AutoNation 2001 Annual Report Download - page 34

the charge. The remaining finance leases, installment loans and investments in
securitizations are expected to be substantially collected over the next three
years. See discussion of key economic assumptions and other information in Note
12, Finance Underwriting and Asset Securitizations, of the Notes to Consolidated
Financial Statements.
RESTRUCTURING ACTIVITIES
During the fourth quarter of 1999, we approved a plan to restructure
certain of our operations. The restructuring plan was comprised of the following
major components: (1) exiting the used vehicle megastore business; and (2)
reducing the corporate workforce. The restructuring plan also included divesting
of certain non-core franchised dealerships. Approximately 2,000 positions were
eliminated as a result of the restructuring plan of which 1,800 were megastore
positions and 200 were corporate positions. These restructuring activities
resulted in pre-tax charges of $443.7 million in 1999 of which $416.4 million
appears as Restructuring and Impairment Charges (Recoveries), Net in our 1999
Consolidated Income Statement. These pre-tax charges include $286.9 million of
asset impairment charges; $103.3 million of reserves for residual value
guarantees for closed lease properties; $26.2 million of severance and other
exit costs; and $27.3 million of inventory related costs. The $286.9 million
asset impairment charge consists of: $244.9 million of megastore and other
property impairments; $26.6 million of goodwill impairment reserves for the
divestiture of certain non-core franchised automotive dealerships; and $15.4
million of information systems impairments. Of the $443.7 million restructuring
reserve recorded, $10.8 million of severance was paid in 1999 and $53.7 million
of asset impairments and write-offs were recorded during the fourth quarter of
1999.
We continue to dispose of our closed megastores and other properties,
including closed lease properties, through sales to third parties. At December
31, 2001, properties held for sale total $72.2 million, of which properties with
total asset value of $69.4 million remain to be sold of the total $285.3 million
identified as part of the restructuring plan. These properties continue to be
aggressively marketed. The majority of these properties will be disposed of by
the end of 2002.
The following summarizes the activity in the restructuring and impairment
reserves for the year ended December 31, 2001 (in millions):
DEDUCTIONS
BALANCE AMOUNTS CHARGED ---------------- BALANCE
RESERVE DECEMBER 31, 2000 (CREDITED) TO INCOME CASH NON-CASH DECEMBER 31, 2001
------- ----------------- -------------------- ----- -------- -----------------
Asset reserves:
Asset impairment............... $161.4 $4.7 $ -- $(97.7) $68.4
Accrued liabilities:
Severance and other exit
costs........................ 1.2 (.2) (1.6) .8 .2
------ ---- ----- ------ -----
$162.6 $4.5 $(1.6) $(96.9) $68.6
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The following summarizes the components of the $4.5 million charged to
income during the year ended December 31, 2001 (in millions):
NET GAIN ON ADDITIONAL
SOLD PROPERTIES IMPAIRMENT CHARGES OTHER TOTAL
--------------- ------------------ ----- -----
Asset reserves:
Asset impairment.................................... $(.6) $5.3 $ -- $4.7
Accrued liabilities:
Severance and other exit costs...................... -- -- (.2) (.2)
---- ---- ---- ----
$(.6) $5.3 $(.2) $4.5
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