AutoNation, Inc. (AN)
Q3 2008 Earnings Call Transcript
November 6, 2008 11:00 a.m. ET

Executives

John M. Zimmerman - Vice President, Investor Relations
Mike J. Jackson - Chairman of the Board & Chief Executive Officer
Michael J. Short - Chief Financial Officer & Executive Vice President
Michael E. Maroone - President, Chief Operating Officer & Director

Analysts

Rexford Henderson - Raymond James & Associates
Matt Nemer - Thomas Weisel Partners
N. Richard Nelson, Jr. - Stephens, Inc.
Joseph C. Amaturo - Buckingham Research
Rod Lache - Deutsche Bank
Matthew J. Fassler – Goldman Sachs & Company
David Lim – Wachovia Corporation
Eric Selle – JPMorgan

Presentation

Operator

Welcome to AutoNation’s third 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. To ask a question, please press “*1”. 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 AutoNation.

John M. Zimmerman

Good morning and welcome to AutoNation’s third quarter 2008 conference call. My name is John Zimmerman, AutoNation’s Vice President of Investor Relations. I’d like to remind you that this call is being recorded and will be available for replay at 1-888-567-0381 after 2:00 pm Eastern Time today through November 13, 2008.

Leading our call today will be Mike Jackson, Chairman and Chief Executive Officer of AutoNation. Joining him will be Mike Maroone, President and Chief Operating Officer, and Mike Short, Chief Financial Officer. At the end of their remarks, we’ll open the call to questions. I’ll also be available by phone to address any follow-up issues.

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 the Company’s SEC filings.

Certain non-GAAP financial measures as defined under the SEC rules may be discussed on this call. As required by applicable SEC rules, the company provides reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on the Investor Relations section of AutoNation’s website at www.autonation.com.

Now I’ll turn the call over to AutoNation’s Chairman and Chief Executive Officer, Mike Jackson.

Mike J. Jackson

Good morning and thank you for joining us. Today we reported a third quarter net loss from continuing operations of $1.4 billion or $7.95 per share. In the quarter the company recorded noncash charges for goodwill and franchise impairment of $1.46 billion after tax. Despite these charges we remain in compliance with our debt covenants. After adjusting for the impairment charges and certain other items, net income from continuing operations for the 2008 third quarter was $44 million or $0.25 per share compared to $73 million or $0.37 per share in the prior year.

In the third quarter total US industry new vehicle retail sales declined 31% based on CNW research data. In comparison, in the third quarter AutoNation’s new vehicle unit sales declined 24%. This performance relative to the US retail total is attributable to a combination of increased market share as well as the benefit of our geographic and brand mix relative to the total market.

In the third quarter we want to address four major items.

First. In the third quarter the US economy moved deeper into recession as the credit crisis escalated to a credit panic in September as credit freeze ensued which broke consumer confidence which has been under pressure throughout the year. The industry saw a decline in floor traffic at automotive showrooms and for those customers who were in the showrooms credit availability was very tight.

We do believe the actions taken by the Federal Reserve and Treasury Department will bring credit back into the marketplace in the near future. The recent total cuts of a 100 basis points by the Federal Reserve is another sign that all tools are being used to get the US economy back on track. LIBOR spreads continue to narrow which has been the case for the last 18 days and we expect this to continue going forward.