AN 10Q 6/30/12

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 1-13107
AutoNation, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
73-1105145
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
200 SW 1st Avenue, Fort Lauderdale, Florida
 
33301
(Address of principal executive offices)
 
(Zip Code)
(954) 769-6000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   þ   No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   þ   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
  
Accelerated filer   o
Non-accelerated filer o   (Do not check if a smaller reporting company)
  
Smaller reporting company   o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨   No  þ
As of July 18, 2012, the registrant had 120,697,720 shares of common stock outstanding.

 
 
 
 
 



AUTONATION, INC.
FORM 10-Q
TABLE OF CONTENTS
 
 
 
 
 
Page
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
Item 1A.
Item 2.
Item 6.



Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share data)
 
 
June 30,
2012
 
December 31,
2011
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
62.1

 
$
86.6

Receivables, net
538.9

 
587.4

Inventory
2,077.7

 
1,809.2

Other current assets
205.2

 
193.0

Total Current Assets
2,883.9

 
2,676.2

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $792.7 million and $756.8 million, respectively
1,987.0

 
1,950.7

GOODWILL
1,172.2

 
1,172.2

OTHER INTANGIBLE ASSETS, NET
213.0

 
217.8

OTHER ASSETS
205.3

 
181.9

Total Assets
$
6,461.4

 
$
6,198.8

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Vehicle floorplan payable - trade
$
1,482.6

 
$
1,362.3

Vehicle floorplan payable - non-trade
639.4

 
536.5

Accounts payable
201.6

 
202.4

Current maturities of long-term debt
28.2

 
12.6

Other current liabilities
363.5

 
348.8

Total Current Liabilities
2,715.3

 
2,462.6

LONG-TERM DEBT, NET OF CURRENT MATURITIES
2,000.3

 
1,634.4

DEFERRED INCOME TAXES
70.6

 
62.3

OTHER LIABILITIES
147.0

 
144.9

COMMITMENTS AND CONTINGENCIES (Note 10)

 

SHAREHOLDERS’ EQUITY:
 
 
 
Preferred stock, par value $0.01 per share; 5,000,000 shares authorized; none issued

 

Common stock, par value $0.01 per share; 1,500,000,000 shares authorized; 163,562,149 shares issued at June 30, 2012, and December 31, 2011, including shares held in treasury
1.6

 
1.6

Additional paid-in capital
27.0

 
19.6

Retained earnings
2,798.2

 
2,646.6

Treasury stock, at cost; 42,955,678 and 27,777,625 shares held, respectively
(1,298.6
)
 
(773.2
)
Total Shareholders’ Equity
1,528.2

 
1,894.6

Total Liabilities and Shareholders’ Equity
$
6,461.4

 
$
6,198.8

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.



1

Table of Contents

AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
(In millions, except per share data)
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2012
 
2011
 
2012
 
2011
Revenue:
 
 
 
 
 
 
 
New vehicle
$
2,196.1

 
$
1,746.6

 
$
4,190.4

 
$
3,531.7

Used vehicle
947.4

 
887.3

 
1,866.2

 
1,718.7

Parts and service
602.5

 
572.0

 
1,202.4

 
1,142.0

Finance and insurance, net
145.1

 
117.0

 
275.3

 
227.7

Other
13.4

 
13.4

 
27.2

 
27.3

TOTAL REVENUE
3,904.5

 
3,336.3

 
7,561.5

 
6,647.4

Cost of sales:
 
 
 
 
 
 
 
New vehicle
2,050.6

 
1,609.9

 
3,910.9

 
3,269.7

Used vehicle
870.3

 
808.7

 
1,708.0

 
1,562.0

Parts and service
349.1

 
326.8

 
698.8

 
652.3

Other
6.5

 
7.5

 
12.8

 
13.8

TOTAL COST OF SALES
3,276.5

 
2,752.9

 
6,330.5

 
5,497.8

Gross Profit:
 
 
 
 
 
 
 
New vehicle
145.5

 
136.7

 
279.5

 
262.0

Used vehicle
77.1

 
78.6

 
158.2

 
156.7

Parts and service
253.4

 
245.2

 
503.6

 
489.7

Finance and insurance
145.1

 
117.0

 
275.3

 
227.7

Other
6.9

 
5.9

 
14.4

 
13.5

TOTAL GROSS PROFIT
628.0

 
583.4

 
1,231.0

 
1,149.6

Selling, general, and administrative expenses
438.6

 
417.6

 
871.5

 
825.3

Depreciation and amortization
20.8

 
21.1

 
42.0

 
41.8

Franchise rights impairment
4.2

 

 
4.2

 

Other expenses (income), net
0.2

 
0.3

 
0.4

 
(1.9
)
OPERATING INCOME
164.2

 
144.4

 
312.9

 
284.4

Non-operating income (expense) items:
 
 
 
 
 
 
 
Floorplan interest expense
(10.8
)
 
(10.9
)
 
(21.5
)
 
(22.1
)
Other interest expense
(22.5
)
 
(15.9
)
 
(43.0
)
 
(32.2
)
Interest income
0.1

 
0.3

 
0.2

 
0.6

Other income (loss), net
(1.4
)
 
0.5

 
0.6

 
2.2

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
129.6

 
118.4

 
249.2

 
232.9

Income tax provision
50.6

 
45.1

 
96.7

 
89.3

NET INCOME FROM CONTINUING OPERATIONS
79.0

 
73.3

 
152.5

 
143.6

Loss from discontinued operations, net of income taxes
(0.4
)
 
(1.4
)
 
(0.9
)
 
(2.3
)
NET INCOME
$
78.6

 
$
71.9

 
$
151.6

 
$
141.3

BASIC EARNINGS (LOSS) PER SHARE:
 
 
 
 
 
 
 
Continuing operations
$
0.65

 
$
0.50

 
$
1.21

 
$
0.97

Discontinued operations
$

 
$
(0.01
)
 
$
(0.01
)
 
$
(0.02
)
Net income
$
0.65

 
$
0.49

 
$
1.20

 
$
0.95

Weighted average common shares outstanding
121.7

 
147.4

 
126.0

 
148.2

DILUTED EARNINGS (LOSS) PER SHARE:
 
 
 
 
 
 
 
Continuing operations
$
0.64

 
$
0.49

 
$
1.19

 
$
0.95

Discontinued operations
$

 
$
(0.01
)
 
$
(0.01
)
 
$
(0.02
)
Net income
$
0.64

 
$
0.48

 
$
1.18

 
$
0.94

Weighted average common shares outstanding
123.7

 
150.0

 
128.0

 
150.9

COMMON SHARES OUTSTANDING, net of treasury stock
120.6

 
145.7

 
120.6

 
145.7


See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


2

Table of Contents

AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(In millions, except share data)
 
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock
 
Total
 
Shares
 
Amount
 
 
 
 
December 31, 2011
163,562,149

 
$
1.6

 
$
19.6

 
$
2,646.6

 
$
(773.2
)
 
$
1,894.6

Net income

 

 

 
151.6

 

 
151.6

Repurchases of common stock

 

 

 

 
(532.9
)
 
(532.9
)
Stock-based compensation expense

 

 
11.2

 

 

 
11.2

Shares awarded under stock-based compensation plans, including income tax benefit of $2.0

 

 
(3.8
)
 

 
7.5

 
3.7

June 30, 2012
163,562,149

 
$
1.6

 
$
27.0

 
$
2,798.2

 
$
(1,298.6
)
 
$
1,528.2


See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.



3

Table of Contents

AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 
 
Six Months Ended
 
June 30,
 
2012
 
2011
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
 
 
 
Net income
$
151.6

 
$
141.3

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Loss from discontinued operations
0.9

 
2.3

Depreciation and amortization
42.0

 
41.8

Amortization of debt issuance costs and discounts
2.8

 
2.1

Stock-based compensation expense
11.2

 
11.5

Deferred income tax provision
8.2

 
4.7

Franchise rights impairment
4.2

 

Net gain on asset sales and dispositions
(0.1
)
 
(1.7
)
Other
(0.2
)
 
(2.5
)
(Increase) decrease, net of effects from business combinations and divestitures:
 
 
 
Receivables
48.1

 
55.1

Inventory
(268.5
)
 
99.3

Other assets
(23.4
)
 
(12.3
)
Increase (decrease), net of effects from business combinations and divestitures:
 
 
 
Vehicle floorplan payable-trade, net
120.3

 
(218.3
)
Accounts payable
0.9

 
33.4

Other liabilities
22.0

 
(31.9
)
Net cash provided by continuing operations
120.0

 
124.8

Net cash provided by (used in) discontinued operations
(0.5
)
 
0.3

Net cash provided by operating activities
119.5

 
125.1

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
 
 
 
Purchases of property and equipment
(69.3
)
 
(63.6
)
Property operating lease buy-outs
(15.5
)
 

Proceeds from the sale of property and equipment
0.6

 
3.0

Proceeds from assets held for sale
10.7

 

Cash used in business acquisitions, net of cash acquired

 
(64.2
)
Proceeds from the sale of restricted investments
0.4

 

Cash received from business divestitures, net of cash relinquished

 
1.2

Other
(1.7
)
 
(5.1
)
Net cash used in continuing operations
(74.8
)
 
(128.7
)
Net cash used in discontinued operations

 

Net cash used in investing activities
(74.8
)
 
(128.7
)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


4

Table of Contents

AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Continued)
 
 
Six Months Ended
 
June 30,
 
2012
 
2011
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
 
 
 
Repurchases of common stock
(531.9
)
 
(170.6
)
Proceeds from revolving credit facility
715.0

 
250.0

Payment of revolving credit facility
(680.0
)
 
(155.0
)
Proceeds from 5.5% Senior Notes due 2020
350.0

 

Payment of 7% Senior Notes due 2014
(14.7
)
 

Payment of debt issuance costs
(6.0
)
 

Net proceeds from vehicle floorplan payable - non-trade
102.9

 
15.0

Payments of mortgage facilities
(4.0
)
 
(3.8
)
Payments of capital leases
(4.2
)
 
(0.3
)
Proceeds from the exercise of stock options
1.7

 
39.9

Excess tax benefit from stock-based awards
2.0

 
15.1

Net cash used in continuing operations
(69.2
)
 
(9.7
)
Net cash used in discontinued operations

 

Net cash used in financing activities
(69.2
)
 
(9.7
)
DECREASE IN CASH AND CASH EQUIVALENTS
(24.5
)
 
(13.3
)
CASH AND CASH EQUIVALENTS at beginning of period
86.6

 
95.1

CASH AND CASH EQUIVALENTS at end of period
$
62.1

 
$
81.8


See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.




5

Table of Contents

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share data)
 
1.
INTERIM FINANCIAL STATEMENTS
Business and Basis of Presentation
AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of June 30, 2012, we owned and operated 260 new vehicle franchises from 215 stores located in major metropolitan markets, predominantly in the Sunbelt region of the United States. We offer a diversified range of automotive products and services, including new vehicles, used vehicles, parts and automotive repair and maintenance services (also referred to as “parts and service”), and automotive finance and insurance products (also referred to as “finance and insurance”), including the arranging of financing for vehicle purchases through third-party finance sources. For convenience, the terms “AutoNation,” “Company,” and “we” are used to refer collectively to AutoNation, Inc. and its subsidiaries, unless otherwise required by the context. Our dealership operations are conducted by our subsidiaries.
The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of AutoNation, Inc. and its subsidiaries; all significant intercompany accounts and transactions have been eliminated. The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information related to our organization, significant accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These Unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to fairly state, in all material respects, our financial position and results of operations for the periods presented.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ materially from these estimates. We periodically evaluate estimates and assumptions used in the preparation of the financial statements and make changes on a prospective basis when adjustments are necessary. Significant estimates made by AutoNation in the accompanying Unaudited Condensed Consolidated Financial Statements include certain assumptions related to goodwill, intangible assets, long-lived assets, assets held for sale, allowances for doubtful accounts, accruals for chargebacks against revenue recognized from the sale of finance and insurance products, accruals related to self-insurance programs, certain legal proceedings, estimated tax liabilities, estimated losses from disposals of discontinued operations, and certain assumptions related to stock-based compensation.
Operating results for interim periods are not necessarily indicative of the results that can be expected for a full year. These interim financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our most recent Annual Report on Form 10-K.
Recent Accounting Pronouncements
Disclosures About Offsetting Assets and Liabilities
In December 2011, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update that requires an entity to disclose information about offsetting and related arrangements of financial instruments and derivative instruments to enable users of its financial statements to understand the effect of these arrangements on its financial position. The amendments in this accounting standard update are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. We do not expect the adoption of this accounting standard update will have a material effect on our consolidated financial statements, but it may require certain additional disclosures.
Testing for Goodwill Impairment
In September 2011, the FASB issued an accounting standard update that amends the accounting guidance on goodwill impairment testing. The amendments in this accounting standard update are intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding


6

Table of Contents
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments in this accounting standard update are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We test goodwill for impairment annually on April 30 or more frequently when events or changes in circumstances indicate that the carrying value of a reporting unit more likely than not exceeds its fair value. The adoption of this accounting standard update did not have an impact on our consolidated financial position, results of operations, or cash flows.

2.
RECEIVABLES, NET
The components of receivables, net of allowance for doubtful accounts, are as follows:
 
June 30,
2012
 
December 31,
2011
Trade receivables
$
91.7

 
$
94.3

Manufacturer receivables
134.4

 
138.4

Other
38.9

 
41.4

 
265.0

 
274.1

Less: Allowances
(2.8
)
 
(3.0
)
 
262.2

 
271.1

Contracts-in-transit and vehicle receivables
262.0

 
306.1

Income tax refundable (see Note 6)
14.7

 
10.2

Receivables, net
$
538.9

 
$
587.4


Contracts-in-transit and vehicle receivables primarily represent receivables from financial institutions for the portion of the vehicle sales price financed by our customers.

3.
INVENTORY AND VEHICLE FLOORPLAN PAYABLE
The components of inventory are as follows:
 
June 30,
2012
 
December 31,
2011
New vehicles
$
1,622.9

 
$
1,397.1

Used vehicles
323.3

 
286.3

Parts, accessories, and other
131.5

 
125.8

 
$
2,077.7

 
$
1,809.2


The components of vehicle floorplan payable are as follows:
 
June 30,
2012
 
December 31,
2011
Vehicle floorplan payable - trade
$
1,482.6

 
$
1,362.3

Vehicle floorplan payable - non-trade
639.4

 
536.5

 
$
2,122.0

 
$
1,898.8


Vehicle floorplan payable-trade reflects amounts borrowed to finance the purchase of specific new vehicle inventories with the corresponding manufacturers’ captive finance subsidiaries (“trade lenders”). Vehicle floorplan payable - non-trade represents amounts borrowed to finance the purchase of specific new and, to a lesser extent, used vehicle inventories with non-trade lenders, as well as amounts borrowed under our secured used floorplan facilities, which are primarily collateralized by used vehicle inventories and related receivables. Changes in vehicle floorplan payable-trade are reported as operating cash flows and changes in vehicle floorplan payable-non-trade are reported as financing cash flows in the accompanying Unaudited Condensed Consolidated Statements of Cash Flows.


7

Table of Contents
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Our inventory costs are generally reduced by manufacturer holdbacks, incentives, and floorplan assistance, while the related vehicle floorplan payables are reflective of the gross cost of the vehicle. The vehicle floorplan payables, as shown in the above table, will generally also be higher than the inventory cost due to the timing of the sale of a vehicle and payment of the related liability.
Floorplan facilities are due on demand, but in the case of new vehicle inventories, are generally paid within several business days after the related vehicles are sold. Our manufacturer agreements generally require that the manufacturer have the ability to draft against new vehicle floorplan facilities so the lender directly funds the manufacturer for the purchase of new vehicle inventory. Floorplan facilities are primarily collateralized by vehicle inventories and related receivables.
Our floorplan facilities utilize LIBOR-based interest rates, which averaged 2.2% for the six months ended June 30, 2012, and 2.4% for the six months ended June 30, 2011. At June 30, 2012, the aggregate capacity under our used vehicle floorplan facilities with various lenders to finance a portion of our used vehicle inventory was $275.0 million, of which $141.0 million had been borrowed. The remaining borrowing capacity of $134.0 million was limited to $81.7 million based on the eligible used vehicle inventory that could have been pledged as collateral. At June 30, 2012, the aggregate capacity under all of our floorplan facilities to finance vehicles was approximately $3.0 billion, of which $2.1 billion had been borrowed.

4.
GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets, net, consist of the following:
 
June 30,
2012
 
December 31,
2011
Goodwill
$
1,172.2

 
$
1,172.2

 
 
 
 
Franchise rights - indefinite-lived
$
208.4

 
$
212.6

Other intangibles
8.4

 
8.4

 
216.8

 
221.0

Less: accumulated amortization
(3.8
)
 
(3.2
)
Other intangible assets, net
$
213.0

 
$
217.8


Goodwill
We test goodwill of our Domestic, Import, and Premium Luxury reporting units for impairment annually on April 30 or more frequently when events or changes in circumstances indicate that the carrying value of a reporting unit more likely than not exceeds its fair value. As discussed in Note 1 above, the FASB issued an accounting standard update that permits an entity to first make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it is necessary to calculate the fair value of a reporting unit under the two-step goodwill impairment test.
We completed our qualitative assessment of any potential goodwill impairment as of April 30, 2012. Based on our qualitative assessment, we determined that it was not more likely than not that the fair values of our reporting units were less than their carrying amounts and we were therefore not required to perform the two-step goodwill impairment test for any of our reporting units.
Intangible Assets
Our principal identifiable intangible assets are individual store rights under franchise agreements with vehicle manufacturers, which have indefinite lives and are tested at least annually as of April 30 for impairment. We completed our annual impairment test for our franchise rights as of April 30, 2012, and we recorded $4.2 million ($2.6 million after-tax) of non-cash impairment charges related to rights under a Premium Luxury store’s franchise agreement. This non-cash impairment charge was recorded to reduce the carrying value of the store’s franchise agreement to its estimated fair value.




8

Table of Contents
AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

5.
LONG-TERM DEBT
Long-term debt consisted of the following:
 
June 30,
2012
 
December 31,
2011
7% Senior Notes due 2014
$

 
$
14.7

6.75% Senior Notes due 2018
395.3

 
395.0

5.5% Senior Notes due 2020
350.0

 

Term loan facility due 2016
500.0

 
500.0

Revolving credit facility due 2016
530.0

 
495.0

Mortgage facility (1)
207.5

 
211.5

Capital leases due from 2012 to 2031
45.7

 
30.8

 
2,028.5

 
1,647.0

Less: current maturities
(28.2
)
 
(12.6
)
Long-term debt, net of current maturities
$
2,000.3

 
$
1,634.4

(1) 
The mortgage facility requires monthly principal and interest payments of $1.7 million based on a fixed amortization schedule with a balloon payment of $155.4 million due November 2017.
Senior Unsecured Notes and Credit Agreement
On February 1, 2012, we issued $350.0 million aggregate principal amount of 5.5% Senior Notes due 2020. Interest is payable on February 1 and August 1 of each year, beginning on August 1, 2012. At any time prior to February 1, 2015, we may redeem up to 35% of the principal amount of these notes with the net cash proceeds of one or more public equity offerings of our common stock at 105.5% of principal. These notes will mature on February 1, 2020.
On April 16, 2012, we redeemed all of our outstanding 7% Senior Notes due 2014 at 100% of principal, for which we paid $15.2 million (which included accrued and unpaid interest).
At June 30, 2012, we had outstanding $395.3 million of 6.75% Senior Notes due 2018, net of debt discount. Interest on the 6.75% Senior Notes due 2018 is payable on April 15 and October 15 of each year. At any time prior to April 15, 2013, we may redeem up to 35% of the principal amount of these notes with the net cash proceeds of one or more public equity offerings of our common stock at 106.75% of principal. These notes will mature on April 15, 2018.
Under our credit agreement, we have a $500.0 million term loan facility and a $1.2 billion revolving credit facility. The term loan and revolving credit facilities under the credit agreement mature December 7, 2016. As of June 30, 2012, we had borrowings outstanding of $530.0 million under our revolving credit facility. We have a $200.0 million letter of credit sublimit as part of our revolving credit facility. The amount available to be borrowed under the revolving credit facility is reduced on a dollar-for-dollar basis by the cumulative amount of any outstanding letters of credit, which was $56.5 million at June 30, 2012, leaving an additional borrowing capacity under the revolving credit facility of $613.5 million at June 30, 2012. This borrowing capacity was limited under the maximum consolidated leverage ratio contained in our credit agreement to $465.5 million as of June 30, 2012.
Our term loan facility provides for various interest rates generally at LIBOR plus 1.75%. Our revolving credit facility provides for a commitment fee on undrawn amounts of 0.30% and various interest rates on borrowings generally at LIBOR plus 1.75%.
The credit spread charged for both our term loan facility and revolving credit facility is affected by our leverage ratio. For instance, an increase in our leverage ratio from greater than or equal to 2.0x but less than 3.25x to greater than or equal to 3.25x would result in a 25 basis point increase in the credit spread under both our term loan facility and revolving credit facility.
Our senior unsecured notes and borrowings under our credit agreement are guaranteed by substantially all of our subsidiaries. Within the meaning of Regulation S-X, Rule 3-10, AutoNation, Inc. (the parent company) has no independent assets or operations, the guarantees of its subsidiaries are full and unconditional and joint and several, and any subsidiaries other than the guarantor subsidiaries are minor.


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AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Other Debt
At June 30, 2012, we had $207.5 million outstanding under a mortgage facility with an automotive manufacturer’s captive finance subsidiary that matures on November 30, 2017. The mortgage facility utilizes a fixed interest rate of 5.864% and is secured by 10-year mortgages on certain of our store properties. At June 30, 2012, we had capital lease obligations of $45.7 million.
Restrictions and Covenants
Our credit agreement, the indentures for our 6.75% Senior Notes due 2018 and 5.5% Senior Notes due 2020, our vehicle floorplan facilities, and our mortgage facility contain customary financial and operating covenants that place restrictions on us, including our ability to incur additional indebtedness or prepay existing indebtedness, to create liens or other encumbrances, to sell (or otherwise dispose of) assets, and to merge or consolidate with other entities.
Under our credit agreement, we are required to remain in compliance with a maximum leverage ratio and maximum capitalization ratio. The leverage ratio is a contractually defined amount principally reflecting non-vehicle debt divided by a contractually defined measure of earnings with certain adjustments. The capitalization ratio is a contractually defined amount principally reflecting vehicle floorplan payable and non-vehicle debt divided by our total capitalization including vehicle floorplan payable. Under the credit agreement, the maximum capitalization ratio is 65.0% and the maximum leverage ratio is 3.75x. In calculating our leverage and capitalization ratios, we are not required to include letters of credit in the definition of debt (except to the extent of letters of credit in excess of $150.0 million). In addition, in calculating our capitalization ratio, we are permitted to add back to shareholders’ equity all goodwill, franchise rights, and long-lived asset impairment charges subsequent to September 30, 2011 plus $1.52 billion.
The indentures for our 6.75% Senior Notes due 2018 and 5.5% Senior Notes due 2020 contain certain limited covenants, including limitations on liens and sale and leaseback transactions. Our mortgage facility contains covenants regarding maximum cash flow leverage and minimum interest coverage.
Our failure to comply with the covenants contained in our debt agreements could permit acceleration of all of our indebtedness. Our debt agreements have cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness of AutoNation.
Under the terms of our credit agreement, at June 30, 2012, our leverage ratio and capitalization ratio were as follows:
 
June 30, 2012
 
Requirement
  
Actual
Leverage ratio
3.75x
  
3.05x
Capitalization ratio
65.0%
  
57.6%

Both the leverage ratio and the capitalization ratio limit our ability to incur additional non-vehicle debt. The capitalization ratio also limits our ability to incur additional vehicle floorplan indebtedness.
In the event of a downgrade in our credit ratings, none of the covenants described above would be impacted. In addition, availability under our credit agreement described above would not be impacted should a downgrade in our senior unsecured debt credit ratings occur.

6.
INCOME TAXES
Income taxes refundable included in Receivables, net totaled $14.7 million at June 30, 2012, and $10.2 million at December 31, 2011.
We file income tax returns in the U.S. federal jurisdiction and various states. As a matter of course, various taxing authorities, including the IRS, regularly audit us. Currently, no tax years are under examination by the IRS, and tax years from 2007 to 2010 are under examination by certain U.S. state jurisdictions. These audits may result in proposed assessments where the ultimate resolution may result in our owing additional taxes. We believe that our tax positions comply with applicable tax law and that we have adequately provided for these matters.
It is our continuing policy to account for interest and penalties associated with income tax obligations as a component of Income Tax Provision in the accompanying Unaudited Condensed Consolidated Financial Statements.


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AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

7.
SHAREHOLDERS’ EQUITY
A summary of shares repurchased under our stock repurchase program authorized by our Board of Directors follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2012
 
2011
 
2012
 
2011
Shares repurchased
3.7

 
3.4

 
15.4

 
5.1

Aggregate purchase price
$
126.2

 
$
110.9

 
$
531.6

 
$
169.7

Average purchase price per share
$
33.99

 
$
33.04

 
$
34.54

 
$
32.97


As of June 30, 2012, $118.2 million remained available under our stock repurchase authorization limit. In July 2012, our Board of Directors authorized the repurchase of an additional $250.0 million of shares of our common stock. As of July 18, 2012, $368.2 million remained available under our stock repurchase authorization limit.
A summary of shares of common stock issued in connection with the exercise of stock options follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2012
 
2011
 
2012
 
2011
Shares issued
0.1

 
0.4

 
0.1

 
2.3

Proceeds from exercise of stock options
$
1.4

 
$
8.0

 
$
1.7

 
$
39.9

Average exercise price per share
$
17.15

 
$
17.81

 
$
17.42

 
$
17.05


The following table presents a summary of shares of common stock issued in connection with grants of restricted stock and shares surrendered to AutoNation to satisfy tax withholding obligations in connection with the vesting of restricted stock (in actual number of shares):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2012
 
2011
 
2012
 
2011
Shares issued

 

 
155,740

 
163,892

Shares surrendered to AutoNation to satisfy tax withholding obligations in connection with the vesting of restricted stock
28,303

 
23,008

 
36,935

 
31,297


8.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period, including outstanding unvested restricted stock awards which contain rights to non-forfeitable dividends. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding adjusted for the dilutive effect of stock options.
The computation of weighted average common and common equivalent shares used in the calculation of basic and diluted earnings per share is as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2012
 
2011
 
2012
 
2011
Weighted average common shares outstanding used in calculating basic earnings per share
121.7

 
147.4

 
126.0

 
148.2

Effect of dilutive stock options
2.0

 
2.6

 
2.0

 
2.7

Weighted average common and common equivalent shares used in calculating diluted earnings per share
123.7

 
150.0

 
128.0

 
150.9




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AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

A summary of anti-dilutive options excluded from the computation of diluted earnings per share follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2012
 
2011
 
2012
 
2011
Anti-dilutive options excluded from the computation of diluted earnings per share
1.0

 
0.4

 
1.0

 
0.4


9.
ACQUISITIONS
We did not acquire any automotive retail franchises during the six months ended June 30, 2012. We acquired one automotive retail franchise and related assets during the six months ended June 30, 2011, for which we paid in cash $64.2 million.

10.
COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are involved, and will continue to be involved, in numerous legal proceedings arising out of the conduct of our business, including litigation with customers, employment-related lawsuits, class actions, purported class actions, and actions brought by governmental authorities. We do not believe that the ultimate resolution of these matters will have a material adverse effect on our results of operations, financial condition, or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on our financial condition, results of operations, and cash flows.
Other Matters
AutoNation, acting through its subsidiaries, is the lessee under many real estate leases that provide for the use by our subsidiaries of their respective store premises. Pursuant to these leases, our subsidiaries generally agree to indemnify the lessor and other related parties from certain liabilities arising as a result of the use of the leased premises, including environmental liabilities, or a breach of the lease by the lessee. Additionally, from time to time, we enter into agreements with third parties in connection with the sale of assets or businesses in which we agree to indemnify the purchaser or related parties from certain liabilities or costs arising in connection with the assets or business. Also, in the ordinary course of business in connection with purchases or sales of goods and services, we enter into agreements that may contain indemnification provisions. In the event that an indemnification claim is asserted, our liability would be limited by the terms of the applicable agreement.
From time to time, primarily in connection with dispositions of automotive stores, our subsidiaries assign or sublet to the store purchaser the subsidiaries’ interests in any real property leases associated with such stores. In general, our subsidiaries retain responsibility for the performance of certain obligations under such leases to the extent that the assignee or sublessee does not perform, whether such performance is required prior to or following the assignment or subletting of the lease. Additionally, AutoNation and its subsidiaries generally remain subject to the terms of any guarantees made by us and our subsidiaries in connection with such leases. Although we generally have indemnification rights against the assignee or sublessee in the event of non-performance under these leases, as well as certain defenses, we estimate that lessee rental payment obligations during the remaining terms of these leases with expirations ranging from 2012 to 2034 are approximately $59 million at June 30, 2012. We do not have any material known commitments that we or our subsidiaries will be called on to perform under any such assigned leases or subleases at June 30, 2012. Our exposure under these leases is difficult to estimate and there can be no assurance that any performance of AutoNation or its subsidiaries required under these leases would not have a material adverse effect on our business, financial condition, and cash flows.
At June 30, 2012, surety bonds, letters of credit, and cash deposits totaled $91.3 million, including $56.5 million of letters of credit. In the ordinary course of business, we are required to post performance and surety bonds, letters of credit, and/or cash deposits as financial guarantees of our performance. We do not currently provide cash collateral for outstanding letters of credit.
In the ordinary course of business, we are subject to numerous laws and regulations, including automotive, environmental, health and safety, and other laws and regulations. We do not anticipate that the costs of such compliance will have a material adverse effect on our business, consolidated results of operations, cash flows, or financial condition, although such outcome is possible given the nature of our operations and the extensive legal and regulatory framework applicable to our business. The Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law on July 21, 2010,


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AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

established a new consumer financial protection agency with broad regulatory powers. Although automotive dealers are generally excluded, the Dodd-Frank Act could lead to additional, indirect regulation of automotive dealers through its regulation of automotive finance companies and other financial institutions. In addition, we expect that the Patient Protection and Affordable Care Act, which was signed into law on March 23, 2010, will increase our annual employee health care costs that we fund, with the most significant increases commencing in 2014. Further, we expect that new laws and regulations, particularly at the federal level, in other areas may be enacted, which could also materially adversely impact our business. We do not have any material known environmental commitments or contingencies.

11.
DISCONTINUED OPERATIONS
Discontinued operations are related to stores that were sold or terminated, that we have entered into an agreement to sell or terminate, or for which we otherwise deem a proposed sales transaction or termination to be probable, with no material changes expected. Generally, the sale of a store is completed within 60 to 90 days after the date of a sale agreement. We account for a store that either has been disposed of or is classified as held for sale as a discontinued operation if (a) the operations and cash flows of the store have been (or will be) eliminated from our ongoing operations and (b) we will not have any significant continuing involvement in the operations of the store after the disposal transaction.
In evaluating whether a store’s cash flows will be eliminated from our ongoing operations, we consider whether we expect to continue to generate revenues or incur expenses from the sale of similar products or services to customers of the disposed store in the same geographic market. If we believe that a significant portion of the cash flows previously generated by the disposed store will migrate to our other operating stores, we will not treat the disposition as a discontinued operation.
We received no proceeds related to discontinued operations during the six months ended June 30, 2012. We received $1.2 million in proceeds (net of cash relinquished) during the same period in 2011 related to discontinued operations.
We had assets held for sale in discontinued operations of $51.6 million at June 30, 2012, and $51.7 million at December 31, 2011, primarily related to real estate we have not yet sold associated with stores that have been closed. Assets and liabilities of discontinued operations are reported in the “Corporate and other” category of our segment information.

12.
SEGMENT INFORMATION
At June 30, 2012 and 2011, we had three operating and reportable segments: (1) Domestic, (2) Import, and (3) Premium Luxury. As of March 31, 2012, we revised the basis of segmentation for our Import and Premium Luxury segments to reclassify Audi franchises from the Import segment to the Premium Luxury segment. In connection with this change, we have reclassified historical amounts to conform to our current segment presentation. We have five Audi franchises for which we reclassified revenue of $47.6 million and segment income of $3.2 million for the three months ended June 30, 2011, and revenue of $87.3 million and segment income of $5.7 million for the six months ended June 30, 2011.
Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by Ford, General Motors, 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-Benz, 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.
“Corporate and other” is comprised of our other businesses, including collision centers, a customer lead generation business, and an auction operation, each of which generates revenues, as well as unallocated corporate overhead expenses and retrospective commissions for certain financing and insurance transactions that we arrange under agreements with third parties.
The operating segments identified above are the business activities of the Company for which discrete financial information is available and for which operating results are regularly reviewed by our chief operating decision maker to allocate resources and assess performance. Our chief operating decision maker is our Chief Executive Officer. We have determined that our three operating segments also represent our reportable segments.


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AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Reportable segment revenue and segment income are as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2012
 
2011
 
2012
 
2011
Revenue:
 
 
 
 
 
 
 
Domestic
$
1,295.1

 
$
1,145.0

 
$
2,524.2

 
$
2,241.1

Import
1,475.8

 
1,165.9

 
2,842.4

 
2,423.4

Premium Luxury
1,093.4

 
989.2

 
2,115.6

 
1,907.2

Total segment revenue
3,864.3

 
3,300.1

 
7,482.2

 
6,571.7

Corporate and other
40.2

 
36.2

 
79.3

 
75.7

Total consolidated revenue
$
3,904.5

 
$
3,336.3

 
$
7,561.5

 
$
6,647.4


 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2012
 
2011
 
2012
 
2011
Segment income*:
 
 
 
 
 
 
 
Domestic
$
53.6

 
$
46.4

 
$
103.3

 
$
89.1

Import
67.2

 
62.5

 
129.1

 
117.4

Premium Luxury
68.3

 
59.8

 
127.1

 
117.4

Total segment income
189.1

 
168.7

 
359.5

 
323.9

Corporate and other
(35.7
)
 
(35.2
)
 
(68.1
)
 
(61.6
)
Other interest expense
(22.5
)
 
(15.9
)
 
(43.0
)
 
(32.2
)
Interest income
0.1

 
0.3

 
0.2

 
0.6

Other income (loss), net
(1.4
)
 
0.5

 
0.6

 
2.2

Income from continuing operations before income taxes
$
129.6

 
$
118.4

 
$
249.2

 
$
232.9

* Segment income for each of our segments is defined as operating income less floorplan interest expense.

13.
BUSINESS AND CREDIT CONCENTRATIONS
We are subject to a concentration of risk in the event of financial distress of or other adverse event related to a major vehicle manufacturer. The core brands of vehicles that we sell are manufactured by Ford, Toyota, Honda, Nissan, General Motors, Mercedes-Benz, BMW, and Chrysler. Our business could be materially adversely impacted by a bankruptcy of or other adverse event related to a major vehicle manufacturer or related lender.
We had receivables from manufacturers or distributors of $134.4 million at June 30, 2012, and $138.4 million at December 31, 2011. Additionally, a large portion of our Contracts-in-Transit included in Receivables, Net, in the accompanying Unaudited Condensed Consolidated Balance Sheets, are due from automotive manufacturers’ captive finance subsidiaries, which provide financing directly to our new and used vehicle customers. Concentrations of credit risk with respect to non-manufacturer trade receivables are limited due to the wide variety of customers and markets in which our products are sold as well as their dispersion across many different geographic areas in the United States. Consequently, at June 30, 2012, we do not consider AutoNation to have any significant non-manufacturer concentrations of credit risk.

14.
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore cannot be determined with precision. The assumptions used have a significant effect on the estimated amounts reported.


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AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Accounting standards define fair value as the price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and also establishes the following three levels of inputs that may be used to measure fair value:
Level 1
Quoted prices in active markets for identical assets or liabilities
 
 
Level 2
Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted market prices in markets that are not active; or model-derived valuations or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
 
 
Level 3
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
The following methods and assumptions were used by us in estimating fair value disclosures for financial instruments:
Cash and cash equivalents, accounts receivable, other current assets, vehicle floorplan payable, accounts payable, other current liabilities, and variable rate debt: The amounts reported in the accompanying Unaudited Condensed Consolidated Balance Sheets approximate fair value due to their short-term nature or the existence of variable interest rates that approximate prevailing market rates.
Fixed rate debt: Our fixed rate debt primarily consists of amounts outstanding under our senior unsecured notes and mortgages. We estimate the fair value of our senior unsecured notes using quoted prices for the identical liability (Level 1). We estimate the fair value of our mortgages using a present value technique based on our current market interest rates for similar types of financial instruments (Level 2). A summary of the aggregate carrying values and fair values of our fixed rate debt are as follows:
 
June 30,
2012
 
December 31,
2011
Carrying value
$
998.5

 
$
652.0

Fair value
$
1,058.2

 
$
675.6


Nonfinancial assets such as goodwill, other intangible assets, and long-lived assets held and used are measured at fair value when there is an indicator of impairment and recorded at fair value only when impairment is recognized or for a business combination. The fair values less costs to sell of long-lived assets held for sale are assessed each reporting period they remain classified as held for sale. Subsequent changes in the held for sale long-lived asset’s fair value less cost to sell (increase or decrease) is reported as an adjustment to its carrying amount, except that the adjusted carrying amount cannot exceed the carrying amount of the long-lived asset at the time it was initially classified as held for sale.
Goodwill and Other Intangible Assets
Under accounting standards, we chose to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of our reporting units under the two-step goodwill impairment test. We completed our qualitative assessment of potential goodwill impairment as of April 30, 2012, and we determined that it was not more likely than not that the fair values of our reporting units were less than their carrying amounts. During the three and six months ended June 30, 2011, no impairment charges were recorded for the carrying value of goodwill.
Our principal identifiable intangible assets are individual store rights under franchise agreements with vehicle manufacturers, which have indefinite lives and are tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that impairment may have occurred. The impairment test for intangibles with indefinite lives requires the comparison of estimated fair value to its carrying value by store. Fair values of rights under franchise agreements are estimated using Level 3 inputs by discounting expected future cash flows of the store. The forecasted cash flows contain inherent uncertainties, including significant estimates and assumptions related to growth rates, margins, working capital requirements, capital expenditures, and cost of capital, for which we utilize certain market participant-based assumptions, using third-party industry projections, economic projections, and other marketplace data we believe to be reasonable. The development of the assumptions used in our annual impairment test is coordinated by our financial planning and analysis group, and the assumptions are reviewed by management.


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AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

During the three and six months ended June 30, 2012 , we recorded $4.2 million of non-cash impairment charges related to rights under a Premium Luxury store’s franchise agreement in accordance with accounting guidance for goodwill and other intangible assets. The non-cash impairment charge was recorded to reduce the carrying value of the store’s franchise agreement to its estimated fair value. During the three and six months ended June 30, 2011, no impairment charges were recorded for the carrying value of franchise rights.
Long-Lived Assets
The fair value measurement valuation process for our long-lived assets is established by our corporate real estate services group, which reports to the Company’s President and Chief Operating Officer. Fair value measurements, which are based on Level 3 inputs, and changes in fair value measurements are reviewed and assessed each quarter for properties classified as held for sale, or when an indicator of impairment exists for properties classified as held and used, by the corporate real estate services group. Our corporate real estate services group utilizes its knowledge of the automotive industry and historical experience in real estate markets and transactions in establishing the valuation process, which is generally based on a combination of the market and replacement cost approaches.
In a market approach, the corporate real estate services group uses transaction prices for comparable properties that have recently been sold. These transaction prices are adjusted for factors related to a specific property. The corporate real estate services group also evaluates changes in local real estate markets, and/or recent market interest or negotiations related to a specific property. In a replacement cost approach, the cost to replace a specific long-lived asset is considered, which is adjusted for depreciation from physical deterioration, as well as functional and economic obsolescence, if present and measurable.
To validate the fair values determined under the valuation process noted above, our corporate real estate services group also obtains independent third-party appraisals for our properties and/or third-party brokers’ opinions of value, which are generally developed using the same valuation approaches described above, and evaluates any recent negotiations or discussions with third-party real estate brokers related to a specific long-lived asset or market. 
Long-lived Assets Held and Used in Continuing Operations
During the three and six months ended June 30, 2012 and 2011, no impairment charges were recorded for the carrying value of long-lived assets held and used in continuing operations.
Long-lived Assets Held for Sale in Continuing Operations
During the three and six months ended June 30, 2012 and 2011, no impairment charges were recorded for the carrying value of long-lived assets held for sale in continuing operations.
Long-lived Assets Held for Sale in Discontinued Operations
During the three and six months ended June 30, 2012, long-lived assets held for sale in discontinued operations with a carrying amount of $3.8 million were written down to their fair value of $3.7 million, resulting in a non-cash impairment charge of $0.1 million.
During the three and six months ended June 30, 2011, long-lived assets held for sale in discontinued operations with a carrying amount of $11.4 million were written down to their fair value of $10.9 million, resulting in a non-cash impairment charge of $0.5 million.
The 2012 and 2011 non-cash impairment charges related to assets held for sale in discontinued operations were included in Loss from Discontinued Operations in our Unaudited Condensed Consolidated Income Statements.
As of June 30, 2012, we had long-lived assets held for sale of $76.7 million in continuing operations and $49.4 million in discontinued operations.



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AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

15.
CASH FLOW INFORMATION
We consider all highly liquid investments with a maturity of three months or less as of the date of purchase to be cash equivalents unless the investments are legally or contractually restricted for more than three months. We had non-cash investing activities related to the increase in property acquired under capital leases of $19.1 million for the six months ended June 30, 2012, and $5.0 million for the six months ended June 30, 2011. The effect of non-cash transactions is excluded from the accompanying Unaudited Condensed Consolidated Statements of Cash Flows.
We made interest payments of $55.4 million during the six months ended June 30, 2012, and $53.9 million during the six months ended June 30, 2011. We made income tax payments, net of income tax refunds, of $90.2 million during the six months ended June 30, 2012, and $82.8 million during the six months ended June 30, 2011.




17

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and notes thereto included under Part I, Item 1. In addition, reference should be made to our Audited Consolidated Financial Statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our most recent Annual Report on Form 10-K.
Overview
AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of June 30, 2012, we owned and operated 260 new vehicle franchises from 215 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 32 different brands of new vehicles. The core brands of vehicles that we sell, representing approximately 89% of the new vehicles that we sold during the six months ended June 30, 2012, are manufactured by Ford, Toyota, Honda, Nissan, General Motors, Mercedes-Benz, 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.
At June 30, 2012, we had three operating and reportable segments: (1) Domestic, (2) Import, and (3) Premium Luxury. As of March 31, 2012, we revised the basis of segmentation for our Import and Premium Luxury segments to reclassify Audi franchises from the Import segment to the Premium Luxury segment. In connection with this change, we have reclassified historical amounts to conform to our current segment presentation. We have five Audi franchises for which we reclassified revenue of $47.6 million and segment income of $3.2 million during the three months ended June 30, 2011, and revenue of $87.3 million and segment income of $5.7 million during the six months ended June 30, 2011.
Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by Ford, General Motors, 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-Benz, 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 six months ended June 30, 2012, new vehicle sales accounted for approximately 55% of our total revenue, but approximately 23% of our total gross profit. Used vehicle sales accounted for approximately 25% of our total revenue, and approximately 13% of our total gross profit. Our parts and service and finance and insurance operations, while comprising approximately 20% of our total revenue for the six months ended June 30, 2012, contributed approximately 63% of our total gross profit for the same period.

Results of Operations
Second Quarter 2012 compared to Second Quarter 2011
During the three months ended June 30, 2012, we had net income from continuing operations of $79.0 million or $0.64 per share on a diluted basis, as compared to net income from continuing operations of $73.3 million or $0.49 per share on a diluted basis during the same period in 2011.
Results for the three months ended June 30, 2012, were adversely impacted by a non-cash franchise rights impairment charge of $4.2 million ($2.6 million after-tax, or approximately $0.02 per share).
First Six Months 2012 compared to First Six Months 2011
During the six months ended June 30, 2012, we had net income from continuing operations of $152.5 million or $1.19 per share on a diluted basis, as compared to net income from continuing operations of $143.6 million or $0.95 per share on a diluted basis during the same period in 2011.
Results for the six months ended June 30, 2012, were adversely impacted by a non-cash franchise rights impairment charge of $4.2 million ($2.6 million after-tax, or approximately $0.02 per share).


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Table of Contents

Market Conditions
In the second quarter of 2012, the seasonally adjusted annual rate (“SAAR”) of industry new vehicle sales in the United States was 14.1 million units, an increase of 16% as compared to the new vehicle SAAR of 12.1 million units in the second quarter of 2011.
In the second quarter of 2012, new vehicle industry sales were driven in part by replacement demand. Based on industry data, the average age of cars and trucks in the United States is at a record high of nearly 11 years compared to an average age of 9 years during the period from 2000 to 2007. A robust consumer credit environment and accelerated product offerings from automotive manufacturers were also supportive of a strong selling environment. Further, inventory levels of vehicles produced by Japanese manufacturers were significantly improved as compared to the second quarter of 2011, as vehicle production by Japanese manufacturers was adversely impacted in the second quarter of 2011 by the March 2011 earthquake and tsunami that struck Japan. For the full year ended December 31, 2012, we believe that gross profit per new vehicle retailed should remain relatively stable with the first half of 2012, although lower than 2011 due to the improved supply environment. However, gross profit per new vehicle retailed could vary by quarter and also could be materially impacted by manufacturer incentive programs and market conditions. Accordingly, there can be no assurance that gross profit per new vehicle retailed will remain stable in 2012.
Our 2012 industry new vehicle sales forecast continues to be at the mid-14 million unit level, an improvement as compared to 2011 but still below pre-recession levels. The rate of industry new vehicle unit sales over the past few years has led to a decline in the number of recent-model-year vehicles in operation, our primary service base. We expect the units in operation in our primary service base to begin increasing in 2013, but it may take several years for this service base to return to pre-recession levels.
Inventory Management
Our new and used vehicle inventories are stated at the lower of cost or market on our consolidated balance sheets. We monitor our vehicle inventory levels closely based on current economic conditions.
We have generally not experienced losses on the sale of new vehicle inventory, in part due to incentives provided by manufacturers to promote sales of new vehicles and our inventory management practices. We had 49,187 units in new vehicle inventory at June 30, 2012, 43,906 units at December 31, 2011, and 38,907 units at June 30, 2011
In general, used vehicles that are not sold on a retail basis are liquidated at wholesale auctions. We record estimated losses on used vehicle inventory expected to be liquidated at wholesale auctions at a loss. Our used vehicle inventory balance was net of cumulative write-downs of $0.3 million at June 30, 2012, and $0.9 million at December 31, 2011.
Parts, accessories, and other inventory are carried at the lower of acquisition cost (first-in, first-out method) or market. We estimate the amount of potential obsolete inventory based upon past experience and market trends. Our parts, accessories, and other inventory balance was net of cumulative write-downs of $3.3 million at June 30, 2012, and $2.8 million at December 31, 2011.

Critical Accounting Policies and Estimates
We prepare our Unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimates on an ongoing basis, and we base our estimates on historical experience and various other assumptions we believe to be reasonable. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our Unaudited Condensed Consolidated Financial Statements. For additional discussion of our critical accounting policies and estimates, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10‑K for the fiscal year ended December 31, 2011.
Goodwill
Goodwill for our Domestic, Import, and Premium Luxury reporting units is tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that impairment may have occurred.
Under accounting standards, we chose to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of our reporting units under the two-step goodwill impairment


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Table of Contents

test. See Notes 1 and 4 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information. We completed our qualitative assessment of potential goodwill impairment as of April 30, 2012, and we determined that it was not more likely than not that the fair values of our reporting units were less than their carrying amounts.
The fair values of the Domestic, Import, and Premium Luxury reporting units were substantially in excess of their carrying values as of April 30, 2011, the date of our most recent quantitative annual impairment test.
Other Intangible Assets
Our principal identifiable intangible assets are individual store rights under franchise agreements with vehicle manufacturers, which have indefinite lives and are tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that impairment may have occurred. See Note 14 of the Notes to Unaudited Condensed Consolidated Financial Statements for information on how fair value measurements are derived for our franchise rights. We completed our annual impairment test for our franchise rights as of April 30, 2012, and we recorded $4.2 million ($2.6 million after-tax) of non-cash impairment charges related to rights under a Premium Luxury store’s franchise agreement. This non-cash impairment charge was recorded to reduce the carrying value of the store’s franchise agreement to its estimated fair value. Our franchise rights, which related to 27 franchises and totaled $208.4 million at April 30, 2012, are evaluated for impairment on a franchise-by-franchise basis. If the fair value of each of our franchise rights had been determined to be a hypothetical 10% lower as of the valuation date of April 30, 2012, we would not have had to record any additional impairment charges.
Long-Lived Assets
We estimate the depreciable lives of our property and equipment, including leasehold improvements, and review them for impairment when events or changes in circumstances indicate that their carrying amounts may be impaired. Such events or changes may include a significant decrease in market value, a significant change in the business climate in a particular market, a current expectation that more-likely-than-not a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life, or a current-period operating or cash flow loss combined with historical losses or projected future losses.
When property and equipment is identified as held for sale, we reclassify the held for sale assets to Other Current Assets and cease recording depreciation. We measure each long-lived asset or disposal group at the lower of its carrying amount or fair value less cost to sell and recognize a loss for any initial adjustment of the long-lived asset’s or disposal group’s carrying amount to fair value less cost to sell in the period the “held for sale” criteria are met. We periodically evaluate the carrying value of assets held for sale to determine if, based on market conditions, the values of these assets should be adjusted.
As of June 30, 2012, we had long-lived assets held for sale of $76.7 million in continuing operations and $49.4 million in discontinued operations.
During the three and six months ended June 30, 2012, we recorded no impairment charges associated with assets held and used in continuing operations or assets held for sale in continuing operations. During the three and six months ended June 30, 2012, we recorded a non-cash impairment charge of $0.1 million associated with long-lived assets held for sale in discontinued operations, which is included in Loss from Discontinued Operations in our Unaudited Condensed Consolidated Financial Statements.
The fair value measurements for our property and equipment and assets held for sale are based on Level 3 inputs, which considered information from third-party real estate valuation sources, or, in certain cases, pending agreements to sell the related assets. See Note 14 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information on our fair value measurement valuation process. Although we believe our property and equipment and assets held for sale are appropriately valued, the assumptions and estimates used may change and we may be required to record impairment charges to reduce the value of these assets.


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Table of Contents

Reported Operating Data
Historical operating results include the results of acquired businesses from the date of acquisition.
 
($ in millions, except per vehicle data)
Three Months Ended June 30,
 
Six Months Ended June 30,
2012
 
2011
 
Variance
Favorable /
(Unfavorable)
 
%
Variance
 
2012
 
2011
 
Variance
Favorable /
(Unfavorable)
 
%
Variance
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle
$
2,196.1

 
$
1,746.6

 
$
449.5

 
25.7

 
$
4,190.4

 
$
3,531.7

 
$
658.7

 
18.7

Used vehicle
947.4

 
887.3

 
60.1

 
6.8

 
1,866.2

 
1,718.7

 
147.5

 
8.6

Parts and service
602.5

 
572.0

 
30.5

 
5.3

 
1,202.4

 
1,142.0

 
60.4

 
5.3

Finance and insurance, net
145.1

 
117.0

 
28.1

 
24.0

 
275.3

 
227.7

 
47.6

 
20.9

Other
13.4

 
13.4

 

 
 
 
27.2

 
27.3

 
(0.1
)
 
 
Total revenue
$
3,904.5

 
$
3,336.3

 
$
568.2

 
17.0

 
$
7,561.5

 
$
6,647.4

 
$
914.1

 
13.8

Gross profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle
$
145.5

 
$
136.7

 
$
8.8

 
6.4

 
$
279.5

 
$
262.0

 
$
17.5

 
6.7

Used vehicle
77.1

 
78.6

 
(1.5
)
 
(1.9
)
 
158.2

 
156.7

 
1.5

 
1.0

Parts and service
253.4

 
245.2

 
8.2

 
3.3

 
503.6

 
489.7

 
13.9

 
2.8

Finance and insurance
145.1

 
117.0

 
28.1

 
24.0

 
275.3

 
227.7

 
47.6

 
20.9

Other
6.9

 
5.9

 
1.0

 
 
 
14.4

 
13.5

 
0.9

 
 
Total gross profit
628.0

 
583.4

 
44.6

 
7.6

 
1,231.0

 
1,149.6

 
81.4

 
7.1

Selling, general and administrative expenses
438.6

 
417.6

 
(21.0
)
 
(5.0
)
 
871.5

 
825.3

 
(46.2
)
 
(5.6
)
Depreciation and amortization
20.8

 
21.1

 
0.3

 
 
 
42.0

 
41.8

 
(0.2
)
 
 
Franchise rights impairment
4.2

 

 
(4.2
)
 
 
 
4.2

 

 
(4.2
)
 
 
Other expenses (income), net
0.2

 
0.3

 
0.1

 
 
 
0.4

 
(1.9
)
 
(2.3
)
 
 
Operating income
164.2

 
144.4

 
19.8

 
13.7

 
312.9

 
284.4

 
28.5

 
10.0

Non-operating income (expense) items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Floorplan interest expense
(10.8
)
 
(10.9
)
 
0.1

 
 
 
(21.5
)
 
(22.1
)
 
0.6

 
 
Other interest expense
(22.5
)
 
(15.9
)
 
(6.6
)
 
 
 
(43.0
)
 
(32.2
)
 
(10.8
)
 
 
Interest income
0.1

 
0.3

 
(0.2
)
 
 
 
0.2

 
0.6

 
(0.4
)
 
 
Other income (loss), net
(1.4
)
 
0.5

 
(1.9
)
 
 
 
0.6

 
2.2

 
(1.6
)
 
 
Income from continuing operations before income taxes
$
129.6

 
$
118.4

 
$
11.2

 
9.5

 
$
249.2

 
$
232.9

 
$
16.3

 
7.0

Retail vehicle unit sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle
66,987

 
51,824

 
15,163

 
29.3

 
128,503

 
107,534

 
20,969

 
19.5

Used vehicle
46,236

 
42,833

 
3,403

 
7.9

 
92,352

 
84,922

 
7,430

 
8.7

 
113,223

 
94,657

 
18,566

 
19.6

 
220,855

 
192,456

 
28,399

 
14.8

Revenue per vehicle retailed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle
$
32,784

 
$
33,703

 
$
(919
)
 
(2.7
)
 
$
32,609

 
$
32,843

 
$
(234
)
 
(0.7
)
Used vehicle
$
17,941

 
$
18,350

 
$
(409
)
 
(2.2
)
 
$
17,656

 
$
17,821

 
$
(165
)
 
(0.9
)
Gross profit per vehicle retailed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle
$
2,172

 
$
2,638

 
$
(466
)
 
(17.7
)
 
$
2,175

 
$
2,436

 
$
(261
)
 
(10.7
)
Used vehicle
$
1,624

 
$
1,800

 
$
(176
)
 
(9.8
)
 
$
1,663

 
$
1,777

 
$
(114
)
 
(6.4
)
Finance and insurance
$
1,282

 
$
1,236

 
$
46

 
3.7

 
$
1,247

 
$
1,183

 
$
64

 
5.4




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Table of Contents

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2012 (%)
 
2011 (%)
 
2012 (%)
 
2011 (%)
Revenue mix percentages:
 
 
 
 
 
 
 
New vehicle
56.2
 
52.4
 
55.4
 
53.1
Used vehicle
24.3
 
26.6
 
24.7
 
25.9
Parts and service
15.4
 
17.1
 
15.9
 
17.2
Finance and insurance, net
3.7
 
3.5
 
3.6
 
3.4
Other
0.4
 
0.4
 
0.4
 
0.4
Total
100.0
 
100.0
 
100.0
 
100.0
Gross profit mix percentages:
 
 
 
 
 
 
 
New vehicle
23.2
 
23.4
 
22.7
 
22.8
Used vehicle
12.3
 
13.5
 
12.9
 
13.6
Parts and service
40.4
 
42.0
 
40.9
 
42.6
Finance and insurance
23.1
 
20.1
 
22.4
 
19.8
Other
1.0
 
1.0
 
1.1
 
1.2
Total
100.0
 
100.0
 
100.0
 
100.0
Operating items as a percentage of revenue:
 
 
 
 
 
 
 
Gross profit:
 
 
 
 
 
 
 
New vehicle
6.6
 
7.8
 
6.7
 
7.4
Used vehicle - retail
9.1
 
9.8
 
9.4
 
10.0
Parts and service
42.1
 
42.9
 
41.9
 
42.9
Total
16.1
 
17.5
 
16.3
 
17.3
Selling, general and administrative expenses
11.2
 
12.5
 
11.5
 
12.4
Operating income
4.2
 
4.3
 
4.1
 
4.3
Operating items as a percentage of total gross profit:
 
 
 
 
 
 
 
Selling, general and administrative expenses
69.8
 
71.6
 
70.8
 
71.8
Operating income
26.1
 
24.8
 
25.4
 
24.7
 
June 30,
2012
 
June 30,
2011
 
 
 
 
Days supply:
 
 
 
 
 
 
 
New vehicle (industry standard of selling days, including fleet)
60 days
 
59 days
 
 
 
 
Used vehicle (trailing calendar month days) (1)
31 days
 
36 days
 
 
 
 
(1) 
As of December 31, 2011, we have revised our method of calculating used vehicle days supply from a dollar day supply to a unit day supply (including wholesale units). We have revised prior periods to conform to our revised method of calculation.

The following table details net new vehicle inventory carrying benefit, consisting of new vehicle floorplan interest expense, net of floorplan assistance earned (amounts received from manufacturers specifically to support store financing of new vehicle inventory). Floorplan assistance is accounted for as a component of new vehicle gross profit.
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In millions)
2012
 
2011
 
Variance
 
2012
 
2011
 
Variance
Floorplan assistance
$
18.5

 
$
13.7

 
$
4.8

 
$
35.7

 
$
29.0

 
$
6.7

Floorplan interest expense (new vehicles)
(10.3
)
 
(10.3
)
 

 
(20.7
)
 
(20.8
)
 
0.1

Net new vehicle inventory carrying benefit
$
8.2

 
$
3.4

 
$
4.8

 
$
15.0

 
$
8.2

 
$
6.8




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Table of Contents

Same Store Operating Data
We have presented below our operating results on a same store basis to reflect our internal performance. The “Same Store” amounts presented below include the results of our stores for the identical months in each period presented in the comparison, commencing with the first full month in which the store was owned by us.

</
 
Three Months Ended June 30,
 
Six Months Ended June 30,
($ in millions, except per vehicle data)
2012
 
2011
 
Variance
Favorable /
(Unfavorable)
 
%
Variance
 
2012
 
2011
 
Variance
Favorable /
(Unfavorable)
 
%
Variance
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle
$
2,193.0

 
$
1,746.6

 
$
446.4

 
25.6

 
$
4,151.4

 
$
3,531.7

 
$
619.7

 
17.5

Used vehicle
943.8

 
887.3

 
56.5

 
6.4

 
1,843.9

 
1,718.7

 
125.2

 
7.3

Parts and service
601.1

 
572.0

 
29.1

 
5.1

 
1,194.1

 
1,142.0

 
52.1

 
4.6

Finance and insurance, net
144.8

 
117.0

 
27.8

 
23.8

 
273.2

 
227.7

 
45.5

 
20.0

Other
13.3

 
13.4

 
(0.1
)
 
 
 
27.0

 
27.3

 
(0.3
)
 
 
Total revenue
$
3,896.0

 
$
3,336.3

 
$
559.7

 
16.8

 
$
7,489.6

 
$
6,647.4

 
$
842.2

 
12.7

Gross profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle
$
145.2

 
$
136.7

 
$
8.5

 
6.2

 
$
276.9

 
$
262.0

 
$
14.9

 
5.7

Used vehicle
77.0

 
78.6

 
(1.6
)
 
(2.0
)
 
156.8

 
156.7

 
0.1

 
0.1

Parts and service
252.8

 
245.2

 
7.6

 
3.1

 
499.9

 
489.7

 
10.2

 
2.1

Finance and insurance
144.8

 
117.0

 
27.8

 
23.8

 
273.2

 
227.7

 
45.5

 
20.0

Other
6.8

 
5.9

 
0.9

 
 
 
14.3

 
13.5

 
0.8

 
 
Total gross profit
$
626.6

 
$
583.4

 
$
43.2

 
7.4

 
$
1,221.1

 
$
1,149.6

 
$
71.5

 
6.2

Retail vehicle unit sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle
66,828

 
51,824

 
15,004

 
29.0

 
127,155

 
107,534

 
19,621

 
18.2

Used vehicle
46,029

 
42,833

 
3,196

 
7.5

 
91,524

 
84,922

 
6,602

 
7.8

 
112,857

 
94,657

 
18,200

 
19.2

 
218,679

 
192,456

 
26,223

 
13.6

Revenue per vehicle retailed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New vehicle
$
32,816

 
$
33,703

 
$
(887
)
 
(2.6
)
 
$
32,648

 
$
32,843

 
$
(195
)
 
(0.6
)