AutoNation 2003 Annual Report Download - page 62

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Table of Contents
AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
3. INVENTORY AND FLOORPLAN NOTES PAYABLE
The components of inventory at December 31 are as follows:
2003 2002
New vehicles $2,479.4 $2,182.4
Used vehicles 299.4 277.1
Parts, accessories and other 140.5 138.9
$2,919.3 $2,598.4
At December 31, 2003 and 2002, floorplan notes payable totaled $2.8 billion and $2.3 billion, respectively. Floorplan notes payable reflect
amounts borrowed to finance the purchase of specific vehicle inventories at LIBOR-based rates of interest (2.6% and 3.0% weighted average
for 2003 and 2002, respectively) primarily with manufacturers’ captive finance subsidiaries, and are generally due when the related vehicles
are sold. Floorplan facilities are primarily collaterialized by new vehicle inventories and related receivables and contain certain financial and
operational covenants. At December 31, 2003, the Company was in compliance with such covenants in all material respects. At
December 31, 2003, aggregate capacity under the floorplan credit facilities was approximately $3.8 billion, of which $2.8 billion was
outstanding at December 31, 2003.
4. RESTRICTED ASSETS AND REINSURANCE
The Company has restricted assets primarily in trust accounts in accordance with the terms and conditions of certain reinsurance
agreements to secure the payments of outstanding losses and loss adjustment expenses relating to its captive insurance subsidiaries.
A summary of restricted assets at December 31 is as follows:
2003 2002
Restricted cash $40.3 $100.8
Restricted investments 25.5 —
$65.8 $100.8
Sales of available-for-sale restricted investments are as follows:
Years Ended
December 31,
2003 2002 2001
Proceeds from sales $ — $221.2 $19.9
Gross realized gains $ — $6.7 $.1
Gross realized losses $ — $(.7) $ —
In September 2002, one of the Company’s captive insurance companies terminated a reinsurance agreement with a third-party
insurance company and transferred its risk pertaining to certain extended warranty products under the reinsurance agreement back to such
insurance company resulting in an $8.1 million gain, which has been included in Other (Gains) Losses in the accompanying 2002
Consolidated Income Statement. As a result of the transaction, the Company reduced its insurance reserves and liquidated related restricted
assets, realizing a $3.1 million gain on the sale, which has been included in Other Income (Expense), Net in the accompanying 2002
Consolidated Income Statement. The Company transferred $66.6 million of restricted assets to the third-party insurance company in
exchange for the assumption of the related insurance reserves. Additionally, in 2002, the Company converted its remaining restricted
investments to restricted cash, realizing a $2.7 million gain on the sale.
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