Company Quick10K Filing
Quick10K
Autonation
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$40.10 89 $3,580
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-04-26 Earnings, Regulation FD, Exhibits
8-K 2019-04-18 Shareholder Vote
8-K 2019-02-15 Earnings, Officers, Regulation FD, Exhibits
8-K 2019-01-17 Officers, Exhibits
8-K 2019-01-17 Officers, Exhibits
8-K 2019-01-03 Officers, Regulation FD, Exhibits
8-K 2018-12-14 Officers, Regulation FD, Exhibits
8-K 2018-10-30 Earnings, Regulation FD, Exhibits
8-K 2018-09-17 Officers, Regulation FD, Exhibits
8-K 2018-08-01 Earnings, Exhibits
8-K 2018-04-19 Shareholder Vote, Regulation FD, Exhibits
8-K 2018-02-01 Earnings, Exhibits
8-K 2018-01-16 Earnings, Exhibits
APTV Aptiv 20,090
NSP Insperity 4,830
LIVN Livanova 3,430
TEX Terex 2,210
CTRL Control4 636
TOUR Tuniu 532
KDMN Kadmon Holdings 279
MPB Mid Penn Bancorp 214
OTIV On Track Innovations 22
NGLD Nevada Canyon Gold 0
AN 2019-03-31
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 an10q33119ex311.htm
EX-31.2 an10q33119ex312.htm
EX-32.1 an10q33119ex321.htm
EX-32.2 an10q33119ex322.htm

Autonation Earnings 2019-03-31

AN 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
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 or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
200 SW 1st Avenue, Fort Lauderdale, Florida
 
33301
(Address of principal executive offices)
 
(Zip Code)
(954) 769-6000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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   þ   No   ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   þ   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
  
Accelerated filer   o
Non-accelerated filer o  
  
Smaller reporting company   o
 
 
Emerging growth company   o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨   No  þ
As of April 24, 2019, the registrant had 89,208,853 shares of common stock outstanding.
 
 
 
 
 



AUTONATION, INC.
FORM 10-Q
TABLE OF CONTENTS
 
 
 
Page
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Item 1A.
Item 2.
Item 6.



Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share data)
 
 
March 31,
2019
 
December 31,
2018
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
48.7

 
$
48.6

Receivables, net
782.7

 
976.2

Inventory
3,771.4

 
3,650.5

Other current assets
229.0

 
208.7

Total Current Assets
4,831.8

 
4,884.0

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $1.4 billion and $1.3 billion, respectively
3,129.6

 
3,155.3

OPERATING LEASE ASSETS
343.4

 

GOODWILL
1,509.8

 
1,513.2

OTHER INTANGIBLE ASSETS, NET
596.7

 
595.4

OTHER ASSETS
503.0

 
517.2

Total Assets
$
10,914.3

 
$
10,665.1

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Vehicle floorplan payable - trade
$
2,453.7

 
$
2,388.0

Vehicle floorplan payable - non-trade
1,577.4

 
1,609.7

Accounts payable
269.2

 
306.2

Commercial paper
470.0

 
630.0

Current maturities of long-term debt
393.5

 
44.3

Other current liabilities
734.7

 
679.9

Total Current Liabilities
5,898.5

 
5,658.1

LONG-TERM DEBT, NET OF CURRENT MATURITIES
1,575.9

 
1,926.2

NONCURRENT OPERATING LEASE LIABILITIES
315.0

 

DEFERRED INCOME TAXES
90.6

 
89.8

OTHER LIABILITIES
248.5

 
275.0

COMMITMENTS AND CONTINGENCIES (Note 15)

 

SHAREHOLDERS’ EQUITY:
 
 
 
Preferred stock, par value $0.01 per share; 5,000,000 shares authorized; none issued

 

Common stock, par value $0.01 per share; 1,500,000,000 shares authorized; 102,562,149 shares issued at March 31, 2019, and December 31, 2018, including shares held in treasury
1.0

 
1.0

Additional paid-in capital
24.7

 
20.8

Retained earnings
3,330.3

 
3,238.3

Treasury stock, at cost; 13,357,532 and 12,540,065 shares held, respectively
(570.2
)
 
(544.1
)
Total Shareholders’ Equity
2,785.8

 
2,716.0

Total Liabilities and Shareholders’ Equity
$
10,914.3

 
$
10,665.1


See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


1

Table of Contents

AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
 
Three Months Ended
 
March 31,
 
2019
 
2018
Revenue:
 
 
 
New vehicle
$
2,496.7

 
$
2,802.3

Used vehicle
1,339.6

 
1,330.5

Parts and service
876.7

 
858.5

Finance and insurance, net
236.5

 
240.8

Other
32.3

 
27.8

TOTAL REVENUE
4,981.8

 
5,259.9

Cost of sales:
 
 
 
New vehicle
2,374.8

 
2,672.6

Used vehicle
1,249.1

 
1,244.7

Parts and service
477.8

 
473.0

Other
30.9

 
27.3

TOTAL COST OF SALES (excluding depreciation shown below)
4,132.6

 
4,417.6

Gross profit:
 
 
 
New vehicle
121.9

 
129.7

Used vehicle
90.5

 
85.8

Parts and service
398.9

 
385.5

Finance and insurance
236.5

 
240.8

Other
1.4

 
0.5

TOTAL GROSS PROFIT
849.2

 
842.3

Selling, general, and administrative expenses
623.0

 
626.8

Depreciation and amortization
44.1

 
40.0

Other income, net
(8.7
)
 
(10.3
)
OPERATING INCOME
190.8

 
185.8

Non-operating income (expense) items:
 
 
 
Floorplan interest expense
(39.0
)
 
(28.3
)
Other interest expense
(27.8
)
 
(32.3
)
Interest income
0.2

 
0.2

Other income, net
1.9

 
0.8

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
126.1

 
126.2

Income tax provision
34.0

 
32.9

NET INCOME FROM CONTINUING OPERATIONS
92.1

 
93.3

Income (loss) from discontinued operations, net of income taxes
(0.1
)
 
0.4

NET INCOME
$
92.0

 
$
93.7

BASIC EARNINGS (LOSS) PER SHARE:
 
 
 
Continuing operations
$
1.02

 
$
1.01

Discontinued operations
$

 
$

Net income
$
1.02

 
$
1.02

Weighted average common shares outstanding
90.5

 
92.1

DILUTED EARNINGS (LOSS) PER SHARE:
 
 
 
Continuing operations
$
1.02

 
$
1.01

Discontinued operations
$

 
$

Net income
$
1.01

 
$
1.01

Weighted average common shares outstanding
90.7

 
92.7

COMMON SHARES OUTSTANDING, net of treasury stock, at period end
89.2

 
91.3

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


2

Table of Contents

AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In millions, except share data)
 
 
Three months ended March 31, 2019
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock
 
Total
 
Shares
 
Amount
 
 
 
 
BALANCE AT DECEMBER 31, 2018
102,562,149

 
$
1.0

 
$
20.8

 
$
3,238.3

 
$
(544.1
)
 
$
2,716.0

Net income

 

 

 
92.0

 

 
92.0

Repurchases of common stock

 

 

 

 
(33.5
)
 
(33.5
)
Stock-based compensation expense

 

 
13.7

 

 

 
13.7

Shares awarded under stock-based compensation plans, net of shares withheld for taxes

 

 
(9.8
)
 

 
7.4

 
(2.4
)
BALANCE AT MARCH 31, 2019
102,562,149

 
$
1.0

 
$
24.7

 
$
3,330.3

 
$
(570.2
)
 
$
2,785.8


 
Three months ended March 31, 2018
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock
 
Total
 
Shares
 
Amount
 
 
 
 
BALANCE AT DECEMBER 31, 2017
102,562,149

 
$
1.0

 
$
4.0

 
$
2,832.2

 
$
(467.9
)
 
$
2,369.3

Net income

 

 

 
93.7

 

 
93.7

Repurchases of common stock

 

 

 

 
(26.6
)
 
(26.6
)
Stock-based compensation expense

 

 
14.3

 

 

 
14.3

Shares awarded under stock-based compensation plans, net of shares withheld for taxes

 

 
(2.2
)
 

 
13.3

 
11.1

Cumulative effect of change in accounting principle - revenue recognition

 

 

 
10.1

 

 
10.1

BALANCE AT MARCH 31, 2018
102,562,149

 
$
1.0

 
$
16.1

 
$
2,936.0

 
$
(481.2
)
 
$
2,471.9



See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.



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Table of Contents

AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 
 
Three Months Ended
 
March 31,
 
2019
 
2018
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
 
 
 
Net income
$
92.0

 
$
93.7

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
(Income) loss from discontinued operations
0.1

 
(0.4
)
Depreciation and amortization
44.1

 
40.0

Amortization of debt issuance costs and accretion of debt discounts
1.3

 
1.7

Stock-based compensation expense
13.7

 
14.3

Deferred income tax provision
0.8

 
1.0

Net gain related to business/property dispositions
(8.3
)
 
(12.2
)
Non-cash impairment charges
0.2

 
1.3

Other
(2.0
)
 
(0.1
)
(Increase) decrease, net of effects from business combinations and divestitures:
 
 
 
Receivables
193.3

 
214.6

Inventory
(141.4
)
 
(177.7
)
Other assets
33.2

 
(74.2
)
Increase (decrease), net of effects from business combinations and divestitures:
 
 
 
Vehicle floorplan payable - trade, net
65.7

 
63.6

Accounts payable
(35.2
)
 
(0.5
)
Other liabilities
2.2

 
33.6

Net cash provided by continuing operations
259.7

 
198.7

Net cash provided by discontinued operations

 

Net cash provided by operating activities
259.7

 
198.7

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
 
 
 
Purchases of property and equipment
(60.0
)
 
(101.5
)
Proceeds from assets held for sale

 
1.8

Insurance recoveries on property and equipment
0.3

 

Cash received from business divestitures, net of cash relinquished
17.4

 
89.2

Cash used in business acquisitions, net of cash acquired
(4.3
)
 
(1.9
)
Other
(2.0
)
 
(0.8
)
Net cash used in continuing operations
(48.6
)
 
(13.2
)
Net cash used in discontinued operations

 

Net cash used in investing activities
(48.6
)
 
(13.2
)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


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Table of Contents

AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Continued)
 
 
Three Months Ended
 
March 31,
 
2019
 
2018
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
 
 
 
Repurchases of common stock
(33.4
)
 
(23.3
)
Net payments of commercial paper
(160.0
)
 
(60.0
)
Net payments of vehicle floorplan payable - non-trade
(12.5
)
 
(124.2
)
Payments of other debt obligations
(2.6
)
 
(1.2
)
Proceeds from the exercise of stock options
0.3

 
13.3

Payments of tax withholdings for stock-based awards
(2.7
)
 
(2.3
)
Net cash used in continuing operations
(210.9
)
 
(197.7
)
Net cash used in discontinued operations

 

Net cash used in financing activities
(210.9
)
 
(197.7
)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
0.2

 
(12.2
)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at beginning of period
49.4

 
71.1

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at end of period
$
49.6

 
$
58.9


See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.




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Table of Contents

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share data)
 
1.
INTERIM FINANCIAL STATEMENTS
Business and Basis of Presentation
AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of March 31, 2019, we owned and operated 326 new vehicle franchises from 239 stores located in the United States, predominantly in major metropolitan markets in the Sunbelt region. Our stores sell 33 different new vehicle brands. The core brands of new vehicles that we sell, representing approximately 92% of the new vehicles that we sold during the three months ended March 31, 2019, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, FCA US, Mercedes-Benz, BMW, Nissan, and Volkswagen (including Audi and Porsche). As of March 31, 2019, we also owned and operated 83 AutoNation-branded collision centers, and together with our vehicle dealerships, our AutoNation USA stores, our automotive auctions, and our parts distribution centers, we owned and operated over 325 locations coast to coast.
We offer a diversified range of automotive products and services, including new vehicles, used vehicles, “parts and service,” which includes automotive repair and maintenance services as well as wholesale parts and collision businesses, and automotive “finance and insurance” products, which include vehicle service and other protection products, as well as the arranging of financing for vehicle purchases through third-party finance sources. For convenience, the terms “AutoNation,” “Company,” and “we” are used to refer collectively to AutoNation, Inc. and its subsidiaries, unless otherwise required by the context. Our dealership operations are conducted by our subsidiaries.
The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of AutoNation, Inc. and its subsidiaries; intercompany accounts and transactions have been eliminated. The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Additionally, operating results for interim periods are not necessarily indicative of the results that can be expected for a full year. The Unaudited Condensed Consolidated Financial Statements herein should be read in conjunction with our audited Consolidated Financial Statements and notes thereto included within our most recent Annual Report on Form 10-K. These Unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to fairly state, in all material respects, our financial position and results of operations for the periods presented.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ materially from these estimates. We periodically evaluate estimates and assumptions used in the preparation of the financial statements and make changes on a prospective basis when adjustments are necessary. The critical accounting estimates made in the accompanying Unaudited Condensed Consolidated Financial Statements include certain assumptions related to goodwill, other intangible assets, and accruals for chargebacks against revenue recognized from the sale of finance and insurance products. Other significant accounting estimates include certain assumptions related to long-lived assets, assets held for sale, accruals related to self-insurance programs, certain legal proceedings, and estimated tax liabilities.
Recent Accounting Pronouncements
Accounting for Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update (ASC Topic 842) that amends the accounting guidance on leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The FASB also subsequently issued amendments to the standard, including providing an additional and optional


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Table of Contents
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

transition method to adopt the new standard, described below, as well as certain practical expedients related to land easements and lessor accounting.
The accounting standard update originally required the use of a modified retrospective approach reflecting the application of the standard to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements with the option to elect certain practical expedients. A subsequent amendment to the standard provides an additional and optional transition method that allows entities to initially apply the new leases standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP (ASC Topic 840) if the optional transition method is elected. The new accounting standard is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. We adopted this accounting standard effective January 1, 2019, using the optional transition method with no restatement of comparative periods. Therefore, the comparative information has not been adjusted and continues to be reported under ASC Topic 840. Our adoption of the new standard did not result in a cumulative effect adjustment to retained earnings.

We elected certain practical expedients available under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification of our existing leases.We did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us. Consequently, on adoption, we recognized additional operating liabilities of $358.1 million and ROU assets of $344.6 million. The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. As a result, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and we did not recognize ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also elected the practical expedient to not separate lease and non-lease components of leases for the majority of our classes of underlying assets. See Note 7 for additional information on our leases.

2.    REVENUE RECOGNITION
Disaggregation of Revenue
The significant majority of our revenue is from contracts with customers. Taxes assessed by governmental authorities that are directly imposed on revenue transactions are excluded from revenue. In the following table, revenue is disaggregated by major lines of goods and services and timing of transfer of goods and services. We have determined that these categories depict how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors. The table below also includes a reconciliation of the disaggregated revenue with our reportable segments.
 
 
Three Months Ended March 31, 2019
 
 
Domestic
 
Import
 
Premium Luxury
 
Corporate and other(1)
 
Total
Major Goods/Service Lines
 
 
 
 
 
 
 
 
 
 
New vehicle
 
$
781.0

 
$
820.2

 
$
895.5

 
$

 
$
2,496.7

Used vehicle
 
443.4

 
369.5

 
496.7

 
30.0

 
1,339.6

Parts and service
 
236.3

 
220.2

 
278.2

 
142.0

 
876.7

Finance and insurance, net
 
80.4

 
84.5

 
61.6

 
10.0

 
236.5

Other
 
27.7

 
1.7

 
2.1

 
0.8

 
32.3

 
 
$
1,568.8

 
$
1,496.1

 
$
1,734.1

 
$
182.8

 
$
4,981.8

 
 
 
 
 
 
 
 
 
 
 
Timing of Revenue Recognition
 
 
 
 
 
 
 
 
 
 
Goods and services transferred at a point in time
 
$
1,398.1

 
$
1,324.8

 
$
1,497.2

 
$
92.7

 
$
4,312.8

Goods and services transferred over time(2)
 
170.7

 
171.3

 
236.9

 
90.1

 
669.0

 
 
$
1,568.8

 
$
1,496.1

 
$
1,734.1

 
$
182.8

 
$
4,981.8

 
 
 
 
 
 
 
 
 
 
 


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Table of Contents
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

 
 
Three Months Ended March 31, 2018
 
 
Domestic
 
Import
 
Premium Luxury
 
Corporate and other(1)
 
Total
Major Goods/Service Lines
 
 
 
 
 
 
 
 
 
 
New vehicle
 
$
933.6

 
$
955.8

 
$
912.9

 
$

 
$
2,802.3

Used vehicle
 
462.8

 
366.8

 
478.0

 
22.9

 
1,330.5

Parts and service
 
270.5

 
234.3

 
268.6

 
85.1

 
858.5

Finance and insurance, net
 
85.8

 
89.3

 
58.0

 
7.7

 
240.8

Other
 
21.0

 
6.4

 
0.3

 
0.1

 
27.8

 
 
$
1,773.7

 
$
1,652.6

 
$
1,717.8

 
$
115.8

 
$
5,259.9

 
 
 
 
 
 
 
 
 
 
 
Timing of Revenue Recognition
 
 
 
 
 
 
 
 
 
 
Goods and services transferred at a point in time
 
$
1,602.8

 
$
1,475.2

 
$
1,492.2

 
$
30.9

 
$
4,601.1

Goods and services transferred over time(2)
 
170.9

 
177.4

 
225.6

 
84.9

 
658.8

 
 
$
1,773.7

 
$
1,652.6

 
$
1,717.8

 
$
115.8

 
$
5,259.9

 
 
 
 
 
 
 
 
 
 
 
(1) Corporate and other is comprised of our other businesses, including collision centers, auction operations, AutoNation USA stand-alone used vehicle sales and service centers, and parts distribution centers.
(2) Represents revenue recognized during the period for automotive repair and maintenance services.


Transaction Price Allocated to Remaining Performance Obligations
We sell a vehicle maintenance program (the AutoNation Vehicle Care Program or “VCP”) under which a customer purchases a specific number of maintenance services to be redeemed at an AutoNation location over a five-year term from the date of purchase. We satisfy our performance obligations related to this program and recognize revenue as the maintenance services are rendered, since the customer benefits when we have completed the maintenance service. The following table includes estimated revenue expected to be recognized in the future related to VCP performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.
 
 
Revenue Expected to Be Recognized by Period
 
 
Total
 
Less Than 1 Year
 
1 - 3 Years
 
3 - 5 Years
Revenue expected to be recognized on VCP contracts sold as of period end
 
$
88.0

 
$
30.5

 
$
43.2

 
$
14.3



As a practical expedient, since automotive repair and maintenance services are performed within one year or less, we do not disclose estimated revenue expected to be recognized in the future for automotive repair and maintenance performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period or when we expect to recognize such revenue.

Contract Assets and Liabilities
When the timing of our provision of goods or services is different from the timing of the payments made by our customers, we recognize either a contract asset (performance precedes contractual due date) or a contract liability (customer payment precedes performance). Contract assets primarily relate to our right to consideration for work in process not yet billed at the reporting date associated with automotive repair and maintenance services, as well as our estimate of variable consideration that has been included in the transaction price for certain finance and insurance products (retrospective commissions). These contract assets are reclassified to receivables when the right to consideration becomes unconditional. Contract liabilities primarily relate to upfront payments received from customers for the sale of VCP maintenance contracts for which our performance obligations are satisfied, and revenue is recognized, as each underlying service of the multi-year contract is completed during the contract term.



8

Table of Contents
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Our receivables from contracts with customers are included in Receivables, net, our current contract asset is included with Other Current Assets, our long-term contract asset is included with Other Assets, our current contract liability is included with Other Current Liabilities, and our long-term contract liability is included with Other Long-Term Liabilities in our consolidated balance sheet.

The opening and closing balances of our receivables from contracts with customers and our current and long-term contract assets and contract liabilities are as follows:
 
March 31, 2019
 
December 31, 2018
Receivables from contracts with customers, net
$
567.4

 
$
706.7

Contract Asset (Current)
$
26.0

 
$
28.2

Contract Asset (Long-Term)
$
9.0

 
$
17.4

Contract Liability (Current)
$
31.3

 
$
31.6

Contract Liability (Long-Term)
$
57.5

 
$
61.9

 
Three Months Ended March 31, 2019
Revenue recognized in the period from:
 
Amounts included in contract liability at the beginning of the period
$
13.0

Performance obligations satisfied in previous periods
$
4.6


The differences between the opening and closing balances of our contract assets and contract liabilities primarily result from the timing differences between our performance and the customer’s payment, as well as changes in the estimated transaction price related to variable consideration that was constrained for performance obligations satisfied in previous periods. Other significant changes include contract assets of $24.4 million reclassified to receivables.

3.
EARNINGS PER SHARE
Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are to be included in the computation of earnings per share (“EPS”) under the two-class method. Our restricted stock awards are considered participating securities because they contain non-forfeitable rights to dividends. As the number of shares granted under such awards that have not yet vested is immaterial, all earnings per share amounts reflect such shares as if they were fully vested shares and the disclosures associated with the two-class method are not presented. Restricted stock unit (“RSU”) awards are not considered participating securities as they do not contain non-forfeitable rights to dividends.
Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period, including outstanding unvested restricted stock awards and vested RSU awards. Diluted EPS is computed by dividing net income by the weighted average number of shares outstanding, noted above, adjusted for the dilutive effect of stock options and unvested RSU awards.


9

Table of Contents
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

The following table presents the calculation of basic and diluted EPS:
 
Three Months Ended
 
March 31,
 
2019
 
2018
Net income from continuing operations
$
92.1

 
$
93.3

Income (loss) from discontinued operations, net of income taxes
(0.1
)
 
0.4

Net income
$
92.0

 
$
93.7

 
 
 
 
Weighted average common shares outstanding used in calculating basic EPS
90.5

 
92.1

Effect of dilutive stock options and unvested RSUs
0.2

 
0.6

Weighted average common shares outstanding used in calculating diluted EPS
90.7

 
92.7

 
 
 
 
Basic EPS amounts(1):
 
 
 
Continuing operations
$
1.02

 
$
1.01

Discontinued operations
$

 
$

Net income
$
1.02

 
$
1.02

 
 
 
 
Diluted EPS amounts(1):
 
 
 
Continuing operations
$
1.02

 
$
1.01

Discontinued operations
$

 
$

Net income
$
1.01

 
$
1.01

 
 
 
 
(1) Earnings per share amounts are calculated discretely and therefore may not add up to the total due to rounding.

A summary of anti-dilutive equity instruments excluded from the computation of diluted earnings per share is as follows:
 
Three Months Ended
 
March 31,
 
2019
 
2018
Anti-dilutive equity instruments excluded from the computation of diluted earnings per share
2.8

 
1.4



4.
RECEIVABLES, NET
The components of receivables, net of allowance for doubtful accounts, are as follows:
 
March 31,
2019
 
December 31,
2018
Trade receivables
$
132.7

 
$
130.4

Manufacturer receivables
198.5

 
242.3

Other
32.4

 
31.4

 
363.6

 
404.1

Less: allowances for doubtful accounts
(4.3
)
 
(4.6
)
 
359.3

 
399.5

Contracts-in-transit and vehicle receivables
423.4

 
568.6

Income taxes receivable (see Note 9)

 
8.1

Receivables, net
$
782.7

 
$
976.2





10

Table of Contents
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Trade receivables represent amounts due for parts and services that have been delivered or sold, excluding amounts due from manufacturers, as well as receivables from finance organizations for commissions on the sale of finance and insurance products. Manufacturer receivables represent amounts due from manufacturers for holdbacks, rebates, incentives, floorplan assistance, and warranty claims. Contracts-in-transit and vehicle receivables primarily represent receivables from financial institutions for the portion of the vehicle sales price financed by our customers.
We evaluate our receivables for collectability based on the age of receivables and past collection experience.

5.
INVENTORY AND VEHICLE FLOORPLAN PAYABLE
The components of inventory are as follows:
 
March 31,
2019
 
December 31,
2018
New vehicles
$
3,040.9

 
$
2,874.8

Used vehicles
494.4

 
553.8

Parts, accessories, and other
236.1

 
221.9

Inventory
$
3,771.4

 
$
3,650.5



The components of vehicle floorplan payable are as follows:
 
March 31,
2019
 
December 31,
2018
Vehicle floorplan payable - trade
$
2,453.7

 
$
2,388.0

Vehicle floorplan payable - non-trade
1,577.4

 
1,609.7

Vehicle floorplan payable
$
4,031.1

 
$
3,997.7


Vehicle floorplan payable-trade reflects amounts borrowed to finance the purchase of specific new and, to a lesser extent, used vehicle inventories with the corresponding manufacturers’ captive finance subsidiaries (“trade lenders”). Vehicle floorplan payable-non-trade represents amounts borrowed to finance the purchase of specific new and, to a lesser extent, used vehicle inventories with non-trade lenders, as well as amounts borrowed under our secured used vehicle floorplan facilities. Changes in vehicle floorplan payable-trade are reported as operating cash flows and changes in vehicle floorplan payable-non-trade are reported as financing cash flows in the accompanying Unaudited Condensed Consolidated Statements of Cash Flows.
Our inventory costs are generally reduced by manufacturer holdbacks, incentives, floorplan assistance, and non-reimbursement-based manufacturer advertising rebates, while the related vehicle floorplan payables are reflective of the gross cost of the vehicle. The vehicle floorplan payables, as shown in the above table, will generally also be higher than the inventory cost due to the timing of the sale of a vehicle and payment of the related liability.
Vehicle floorplan facilities are due on demand, but in the case of new vehicle inventories, are generally paid within several business days after the related vehicles are sold. Our manufacturer agreements generally allow the manufacturer to draft against new vehicle floorplan facilities so the lender funds the manufacturer directly for the purchase of new vehicle inventory. Vehicle floorplan facilities are primarily collateralized by vehicle inventories and related receivables.
Our new vehicle floorplan facilities utilize LIBOR-based interest rates, which averaged 4.0% for the three months ended March 31, 2019, and 3.1% for the three months ended March 31, 2018. At March 31, 2019, the aggregate capacity under our new vehicle floorplan facilities to finance our new vehicle inventory was approximately $4.9 billion, of which $3.7 billion had been borrowed.
Our used vehicle floorplan facilities utilize LIBOR-based interest rates, which averaged 3.9% for the three months ended March 31, 2019, and 3.1% for the three months ended March 31, 2018. At March 31, 2019, the aggregate capacity under our used vehicle floorplan facilities with various lenders to finance a portion of our used vehicle inventory was $515.0 million, of which $377.5 million had been borrowed. The remaining borrowing capacity of $137.5 million was limited to $0.6 million based on the eligible used vehicle inventory that could have been pledged as collateral.



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AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

6.
GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill and intangible assets, net, consist of the following:
 
March 31,
2019
 
December 31,
2018
Goodwill
$
1,509.8

 
$
1,513.2

 
 
 
 
Franchise rights - indefinite-lived
$
580.1

 
$
580.1

Other intangibles
23.9

 
22.2

 
604.0

 
602.3

Less: accumulated amortization
(7.3
)
 
(6.9
)
Other intangible assets, net
$
596.7

 
$
595.4


We are scheduled to complete our annual impairment tests of our goodwill and franchise rights as of April 30, 2019.

7.     LEASES
General description
The significant majority of leases that we enter into are for real estate. We lease numerous facilities relating to our operations, including primarily for automobile showrooms, display lots, service facilities, collision repair centers, supply facilities, automobile storage lots, parking lots, offices, and our corporate headquarters. Leases for real property have terms ranging from one to twenty-five years. We also lease various types of equipment, including security cameras, diagnostic equipment, copiers, key-cutting machines, and postage machines, among others. Equipment leases generally have terms ranging from one to five years. In addition, we lease certain vehicles from vehicle manufacturers to provide our service customers with the use of a vehicle while their vehicles are being serviced at our dealerships. Service loaner vehicle leases generally have terms ranging from six to eighteen months, and we typically purchase the service loaner vehicles at the end of the lease.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We do not have any significant leases that have not yet commenced but that create significant rights and obligations for us. We have elected the practical expedient under ASC 842 to not separate lease and nonlease components for the following classes of underlying assets: real estate, office equipment, service loaner vehicles, and marketing-related assets (e.g., billboards).

Our real estate and equipment leases often require that we pay maintenance in addition to rent. Additionally, our real estate leases generally require payment of real estate taxes and insurance. Maintenance, real estate taxes, and insurance payments are generally variable and based on actual costs incurred by the lessor. Therefore, these amounts are not included in the consideration of the contract when determining the right-of-use (“ROU”) asset and lease liability, but are reflected as variable lease expenses for those classes of underlying assets for which we have elected the practical expedient to not separate lease and nonlease components.
Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. We rent or sublease certain real estate to third parties, which are primarily operating leases.
Variable lease payments
A majority of our lease agreements include fixed rental payments. Certain of our lease agreements include fixed rental payments that are adjusted periodically for changes in the Consumer Price Index (“CPI”). Payments based on a change in an index or a rate are not considered in the determination of lease payments for purposes of measuring the related lease liability. While lease liabilities are not remeasured as a result of changes to the CPI, changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments are incurred.
Options to extend or terminate leases
Most of our real estate leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The exercise of lease renewal options is at our sole discretion. If it is reasonably certain that we


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AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

will exercise such options, the periods covered by such options are included in the lease term and are recognized as part of our ROU assets and lease liabilities. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Discount rate
For our incremental borrowing rate, we generally use a portfolio approach to determine the discount rate for leases with similar characteristics. We determine discount rates based on the rates of our unsecured borrowings, which are then adjusted for the appropriate lease term and the effects of full collateralization.

Leases
 
Classification
 
March 31, 2019
Assets
 
 
 
 
Operating
 
Operating Lease Assets
 
$
343.4

Finance
 
Property and Equipment, Net and Other Assets
 
101.4

Total right-of-use assets
 
 
 
$
444.8

 
 
 
 
 
Liabilities
 
 
 
 
Current
 
 
 
 
Operating
 
Other Current Liabilities
 
$
41.1

Finance
 
Current Maturities of Long-Term Debt and Vehicle Floorplan Payable - Trade
 
66.4

Noncurrent
 
 
 
 
Operating
 
Noncurrent Operating Lease Liabilities
 
315.0

Finance
 
Long-Term Debt, Net of Current Maturities
 
86.6

Total lease liabilities
 
 
 
$
509.1


 
 
 
 
Three Months Ended
Lease cost
 
Classification
 
March 31, 2019
Operating lease cost
 
Selling, general, and administrative expenses
 
$
15.2

Finance lease cost:
 
 
 
 
Amortization of ROU assets
 
Depreciation and amortization
 
2.7

Interest on lease liabilities
 
Other interest expense and floorplan interest expense
 
2.2

Short-term lease cost (1)
 
Selling, general, and administrative expenses
 
3.3

Variable lease cost
 
Selling, general, and administrative expenses
 
1.3

Sublease income
 
Selling, general, and administrative expenses
 
(0.4
)
Net lease cost
 
 
 
$
24.3

 
 
 
 
 
(1) Includes leases with a term of one month or less.
Lease Term and Discount Rate
 
March 31, 2019
Weighted average remaining lease term
 
 
Operating
 
11 years

Finance
 
10 years

Weighted-average discount rate
 
 
Operating
 
5.29
%
Finance
 
8.27
%



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AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

 
 
Three Months Ended
Other Information
 
March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
Operating cash flows from operating leases
 
$
15.7

Operating cash flows from finance leases (1)
 
$
13.7

Financing cash flows from finance leases
 
$
2.1

Right-of-use assets obtained in exchange for new:
 
 
Operating lease liabilities
 
$
9.1

Finance lease liabilities
 
$
11.8

 
 
 
(1) Includes the interest component of payments made on finance leases as well as principal payments on vehicle floorplan payables with trade lenders for certain service loaner vehicle leases.

Maturity of Lease Liabilities
 
Operating Leases
 
Finance Leases
Twelve months ending March 31,
 
 
 
 
2020
 
$
57.8

 
$
74.4

2021
 
51.8

 
10.6

2022
 
47.5

 
10.5

2023
 
42.0

 
10.4

2024
 
36.3

 
10.5

Thereafter
 
250.1

 
105.2

Total lease payments
 
485.5

 
221.6

Less: interest
 
(129.4
)
 
(68.6
)
Present value of lease liabilities
 
$
356.1

 
$
153.0



8.
LONG-TERM DEBT AND COMMERCIAL PAPER
Long-term debt consists of the following:
Debt Description
 
Maturity Date
 
Interest Payable
 
March 31,
2019
 
December 31,
2018
5.5% Senior Notes
 
February 1, 2020
 
February 1 and August 1
 
$
350.0

 
$
350.0

3.35% Senior Notes
 
January 15, 2021
 
January 15 and July 15
 
300.0

 
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

Revolving credit facility
 
October 19, 2022
 
Monthly
 

 

Other debt (1)
 
Various dates through 2038
 
Monthly
 
131.3

 
133.1

 
 
 
 
 
 
1,981.3

 
1,983.1

Less: unamortized debt discounts and debt issuance costs
 
(11.9
)
 
(12.6
)
Less: current maturities
 
 
 
 
 
(393.5
)
 
(44.3
)
Long-term debt, net of current maturities
 
 
 
$
1,575.9

 
$
1,926.2

 
(1) Other debt includes finance leases as of March 31, 2019, and capital leases as of December 31, 2018.
Senior Unsecured Notes and Credit Agreement
Our 5.5% Senior Notes due 2020 will mature on February 1, 2020, and were therefore reclassified to current maturities during the first quarter of 2019.


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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

The interest rates payable on the 3.35% Senior Notes, 3.5% Senior Notes, 4.5% Senior Notes, and 3.8% Senior Notes are subject to adjustment upon the occurrence of certain credit rating events as provided in the indentures for these senior unsecured notes.
Under our credit agreement, we have a $1.8 billion revolving credit facility that matures on October 19, 2022. The credit agreement also contains an accordion feature that allows us, subject to credit availability and certain other conditions, to increase the amount of the revolving credit facility, together with any added term loans, by up to $500.0 million in the aggregate. As of March 31, 2019, we had no borrowings outstanding under our revolving credit facility. We have a $200.0 million letter of credit sublimit as part of our revolving credit facility. The amount available to be borrowed under the revolving credit facility is reduced on a dollar-for-dollar basis by the cumulative amount of any outstanding letters of credit, which was $41.7 million at March 31, 2019, leaving a borrowing capacity under the revolving credit facility of $1.8 billion at March 31, 2019. As of March 31, 2019, this borrowing capacity was limited under the applicable maximum consolidated leverage ratio contained in our credit agreement to $741.1 million.
Our revolving credit facility under the amended credit agreement provides for a commitment fee on undrawn amounts ranging from 0.150% to 0.25% and interest on borrowings at LIBOR or the base rate, in each case plus an applicable margin. The applicable margin ranges from 1.25% to 1.625% for LIBOR borrowings and 0.25% to 0.625% for base rate borrowings. The interest rate charged for our revolving credit facility is affected by our leverage ratio. For instance, an increase in our leverage ratio from greater than or equal to 2.0x but less than 3.25x to greater than or equal to 3.25x would result in a 12.5 basis point increase in the applicable margin.
Our senior unsecured notes and borrowings under our credit agreement are guaranteed by substantially all of our subsidiaries. Within the meaning of Regulation S-X, Rule 3-10, AutoNation, Inc. (the parent company) has no independent assets or operations, the guarantees of its subsidiaries are full and unconditional and joint and several, and any subsidiaries other than the guarantor subsidiaries are minor.
Other Long-Term Debt
At March 31, 2019, we had finance lease and other debt obligations of $131.3 million, which are due at various dates through 2038.
Commercial Paper
We have a commercial paper program pursuant to which we may issue short-term, unsecured commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $1.0 billion. The interest rate for the commercial paper notes varies based on duration and market conditions. The maturities of the commercial paper notes may vary, but may not exceed 397 days from the date of issuance. The commercial paper notes are guaranteed by substantially all of our subsidiaries. Proceeds from the issuance of commercial paper notes are used to repay borrowings under the revolving credit facility, to finance acquisitions and for working capital, capital expenditures, share repurchases, and/or other general corporate purposes. We plan to use the revolving credit facility under our credit agreement as a liquidity backstop for borrowings under the commercial paper program. A downgrade in our credit ratings could negatively impact our ability to issue, or the interest rates for, commercial paper notes.
At March 31, 2019, we had $470.0 million of commercial paper notes outstanding with a weighted-average annual interest rate of 2.97% and a weighted-average remaining term of 6 days. At December 31, 2018, we had $630.0 million of commercial paper notes outstanding with a weighted-average annual interest rate of 3.22% and a weighted-average remaining term of 21 days.

9.
INCOME TAXES
Income taxes payable included in Other Current Liabilities totaled $23.5 million at March 31, 2019. Income taxes receivable included in Receivables, net totaled $8.1 million at December 31, 2018.
We file income tax returns in the U.S. federal jurisdiction and various states. As a matter of course, various taxing authorities, including the IRS, regularly audit us. Currently, no tax years are under examination by the IRS, and tax years from 2014 to 2017 are under examination by certain U.S. state jurisdictions. These audits may result in proposed assessments where the ultimate resolution may result in our owing additional taxes.


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AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

It is our policy to account for interest and penalties associated with income tax obligations as a component of Income Tax Provision in the accompanying Unaudited Condensed Consolidated Financial Statements.

10.
SHAREHOLDERS’ EQUITY
A summary of shares repurchased under our stock repurchase program authorized by our Board of Directors follows:
 
Three Months Ended
 
March 31,
 
2019
 
2018
Shares repurchased
1.0

 
0.5

Aggregate purchase price
$
33.5

 
$
26.6

Average purchase price per share