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PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(All tables in millions, except per share data)
10. RESTRUCTURING AND IMPAIRMENT CHARGES (RECOVERIES), NET
During the fourth quarter of 1999, the Company
approved a plan to restructure certain of its operations. The
restructuring plan was comprised of the following major components:
(1) exiting the used vehicle megastore business; and (2) reducing
the corporate workforce. The restructuring plan also included
divesting of certain non-core franchised dealerships. Approximately
2,000 positions were eliminated as a result of the restructuring
plan of which 1,800 were megastore positions and 200 were corporate
positions. These restructuring activities resulted in pre-tax
charges of $443.7 million in 1999, of which $416.4 million appears
as Asset Impairment Charges (Recoveries), Net in the Company's
1999 Consolidated Income Statements. These pre-tax charges include
$286.9 million of asset impairment charges; $103.3 million of
reserves for residual value guarantees for closed lease properties;
$26.2 million of severance and other exit costs; and $27.3 million
of inventory related costs. The $286.9 million asset impairment
charge consists of: $244.9 million of megastore and other property
impairments; $26.6 million of goodwill impairment reserves for
the divestiture of certain non-core franchised automotive dealerships;
and $15.4 million of information systems impairments. Of the $443.7
million restructuring reserve recorded, $10.8 million of severance
was paid in 1999 and $53.7 million of asset impairments and write-offs
were recorded during the fourth quarter of 1999.
The Company intends to complete the sale of
its Flemington dealer group during the second quarter of 2001
as previously described in Note2, Business
Acquisitions and Divestitures, resulting in the substantial completion
of its non-core dealership divestiture plan. Closed megastores
and other properties are being disposed of through sales to third
parties. Although these properties are being aggressively marketed,
their ultimate disposition will not be substantially completed
until late 2001. Revenue for the operations disposed or to be
disposed was $923.5 million, $2.12 billion and $1.70 billion during
2000, 1999 and 1998 respectively. Operating income for the operations
disposed or to be disposed was $21.8 million, $15.5 million and
$12.9 million for the years ended December 31, 2000, 1999 and
1998 respectively.
The following summarizes activity in the Company's
restructuring and impairment reserves for the year ended December
31, 2000:
Deductions
Balance Amounts Charged --------------------------- Balance
Reserve December 31, 1999 (Credited) to Income Cash Non-cash December 31, 2000
-------------------------- ------------------- --------------------- ------------ ------------ ------------------
Asset reserves:
Asset impairment ....... $ 263.3(1) $ (15.0) $ -- $ (86.9) $ 161.4
Inventory .............. 15.0 -- -- (15.0) --
Accrued liabilities:
Property lease residual
value guarantees ...... 103.3 (14.8) (88.5) -- --
Severance and other
exit costs ............ 17.3 9.4 (22.7) (2.8) 1.2
Finance lease residual
value write-down ....... -- 16.6 -- (16.6) --
------------ --------- ------- ------- ---------
$ 398.9 $ (3.8) $(111.2) $(121.3) $ 162.6
============ ========= ======= ======= =========
(1) Includes $19.7 million of reserves that had
been established on these properties prior to the 1999 restructuring
and impairment charges recorded.
The following summarizes the components of the
$3.8 million amount credited to income during the year ended December
31, 2000:
Properties Placed Back Net Gain on Additional
into Service or Retained Sold Properties Impairment Charges Other Total
-------------------------- ----------------- -------------------- --------- ---------
Asset reserves:
Asset impairment ........ $ (23.2) $ (3.4) $ 11.6 $ -- $(15.0)
Accrued liabilities:
Property lease residual
value guarantees ...... (13.0) (1.8) -- -- (14.8)
Severance and other
exit costs ............ -- -- -- 9.4 9.4
Finance lease residual
value write-down ........ -- -- -- 16.6 16.6
------- ------ ------ ------ ------
$ (36.2) $ (5.2) $ 11.6 $ 26.0 $ (3.8)
======= ====== ====== ====== ======
During 2000, certain events occurred which caused
the Company to re-evaluate its plans with respect to various retail
properties. As a result, certain megastore properties were placed
back in service and the Company decided to retain certain dealerships
that had been held for sale. Accordingly, based upon the Company's
re-evaluation of the fair values of the properties, the Company
determined that the asset impairment and lease residual value reserves
for these properties were no longer necessary and the Company was
required to reverse the related estimated reserves totaling $36.2
million back into income. An additional impairment charge of $11.6
million was recognized primarily related to a decision in 2000 to
close one additional megastore property as part of the overall restructuring
plan. During 2000, the Company also recognized an impairment charge
totaling $16.6 million associated with the deterioration in residual
values of finance lease receivables. The Company discontinued writing
finance leases in mid-1999 and the majority of the leases terminate
in late 2001.
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Form
10-K 
