AutoNation 2006 Annual Report Download

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Table of Contents



(Mark One)




oo





(Exact Name of Registrant as Specified in its Charter)
 
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

 
(Address of Principal Executive Offices) (Zip Code)

(Registrant’s Telephone Number, Including Area Code)
 
 
Common Stock, Par Value $.01 Per Share The New York Stock Exchange
 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act. Yes o No
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 No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Act).
Large accelerated filer Accelerated filer o Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No
As of June 30, 2006, the aggregate market value of the common stock of the registrant held by non-affiliates was approximately $3.3 billion
based on the closing price of the common stock on The New York Stock Exchange on such date.
As of February 23, 2007, the registrant had 209,075,307 shares of common stock outstanding.

Part III Portions of the Registrant’s Proxy Statement relating to the 2007 Annual Meeting of Stockholders.

Table of contents

  • Page 1
    ... (State or Other Jurisdiction of Incorporation or Organization) 73-1105145 (I.R.S. Employer Identification No.) 110 S.E. 6TH STREET, FORT LTUDERDTLE, FLORIDT (Address of Principal Executive Offices) 33301 (Zip Code) (954) 769-6000 (Registrant's Telephone Number, Including Area Code) Segurities...

  • Page 2
    ... in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PTRT III Directors, Executive Officers and Corporate Governance of the Registrant Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 3
    .... 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...

  • Page 4
    ... vehicle services and repairs for like-brand vehicles within each of our markets. • Increasing Finance, Insurance and Other Aftermarket Product Sales: We continue to improve our finance and insurance business by using our standardized best common processes across our store network. Our customers...

  • Page 5
    ... policies across all of our stores. Our training program educates our key store employees about their respective job roles and responsibilities and our standardized common processes in all of our areas of operation, including sales, finance and insurance and parts and service. Our training program...

  • Page 6
    ...including "Maroone" in South Florida; "GO" in Denver, Colorado; "AutoWay" in Tampa, Florida; "Bankston" in Dallas, Texas; "Courtesy" in Orlando, Florida; "Desert" in Las Vegas, Nevada; "Team" in Atlanta, Georgia; "Mike Shad" in Jacksonville, Florida; "Dobbs" in Memphis, Tennessee; "Fox" in Baltimore...

  • Page 7
    ... our customers various vehicle protection products, including extended service contracts, maintenance programs, guaranteed auto protection (known as "GAP," this protection covers the shortfall between a customer's loan balance and insurance payoff in the event of a casualty), credit insurance, lease...

  • Page 8
    ... extensive laws and regulations applicable to new and used motor vehicle dealers, as well as a variety of other laws and regulations. These laws also include federal and state wage-hour, anti-discrimination and other employment practices laws. Our financing activities with customers are subject to...

  • Page 9
    ... and regulations of various state motor vehicle regulatory agencies. The imported automobiles we purchase are subject to United States customs duties and, in the ordinary course of our business we may, from time to time, be subject to claims for duties, penalties, liquidated damages or other charges...

  • Page 10
    ... use of factory-approved replacement parts, expertise with the particular vehicle lines and customer service. In addition to competition for vehicle sales and service, we face competition from a broad range of financial institutions in our finance and insurance and after-market products businesses...

  • Page 11
    ... own a number of registered service marks and trademarks, including, among other marks, AutoNation AutoNation ®. Pursuant to agreements with vehicle manufacturers, we have the right to use and display manufacturers' trademarks, logos and designs at our stores and in our advertising and promotional...

  • Page 12
    ... by Ford, General Motors, DaimlerChrysler, Toyota, Nissan, Honda and BMW. In particular, our General Motors Corporation and Ford Motor Company stores represented over 33% of our new vehicle revenue in 2006. We are subject to a concentration of risk in the event of financial distress, including...

  • Page 13
    ... may materially adversely impact our sales of used vehicles, finance and vehicle protection products, vehicle service and parts and repair services. Our new vehicle sales are impacted by the consumer incentive and marketing programs of vehicle manufacturers. Most vehicle manufacturers from time to...

  • Page 14
    ... on our new vehicle and aftermarket product sales, consolidated results of operations and cash flows. Natural disasters and adverse weather events can disrupt our business. Our stores are concentrated in states and regions in the United States, including primarily Florida, Texas and California, in...

  • Page 15
    ... arranging financing for vehicle purchasers, to require disclosure to consumers of the fees that stores earn to arrange financing and to enact other additional regulations with respect to various aspects of our business, including with respect to the sale of used vehicles and finance and insurance...

  • Page 16
    ... or other encumbrances, to make certain payments (including dividends and repurchases of our shares) and investments, and to sell or otherwise dispose of assets and merge or consolidate with other entities. Our amended credit agreement also requires us to meet certain financial ratios and tests that...

  • Page 17
    ... 17 states: Alabama; Arizona; California; Colorado; Florida; Georgia; Idaho; Illinois; Maryland; Minnesota; North Carolina; Nevada; Ohio; Tennessee; Texas; Virginia and Washington. These facilities consist primarily of automobile showrooms, display lots, service facilities, collision repair centers...

  • Page 18
    ... AutoNation, Inc. during the three months ended December 31, 2006. See Note 9 of our Notes to Unaudited Consolidated Financial Statements for additional information regarding our stock repurchase programs. Total Number of Shares Purghased as Part of Publigly Tnnounged Programs Maximum Dollar Value...

  • Page 19
    ... Stock Index and (ii) the Standard & Poor's Specialty Stores Index. We have created these comparisons using data supplied by Research Data Group,...stock and each index on December 31, 2001. Cumulative Total Return 12/01 12/02 12/03 12/04 12/05 12/06 AutoNation Inc. S&P 500 S&P Specialty Stores...

  • Page 20
    ... "Management's Discussion and Analysis of Financial Condition and Results of Operations," our Consolidated Financial Statements and Notes thereto and other financial information included elsewhere in this Form 10-K. (In millions, exgept per share data) 2006 Ts of and for the Years Ended Degember...

  • Page 21
    .... 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...

  • Page 22
    ... we may incur. Goodwill consists of the cost of acquired businesses in excess of the fair value of net assets acquired, using the purchase method of accounting. Acquired intangible assets are separately recognized if the benefit of the intangible asset is obtained through contractual or other legal...

  • Page 23
    ... of the sales of new and used vehicles and commissions from related finance and insurance products and sales of parts and services. We recognize revenue in the period in which products are sold or services are provided. We recognize vehicle and finance and insurance revenue when a sales contract has...

  • Page 24
    ... Gross profit: New vehicle Used vehicle $ Parts and service Finance and insurance Other Total gross profit Selling, general & administrative...losses), net Income from continuing operations before income taxes Retail vehicle unit sales: New vehicle Used vehicle 817.2 $ 816.7 $ 409.1 418.8 1,141.4 ...

  • Page 25
    ... Parts and service Finance and insurance, net Other Total Gross profit mix percentages: New vehicle Used vehicle Parts and service Finance and insurance Other Total Operating items as a percentage of revenue: Gross profit: New vehicle Used vehicle - retail Parts and service Total Selling, general...

  • Page 26
    ... vehicle Used vehicle Parts and service Finance and insurance Other 31.8 (1.6) (2.8) 2.4 5.3 1.2 Total gross profit Retail vehicle unit sales: New vehicle Used vehicle $ 35.4 (13,417) Total Revenue per vehicle retailed: New vehicle Used vehicle Gross profit per vehicle retailed: New vehicle...

  • Page 27
    ...net inventory carrying benefit (cost), consisting of floorplan interest expense net of floorplan assistance earned (amounts received from manufacturers specifically to support store financing of inventory). Floorplan assistance is accounted for as a component of new vehicle gross profit. Years Ended...

  • Page 28
    ... in July 2005 with similar programs by Ford and Chrysler. Although these programs helped drive unit volume during 2005, a challenging United States automotive retail environment and the effects of Hurricane Wilma on our Florida stores negatively impacted new vehicle unit volume during the fourth...

  • Page 29
    ... United States' automotive retail environment and the effects of Hurricane Wilma on our Florida stores during the fourth quarter of 2005. Gross profit and gross profit as a percentage of revenue increased as a result of better inventory management focused on optimizing used vehicle inventory supply...

  • Page 30
    ...from vehicle repairs paid directly by the customers or via reimbursement from manufacturers and others under warranty programs. Reported parts and service revenue and gross profit benefited from the impact of acquisitions when compared to same store performance. Same store parts and service revenue...

  • Page 31
    ... of acquisitions when compared to same store performance. During 2006, same store finance and insurance revenue and gross profit benefited from increased retrospective commissions received on extended service contracts, as well as higher new and used vehicle prices and increased premium luxury...

  • Page 32
    ... costs related to Hurricane Wilma which impacted our Florida stores during the fourth quarter of 2005. Improvements are due to our continued efforts to leverage our cost structure, particularly in the areas of compensation and other selling, general and administrative expenses, partially offset by...

  • Page 33
    ... notes and term loan facility, together with cash on hand and borrowings of $80.0 million under the amended revolving credit facility, were used to: (1) purchase 50 million shares of our common stock at $23 per share for an aggregate purchase price of $1.15 billion pursuant to our equity 32

  • Page 34
    ...to finance the purchase of specific vehicle inventories with non-trade lenders. All the floorplan facilities are at LIBOR-based rates of interest. Secured floorplan facilities are used to finance new vehicle inventories and the amounts outstanding thereunder are due on demand, but are generally paid...

  • Page 35
    ... finance programs and is expected to continue to provide GM dealers and their customers with the same financial products and services under the same arrangements with us as before the sale. However, as a result of this sale, we have treated new vehicles financed after the change in GMAC ownership...

  • Page 36
    ... in Note 15, Acquisitions, of Notes to Consolidated Financial Statements. Cash Flows from Financing Activities Cash flows from financing activities primarily include treasury stock purchases, stock option exercises, debt activity and changes in vehicle floorplan payable-non-trade. In April 2006...

  • Page 37
    ... Our operations generally experience higher volumes of vehicle sales and service in the second and third quarters of each year due in part to consumer buying trends and the introduction of new vehicle models. Also, demand for vehicles and light trucks is generally lower during the winter months than...

  • Page 38
    ...Payment," a revision of SFAS No. 123. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107) regarding its interpretation of SFAS No. 123R. The standard requires companies to expense the grant-date fair value of stock options and other equity-based compensation issued to employees...

  • Page 39
    ... profit margins that we can achieve on our sales of new vehicles, all of which are very difficult to predict. • Our new vehicle sales are impacted by the consumer incentive and marketing programs of vehicle manufacturers. • Natural disasters and adverse weather events can disrupt our business...

  • Page 40
    ..., and had a fair value of $363.4 million and $398.5 million, respectively. Interest rate derivatives may be used to adjust interest rate exposures when appropriate based upon market conditions. Interest Rate Risk At December 31, 2006 and 2005, we had variable rate vehicle floorplan payable totaling...

  • Page 41
    ... Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDTTED FINTNCITL STTTEMENTS Page Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2006 and 2005 Consolidated Income Statements for the Years Ended December 31, 2006...

  • Page 42
    ... the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and...

  • Page 43
    ... is to express an opinion on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those...

  • Page 44
    ... Inventory Other current assets Total Current Assets $ PROPERTY AND EQUIPMENT, NET GOODWILL, NET OTHER INTANGIBLE ASSETS, NET OTHER ASSETS Total Assets LITBILITIES TND SHTREHOLDERS' EQUITY CURRENT LIABILITIES: Vehicle floorplan payable - trade Vehicle floorplan payable - non-trade Accounts payable...

  • Page 45
    ....7 3,718.5 1,330.2 35.6 15,533.0 3,896.2 1,408.5 33.4 TOTAL COST OF SALES Gross Profit: New vehicle Used vehicle Parts and service Finance and insurance Other TOTAL GROSS PROFIT Selling, general & administrative expenses Depreciation and amortization Other expenses (income), net OPERATING INCOME...

  • Page 46
    ...Years Ended Degember 31, 2006, 2005 and 2004 (In millions, exgept share data) Tggumulated Other CompreCommon Stogk Shares Tmount Tdditional Paid... $ 314.7 Purchases of treasury stock Treasury stock cancellation Other Stock option expense Exercise of stock options, including income tax benefit of $18...

  • Page 47
    ... 9% senior unsecured notes Net proceeds (payments) of vehicle floor plan-non-trade Payments of mortgage facilities Proceeds (payments) of notes payable and long-term debt Proceeds from the exercise of stock options Tax benefit from stock options Other Net cash used in continuing operations Net cash...

  • Page 48
    ... 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. The Company also arranges financing for vehicle purchases through third-party...

  • Page 49
    ... the fair value. Fair values generally are estimated using prices for similar assets and/or discounted cash flows. Goodwill and Other Intangible Assets, net The Company accounts for acquisitions using the purchase method of accounting. Goodwill consists of the cost of acquired businesses in excess...

  • Page 50
    ... Other Current Liabilities consist of various items payable within one year including, among other items, accruals for payroll and benefits, sales taxes, finance and insurance chargeback liabilities, deferred revenue, accrued expenses, and customer deposits. Other Current Liabilities also includes...

  • Page 51
    ...Consolidated Financial Statements for prior periods have not been restated to reflect the adoption of SFAS No. 123R. Prior to January 1, 2006, the Company applied APB 25 in accounting for stock-based employee compensation arrangements whereby compensation cost related to stock options was generally...

  • Page 52
    ... following types of products: extended warranties, guaranteed auto protection ("GAP," which covers the shortfall between loan balance and insurance payoff), credit insurance, lease "wear and tear" insurance and theft protection products. The products the Company offers include products that are sold...

  • Page 53
    ... method for recording and reporting these sales taxes in the Company's Consolidated Financial Statements as the Company's policy is to exclude all ...Accounting for Income Taxes" (FIN 48) to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting...

  • Page 54
    ... programs and is expected to continue to provide GM dealers and their customers with the same financial products and services under the same arrangements with the Company as before the sale. As a result of this sale, the Company has treated new vehicles financed after the change in GMAC ownership...

  • Page 55
    ...6. INSURTNCE Under self-insurance programs, the Company retains various levels of aggregate loss limits, per claim deductibles and claims handling expenses as part of its various insurance programs, including property and casualty, employee medical benefits and workers' compensation. Costs in excess...

  • Page 56
    ... 15, 2012 at 100% of principal. In connection with the issuance of the new senior unsecured notes, the Company amended its existing credit agreement to provide: (1) a $675.0 million revolving credit facility that provides for various interest rates on borrowings generally at LIBOR plus .80%, and...

  • Page 57
    ... credit agreement, the indenture for the Company's new senior unsecured notes, vehicle floorplan payable facilities and mortgage facility have cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness of the Company. In connection with...

  • Page 58
    ... brought by governmental authorities. Many of the Company's Texas dealership subsidiaries had been named in three class action lawsuits brought against the Texas Automobile Dealers Association ("TADA") and approximately 700 new vehicle stores in Texas that are members of the TADA. The three actions...

  • Page 59
    ... literature. Expenses under real property, equipment and software leases were $60.7 million, $59.8 million and $56.7 million for the years ended December 31, 2006, 2005 and 2004, respectively. The leases require payment of real estate taxes, insurance and common area maintenance in addition to...

  • Page 60
    ... follows: Year Ended Degember 31: Shares Repurghased Tggregate Purghase Prige 2006 2005 2004 61.2 11.8 14.1 $ $ $ 1,380.6 237.1 236.8 As discussed in Note 7 to the Notes to the Consolidated Financial Statements, the Company purchased 50 million shares of its common stock at $23 per share for...

  • Page 61
    ... expense (included in Selling, General and Administrative Expenses in the 2006 Consolidated Income Statement) attributable to stock options granted or vested subsequent to December 31, 2005. The Company uses the Black-Scholes valuation model to determine compensation expense and amortizes...

  • Page 62
    ..., which is expected to be recognized over a period of four years. The total fair value of shares vested during 2006 was $14.7 million. Prior to the adoption of SFAS No. 123R, the Company reported all tax benefits resulting from the exercise of common stock options as operating cash flows in the...

  • Page 63
    ... in the period management determines it is more likely than not that deferred tax assets will or will not be realized. Certain decreases to valuation allowances are offset against intangible assets associated with business acquisitions accounted for under the purchase method of accounting. In March...

  • Page 64
    ... As discussed in Note 7 of the Notes to Consolidated Financial Statements, in April 2006 the Company repurchased 50 million shares of its common stock pursuant to an equity tender offer. As of December 31, 2006, the Company had employee stock options outstanding of 22.5 million of which 5.5 million...

  • Page 65
    ... buyer. Cash received from business divestitures is net of vehicle floorplan payable assumed by the buyer. 14. OTHER COMPREHENSIVE INCOME (LOSS) The changes in the components of other comprehensive income (loss), net of income taxes, are as follows for the years ended December 31: 2006 Pre-Tax...

  • Page 66
    ... Inventory Property and equipment Goodwill Franchise rights - indefinite lived Other intangibles subject to amortization Other assets Vehicle floorplan payable-trade Vehicle floorplan payable-non-trade Other liabilities $ Cash paid in deferred purchase price Cash used in business acquisitions...

  • Page 67
    ... were used by the Company in estimating fair value disclosures for financial instruments: • Cash and cash equivalents, trade and manufacturer receivables, other current assets, vehicle floorplan payable, accounts payable, other current liabilities and variable rate debt: The amounts reported in...

  • Page 68
    ...of credit risk. 20. QUTRTERLY INFORMTTION (UNTUDITED) The Company's operations generally experience higher volumes of vehicle sales and service in the second and third quarters of each year in part due to consumer buying trends and the introduction of new vehicle models. Also, demand for cars and...

  • Page 69
    ... STTTEMENTS - (Continued) The following table sets forth, for the periods indicated, the high and low prices per share of the Company's Common Stock as reported by the New York Stock Exchange: High Low 2006 Fourth Quarter Third Quarter Second Quarter First Quarter 2005 $ 21.52 $ 21.68 $ 22...

  • Page 70
    ... our internal control over financial reporting. The initial or "core" phase consists of implementing a standard data processing platform in the store and centralizing to a shared services center certain key accounting processes (non-inventory accounts payable, bank account reconciliations and...

  • Page 71
    ...AutoNation, Inc. By: /s/ Michael J. Jackson Mighael J. Jagkson Chairman of the Board and Chief Exegutive Offiger February 27, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934, this report...Vice President - Corporate Controller (Principal Accounting Officer) Director February ...

  • Page 72
    Table of Contents Signature T i t l e Date /s/ Michael E. Maroone Michael E. Maroone Director February 27, 2007 /s/ Carlos A. Migoya Carlos A. Migoya /s/ Irene B. Rosenfeld Irene B. Rosenfeld Director February 27, 2007 Director February 27, 2007 71

  • Page 73
    ...as amended to date (incorporated by reference to Exhibit 10.2 to AutoNation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000). AutoNation Enterprises Incorporated Amended and Restated 1995 Employee Stock Option Plan, as amended to date (incorporated by reference to Exhibit 10.3 to...

  • Page 74
    ... 1995 Non-Employee Director Stock Option Plan (incorporated by reference to Exhibit 10.1 of AutoNation's Annual Report on Form 10-Q for the quarter ended September 30, 2006 filed on October 27, 2006). AutoNation, Inc. 2007 Non-Employee Director Stock Option Plan (adopted by AutoNation's Board of...

  • Page 75
    ...this Supplemental Indenture has been duly authorized by all necessary corporate action on the part of the Company and the Guarantors. NOW, THEREFORE, the Company, the Guarantors and the Trustee agree as follows for the equal and ratable benefit of the Holders of the Notes as follows: 1. Capitalized...

  • Page 76
    ...Payment Restrictions Affecting Restricted Subsidiaries Limitation on Indebtedness Limitation on Transactions with Affiliates Limitation on Liens Limitation on Unrestricted Subsidiaries Corporate Existence Limitations on Guarantees... and any definitions used exclusively within such ... the Company and ...

  • Page 77
    ...effective and binding on the Company, the Guarantors and the Trustee upon the execution and delivery by the parties to ...New York Law to Govern. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE. 9. Counterparts . The parties may sign any number...

  • Page 78
    ... Supplemental Indenture to be duly executed and attested, all as of the date first above written. AUTONATION, INC. By: /s/ Name: Gordon E. Devens Title: Vice President, Associate General Counsel WELLS FARGO BANK, N.A., AS TRUSTEE By: /s/ Name: Title: GUARANTORS (listed on the following pages) By...

  • Page 79
    ... Corpus Christi T. Imports GP, LLC AN Corpus Christi T. Imports, LP AN County Line Ford, Inc. AN Dealership Holding Corp. AN East Central Region Management, LLC AN Florida Region Management, LLC AN Fremont Luxury Imports, Inc. AN Imports of Henderson, LLC AN Imports of Lithia Springs, LLC AN Imports...

  • Page 80
    ... Agency, Inc. Auto Car, Inc. Auto Holding Corp. Auto Mission Ltd. Auto West, Inc. AutoNation Benefits Company, Inc. AutoNation Corporate Management, LLC AutoNation Dodge of Pembroke Pines, Inc. AutoNation Enterprises Incorporated AutoNation Financial Services Corp. AutoNation Fort Worth Motors, Ltd...

  • Page 81
    ...-Whitehead Ford, Inc. Corporate Properties Holding, Inc. Costa Mesa Cars, Inc. Courtesy Auto Group, Inc. Courtesy Broadway, LLC Covington Pike Motors, Inc. CT Intercontinental GP, LLC CT Intercontinental, Ltd. CT Motors, Inc. D/L Motor Company Deal Dodge of Des Plaines, Inc. Dealership Properties...

  • Page 82
    ... Corporation Desert Buick-GMC Management Group, Inc. Desert Buick-GMC Trucks, L.L.C. Desert Chrysler-Plymouth, Inc. Desert Dodge, Inc. Desert GMC-East, Inc. Desert GMC, LLC Desert Lincoln-Mercury, Inc. Dobbs Brothers Buick-Pontiac, Inc. Dobbs Ford of Memphis, Inc. Dobbs Ford, Inc. Dobbs Mobile Bay...

  • Page 83
    ..., Inc. Lew Webb's Ford, Inc. Lew Webb's Irvine Nissan, Inc. Lewisville Imports GP, LLC Lewisville Imports, Ltd. Lexus of Cerritos Limited Partnership Lot 4 Real Estate Holdings, LLC MacHoward Leasing MacPherson Enterprises, Inc. Magic Acquisition Corp. Marks Family Dealerships, Inc. Marks Transport...

  • Page 84
    ...LLC Mullinax Used Cars, Inc. Naperville Imports, Inc. Newport Beach Cars, LLC Nichols Ford, Ltd. Nichols GP, LLC Nissan of Brandon, Inc. Northpoint Chevrolet, LLC Northpoint Ford, Inc. Northwest Financial Group, Inc. Ontario Dodge, Inc. Orange County Automotive Imports, LLC Payton-Wright Ford Sales...

  • Page 85
    ... Motor Company Steve Moore Chevrolet Delray, LLC Steve Moore Chevrolet, LLC Steve Moore's Buy-Right Auto Center, Inc. Steve Rayman Pontiac-Buick-GMC-Truck, LLC Stevens Creek Motors, Inc. Sunrise Nissan of Jacksonville, Inc. Sunrise Nissan of Orange Park, Inc. Sunset Pontiac-GMC Truck South, Inc...

  • Page 86
    ... Park J. Imports, Inc. Tinley Park V. Imports, Inc. Torrance Nissan, LLC Tousley Ford, Inc. Town & Country Chrysler Jeep, Inc. Toyota Cerritos Limited Partnership Triangle Corporation T-West Sales & Service, Inc. Valencia B. Imports, Inc. Valencia Dodge Valencia H. Imports, Inc. Valencia Lincoln...

  • Page 87
    Exhibit 10.4 AUTONATION, INC. 1997 EMPLOYEE STOCK OPTION PLAN (As Amended and Restated on February 5, 2007) AutoNation, Inc. (the "Company") hereby adopts this AutoNation, Inc. 1997 Employee Stock Option Plan (the "Plan"), the terms of which shall be as follows: 1. PURPOSE The Plan is intended ...

  • Page 88
    ... the maximum number of shares of Stock available for delivery. 4. ELIGIBILITY (a) EMPLOYEES. Options may be granted under the Plan to any employee of the Company, a Subsidiary or any other entity of which on the relevant date at least a majority of the securities or other ownership interest having...

  • Page 89
    ... or termination of the Plan. The maximum number of shares of Stock subject to Options that may be granted during any calendar year under the Plan to any executive officer or other employee of the Company or any Subsidiary or Affiliate whose compensation is or may be subject to Code §162(m) is 5,000...

  • Page 90
    ...comply with all terms of the Plan. 9. OPTION PRICE The purchase price of each share of the Stock subject to an Option shall be not less than 100 percent of the fair market value of a share of the Stock which shall mean the closing price of a share of the Stock on the trading day prior to the date...

  • Page 91
    ... that is exercisable hereunder may be exercised by delivery to the Company on any business day, at its principal office, addressed to the attention of the Stock Option Administrator, of written notice of exercise, which notice shall specify the number of shares with respect to which the Option is...

  • Page 92
    ... Company to pay, in cancellation of such Option, an amount equal to the product of (i) the excess of (x) the fair market value per share of the Stock (which shall mean the closing price as of the trading day preceding the day of the Change in Control) over (y) the Option Price times (ii) the number...

  • Page 93
    ... 12. TERMINATION OF EMPLOYMENT OR SERVICE (a) GENERAL. Except as otherwise provided in Section 12 (b) or 13 below or as may otherwise be provided by the Board, upon the termination of employment or other service of an Optionee with the Company, a Subsidiary, a spin-off corporation or an Affiliate...

  • Page 94
    ... 14. USE OF PROCEEDS The proceeds received by the Company from the sale of Stock pursuant to Options granted under the Plan shall constitute general funds of the Company. 15. REQUIREMENTS OF LAW (a) VIOLATIONS OF LAW. The Company shall not be required to sell or issue any shares of Stock under...

  • Page 95
    ... cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares of Stock, or other similar occurrence. In the event of such a corporate transaction, the Board shall, in such manner as the Board deems equitable, adjust (i) the number 9

  • Page 96
    ... that such event is proposed. (c) NO LIMITATIONS ON CORPORATION. The grant of an Option pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to...

  • Page 97
    ... in its discretion determines desirable, including, without limitation, the granting of stock options or stock appreciation rights otherwise than under the Plan. This Plan was duly adopted and approved by the Board of Directors of the Company effective as of the 2nd day of January, 1997, subject to...

  • Page 98
    Exhibit 10.5 AUTONATION, INC. 1998 EMPLOYEE STOCK OPTION PLAN (As Amended and Restated on February 5, 2007) AutoNation, Inc. (the "Company") hereby adopts this AutoNation, Inc. 1998 Employee Stock Option Plan (the "Plan"), the terms of which shall be as follows: 1. PURPOSE The Plan is intended to ...

  • Page 99
    ... or termination of the Plan. The maximum number of shares of Stock subject to Options that may be granted during any calendar year under the Plan to any executive officer or other employee of the Company or any Subsidiary or Affiliate whose compensation is or may be subject to Code §162(m) is 5,000...

  • Page 100
    .... Options may be granted to independent contractors performing services for the Company or any Subsidiary or Affiliate as determined by the Board from time to time on the basis of their importance to the business of the Company or such Subsidiary or Affiliate. Independent contractors shall...

  • Page 101
    ... comply with all terms of the Plan. 9. OPTION PRICE The purchase price of each share of the Stock subject to an Option shall be not less than 100 percent of the fair market value of a share of the Stock which shall mean the closing price of a share of the Stock on the trading day prior to the date...

  • Page 102
    ... that is exercisable hereunder may be exercised by delivery to the Company on any business day, at its principal office, addressed to the attention of the Stock Option Administrator, of written notice of exercise, which notice shall specify the number of shares with respect to which the Option is...

  • Page 103
    ... Company to pay, in cancellation of such Option, an amount equal to the product of (i) the excess of (x) the fair market value per share of the Stock (which shall mean the closing price as of the trading day preceding the day of the Change in Control) over (y) the Option Price times (ii) the number...

  • Page 104
    .... 12. TERMINATION OF EMPLOYMENT OR SERVICE (a) GENERAL. Except as otherwise provided in Section 12(b) or 13 below or as may otherwise be provided by the Board, upon the termination of employment or other service of an Optionee with the Company, a Subsidiary, a spin-off corporation or an Affiliate...

  • Page 105
    ... of a corporation or other entity that acquires such assets and engages in such trade or business. (c) Whether a leave of absence or leave on military or government service shall constitute a termination of employment of service for purposes of the Plan shall be determined by the Board, which...

  • Page 106
    14. USE OF PROCEEDS The proceeds received by the Company from the sale of Stock pursuant to Options granted under the Plan shall constitute general funds of the Company. 15. REQUIREMENTS OF LAW (a) VIOLATIONS OF LAW. The Company shall not be required to sell or issue any shares of Stock under any ...

  • Page 107
    ... that such event is proposed. (c) NO LIMITATIONS ON CORPORATION. The grant of an Option pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to...

  • Page 108
    ...nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations upon the right and authority of the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes...

  • Page 109
    ... promote the interests of AutoNation, Inc., a Delaware corporation (the "Company"), by offering non-employee members of the Board of Directors of the Company (individually, a "Non-Employee Director," and collectively, "Non-Employee Directors") the opportunity to participate in a stock option program...

  • Page 110
    ... who was not granted an option to purchase at least 50,000 shares of Common Stock under the Company's 1995 Amended and Restated Non-Employee Director Stock Option Plan (the "1995 Plan") upon such individual's prior election or appointment as a Non-Employee Director shall be automatically granted, on...

  • Page 111
    ... of the ownership of capital stock, by contract or otherwise), or the ability to elect or cause the election of directors consisting at the time of such election of a majority of the Board of Directors of the Company. As used herein, "person" shall mean any person, corporation, partnership, joint...

  • Page 112
    ... purposes of this Plan, "Retirement" shall mean termination of Board service as a result of a Non-Employee Director's retirement or resignation from the Board after having reached age 55 and having provided at least six (6) years of Board service to the Company. 10. TRANSFERABILITY OF OPTIONS . No...

  • Page 113
    ... Act of 1934, as amended (the "1934 Act"), or any other applicable law. 13. CASH PROCEEDS . Any cash proceeds received by the Company from the sale of shares pursuant to the Options granted under this Plan shall be used for general corporate purposes. 14. NO IMPAIRMENT OF RIGHTS. Nothing in this...

  • Page 114
    ...be appointed by the Board to administer the Plan in accordance with Section 3 of the Plan. (e) "Common Stock" shall mean the common stock of the Company, par value $.01 per share. (f) "Company" shall mean AutoNation, Inc., a Delaware corporation, or any successor corporation. (g) "Disability" shall...

  • Page 115
    ... the Plan, extraordinary items shall be defined as (1) any profit or loss attributable to acquisitions or dispositions of stock or assets, (2) any changes in accounting standards or treatments that may be required or permitted by the Financial Accounting Standards Board or adopted by the Company or...

  • Page 116
    ... securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (o) "Plan" shall mean this AutoNation, Inc. Senior Executive Incentive...

  • Page 117
    ... have been paid, unless earlier terminated as provided below. 7. General Provisions . (a) Compliance with Legal Requirements . The Plan and the granting and payment of Awards, and the other obligations of the Company under the Plan shall be subject to all applicable federal and state laws, rules...

  • Page 118
    ... the Participant or such other person to pay to the Company prior to delivery of such payment, an amount sufficient to satisfy any federal, state, local or other withholding tax requirements related thereto. (e) Amendment and Termination of the Plan . The Board or the Committee may at any time...

  • Page 119
    ... payable to the Participant's beneficiary pursuant to Section 7(b) , the executor or administrator of the Participant's estate shall be deemed to be the grantee's beneficiary. (l) Interpretation . The Plan is designed and intended to comply, to the extent applicable, with Section 162(m) of the Code...

  • Page 120
    ... Toyota Mercedes-Benz of Pembroke Pines BMW Encinitas Mercedes-Benz of Sarasota BMW of Dallas; MINI of Dallas Maroone Volkswagen Ford of North Scottsdale AutoNation Shared Resource Center Go Courtesy Ford Joe Madden Ford Dobbs Nissan Ford of Bellevue Appleway Chevrolet; Appleway Mazda-Subaru...

  • Page 121
    Mitsubishi; Appleway Toyota; Appleway Volkswagen-Audi

  • Page 122
    ... Fort Worth Champion Nissan Team Scion; Team Toyota Courtesy Honda Lexus of Palm Beach Courtesy Toyota Maroone Nissan of Kendall Maroone Volvo Bankston Chrysler Jeep Dodge of Frisco Bankston Ford of Frisco Bankston Nissan Irving Bankston Nissan Lewisville Lexus of Cerritos California Colorado...

  • Page 123

  • Page 124
    ... AutoNation Collision Repair Center Go Ford West Courtesy Chevrolet at the Airport Team Ford of Marietta Coastal Cadillac Mercedes-Benz of Orlando; Porsche of North Orlando Cook Whitehead Ford; Cook Whitehead Ford Collision Panama City Power Honda Costa Mesa Courtesy Buick; Courtesy Pontiac GMC...

  • Page 125
    Eastgate Ford, Inc. Ed Mullinax Ford, LLC Ed Mullinax Ford Ohio Delaware

  • Page 126
    ... Florida Florida Delaware Power Toyota Buena Park California Delaware Georgia Washington Fox Chevrolet Fox Mitsubishi Fox Buick-Pontiac-GMC Maroone Nissan of Ft. Lauderdale Power Volvo South Bay Gene Evans Team Ford Team Nissan of Marietta Treadwell Honda Lexus of Clearwater; Lexus of Tampa Bay...

  • Page 127

  • Page 128
    ... Hwy 6 Mike Shad Chrysler Jeep at Cassat Mike Shad Ford of Orange Park Miller-Sutherlin Automotive Power Toyota Cerritos Mullinax Ford East Mullinax Ford North Canton Maroone Ford of Margate Mullinax Used Cars Mercedes-Benz of Naperville Newport Auto Center Nichols Ford Nichols GP, LLC Nissan of...

  • Page 129

  • Page 130
    ... Colorado Delaware Delaware Payton-Wright Ford Power Acura South Bay Power Ford Torrance Infiniti South Bay Jaguar South Bay AutoNation Fleet Direct Power Scion Tempe; Power Toyota Tempe Power Pontiac Buick GMC Scottsdale Power Chrysler Jeep Scottsdale Power Hyundai Isuzu; Power Subaru Plains...

  • Page 131

  • Page 132
    ...-Buick-GMC AutoWest Acura of Stevens Creek Mike Shad Nissan of Jacksonville Mike Shad Nissan of Orange Park AutoWay Pontiac GMC-North Superior Nissan Team Chrysler Jeep Team Honda AutoWay Toyota Team Nissan of Lithia Springs Team Dodge of Union City Land Rover Encino Texan Ford Champion Ford Katy...

  • Page 133

  • Page 134
    ... Warranty Co. York Enterprises Holding, LLC Bankston Lincoln-Mercury Bankston Nissan Dallas Maroone Dodge Delray Maroone Ford of Delray Maroone Lincoln-Mercury of North Palm Beach Maroone Nissan of Delray West Side Honda Westgate Chevrolet Laurel Audi of Westmont Laurel BMW of Westmont Mercedes...

  • Page 135
    ...report on Form 10-K of AutoNation, Inc. Our report on the consolidated financial statements refers to the adoption of Statement of Financial Accounting Standard No. 123 (revised 2004), Share-Based Payment...81888, and 333130019). Februarc 27, 2007 Fort Lauderdale, Florida Certified Public Accountants

  • Page 136
    ...to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 27, 2007 /s/ Michael J. Jackson Michael...

  • Page 137
    ..., process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 27, 2007 /s/ Michael J. Short Michael J. Short...

  • Page 138
    ...ACT OF 2002 In connection with the Annual Report on Form 10-K of AutoNation, Inc. (the "Company") for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael J. JacKson, Chief Executive Officer of the Company, hereby certify...

  • Page 139
    ... OF 2002 In connection with the Annual Report on Form 10-K of AutoNation, Inc. (the "Company") for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael J. Short, ExecutiKe Vice President and Chief Financial Officer of the...