AutoNation 2006 Annual Report Download - page 35

Table of Contents
Cash Flows from Operating Activities
Cash provided by operating activities was $299.1 million, $579.8 million and $562.0 million for the years ended December 31,
2006, 2005 and 2004, respectively.
Cash flows from operating activities include net income adjusted for non-cash items and the effects of changes in working capital
including changes in vehicle floorplan payable-trade (vehicle floorplan payables with the automotive manufacturers’ captive finance
subsidiary for the related franchise), which directly relates to changes in new vehicle inventory for those franchises. On November 30,
2006, General Motors (“GM”) completed the sale of a majority stake in General Motors Acceptance Corporation (“GMAC”), which was
GM’s wholly-owned captive finance subsidiary prior to this transaction. GMAC will remain the exclusive provider of GM-sponsored auto
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 control (totaling $139.3 million at December 31, 2006) as vehicle floorplan-non-trade with related changes as
financing cash flows. Vehicles financed by GMAC prior to this transaction (totaling $281.2 million at December 31, 2006) continue to be
classified as floorplan-trade with related changes as operating cash flows.
During 2007, as we sell the vehicles financed by GMAC, the repayment of the $281.2 million classified as floorplan-trade at
December 31, 2006 will be reflected as a use of cash flows from operating activities. Vehicle purchases financed through GMAC in 2007
will be classified as floorplan-non-trade and reflected as sources of cash flows from financing activities. Payments to GMAC for
purchases classified as floorplan-non-trade will be reflected as uses of cash flows from financing activities.
In 2006, we made estimated state tax and federal tax payments totaling $278.3 million, including approximately $100 million related
to provisions for the third and fourth quarter of 2005, payment for which had been deferred as allowed for filers impacted by hurricanes
in 2004. In March 2003, we entered into a settlement agreement with the IRS with respect to the tax treatment of certain transactions we
entered into in 1997 and 1999. In 2004, we prepaid the remaining balance due related to the IRS settlement totaling $128.9 million,
including accrued interest. Cash used in discontinued operations was $4.5 million, $3.3 million and $23.4 million during 2006, 2005
and 2004, respectively. A portion of the cash used in 2006, 2005 and 2004 relates to payments made in conjunction with property leases
assumed from ANC Rental.
Cash Flows from Investing Activities
Cash flows from investing activities consist primarily of cash used in capital additions, activity from business acquisitions,
property dispositions, purchases and sales of investments and other transactions as further described below.
Capital expenditures, excluding property operating lease buy-outs, were $170.2 million, $130.9 million and $132.4 million during
the years ended December 31, 2006, 2005 and 2004, respectively. During 2006, we spent $30.0 million on land purchases for future
operating sites, which is included in the 2006 capital expenditures. We will make facility and infrastructure upgrades and improvements
from time to time as we identify projects that are required to maintain our current business or that we expect to provide us with acceptable
rates of return. We expect 2007 capital expenditures of approximately $140.0 million, excluding any acquisition-related spending, land
purchased for future sites or lease buy-outs.
Property operating lease buy-outs were $5.9 million, $10.3 million and $77.7 million for the years ended December 31, 2006, 2005
and 2004, respectively. We continue to analyze certain of our higher cost operating leases and evaluate alternatives in order to lower the
effective financing costs.
Proceeds from the disposal of property held for sale were $6.5 million, $33.4 million and $37.9 million during the years ended
December 31, 2006, 2005 and 2004, respectively. These amounts are primarily from the sales of stores and other properties held for sale.
Cash received from business divestitures, net of cash relinquished, totaled $24.0 million, $55.0 million and $19.4 million during the
years ended December 31, 2006, 2005 and 2004, respectively.
Cash used in business acquisitions, net of cash acquired, was $166.7 million, $15.9 million and $197.9 million for the years
ended December 31, 2006, 2005 and 2004, respectively. During 2006 and 2005, we acquired five and two
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