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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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73-1105145
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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200 SW 1st Avenue, Fort Lauderdale, Florida
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33301
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Emerging growth company
o
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1
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Item 1A.
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Item 2.
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Item 6.
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March 31,
2018 |
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December 31,
2017 |
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ASSETS
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CURRENT ASSETS:
|
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|
||||
Cash and cash equivalents
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$
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57.5
|
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$
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69.2
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Receivables, net
|
883.1
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|
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1,111.0
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Inventory
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3,529.3
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|
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3,365.6
|
|
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Other current assets
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177.0
|
|
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251.7
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|
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Total Current Assets
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4,646.9
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|
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4,797.5
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PROPERTY AND EQUIPMENT, net of accumulated depreciation of $1.2 billion and $1.2 billion, respectively
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3,000.3
|
|
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2,962.7
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GOODWILL
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1,513.6
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1,515.0
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OTHER INTANGIBLE ASSETS, NET
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587.3
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586.8
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OTHER ASSETS
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472.2
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409.5
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Total Assets
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$
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10,220.3
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$
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10,271.5
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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||||
CURRENT LIABILITIES:
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||||
Vehicle floorplan payable - trade
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$
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2,233.1
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$
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2,179.1
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Vehicle floorplan payable - non-trade
|
1,506.1
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1,627.8
|
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Accounts payable
|
302.2
|
|
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309.8
|
|
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Commercial paper
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270.0
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330.0
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Current maturities of long-term debt
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414.8
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414.5
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Other current liabilities
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707.4
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774.5
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Total Current Liabilities
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5,433.6
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5,635.7
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LONG-TERM DEBT, NET OF CURRENT MATURITIES
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1,958.7
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1,959.2
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DEFERRED INCOME TAXES
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76.1
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71.9
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OTHER LIABILITIES
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280.0
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235.4
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COMMITMENTS AND CONTINGENCIES (Note 12)
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SHAREHOLDERS’ EQUITY:
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||||
Preferred stock, par value $0.01 per share; 5,000,000 shares authorized; none issued
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—
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—
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Common stock, par value $0.01 per share; 1,500,000,000 shares authorized; 102,562,149 shares issued at March 31, 2018, and December 31, 2017, including shares held in treasury
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1.0
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1.0
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Additional paid-in capital
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16.1
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4.0
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Retained earnings
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2,936.0
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2,832.2
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Treasury stock, at cost; 11,232,634 and 11,002,298 shares held, respectively
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(481.2
|
)
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(467.9
|
)
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Total Shareholders’ Equity
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2,471.9
|
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2,369.3
|
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Total Liabilities and Shareholders’ Equity
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$
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10,220.3
|
|
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$
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10,271.5
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Three Months Ended
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||||||
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March 31,
|
||||||
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2018
|
|
2017
|
||||
Revenue:
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|
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New vehicle
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$
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2,802.3
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$
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2,796.2
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Used vehicle
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1,330.5
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1,240.9
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Parts and service
|
858.5
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845.1
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Finance and insurance, net
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240.8
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221.6
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Other
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27.8
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35.6
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TOTAL REVENUE
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5,259.9
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5,139.4
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|
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Cost of sales:
|
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|
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New vehicle
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2,672.6
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2,651.9
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Used vehicle
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1,244.7
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1,163.9
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Parts and service
|
473.0
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474.1
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Other
|
27.3
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29.7
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TOTAL COST OF SALES (excluding depreciation shown below)
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4,417.6
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4,319.6
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Gross profit:
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|
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New vehicle
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129.7
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144.3
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Used vehicle
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85.8
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77.0
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Parts and service
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385.5
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371.0
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Finance and insurance
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240.8
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221.6
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Other
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0.5
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5.9
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TOTAL GROSS PROFIT
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842.3
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819.8
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Selling, general, and administrative expenses
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626.8
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595.3
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Depreciation and amortization
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40.0
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37.3
|
|
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Other income, net
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(10.3
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)
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(19.5
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)
|
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OPERATING INCOME
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185.8
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206.7
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Non-operating income (expense) items:
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Floorplan interest expense
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(28.3
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)
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(21.5
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)
|
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Other interest expense
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(32.3
|
)
|
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(28.8
|
)
|
||
Interest income
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0.2
|
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0.4
|
|
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Other income, net
|
0.8
|
|
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3.0
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INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
126.2
|
|
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159.8
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|
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Income tax provision
|
32.9
|
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61.6
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|
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NET INCOME FROM CONTINUING OPERATIONS
|
93.3
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98.2
|
|
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Income (loss) from discontinued operations, net of income taxes
|
0.4
|
|
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(0.1
|
)
|
||
NET INCOME
|
$
|
93.7
|
|
|
$
|
98.1
|
|
BASIC EARNINGS (LOSS) PER SHARE:
|
|
|
|
||||
Continuing operations
|
$
|
1.01
|
|
|
$
|
0.97
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
Net income
|
$
|
1.02
|
|
|
$
|
0.97
|
|
Weighted average common shares outstanding
|
92.1
|
|
|
101.1
|
|
||
DILUTED EARNINGS (LOSS) PER SHARE:
|
|
|
|
||||
Continuing operations
|
$
|
1.01
|
|
|
$
|
0.97
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
Net income
|
$
|
1.01
|
|
|
$
|
0.97
|
|
Weighted average common shares outstanding
|
92.7
|
|
|
101.6
|
|
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COMMON SHARES OUTSTANDING, net of treasury stock, at period end
|
91.3
|
|
|
101.3
|
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Common Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Treasury
Stock
|
|
Total
|
|||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||
BALANCE AT DECEMBER 31, 2017
|
102,562,149
|
|
|
$
|
1.0
|
|
|
$
|
4.0
|
|
|
$
|
2,832.2
|
|
|
$
|
(467.9
|
)
|
|
$
|
2,369.3
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
93.7
|
|
|
—
|
|
|
93.7
|
|
|||||
Repurchases of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26.6
|
)
|
|
(26.6
|
)
|
|||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
14.3
|
|
|
—
|
|
|
—
|
|
|
14.3
|
|
|||||
Shares awarded under stock-based compensation plans, net of shares withheld for taxes
|
—
|
|
|
—
|
|
|
(2.2
|
)
|
|
—
|
|
|
13.3
|
|
|
11.1
|
|
|||||
Cumulative effect of change in accounting principle - revenue recognition
|
—
|
|
|
—
|
|
|
—
|
|
|
10.1
|
|
|
—
|
|
|
10.1
|
|
|||||
BALANCE AT MARCH 31, 2018
|
102,562,149
|
|
|
$
|
1.0
|
|
|
$
|
16.1
|
|
|
$
|
2,936.0
|
|
|
$
|
(481.2
|
)
|
|
$
|
2,471.9
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2018
|
|
2017
|
||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
93.7
|
|
|
$
|
98.1
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
(Income) loss from discontinued operations
|
(0.4
|
)
|
|
0.1
|
|
||
Depreciation and amortization
|
40.0
|
|
|
37.3
|
|
||
Amortization of debt issuance costs and accretion of debt discounts
|
1.7
|
|
|
1.4
|
|
||
Stock-based compensation expense
|
14.3
|
|
|
4.6
|
|
||
Deferred income tax provision
|
1.0
|
|
|
4.2
|
|
||
Net gain related to business/property dispositions
|
(12.2
|
)
|
|
(9.6
|
)
|
||
Non-cash impairment charges
|
1.3
|
|
|
—
|
|
||
Other
|
(0.1
|
)
|
|
(7.3
|
)
|
||
(Increase) decrease, net of effects from business combinations and divestitures:
|
|
|
|
||||
Receivables
|
214.6
|
|
|
201.6
|
|
||
Inventory
|
(177.7
|
)
|
|
(185.8
|
)
|
||
Other assets
|
(74.2
|
)
|
|
(16.0
|
)
|
||
Increase (decrease), net of effects from business combinations and divestitures:
|
|
|
|
||||
Vehicle floorplan payable - trade, net
|
63.6
|
|
|
(8.4
|
)
|
||
Accounts payable
|
(0.5
|
)
|
|
6.7
|
|
||
Other liabilities
|
33.6
|
|
|
58.9
|
|
||
Net cash provided by continuing operations
|
198.7
|
|
|
185.8
|
|
||
Net cash used in discontinued operations
|
—
|
|
|
(0.2
|
)
|
||
Net cash provided by operating activities
|
198.7
|
|
|
185.6
|
|
||
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
|
|
|
|
||||
Purchases of property and equipment
|
(101.5
|
)
|
|
(90.1
|
)
|
||
Property operating lease buy-outs
|
—
|
|
|
(3.3
|
)
|
||
Proceeds from the sale of property and equipment
|
—
|
|
|
0.3
|
|
||
Proceeds from assets held for sale
|
1.8
|
|
|
13.4
|
|
||
Insurance recoveries on property and equipment
|
—
|
|
|
1.2
|
|
||
Cash received from business divestitures, net of cash relinquished
|
89.2
|
|
|
9.9
|
|
||
Cash used in business acquisitions, net of cash acquired
|
(1.9
|
)
|
|
(5.8
|
)
|
||
Other
|
(0.8
|
)
|
|
(0.9
|
)
|
||
Net cash used in continuing operations
|
(13.2
|
)
|
|
(75.3
|
)
|
||
Net cash used in discontinued operations
|
—
|
|
|
—
|
|
||
Net cash used in investing activities
|
(13.2
|
)
|
|
(75.3
|
)
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2018
|
|
2017
|
||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
|
|
|
|
||||
Repurchases of common stock
|
(23.3
|
)
|
|
—
|
|
||
Proceeds from revolving credit facility
|
—
|
|
|
260.0
|
|
||
Payments of revolving credit facility
|
—
|
|
|
(260.0
|
)
|
||
Net payments of commercial paper
|
(60.0
|
)
|
|
(177.0
|
)
|
||
Net proceeds from (payments of) vehicle floorplan payable - non-trade
|
(124.2
|
)
|
|
41.4
|
|
||
Payments of mortgage facility
|
—
|
|
|
(2.5
|
)
|
||
Payments of capital leases and other debt obligations
|
(1.2
|
)
|
|
(1.1
|
)
|
||
Proceeds from the exercise of stock options
|
13.3
|
|
|
21.5
|
|
||
Payments of tax withholdings for stock-based awards
|
(2.3
|
)
|
|
(0.4
|
)
|
||
Net cash used in continuing operations
|
(197.7
|
)
|
|
(118.1
|
)
|
||
Net cash used in discontinued operations
|
—
|
|
|
—
|
|
||
Net cash used in financing activities
|
(197.7
|
)
|
|
(118.1
|
)
|
||
DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
(12.2
|
)
|
|
(7.8
|
)
|
||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at beginning of period
|
71.1
|
|
|
65.4
|
|
||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at end of period
|
$
|
58.9
|
|
|
$
|
57.6
|
|
1.
|
INTERIM FINANCIAL STATEMENTS
|
Consolidated Balance Sheet Line Items
|
||||||||||||
|
|
Impact of changes in accounting policies
|
||||||||||
March 31, 2018
|
|
As reported
|
|
Balances without adoption of ASC Topic 606
|
|
Impact of adoption
Higher/(Lower)
|
||||||
Receivables, net
|
|
$
|
883.1
|
|
|
$
|
890.2
|
|
|
$
|
(7.1
|
)
|
Inventory
|
|
3,529.3
|
|
|
3,533.5
|
|
|
(4.2
|
)
|
|||
Other current assets
|
|
177.0
|
|
|
127.4
|
|
|
49.6
|
|
|||
Other assets
|
|
472.2
|
|
|
419.4
|
|
|
52.8
|
|
|||
Other current liabilities
|
|
707.4
|
|
|
677.2
|
|
|
30.2
|
|
|||
Deferred income taxes
|
|
76.1
|
|
|
72.7
|
|
|
3.4
|
|
|||
Other liabilities
|
|
280.0
|
|
|
233.1
|
|
|
46.9
|
|
|||
Retained earnings
|
|
2,936.0
|
|
|
2,925.4
|
|
|
10.6
|
|
Consolidated Statement of Income Line Items
|
||||||||||||
|
|
Impact of changes in accounting policies
|
||||||||||
Three Months Ended March 31, 2018
|
|
As reported
|
|
Balances without adoption of ASC Topic 606
|
|
Impact of adoption
Higher/(Lower) |
||||||
Revenue:
|
|
|
|
|
|
|
||||||
Parts and service
|
|
$
|
858.5
|
|
|
$
|
859.5
|
|
|
$
|
(1.0
|
)
|
Finance and insurance
|
|
240.8
|
|
|
239.7
|
|
|
1.1
|
|
|||
Cost of sales:
|
|
|
|
|
|
|
||||||
Parts and service
|
|
473.0
|
|
|
473.6
|
|
|
(0.6
|
)
|
|||
Gross profit:
|
|
|
|
|
|
|
||||||
Parts and service
|
|
385.5
|
|
|
385.9
|
|
|
(0.4
|
)
|
|||
Finance and insurance
|
|
240.8
|
|
|
239.7
|
|
|
1.1
|
|
|||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
|
126.2
|
|
|
125.5
|
|
|
0.7
|
|
|||
Income tax provision
|
|
32.9
|
|
|
32.7
|
|
|
0.2
|
|
|||
NET INCOME FROM CONTINUING OPERATIONS
|
|
93.3
|
|
|
92.8
|
|
|
0.5
|
|
|||
NET INCOME
|
|
93.7
|
|
|
93.2
|
|
|
0.5
|
|
Consolidated Statement of Cash Flows Line Items
|
||||||||||||
|
|
Impact of changes in accounting policies
|
||||||||||
Three Months Ended March 31, 2018
|
|
As reported
|
|
Balances without adoption of ASC Topic 606
|
|
Impact of adoption
Higher/(Lower) |
||||||
Net income
|
|
$
|
93.7
|
|
|
$
|
93.2
|
|
|
$
|
0.5
|
|
Deferred income tax provision
|
|
1.0
|
|
|
0.8
|
|
|
0.2
|
|
|||
(Increase) decrease, net of effects from business combinations and divestitures:
|
|
|
|
|
|
|
||||||
Receivables
|
|
214.6
|
|
|
207.5
|
|
|
7.1
|
|
|||
Inventory
|
|
(177.7
|
)
|
|
(177.2
|
)
|
|
(0.5
|
)
|
|||
Other assets
|
|
(74.2
|
)
|
|
10.2
|
|
|
(84.4
|
)
|
|||
Increase (decrease), net of effects from business combinations and divestitures:
|
|
|
|
|
|
|
||||||
Other liabilities
|
|
33.6
|
|
|
(43.5
|
)
|
|
77.1
|
|
|
March 31, 2018
|
|
January 1, 2018
|
||||
Receivables from contracts with customers, net
|
$
|
671.8
|
|
|
$
|
854.3
|
|
Contract Asset (Current)
|
19.5
|
|
|
18.4
|
|
||
Contract Asset (Long-Term)
|
5.9
|
|
|
1.4
|
|
||
Contract Liability (Current)
|
28.5
|
|
|
26.7
|
|
||
Contract Liability (Long-Term)
|
63.6
|
|
|
63.8
|
|
|
|
Three Months Ended
|
||
|
|
March 31,
|
||
|
|
2018
|
||
Revenue recognized in the period from:
|
|
|
||
Amounts included in contract liability at the beginning of the period
|
|
$
|
7.5
|
|
Performance obligations satisfied in previous periods
|
|
$
|
5.9
|
|
|
|
Revenue Expected to Be Recognized by Period
|
||||||||||||||
|
|
Total
|
|
Less Than 1 Year
|
|
1 - 3 Years
|
|
3 - 5 Years
|
||||||||
Revenue expected to be recognized on VCP contracts sold as of period end
|
|
$
|
91.9
|
|
|
$
|
28.3
|
|
|
$
|
45.6
|
|
|
$
|
18.0
|
|
3.
|
RECEIVABLES, NET
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Trade receivables
|
$
|
145.3
|
|
|
$
|
162.6
|
|
Manufacturer receivables
|
217.6
|
|
|
253.3
|
|
||
Other
|
39.5
|
|
|
44.9
|
|
||
|
402.4
|
|
|
460.8
|
|
||
Less: allowances for doubtful accounts
|
(4.5
|
)
|
|
(5.5
|
)
|
||
|
397.9
|
|
|
455.3
|
|
||
Contracts-in-transit and vehicle receivables
|
485.2
|
|
|
655.7
|
|
||
Receivables, net
|
$
|
883.1
|
|
|
$
|
1,111.0
|
|
4.
|
INVENTORY AND VEHICLE FLOORPLAN PAYABLE
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
New vehicles
|
$
|
2,812.5
|
|
|
$
|
2,577.9
|
|
Used vehicles
|
503.1
|
|
|
576.5
|
|
||
Parts, accessories, and other
|
213.7
|
|
|
211.2
|
|
||
Inventory
|
$
|
3,529.3
|
|
|
$
|
3,365.6
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Vehicle floorplan payable - trade
|
$
|
2,233.1
|
|
|
$
|
2,179.1
|
|
Vehicle floorplan payable - non-trade
|
1,506.1
|
|
|
1,627.8
|
|
||
Vehicle floorplan payable
|
$
|
3,739.2
|
|
|
$
|
3,806.9
|
|
5.
|
GOODWILL AND INTANGIBLE ASSETS, NET
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Goodwill
|
$
|
1,513.6
|
|
|
$
|
1,515.0
|
|
|
|
|
|
||||
Franchise rights - indefinite-lived
|
$
|
572.2
|
|
|
$
|
572.2
|
|
Other intangibles
|
24.1
|
|
|
23.3
|
|
||
|
596.3
|
|
|
595.5
|
|
||
Less: accumulated amortization
|
(9.0
|
)
|
|
(8.7
|
)
|
||
Other intangible assets, net
|
$
|
587.3
|
|
|
$
|
586.8
|
|
6.
|
LONG-TERM DEBT AND COMMERCIAL PAPER
|
Debt Description
|
|
Maturity Date
|
|
Interest Payable
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
6.75% Senior Notes
|
|
April 15, 2018
|
|
April 15 and October 15
|
|
$
|
400.0
|
|
|
$
|
400.0
|
|
5.5% Senior Notes
|
|
February 1, 2020
|
|
February 1 and August 1
|
|
350.0
|
|
|
350.0
|
|
||
3.35% Senior Notes
|
|
January 15, 2021
|
|
January 15 and July 15
|
|
300.0
|
|
|
300.0
|
|
||
3.5% Senior Notes
|
|
November 15, 2024
|
|
May 15 and November 15
|
|
450.0
|
|
|
450.0
|
|
||
4.5% Senior Notes
|
|
October 1, 2025
|
|
April 1 and October 1
|
|
450.0
|
|
|
450.0
|
|
||
3.8% Senior Notes
|
|
November 15, 2027
|
|
May 15 and November 15
|
|
300.0
|
|
|
300.0
|
|
||
Revolving credit facility
|
|
October 19, 2022
|
|
Monthly
|
|
—
|
|
|
—
|
|
||
Capital leases and other debt
|
|
Various dates through 2037
|
|
Monthly
|
|
138.1
|
|
|
139.4
|
|
||
|
|
|
|
|
|
2,388.1
|
|
|
2,389.4
|
|
||
Less: unamortized debt discounts and debt issuance costs
|
|
(14.6
|
)
|
|
(15.7
|
)
|
||||||
Less: current maturities
|
|
|
|
|
|
(414.8
|
)
|
|
(414.5
|
)
|
||
Long-term debt, net of current maturities
|
|
|
|
$
|
1,958.7
|
|
|
$
|
1,959.2
|
|
7.
|
INCOME TAXES
|
8.
|
SHAREHOLDERS’ EQUITY
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2018
|
|
2017
|
||||
Shares repurchased
|
0.5
|
|
|
—
|
|
||
Aggregate purchase price
|
$
|
26.6
|
|
|
$
|
—
|
|
Average purchase price per share
|
$
|
48.38
|
|
|
$
|
—
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2018
|
|
2017
|
||||
Shares issued
|
0.3
|
|
|
0.6
|
|
||
Proceeds from the exercise of stock options
|
$
|
13.3
|
|
|
$
|
21.5
|
|
Average exercise price per share
|
$
|
51.15
|
|
|
$
|
34.03
|
|
|
Three Months Ended
|
||||
|
March 31,
|
||||
|
2018
|
|
2017
|
||
Shares issued
|
112,824
|
|
|
—
|
|
Shares surrendered to AutoNation to satisfy tax withholding obligations
|
45,690
|
|
|
8,124
|
|
9.
|
EARNINGS PER SHARE
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2018
|
|
2017
|
||||
Net income from continuing operations
|
$
|
93.3
|
|
|
$
|
98.2
|
|
Income (loss) from discontinued operations, net of income taxes
|
0.4
|
|
|
(0.1
|
)
|
||
Net income
|
$
|
93.7
|
|
|
$
|
98.1
|
|
|
|
|
|
||||
Weighted average common shares outstanding used in calculating basic EPS
|
92.1
|
|
|
101.1
|
|
||
Effect of dilutive stock options and unvested RSUs
|
0.6
|
|
|
0.5
|
|
||
Weighted average common shares outstanding used in calculating diluted EPS
|
92.7
|
|
|
101.6
|
|
||
|
|
|
|
||||
Basic EPS amounts
(1)
:
|
|
|
|
||||
Continuing operations
|
$
|
1.01
|
|
|
$
|
0.97
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
Net income
|
$
|
1.02
|
|
|
$
|
0.97
|
|
|
|
|
|
||||
Diluted EPS amounts
(1)
:
|
|
|
|
||||
Continuing operations
|
$
|
1.01
|
|
|
$
|
0.97
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
Net income
|
$
|
1.01
|
|
|
$
|
0.97
|
|
(1)
Earnings per share amounts are calculated discretely and therefore may not add up to the total due to rounding.
|
|
Three Months Ended
|
||||
|
March 31,
|
||||
|
2018
|
|
2017
|
||
Anti-dilutive equity instruments excluded from the computation of diluted earnings per share
|
1.4
|
|
|
3.1
|
|
10.
|
STORE DIVESTITURES
|
11.
|
ACQUISITIONS
|
12.
|
COMMITMENTS AND CONTINGENCIES
|
13.
|
SEGMENT INFORMATION
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2018
|
|
2017
|
||||
Total segment income for reportable segments
|
$
|
220.8
|
|
|
$
|
213.6
|
|
Corporate and other
|
(63.3
|
)
|
|
(28.4
|
)
|
||
Other interest expense
|
(32.3
|
)
|
|
(28.8
|
)
|
||
Interest income
|
0.2
|
|
|
0.4
|
|
||
Other income, net
|
0.8
|
|
|
3.0
|
|
||
Income from continuing operations before income taxes
|
$
|
126.2
|
|
|
$
|
159.8
|
|
14.
|
BUSINESS AND CREDIT CONCENTRATIONS
|
15.
|
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
|
Level 1
|
Quoted prices in active markets for identical assets or liabilities
|
|
|
Level 2
|
Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted market prices in markets that are not active; or model-derived valuations or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
|
|
|
Level 3
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
|
•
|
Cash and cash equivalents, receivables, other current assets, vehicle floorplan payable, accounts payable, other current liabilities, commercial paper, and variable rate debt
: The amounts reported in the accompanying Unaudited Condensed Consolidated Balance Sheets approximate fair value due to their short-term nature or the existence of variable interest rates that approximate prevailing market rates.
|
•
|
Fixed rate long-term debt
: Our fixed rate long-term debt primarily consists of amounts outstanding under our senior unsecured notes. We estimate the fair value of our senior unsecured notes using quoted prices for the identical liability (Level 1). A summary of the aggregate carrying values and fair values of our fixed rate long-term debt is as follows:
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Carrying value
|
$
|
2,373.5
|
|
|
$
|
2,373.7
|
|
Fair value
|
$
|
2,385.2
|
|
|
$
|
2,442.1
|
|
|
|
2018
|
|
2017
|
||||||||||||
Description
|
|
Fair Value
Measurements Using Significant Unobservable Inputs (Level 3) |
|
Gain/(Loss)
|
|
Fair Value
Measurements Using Significant Unobservable Inputs (Level 3) |
|
Gain/(Loss)
|
||||||||
Long-lived assets held and used
|
|
$
|
—
|
|
|
$
|
(1.0
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Long-lived assets held for sale in continuing operations
|
|
$
|
0.6
|
|
|
$
|
(0.3
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
16.
|
CASH FLOW INFORMATION
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Cash and cash equivalents
|
$
|
57.5
|
|
|
$
|
69.2
|
|
Restricted cash included in Current Assets
|
1.4
|
|
|
1.9
|
|
||
Total cash, cash equivalents, and restricted cash
|
$
|
58.9
|
|
|
$
|
71.1
|
|
($ in millions, except per vehicle data)
|
Three Months Ended March 31,
|
|||||||||||||
2018
|
|
2017
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
New vehicle
|
$
|
2,802.3
|
|
|
$
|
2,796.2
|
|
|
$
|
6.1
|
|
|
0.2
|
|
Retail used vehicle
|
1,237.1
|
|
|
1,156.1
|
|
|
81.0
|
|
|
7.0
|
|
|||
Wholesale
|
93.4
|
|
|
84.8
|
|
|
8.6
|
|
|
10.1
|
|
|||
Used vehicle
|
1,330.5
|
|
|
1,240.9
|
|
|
89.6
|
|
|
7.2
|
|
|||
Finance and insurance, net
|
240.8
|
|
|
221.6
|
|
|
19.2
|
|
|
8.7
|
|
|||
Total variable operations
(1)
|
4,373.6
|
|
|
4,258.7
|
|
|
114.9
|
|
|
2.7
|
|
|||
Parts and service
|
858.5
|
|
|
845.1
|
|
|
13.4
|
|
|
1.6
|
|
|||
Other
|
27.8
|
|
|
35.6
|
|
|
(7.8
|
)
|
|
|
||||
Total revenue
|
$
|
5,259.9
|
|
|
$
|
5,139.4
|
|
|
$
|
120.5
|
|
|
2.3
|
|
Gross profit:
|
|
|
|
|
|
|
|
|||||||
New vehicle
|
$
|
129.7
|
|
|
$
|
144.3
|
|
|
$
|
(14.6
|
)
|
|
(10.1
|
)
|
Retail used vehicle
|
82.0
|
|
|
74.9
|
|
|
7.1
|
|
|
9.5
|
|
|||
Wholesale
|
3.8
|
|
|
2.1
|
|
|
1.7
|
|
|
|
||||
Used vehicle
|
85.8
|
|
|
77.0
|
|
|
8.8
|
|
|
11.4
|
|
|||
Finance and insurance
|
240.8
|
|
|
221.6
|
|
|
19.2
|
|
|
8.7
|
|
|||
Total variable operations
(1)
|
456.3
|
|
|
442.9
|
|
|
13.4
|
|
|
3.0
|
|
|||
Parts and service
|
385.5
|
|
|
371.0
|
|
|
14.5
|
|
|
3.9
|
|
|||
Other
|
0.5
|
|
|
5.9
|
|
|
(5.4
|
)
|
|
|
||||
Total gross profit
|
842.3
|
|
|
819.8
|
|
|
22.5
|
|
|
2.7
|
|
|||
Selling, general, and administrative expenses
|
626.8
|
|
|
595.3
|
|
|
(31.5
|
)
|
|
(5.3
|
)
|
|||
Depreciation and amortization
|
40.0
|
|
|
37.3
|
|
|
(2.7
|
)
|
|
|
||||
Other income, net
|
(10.3
|
)
|
|
(19.5
|
)
|
|
(9.2
|
)
|
|
|
||||
Operating income
|
185.8
|
|
|
206.7
|
|
|
(20.9
|
)
|
|
(10.1
|
)
|
|||
Non-operating income (expense) items:
|
|
|
|
|
|
|
|
|||||||
Floorplan interest expense
|
(28.3
|
)
|
|
(21.5
|
)
|
|
(6.8
|
)
|
|
|
||||
Other interest expense
|
(32.3
|
)
|
|
(28.8
|
)
|
|
(3.5
|
)
|
|
|
||||
Interest income
|
0.2
|
|
|
0.4
|
|
|
(0.2
|
)
|
|
|
||||
Other income, net
|
0.8
|
|
|
3.0
|
|
|
(2.2
|
)
|
|
|
||||
Income from continuing operations before income taxes
|
$
|
126.2
|
|
|
$
|
159.8
|
|
|
$
|
(33.6
|
)
|
|
(21.0
|
)
|
Retail vehicle unit sales:
|
|
|
|
|
|
|
|
|||||||
New vehicle
|
74,178
|
|
|
75,798
|
|
|
(1,620
|
)
|
|
(2.1
|
)
|
|||
Used vehicle
|
62,210
|
|
|
60,608
|
|
|
1,602
|
|
|
2.6
|
|
|||
|
136,388
|
|
|
136,406
|
|
|
(18
|
)
|
|
—
|
|
|||
Revenue per vehicle retailed:
|
|
|
|
|
|
|
|
|||||||
New vehicle
|
$
|
37,778
|
|
|
$
|
36,890
|
|
|
$
|
888
|
|
|
2.4
|
|
Used vehicle
|
$
|
19,886
|
|
|
$
|
19,075
|
|
|
$
|
811
|
|
|
4.3
|
|
Gross profit per vehicle retailed:
|
|
|
|
|
|
|
|
|||||||
New vehicle
|
$
|
1,748
|
|
|
$
|
1,904
|
|
|
$
|
(156
|
)
|
|
(8.2
|
)
|
Used vehicle
|
$
|
1,318
|
|
|
$
|
1,236
|
|
|
$
|
82
|
|
|
6.6
|
|
Finance and insurance
|
$
|
1,766
|
|
|
$
|
1,625
|
|
|
$
|
141
|
|
|
8.7
|
|
Total variable operations
(2)
|
$
|
3,318
|
|
|
$
|
3,232
|
|
|
$
|
86
|
|
|
2.7
|
|
|
|
|
|
|
|
|
|
|||||||
(1)
Total variable operations includes new vehicle, used vehicle (retail and wholesale), and finance and insurance results.
|
||||||||||||||
(2)
Total variable operations gross profit per vehicle retailed is calculated by dividing the sum of new vehicle, retail used vehicle, and finance and insurance gross profit by total retail vehicle unit sales.
|
|
Three Months Ended
|
||
|
March 31,
|
||
|
2018 (%)
|
|
2017 (%)
|
Revenue mix percentages:
|
|
|
|
New vehicle
|
53.3
|
|
54.4
|
Used vehicle
|
25.3
|
|
24.1
|
Parts and service
|
16.3
|
|
16.4
|
Finance and insurance, net
|
4.6
|
|
4.3
|
Other
|
0.5
|
|
0.8
|
Total
|
100.0
|
|
100.0
|
Gross profit mix percentages:
|
|
|
|
New vehicle
|
15.4
|
|
17.6
|
Used vehicle
|
10.2
|
|
9.4
|
Parts and service
|
45.8
|
|
45.3
|
Finance and insurance
|
28.6
|
|
27.0
|
Other
|
—
|
|
0.7
|
Total
|
100.0
|
|
100.0
|
Operating items as a percentage of revenue:
|
|
|
|
Gross profit:
|
|
|
|
New vehicle
|
4.6
|
|
5.2
|
Used vehicle - retail
|
6.6
|
|
6.5
|
Parts and service
|
44.9
|
|
43.9
|
Total
|
16.0
|
|
16.0
|
Selling, general, and administrative expenses
|
11.9
|
|
11.6
|
Operating income
|
3.5
|
|
4.0
|
Operating items as a percentage of total gross profit:
|
|
|
|
Selling, general, and administrative expenses
|
74.4
|
|
72.6
|
Operating income
|
22.1
|
|
25.2
|
|
|
||
|
March 31,
|
||
|
2018
|
|
2017
|
Inventory days supply:
|
|
|
|
New vehicle (industry standard of selling days)
|
69 days
|
|
71 days
|
Used vehicle (trailing calendar month days)
|
31 days
|
|
37 days
|
|
|
|
|
|
Three Months Ended March 31,
|
|||||||||||||
($ in millions, except per vehicle data)
|
2018
|
|
2017
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
|||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
New vehicle
|
$
|
2,757.4
|
|
|
$
|
2,718.3
|
|
|
$
|
39.1
|
|
|
1.4
|
|
Retail used vehicle
|
1,200.6
|
|
|
1,116.7
|
|
|
83.9
|
|
|
7.5
|
|
|||
Wholesale
|
88.4
|
|
|
81.9
|
|
|
6.5
|
|
|
7.9
|
|
|||
Used vehicle
|
1,289.0
|
|
|
1,198.6
|
|
|
90.4
|
|
|
7.5
|
|
|||
Finance and insurance, net
|
237.6
|
|
|
216.8
|
|
|
20.8
|
|
|
9.6
|
|
|||
Total variable operations
(1)
|
4,284.0
|
|
|
4,133.7
|
|
|
150.3
|
|
|
3.6
|
|
|||
Parts and service
|
841.5
|
|
|
823.3
|
|
|
18.2
|
|
|
2.2
|
|
|||
Other
|
27.8
|
|
|
35.5
|
|
|
(7.7
|
)
|
|
|
||||
Total revenue
|
$
|
5,153.3
|
|
|
$
|
4,992.5
|
|
|
$
|
160.8
|
|
|
3.2
|
|
Gross profit:
|
|
|
|
|
|
|
|
|||||||
New vehicle
|
$
|
127.4
|
|
|
$
|
141.2
|
|
|
$
|
(13.8
|
)
|
|
(9.8
|
)
|
Retail used vehicle
|
80.7
|
|
|
72.5
|
|
|
8.2
|
|
|
11.3
|
|
|||
Wholesale
|
0.8
|
|
|
2.0
|
|
|
(1.2
|
)
|
|
|
||||
Used vehicle
|
81.5
|
|
|
74.5
|
|
|
7.0
|
|
|
9.4
|
|
|||
Finance and insurance
|
237.6
|
|
|
216.8
|
|
|
20.8
|
|
|
9.6
|
|
|||
Total variable operations
(1)
|
446.5
|
|
|
432.5
|
|
|
14.0
|
|
|
3.2
|
|
|||
Parts and service
|
377.7
|
|
|
361.2
|
|
|
16.5
|
|
|
4.6
|
|
|||
Other
|
0.5
|
|
|
5.8
|
|
|
(5.3
|
)
|
|
|
||||
Total gross profit
|
$
|
824.7
|
|
|
$
|
799.5
|
|
|
$
|
25.2
|
|
|
3.2
|
|
Retail vehicle unit sales:
|
|
|
|
|
|
|
|
|||||||
New vehicle
|
73,275
|
|
|
73,538
|
|
|
(263
|
)
|
|
(0.4
|
)
|
|||
Used vehicle
|
60,270
|
|
|
58,233
|
|
|
2,037
|
|
|
3.5
|
|
|||
|
133,545
|
|
|
131,771
|
|
|
1,774
|
|
|
1.3
|
|
|||
Revenue per vehicle retailed:
|
|
|
|
|
|
|
|
|||||||
New vehicle
|
$
|
37,631
|
|
|
$
|
36,965
|
|
|
$
|
666
|
|
|
1.8
|
|
Used vehicle
|
$
|
19,920
|
|
|
$
|
19,176
|
|
|
$
|
744
|
|
|
3.9
|
|
Gross profit per vehicle retailed:
|
|
|
|
|
|
|
|
|||||||
New vehicle
|
$
|
1,739
|
|
|
$
|
1,920
|
|
|
$
|
(181
|
)
|
|
(9.4
|
)
|
Used vehicle
|
$
|
1,339
|
|
|
$
|
1,245
|
|
|
$
|
94
|
|
|
7.6
|
|
Finance and insurance
|
$
|
1,779
|
|
|
$
|
1,645
|
|
|
$
|
134
|
|
|
8.1
|
|
Total variable operations
(2)
|
$
|
3,337
|
|
|
$
|
3,267
|
|
|
$
|
70
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|||||||
(1)
Total variable operations includes new vehicle, used vehicle (retail and wholesale), and finance and insurance results.
|
||||||||||||||
(2)
Total variable operations gross profit per vehicle retailed is calculated by dividing the sum of new vehicle, retail used vehicle, and finance and insurance gross profit by total retail vehicle unit sales.
|
|
Three Months Ended
|
||
|
March 31,
|
||
|
2018 (%)
|
|
2017 (%)
|
Revenue mix percentages:
|
|
|
|
New vehicle
|
53.5
|
|
54.4
|
Used vehicle
|
25.0
|
|
24.0
|
Parts and service
|
16.3
|
|
16.5
|
Finance and insurance, net
|
4.6
|
|
4.3
|
Other
|
0.6
|
|
0.8
|
Total
|
100.0
|
|
100.0
|
Gross profit mix percentages:
|
|
|
|
New vehicle
|
15.4
|
|
17.7
|
Used vehicle
|
9.9
|
|
9.3
|
Parts and service
|
45.8
|
|
45.2
|
Finance and insurance
|
28.8
|
|
27.1
|
Other
|
0.1
|
|
0.7
|
Total
|
100.0
|
|
100.0
|
Operating items as a percentage of revenue:
|
|
|
|
Gross profit:
|
|
|
|
New vehicle
|
4.6
|
|
5.2
|
Used vehicle - retail
|
6.7
|
|
6.5
|
Parts and service
|
44.9
|
|
43.9
|
Total
|
16.0
|
|
16.0
|
|
Three Months Ended March 31,
|
|||||||||||||
($ in millions, except per vehicle data)
|
2018
|
|
2017
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
|||||||
Reported:
|
|
|
|
|
|
|
|
|||||||
Revenue
|
$
|
2,802.3
|
|
|
$
|
2,796.2
|
|
|
$
|
6.1
|
|
|
0.2
|
|
Gross profit
|
$
|
129.7
|
|
|
$
|
144.3
|
|
|
$
|
(14.6
|
)
|
|
(10.1
|
)
|
Retail vehicle unit sales
|
74,178
|
|
|
75,798
|
|
|
(1,620
|
)
|
|
(2.1
|
)
|
|||
Revenue per vehicle retailed
|
$
|
37,778
|
|
|
$
|
36,890
|
|
|
$
|
888
|
|
|
2.4
|
|
Gross profit per vehicle retailed
|
$
|
1,748
|
|
|
$
|
1,904
|
|
|
$
|
(156
|
)
|
|
(8.2
|
)
|
Gross profit as a percentage of revenue
|
4.6
|
%
|
|
5.2
|
%
|
|
|
|
|
|||||
Inventory days supply (industry standard of selling days)
|
69 days
|
|
|
71 days
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||||||
|
Three Months Ended March 31,
|
|||||||||||||
|
2018
|
|
2017
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
|||||||
Same Store:
|
|
|
|
|
|
|
|
|||||||
Revenue
|
$
|
2,757.4
|
|
|
$
|
2,718.3
|
|
|
$
|
39.1
|
|
|
1.4
|
|
Gross profit
|
$
|
127.4
|
|
|
$
|
141.2
|
|
|
$
|
(13.8
|
)
|
|
(9.8
|
)
|
Retail vehicle unit sales
|
73,275
|
|
|
73,538
|
|
|
(263
|
)
|
|
(0.4
|
)
|
|||
Revenue per vehicle retailed
|
$
|
37,631
|
|
|
$
|
36,965
|
|
|
$
|
666
|
|
|
1.8
|
|
Gross profit per vehicle retailed
|
$
|
1,739
|
|
|
$
|
1,920
|
|
|
$
|
(181
|
)
|
|
(9.4
|
)
|
Gross profit as a percentage of revenue
|
4.6
|
%
|
|
5.2
|
%
|
|
|
|
|
|
Three Months Ended March 31,
|
||||||||||
(In millions)
|
2018
|
|
2017
|
|
Variance
|
||||||
Floorplan assistance
|
$
|
28.5
|
|
|
$
|
28.3
|
|
|
$
|
0.2
|
|
New vehicle floorplan interest expense
|
(26.2
|
)
|
|
(20.2
|
)
|
|
(6.0
|
)
|
|||
Net new vehicle inventory carrying benefit
|
$
|
2.3
|
|
|
$
|
8.1
|
|
|
$
|
(5.8
|
)
|
|
Three Months Ended March 31,
|
||||||||||||
($ in millions, except per vehicle data)
|
2018
|
|
2017
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
||||||
Reported:
|
|
|
|
|
|
|
|
||||||
Retail revenue
|
$
|
1,237.1
|
|
|
$
|
1,156.1
|
|
|
$
|
81.0
|
|
|
7.0
|
Wholesale revenue
|
93.4
|
|
|
84.8
|
|
|
8.6
|
|
|
10.1
|
|||
Total revenue
|
$
|
1,330.5
|
|
|
$
|
1,240.9
|
|
|
$
|
89.6
|
|
|
7.2
|
Retail gross profit
|
$
|
82.0
|
|
|
$
|
74.9
|
|
|
$
|
7.1
|
|
|
9.5
|
Wholesale gross profit
|
3.8
|
|
|
2.1
|
|
|
1.7
|
|
|
|
|||
Total gross profit
|
$
|
85.8
|
|
|
$
|
77.0
|
|
|
$
|
8.8
|
|
|
11.4
|
Retail vehicle unit sales
|
62,210
|
|
|
60,608
|
|
|
1,602
|
|
|
2.6
|
|||
Revenue per vehicle retailed
|
$
|
19,886
|
|
|
$
|
19,075
|
|
|
$
|
811
|
|
|
4.3
|
Gross profit per vehicle retailed
|
$
|
1,318
|
|
|
$
|
1,236
|
|
|
$
|
82
|
|
|
6.6
|
Gross profit as a percentage of revenue
|
6.6
|
%
|
|
6.5
|
%
|
|
|
|
|
||||
Inventory days supply (trailing calendar month days)
|
31 days
|
|
|
37 days
|
|
|
|
|
|
||||
|
|
||||||||||||
|
Three Months Ended March 31,
|
||||||||||||
|
2018
|
|
2017
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
||||||
Same Store:
|
|
|
|
|
|
|
|
||||||
Retail revenue
|
$
|
1,200.6
|
|
|
$
|
1,116.7
|
|
|
$
|
83.9
|
|
|
7.5
|
Wholesale revenue
|
88.4
|
|
|
81.9
|
|
|
6.5
|
|
|
7.9
|
|||
Total revenue
|
$
|
1,289.0
|
|
|
$
|
1,198.6
|
|
|
$
|
90.4
|
|
|
7.5
|
Retail gross profit
|
$
|
80.7
|
|
|
$
|
72.5
|
|
|
$
|
8.2
|
|
|
11.3
|
Wholesale gross profit
|
0.8
|
|
|
2.0
|
|
|
(1.2
|
)
|
|
|
|||
Total gross profit
|
$
|
81.5
|
|
|
$
|
74.5
|
|
|
$
|
7.0
|
|
|
9.4
|
Retail vehicle unit sales
|
60,270
|
|
|
58,233
|
|
|
2,037
|
|
|
3.5
|
|||
Revenue per vehicle retailed
|
$
|
19,920
|
|
|
$
|
19,176
|
|
|
$
|
744
|
|
|
3.9
|
Gross profit per vehicle retailed
|
$
|
1,339
|
|
|
$
|
1,245
|
|
|
$
|
94
|
|
|
7.6
|
Gross profit as a percentage of revenue
|
6.7
|
%
|
|
6.5
|
%
|
|
|
|
|
|
Three Months Ended March 31,
|
||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
||||||
Reported:
|
|
|
|
|
|
|
|
||||||
Revenue
|
$
|
858.5
|
|
|
$
|
845.1
|
|
|
$
|
13.4
|
|
|
1.6
|
Gross Profit
|
$
|
385.5
|
|
|
$
|
371.0
|
|
|
$
|
14.5
|
|
|
3.9
|
Gross profit as a percentage of revenue
|
44.9
|
%
|
|
43.9
|
%
|
|
|
|
|
||||
Same Store:
|
|
|
|
|
|
|
|
||||||
Revenue
|
$
|
841.5
|
|
|
$
|
823.3
|
|
|
$
|
18.2
|
|
|
2.2
|
Gross Profit
|
$
|
377.7
|
|
|
$
|
361.2
|
|
|
$
|
16.5
|
|
|
4.6
|
Gross profit as a percentage of revenue
|
44.9
|
%
|
|
43.9
|
%
|
|
|
|
|
|
Three Months Ended March 31,
|
||||||||||||
($ in millions, except per vehicle data)
|
2018
|
|
2017
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
||||||
Reported:
|
|
|
|
|
|
|
|
||||||
Revenue and gross profit
|
$
|
240.8
|
|
|
$
|
221.6
|
|
|
$
|
19.2
|
|
|
8.7
|
Gross profit per vehicle retailed
|
$
|
1,766
|
|
|
$
|
1,625
|
|
|
$
|
141
|
|
|
8.7
|
Same Store:
|
|
|
|
|
|
|
|
||||||
Revenue and gross profit
|
$
|
237.6
|
|
|
$
|
216.8
|
|
|
$
|
20.8
|
|
|
9.6
|
Gross profit per vehicle retailed
|
$
|
1,779
|
|
|
$
|
1,645
|
|
|
$
|
134
|
|
|
8.1
|
|
Three Months Ended March 31,
|
|||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
|||||||
Revenue
|
$
|
1,773.7
|
|
|
$
|
1,800.8
|
|
|
$
|
(27.1
|
)
|
|
(1.5
|
)
|
Segment income
|
$
|
60.3
|
|
|
$
|
61.4
|
|
|
$
|
(1.1
|
)
|
|
(1.8
|
)
|
Retail new vehicle unit sales
|
24,605
|
|
|
26,259
|
|
|
(1,654
|
)
|
|
(6.3
|
)
|
|
Three Months Ended March 31,
|
|||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
|||||||
Revenue
|
$
|
1,652.6
|
|
|
$
|
1,631.7
|
|
|
$
|
20.9
|
|
|
1.3
|
|
Segment income
|
$
|
72.8
|
|
|
$
|
71.7
|
|
|
$
|
1.1
|
|
|
1.5
|
|
Retail new vehicle unit sales
|
33,950
|
|
|
34,315
|
|
|
(365
|
)
|
|
(1.1
|
)
|
|
Three Months Ended March 31,
|
||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
||||||
Revenue
|
$
|
1,717.8
|
|
|
$
|
1,616.6
|
|
|
$
|
101.2
|
|
|
6.3
|
Segment income
|
$
|
87.7
|
|
|
$
|
80.5
|
|
|
$
|
7.2
|
|
|
8.9
|
Retail new vehicle unit sales
|
15,623
|
|
|
15,224
|
|
|
399
|
|
|
2.6
|
|
Three Months Ended March 31,
|
|||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
Variance
Favorable /
(Unfavorable)
|
|
%
Variance
|
|||||||
Reported:
|
|
|
|
|
|
|
|
|||||||
Compensation
|
$
|
399.7
|
|
|
$
|
377.2
|
|
|
$
|
(22.5
|
)
|
|
(6.0
|
)
|
Advertising
|
44.3
|
|
|
45.7
|
|
|
1.4
|
|
|
3.1
|
|
|||
Store and corporate overhead
|
182.8
|
|
|
172.4
|
|
|
(10.4
|
)
|
|
(6.0
|
)
|
|||
Total
|
$
|
626.8
|
|
|
$
|
595.3
|
|
|
$
|
(31.5
|
)
|
|
(5.3
|
)
|
|
|
|
|
|
|
|
|
|||||||
SG&A as a % of total gross profit:
|
|
|
|
|
|
|
|
|||||||
Compensation
|
47.5
|
|
|
46.0
|
|
|
(150
|
)
|
|
bps
|
||||
Advertising
|
5.3
|
|
|
5.6
|
|
|
30
|
|
|
bps
|
||||
Store and corporate overhead
|
21.6
|
|
|
21.0
|
|
|
(60
|
)
|
|
bps
|
||||
Total
|
74.4
|
|
|
72.6
|
|
|
(180
|
)
|
|
bps
|
(In millions)
|
March 31,
2018 |
|
December 31,
2017 |
||||
Cash and cash equivalents
|
$
|
57.5
|
|
|
$
|
69.2
|
|
Revolving credit facility
(1)
|
$
|
1,364.5
|
|
(2)
|
$
|
1,378.6
|
|
Secured used vehicle floorplan facilities
(3)
|
$
|
26.7
|
|
|
$
|
0.4
|
|
(1)
|
As limited by the maximum consolidated leverage ratio contained in our credit agreement.
|
(2)
|
At
March 31, 2018
, we had
$47.9 million
of letters of credit outstanding. In addition, we use the revolving credit facility under our credit agreement as a liquidity backstop for borrowings under our commercial paper program. We had
$270.0 million
of commercial paper notes outstanding at
March 31, 2018
. See Note 6 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.
|
(3)
|
Based on the eligible used vehicle inventory that could have been pledged as collateral. See Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
(In millions, except per share data)
|
2018
|
|
2017
|
||||
Shares repurchased
|
0.5
|
|
|
—
|
|
||
Aggregate purchase price
|
$
|
26.6
|
|
|
$
|
—
|
|
Average purchase price per share
|
$
|
48.38
|
|
|
$
|
—
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
(In millions)
|
2018
|
|
2017
|
||||
Purchases of property and equipment, including operating lease buy-outs
(1)
|
$
|
79.4
|
|
|
$
|
86.8
|
|
(1)
|
Includes accrued construction in progress and excludes property associated with capital leases entered into during the year.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
(In millions)
|
2018
|
|
2017
|
||||
Cash received from (used in) business acquisitions, net
(1)
|
$
|
(1.9
|
)
|
|
$
|
(5.8
|
)
|
Cash received from (used in) business divestitures, net
|
$
|
89.2
|
|
|
$
|
9.9
|
|
(1)
|
Excludes capital leases and deferred purchase price commitments.
|
|
March 31, 2018
|
||
|
Requirement
|
|
Actual
|
Leverage ratio (subject to step-downs to 3.75x by December 31, 2018)
|
≤ 4.25x
|
|
2.81x
|
Capitalization ratio
|
≤ 70.0%
|
|
61.3%
|
(In millions)
|
March 31,
2018 |
|
December 31,
2017 |
||||
Vehicle floorplan payable - trade
|
$
|
2,233.1
|
|
|
$
|
2,179.1
|
|
Vehicle floorplan payable - non-trade
|
1,506.1
|
|
|
1,627.8
|
|
||
Vehicle floorplan payable
|
$
|
3,739.2
|
|
|
$
|
3,806.9
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
(In millions)
|
2018
|
|
2017
|
||||
Net cash provided by operating activities
|
$
|
198.7
|
|
|
$
|
185.6
|
|
Net cash used in investing activities
|
$
|
(13.2
|
)
|
|
$
|
(75.3
|
)
|
Net cash used in financing activities
|
$
|
(197.7
|
)
|
|
$
|
(118.1
|
)
|
•
|
The automotive retail industry is sensitive to changing economic conditions and various other factors. Our business and results of operations are substantially dependent on new vehicle sales levels in the United States and in our particular geographic markets, as well as the gross profit margins that we can achieve on our sales of vehicles, all of which are very difficult to predict.
|
•
|
Our new vehicle sales are impacted by incentive, marketing, and other programs of vehicle manufacturers.
|
•
|
We are dependent upon the success and continued financial viability of the vehicle manufacturers and distributors with which we hold franchises.
|
•
|
If we are not able to maintain and enhance our retail brands and reputation or to attract consumers to our own digital channels, or if events occur that damage our retail brands, reputation, or sales channels, our business and financial results may be harmed. We are investing significantly in our brand extension strategy, and if our strategic initiatives are not successful, we will have incurred significant expenses without the benefit of improved financial results.
|
•
|
New laws, regulations, or governmental policies regarding fuel economy and greenhouse gas emission standards, or changes to existing standards, may affect vehicle manufacturers’ ability to produce cost-effective vehicles or vehicles that consumers demand, which could adversely impact our business, results of operations, financial condition, cash flow, and prospects.
|
•
|
Natural disasters and adverse weather events can disrupt our business.
|
•
|
We are subject to restrictions imposed by, and significant influence from, vehicle manufacturers that may adversely impact our business, financial condition, results of operations, cash flows, and prospects, including our ability to acquire additional stores.
|
•
|
We are subject to numerous legal and administrative proceedings, which, if the outcomes are adverse to us, could materially adversely affect our business, results of operations, financial condition, cash flows, and prospects.
|
•
|
Our operations are subject to extensive governmental laws and regulations. If we are found to be in purported violation of or subject to liabilities under any of these laws or regulations, or if new laws or regulations are enacted that adversely affect our operations, our business, operating results, and prospects could suffer.
|
•
|
A failure of our information systems or any security breach or unauthorized disclosure of confidential information could have a material adverse effect on our business.
|
•
|
Our debt agreements contain certain financial ratios and other restrictions on our ability to conduct our business, and our substantial indebtedness could adversely affect our financial condition and operations and prevent us from fulfilling our debt service obligations.
|
•
|
We are subject to interest rate risk in connection with our vehicle floorplan payables, revolving credit facility, and commercial paper program that could have a material adverse effect on our profitability.
|
•
|
Goodwill and other intangible assets comprise a significant portion of our total assets. We must test our goodwill and other intangible assets for impairment at least annually, which could result in a material, non-cash write-down of goodwill or franchise rights and could have a material adverse impact on our results of operations and shareholders’ equity.
|
•
|
Our largest stockholders, as a result of their ownership stakes in us, may have the ability to exert substantial influence over actions to be taken or approved by our stockholders or Board of Directors. In addition, future share repurchases and fluctuations in the levels of ownership of our largest stockholders could impact the volume of trading, liquidity, and market price of our common stock.
|
•
|
AutoNation’s Twitter feed (
www.twitter.com/autonation
)
|
•
|
Mike Jackson’s Twitter feed (
www.twitter.com/CEOMikeJackson
)
|
•
|
AutoNation’s Facebook page (
www.facebook.com/autonation
)
|
•
|
Mike Jackson’s Facebook page (
www.facebook.com/CEOMikeJackson
)
|
Period
|
Total Number of
Shares Purchased
(1)
|
|
Avg. Price
Paid Per
Share
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
|
|
Approximate Dollar Value of
Shares That May Yet Be
Purchased Under The
Programs (in millions)
(1)
|
||||||
January 1, 2018 - January 31, 2018
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
113.7
|
|
February 1, 2018 - February 28, 2018
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
113.7
|
|
March 1, 2018 - March 31, 2018
|
555,926
|
|
|
$
|
48.39
|
|
|
549,800
|
|
|
$
|
87.1
|
|
Total
|
555,926
|
|
|
|
|
549,800
|
|
|
|
(1)
|
Our Board of Directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary limit. As of
March 31, 2018
,
$87.1 million
remained available under our stock repurchase authorization limit. The Board’s authorization has no expiration date. During the
first
quarter of
2018
, all of the shares reflected in the table above were repurchased under our stock repurchase program, except for
6,126
shares surrendered to AutoNation to satisfy tax withholding obligations in connection with the vesting of restricted stock.
|
Exhibit No.
|
Description
|
|
|
10.1
|
|
10.2
|
|
31.1
|
|
31.2
|
|
32.1
|
|
32.2
|
|
101.INS
|
XBRL Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
AUTONATION, INC.
|
|
|
|
|
|
Date:
|
May 1, 2018
|
By:
|
/s/ Christopher Cade
|
|
|
|
Christopher Cade
Senior Vice President and Chief Accounting Officer
|
|
|
|
|
|
|
|
(Duly Authorized Officer and Principal Accounting Officer)
|
(a)
|
RSUs Grant 1
- Except as otherwise provided in Section 5 of this Agreement or in the Plan, the RSUs shall become vested on the applicable vesting date set forth on Schedule 1, subject to the Participant’s continued employment with the Company, its Subsidiaries or its Affiliates, through such vesting date. If the Performance Goal set forth on Schedule 1 is not achieved, the RSUs shall be immediately forfeited.
|
(b)
|
PSUs
. Except as otherwise provided in Section 5 of this Agreement or in the Plan:
|
(i)
|
Grant 2
- the PSUs in respect of this Grant 2 shall be earned based on the achievement of the Performance Goals set forth on Schedule 2 attached hereto and become vested on the date that the Board certifies the level at which such Performance Goals have been achieved, subject to the Participant’s continued employment with the Company, its Subsidiaries or its Affiliates through the end of the Performance Period set forth on such Schedule. If the Performance Goals set forth on Schedule 2 are not achieved, the PSUs in respect of this Grant 2 shall be immediately forfeited.
|
(ii)
|
Grant 3
- the PSUs in respect of this Grant 3 shall be earned based on the achievement of the Performance Goals set forth on Schedule 3 attached hereto and become vested on the date the Board certifies the level at which such Performance Goals have been achieved, subject to the Participant’s continued employment with the Company, its Subsidiaries or its Affiliates through the end of the Performance Period set forth on such Schedule. If the Performance Goals set forth on Schedule 3 are not achieved, the PSUs in respect of this Grant 3 shall be immediately forfeited.
|
(iii)
|
Grant 4
- the PSUs in respect of this Grant 4 shall be earned based on the achievement of the Performance Goals set forth on Schedule 4 attached hereto and become vested on the date the Board certifies the level at which such Performance Goals have been achieved, subject to the Participant’s continued employment with the Company, its Subsidiaries or its Affiliates through the end of the Performance Period set forth on such Schedule. If the Performance Goals set forth on Schedule 4 are not achieved, the PSUs in respect of this Grant 4 shall be immediately forfeited.
|
(c)
|
Without limiting the generality of the foregoing, the Board may exercise negative discretion in respect of the final determination of each Award as set forth on each Schedule to the extent the Board determines such adjustment to be equitable in good faith.
|
(a)
|
Termination of Employment for Cause
. Upon the termination of the Participant’s employment for Cause by the Company, its Subsidiaries or its Affiliates, this Agreement shall terminate and all rights of the Participant with respect to all RSUs or PSUs that have not been settled shall immediately terminate. The RSUs and PSUs shall be forfeited without payment of any consideration, and neither the Participant nor any of the Participant’s successors, heirs, assigns, or personal representatives shall thereafter have any further rights or interests in such RSUs or PSUs.
|
(b)
|
Qualifying Termination of Employment
.
|
(i)
|
Death - RSUs
. Upon the termination of the Participant’s employment with the Company, its Subsidiaries or its Affiliates thereof on account of death, the Participant shall immediately vest in full in the RSUs, without regard to the level of achievement of the Performance Goal.
|
(ii)
|
Death - PSUs
. Upon the termination of the Participant’s employment with the Company, its Subsidiaries or its Affiliates thereof on account of death, the Participant shall continue to vest (as if the Participant’s employment had not been terminated) in a pro-rated portion of the PSUs, subject to the achievement of the Performance Goals as set forth on the applicable Schedule and the immediately following sentence. Any portion of the PSUs that do not vest in accordance with the foregoing shall automatically be forfeited. For purposes of the foregoing, the pro-rated portion of the PSUs shall equal the number of full months in the Performance Period during which the Participant was employed by the Company, its Subsidiaries or its Affiliates divided by thirty-six (36).
|
(iii)
|
Disability and Retirement - RSUs and PSUs
. Upon the termination of the Participant’s employment with the Company, its Subsidiaries or its Affiliates thereof (i) due to Disability or (ii) by the Participant due to Retirement, the Participant shall continue to vest (as if the Participant’s employment had not been terminated) in the RSUs and in a pro-rated portion of the PSUs, subject to the achievement of the Performance Goals as set forth on the applicable Schedule and the immediately following sentence. The RSUs and the pro-rated portion of the PSUs shall continue to vest only if the Participant fully complies with any non-compete, non-disparagement, confidentiality and other restrictive covenants set forth in any agreement entered into between the Participant and the Company or its Subsidiaries or its Affiliates from time to time (including, but not limited to any Restrictive Covenants and Confidentiality Agreement entered into between the Participant and the Company) determined, notwithstanding the time periods set forth therein, as if all such restrictive covenants applied at all times while the Awards are outstanding. The Board shall determine whether the Participant has complied with such restrictive covenants. Any portion of the RSUs or PSUs that does not vest in accordance with the foregoing shall automatically be forfeited. For purposes of the foregoing, the pro-rated portion of the PSUs shall equal the number of full months in the Performance Period during which the Participant was employed by the Company, its Subsidiaries or its Affiliates divided by thirty-six (36).
|
(a)
|
RSU Payment
. The Company shall deliver to the Participant either, in its sole and absolute discretion (a) a number of shares of Stock equal to the number of vested shares subject to the RSU Award, including dividend equivalents credited with respect to such shares, or (b) an amount of cash equal to the Fair Market Value of such shares on the date of the distribution, in either case, on or as soon as administratively practical following the date of vesting of the applicable portion of the total RSUs pursuant to the terms hereof (and in all events within seventy-five (75) days of the vesting date to the extent necessary to determine whether the Performance Goal has been achieved and otherwise within thirty (30) days of the vesting date).
|
(b)
|
PSU Payment
. The Company shall deliver to the Participant either, in its sole and absolute discretion (a) a number of shares of Stock equal to the number of shares of Stock earned and vested with respect to each applicable PSU Award, including dividend equivalents credited with respect to such shares, or (b) an amount of cash equal to the Fair Market Value of such shares on the date of the distribution, in either case, on or as soon as administratively practical following expiration of the applicable Performance Period (and in all events within seventy-five (75) days thereof).
|
Section 1.
|
DEFINITIONS
. As hereinafter used:
|
Section 2.
|
SEVERANCE BENEFITS
.
|
Section 3.
|
PLAN ADMINISTRATION
.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of AutoNation, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Michael J. Jackson
|
Michael J. Jackson
|
Chairman, Chief Executive Officer and President
|
1.
|
I have reviewed this quarterly report on Form 10-Q of AutoNation, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Cheryl Miller
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Cheryl Miller
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Executive Vice President and Chief Financial Officer
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(1)
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the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Michael J. Jackson
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Michael J. Jackson
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Chairman, Chief Executive Officer and President
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(1)
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the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Cheryl Miller
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Cheryl Miller
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Executive Vice President and Chief Financial Officer
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