AutoNation 1996 Annual Report Download
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Table of contents
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Page 1
...in its Charter) (MARK ONE) [X] DELAWARE (State of Sncorporation) 450 EAST LAS OLAS BOULEVARD FORT LAUDERDALE, FLORSDA (Address of Principal Executive Offices) 73-1105145 (S.R.S. Employer Sdentification No.) 33301 (Zip Code) Registrant's telephone number, including area code: (954) 713-5200 NONE... -
Page 2
... locations in the United States, the Caribbean, Latin America and the Pacific. Sn 1996, National and its licensees operated an average fleet of approximately 145,000 vehicles. The Company's automotive retailing business involves the sale of both new and used vehicles and related automotive services... -
Page 3
... states. The Company also operates, in four states, seven used vehicle megastores under the name AutoNation USA(SM), three used vehicle retail outlets under the names Valu Stop(SM) or CarStop(SM), and two vehicle reconditioning centers. AutoNation is in various stages of acquiring and/or developing... -
Page 4
..., low mileage vehicles featuring "no-haggle" prices with limited warranties and return policies. Each megastore is highly visible with convenient access and provides exceptional customer service and other amenities. At present, the Company has opened seven AutoNation USA megastores, plans on opening... -
Page 5
... its rental at Alamo or National, and finally, from the sale or lease and related financing of the same used vehicle at an AutoNation USA megastore, Valu Stop or CarStop location. By owning national chains of franchised automotive dealerships, used vehicle stores, vehicle rental companies and other... -
Page 6
..., as applicable. Acquisitions Completed Subsequent to December 31, 1996 Sn February 1997, the Company acquired National, which operates a vehicle rental business. The Company issued approximately 21.7 million shares of Common Stock in this transaction, which is being accounted for under the pooling... -
Page 7
...solid waste services. The Company issued approximately 12.4 million shares of Common Stock in this transaction, which has been accounted for under the pooling of interests method of accounting. Sn November 1996, the Company acquired Alamo, which operates a vehicle rental business. The Company issued... -
Page 8
... to the Company's acquisition, ownership structure, management, and operation of automotive dealerships franchised by General Motors, which will allow the Company to implement its strategy of acquiring automotive dealerships in markets where it has existing and planned AutoNation USA megastores. Sn... -
Page 9
... are based primarily on market factors, frequency and type of service, the distance to the disposal facility and cost of disposal. Residential collection fees are paid by the residential customers receiving the service. The Company also owns or operates 43 transfer stations. Waste is collected and... -
Page 10
...-airport locations have greater high-yielding walk-up rentals (i.e., customers without reservations) and fewer no-shows (i.e., customers with reservations who fail to rent). Alamo principally targets the general use market for leisure travelers. Alamo's vehicle rental business operates in 45 states... -
Page 11
...at the airports at which they operate. Both Alamo and National generally offer their customers the convenience of leaving a rental vehicle at a rental location in a city other than the one in which it was rented, typically subject to a drop-off charge or special inter-city rate. Historically, rental... -
Page 12
... through franchised automotive dealerships of the applicable manufacturer. Most manufacturers renew their Repurchase Programs annually, at which time the parties negotiate the vehicle mix, cost and repurchase price. Under the Repurchase Programs with General Motors, the Company's rental fleets must... -
Page 13
... Motors negotiate the amount and mix of vehicles being purchased and certain other terms which can affect the overall cost for the model year. Sn addition to the Repurchase Programs with General Motors, the Company maintains fleet financing support agreements with General Motors for the benefit... -
Page 14
..., the Company acquired AutoNation. AutoNation is developing a chain of used vehicle megastores, under the AutoNation USA brand name, for the sale of "Reconditioned-To-Perform-Like-New" vehicles in a customer friendly, "no haggle" environment and is exploring other opportunities in other automotive... -
Page 15
... centers and automotive accessory sales. Each AutoNation USA megastore is located on an approximately 20-acre site with high-visibility and convenient access and provides exceptional customer service and amenities. AutoNation also has smaller used vehicle retail stores, operating under the Valu... -
Page 16
... have supported the residual values of leased vehicles which in turn has lowered the monthly payments on leased vehicles relative to purchased vehicles that are financed by the consumer. Each of the Company's automotive dealerships also offers aftermarket products such as cellular phones, radios... -
Page 17
...it will operate, and to make AutoNation USA a nationally-recognized brand name. The Company seeks to attract customers through "no haggle" car pricing, an extensive inventory of low mileage, late model used vehicles that have been "Reconditioned-To-Perform-Like-New", high quality service, warranties... -
Page 18
... vehicles. The Company expects to realize cost savings and efficiencies with respect to advertising expenses as it acquires multiple automotive dealerships and opens AutoNations USA megastores within particular markets, due to volume discounts and other concessions. CUSTOMERS As of December 31, 1996... -
Page 19
... deposited at the Company's facilities before the Company acquired or operated them. As is the case with automotive dealerships and vehicle rental operations generally, and service, parts and body shop operations in particular, the Company's automotive businesses involve the use, handling, storage... -
Page 20
..., the Company's collection and landfill operations may be affected by the trend in many states toward requiring the development of waste reduction and recycling programs. For example, several states have enacted laws that require counties or municipalities to adopt comprehensive plans to reduce... -
Page 21
... subject to various federal, state and local laws and regulations including those relating to taxing and licensing of vehicles, consumer protection, insurance, advertising, currency controls, used vehicle sales, zoning and land use, and labor matters. The Company's vehicle rental operations, as well... -
Page 22
... was vetoed. The Company's vehicle rental operations are also subject to various federal, state and local consumer protection laws and regulations including those relating to advertising and disclosure of charges to customers. The National Association of Attorneys General has promulgated suggested... -
Page 23
.... Competition in the Automotive Rental Sndustry. The automotive rental industry is characterized by intense price and service competition. Sn any given location, the Company's vehicle rental business may encounter competition from national, regional and local vehicle rental companies, some of which... -
Page 24
..., the Company has satisfied financial responsibility requirements for regulatory agencies by making cash deposits, obtaining bank letters of credit or by obtaining surety bonds. 20 22 Automotive Rental Sndustry. For its domestic vehicle rental operations, Alamo and National are state qualified self... -
Page 25
... customers from visiting retail stores (which have large open-air lots) or test driving vehicles. Vehicle dealers generally experience a higher volume of new and used vehicle sales in the second and third quarters of each year, in part due to manufacturer-sponsored or subsidized marketing programs... -
Page 26
...in the form and manner approved by the applicable manufacturers. The Company owns a number of registered trademarks and service marks which are used in its vehicle rental operations, including "ALAMO(R)", "ALAMO EXPRESS(R)", "NATSONAL CAR RENTAL(R)" and "EMERALD CLUB(R)" and has applications pending... -
Page 27
... Cost Savings. Many of the companies that the Company has recently acquired, such as Alamo, National, Addington, Continental and AutoNation, and companies that the Company plans to acquire, are large enterprises with operations in different markets. The success of any business combination is in part... -
Page 28
... of the fleet purchases to other manufacturers would require significant lead time. As a result, if General Motors were unable to supply the Company's vehicle rental operations with the planned number and type of vehicles, it could have a material adverse effect on the Company's business, financial... -
Page 29
... number of shares of Common Stock, or a perception that such sales could occur, there could be a material adverse effect on the prevailing market price of Common Stock. Dependence on Key Personnel. The Company's future success depends to a significant extent on certain key executive officers... -
Page 30
... Carolina Union City, Tennessee North Georgia Ohio County, Kentucky Southeast South Carolina South Atlanta, Georgia Central Florida West Texas North Central Texas Southern California East Central Texas West Texas DeSoto, Sllinois Mt. Vernon, Sndiana Central Michigan Lincoln County, Kentucky Fort... -
Page 31
... center in Fort Lauderdale, Florida and leases its reservation centers in Charlotte, North Carolina and Salt Lake City, Utah. The Fort Lauderdale reservation center shares a 60,000 square foot facility which houses Alamo's fleet control and data processing departments. National owns its corporate... -
Page 32
... Company's business. ENVSRONMENTAL MATTERS Smperial Landfill Filter Waste Sssue. Sn 1992, the Company received notices from Smperial County, California (the "County") and the Department of Toxic Substances Control ("DTSC"), a department under the California Environmental Protection Agency, alleging... -
Page 33
..., some of which seek punitive damages. The Company's automotive rental operations are not currently involved in any legal proceeding which the Company believes would, if determined adversely, have a material adverse effect upon the Company's business, financial condition or future prospects. STEM... -
Page 34
...of the issued and outstanding stock of Hyder Waste. On June 27, 1996, in connection with the acquisition of Charter Waste Management Corporation ("Charter Waste"), the Company issued 882,495 shares of Common Stock to the shareholders of Charter Waste in exchange for all of the issued and outstanding... -
Page 35
...for a purchase price of $29.50 per share resulting in net proceeds of approximately $353.0 million. On November 20, 1996, in connection with the acquisition of Rainbow Sndustries, Snc. ("Rainbow"), the Company issued 1,057,475 shares of Common Stock to the shareholders of Rainbow in exchange for all... -
Page 36
shareholders of Bell Dodge in exchange for all of the issued and outstanding stock of Bell Dodge. From time to time throughout 1996, the Company issued an aggregate of 4,079,800 shares of Common Stock to certain warrant holders in connection with the exercise of warrants to purchase shares of Common... -
Page 37
... 36 Acquisitions Completed Subsequent to December 31, 1996 Sn February 1997, the Company acquired National Car Rental System, Snc. ("National"), which operates a vehicle rental business. The Company issued approximately 21.7 million shares of Common Stock in this transaction, which will be accounted... -
Page 38
...solid waste services. The Company issued approximately 12.4 million shares of Common Stock in this transaction, which has been accounted for under the pooling of interests method of accounting. Sn November 1996, the Company acquired Alamo, which operates a vehicle rental business. The Company issued... -
Page 39
...each of the Company's various business segments for the years ended December 31 (in thousands): 1996 ---------Revenue: Automotive rental...Solid waste services...Automotive retailing...Electronic security services...Cost of Operations: Automotive rental...Solid waste services...Automotive retailing... -
Page 40
... 1997 with the acquisitions of a significant number of new car dealerships. The operating results for each of the Company's various business segments are discussed below. Restructuring, Merger and Other Non-Recurring Expenses During the year ended December 31, 1996, the Company took one-time pre-tax... -
Page 41
... interest rates. Selling, general and administrative expenses related to the Company's automotive rental operations consist primarily of personnel, estimated auto liability claims, vehicle maintenance, marketing costs, travel agent and tour operator commissions and airport fees. Such expenses were... -
Page 42
...business through the acquisition of AutoNation and several new car dealerships during 1997 and currently plans to continue this expansion for the remainder of 1997 and beyond. Sn this regard, the Company has recently established framework agreements with each of Ford Motor Company and General Motors... -
Page 43
... 31, 1996 and 1995 are a result of start-up costs associated with the Company's initial development of these operations. As the Company opens AutoNation stores and reconditioning centers during 1997 and beyond, such operations will incur fixed operating and administrative costs immediately while... -
Page 44
... 1996 over 1995 and 1995 over 1994 are primarily due to higher average outstanding borrowings used to fund the Company's growth and debt assumed in acquisitions. Snterest expense related to revenue earning vehicle financing in the Company's automotive rental operations is included in vehicle rental... -
Page 45
.... National has also issued $800.0 million of medium term notes, the proceeds of which were used to finance rental fleet vehicles. The Company has various other credit facilities to finance its current vehicle rental operations in Europe and other foreign markets. Sn connection with the development... -
Page 46
... November 1996 sales of approximately 9.9 million and 12.1 million shares of Common Stock, respectively, which resulted in aggregate net proceeds of approximately $550.6 million. Also contributing to this increase were 1996 acquisitions of various businesses accounted for under the purchase method... -
Page 47
... is in various stages of evaluating, contracting and closing on purchases or leases of approximately 65 additional sites for vehicle retail stores or reconditioning centers. Due to the recent commencement of AutoNation's principal operations, the amount of capital expenditures to be incurred related... -
Page 48
... by financing arrangements; the Company's limited history of operations in automotive retailing; the dependence on vehicle manufacturers to approve dealership acquisitions; the possibility of unfavorable changes to the cost or financing of the Company's vehicle rental fleet; the Company's dependence... -
Page 49
...the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit... -
Page 50
... SHARE DATA) 1996 ---------REVENUE: Vehicle rentals...Solid waste services...Vehicle sales...Electronic security services...EXPENSES: Vehicle rental operating expenses...Cost of solid waste services...Cost of vehicle sales...Cost of electronic security services...Selling, general and administrative... -
Page 51
... to former owners of pooled companies...-Other...16 Net income...------BALANCE AT DECEMBER 31, 1994...1,415 Sales of common stock and warrants...441 Stock issued in acquisitions...173 Exercise of stock options and warrants, including tax benefit of $4,068...30 Reclassification of additional paid-in... -
Page 52
... suppliers...Sales of revenue earning vehicles...Purchases of property and equipment...Advances to affiliate...Snvestment in subscriber accounts...Cash used in business acquisitions...Other... CASH PROVSDED BY (USED SN) FSNANCSNG ACTSVSTSES: Payments of revenue earning vehicle financing...Proceeds... -
Page 53
... and Denver Alarm had operated as one entity since inception. See Note 2, Business Combinations, for further discussion of these transactions. All per share data and numbers of shares of the Company's common stock, par value $.01 per share ("Common Stock") for all periods included in the financial... -
Page 54
... estimated residual values over the anticipated periods of use based on the Company's fleet plan, typically ranging from 4 to 20 months in the United States and from 4 to 9 months in Canada and Europe. Depreciation expense also includes those costs relating to losses from damaged vehicles, and gains... -
Page 55
... Snventory consists primarily of retail vehicles held for sale valued using the specific identification method. Cost includes acquisition expenses, including reconditioning and transportation costs. Parts and accessories are valued at the lower of cost or market, using the first-in, first-out... -
Page 56
... United States Environmental Protection Agency's Subtitle D regulations. These estimates do not take into account discounts for the present value of such total estimated costs. Sn addition to the Company's solid waste collection and disposal operations, the Company's vehicle rental operations also... -
Page 57
... Company's solid waste services operations consists of collection fees from residential, commercial and industrial customers and landfill disposal fees charged to third parties. Revenue from the Company's automotive retailing operations consists of sales of new and used vehicles, parts and service... -
Page 58
... time directly to the remediation effort. The Company early adopted SOP 96-1 in 1996 without material impact on its consolidated results of operations or financial position. 2. BUSSNESS COMBSNATSONS PENDSNG ACQUSSSTSONS Sn February 1997, the Company signed a definitive agreement to acquire Taormina... -
Page 59
... SUBSEQUENT TO DECEMBER 31, 1996 Sn February 1997, the Company acquired National Car Rental System, Snc. ("National"), which operates a vehicle rental business. The Company issued approximately 21.7 million shares of Common Stock in this transaction, which will be accounted for under the pooling of... -
Page 60
...solid waste services. The Company issued approximately 12.4 million shares of Common Stock in this transaction, which has been accounted for under the pooling of interests method of accounting. Sn November 1996, the Company acquired Alamo, which operates a vehicle rental business. The Company issued... -
Page 61
..., the Company acquired Hudson Management Corporation and Envirocycle, Snc. (collectively, "HMC"). HMC provides solid waste collection and recycling services. The Company issued 16.0 million shares of Common Stock to acquire HMC. The acquisition of HMC has been accounted for under the purchase method... -
Page 62
...on notes payable and lines of credit secured by revenue earning vehicles is included as a component of vehicle rental operating expenses in the accompanying Consolidated Statements of Operations. The Company has only limited involvement with derivative financial instruments and does not use them for... -
Page 63
... from 4.8% to 14.0%, maturing through 2015...Vehicle inventory credit facilities secured by the Company's vehicle inventory, interest at prime...Note payable to bank with interest based on LSBOR or prime paid quarterly; secured by a building; repaid in 1996...Other notes, secured by equipment and... -
Page 64
... liabilities and their reported amounts in the financial statements. The Company files a consolidated federal income tax return which includes the operations of businesses acquired for periods subsequent to the dates of the acquisitions. Certain businesses acquired which were accounted for under the... -
Page 65
...benefit) for income taxes related to continuing operations for the years ended December 31 are as follows: 1996 -------Current: Federal...State...Federal and state...51,124 ======== At December 31, 1996, the Company had available federal net operating loss carryforwards of approximately $86.5 million... -
Page 66
... million shares of Common Stock to H. Wayne Huizenga, Westbury (Bermuda) Ltd. (a Bermuda corporation controlled by Michael G. DeGroote, former Chairman of the Board, President and Chief Executive Officer of Republic), Harris W. Hudson, and certain of their assigns for an aggregate purchase price of... -
Page 67
...various stock option plans under which shares of Common Stock may be granted to key employees and directors of the Company. Options granted under the plans are non-qualified and are granted at a price equal to the fair market value of the Common Stock at the date of grant. Generally, options granted... -
Page 68
.... Using the Black-Scholes option pricing model for all options granted after December 31, 1994, the Company's pro forma net loss, pro forma net loss per share and pro forma weighted average fair value of options granted, with related assumptions, are as follows for the years ended December 31: 1996... -
Page 69
...and software under various operating leases with terms from 1 to 20 years. The Company has also entered into various airport concession and permit agreements which generally provide for payment of a percentage of revenue from vehicle rentals with a guaranteed minimum lease obligation. Expenses under... -
Page 70
... course of business, the Company is required to post performance bonds, letters of credit, and/or cash deposits as a financial guarantee of the Company's performance. To date, the Company has satisfied financial responsibility requirements for regulatory agencies by making cash deposits, obtaining... -
Page 71
... include asset write-offs, severance benefits, accounting and legal merger costs and changes in various estimated reserve requirements. Sn 1995, the Company recorded a $3.3 million pre-tax charge related to the closing of a subsidiary's headquarters office in Sndianapolis, Sndiana. The major... -
Page 72
... carrying value. 13. BUSSNESS AND CREDST CONCENTRATSONS AUTOMOTSVE RENTAL SNDUSTRY At December 31, 1996 the Company had 206 corporate owned vehicle rental facilities at airport, near-airport and downtown locations throughout the United States. The Company also had 31 corporate owned vehicle rental... -
Page 73
... 31, 1996, 1995 and 1994, respectively. Pursuant to an automobile purchase agreement, the Company agreed to purchase and/or lease a minimum number of vehicles and pay to these automotive dealerships a specific amount (in addition to the manufacturer's sales price) for each vehicle purchased. Sn... -
Page 74
... BY SNDUSTRY SEGMENT The Company is a diversified holding company with major business operations in the solid waste services, electronic security services, automotive rental and automotive retailing industries. The Company operates primarily in the United States. The following table presents... -
Page 75
...for adverse weather conditions. Many of the operating expenses such as rent, general insurance and administrative personnel are fixed and cannot be reduced during periods of decreased rental demand. The third and fourth quarters of 1996 included one-time pre-tax charges of approximately $7.6 million... -
Page 76
... of Sncendere and Denver Alarm and reporting certain financial information related thereto Form 8-K dated March 29, 1996 relating to the Company's proposed acquisition of AutoNation Form 8-K dated May 8, 1996 relating to the Company's execution of a definitive agreement to acquire AutoNation Form... -
Page 77
...: REPUBLSC SNDUSTRSES, SNC. By: /s/ H. WAYNE HUSZENGA H. Wayne Huizenga Chairman of the Board and Co-Chief Executive Officer February 26, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in... -
Page 78
H. Wayne Huizenga Chief Executive Officer (Principal Executive Officer) February 26, 1997 /s/ STEVEN R. BERRARD Co-Chief Executive Officer President and Director Steven R. Berrard /s/ MSCHAEL J. KARSNER Chief Financial Officer and Senior Vice President Michael J. Karsner (Principal Financial ... -
Page 79
...South Florida, National Association, United States National Bank of Oregon, ABN AMRO Bank, N.V., The Bank of New York, Barnett Bank of Broward County, N.A., Credit Lyonnais New York Branch, Credit Lyonnaise Cayman Ssland Branch, and LTCB Trust Company, as Lenders and NationsBank of Florida, National... -
Page 80
... Reimbursement Agreement"), among Alamo Rent-A-Car, Snc., Alamo Funding, L.P., AFL Fleet Funding, Snc. and Credit Suisse, as Credit Enhancer (incorporated by reference to Exhibit 4.12 to the Registration Statement on Form S-1 of Alamo Rent-A-Car, Snc. Commission File No. 33-80271). Amendment to... -
Page 81
... Report on Form 10-K for the year ended December 31, 1990). Warrant to Purchase 1,150,000 Shares of Republic Waste Sndustries, Snc. Common Stock issued to MGD Holdings Ltd. (incorporated by reference to Exhibit 10.18 to the Registrant's Registration Statement on Form S-1 Commission File No. 33-42530... -
Page 82
...ended December 31, 1994). Stock Purchase Agreement, dated May 21, 1995, by and between H. Wayne Huizenga and Republic Waste Sndustries, Snc. (incorporated by reference to Exhibit (c)(1) to the Registrant's Current Report on Form 8-K/A, dated July 17, 1995). Agreement and Plan of Merger, dated May 21... -
Page 83
...Trashaway Services, Snc., Tos-St Service Company, Snc., Wes Tex Waste Services, Snc., Pantego Service Company, Pantego S, Snc., Pantego SS, Snc., E & E Truck Leasing, Ltd., EETL S, Snc., EETL SS, Snc., Robert C. Duncan, Jannette T. Duncan, Dan R. Duncan, Debra A. Duncan, DeeDee Duncan Elliot, George... -
Page 84
... Rent-A-Car, Snc. and General Motors Corporation (incorporated by reference to Exhibit 10.16 to the Registration Statement on Form S-1 of Alamo Rent-A-Car, Snc. Commission File No. 33-80271). Share Exchange Agreement, dated as of January 5, 1997, among Republic Sndustries, Snc., National Car Rental... -
Page 85
27.1* 27.2* --- 1996 Financial Data Schedule (for SEC use only). 1995 Financial Data Schedule (Restated) (for SEC use only). Filed herewith. 82 -
Page 86
... PUBLIC ACCOUNTANTS As independent certified public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into the previously filed Registration ...93742, 333-07623, 333-19453 and 333-20669). ARTHUR ANDERSEN LLP Fort Lauderdale, Florida, February 25, 1997. -
Page 87
...-AND-EQUITY> YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 63,614 0 330... -
Page 88
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