AN » Topics » Overview

This excerpt taken from the AN 10-K filed Feb 17, 2010.

Overview

AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of December 31, 2009, we owned and operated 246 new vehicle franchises from 203 stores located in major metropolitan markets, predominantly in the Sunbelt region of the United States. Our stores, which we believe include some of the most recognizable and well known in our key markets, sell 33 different brands of new vehicles. The core brands of vehicles that we sell, representing approximately 96% of the new vehicles that we sold in 2009, are manufactured by Toyota, Ford, Honda, Nissan, General Motors, Mercedes, BMW, and Chrysler.

We offer a diversified range of automotive products and services, including new vehicles, used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products. We also arrange financing for vehicle purchases through third-party finance sources. We believe that the significant scale of our operations and the quality of our managerial talent allow us to achieve efficiencies in our key markets by, among other things, leveraging our market brands and advertising, improving asset management, implementing standardized processes, and increasing productivity across all of our stores.

As of December 31, 2009, we had three operating segments: Domestic, Import, and Premium Luxury. Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by General Motors, Ford, and Chrysler. Our Import segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda, and Nissan. Our Premium Luxury segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Mercedes, BMW, and Lexus. The franchises in each segment also sell used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products.

For the year ended December 31, 2009, new vehicle sales accounted for approximately 53% of our total revenue, but approximately 20% of our total gross margin. Our parts and service and finance and insurance operations, while comprising approximately 23% of total revenue, contributed approximately 67% of our gross margin.

We had net income from continuing operations of $234.2 million and diluted earnings per share of $1.32 in 2009, as compared to a net loss from continuing operations of $1.21 billion and a diluted loss per share of $6.82 in 2008.

The 2009 results were impacted by a favorable tax adjustment of approximately $12.7 million, a net gain on asset sales and dispositions of $16.8 million ($10.4 million after-tax), and a gain on senior note repurchases of $13.0 million ($8.1 million after-tax). See further discussion of these items in Note 7 and 11 of the Notes to Consolidated Financial Statements.

The 2008 results were impacted by a non-cash goodwill impairment charge of $1.61 billion ($1.37 billion after-tax), non-cash franchise impairments of $127.4 million ($79.1 million after-tax), a favorable tax adjustment of approximately $35 million, and a gain on senior note repurchases of $51.3 million ($31.5 million after-tax).

This excerpt taken from the AN DEF 14A filed Mar 23, 2009.
Overview
 
Our compensation programs are administered by the Compensation Committee (the “Committee”) and the Executive Compensation Subcommittee (the “Subcommittee”) of the Committee. The Committee primarily assists the Board in fulfilling its oversight responsibilities by, among other things: (i) reviewing our director compensation program; (ii) reviewing and approving the compensation of our chief executive officer (“CEO”) and other senior executive officers and, except as expressly delegated to the Subcommittee, setting annual and long-term performance goals for these individuals and reviewing the performance of these individuals; and (iii) reviewing and approving the compensation of all of our corporate officers.
 
The Subcommittee assists the Board and the Committee in fulfilling their responsibilities by performing the following duties: (i) reviewing and approving performance-based compensation of executive officers as contemplated under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), including bonuses and stock-based awards; (ii) administering the AutoNation, Inc. Senior Executive Incentive Bonus Plan, including establishing performance goals and certifying whether such goals are attained as contemplated under Section 162(m) of the Code; and (iii) administering our equity compensation plans, including approving stock-based awards.
 
From January 1, 2008 until May 7, 2008, the Committee consisted of William C. Crowley (Chair), Robert J. Brown and Carlos A. Migoya, and the Subcommittee consisted of Mr. Migoya (Chair) and Mr. Brown. From May 7, 2008 until December 31, 2008, the Committee consisted of William C. Crowley (Chair), Rick L. Burdick, Kim C. Goodman and Carlos A. Migoya, and the Subcommittee consisted of Mr. Migoya (Chair) and Kim C. Goodman. Since January 1, 2009, the Committee has consisted of William C. Crowley (Chair), Rick L. Burdick and Carlos A. Migoya, and the Subcommittee has consisted of Mr. Migoya (Chair) and Rick L. Burdick.
 
For the fiscal year ended December 31, 2008, our “named executive officers” were: Mike Jackson, our Chairman and Chief Executive Officer; Michael E. Maroone, our President and Chief Operating Officer; Michael J. Short, our Executive Vice President and Chief Financial Officer; Jonathan P. Ferrando, our Executive Vice President, General Counsel and Secretary; and Kevin P. Westfall, our Senior Vice President, Sales.
 
These excerpts taken from the AN 10-K filed Feb 17, 2009.
Overview
 
AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of December 31, 2008, we owned and operated 302 new vehicle franchises from 232 stores located in major metropolitan markets, predominantly in the Sunbelt region of the United States. Our stores, which we believe include some of the most recognizable and well known in our key markets, sell 37 different brands of new vehicles. The core brands of vehicles that we sell, representing approximately 96% of the new vehicles that we sold in 2008, are manufactured by Toyota, Ford, Honda, Nissan, General Motors, Daimler, BMW, and Chrysler.
 
We offer a diversified range of automotive products and services, including new vehicles, used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products. We also arrange financing for vehicle purchases through third-party finance sources. We believe that the significant scale of our operations and the quality of our managerial talent allow us to achieve efficiencies in our key markets by, among other things, leveraging our market brands and advertising, improving asset management, implementing standardized processes, and increasing productivity across all of our stores.
 
As of December 31, 2008, we had three operating segments: Domestic, Import, and Premium Luxury. Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by General Motors, Ford, and Chrysler. Our Import segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda, and Nissan. Our Premium Luxury segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Mercedes, BMW, and Lexus. The franchises in each segment also sell used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products. See “Segment Results” below and Note 21 of the Notes to Consolidated Financial Statements for additional information regarding our operating segments.
 
For the year ended December 31, 2008, new vehicle sales account for approximately 55% of our total revenue, but approximately 22% of our total gross margin. Our parts and service and finance and insurance operations, while comprising approximately 21% of total revenue, contribute approximately 65% of our gross margin.
 
We had a net loss from continuing operations of $1.2 billion and diluted loss per share of $6.89 in 2008, as compared to net income from continuing operations of $288.7 million and diluted earnings per share of $1.44 in 2007. The 2008 results were impacted by a non-cash goodwill impairment charge of $1.61 billion ($1.37 billion after-tax), non-cash franchise impairments of $146.5 million ($90.8 million after-tax), a favorable tax adjustment of approximately $35 million, and a gain on senior note repurchases of $51.3 million ($31.5 million after-tax). See further discussion of these items in Note 5, 7, and 11 of the Notes to Consolidated Financial Statements. The 2007 results included favorable tax adjustments of $12.0 million.


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Overview


 



AutoNation, Inc., through its subsidiaries, is the largest
automotive retailer in the United States. As of
December 31, 2008, we owned and operated 302 new vehicle
franchises from 232 stores located in major metropolitan
markets, predominantly in the Sunbelt region of the United
States. Our stores, which we believe include some of the most
recognizable and well known in our key markets, sell 37
different brands of new vehicles. The core brands of vehicles
that we sell, representing approximately 96% of the new vehicles
that we sold in 2008, are manufactured by Toyota, Ford, Honda,
Nissan, General Motors, Daimler, BMW, and Chrysler.


 



We offer a diversified range of automotive products and
services, including new vehicles, used vehicles, parts and
automotive repair and maintenance services, and automotive
finance and insurance products. We also arrange financing for
vehicle purchases through third-party finance sources. We
believe that the significant scale of our operations and the
quality of our managerial talent allow us to achieve
efficiencies in our key markets by, among other things,
leveraging our market brands and advertising, improving asset
management, implementing standardized processes, and increasing
productivity across all of our stores.


 



As of December 31, 2008, we had three operating segments:
Domestic, Import, and Premium Luxury. Our Domestic segment is
comprised of retail automotive franchises that sell new vehicles
manufactured by General Motors, Ford, and Chrysler. Our Import
segment is comprised of retail automotive franchises that sell
new vehicles manufactured primarily by Toyota, Honda, and
Nissan. Our Premium Luxury segment is comprised of retail
automotive franchises that sell new vehicles manufactured
primarily by Mercedes, BMW, and Lexus. The franchises in each
segment also sell used vehicles, parts and automotive repair and
maintenance services, and automotive finance and insurance
products. See “Segment Results” below and Note 21
of the Notes to Consolidated Financial Statements for additional
information regarding our operating segments.


 



For the year ended December 31, 2008, new vehicle sales
account for approximately 55% of our total revenue, but
approximately 22% of our total gross margin. Our parts and
service and finance and insurance operations, while comprising
approximately 21% of total revenue, contribute approximately 65%
of our gross margin.


 



We had a net loss from continuing operations of
$1.2 billion and diluted loss per share of $6.89 in 2008,
as compared to net income from continuing operations of
$288.7 million and diluted earnings per share of $1.44 in
2007. The 2008 results were impacted by a non-cash goodwill
impairment charge of $1.61 billion ($1.37 billion
after-tax), non-cash franchise impairments of
$146.5 million ($90.8 million after-tax), a favorable
tax adjustment of approximately $35 million, and a gain on
senior note repurchases of $51.3 million
($31.5 million after-tax). See further discussion of these
items in Note 5, 7, and 11 of the Notes to Consolidated
Financial Statements. The 2007 results included favorable tax
adjustments of $12.0 million.





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This excerpt taken from the AN DEF 14A filed Mar 27, 2008.
Overview
 
Our compensation programs are administered by the Compensation Committee (the “Committee”) and the Executive Compensation Subcommittee (the “Subcommittee”) of the Committee. The Committee primarily assists the Board in fulfilling its oversight responsibilities by, among other things: (i) reviewing our director compensation program; (ii) reviewing and approving the compensation of our chief executive officer (“CEO”) and other senior executive officers and, except as expressly delegated to the Subcommittee, setting annual and long-term performance goals for these individuals and reviewing the performance of these individuals; and (iii) reviewing and approving the compensation of all of our corporate officers.
 
The Subcommittee assists the Board and the Committee in fulfilling their responsibilities by performing the following duties: (i) reviewing and approving performance-based compensation of executive officers as contemplated under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), including bonuses and stock option grants; (ii) administering our Senior Executive Incentive Bonus Plan, including establishing performance goals and certifying whether such goals are attained as contemplated under Section 162(m) of the Code; and (iii) administering our stock option plans, including approving stock option grants.
 
From January 1, 2007 until May 8, 2007, the Committee consisted of Edward S. Lampert (Chair), Robert J. Brown, and Irene B. Rosenfeld, and the Subcommittee consisted of Ms. Rosenfeld (Chair) and Mr. Brown. Since May 9, 2007, the Committee has consisted of William C. Crowley (Chair), Carlos A. Migoya and Mr. Brown, and the Subcommittee has consisted of Carlos A. Migoya (Chair) and Mr. Brown. The Board has determined that each member of the Committee and the Subcommittee satisfies the requisite director independence standards under the listing standards of the New York Stock Exchange and our Corporate Governance Guidelines. The Board has also determined that each member of the Subcommittee qualifies as an “outside director” under Section 162(m) of the Code and as a “non-employee director” under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended. The operations of the Committee and the Subcommittee are governed by written charters adopted by the Board, copies of which are available at http://corp.autonation.com/investors/.
 
For the fiscal year ended December 31, 2007, our “named executive officers” were: our Chairman and Chief Executive Officer (Mike Jackson), our President and Chief Operating Officer (Michael E. Maroone), our Executive Vice President and Chief Financial Officer (Michael J. Short), our former Vice President, Controller and Interim Chief Financial Officer (J. Alexander McAllister, who served as our principal financial officer until January 15, 2007), our Executive Vice President, General Counsel and Secretary (Jonathan P. Ferrando) and our Senior Vice President, Sales (Kevin P. Westfall).
 
These excerpts taken from the AN 10-K filed Feb 28, 2008.
Overview
 
AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of December 31, 2007, we owned and operated 322 new vehicle franchises from 244 dealerships located in major metropolitan markets, predominantly in the Sunbelt region of the United States. Our stores, which we believe include some of the most recognizable and well known in our key markets, sell 38 different brands of new vehicles. The core brands of vehicles that we sell, representing approximately 96% of the new vehicles that we sold in 2007, are manufactured by Toyota, Ford, General Motors, Honda, Nissan, Chrysler, Daimler, and BMW.
 
We operate in a single operating and reporting segment, automotive retailing. We offer a diversified range of automotive products and services, including new vehicles, used vehicles, vehicle maintenance and repair services, vehicle parts, extended service contracts, vehicle protection products, and other aftermarket products. We also arrange financing for vehicle purchases through third-party finance sources. We believe that the significant scale of our operations and the quality of our managerial talent allow us to achieve efficiencies in our key markets by, among other things, leveraging our market brands and advertising, improving asset management, implementing standardized processes, and increasing productivity across all of our stores.
 
For the year ended December 31, 2007, new vehicle sales account for approximately 58% of our total revenue, but approximately 25% of our total gross margin. Our parts and service and finance and insurance operations, while comprising approximately 18% of total revenue, contribute approximately 61% of our gross margin. We believe that many factors affect sales of new vehicles and retailers’ gross profit margins in the United States and in our particular geographic markets, including the economy, inflation, recession or economic slowdown, consumer confidence, housing markets, fuel prices, credit availability, the level of manufacturers’ production capacity, manufacturer incentives (and consumers’ reaction to such offers), intense industry competition, interest rates, the prospects of war, other international conflicts or terrorist attacks, severe weather conditions, the level of personal discretionary spending, product quality, affordability and innovation, employment/unemployment rates, the number of consumers whose vehicle leases are expiring, and the length of consumer loans on existing vehicles. Changes in interest rates could significantly impact industry new vehicle sales and vehicle affordability, due to the direct relationship between interest rates and monthly loan payments, a critical factor for many vehicle buyers, and the impact interest rates can have on customers’ borrowing capacity and disposable income. Sales of certain new vehicles, particularly larger trucks and sports utility vehicles that historically have provided us with higher gross margins, also are impacted by fuel prices.
 
The automotive retail environment was challenging in 2007, especially in California and Florida, where the housing markets experienced a significant decline. For 2008, we anticipate that the automotive retail market will remain challenging and that full-year industry new vehicle sales will decline from the low-16 million unit level in 2007 to the mid-15 million unit level. However, actual sales may materially differ.
 
We had net income from continuing operations of $288.0 million in 2007 and $330.8 million in 2006 and diluted earnings per share from continuing operations of $1.44 in 2007 and 2006. The 2007 results included favorable tax adjustments of $12.0 million, or $.06 per share. The 2006 results included pre-tax charges of $34.5 million, or $.09 per share, for the debt tender premium and other financing costs relating to our April 2006 recapitalization.
 
Our Board of Directors authorized a $500.0 million share repurchase program in April 2007 and an additional $250.0 million share repurchase program in October 2007. We repurchased 33.2 million shares of


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our common stock for an aggregate purchase price of $645.7 million (average purchase price per share of $19.43) during the year ended December 31, 2007. Future share repurchases are subject to limitations contained in the indenture relating to our senior unsecured notes. As of January 1, 2008, we had approximately $30 million available for share repurchases and other restricted payments that are subject to these limitations. This amount will increase in future periods by 50% of our cumulative consolidated net income (as defined in the indenture), the net proceeds of stock option exercises, and certain other items, and decrease by the amount of future share repurchases and other restricted payments subject to these limitations. For further information, see “Liquidity and Capital Resources” and Note 7, Notes Payable and Long-Term Debt, of the Notes to Consolidated Financial Statements. During 2007, 6.8 million shares of our common stock were issued upon exercise of stock options, resulting in proceeds of $96.6 million (average price per share of $14.12).
 
We had a loss from discontinued operations totaling $9.3 million in 2007 and $13.9 million in 2006, net of income taxes. Certain amounts reflected in the accompanying Consolidated Financial Statements for the years ended December 31, 2007, 2006, and 2005, have been adjusted to reclassify as discontinued operations the results of stores that were sold, that we have entered into an agreement to sell, or for which we otherwise deem a proposed sales transaction to be probable with no material changes expected.
 
Overview


 



AutoNation, Inc., through its subsidiaries, is the largest
automotive retailer in the United States. As of
December 31, 2007, we owned and operated 322 new vehicle
franchises from 244 dealerships located in major metropolitan
markets, predominantly in the Sunbelt region of the United
States. Our stores, which we believe include some of the most
recognizable and well known in our key markets, sell 38
different brands of new vehicles. The core brands of vehicles
that we sell, representing approximately 96% of the new vehicles
that we sold in 2007, are manufactured by Toyota, Ford, General
Motors, Honda, Nissan, Chrysler, Daimler, and BMW.


 



We operate in a single operating and reporting segment,
automotive retailing. We offer a diversified range of automotive
products and services, including new vehicles, used vehicles,
vehicle maintenance and repair services, vehicle parts, extended
service contracts, vehicle protection products, and other
aftermarket products. We also arrange financing for vehicle
purchases through third-party finance sources. We believe that
the significant scale of our operations and the quality of our
managerial talent allow us to achieve efficiencies in our key
markets by, among other things, leveraging our market brands and
advertising, improving asset management, implementing
standardized processes, and increasing productivity across all
of our stores.


 



For the year ended December 31, 2007, new vehicle sales
account for approximately 58% of our total revenue, but
approximately 25% of our total gross margin. Our parts and
service and finance and insurance operations, while comprising
approximately 18% of total revenue, contribute approximately 61%
of our gross margin. We believe that many factors affect sales
of new vehicles and retailers’ gross profit margins in the
United States and in our particular geographic markets,
including the economy, inflation, recession or economic
slowdown, consumer confidence, housing markets, fuel prices,
credit availability, the level of manufacturers’ production
capacity, manufacturer incentives (and consumers’ reaction
to such offers), intense industry competition, interest rates,
the prospects of war, other international conflicts or terrorist
attacks, severe weather conditions, the level of personal
discretionary spending, product quality, affordability and
innovation, employment/unemployment rates, the number of
consumers whose vehicle leases are expiring, and the length of
consumer loans on existing vehicles. Changes in interest rates
could significantly impact industry new vehicle sales and
vehicle affordability, due to the direct relationship between
interest rates and monthly loan payments, a critical factor for
many vehicle buyers, and the impact interest rates can have on
customers’ borrowing capacity and disposable income. Sales
of certain new vehicles, particularly larger trucks and sports
utility vehicles that historically have provided us with higher
gross margins, also are impacted by fuel prices.


 



The automotive retail environment was challenging in 2007,
especially in California and Florida, where the housing markets
experienced a significant decline. For 2008, we anticipate that
the automotive retail market will remain challenging and that
full-year industry new vehicle sales will decline from the
low-16 million unit level in 2007 to the
mid-15 million unit level. However, actual sales may
materially differ.


 



We had net income from continuing operations of
$288.0 million in 2007 and $330.8 million in 2006 and
diluted earnings per share from continuing operations of $1.44
in 2007 and 2006. The 2007 results included favorable tax
adjustments of $12.0 million, or $.06 per share. The 2006
results included pre-tax charges of $34.5 million, or $.09
per share, for the debt tender premium and other financing costs
relating to our April 2006 recapitalization.


 



Our Board of Directors authorized a $500.0 million share
repurchase program in April 2007 and an additional
$250.0 million share repurchase program in October 2007. We
repurchased 33.2 million shares of





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our common stock for an aggregate purchase price of
$645.7 million (average purchase price per share of $19.43)
during the year ended December 31, 2007. Future share
repurchases are subject to limitations contained in the
indenture relating to our senior unsecured notes. As of
January 1, 2008, we had approximately $30 million
available for share repurchases and other restricted payments
that are subject to these limitations. This amount will increase
in future periods by 50% of our cumulative consolidated net
income (as defined in the indenture), the net proceeds of stock
option exercises, and certain other items, and decrease by the
amount of future share repurchases and other restricted payments
subject to these limitations. For further information, see
“Liquidity and Capital Resources” and Note 7,
Notes Payable and Long-Term Debt, of the Notes to Consolidated
Financial Statements. During 2007, 6.8 million shares of
our common stock were issued upon exercise of stock options,
resulting in proceeds of $96.6 million (average price per
share of $14.12).


 



We had a loss from discontinued operations totaling
$9.3 million in 2007 and $13.9 million in 2006, net of
income taxes. Certain amounts reflected in the accompanying
Consolidated Financial Statements for the years ended
December 31, 2007, 2006, and 2005, have been adjusted to
reclassify as discontinued operations the results of stores that
were sold, that we have entered into an agreement to sell, or
for which we otherwise deem a proposed sales transaction to be
probable with no material changes expected.


 




This excerpt taken from the AN DEF 14A filed Apr 5, 2007.
Overview
 
Our compensation programs are administered by the Compensation Committee (the “Committee”) and the Executive Compensation Subcommittee (the “Subcommittee”) of the Committee. The Committee primarily assists the Board in fulfilling its oversight responsibilities by, among other things: (i) reviewing our director compensation program; (ii) reviewing and approving the compensation of our chief executive officer (“CEO”) and other senior executive officers and, except as expressly delegated to the Subcommittee, setting annual and long-term performance goals for these individuals and reviewing the performance of these individuals; and (iii) reviewing and approving the compensation of all of our corporate officers.
 
The Subcommittee assists the Board and the Committee in fulfilling their responsibilities by performing the following duties: (i) reviewing and approving performance-based compensation of executive officers as contemplated under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), including bonuses and stock option grants; (ii) administering our Senior Executive Incentive Bonus Plan, including establishing performance goals and certifying whether such goals are attained as contemplated under Section 162(m) of the Code; and (iii) administering our stock option plans, including approving stock option grants.
 
During 2006, the Committee consisted of Edward S. Lampert (Chair), Robert J. Brown, and Irene B. Rosenfeld and the Subcommittee consisted of Ms. Rosenfeld (Chair) and Mr. Brown. The Board has determined that each member of the Committee and the Subcommittee satisfies the requisite director independence standards under our Corporate Governance Guidelines and the corporate governance standards of The New York Stock Exchange. The Board also has determined that each member of the Subcommittee qualifies as an “outside director” under Section 162(m) of the Code and as a “non-employee director” under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended. The operations of the Committee and the Subcommittee are governed by written charters adopted by the Board, copies of which are available on our corporate website at http://corp.autonation.com/investors/.
 
For the fiscal year ended December 31, 2006, our named executive officers were the Chairman and CEO (Mike Jackson), President and Chief Operating Officer (Michael E. Maroone), former Executive Vice President and Chief Financial Officer (Craig T. Monaghan), Vice President, Controller and former Interim-Chief Financial Officer (J. Alexander McAllister), Executive Vice President, General Counsel and Secretary (Jonathan P. Ferrando) and Senior Vice President — Sales (Kevin P. Westfall).
 
This excerpt taken from the AN 10-K filed Feb 28, 2007.
Overview
 
AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of December 31, 2006, we owned and operated 331 new vehicle franchises from 257 dealerships located in major metropolitan markets, predominantly in the Sunbelt region of the United States. Our stores, which we believe include some of the most recognizable and well known in our key markets, sell 37 different brands of new vehicles. The core brands of vehicles that we sell, representing more than 90% of the new vehicles that we sold in 2006, are manufactured by Ford, General Motors, Daimler Chrysler, Toyota, Nissan, Honda and BMW.
 
We operate in a single operating and reporting segment, automotive retailing. We offer a diversified range of automotive products and services, including new vehicles, used vehicles, vehicle maintenance and repair services, vehicle parts, extended service contracts, vehicle protection products and other aftermarket products. We also arrange financing for vehicle purchases through third-party finance sources. We believe that the significant scale of our operations and the quality of our managerial talent allow us to achieve efficiencies in our key markets by, among other things, leveraging our market brands and advertising, improving asset management, driving common processes and increasing productivity across all of our stores.
 
New vehicle sales account for approximately 60% of our total revenue, but less than 30% of our total gross margin. Our parts and service and finance and insurance operations, while comprising less than 20% of total revenue, contribute approximately 60% of our gross margin. We believe that many factors affect sales of new vehicles and retailers’ gross profit margins in the United States and in our particular geographic markets, including the economy, inflation, recession or economic slowdown, consumer confidence, housing markets, the level of manufacturers’ production capacity, manufacturer incentives (and consumers’ reaction to such offers), intense industry competition, interest rates, the prospects of war, other international conflicts or terrorist attacks, severe weather conditions, the level of personal discretionary spending, product quality, affordability and innovation, fuel prices, credit availability, unemployment rates, the number of consumers whose vehicle leases are expiring, and the length of consumer loans on existing vehicles. Increases in interest rates could significantly impact industry new vehicle sales and vehicle affordability, due to the direct relationship between higher rates and higher monthly loan payments, a critical factor for many vehicle buyers, and the impact higher rates can have on customers’ borrowing capacity and disposable income. Sales of certain new vehicles, particularly larger trucks and sports utility vehicles that historically have provided us with higher gross margins, also could be impacted adversely by significant increases in fuel prices.
 
The automotive retail environment was challenging in 2006 compared to 2005 especially in California and Florida where the housing markets experienced a significant decline. In 2006, we saw continued declines in our domestic new vehicle business and a continued revenue shift in our brand mix from domestic brands to volume import and premium luxury brands. Additionally, we saw a significant decline in non-luxury truck sales, which we believe is attributable to economic issues. For 2007, we anticipate that the automotive retail market will remain challenging and that full-year industry new vehicle sales will decline to the low-16 million unit level. However, the level of retail sales for 2007 is very difficult to predict.
 
For the years ended December 31, 2006 and 2005, we had net income from continuing operations of $331.4 million and $396.9 million, respectively, and diluted earnings per share from continuing operations of $1.45 and $1.48, respectively. Our 2006 results were positively impacted by increased gross profits in parts and service and finance and insurance, offset by lower used vehicle gross profit, higher floorplan and other interest expense and $15.2 million ($9.3 million after-tax) of stock option expense related to the implementation of Statement of


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Financial Accounting Standard No. 123 (revised 2004), “Share- Based Payment” (“SFAS No. 123R”). The results for 2006 and 2005 also include $34.5 million and $17.4 million, respectively, of premium and deferred financing costs recognized as Interest Expense related to the repurchase of our 9% senior unsecured notes. The effect on earnings per share of higher other interest expense was more than offset by the 19% reduction in shares outstanding due to the 50 million share equity tender offer completed in April 2006. Additionally, during 2005 we recorded net tax benefits in continuing operations totaling $14.5 million.
 
In April 2006, we purchased 50 million shares of our common stock at $23 per share for an aggregate purchase price of $1.15 billion pursuant to our equity tender offer. We repurchased an additional 11.2 million shares of our common stock for a purchase price of $228.9 million during the remainder of 2006, for a total of 61.2 million shares repurchased for an aggregate purchase price of $1.38 billion in 2006. There is approximately $92.4 million available for share repurchases authorized by our Board of Directors. Future share repurchases are subject to limitations contained in the indenture relating to our new senior notes. See further discussion under the heading “Financial Condition.” During 2006, 5.7 million shares of our common stock were issued upon the exercise of stock options, resulting in proceeds of $75.7 million.
 
During the years ended December 31, 2006 and 2005, we had a (loss)/income from discontinued operations totaling $(14.5) million and $99.6 million, respectively, net of income taxes. For the year ended December 31, 2005, we recognized income of $110.0 million included in discontinued operations primarily related to the resolution of various income tax matters. Certain amounts reflected in the accompanying Consolidated Financial Statements for the years ended December 31, 2006, 2005 and 2004, have been adjusted to classify as discontinued operations the results of stores that were sold, that we have entered into an agreement to sell, or for which the Company otherwise deems a proposed sales transaction to be probable with no material changes expected.
 
This excerpt taken from the AN 10-K filed Feb 24, 2005.
Overview

      AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of December 31, 2004, we owned and operated 358 new vehicle franchises from 281 dealerships located in major metropolitan markets in 17 states, predominantly in the Sunbelt region of the United States. Our stores, which we believe include some of the most recognizable and well known in our key markets, sell 35 different brands of new vehicles. The core brands of vehicles that we sell, representing approximately 98% of the new vehicles that we sold in 2004, are manufactured by Ford, General Motors, Daimler Chrysler, Toyota, Nissan, Honda and BMW.

      We operate in a single industry segment, automotive retailing. We offer a diversified range of automotive products and services, including new vehicles, used vehicles, vehicle maintenance and repair services, vehicle parts, extended service contracts, vehicle protection products and other aftermarket products. We also arrange financing for vehicle purchases through third-party finance sources. We believe that the significant scale of our operations and the quality of our managerial talent allow us to achieve efficiencies in our key markets by, among other things, reducing operating expenses, leveraging our market brands and advertising, improving asset management and sharing and implementing best practices across all of our stores.

      The automotive retailing industry historically has been subject to substantial cyclical variation characterized by periods of oversupply of new vehicles and weak consumer demand although the impact on retailers has been mitigated in recent years by lower interest rates and higher manufacturer incentives. We believe that many factors affect industry-wide sales of new vehicles and retailers’ gross profit margins, including consumer confidence in the economy, the level of manufacturers’ excess production capacity, manufacturer incentives (and consumers’ reaction to such offers), intense industry competition, interest rates, the prospects of war, other international conflicts or terrorist attacks, severe weather conditions, the level of personal discretionary spending, product quality, affordability and innovation, fuel prices, credit availability, unemployment rates, the number of consumers whose vehicle leases are expiring and the length of consumer loans on existing vehicles.

      During 2004, we experienced revenue growth in each of our business lines while leveraging our cost structure and reducing new and used vehicle inventory levels. The year ended December 31, 2004 was marked by a number of accomplishments, including the implementation of a streamlined operational structure, the successful transition from a low interest rate environment to a rising interest rate environment, especially in regard to inventories, and the launch of the “AutoNation Pledge.” The “AutoNation Pledge” is our commitment to provide our customers with disclosures relating to the finance and insurance sales process. In 2005, we anticipate that new vehicle sales will remain stable in the United States and continue to be highly competitive. However, the level of retail sales for 2005 is very difficult to predict.

      For the years ended December 31, 2004 and 2003, we had net income from continuing operations of $396.4 million and $515.2 million, respectively, and diluted earnings per share from continuing operations of $1.45 and $1.80, respectively. During 2004 and 2003, we recorded net income tax benefits in continuing operations totaling $25.8 million and $140.9 million (which includes $127.5 million recognized as a result of an Internal Revenue Service (“IRS”) settlement), respectively, primarily related to resolution of various income tax matters.

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      During 2004, we had income from discontinued operations totaling $37.2 million, net of income taxes. In 2004, we recognized a $52.2 million gain included in discontinued operations related to the settlement of various income tax matters related to items previously reported in discontinued operations. We also recognized a loss totaling $13.9 million, net of income taxes, related to stores that were sold or for which we have entered into a definitive agreement to sell. Certain amounts reflected in the accompanying Consolidated Financial Statements for the years ended December 31, 2004, 2003, and 2002, have been adjusted to classify the results of the stores described above as discontinued operations. Additionally, 2003 was impacted by a loss from discontinued operations due to an agreement reached with ANC Rental and a charge for the cumulative effect of accounting change for manufacturer allowances, primarily related to floorplan assistance.

      During 2004, we acquired 14.1 million shares of our common stock for an aggregate purchase price of $236.8 million. As of February 18, 2005, we repurchased an additional .2 million shares of common stock for an aggregate purchase price of $4.0 million, leaving approximately $304.4 million available for share repurchases under the repurchase program authorized by our Board of Directors. Our revolving credit facilities and the indenture for our senior notes contain restrictions on our ability to make share repurchases. See further discussion under the heading “Financial Condition.” During 2004, 8.7 million shares of our common stock were issued upon the exercise of stock options resulting in proceeds of $94.2 million.

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