AutoNation 2001 Annual Report Download - page 35

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During 2001, we recognized an additional impairment charge totaling $5.3
million based on the re-evaluation of the fair value of certain properties.
30
The following summarizes the activity in the restructuring and impairment
reserves for the year ended December 31, 2000 (in millions):
DEDUCTIONS
BALANCE AMOUNT CHARGED ------------------ BALANCE
RESERVE DECEMBER 31, 1999 (CREDITED) TO INCOME CASH NON-CASH DECEMBER 31, 2000
------- ----------------- -------------------- ------- -------- -----------------
Asset reserves:
Asset impairment............. $ 263.3(1) $(15.0) $ -- $ (86.9) $161.4
Inventory.................... 15.0 -- -- (15.0) --
Accrued liabilities:
Property lease residual value
guarantees................. 103.3 (14.8) (88.5) -- --
Severance and other exit
costs...................... 17.3 9.4 (22.7) (2.8) 1.2
-------- ------ ------- ------- ------
$ 398.9 $(20.4) $(111.2) $(104.7) $162.6
======== ====== ======= ======= ======
---------------
(1) Includes $19.7 million of reserves that had been established on these
properties prior to the 1999 restructuring and impairment charges recorded.
The following summarizes the components of the $20.4 million amount
credited to income during the year ended December 31, 2000 (in millions):
PROPERTIES PLACED BACK NET GAIN ON ADDITIONAL
INTO SERVICE OR RETAINED SOLD PROPERTIES IMPAIRMENT CHARGES OTHER TOTAL
------------------------ --------------- ------------------ -------- ------
Asset reserves:
Asset impairment..................... $(23.2) $(3.4) $11.6 $ -- $(15.0)
Accrued liabilities:
Property lease residual value
guarantees......................... (13.0) (1.8) -- -- (14.8)
Severance and other exit costs..... -- -- -- 9.4 9.4
------ ----- ----- -------- ------
$(36.2) $(5.2) $11.6 $ 9.4 $(20.4)
====== ===== ===== ======== ======
During 2000, certain events occurred which caused us to re-evaluate our
plans with respect to various retail properties. As a result, certain megastore
properties were placed back in service and we decided to retain certain
dealerships that had been held for sale. Accordingly, based on our re-evaluation
of the fair value of the properties, we determined that the asset impairment and
lease residual value reserves for these properties were no longer necessary and
we were required to reverse the related estimated reserves totaling $36.2
million back into income. An additional impairment charge of $11.6 million was
recognized primarily related to a decision in 2000 to close one additional
megastore property as part of the overall restructuring plan.
NON-OPERATING INCOME (EXPENSE)
OTHER INTEREST EXPENSE
During 2001, other interest expense was incurred primarily on borrowings
under our revolving credit facilities, mortgage facilities and the outstanding
senior unsecured notes sold in August 2001. See further discussion under heading
"Financial Condition". Other interest expense was $43.7 million, $47.7 million
and $34.9 million for the years ended December 31, 2001, 2000 and 1999,
respectively. The decrease in 2001 was due to lower average borrowings as well
as lower floating interest rates partially offset by additional fixed interest
expense related to the senior unsecured notes. The increase in 2000 is due to
higher average borrowings along with higher interest rates. Going forward
because of the issuance of the senior unsecured notes, we will be less sensitive
to changing interest rates due to a higher ratio of fixed versus floating rate