AutoNation, Inc. Q1 2010 Earnings Call Transcript
AutoNation, Inc. (AN)
Q1 2010 Earnings Call
April 22, 2010 11:00 AM EST
Executives
Cheryl Scully – Treasurer and VP of Investor Relations
Mike Jackson – Chairman and CEO
Mike Maroone – President and COO
Mike Short – CFO
Analysts
John Murphy – Bank of America Merrill Lynch
Rick Nelson – Stephens
Matthew Fassler - Goldman Sachs
Michael Ward - Soleil
Dan Gallatin (ph) - Deutsche Bank
Ravi Shankar – Morgan Stanley
Matthew Nemer – Wells Fargo Securities
Ryan Brinkman – JPMorgan Chase
Colin Langan – UBS
Brian Sponheimer - Gabelli
Presentation
Operator
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Thank you for standing by and welcome to AutoNation's first quarter earnings conference call. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. (Operator Instructions). Today’s conference is being recorded. If you have any objections, you may disconnect at this time.
Now, I will turn the call over to your conference host, Ms. Cheryl Scully, Treasurer and Vice President of Investor Relations for AutoNation. Ma’am, you may begin.
Cheryl Scully
Good morning, everyone, and welcome to AutoNation's first quarter 2010 conference call. Leading our call today will be Mike Jackson, our Chairman and CEO; Mike Maroone, our President and Chief Operating Officer; and Mike Short, our CFO. Following their remarks, we will open up the call for questions. Derek and I will also be available by phone to address any additional questions you may have.
Before we begin, let me read our brief statement regarding forward-looking comments and the use of non-GAAP financial measures. Certain statements and information on this call will constitute forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve risks which may cause the actual results or performance to differ materially from expectations. Additional discussions of factors that could cause actual results to differ materially are contained in our SEC filings. Certain non-GAAP financial measures as defined under SEC rules may be discussed on this call. Reconciliations are provided in our press release, which is available on our website at
.
And with that, I would now like to turn the call over to AutoNation’s Chairman and Chief Executive Officer, Mike Jackson.
Mike Jackson
Good morning, thank you for joining us. Today, we reported first quarter EPS from continuing operations of $0.34, a 55% increase compared to adjusted EPS from continuing operations of $0.22 in the prior year and a 13% increase compared to the $0.30 on a GAAP basis.
First quarter 2010 revenue totaled $2.8 billion compared to $2.4 billion in the year-ago period, an increase of 19% and increased in all of our revenue categories. In the first quarter, total US industry new vehicle retail sales increased 15%, based on CNW Research Data. In comparison during the same period, AutoNation’s new vehicle unit sales increased 19%. Our new and used vehicle and finance and insurance revenues, all increased 24%. And parts and service revenue was up slightly for the first time since the first of 2008.
Going forward, there are three issues I would like to address. The first is that we had two quarters of growth in all of AutoNation’s regions with significant year-over-year growth in our largest state of Florida, where we have 54 dealerships that represents 30% of our revenue in the first quarter of 2010. Florida was one of the initial states that saw a downturn beginning in 2007 and a collapse in the middle of 2008. We have now seen two straight quarters of growth in Florida.
After increasing 15% in the fourth quarter of 2009, Florida revenue grew 29% and new units saw a 27% increase in the first quarter of this year. The second issue is the recent recall by Toyota. We saw a no sales period that lasted nearly all of February and affected over 55% of our Toyota inventory. In March, Toyota launched an incentive program that brought customers who have been waiting back into our Toyota dealerships. Toyota has continued to retain the trust of their customers. AutoNation new vehicle unit sales for Toyota in March were up 38% and 6% for the first quarter.
And third, we have begun to see the resurgence of domestic brands, especially at Ford and General Motors. Because of our balanced brand portfolio and our focus on the Ford and Chevy brands, AutoNation is well positioned to benefit from the recovery of these manufacturers.
I would now like to turn it over to our Chief Financial Officer, Mike Short.
Mike Short
Thank you, Mike. Good morning, ladies and gentlemen. Let’s turn to our financial results for the first quarter. As Mike mentioned, we reported net income from continuing operations of $58.4 million or $0.34 per share versus $52.6 million or $0.30 per share during the first quarter of 2009.
Part of (results) included the gain on senior note repurchases of $0.04 per share, a net gain on assets sales and dispositions of $0.03 per share, partially offset by property and over appearance. After giving the effect of these items, our adjusted EPS from last year's first quarter was $0.22 per share. Adjustments to net income are included in the reconciliations provided in our press release.
Compared to last year, revenue increased $446 million or 19% and gross profit improved by $54 million or 12%. The SG&A increased of $23 million was primarily related to variable expenses, such as sales commissions increasing with higher sales volume and improved gross margin. As a percentage of gross profit, SG&A was 73.6%, that’s a reduction of 360 basis points year-over-year and down 280 basis points sequentially from the fourth quarter of 2009.
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