaudited condensed consolidated financial statements.
Selected statement of operations data for the Company's discontinued
operations is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-----------------------------------------------------------------------
2000 1999
-------------- ------------------------------------------------
AUTOMOTIVE AUTOMOTIVE SOLID
RENTAL RENTAL WASTE TOTAL
-------------- ---------- --------- --------
<S> <C> <C> <C> <C>
Revenue .................... $ 910.6 $ 892.8 $ 149.0 $1,041.8
======== ======== ======== ========
Pre-tax income ............. $ 25.4 $ 21.5 $ 27.5 $ 49.0
Provision for income taxes 9.9 7.7 10.6 18.3
Minority interest in RSG ... -- -- 5.9 5.9
-------- -------- -------- --------
Net income ................. 15.5 13.8 11.0 24.8
Gain/(loss) on disposal of
segment, net of income
taxes ................... (11.3) -- 379.3 379.3
-------- -------- -------- --------
Income from discontinued
operations, net of
income taxes ............ $ 4.2 $ 13.8 $ 390.3 $ 404.1
======== ======== ======== ========
</TABLE>
14
<PAGE> 15
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------------------------------------------------
2000 1999
-------------- ------------------------------------------------
AUTOMOTIVE AUTOMOTIVE SOLID
RENTAL RENTAL WASTE TOTAL
-------------- ---------- --------- --------
<S> <C> <C> <C> <C>
Revenue ...................... $1,721.2 $1,683.7 $ 552.5 $2,236.2
======== ======== ======== ========
Pre-tax income ............... $ (14.8) $ 9.5 $ 100.8 $ 110.3
Provision (benefit) for
income taxes .............. (5.8) 3.4 38.8 42.2
Minority interest in RSG ..... -- -- 21.6 21.6
-------- -------- -------- --------
Net income (loss) ............ (9.0) 6.1 40.4 46.5
Previously estimated and
accrued losses, net
of income taxes ......... 22.1 -- -- --
Gain/(loss) on disposal of
segment, net of income
taxes ..................... (11.3) -- 379.3 379.3
-------- -------- -------- --------
Income from discontinued
operations, net of
income taxes .............. $ 1.8 $ 6.1 $ 419.7 $ 425.8
======== ======== ======== ========
</TABLE>
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
unaudited condensed consolidated financial statements and notes thereto included
under Item 1. In addition, reference should be made to the Company's audited
consolidated financial statements and notes thereto and related Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's most recent Annual Report on Form 10-K.
DISCONTINUED BUSINESS SEGMENTS
On June 30, 2000, the Company completed the spin-off of its former
automotive rental businesses, which have been organized under ANC Rental
Corporation ("ANC Rental"), by distributing 100% of ANC Rental's common stock to
AutoNation's stockholders as a tax-free dividend. As a result of the spin-off,
AutoNation stockholders received one share of ANC Rental common stock for every
eight shares of AutoNation common stock owned as of the June 16, 2000 record
date. As discussed in Note 18, Discontinued Operations, of notes to unaudited
condensed consolidated financial statements, ANC Rental has been accounted for
as discontinued operations and the accompanying unaudited condensed consolidated
financial statements presented herein have been restated to report separately
the net assets and operating results of these discontinued operations.
In July 1998, the Company completed an initial public offering of 36.1%
of the common stock of the Company's former solid waste subsidiary, Republic
Services, Inc. ("RSG"). In May 1999, the Company sold substantially all of its
remaining interest in RSG in a public offering. As discussed in Note 18,
Discontinued Operations, the Company's former solid waste services segment has
been accounted for as discontinued operations and accordingly, the operating
results of RSG for the period prior to disposition have been classified as
discontinued operations in the accompanying unaudited condensed consolidated
financial statements presented herein.
BUSINESS COMBINATIONS
The Company has entered into framework agreements with various
automotive manufacturers that allow the Company to acquire franchised automotive
dealerships subject to various limits and conditions. Since 1996, the Company
has aggressively expanded its automotive retail operations through the
acquisition of franchised automotive dealerships. The Company has continued to
complete acquisitions of franchised automotive dealerships during 2000. However,
the Company has not completed and does not expect to complete acquisitions at
the same pace as in prior years. Acquisitions completed in 2000 have been and
will continue to be single dealerships or small dealership groups focused in key
existing markets, or strategic acquisitions to enhance the Company's e-commerce
business.
Businesses acquired through June 30, 2000 and accounted for under the
purchase method of accounting are included in the unaudited condensed
consolidated financial statements from the date of acquisition.
During the six months ended June 30, 2000, the Company acquired various
businesses which have been accounted for under the purchase method of
accounting. The Company paid approximately $78.1 million of cash for these
acquisitions. During the six months ended June 30, 2000 the Company also paid
approximately $114.2 million in purchase price for certain prior year automotive
retail acquisitions. As of June 30, 2000, the Company has accrued approximately
$27.5 million of additional purchase price due to former owners of acquired
businesses.
16
<PAGE> 17
SHARE REPURCHASES
During the second quarter of 2000, the Company did not repurchase any
shares of its common stock, par value $.01 per share ("Common Stock"), under the
Company's Board authorized share repurchase program. During the first quarter of
2000, the Company repurchased 14.3 million shares of Common Stock, for an
aggregate purchase price of $106.9 million. On a cumulative basis, through June
30, 2000, the Company has acquired an aggregate of 114.4 million shares of
Common Stock for an aggregate purchase price of $1.4 billion. As of June 30,
2000, the Company has $349.0 million remaining for share repurchases under its
share repurchase program.
CONSOLIDATED RESULTS OF OPERATIONS
The following is a summary of the Company's consolidated results of
operations both in gross dollars and on a diluted per share basis for the
periods indicated (in millions, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------------------ --------------------------------------------
2000 1999 2000 1999
------------------ ------------------ ------------------- ---------------------
DILUTED DILUTED DILUTED DILUTED
PER PER PER PER
GROSS SHARE GROSS SHARE GROSS SHARE GROSS SHARE
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income from continuing
operations .............. $ 96.6 $ .27 $ 97.1 $ .21 $ 161.3 $ .44 $ 155.5 $ .34
Income from discontinued
operations:
Automotive rental ..... 4.2 .01 13.8 .03 1.8 .01 6.1 .01
Solid waste services... -- -- 390.3 .87 -- -- 419.7 .92
-------- ----- ------- ------- -------- ------ -------- ------
4.2 .01 404.1 .90 1.8 .01 425.8 .93
-------- ----- ------- ------- -------- ------ -------- ------
Net income ................ $100.8 $ .28 $ 501.2 $ 1.11 $ 163.1 $ .45 $ 581.3 $ 1.27
======== ===== ======= ======= ======== ====== ======== ======
</TABLE>
CONTINUING OPERATIONS
Historical operating results include the results of acquired businesses
from the date of acquisition for acquisitions accounted for under the purchase
method of accounting. Due to acquisitions, year over year comparisons of
reported operating results do not provide a meaningful representation of
internal performance. Accordingly, presented below are operating results for the
three and six months ended June 30, 2000 and 1999 on a same store basis to
better represent internal performance.
17
<PAGE> 18
SAME STORE OPERATING DATA:
The following table sets forth the components of same store revenue,
with the percentage change between periods, and same store gross margin, same
store selling, general and administrative expenses ("S,G & A"), and same store
performance margin, with percentages of total same store revenue and with the
percentage change between periods, for the periods indicated (in millions):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------------- ----------------------------------------
2000 1999 % CHANGE 2000 1999 % CHANGE
---------- --------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
New vehicle................... $2,720.2 $2,588.0 5.1 $5,092.3 $4,672.3 9.0
Used vehicle.................. 839.7 878.1 (4.4) 1,561.1 1,610.7 (3.1)
Fixed operations.............. 473.6 458.0 3.4 892.3 851.4 4.8
Other......................... 302.3 302.9 (0.2) 568.5 587.5 (3.2)
--------- --------- --------- ---------
$4,335.8 $4,227.0 2.6 $8,114.2 $7,721.9 5.1
========= ========= ========= =========
Gross Margin.................... $ 574.3 $ 577.3 (0.5) $1,058.5 $1,033.5 2.4
%............................... 13.2% 13.6% (0.4) 13.0% 13.4% (0.4)
S, G & A........................ $ 407.6 $ 410.4 (0.7) $ 757.4 $ 746.4 1.5
%............................... 9.4% 9.7% (0.3) 9.3% 9.7% (0.4)
Store Performance Margin........ $ 166.7 $ 166.9 (0.1) $ 301.1 $ 287.1 4.9
%............................... 3.8% 3.9% (0.1) 3.7% 3.7% --
</TABLE>
Overall, the Company's same store performance margins during the second
quarter of 2000 in aggregate dollars were consistent with the prior year period.
However, same store performance margins as a percentage of same store revenue
decreased 10 basis points to 3.8% during the three months ended June 30, 2000.
The margin percentage decline during the three months ended June 30, 2000 is
primarily due to gross margin compression largely offset by S, G & A reductions.
Same store sales were $4.34 billion for the three months ended June 30,
2000 versus $4.23 billion for the comparable 1999 period, an increase of 2.6%.
Same store sales were $8.11 billion for the six months ended June 30, 2000
versus $7.72 billion for the comparable 1999 period, an increase of 5.1%. The
primary components of these same store sales increases are described below.
During the second quarter, the automotive retail industry continued to
experience strong new vehicle unit sales volume, although not as strong as the
record pace experienced during the first quarter. The Company's new vehicle same
store sales increased 5.1% to $2.72 billion during the three months ended June
30, 2000. The increase is due to price of 4.6% and volume of .5%. Same store new
vehicle sales increased 9.0% to $5.09 billion during the six months ended June
30, 2000. The increase is due to increases in volume of 4.5% and price of 4.5%.
The used vehicle market has been less robust due, in part, to strong
manufacturer incentives for new vehicles. Used vehicle same store sales
decreased 4.4% to $839.7 million during the three months ended June 30, 2000.
The decrease is due to lower volume of 8.9% partially offset by price increases
of 4.5%. Same store used vehicle sales decreased 3.1% to $1.56 billion during
the six months ended June 30, 2000. The decrease is attributed to lower volume
of 7.9% partially offset by price increases of 4.8%.
Fixed operations same store sales increased 3.4% to $473.6 million
during the three months ended June 30, 2000 and 4.8% to $892.3 million during
the six months ended June 30, 2000. The increases are primarily due to volume.
Same store other sales consist primarily of wholesale revenue. Same
store other sales were consistent with the prior year at $302.3 million for the
three months ended June 30, 2000. Same store other sales decreased 3.2% to
$568.5 million during the six months ended June 30, 2000. The decline during the
six months ended June 30, 2000 is primarily due to a decline in wholesale volume
and pricing during the period.
18
<PAGE> 19
Same store gross margins were $574.3 million and $1.06 billion for the
three and six months ended June 30, 2000, respectively, versus $577.3 million
and $1.03 billion for the comparable 1999 periods. Same store gross margins as a
percentage of same store revenue were 13.2% and 13.0% for the three and six
months ended June 30, 2000, respectively, versus 13.6% and 13.4% for the
comparable 1999 periods. The decreases in same store gross margins as
percentages of same store total revenue are primarily due to a shift in mix as a
result of stronger new versus used vehicle sales and compression in new vehicle
margins resulting from higher floorplan interest due to increased inventory
levels and increased pricing competition in new truck sales.
Same store selling, general and administrative expenses were $407.6
million and $757.4 million during the three and six months ended June 30, 2000,
respectively, versus $410.4 million and $746.4 million for the comparable 1999
periods. The increase in aggregate dollars during the six months ended June 30,
2000 is primarily due to higher selling expenses associated with increased same
store sales. Same store selling, general and administrative expenses as a
percentage of same store total revenue were 9.4% and 9.3% for the three and six
months ended June 30, 2000 respectively, versus 9.7% for both comparable 1999
periods. The decreases in same store selling, general and administrative
expenses as percentages of same store sales are primarily due to the Company's
cost cutting initiatives.
Same store performance margins were $166.7 million and $301.1 million
for the three and six months ended June 30, 2000, respectively, versus $166.9
million and $287.1 million for the comparable 1999 periods. Same store
performance margins as a percentage of same store total revenue were 3.8% and
3.7% for the three and six months ended June 30, 2000 and 1999, respectively,
versus 3.9% and 3.7% for comparable 1999 periods. The decrease in same store
performance margin as a percentage of same store revenue during the three months
ended June 30, 2000 is the result of gross margin compression largely offset by
decreases in selling, general and administrative expenses.
REPORTED OPERATING DATA:
The following table sets forth the components of revenue, with
percentages of total revenue, and gross margin, store level S, G & A, store
performance margin, overhead, property carrying costs and operating income, with
percentages of total revenue, on a reported basis for the periods indicated (in
millions):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------------------- -----------------------------------------
2000 % 1999 % 2000 % 1999 %
-------- ------ --------- ------ -------- ----- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
New vehicle................... $3,308.2 62.0 $2,906.3 57.3 $ 6,527.8 61.8 $5,455.2 56.6
Used vehicle.................. 1,053.6 19.7 1,235.3 24.4 2,101.5 19.9 2,358.2 24.5
Fixed operations.............. 588.8 11.0 549.6 10.8 1,176.7 11.1 1,058.3 11.0
Other......................... 388.9 7.3 378.4 7.5 763.7 7.2 760.6 7.9
--------- ------ --------- ----- --------- ------ -------- -----
$5,339.5 100.0 $5,069.6 100.0 $10,569.7 100.0 $9,632.3 100.0
========= ====== ========= ===== ========== ====== ======== =====
Gross Margin.................... $ 705.9 13.2 $ 706.8 14.0 $ 1,383.0 13.1 $1,317.0 13.7
Store S, G & A.................. 512.7 9.6 514.3 10.2 1,024.0 9.7 985.6 10.3
Store Performance Margin........ 193.2 3.6 192.5 3.8 359.0 3.4 331.4 3.4
Overhead........................ 31.7 0.6 37.6 0.7 71.2 0.7 83.6 0.8
Property carrying costs......... 9.1 0.1 -- -- 19.9 0.2 -- --
Operating Income................ 152.4 2.9 154.9 3.1 267.9 2.5 247.8 2.6
</TABLE>
Revenue was $5.34 billion for the three months ended June 30, 2000
versus $5.07 billion for the comparable 1999 period, an increase of 5.3%.
Revenue was $10.57 billion for the six months ended June 30, 2000 versus $9.63
billion for the comparable 1999 period, an increase of 9.7%. The primary
components of these increases are described below.
19
<PAGE> 20
New vehicle sales increased 13.8% to $3.31 billion during the three
months ended June 30, 2000 and 19.7% to $6.53 billion during the six months
ended June 30, 2000. During the quarter, the Company sold approximately 127,000
new vehicles versus 119,000 new vehicles last year, an increase of 6.7%. During
the six months ended June 30, 2000, the Company sold 253,000 new vehicles versus
224,000 new vehicles last year, an increase of 12.9%. The increases in new
vehicle revenue during the three and six months ended June 30, 2000 are
attributed to acquisitions, higher pricing and unit growth.
Used vehicle sales decreased 14.7% to $1.05 billion during the three
months ended June 30, 2000 and 10.9% to $2.10 billion during the six months
ended June 30, 2000. During the quarter, the Company sold approximately 67,000
used vehicles versus 84,000 used vehicles last year, a decrease of 20.2%. During
the six months ended June 30, 2000, the Company sold 134,000 used vehicles
versus 163,000 used vehicles last year, a decrease of 17.8%. The decline in
revenue and unit volume for both periods is primarily attributable to volume
associated with the used vehicle megastores that were closed in connection with
the restructuring activities in the fourth quarter of 1999. Excluding the closed
megastores, used vehicle revenue increased approximately 2.5% and 7.1% during
the three and six months ended June 30, 2000, respectively. The increases are
primarily due to acquisitions which more than offset decreases in used vehicle
same store sales.
Fixed operations revenue increased 7.1% to $588.8 million during the
three months ended June 30, 2000 and 11.2% to $1.18 billion during the six
months ended June 30, 2000. The increase is primarily due to acquisitions and
internal growth.
Gross margins were $705.9 million and $1.38 billion for the three and
six months ended June 30, 2000, respectively, versus $706.8 million and $1.32
billion for the comparable 1999 periods. Gross margins as a percentage of
revenue were 13.2% and 13.1% for the three and six months ended June 30, 2000,
respectively, versus 14.0% and 13.7% for the comparable 1999 periods. The
decreases in gross margins as percentages of revenue are due to the same factors
which resulted in the decreases in same store gross margin percentages
previously described.
Store level selling, general and administrative expenses were $512.7
million and $1.02 billion for the three and six months ended June 30, 2000,
respectively, versus $514.3 million and $985.6 million for the comparable 1999
periods. Store level selling, general and administrative expenses as a
percentage of revenue were 9.6% and 9.7% for the three and six months ended June
30, 2000, respectively, versus 10.2% and 10.3% for the comparable 1999 periods.
The decreases in these costs as a percentage of revenue are due to the Company's
cost cutting initiatives.
Store performance margins were $193.2 million and $359.0 million for
the three and six months ended June 30, 2000, respectively, versus $192.5
million and $331.4 million for the comparable 1999 periods. Store performance
margins as percentages of revenue were 3.6% and 3.4% for the three and six
months ended June 30, 2000, respectively, versus 3.8% and 3.4% for the
comparable 1999 periods. The decrease in store performance margins for the three
months ended June 30, 2000 is a result of gross margin compression partially
offset by lower selling, general and administrative expenses.
Overhead was $31.7 million and $71.2 million for the three and six
months ended June 30, 2000, respectively, versus $37.6 million and $83.6 million
for the comparable 1999 periods. Overhead as a percentage of revenue was .6% and
.7% for the three and six months ended June 30, 2000, respectively, versus .7%
and .8% for the comparable 1999 periods. The overhead decreases in aggregate
dollars and as percentages of revenue are a result of the Company's cost cutting
initiatives. Corporate expenses which will no longer be incurred following the
spin-off of ANC Rental have been allocated to income from discontinued
operations. These allocated costs totaled approximately $4.0 million and $8.0
million for the three and six months ended June 30, 1999. Due to the
establishment of ANC Rental's corporate infrastructure and decreasing reliance
on AutoNation, allocations of corporate overhead were discontinued in 2000.
20
<PAGE> 21
Property carrying costs represent costs associated with megastore and
other properties held for sale by the Company. The Company incurred $9.1 million
and $19.9 million of property carrying costs during the three and six months
ended June 30, 2000, respectively. Expected annual carrying costs associated
with closed properties total approximately $40.0 million and are charged to
expense as incurred.
NON-OPERATING INCOME (EXPENSE)
Interest Income
Interest income was $4.9 million and $8.7 million for the three and six
months ended June 30, 2000, respectively, versus $5.3 million and $8.7 million
for the comparable 1999 periods. The decrease during the three months ended June
30, 2000 is primarily the result of lower cash balances on hand during the
periods.
Interest Expense
Interest expense was incurred primarily on borrowings under the
Company's revolving credit facilities. Interest expense was $10.4 million and
$22.4 million for the three and six months ended June 30, 2000, respectively,
versus $9.9 million and $16.6 million for the comparable 1999 periods. The
increases are primarily due to higher average borrowings and higher interest
rates. Interest expense related to vehicle inventory credit facilities is
included in cost of operations.
Other Income, Net
Other income for the three months ended June 30, 2000 includes a gain
of approximately $9.9 million on the sale of approximately 1.4 million shares of
common stock of the Company's former solid waste subsidiary, Republic Services,
Inc. As of June 30, 2000, the Company had approximately 1.7 million remaining
shares of Republic Services, Inc. with a fair value of $27.5 million included in
marketable securities.
Income Taxes
The provision for income taxes from continuing operations was $57.9
million and $96.7 million for the three and six months ended June 30, 2000,
respectively, versus $54.6 million and $87.5 million for the comparable 1999
periods. Income taxes have been provided based upon the Company's anticipated
annual effective income tax rate.
Restructuring Activities
During the fourth quarter of 1999, the Company approved a plan to
restructure certain of its operations. The restructuring plan is comprised of
the following major components: (1) exiting the used vehicle megastore business;
and (2) reducing the corporate workforce. The restructuring plan also includes
divesting of certain non-core franchised automotive dealerships. Approximately
2,000 positions were eliminated as a result of the restructuring plan of which
1,800 were megastore positions and 200 were corporate positions. These
restructuring activities resulted in pre-tax charges of $443.7 million in the
fourth quarter of 1999. These pre-tax charges include $286.9 million of asset
impairment charges; $103.3 million of reserves for residual value guarantees for
closed leased properties; $26.2 million of severance and other exit costs; and
$27.3 million of inventory related costs. The $286.9 million asset impairment
charge consists of: $244.9 million of megastore and other property impairments;
$26.6 million of goodwill impairment reserves for the divestiture of certain
non-core franchised automotive dealerships; and $15.4 million for information
systems impairments.
The Company will dispose of its closed properties and non-core
dealerships through sale to third parties. Although the Company intends to
aggressively market these properties, the ultimate disposition could exceed one
year. Revenue for the operations to be disposed was $208.3 million and $782.4
million during the six months ended June 30, 2000 and 1999, respectively.
Operating income (loss) for the operations to be disposed was $1.5 million and
$(4.1) million during the six months ended June 30, 2000 and 1999, respectively.
21
<PAGE> 22
The following summarizes activity in the Company's restructuring and
impairment reserves for the six months ended June 30, 2000:
<TABLE>
<CAPTION>
DEDUCTIONS
BALANCE AMOUNTS CHARGED ------------------- Balance
RESERVE DECEMBER 31, 1999 (CREDITED) TO INCOME CASH NON-CASH JUNE 30, 2000
------- ----------------- -------------------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Asset reserves:
Asset impairment .... $263.3 $ (2.7) $ -- $(63.1) $197.5
Inventory ........... 15.0 -- -- (15.0) --
Accrued liabilities:
Lease residual
value guarantees... 103.3 (.3) (3.6) -- 99.4
Severance and other
exit costs ........ 17.3 3.0 (15.3) -- 5.0
------ ------ ------ ------ ------
$398.9 $ -- $(18.9) $(78.1) $301.9
====== ====== ====== ====== ======
</TABLE>
During the six months ended June 30, 2000, the Company recognized gross
gains of $4.6 million and gross losses of $1.6 million related to the
disposition of closed properties. In addition, the Company recorded $3.0 million
of additional charges related to exiting the used vehicle megastore business.
Financial Condition
At June 30, 2000, the Company had $154.8 million of unrestricted cash
and $613.6 million available under its $1.5 billion unsecured revolving credit
facilities which may be used for general corporate purposes. In March 2000, the
Company entered into a new $500.0 million 364-day unsecured bank revolving
credit facility to replace the $500.0 million 364-day facility which matured in
March 2000. This facility complements the $1.0 billion unsecured bank revolving
credit facility maturing in April 2002.
The Company finances its vehicle inventory through secured financings
including floor plan facilities with manufacturer captive finance companies as
well as a $500.0 million bank-sponsored multi-seller commercial paper conduit
facility. At June 30, 2000, the Company had approximately $230.1 million of
availability under the commercial paper conduit facility. This facility
supplements the new and used vehicle inventory finance facilities provided by
vehicle manufacturer finance companies.
The Company is the lessee under a $500.0 million lease facility that
was established to acquire and develop the used vehicle megastores and other
properties. At June 30, 2000, $366.5 million was funded under this facility of
which $110.8 million has been accounted for as capital leases and $255.7 has
been accounted for as operating leases. The Company has guaranteed the residual
value of the properties under this facility which guarantee totaled
approximately $322.5 million at June 30, 2000. In connection with the Company's
1999 restructuring activities previously described, the Company accrued an
estimate of its liability under the residual value guaranty totaling
approximately $103.3 million. As of June 30, 2000, $99.4 million remained
accrued for this liability. The Company intends to fund the residual value
guarantee obligation primarily using proceeds from the sale of owned properties.
The Company securitizes installment loan receivables through a $1.7
billion commercial paper warehouse facility with certain financial institutions,
as amended. During the six months ended June 30, 2000, the Company securitized
approximately $324.8 million of loan receivables under this program, net of
retained interests. At June 30, 2000, the Company had approximately $615.3
million of capacity under this program. The Company has entered into certain
interest rate derivative transactions with certain financial institutions to
manage the impact of interest rate changes on securitized installment loan
receivables. Installment loans sold under this program are nonrecourse beyond
the Company's retained interests. Proceeds from securitizations are primarily
used to repay borrowings under the Company's revolving credit facilities and to
invest in the Company's business. The Company expects to continue to securitize
receivables under this facility and/or other programs.
22
<PAGE> 23
The Company also securitizes installment loan receivables through the
issuance of asset-backed notes through a non-consolidated special purpose entity
under a $2.0 billion shelf registration statement. Proceeds from these notes are
used to refinance installment loans previously securitized under the warehouse
facility and to securitize additional loans held by the Company. The Company
provides credit enhancement related to these notes in the form of 1%
overcollateralization, a reserve fund and a third party surety bond. At June 30,
2000, $580.1 million was outstanding under this program. In August 2000, a
non-consolidated subsidiary of the Company issued approximately $691.7 million
in additional asset-backed notes under this program. Following this transaction,
the Company had approximately $1.26 billion of capacity under its $1.7 billion
commercial paper warehouse facility.
Since the 1998 inception of the Company's Board authorized $1.75
billion cumulative share repurchase programs through June 30, 2000, the Company
has repurchased 114.4 million shares of Common Stock for an aggregate purchase
price of $1.4 billion. The Company did not repurchase any shares of its Common
Stock during the second quarter of 2000. During the first quarter of 2000, 14.3
million shares of Common Stock were acquired under the $500.0 million share
repurchase program authorized in December 1999 for an aggregate purchase price
of $106.9 million. Repurchases are made pursuant to Rule 10b-18 of the
Securities Exchange Act of 1934, as amended. The Company will continue to
evaluate share repurchases based upon financial and other investment
considerations.
In connection with the ANC Rental spin-off, the Company made certain
capital contributions to ANC Rental during the six months ended June 30, 2000.
These contributions include cash of approximately $200.0 million and the net
assets of an insurance subsidiary. The Company also entered into various
agreements with ANC Rental which set forth the terms of the distribution and
other agreements governing the Company's relationship with ANC Rental after the
spin-off. As a result of the spin-off, the Company's equity as of June 30, 2000
was reduced by the net assets of ANC Rental totaling $894.3 million. The equity
adjustment resulting from the spin-off is subject to further adjustment
resulting from changes in estimated shared assets and liabilities of AutoNation
and ANC Rental and certain other matters. However, such adjustments, if any, are
not expected to be significant.
In connection with the spin-off, the Company agreed to continue to
provide ANC Rental with guarantees and other credit enhancements with respect to
$60.0 million of letters of credit, $10.3 million of indebtedness owed to the
former owners of an acquired business and certain property and vehicle lease
obligations. The Company will receive fees for providing these guarantees
commensurate with market rates.
The Company believes that it has sufficient operating cash flow and
other financial resources available to meet its anticipated capital requirements
and obligations as they come due.
CASH FLOWS
Cash and cash equivalents decreased by $81.2 million and $142.9 million
during the six months ended June 30, 2000 and 1999, respectively. The major
components of these changes are discussed below.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash provided by operating activities was $149.8 million and $9.9
million during the six months ended June 30, 2000 and 1999, respectively.
Cash flows from operating activities include purchases of vehicle
inventory which are separately financed through secured vehicle financings.
Accordingly, the Company measures its operating cash flow including net proceeds
under these secured vehicle financings which totaled $141.9 million and $174.7
million during the six months ended June 30, 2000 and 1999, respectively.
Including net proceeds under these secured vehicle financings, the Company
generated operating cash flow of $291.7 million and $184.6 million during the
six months ended June 30, 2000 and 1999, respectively.
23
<PAGE> 24
CASH FLOWS FROM INVESTING ACTIVITIES
Cash flows from investing activities include business acquisitions and
divestitures, capital additions and other transactions as further described
below.
Cash used in business acquisitions was $192.3 million and $551.6
million for the six months ended June 30, 2000 and 1999, respectively. The
decrease in cash used in business acquisitions was primarily due to the
Company's shift in 2000 to acquire single dealerships or small dealership groups
focused in key markets in which business is already conducted as well as
strategic e-commerce acquisitions. Cash used in business acquisitions during the
six months ended June 30, 2000 includes $114.2 million in purchase price for
certain prior year automotive retail acquisitions. See "Business Combinations"
of Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note 2, Business Combinations, of notes to unaudited condensed
consolidated financial statements for a further discussion of businesses
acquired.
Capital expenditures were $52.9 million and $120.1 million during the
six months ended June 30, 2000 and 1999, respectively. The decrease is due to
the megastore closures and fewer acquisitions. The Company expects capital
expenditures in 2000 to be less than 1999 due to the megastore closures, fewer
acquisitions and other factors.
Proceeds from the sale of property and equipment and assets held for
sale were $70.8 million and $37.3 million during the six months ended June 30,
2000 and 1999, respectively. The increase is primarily due to sales of megastore
and other properties held for sale.
The Company intends to finance capital expenditures and business
acquisitions through cash flow from operations, revolving credit facilities and
other financings.
CASH FLOWS FROM FINANCING ACTIVITIES
Cash flows from financing activities during the six months ended June
30, 2000 and 1999 consisted of revolving credit and vehicle floorplan
financings, repayments of debt and share repurchases.
During the six months ended June 30, 2000 and 1999, the Company spent
approximately $106.9 million and $318.6 million, respectively to repurchase
shares of Common Stock under the Company's Board approved share repurchase
programs.
CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash used in discontinued operations was as follows during the six
months ended June 30:
2000 1999
------- -------
Automotive rental ....... $ 227.0 $ 85.1
Solid waste services..... -- 546.0
------- -------
$ 227.0 $ 631.1
======= =======
Cash used in the Company's former automotive rental business during the
six months ended June 30, 2000 consists primarily of cash used to replace
maturing letters of credit which provide credit enhancement for ANC Rental's
vehicle financing. Cash used in the Company's former discontinued solid waste
operations during the six months ended June 30, 1999 primarily consists of cash
used by RSG for acquisitions.
24
<PAGE> 25
SEASONALITY
The Company's operations generally experience higher volumes of vehicle
sales in the second and third quarters of each year in part due to consumer
buying trends and the introduction of new vehicle models. Also, demand for cars
and light trucks is generally lower during the winter months than in other
seasons, particularly in regions of the United States where dealerships may be
subject to harsh winters. Accordingly, the Company expects its revenue and
operating results to be generally lower in the first and fourth quarters as
compared to the second and third quarters.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. In June 2000, the FASB issued Statement of Financial Accounting Standards
No. 138 ("SFAS 138") which amends SFAS 133 for certain derivative instruments
and certain hedging activities. SFAS 133, as amended, is effective for fiscal
years beginning after June 15, 2000. The Company will adopt SFAS 133 beginning
January 1, 2001. The Company has not yet quantified the impact of adopting SFAS
133, as amended, on the Company's consolidated financial statements. However,
SFAS 133 could increase volatility in earnings and other comprehensive income.
DISCONTINUED OPERATIONS
AUTOMOTIVE RENTAL
On June 30, 2000, the Company completed the tax-free spin-off of ANC
Rental. Accordingly, the net assets and operating results of the Company's
former automotive rental segment have been classified as discontinued operations
for all periods presented in the accompanying unaudited condensed consolidated
financial statements. Revenue for these discontinued operations was $910.6
million and $1.72 billion for the three and six months ended June 30, 2000,
respectively. Income from these discontinued operations was $4.2 million and
$1.8 million for the three and six months ended June 30, 2000, respectively.
Income from discontinued operations during the six months ended June 30, 2000 is
net of previously estimated losses of $22.1 million which were accrued in the
fourth quarter of 1999 and $11.3 million of additional costs associated with the
spin-off recorded in the second quarter of 2000.
SOLID WASTE SERVICES
In July 1998, the Company completed an initial public offering of 36.1%
of RSG resulting in net proceeds of $1.43 billion. The Company sold
substantially all of its remaining interest in RSG in May 1999 resulting in an
after tax gain of approximately $379.3 million in the second quarter of 1999.
Accordingly, operating results of the Company's former solid waste services
segment have been classified as discontinued operations for the six months ended
June 30, 1999 in the accompanying unaudited condensed consolidated financial
statements. Revenue from these discontinued operations was $552.5 million in
1999 for the period prior to disposition. Income from these discontinued
operations, net of minority interest, was $40.4 million in 1999 for the period
prior to disposition.
25
<PAGE> 26
FORWARD-LOOKING STATEMENTS
The Company's financial condition, results of operations, cash flows
and future prospects, and the prevailing market price and performance of the
Company's common stock, may be adversely affected by a number of factors,
including the matters discussed below. Some of the statements and information
contained herein constitute "forward-looking statements" within the meaning of
the Federal Private Securities litigation Reform Act of 1995. Such
forward-looking statements describe known and unknown risks, uncertainties and
other factors which may cause the Company's actual results, performance, or
achievements to be materially different from any future results, performance, or
achievements, expressed or implied, by the forward-looking statements. Such
factors include, among other things, competition in the automotive retail
industry; the need for substantial additional capital; significant indebtedness
outstanding; the cyclical and highly seasonal nature of the automobile retail
industry and its sensitivity to changing economic conditions; consumer demand
for vehicles, automotive service and parts and other Company products and
services; the successful rollout of the Company's strategy to existing markets;
the dependence on vehicle manufacturers to approve franchised automotive
dealership acquisitions and the restrictions imposed by vehicle manufacturers on
franchised automotive dealership acquisitions and operations; the ability to
integrate and successfully operate acquired businesses and the risks associated
with such businesses; the dependence on vehicle manufacturers for inventory
supply; the level of manufacturer incentives on new vehicle sales; the ability
to retain key personnel; extensive governmental and environmental regulation;
various legal and administrative proceedings; and matters relating to imported
products.
26
<PAGE> 27
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following information about the Company's market sensitive
financial instruments constitutes a "forward-looking statement." The Company's
major market risk exposure is changing interest rates. Following the spin-off of
ANC Rental, the Company does not have any foreign operations and therefore has
no material market risk exposures relative to changes in foreign exchange rates.
The Company's policy is to manage interest rates through use of a combination of
fixed and floating rate debt. Interest rate derivatives may be used to adjust
interest rate exposures when appropriate, based upon market conditions. These
derivatives consist of interest rate swaps, caps and floors which are entered
into with a group of financial institutions with investment grade credit
ratings, thereby minimizing the risk of credit loss.
Reference is made to the Company's quantitative disclosures about
market risk as of December 31, 1999 included in the Company's Annual Report on
Form 10-K.
The Company uses interest rate swap agreements to manage the impact of
interest rate changes on borrowings under the Company's variable rate vehicle
inventory and revolving credit facilities. At June 30, 2000, notional principal
amounts related to interest rate swaps (variable to fixed rate) were $50.0
million maturing in December 2000. At June 30, 2000 the weighted average fixed
rate payment on variable to fixed rate swaps was 6.11%. Variable rates are
indexed to LIBOR.
The Company has entered into certain interest rate derivative
transactions with certain financial institutions to manage the impact of
interest rate changes on securitized installment loan receivables. These
derivative transactions consist of a series of interest rate caps and floors
with an aggregate notional amount of $1.15 billion contractually maturing
through 2006 which effectuate a variable to fixed rate swap at a weighted
average rate of 6.34%. Variable rates on the underlying portfolio are indexed to
the Commercial Paper Nonfinancial rate.
27
<PAGE> 28
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's 2000 Annual Meeting of Stockholders on May 16, 2000,
the stockholders of the Company voted upon and elected the following directors
and approved and adopted the following proposal:
(A) DIRECTOR NOMINEE VOTES CAST FOR VOTES WITHHELD
---------------- -------------- --------------
H. Wayne Huizenga 289,315,380 3,022,929
Michael J. Jackson 289,933,605 2,404,704
Harris W. Hudson 289,547,509 2,790,800
Robert J. Brown 289,881,810 2,456,499
J.P. Bryan 288,523,932 3,814,377
Rick L. Burdick 288,219,170 4,119,139
Michael G. DeGroote 289,330,061 3,008,248
George D. Johnson, Jr. 289,826,022 2,512,287
John J. Melk 289,874,832 2,463,477
Irene B. Rosenfeld 289,919,605 2,418,704
(B) To ratify the appointment of Arthur Andersen LLP as the
Company's independent public accountants for 2000 (291,513,998
votes were cast for this matter, 640,549 votes were cast against
this matter, there were 183,762 abstentions and there were no
broker non-votes).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2.1 Agreement and Plan of Merger and Reorganization, dated May 30, 1991,
by and between Republic Waste Industries, Inc., an Oklahoma
corporation, and Republic Waste Industries, Inc., a Delaware
corporation (incorporated by reference to Exhibit 3.1 to
AutoNation's Annual Report on Form 10-K for the year ended December
31, 1991).
2.2 Separation and Distribution Agreement dated June 30, 2000, between
AutoNation, Inc. and ANC Rental Corporation (incorporated by
reference to Exhibit 2.1 to AutoNation's Report on Form 8-K dated
June 30, 2000).
3.1 Third Amended and Restated Certificate of Incorporation of
AutoNation, Inc. (incorporated by reference to Exhibit 3.1 to
AutoNation's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999).
3.2 Bylaws of AutoNation, Inc., as amended to date (incorporated by
reference to Exhibit 3.2 to AutoNation's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999).
10.1* AutoNation, Inc. 1991 Stock Option Plan (as amended and restated on
April 17, 2000).
10.2* AutoNation, Inc. 1995 Employee Stock Option Plan (as amended and
restated on April 17, 2000).
10.3* AutoNation Enterprises Incorporated 1995 Employee Stock Option Plan
(as amended and restated on April 17,
2000).
10.4* AutoNation, Inc. 1997 Employee Stock Option Plan (as amended and
restated on April 17, 2000).
28
<PAGE> 29
10.5* AutoNation, Inc. 1998 Employee Stock Option Plan (as amended and
restated on April 17, 2000).
10.6* Letter Agreement dated April 18, 2000 between AutoNation, Inc. and
Craig T. Monaghan, Chief Operating Officer.
10.7 Tax Sharing Agreement dated June 30, 2000 between AutoNation, Inc.
and ANC Rental Corporation (incorporated by reference to Exhibit
10.1 to AutoNation's Report on Form 8-K dated June 30, 2000).
10.8 Benefits Agreement dated June 30, 2000 between AutoNation, Inc. and
ANC Rental Corporation (incorporated by reference to Exhibit 10.2 to
AutoNation's Report on Form 8-K dated June 30, 2000).
10.9 Reimbursement Agreement dated June 30, 2000 between AutoNation, Inc.
and ANC Rental Corporation (incorporated by reference to Exhibit
10.3 to AutoNation's Report on Form 8-K dated June 30, 2000).
27.1* Financial Data Schedule for the Six Months Ended June 30, 2000 (for
SEC use only).
(b) Reports on Form 8-K:
Form 8-K, dated May 31, 2000 (filed June 1, 2000), Item 5, reporting
that on May 31, 2000 the Board of Directors of AutoNation, Inc.
granted final approval of the spin-off of ANC Rental Corporation
("ANC Rental"). AutoNation also announced a record date for the
spin-off of June 16, 2000 and a distribution date of June 30, 2000
based upon the ratio of one share of ANC Rental common stock for
every eight shares of AutoNation common stock owned on the record
date.
-------------------------------
*Filed herewith
29
<PAGE> 30
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant, AutoNation, Inc., has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AUTONATION, INC.
By: /s/ Ronald L. Rubin
----------------------------------
Ronald L. Rubin
VICE PRESIDENT, CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
Date: August 14, 2000
30
