AutoNation 2007 Annual Report Download - page 65

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Expenses under real property, equipment, and software leases were $66.9 million in 2007, $58.2 million in 2006, and $57.4 million in
2005. The leases require payment of real estate taxes, insurance, and maintenance in addition to rent. Most of the leases contain renewal options
and escalation clauses. Lease expense is recognized on a straight-line basis over the term of the lease, including any option periods, as
appropriate. The same lease term is used for lease classification, the amortization period of related leasehold improvements, and the estimation of
future lease commitments.
Future minimum lease obligations under non-cancelable real property, equipment, and software leases with initial terms in excess of one year
at December 31, 2007, are as follows:
Year Ending December 31:
2008 $ 60.6
2009 58.3
2010 47.5
2011 46.3
2012 44.4
Thereafter 408.1
665.2
Less: sublease rentals (11.7)
$ 653.5
Other Matters
AutoNation, acting through its subsidiaries, is the lessee under many real estate leases that provide for the use by our subsidiaries of their
respective dealership premises. Pursuant to these leases, our 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, we enter into agreements with third parties in connection with the sale of assets or businesses in which we agree
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, we enter 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, our subsidiaries assign or sublet to the dealership
purchaser the subsidiaries’ interests in any real property leases associated with such stores. In general, our 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, AutoNation and its subsidiaries generally remain subject
to the terms of any guarantees made by us in connection with such leases. Although we generally have indemnification rights against the
assignee or sublessee in the event of non-performance under these leases, as well as certain defenses, and we presently have no reason to believe
that we or our subsidiaries will be called on to perform under any such assigned leases or subleases, we estimate that lessee rental payment
obligations during the remaining terms of these leases are approximately $90 million at December 31, 2007. Our exposure under these leases is
difficult to estimate and there can be no assurance that any performance of AutoNation or its subsidiaries required under these leases would not
have a material adverse effect on our business, financial condition, and cash flows.
At December 31, 2007, surety bonds, letters of credit, and cash deposits totaled $111.6 million, including $78.8 million of letters of credit.
In the ordinary course of business, we are required to post performance and
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