AutoNation 2005 Annual Report Download - page 69

Table of Contents
AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In connection with the Company’s spin-off of ANC Rental in June 2000, the Company entered into certain agreements and
arrangements with ANC Rental. J.P. Bryan, a Company Director, and H. Wayne Huizenga, a former Company Director, were directors of
ANC Rental from July 2000 until October 2003. ANC Rental agreed to buy automotive parts from the Company following the spin-off, and
paid the Company approximately $3.0 million for parts purchases made during 2003. See further information in Note 13, Discontinued
Operations.
17. CASH FLOW INFORMATION
The Company considers all highly liquid investments with purchased maturities of three months or less to be cash equivalents unless
the investments are legally or contractually restricted for more than three months. The effect of non-cash transactions is excluded from the
accompanying Consolidated Statements of Cash Flows.
The Company made interest payments of approximately $187.2 million, $152.4 million, and $132.4 million for the years ended
December 31, 2005, 2004 and 2003, respectively, including interest on vehicle inventory financing. The Company made income tax
payments of approximately $43.4 million, $253.4 million and $471.5 million for the years ended December 31, 2005, 2004 and 2003,
respectively. The tax payments for 2004 include prepayments of the IRS settlement totaling $128.9 million as further discussed in Note 11,
Income Taxes, of Notes to Consolidated Financial Statements. In February 2006, the Company made estimated state tax and federal tax
payments totaling approximately $100 million, primarily related to provisions for the third and fourth quarter of 2005.
18. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced sale or liquidation. Fair value estimates are made at a specific point in time, based on relevant
market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of
significant judgment, and therefore cannot be determined with precision. The assumptions used have a significant effect on the estimated
amounts reported.
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:
• Cash and cash equivalents, trade and manufacturer receivables, other current assets, vehicle floorplan payable, accounts
payable, other current liabilities and variable rate debt: The amounts reported in the accompanying Consolidated Balance Sheets
approximate fair value due to their short-term nature.
• Fixed rate debt: The fair value of fixed rate debt is based on borrowing rates currently available to the Company for debt with similar
terms and maturities. At December 31, 2005 and 2004, the carrying amounts of the Company’s fixed rate debt primarily consisting of
amounts outstanding under the Company’s senior unsecured notes, totaled $371.3 million and $494.5 million, respectively, with a
fair value of $398.5 million and $561.5 million, respectively.
19. BUSINESS AND CREDIT CONCENTRATIONS
The Company owns and operates franchised automotive stores in the United States pursuant to franchise agreements with vehicle
manufacturers. Franchise agreements generally provide the manufacturers or distributors with considerable influence over the operations of
the store. The success of any franchised automotive dealership is dependent, to a large extent, on the financial condition, management,
marketing, production and distribution capabilities of the vehicle manufacturers or distributors of which the Company holds franchises. At
December 31, 2005 and 2004, the Company had receivables from manufacturers or
67