AutoNation 2001 Annual Report Download - page 36

obligations. However, we expect other interest expense to increase in 2002
compared to 2001 due to the fixed interest expense.
INTEREST INCOME
Interest income was $9.0 million, $14.3 million and $20.6 million for the
years ended December 31, 2001, 2000 and 1999, respectively. The 2001 decrease is
primarily due to lower interest rates. The 2000 decrease is primarily due to
lower cash and investment balances on hand.
31
OTHER INCOME (EXPENSE), NET
For the year ended December 31, 2001, other expense, net, was $4.5 million.
Other income, net, for the year ended December 31, 2000, was $33.4 million and
primarily included gains of approximately $24.0 million on the sale of
approximately 3.1 million shares of common stock of our former solid waste
subsidiary, Republic Services, and approximately $53.5 million on the sale of
our former outdoor media business, offset by a $30.0 million valuation
write-down related to an equity-method investment in a privately-held salvage
and parts recycling business as well as a $5.0 million write-down to fair value
of another equity-method investment, subsequently sold in early 2001 at no
additional gain or loss. Other Income (Expense), Net, for the year ended
December 31, 1999 was $2.2 million.
INCOME TAXES
The provision for income taxes from continuing operations was $155.8
million, $196.9 million and $4.0 million for the years ended December 31, 2001,
2000 and 1999, respectively. The effective income tax rate was 38.9% and 37.5%
for the years ended December 31, 2001 and 2000. Although we reported a pre-tax
loss from continuing operations in 1999, an income tax provision of $4.0 million
was recorded due to the effect of certain non-deductible expenses primarily
associated with the restructuring and impairment charges. We anticipate that our
effective income tax rate will be approximately 38% to 39% in 2002.
FINANCIAL CONDITION
At December 31, 2001, we had $128.1 million of unrestricted cash and cash
equivalents. We had a multi-year unsecured revolving credit facility, which
provided $1.0 billion of financing and was scheduled to mature in April 2002,
that was repaid in full and terminated on August 10, 2001. Another facility
provided $250.0 million of borrowing capacity until its termination on June 29,
2001. In August 2001, we entered into two new senior secured revolving credit
facilities with an aggregate capacity of $500.0 million. The 364-day revolving
credit facility provides borrowing capacity up to $200.0 million at a
LIBOR-based interest rate. The five-year revolving credit facility provides
borrowing capacity up to $300.0 million at a LIBOR-based interest rate. These
revolving credit facilities are secured by a pledge of the capital stock of
certain subsidiaries, which directly or indirectly own substantially all of our
dealerships, and are guaranteed by substantially all of our subsidiaries. No
amounts are drawn on these revolving credit facilities.
In August 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. The senior unsecured notes
are guaranteed by substantially all of our subsidiaries.
In conjunction with the revolving credit facilities and senior unsecured
notes offering, we received corporate credit ratings from ratings agencies. The
revolving credit facilities and the senior unsecured notes have provisions
linked to credit ratings. The interest rates for the revolving credit facilities
are impacted by changes in credit ratings and certain covenants related to the
senior unsecured notes would be eliminated with certain upgrades in credit
ratings. Accordingly, in the event of a downgrade in our credit rating, we would
continue to have access to the revolving credit facilities and senior unsecured
notes, but at higher rates of interest for the revolving credit facilities.