AutoNation 2007 Annual Report Download - page 70
Download and view the complete annual report
Please find page 70 of the 2007 AutoNation annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.-
1 -
2
-
3
-
4
-
5
-
6
-
7
-
8
-
9
-
10
-
11
-
12
-
13
-
14
-
15
-
16
-
17
-
18
-
19
-
20
-
21
-
22
-
23
-
24
-
25
-
26
-
27
-
28
-
29
-
30
-
31
-
32
-
33
-
34
-
35
-
36
-
37
-
38
-
39
-
40
-
41
-
42
-
43
-
44
-
45
-
46
-
47
-
48
-
49
-
50
-
51
-
52
-
53
-
54
-
55
-
56
-
57
-
58
-
59
-
60 -
61 -
62 -
63 -
64 -
65 -
66 -
67 -
68 -
69 -
70 -
71 -
72 -
73 -
74 -
75 -
76 -
77 -
78 -
79 -
80 -
81
-
82
-
83
-
84
-
85
-
86
-
87
-
88
-
89
-
90
-
91
-
92
-
93
-
94
-
95
-
96
-
97
-
98
-
99
-
100
-
101
-
102
-
103
-
104
-
105
-
106
-
107
-
108
 |
 |
Table of Contents
from 2002 to 2004. These audits may result in proposed assessments where the ultimate resolution may result in our owing additional taxes. We
believe that our tax positions comply with applicable tax law and that we have adequately provided for these matters.
We adopted the provisions of FIN 48 on January 1, 2007. FIN 48 clarifies the accounting for income taxes by prescribing a minimum
recognition threshold a tax position is required to meet before being recognized. FIN 48 also provides guidance on derecognition, measurement,
classification, interest and penalties, accounting in interim periods, disclosure, and transition. As a result of the implementation of FIN 48, we
recognized an increase of approximately $2 million (net of tax effect) in the liability for unrecognized tax benefits which was accounted for as a
reduction to the January 1, 2007, balance of retained earnings.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Balance at January 1 $41.8
Additions based on tax positions related to the current year —
Additions for tax positions of prior years 2.4
Reductions for tax positions of prior years (7.1)
Settlements (1.8)
Balance at December 31 $35.3
As of December 31, 2007, we have accumulated interest and penalties associated with these unrecognized tax benefits of $39.6 million, of
which $5.8 million of interest was accrued during 2007. We additionally have a deferred tax asset of $22.8 million related to these balances.
The net of the unrecognized tax benefits, associated interest, penalties, and deferred tax asset is $52.1 million, which if resolved favorably (in
whole or in part) would reduce our effective tax rate. The unrecognized tax benefits, associated interest, penalties, and deferred tax asset are
included as components of Current and Non-Current Other Assets and Other Liabilities in the Consolidated Balance Sheets.
It is our continuing policy to account for interest and penalties associated with income tax obligations as a component of income tax expense.
During 2007, we recognized $3.6 million (net of tax effect) of interest and no penalties as part of the provision for income taxes in the
Consolidated Income Statements.
During the twelve months beginning January 1, 2008, it is reasonably possible that we will reduce unrecognized tax benefits by
approximately $35 million to $39 million (net of tax effect) primarily as a result of the expiration of certain statutes of limitations.
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:
Weighted average shares outstanding used to calculate basic earnings per share 198.3 225.2 262.7
Effect of dilutive options 1.7 4.1 5.3
Weighted average common and common equivalent shares used to calculate diluted earnings per share 200.0 229.3 268.0
As discussed in Note 7, Notes Payable and Long-Term Debt, of the Notes to Consolidated Financial Statements, in April 2006 we
repurchased 50 million shares of its common stock pursuant to an equity tender
68