AutoNation 2001 Annual Report Download - page 3

AutoNation, Inc. is the largest automotive retailer in the United States.
As of December 31, 2001, we owned and operated 368 new vehicle franchises from
278 dealerships located in major metropolitan markets in 17 states,
predominantly in the Sunbelt region of the United States. Our dealerships, which
we believe include some of the most recognizable and well-known dealerships in
our key markets, sell 35 different brands of new vehicles. The core brands of
vehicles that we sell, representing approximately 95% of the new vehicles that
we sold in 2001, are manufactured by Ford, General Motors, DaimlerChrysler,
Toyota, Nissan, Honda and BMW.
We offer a diversified range of automotive products and services beyond new
vehicles, such as used vehicles, vehicle maintenance and repair services,
vehicle parts, extended service contracts, insurance products and other
aftermarket products, and we arrange financing for vehicle purchases through
third-party finance sources. We believe that the significant scale of our
operations and the quality of our managerial talent allow us to achieve
efficiencies in our key markets by, among other things, reducing redundant
operating expenses, improving asset management and sharing and implementing best
practices across our dealerships.
Our common stock, par value $.01 per share, is listed on The New York Stock
Exchange under the symbol "AN." For information concerning our financial
condition, results of operations and related financial data, and business
combinations, you should review the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section in this document. You
should also review and consider the risks relating to our business, operations,
financial performance and cash flows that we describe in the "Risk Factors"
section of this document.
RECENT DEVELOPMENTS
Refinancing of Indebtedness. During 2001, we successfully completed the
refinancing of substantially all of our non-vehicle-related indebtedness and
achieved our objective of substantially diversifying our sources of capital and
extending the average maturities of our debt. On August 10, 2001, we sold $450.0
million of 9.0% senior unsecured notes due August 1, 2008 at a price of 98.731%
of face value and we entered into two new senior secured revolving credit
facilities with an aggregate borrowing capacity of $500.0 million at LIBOR-
based interest rates. One of the facilities is a 364-day revolving credit
facility that provides an aggregate borrowing capacity of up to $200.0 million
and the other facility is a five-year facility that provides an aggregate
borrowing capacity of up to $300.0 million. As of December 31, 2001, there were
no amounts outstanding under our revolving credit facilities. In 2001, we also
entered into two mortgage facilities with automotive manufacturers' captive
finance subsidiaries with five- and ten-year terms, respectively, and an
aggregate borrowing capacity of $300.0 million, of which $153.4 million was
outstanding as of December 31, 2001. Both facilities bear interest at a
LIBOR-based interest rate and are secured by mortgages on certain of our
dealerships' real property. We used the net proceeds of these financings to
repay outstanding amounts due under our prior $1.0 billion credit facility,
which we terminated in August 2001, and certain other indebtedness. We intend to
use funds drawn from these facilities to make future capital investments in our
current business, to complete strategic dealership acquisitions, to repurchase
our common stock and for working capital and other general corporate purposes.
Exit from Retail Auto Loan Underwriting Business. In December 2001, we
decided to exit the business of underwriting retail automobile loans for
customers at our dealerships, which we determined was not a part of our core
specialty automotive retail business. We will continue to provide automobile
loans for our customers through unrelated third-party financing sources, which
historically have provided more than 95% of the auto loans made to our
customers. In the fourth quarter of 2001, we incurred a pre-tax charge of $85.8
million to reflect a write-down of our outstanding auto loans and related assets
in our portfolio and to cover costs associated with our exit from the auto loan
business. We include additional details about these charges in
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