AutoNation 2003 Annual Report Download - page 68

Table of Contents
AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 its financial condition, results of operations and cash flows.
Lease Commitments
The Company leases real property, equipment and software under various operating leases most of which have terms from one to twenty
years.
Expenses under real property, equipment and software leases were $78.6 million $77.2 million and $77.5 million for the years ended
December 31, 2003, 2002 and 2001, respectively. The leases require payment of real estate taxes, insurance and common area
maintenance in addition to rent. Most of the leases contain renewal options and escalation clauses.
Future minimum lease obligations under noncancelable real property, equipment and software leases with initial terms in excess of one
year at December 31, 2003 are as follows:
Year Ending December 31:
2004 $65.0
2005 55.8
2006 50.5
2007 44.0
2008 37.5
Thereafter 168.7
421.5
Less: sublease rentals (15.9)
$405.6
Other Matters
The Company, acting through its subsidiaries, is the lessee under many real estate leases that provide for the use by the Company’s
subsidiaries of their respective dealership premises. Pursuant to these leases, the Company’s 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, the Company enters into agreements with third parties in connection
with the sale of assets or businesses in which it agrees 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,
the Company enters into agreements that may contain indemnification provisions. In the event that an indemnification claim is asserted,
liability would be limited by the terms of the applicable agreement.
From time to time, primarily in connection with dispositions of automotive stores, the Company’s subsidiaries assign or sublet to the
dealership purchaser the subsidiaries’ interests in any real property leases associated with such stores. In general, the Company’s
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, the
Company and its subsidiaries generally remain subject to the terms of any guarantees made by the Company and its subsidiaries in
connection with such leases. Although the Company generally has indemnification rights against the assignee or sublessee in the event of
non-performance under these leases, as well as certain defenses, and the Company presently has no reason to believe that it or its
subsidiaries will be called on to
60