AutoNation 2005 Annual Report Download - page 65

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Table of Contents
AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During 2005, 2004 and 2003, the Company recorded net benefits to the provision for income taxes totaling $14.5 million, $25.8 million
and $140.9 million (which includes $127.5 million recognized as a result of an IRS settlement discussed above), respectively, primarily
related to the resolution of various income tax matters. The Company also recognized a $110.0 million and $52.2 million gain included in
Discontinued Operations in 2005 and 2004, respectively, related to the settlement of various income tax matters. The Company completed
the federal income tax audit for the years 1997 though 2001 and a federal income tax audit for 2002 through 2004 is being conducted by the
IRS. In addition, the Company is routinely audited by the states in which it does business and remains under examination by various states
for the tax years discussed above. The Company could experience additional state and federal tax adjustments over the next eighteen
months as it continues to work through various tax matters.
As a matter of course, the Company is regularly audited by various taxing authorities. From time to time, these audits result in proposed
assessments where the ultimate resolution may result in the Company owing additional taxes. The Company believes that its tax positions
comply with applicable tax law and that it has adequately provided for these matters. Included in Other Current Liabilities at December 31,
2005 and 2004 are $54.5 million and $181.3 million, respectively, provided by the Company for these matters.
12. EARNINGS PER SHARE
The computation of weighted average common and common equivalent shares used in the calculation of basic and diluted earnings per
share is as follows for the years ended December 31:
2005 2004 2003
Weighted average shares outstanding used in calculating basic earnings per share 262.7 266.7 279.5
Effect of dilutive options 5.3 5.8 7.5
Weighted average common and common equivalent shares used in calculating diluted
earnings per share 268.0 272.5 287.0
As of December 31, 2005 the Company had employee stock options outstanding of 28.0 million of which 7.2 million have been excluded
from the computation of diluted earnings per share since they are anti-dilutive. As of December 31, 2004 and 2003, outstanding employee
stock options totaling 9.3 million and 6.6 million, respectively, have been excluded since they were anti-dilutive.
13. DISCONTINUED OPERATIONS
Discontinued operations are related to stores that were sold or for which the Company has entered into a definitive sale agreement.
Generally, the sale of a store is completed within 60 to 90 days after the date of a definitive sale agreement. The accompanying Consolidated
Financial Statements for all the periods presented have been adjusted to classify these stores as discontinued operations. Also included in
results from discontinued operations is a gain from an income tax adjustment related to items previously reported in
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