AutoNation, Inc. (NYSE: AN), America's largest automotive retailer, today reported third quarter 2016 net income from continuing operations of $108 million, or $1.05 per share, compared to net income from continuing operations of $119 million, or $1.05 per share, for the same period in the prior year. The Company estimates that the Takata airbag recall negatively impacted third quarter 2016 net income from continuing operations by approximately $6 million after-tax, or $0.06 per share.(1)At the end of the third quarter, approximately 14% of AutoNation's used vehicle inventory was on hold due to the Takata airbag recall.
Commenting on the quarterly results, Mike Jackson, Chairman, Chief Executive Officer and President, said, "Certain manufacturers continued disruptive marketing and sales incentives, which resulted in multi-tier pricing and were unfair for consumers as well as retailers. In the third quarter, these incentives had a significant negative impact on new vehicle volume and gross profit per new vehicle retailed."
AutoNation USA and Comprehensive Brand Extension Strategy
In 2013, the Company launched the AutoNation® retail brand from coast to coast. That branding effort has been successfully extended to AutoNation Express and AutoNation Customer Financial Service products. With the foundation set, AutoNation today announced the next phase of the Company's comprehensive brand extension rollout, which includes: AutoNation USA® stand-alone pre-owned vehicle sales and service centers, AutoNation branded parts and accessories, the expansion of AutoNation branded collision centers, and the expansion of AutoNation Auto Auctions.
Mike Jackson said, "We are pleased to announce the next phase of our comprehensive brand extension strategy, which will provide long-term growth opportunities for the Company. We have built an industry-leading brand, and we remain committed to achieving and sustaining operational excellence, while creating a peerless customer experience and enhanced services throughout the automotive retail sector."
AcquisitionsAutoNation today announced the acquisition of three Premium Luxury franchises and one collision center and the award of three Premium Luxury franchise add-points, with combined anticipated annual revenues of approximately $430 million, once the add-points are fully operational. With the addition of the six Premium Luxury franchises, AutoNation will own and operate a total of 96 Premium Luxury franchises from coast to coast.
Acquisitions
- BMW of Vista – located in San Diego, California
- 2nd BMW store in the San Diego market; 15th BMW store nationwide
- Acquired October 2016
- Represents annual revenue of approximately $60 million and 1,200 retail new and used vehicle unit sales
- Jaguar Bethesda and Land Rover Bethesda – located in Bethesda, Maryland
- 10th store in the Baltimore/D.C. market; 8th Jaguar/Land Rover store nationwide
- Largest Jaguar Land Rover showroom in the United States
- Expected to close in the fourth quarter of 2016
- Represents annual revenue of approximately $80 million and 1,000 retail new and used vehicle unit sales
- Acquisition subject to customary terms and conditions, including manufacturer approval
- Westmont Body Werks – located in Westmont, Illinois, a suburb of Chicago
- 70th AutoNation collision center nationwide
- Acquired October 2016
- Represents annual revenue of approximately $10 million
Add-Points
- BMW of Delray Beach – located in Palm Beach County, Florida
- 1st BMW franchise in South Florida; 25th Premium Luxury franchise in Florida
- Expected to open second half of 2018
- Anticipated annual revenue of approximately $180 million, once fully operational
- Jaguar West Houston and Land Rover West Houston – located in Houston, Texas
- 1st Jaguar Land Rover store in Texas; 10th Premium Luxury store in Texas
- Expected to open second quarter of 2018
- Anticipated annual revenue of approximately $100 million, once fully operational
Mike Jackson said, "These acquisitions and awarded franchises present outstanding Premium Luxury growth opportunities and enhance manufacturer brand representation in markets with excellent Premium Luxury demographics and within our existing footprint. The acquisition of Westmont Body Werks aligns with our brand extension strategy. We look forward to welcoming the BMW of Vista, Jaguar Bethesda, Land Rover Bethesda, and Westmont Body Werks customers and 165 new associates to AutoNation."
Share RepurchaseAutoNation today announced that its Board of Directors has authorized the repurchase of up to an additional $250 million of AutoNation's common stock. AutoNation has approximately $316 million total Board authorization remaining for share repurchases with the increased authorization and approximately 101 million shares outstanding as of October 26, 2016. During the third quarter of 2016, AutoNation repurchased one million shares of common stock for an aggregate purchase price of $50 million.
Segment ResultsSegment results(2) for the third quarter and first nine months of 2016 were as follows:
Third Quarter 2016 Segment Results
- Domestic - Domestic segment income(3) was $84 million compared to year-ago segment income of $95 million, a decrease of 11%.
- Import - Import segment income(3) was $79 million compared to year-ago segment income of $86 million, a decrease of 7%.
- Premium Luxury - Premium Luxury segment income(3) was $81 million compared to year-ago segment income of $85 million, a decrease of 5%.
First Nine Months 2016 Segment Results
- Domestic - Domestic segment income(3) was $247 million compared to year-ago segment income of $259 million, a decrease of 5%.
- Import - Import segment income(3) was $230 million compared to year-ago segment income of $241 million, a decrease of 4%.
- Premium Luxury - Premium Luxury segment income(3) was $257 million compared to year-ago segment income of $274 million, a decrease of 6%.
For the nine-month period ended September 30, 2016, AutoNation reported net income from continuing operations of $316 million, or $3.02 per share, compared to net income from continuing operations of $346 million, or $3.02 per share, for the same period in the prior year. AutoNation's revenue for the nine-month period ended September 30, 2016, totaled $16.1 billion, up 4% compared to $15.5 billion for the same period in the prior year.
The third quarter conference call may be accessed by telephone at (888) 769-8515 (password: AutoNation) at 11:00 a.m. Eastern Time today or on AutoNation's investor relations website at http://investors.autonation.com.
The webcast will also be available on AutoNation's website under "Events & Presentations" following the call. A playback of the conference call will be available after 1:00 p.m. Eastern Time on October 28, 2016, through November 11, 2016 by calling (888) 568-0748 (Passcode: 5481).
| (1) | The estimated impact of the Takata airbag recall includes internal estimates for lost sales and increases in wholesale losses resulting from the recall, as well as direct costs such as floorplan interest expense, insurance, and storage costs related to the impacted vehicles, taking into account the reduction in certain variable expenses. |
| (2) | AutoNation has three operating segments: Domestic, Import, and Premium Luxury. The Domestic segment is comprised of stores that sell vehicles manufactured by General Motors, Ford, and FCA US (formerly Chrysler); the Import segment is comprised of stores that sell vehicles manufactured primarily by Toyota, Honda, Nissan, and Hyundai; and the Premium Luxury segment is comprised of stores that sell vehicles manufactured primarily by Mercedes-Benz, BMW, Lexus, and Audi. |
| (3) | Segment income represents income for each of our reportable segments and is defined as operating income less floorplan interest expense. |
About AutoNation, Inc.
AutoNation, America's largest automotive retailer, through its bold leadership, innovation and its comprehensive brand extensions, is transforming the automotive industry. As of September 30, 2016, AutoNation owned and operated 371 new vehicle franchises from coast to coast. AutoNation has sold over 10 million vehicles, the first automotive retailer to reach this milestone. AutoNation's success is driven by a commitment to delivering a peerless experience through customer-focused sales and service processes. Through its Drive Pink initiative, AutoNation is committed to drive out cancer, create awareness and support critical research. AutoNation continues to be a proud supporter of the Breast Cancer Research Foundation and other cancer-related charities.
