Segment Results
In the following table, revenue and segment income of our reportable segments are reconciled to consolidated revenue and consolidated operating income (loss), respectively. The following discussions of segment results are on a reported basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
($ in millions)
|
2021
|
|
2020
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
|
2021
|
|
2020
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
$
|
2,124.8
|
|
|
$
|
1,486.0
|
|
|
$
|
638.8
|
|
|
43.0
|
|
|
$
|
3,971.5
|
|
|
$
|
2,969.5
|
|
|
$
|
1,002.0
|
|
|
33.7
|
|
Import
|
2,175.0
|
|
|
1,325.3
|
|
|
849.7
|
|
|
64.1
|
|
|
3,944.6
|
|
|
2,687.4
|
|
|
1,257.2
|
|
|
46.8
|
|
Premium Luxury
|
2,468.5
|
|
|
1,564.8
|
|
|
903.7
|
|
|
57.8
|
|
|
4,572.0
|
|
|
3,181.6
|
|
|
1,390.4
|
|
|
43.7
|
|
Total
|
6,768.3
|
|
|
4,376.1
|
|
|
2,392.2
|
|
|
54.7
|
|
|
12,488.1
|
|
|
8,838.5
|
|
|
3,649.6
|
|
|
41.3
|
|
Corporate and other
|
210.1
|
|
|
156.9
|
|
|
53.2
|
|
|
33.9
|
|
|
394.1
|
|
|
361.5
|
|
|
32.6
|
|
|
9.0
|
|
Total consolidated revenue
|
$
|
6,978.4
|
|
|
$
|
4,533.0
|
|
|
$
|
2,445.4
|
|
|
53.9
|
|
|
$
|
12,882.2
|
|
|
$
|
9,200.0
|
|
|
$
|
3,682.2
|
|
|
40.0
|
|
Segment income(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
$
|
169.0
|
|
|
$
|
82.1
|
|
|
$
|
86.9
|
|
|
105.8
|
|
|
$
|
287.5
|
|
|
$
|
136.2
|
|
|
$
|
151.3
|
|
|
111.1
|
|
Import
|
203.7
|
|
|
88.3
|
|
|
115.4
|
|
|
130.7
|
|
|
329.6
|
|
|
154.2
|
|
|
175.4
|
|
|
113.7
|
|
Premium Luxury
|
225.7
|
|
|
89.2
|
|
|
136.5
|
|
|
153.0
|
|
|
384.2
|
|
|
169.4
|
|
|
214.8
|
|
|
126.8
|
|
Total
|
598.4
|
|
|
259.6
|
|
|
338.8
|
|
|
130.5
|
|
|
1,001.3
|
|
|
459.8
|
|
|
541.5
|
|
|
117.8
|
|
Corporate and other
|
(74.8)
|
|
|
(74.5)
|
|
|
(0.3)
|
|
|
|
|
(150.2)
|
|
|
(519.5)
|
|
|
369.3
|
|
|
|
Floorplan interest expense
|
6.6
|
|
|
16.3
|
|
|
9.7
|
|
|
|
|
16.0
|
|
|
41.8
|
|
|
25.8
|
|
|
|
Operating income (loss)
|
$
|
530.2
|
|
|
$
|
201.4
|
|
|
$
|
328.8
|
|
|
163.3
|
|
|
$
|
867.1
|
|
|
$
|
(17.9)
|
|
|
$
|
885.0
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail new vehicle unit sales:
|
Domestic
|
21,459
|
|
|
18,048
|
|
|
3,411
|
|
|
18.9
|
|
|
43,128
|
|
|
36,375
|
|
|
6,753
|
|
|
18.6
|
|
Import
|
36,136
|
|
|
23,605
|
|
|
12,531
|
|
|
53.1
|
|
|
66,979
|
|
|
48,892
|
|
|
18,087
|
|
|
37.0
|
|
Premium Luxury
|
19,569
|
|
|
12,860
|
|
|
6,709
|
|
|
52.2
|
|
|
36,418
|
|
|
25,985
|
|
|
10,433
|
|
|
40.2
|
|
|
77,164
|
|
|
54,513
|
|
|
22,651
|
|
|
41.6
|
|
|
146,525
|
|
|
111,252
|
|
|
35,273
|
|
|
31.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail used vehicle unit sales:
|
Domestic
|
28,056
|
|
|
21,043
|
|
|
7,013
|
|
|
33.3
|
|
|
52,535
|
|
|
40,930
|
|
|
11,605
|
|
|
28.4
|
|
Import
|
27,128
|
|
|
20,064
|
|
|
7,064
|
|
|
35.2
|
|
|
52,229
|
|
|
39,133
|
|
|
13,096
|
|
|
33.5
|
|
Premium Luxury
|
22,370
|
|
|
15,795
|
|
|
6,575
|
|
|
41.6
|
|
|
41,904
|
|
|
30,938
|
|
|
10,966
|
|
|
35.4
|
|
|
77,554
|
|
|
56,902
|
|
|
20,652
|
|
|
36.3
|
|
|
146,668
|
|
|
111,001
|
|
|
35,667
|
|
|
32.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Segment income represents income for each of our reportable segments and is defined as operating income less floorplan interest expense.
|
NM = Not Meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
The Domestic segment operating results included the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
($ in millions)
|
2021
|
|
2020
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
|
2021
|
|
2020
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New vehicle
|
$
|
991.3
|
|
|
$
|
761.7
|
|
|
$
|
229.6
|
|
|
30.1
|
|
|
$
|
1,926.7
|
|
|
$
|
1,500.6
|
|
|
$
|
426.1
|
|
|
28.4
|
|
Used vehicle
|
749.1
|
|
|
436.8
|
|
|
312.3
|
|
|
71.5
|
|
|
1,312.8
|
|
|
841.4
|
|
|
471.4
|
|
|
56.0
|
|
Parts and service
|
257.9
|
|
|
193.3
|
|
|
64.6
|
|
|
33.4
|
|
|
492.0
|
|
|
428.9
|
|
|
63.1
|
|
|
14.7
|
|
Finance and insurance, net
|
125.8
|
|
|
88.0
|
|
|
37.8
|
|
|
43.0
|
|
|
235.1
|
|
|
171.1
|
|
|
64.0
|
|
|
37.4
|
|
Other
|
0.7
|
|
|
6.2
|
|
|
(5.5)
|
|
|
|
|
4.9
|
|
|
27.5
|
|
|
(22.6)
|
|
|
|
Total Revenue
|
$
|
2,124.8
|
|
|
$
|
1,486.0
|
|
|
$
|
638.8
|
|
|
43.0
|
|
|
$
|
3,971.5
|
|
|
$
|
2,969.5
|
|
|
$
|
1,002.0
|
|
|
33.7
|
|
Segment income
|
$
|
169.0
|
|
|
$
|
82.1
|
|
|
$
|
86.9
|
|
|
105.8
|
|
|
$
|
287.5
|
|
|
$
|
136.2
|
|
|
$
|
151.3
|
|
|
111.1
|
|
Retail new vehicle unit sales
|
21,459
|
|
|
18,048
|
|
|
3,411
|
|
|
18.9
|
|
|
43,128
|
|
|
36,375
|
|
|
6,753
|
|
|
18.6
|
|
Retail used vehicle unit sales
|
28,056
|
|
|
21,043
|
|
|
7,013
|
|
|
33.3
|
|
|
52,535
|
|
|
40,930
|
|
|
11,605
|
|
|
28.4
|
|
Second Quarter 2021 compared to Second Quarter 2020
Domestic revenue increased during the three months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle unit volume and new and used vehicle revenue PVR. Unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly in April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.
Domestic segment income increased during the three months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle gross profit, which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in finance and insurance gross profit, which benefited from higher unit volume and an increase in finance and insurance gross profit PVR. Domestic segment income also benefited from increases in parts and service gross profit associated with the preparation of vehicles for sale and customer-pay service. Increases to Domestic segment income were partially offset by an increase in performance-driven SG&A expenses.
First Six Months 2021 compared to First Six Months 2020
Domestic revenue increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle unit volume and new and used vehicle revenue PVR. Unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly during the last two weeks of March 2020 through April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.
Domestic segment income increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle gross profit, which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in finance and insurance gross profit, which benefited from higher unit volume and an increase in finance and insurance gross profit PVR. Increases to Domestic segment income were partially offset by an increase in performance-driven SG&A expenses.
Import
The Import segment operating results included the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
($ in millions)
|
2021
|
|
2020
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
|
2021
|
|
2020
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New vehicle
|
$
|
1,184.2
|
|
|
$
|
712.6
|
|
|
$
|
471.6
|
|
|
66.2
|
|
|
$
|
2,142.2
|
|
|
$
|
1,446.5
|
|
|
$
|
695.7
|
|
|
48.1
|
|
Used vehicle
|
604.5
|
|
|
355.8
|
|
|
248.7
|
|
|
69.9
|
|
|
1,089.2
|
|
|
690.3
|
|
|
398.9
|
|
|
57.8
|
|
Parts and service
|
248.5
|
|
|
170.4
|
|
|
78.1
|
|
|
45.8
|
|
|
462.6
|
|
|
377.9
|
|
|
84.7
|
|
|
22.4
|
|
Finance and insurance, net
|
133.2
|
|
|
82.4
|
|
|
50.8
|
|
|
61.7
|
|
|
242.3
|
|
|
166.4
|
|
|
75.9
|
|
|
45.6
|
|
Other
|
4.6
|
|
|
4.1
|
|
|
0.5
|
|
|
|
|
8.3
|
|
|
6.3
|
|
|
2.0
|
|
|
|
Total Revenue
|
$
|
2,175.0
|
|
|
$
|
1,325.3
|
|
|
$
|
849.7
|
|
|
64.1
|
|
|
$
|
3,944.6
|
|
|
$
|
2,687.4
|
|
|
$
|
1,257.2
|
|
|
46.8
|
|
Segment income
|
$
|
203.7
|
|
|
$
|
88.3
|
|
|
$
|
115.4
|
|
|
130.7
|
|
|
$
|
329.6
|
|
|
$
|
154.2
|
|
|
$
|
175.4
|
|
|
113.7
|
|
Retail new vehicle unit sales
|
36,136
|
|
|
23,605
|
|
|
12,531
|
|
|
53.1
|
|
|
66,979
|
|
|
48,892
|
|
|
18,087
|
|
|
37.0
|
|
Retail used vehicle unit sales
|
27,128
|
|
|
20,064
|
|
|
7,064
|
|
|
35.2
|
|
|
52,229
|
|
|
39,133
|
|
|
13,096
|
|
|
33.5
|
|
Second Quarter 2021 compared to Second Quarter 2020
Import revenue increased during the three months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle unit volume and new and used vehicle revenue PVR. Unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly in April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.
Import segment income increased during the three months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle gross profit, which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in finance and insurance gross profit, which benefited primarily from higher unit volume and an increase in finance and insurance gross profit PVR. Import segment income also benefited from increases in parts and service gross profit associated with the preparation of vehicles for sale and customer-pay service. Increases to Import segment income were partially offset by an increase in performance-driven SG&A expenses.
First Six Months 2021 compared to First Six Months 2020
Import revenue increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle unit volume and new and used vehicle revenue PVR. Unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly during the last two weeks of March 2020 through April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.
Import segment income increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle gross profit, which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in finance and insurance gross profit, which benefited primarily from higher unit volume and an increase in finance and insurance gross profit PVR. Increases to Import segment income were partially offset by an increase in performance-driven SG&A expenses.
Premium Luxury
The Premium Luxury segment operating results included the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
($ in millions)
|
2021
|
|
2020
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
|
2021
|
|
2020
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New vehicle
|
$
|
1,252.8
|
|
|
$
|
787.0
|
|
|
$
|
465.8
|
|
|
59.2
|
|
|
$
|
2,341.7
|
|
|
$
|
1,596.1
|
|
|
$
|
745.6
|
|
|
46.7
|
|
Used vehicle
|
788.8
|
|
|
490.3
|
|
|
298.5
|
|
|
60.9
|
|
|
1,431.1
|
|
|
957.6
|
|
|
473.5
|
|
|
49.4
|
|
Parts and service
|
317.6
|
|
|
223.2
|
|
|
94.4
|
|
|
42.3
|
|
|
602.8
|
|
|
500.6
|
|
|
102.2
|
|
|
20.4
|
|
Finance and insurance, net
|
108.0
|
|
|
64.3
|
|
|
43.7
|
|
|
68.0
|
|
|
194.8
|
|
|
127.3
|
|
|
67.5
|
|
|
53.0
|
|
Other
|
1.3
|
|
|
—
|
|
|
1.3
|
|
|
|
|
1.6
|
|
|
—
|
|
|
1.6
|
|
|
|
Total Revenue
|
$
|
2,468.5
|
|
|
$
|
1,564.8
|
|
|
$
|
903.7
|
|
|
57.8
|
|
|
$
|
4,572.0
|
|
|
$
|
3,181.6
|
|
|
$
|
1,390.4
|
|
|
43.7
|
|
Segment income
|
$
|
225.7
|
|
|
$
|
89.2
|
|
|
$
|
136.5
|
|
|
153.0
|
|
|
$
|
384.2
|
|
|
$
|
169.4
|
|
|
$
|
214.8
|
|
|
126.8
|
|
Retail new vehicle unit sales
|
19,569
|
|
|
12,860
|
|
|
6,709
|
|
|
52.2
|
|
|
36,418
|
|
|
25,985
|
|
|
10,433
|
|
|
40.2
|
|
Retail used vehicle unit sales
|
22,370
|
|
|
15,795
|
|
|
6,575
|
|
|
41.6
|
|
|
41,904
|
|
|
30,938
|
|
|
10,966
|
|
|
35.4
|
|
Second Quarter 2021 compared to Second Quarter 2020
Premium Luxury revenue increased during the three months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle unit volume and new and used vehicle revenue PVR. Unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly in April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.
Premium Luxury segment income increased during the three months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle gross profit, which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in parts and service gross profit associated with customer-pay service and the preparation of vehicles for sale. Premium Luxury segment income also benefited from an increase in finance and insurance gross profit due to higher unit volume and an increase in finance and insurance gross profit PVR. Increases to Premium Luxury segment income were partially offset by an increase in performance-driven SG&A expenses.
First Six Months 2021 compared to First Six Months 2020
Premium Luxury revenue increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle unit volume and new and used vehicle revenue PVR. Unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly during the last two weeks of March 2020 through April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.
Premium Luxury segment income increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle gross profit, which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in finance and insurance gross profit, which benefited from higher unit volume and an increase in finance and insurance gross profit PVR. Premium Luxury segment income also benefited from an increase in parts and service gross profit associated with customer-pay service and the preparation of vehicles. Increases to Premium Luxury segment income were partially offset by an increase in performance-driven SG&A expenses.
Corporate and other
Corporate and other results included the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
($ in millions)
|
2021
|
|
2020
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
|
2021
|
|
2020
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Used vehicle
|
$
|
80.5
|
|
|
$
|
41.6
|
|
|
$
|
38.9
|
|
|
93.5
|
|
|
$
|
138.9
|
|
|
$
|
83.9
|
|
|
$
|
55.0
|
|
|
65.6
|
|
Parts and service
|
126.8
|
|
|
103.0
|
|
|
23.8
|
|
|
23.1
|
|
|
$
|
244.4
|
|
|
$
|
258.8
|
|
|
$
|
(14.4)
|
|
|
(5.6)
|
|
Finance and insurance, net
|
2.0
|
|
|
11.7
|
|
|
(9.7)
|
|
|
(82.9)
|
|
|
9.8
|
|
|
17.4
|
|
|
(7.6)
|
|
|
(43.7)
|
|
Other
|
0.8
|
|
|
0.6
|
|
|
0.2
|
|
|
|
|
1.0
|
|
|
1.4
|
|
|
(0.4)
|
|
|
|
Revenue
|
$
|
210.1
|
|
|
$
|
156.9
|
|
|
$
|
53.2
|
|
|
33.9
|
|
|
$
|
394.1
|
|
|
$
|
361.5
|
|
|
$
|
32.6
|
|
|
9.0
|
|
Income (loss)
|
$
|
(74.8)
|
|
|
$
|
(74.5)
|
|
|
$
|
(0.3)
|
|
|
|
|
$
|
(150.2)
|
|
|
$
|
(519.5)
|
|
|
$
|
369.3
|
|
|
|
“Corporate and other” is comprised of our other businesses, including collision centers, AutoNation USA used vehicle stores, auction operations, 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.
As of June 30, 2021, we had 72 AutoNation-branded collision centers, 6 AutoNation USA used vehicle stores, 4 AutoNation-branded automotive auction operations, and 3 parts distribution centers that service our wholesale parts sales markets for the sale of original equipment manufacturer parts. We plan to expand our AutoNation USA used vehicle stores and are targeting to have over 130 stores by the end of 2026. We opened one AutoNation USA store in the second quarter of 2021 and are on track to open four additional new stores in the second half of 2021 and 12 additional new stores in 2022. The planned expansion may be impacted by a number of variables, including customer adoption, market conditions, availability of used vehicle inventory, and our ability to identify, acquire, and build out suitable locations in a timely manner.
During the six months ended June 30, 2020, we recorded non-cash goodwill impairment charges totaling $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 non-cash franchise rights impairment charges of $57.5 million. The non-cash goodwill impairments and franchise rights impairments are reflected as Goodwill Impairment and Franchise Rights Impairment, respectively, in the accompanying Unaudited Condensed Consolidated Statements of Operations, and are reported in the “Corporate and other” category of our segment information. During the six months ended June 30, 2020, we recorded non-cash long-lived asset impairment charges associated with our aftermarket collision parts business of $5.9 million, and non-cash intangible asset impairment charges associated with our collision centers and aftermarket collision parts business of $2.4 million, both of which are reported in the “Corporate and other” category of our segment information.
Selling, General, and Administrative Expenses
Our Selling, General, and Administrative (“SG&A”) expenses consist primarily of compensation, including store and corporate salaries, commissions, and incentive-based compensation, as well as advertising (net of reimbursement-based manufacturer advertising rebates), and store and corporate overhead expenses, which include occupancy costs, legal, accounting, and professional services, and general corporate expenses. The following table presents the major components of our SG&A expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
($ in millions)
|
2021
|
|
2020
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
|
2021
|
|
2020
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
Reported:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
$
|
534.0
|
|
|
$
|
356.3
|
|
|
$
|
(177.7)
|
|
|
(49.9)
|
|
|
$
|
975.6
|
|
|
$
|
730.4
|
|
|
$
|
(245.2)
|
|
|
(33.6)
|
|
Advertising
|
42.8
|
|
|
28.1
|
|
|
(14.7)
|
|
|
(52.3)
|
|
|
79.5
|
|
|
74.4
|
|
|
(5.1)
|
|
|
(6.9)
|
|
Store and corporate overhead
|
172.1
|
|
|
163.5
|
|
|
(8.6)
|
|
|
(5.3)
|
|
|
341.7
|
|
|
343.8
|
|
|
2.1
|
|
|
0.6
|
|
Total
|
$
|
748.9
|
|
|
$
|
547.9
|
|
|
$
|
(201.0)
|
|
|
(36.7)
|
|
|
$
|
1,396.8
|
|
|
$
|
1,148.6
|
|
|
$
|
(248.2)
|
|
|
(21.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A as a % of total gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
40.3
|
|
|
44.8
|
|
|
450
|
|
|
bps
|
|
41.4
|
|
|
45.4
|
|
|
400
|
|
|
bps
|
Advertising
|
3.2
|
|
|
3.5
|
|
|
30
|
|
|
bps
|
|
3.4
|
|
|
4.6
|
|
|
120
|
|
|
bps
|
Store and corporate overhead
|
13.0
|
|
|
20.6
|
|
|
760
|
|
|
bps
|
|
14.4
|
|
|
21.4
|
|
|
700
|
|
|
bps
|
Total
|
56.5
|
|
|
68.9
|
|
|
1,240
|
|
|
bps
|
|
59.2
|
|
|
71.4
|
|
|
1,220
|
|
|
bps
|
Second Quarter 2021 compared to Second Quarter 2020
SG&A expenses increased during the three months ended June 30, 2021, as compared to the same period in 2020, largely due to a performance-driven increase in compensation expense. Additionally, gross advertising expenses increased $18.5 million, partially offset by an increase in advertising reimbursements from manufacturers of $3.8 million. As a percentage of total gross profit, SG&A expenses decreased to 56.5% during the three months ended June 30, 2021, from 68.9% in the same period in 2020, primarily due to improvements in gross profit PVR and effective cost management.
First Six Months 2021 compared to First Six Months 2020
SG&A expenses increased during the six months ended June 30, 2021, as compared to the same period in 2020, largely due to a performance-driven increase in compensation expense. Additionally, gross advertising expenses increased $8.7 million, partially offset by an increase in advertising reimbursements from manufacturers of $3.6 million. As a percentage of total gross profit, SG&A expenses decreased to 59.2% during the six months ended June 30, 2021, from 71.4% in the same period in 2020, primarily due to improvements in gross profit PVR and effective cost management.
Goodwill Impairment
During the first quarter of 2020, due to the impact of the COVID-19 pandemic on our results and the decrease in our stock price and market capitalization as of March 31, 2020, we recorded non-cash goodwill impairment charges of $318.3 million.
Franchise Rights Impairment
During the first quarter of 2020, we recorded non-cash franchise rights impairment charges of $57.5 million to reduce the carrying values of certain franchise rights to their estimated fair values.
Other (Income) Expense, Net (Operating)
During the second quarter of 2020, we recognized a gain of $3.2 million related to a legal settlement. During the first quarter of 2020, we recognized asset impairment charges of $8.5 million.
Non-Operating Income (Expense)
Floorplan Interest Expense
Second Quarter 2021 compared to Second Quarter 2020
Floorplan interest expense was $6.6 million for the three months ended June 30, 2021, compared to $16.3 million for the same period in 2020. The decrease in floorplan interest expense of $9.7 million was the result of lower average vehicle floorplan balances.
First Six Months 2021 compared to First Six Months 2020
Floorplan interest expense was $16.0 million for the six months ended June 30, 2021, compared to $41.8 million for the same period in 2020. The decrease in floorplan interest expense of $25.8 million was the result of lower average vehicle floorplan balances and lower average interest rates. Floorplan interest rates are variable and therefore increase and decrease with changes in the underlying benchmark interest rates.
Other Interest Expense
Second Quarter 2021 compared to Second Quarter 2020
Other interest expense was $20.9 million for the three months ended June 30, 2021, compared to $23.2 million for the same period in 2020. The decrease of $2.3 million was driven by lower average debt balances.
First Six Months 2021 compared to First Six Months 2020
Other interest expense was $42.1 million for the six months ended June 30, 2021, compared to $46.7 million for the same period in 2020. The decrease of $4.6 million was driven by lower average debt balances.
Other Income (Loss), Net (included in Non-Operating Income)
During the three and six months ended June 30, 2021, we recognized a gain of $5.3 million and $8.8 million, respectively, related to increases in the cash surrender value of corporate-owned life insurance (“COLI”) held in a Rabbi Trust for deferred compensation plan participants as a result of improved market performance of the underlying investments. Gains and losses related to the COLI are substantially offset by corresponding increases and decreases, respectively, in the deferred compensation obligations, which are reflected in SG&A expenses.
Additionally, in the first quarter of 2021, we sold the remaining shares of our Vroom equity investment and recorded a realized gain of $7.5 million. During the second quarters of 2021 and 2020, we recorded unrealized gains of $3.4 million and $214.7 million, respectively, related to changes in the fair values of the underlying securities of our minority equity investments. See Note 11 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.
Income Tax Provision
Income taxes are provided based upon our anticipated underlying annual blended federal and state income tax rates adjusted, as necessary, for any discrete tax matters occurring during the period. As we operate in various states, our effective tax rate is also dependent upon our geographic revenue mix.
Our effective income tax rate was 24.8% for the three months ended June 30, 2021, and 25.7% for the three months ended June 30, 2020. Our effective income tax rate was 24.7% for the six months ended June 30, 2021, and 54.7% for the six months ended June 30, 2020. The tax rate for the six months ended June 30, 2020, reflects the fact that a significant portion of the goodwill impairment charges taken in the first quarter of 2020 was not deductible for income tax purposes.
Discontinued Operations
Discontinued operations are related to stores that were sold or terminated prior to January 1, 2014. Results from discontinued operations, net of income taxes, were primarily related to carrying costs for real estate we have not yet sold associated with stores that were closed prior to January 1, 2014, and other adjustments related to disposed operations.
Liquidity and Capital Resources
We manage our liquidity to ensure access to sufficient funding at acceptable costs to fund our ongoing operating requirements and future capital expenditures while continuing to meet our financial obligations. We believe that our cash and cash equivalents, funds generated through operations, and amounts available under our revolving credit facility, commercial
paper program, and secured used vehicle floorplan facilities will be sufficient to fund our working capital requirements, service our debt, pay our tax obligations and commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future. Depending on market conditions, we may from time to time issue debt, including in private or public offerings, to augment our liquidity, to reduce our cost of capital, or for general corporate purposes.
Available Liquidity Resources
We had the following sources of liquidity available:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
June 30,
2021
|
|
December 31,
2020
|
|
|
Cash and cash equivalents
|
$
|
59.5
|
|
|
$
|
569.6
|
|
|
|
Revolving credit facility
|
$
|
1,760.3
|
|
(1)
|
$
|
1,760.3
|
|
|
|
Secured used vehicle floorplan facilities (2)
|
$
|
0.2
|
|
|
$
|
0.3
|
|
|
|
(1) At June 30, 2021, we had $39.7 million of letters of credit outstanding. In addition, we use the revolving credit facility under our credit agreement as a liquidity backstop for borrowings under our commercial paper program. We had $200.0 million commercial paper notes outstanding at June 30, 2021. See Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.
(2) Based on the eligible used vehicle inventory that could have been pledged as collateral. See Note 5 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.
In January 2021, we repaid the outstanding $300.0 million of 3.35% Senior Notes through utilization of available funds.
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 relating to insurance matters. At June 30, 2021, surety bonds, letters of credit, and cash deposits totaled $100.3 million, of which $39.7 million were letters of credit. We do not currently provide cash collateral for outstanding letters of credit.
In February 2019, we filed an automatic shelf registration statement with the SEC that enables us to offer for sale, from time to time and as the capital markets permit, an unspecified amount of common stock, preferred stock, debt securities, warrants, subscription rights, depositary shares, stock purchase contracts, units, and guarantees of debt securities.
Capital Allocation
Our capital allocation strategy is focused on growing long-term value per share. We invest capital in our business to maintain and upgrade our existing facilities and to build new facilities for existing franchises, as well as for other strategic and technology initiatives. We also deploy capital opportunistically to repurchase our common stock and/or debt, to complete acquisitions or investments, and/or build facilities for newly awarded franchises and new AutoNation USA used vehicle stores. Our capital allocation decisions will be based on factors such as the expected rate of return on our investment, the market price of our common stock versus our view of its intrinsic value, the market price of our debt, the potential impact on our capital structure, our ability to complete acquisitions that meet our market and vehicle brand criteria and return on investment threshold, and limitations set forth in our debt agreements.
Share Repurchases
Our Board of Directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary limit. A summary of shares repurchased under our stock repurchase program authorized by our Board of Directors follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
(In millions, except per share data)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Shares repurchased
|
7.5
|
|
|
—
|
|
|
11.3
|
|
|
2.5
|
|
Aggregate purchase price
|
$
|
736.1
|
|
|
$
|
—
|
|
|
$
|
1,042.2
|
|
|
$
|
80.0
|
|
Average purchase price per share
|
$
|
98.17
|
|
|
$
|
—
|
|
|
$
|
91.94
|
|
|
$
|
31.95
|
|
In July 2021, our Board of Directors increased the share repurchase authorization by $1.0 billion. As of July 19, 2021, $1.0 billion remained available for share repurchases under the program.
The decision to repurchase shares at any given point in time is based on factors such as the market price of our common stock versus our view of its intrinsic value, the potential impact on our capital structure (including compliance with our maximum leverage ratio and other financial covenants in our debt agreements as well as our available liquidity), and the expected return on competing uses of capital such as acquisitions or investments, capital investments in our current businesses, or repurchases of our debt.
Capital Expenditures
The following table sets forth information regarding our capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
(In millions)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Purchases of property and equipment, including operating lease buy-outs (1)
|
$
|
74.3
|
|
|
$
|
24.6
|
|
|
$
|
118.7
|
|
|
$
|
54.6
|
|
(1)Includes accrued construction in progress and excludes property associated with leases entered into during the year.
At June 30, 2021, we owned approximately 83% of our new vehicle franchise store locations with a net book value of $2.1 billion, as well as other properties associated with our collision centers, AutoNation USA used vehicle stores, auction operations, parts distribution centers, and other excess properties with a net book value of $502.4 million. None of these properties are mortgaged or encumbered.
We plan to expand our AutoNation USA used vehicle stores and are targeting to have over 130 stores by the end of 2026. We opened one AutoNation USA store in the second quarter of 2021 and are on track to open four additional new stores in the second half of 2021 and 12 additional new stores in 2022. We anticipate that the initial capital investment will be approximately $10 million to $11 million for each new store on average. The planned expansion may be impacted by a number of variables, including customer adoption, market conditions, availability of used vehicle inventory, and our ability to identify, acquire, and build out suitable locations in a timely manner.
Acquisitions and Divestitures
The following table sets forth information regarding cash used in business acquisitions, net of cash acquired, and cash received from business divestitures, net of cash relinquished:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
(In millions)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Cash received from (used in) business acquisitions, net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.4)
|
|
Cash received from (used in) business divestitures, net
|
$
|
2.4
|
|
|
$
|
—
|
|
|
$
|
4.3
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We divested two stores and two collision centers during the six months ended June 30, 2021. We divested one store and terminated one franchise during the six months ended June 30, 2020.
Long-Term Debt and Commercial Paper
The following table sets forth our non-vehicle long-term debt, net of debt issuance costs, as of June 30, 2021, and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Debt Description
|
|
Maturity Date
|
|
Interest Payable
|
|
June 30,
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
|
|
111.1
|
|
|
116.6
|
|
|
|
|
|
|
|
1,811.1
|
|
|
2,116.6
|
|
Less: unamortized debt discounts and debt issuance costs
|
|
(13.8)
|
|
|
(14.8)
|
|
Less: current maturities
|
|
(7.0)
|
|
|
(309.2)
|
|
Long-term debt, net of current maturities
|
|
$
|
1,790.3
|
|
|
$
|
1,792.6
|
|
In January 2021, we repaid the outstanding $300.0 million of 3.35% Senior Notes through utilization of available funds.
We had $200.0 million of commercial paper notes outstanding at June 30, 2021, and no commercial paper notes outstanding at December 31, 2020.
See Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information on our long-term debt and commercial paper.
Restrictions and Covenants
Our credit agreement, the indentures for our senior unsecured notes, and our vehicle floorplan facilities contain numerous customary financial and operating covenants that place significant restrictions on us, including our ability to incur additional indebtedness or prepay existing indebtedness, to create liens or other encumbrances, to sell (or otherwise dispose of) assets, and to merge or consolidate with other entities.
Under our credit agreement, we are required to remain in compliance with a maximum leverage ratio and maximum capitalization ratio. The leverage ratio is a contractually defined amount principally reflecting non-vehicle debt divided by a contractually defined measure of earnings with certain adjustments. The capitalization ratio is a contractually defined amount principally reflecting vehicle floorplan payable and non-vehicle debt divided by our total capitalization including vehicle floorplan payable. The specific terms of these covenants can be found in our credit agreement, which we filed with our Current Report on Form 8-K on March 26, 2020.
The indentures for our senior unsecured notes contain certain limited covenants, including limitations on liens and sale and leaseback transactions.
Our failure to comply with the covenants contained in our debt agreements could result in the acceleration of all of our indebtedness. Our debt agreements have cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness of AutoNation.
As of June 30, 2021, we were in compliance with the requirements of the financial covenants under our debt agreements. Under the terms of our credit agreement, at June 30, 2021, our leverage ratio and capitalization ratio were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
Requirement
|
|
Actual
|
Leverage ratio
|
≤ 3.75x
|
|
1.17x
|
Capitalization ratio
|
≤ 70.0%
|
|
43.3%
|
Vehicle Floorplan Payable
The components of vehicle floorplan payable are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
June 30,
2021
|
|
December 31,
2020
|
Vehicle floorplan payable - trade
|
$
|
669.5
|
|
|
$
|
1,541.7
|
|
Vehicle floorplan payable - non-trade
|
901.8
|
|
|
1,218.2
|
|
Vehicle floorplan payable
|
$
|
1,571.3
|
|
|
$
|
2,759.9
|
|
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. See Note 5 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information on our vehicle floorplan payable.
Cash Flows
The following table summarizes the changes in our cash provided by (used in) operating, investing, and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
June 30,
|
(In millions)
|
2021
|
|
2020
|
Net cash provided by operating activities
|
$
|
930.3
|
|
|
$
|
894.3
|
|
Net cash used in investing activities
|
$
|
(8.5)
|
|
|
$
|
(124.7)
|
|
Net cash used in financing activities
|
$
|
(1,431.8)
|
|
|
$
|
(554.7)
|
|
Cash Flows from Operating Activities
Our primary sources of operating cash flows result from the sale of vehicles and finance and insurance products, collections from customers for the sale of parts and services, and proceeds from vehicle floorplan payable-trade. Our primary uses of cash from operating activities are repayments of vehicle floorplan payable-trade, purchases of inventory, personnel-related expenditures, and payments related to taxes and leased properties.
Net cash provided by operating activities increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to an increase in earnings, partially offset by an increase in working capital requirements.
Cash Flows from Investing Activities
Net cash flows from investing activities consist primarily of cash used in capital additions and activity from business acquisitions, business divestitures, property dispositions, and other transactions.
Net cash used in investing activities decreased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to proceeds received from the sale of an equity security in 2021 and a decrease in investments made in equity securities, partially offset by an increase in purchases of property and equipment.
Cash Flows from Financing Activities
Net cash flows from financing activities primarily include repurchases of common stock, debt activity, and changes in vehicle floorplan payable-non-trade.
During the six months ended June 30, 2021, we repurchased 11.3 million shares of common stock for an aggregate purchase price of $1.0 billion (average purchase price per share of $91.94), including repurchases for which settlement occurred subsequent to June 30, 2021. During the six months ended June 30, 2020, we repurchased 2.5 million shares of common stock for an aggregate purchase price of $80.0 million (average purchase price per share of $31.95).
During the six months ended June 30, 2021, we had no borrowings or repayments under our revolving credit facility. During the six months ended June 30, 2020, we borrowed $1.1 billion and repaid $1.1 billion under our revolving credit facility.
During the six months ended June 30, 2021, we repaid the outstanding $300.0 million of 3.35% Senior Notes due 2021. During the six months ended June 30, 2020, we repaid the outstanding $350.0 million of 5.5% Senior Notes due 2020, issued $500.0 million aggregate principal amount of 4.75% Senior Notes due 2030, and amended and restated our existing unsecured credit agreement. Cash flows from financing activities during the six months ended June 30, 2020, reflect cash payments of $10.5 million for debt issuance costs associated with the senior note issuance and debt refinancing that are being amortized to interest expense over the terms of the related debt arrangements.
Cash flows from financing activities include changes in commercial paper notes outstanding totaling net proceeds of $200.0 million during the six months ended June 30, 2021, and net repayments of $170.0 million during the six months ended June 30, 2020, as well as changes in vehicle floorplan payable-non-trade totaling net payments of $316.9 million during the six months ended June 30, 2021, and net payments of $431.4 million during the six months ended June 30, 2020.
Forward-Looking Statements
Our business, financial condition, results of operations, cash flows, and prospects, and the prevailing market price and performance of our common stock may be adversely affected by a number of factors, including the matters discussed below. Certain statements and information set forth in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding our strategic initiatives, partnerships, or investments, including the planned expansion of our AutoNation USA used vehicle stores and our anticipated investments in connection therewith; pending acquisitions; our investments in digital and online capabilities and other brand extension strategies; the impact of the COVID-19 pandemic on our business, results of operations, and financial condition; our expectations for the future performance of our business and the automotive retail industry; as well as other written or oral statements made from time to time by us or by our authorized executive officers on our behalf that describe our objectives, goals, or plans constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact, including statements that describe our objectives, plans or goals are, or may be deemed to be, forward-looking statements. Words such as “anticipate,” “expect,” “intend,” “goal,” “plan,” “believe,” “continue,” “may,” “will,” “could,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Our forward-looking statements reflect our current expectations concerning future results and events, and they involve known and unknown risks, uncertainties and other factors that are difficult to predict and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these statements. These forward-looking statements speak only as of the date of this report, and we undertake no obligation to revise or update these statements to reflect subsequent events or circumstances. The risks, uncertainties, and other factors that our stockholders and prospective investors should consider include, but are not limited to, the following:
•The automotive retail industry is sensitive to changing economic conditions and various other factors, including, but not limited to, unemployment levels, consumer confidence, fuel prices, interest rates, and tariffs. New vehicle unit volume has recently been, and could continue to be, impacted by reduced availability of inventory partially driven by certain component shortages in the manufacturers’ supply chains. Our business and results of operations are substantially dependent on new and used vehicle sales levels in the United States and in our particular geographic markets, as well as the gross profit margins that we can achieve on our sales of vehicles, all of which are very difficult to predict.
•The COVID-19 pandemic has disrupted, and may continue to disrupt, our business, results of operations, and financial condition going forward. Future epidemics, pandemics, and other outbreaks could also disrupt our business, results of operations, and financial condition.
•Our new vehicle sales are impacted by the incentive, marketing, and other programs of vehicle manufacturers.
•We are dependent upon the success and continued financial viability of the vehicle manufacturers and distributors with which we hold franchises.
•We are subject to restrictions imposed by, and significant influence from, vehicle manufacturers that may adversely impact our business, financial condition, results of operations, cash flows, and prospects, including our ability to acquire additional stores.
•We are investing significantly in our brand extension strategy, and if our strategic initiatives are not successful, we will have incurred significant expenses without the benefit of improved financial results. The planned expansion of our AutoNation USA stores may be impacted by a number of variables, including customer adoption, market conditions, availability of used vehicle inventory, and our ability to identify, acquire, and build out suitable locations in a timely manner.
•If we are not able to maintain and enhance our retail brands and reputation or to attract consumers to our own digital channels, or if events occur that damage our retail brands, reputation, or sales channels, our business and financial results may be harmed.
•The carrying value of our minority equity investment in Waymo does not have a readily determinable fair value and is required to be adjusted for observable price changes or impairments, both of which could adversely impact our results of operations and financial condition.
•New laws, regulations, or governmental policies regarding fuel economy and greenhouse gas emission standards, or changes to existing standards, may affect vehicle manufacturers’ ability to produce cost-effective vehicles or vehicles that consumers demand, which could adversely impact our business, results of operations, financial condition, cash flow, and prospects.
•We are subject to numerous legal and administrative proceedings, which, if the outcomes are adverse to us, could materially adversely affect our business, results of operations, financial condition, cash flows, and prospects.
•Our operations are subject to extensive governmental laws and regulations. If we are found to be in purported violation of or subject to liabilities under any of these laws or regulations, or if new laws or regulations are enacted that adversely affect our operations, our business, operating results, and prospects could suffer.
•A failure of our information systems or any security breach or unauthorized disclosure of confidential information could have a material adverse effect on our business.
•Our debt agreements contain certain financial ratios and other restrictions on our ability to conduct our business, and our substantial indebtedness could adversely affect our financial condition and operations and prevent us from fulfilling our debt service obligations.
•We are subject to interest rate risk in connection with our vehicle floorplan payables, revolving credit facility, and commercial paper program that could have a material adverse effect on our profitability.
•Goodwill and other intangible assets comprise a significant portion of our total assets. We must test our goodwill and other intangible assets for impairment at least annually, which could result in a material, non-cash write-down of goodwill or franchise rights and could have a material adverse impact on our results of operations and shareholders’ equity.
•Our largest stockholders, as a result of their ownership stakes in us, may have the ability to exert substantial influence over actions to be taken or approved by our stockholders. In addition, future share repurchases and fluctuations in the levels of ownership of our largest stockholders could impact the volume of trading, liquidity, and market price of our common stock.
•Natural disasters and adverse weather events can disrupt our business.
Please refer to our most recent Annual Report on Form 10-K for additional discussion of the foregoing risks. These forward-looking statements speak only as of the date of this report, and we undertake no obligation to update any forward-looking statements to reflect subsequent events or circumstances.
Additional Information
Investors and others should note that we announce material financial information using our company website (www.autonation.com), our investor relations website (investors.autonation.com), SEC filings, press releases, public conference calls, and webcasts. Information about AutoNation, its business, and its results of operations may also be announced by posts on the following social media channels:
•AutoNation’s Twitter feed (www.twitter.com/autonation)
•Mike Jackson’s Twitter feed (www.twitter.com/CEOMikeJackson)
The information that we post on these social media channels could be deemed to be material information. As a result, we encourage investors, the media, and others interested in AutoNation to review the information that we post on these social media channels. These channels may be updated from time to time on AutoNation’s investor relations website. The information on or accessible through our websites and social media channels is not incorporated by reference in this Quarterly Report on Form 10-Q.