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Letter to the Editor
Thursday July 22
AutoNation Q2 Earnings Down Almost 13%
AutoNation, Inc., America's largest automotive retailer, has reported net income from continuing operations of $96 million, or $0.35 per share, on revenue of $5.0 billion for the second quarter ended June 30, 2004. The results compare with 2003 second-quarter net income from continuing operations of $107 million, or $0.37 per share, on revenue of $5.0 billion. Including the impact of $4 million net of tax or $0.01 per share of loss from discontinued operations, primarily due to store divestitures, net income for the second quarter 2004 was $92 million, or $0.34 per share."As previously announced, a number of factors directly impacted the company's second-quarter earnings," said Mike Jackson, chairman and chief executive officer of AutoNation. "Our cost structure was targeted for vehicle sales volume levels that did not materialize, particularly in June, with significant declines in sales of Ford and General Motors products. Low volume when combined with high inventories also caused a gross margin decline in our new vehicle business." The decline in new and used vehicle gross profit was partially offset by improved gross profit performances in parts and service and finance and insurance.
"The economic environment for American retailers in the month of June was particularly challenging, led by a 1.1 percent decline in retail sales, the largest drop in 16 months," said Jackson. "The automotive retail component of that decline was significant; the industry reported a 4.3 percent decrease, a notable falloff when compared to May's 3.2 percent gain."
For the six-month period ended June 30, 2004, the company earned net income from continuing operations of $184 million or $0.67 per share. Net income from continuing operations for the six-month period ended June 30, 2003 was $1.10 per share. Excluding the $0.44 per share benefit of the first- quarter 2003 IRS tax settlement, earnings per share from continuing operations for the six-month period ended June 30, 2003 was $0.66. AutoNation's revenue for the six-month period ended June 30, 2004 totaled $9.7 billion, up 4 percent versus the prior year.
Looking ahead, Mr. Jackson said, "Although the second-quarter earnings were disappointing, our cash flow is strong and our strategy sound. We expect to report third-quarter EPS from continuing operations in the range of $0.36 to $0.38 per share. As previously announced, in light of the second-quarter results and the difficult new vehicle environment that we are operating in, our full-year 2004 guidance for EPS from continuing operations is in the range of $1.35 to $1.40."
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