AutoNation 2001 Annual Report Download - page 27

connection with our portfolio of installment receivables, our lease portfolio
and other related assets. Additionally, we are subject to the risk that based on
certain estimates and assumptions used, our portfolio of installment
receivables, our lease portfolio and other related assets could be overvalued
and require additional write-down. See further discussion in Note 12, Finance
Underwriting and Asset Securitizations, of Notes to Consolidated Financial
Statements.
Income Taxes -- Our income tax policy provides for deferred income taxes to
show the effect of temporary differences between the recognition of revenue and
expenses for financial and income tax reporting purposes and between the tax
basis of assets and liabilities and their reported amounts in the financial
statements in accordance with Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS 109"). In 1997 and 1999, we engaged in
certain transactions that are of a type that the Internal Revenue Service has
indicated it intends to challenge. Approximately $680 million of the net
deferred tax liabilities relate to these transactions, including a significant
portion that relates to a transaction that generally had the effect of
accelerating certain future projected tax deductions. The amount of foregone tax
deductions in 2001 relating to that transaction was approximately $44 million.
These transactions are currently under review by the Internal Revenue Service.
We believe that our tax returns appropriately reflect such transactions, and
that we have established adequate reserves with respect to any tax liabilities
relating to these transactions. However, an unfavorable settlement or adverse
resolution of these matters could have a material adverse effect on our
financial condition, results of operations and cash flows.
23
Reported Operating Data:
Our historical operating results include the results of acquired businesses
from the date of acquisition for acquisitions accounted for under the purchase
method of accounting. The following table sets forth: (1) the components of
revenue, with component percentages of total revenue; (2) the components of
gross margin, with gross margin percentages of applicable revenue; (3) selling,
general and administrative expenses; (4) store performance; and (5) retail
vehicle unit sales:
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------
% VARIANCE
2001 VS. % VARIANCE
2001 % 2000 % 2000 1999 % 2000 VS. 1999
($ IN MILLIONS) --------- ----- --------- ----- ---------- --------- ----- -------------
Revenue:
New vehicle............................ $12,000.0 60.0 $12,489.3 60.6 (3.9) $11,481.0 57.1 8.8
Used vehicle........................... 3,883.2 19.4 3,860.2 18.7 .6 4,429.7 22.0 (12.9)
Parts and service...................... 2,404.9 12.0 2,334.9 11.3 3.0 2,222.0 11.1 5.1
Finance and insurance, net............. 489.6 2.4 431.8 2.1 13.4 423.4 2.1 2.0
Other.................................. 1,211.6 6.2 1,482.8 7.3 (18.3) 1,542.9 7.7 (3.9)
--------- ----- --------- ----- --------- -----
Total revenue.................... $19,989.3 100.0 $20,599.0 100.0 (3.0) $20,099.0 100.0 2.5
========= ===== ========= ===== ========= =====
Gross margin:
New vehicle............................ $ 837.9 7.0 $ 857.4 6.9 (2.3) $ 838.9 7.3 2.2
Used vehicle........................... 426.5 11.0 437.4 11.3 (2.5) 447.8 10.1 (2.3)
Parts and service...................... 1,039.2 43.2 999.7 42.8 4.0 933.8 42.0 7.1
Finance and insurance.................. 489.6 100.0 431.8 100.0 13.4 423.4 100.0 2.0
Other.................................. 80.7 6.7 95.8 6.5 (15.8) 146.7 9.5 (34.7)
--------- --------- ---------
Total gross margin............... 2,873.9 14.4 2,822.1 13.7 1.8 2,790.6 13.9 1.1
S,G &A -- Store.......................... 2,072.0 10.4 2,021.6 9.8 2.5 2,089.4 10.4 (3.2)
--------- --------- ---------
Store performance.................. 801.9 4.0 800.5 3.9 .2 701.2 3.5 14.2
S,G &A -- Corporate...................... 135.2 .7 156.1 .8 (13.4) 190.0 .9 (17.8)
Depreciation............................. 70.7 .4 54.7 .3 29.3 60.1 .3 (9.0)
Amortization............................. 81.2 .4 79.1 .4 2.7 62.9 .3 25.8
Loan and lease underwriting losses
(income)............................... 89.6 .4 6.0 -- n.m. (12.8) (.1) (146.9)
Restructuring and impairment charges
(recoveries), net...................... 4.5 -- (20.4) (.1) (122.1) 416.4 2.1 (104.9)
Other gains.............................. (19.3) (.1) -- -- -- -- -- --
--------- --------- ---------
Operating income (loss)............ $ 440.0 2.2 $ 525.0 2.5 (16.2) $ (15.4) (.1) n.m.
========= ========= =========
Retail vehicle unit sales:
New.................................... 454,000 489,000 (7.2) 469,000 4.3
Used................................... 258,000 255,000 1.2 315,000 (19.0)
--------- --------- ---------
712,000 744,000 (4.3) 784,000 (5.1)
========= ========= =========