AutoNation 2006 Annual Report Download - page 50

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Table of Contents
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Other Assets
Other assets consist of various items, net of applicable amortization, including, among other items, service loaner and rental vehicle
inventory, net, investments in marketable securities, property held for sale, notes receivable, restricted assets and debt issuance costs.
Debt issuance costs are amortized to Other Interest Expense using the effective interest method through maturity.
At December 31, 2006 and 2005, the Company had $18.7 million and $22.0 million, respectively, of property held for sale.
Other Current Liabilities
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 other tax accruals, totaling $58.7 million and $54.5 million at December 31, 2006 and 2005,
respectively. See Note 11, Income Taxes, of Notes to Consolidated Financial Statements for additional discussion of income taxes.
Employee Savings Plan
The Company offers a 401(k) plan to all of its employees and provides a matching contribution to certain employees that participate.
The matching contribution expensed by the Company totaled $5.3 million, $5.8 million and $11.0 million in 2006, 2005 and 2004,
respectively.
In 2005, the Company established a deferred compensation plan (the “Plan”) to provide certain employees with the opportunity to
accumulate assets for retirement on a tax-deferred basis commencing in 2006. Participants in the Plan are allowed to defer a portion of
their compensation and are 100% vested in their respective deferrals and earnings. Participants may choose from a variety of investment
options, which determine their earnings credits. The Company provides a matching contribution to participants in the Plan and may also
make discretionary contributions. The total contributions expensed by the Company totaled $3.3 million in 2006. Matching contributions
vest over two years from the effective date of the employer’s matching contribution and discretionary contributions vest three years after
the effective date of the discretionary contribution. Certain participants in the Plan are not eligible for matching contributions to the
Company’s 401(k) plan. The balances due to participants in the Plan were $10.2 million as of December 31, 2006, and are included in
Other Liabilities in the accompanying Consolidated Balance Sheet.
Stock Options
The Company has various stock option plans under which options to purchase shares of common stock may be granted to key
employees and directors of the Company. Upon exercise, shares of common stock are issued from the Company’s treasury stock.
Options granted under the plans are non-qualified and are granted at a price equal to or above the closing market price of the common
stock on the trading day immediately prior to the date of grant. Generally, options granted will have a term of 10 years from the date of
grant, and will vest in increments of 25% per year over a four-year period on the yearly anniversary of the grant date.
In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard
No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”). 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 and is effective for annual periods beginning after June 15, 2005. As of
January 1, 2006, the Company adopted SFAS No. 123R and related interpretive guidance issued by the FASB and the SEC using the
modified prospective transition method. Under the modified prospective transition method, SFAS No. 123R applies to new awards and to
awards modified, repurchased or cancelled after the required effective
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