AutoNation 2007 Annual Report Download - page 53

Table of Contents
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Organization and Business
AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of December 31, 2007, we owned and
operated 322 new vehicle franchises from 244 stores located in major metropolitan markets, predominantly in the Sunbelt region of the United
States. We offer a diversified range of automotive products and services, including new vehicles, used vehicles, vehicle maintenance and repair
services, vehicle parts, extended service contracts, vehicle protection products, and other aftermarket products. We also arrange financing for
vehicle purchases through third-party finance sources. For convenience, the terms “AutoNation,” “Company,” and “we” are used to refer
collectively to AutoNation, Inc. and its subsidiaries, unless otherwise required by the context.
Basis of Presentation
The accompanying Consolidated Financial Statements include the accounts of AutoNation, Inc. and its subsidiaries. All of our automotive
dealership subsidiaries are indirectly wholly owned by the parent company, AutoNation, Inc. We operate in a single industry segment,
automotive retailing. All significant intercompany accounts and transactions have been eliminated in the consolidation.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. In preparing these
financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due
consideration to materiality. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable.
However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a
result, actual results could differ materially from these estimates. We periodically evaluate estimates and assumptions used in the preparation of
the financial statements and make changes on a prospective basis when adjustments are necessary. Significant estimates made by AutoNation in
the accompanying Consolidated Financial Statements include allowances for doubtful accounts, accruals for chargebacks against revenue
recognized from the sale of finance and insurance products, certain assumptions related to goodwill, intangible, and long-lived assets, accruals
related to self-insurance programs, certain legal proceedings, estimated tax liabilities, estimated losses from disposals of discontinued
operations, and certain assumptions related to determining stock option compensation.
Certain reclassifications of amounts previously reported have been made to the accompanying Consolidated Financial Statements in order to
maintain consistency and comparability between periods presented. We reclassified certain amounts within the Cash Provided by (Used In)
Operating Activities section of our Consolidated Statements of Cash Flows to separately present our deferred income tax provision.
Cash and Cash Equivalents
We consider all highly liquid investments with a maturity of three months or less as of the date of purchase to be cash equivalents unless
the investments are legally or contractually restricted for more than three months.
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