AutoNation Inc.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No o

As of June 30, 2004, the aggregate market value of the common stock of the registrant held by non-affiliates was approximately $3,100,000,000 based on the closing price of the common stock on The New York Stock Exchange on such date.

As of February 18, 2005, the registrant had 265,673,261 shares of common stock outstanding.

Part III — Portions of the Registrant’s Proxy Statement relating to the 2005 Annual Meeting of Stockholders.

AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of December 31, 2004, we owned and operated 358 new vehicle franchises from 281 stores located in major metropolitan markets in 17 states, predominantly in the Sunbelt region of the United States. Our stores, which we believe include some of the most recognizable and well-known in our key markets, sell 35 different brands of new vehicles. The core brands of vehicles that we sell, representing approximately 98% of the new vehicles that we sold in 2004, are manufactured by Ford, General Motors, DaimlerChrysler, Toyota, Nissan, Honda and BMW.

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. We believe that the significant scale of our operations and the quality of our managerial talent allow us to achieve efficiencies in our key markets by, among other things, reducing operating expenses, leveraging our market brands and advertising, improving asset management and sharing and implementing best practices across all of our stores.

Our common stock, par value $.01 per share, is listed on The New York Stock Exchange under the symbol “AN.” For information concerning our financial condition, results of operations and related financial data, you should review the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Financial Statements and Supplementary Data” sections of this document. You also should review and consider the risks relating to our business, operations, financial performance and cash flows that we describe below under “Risk Factors.”

Our corporate website is http://www.AutoNation.com. We make available on this website, free of charge, access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements on Schedule 14A and amendments to those materials filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically submit such material to the Securities and Exchange Commission (the “Commission”). We also make available on our website copies of materials regarding our corporate governance policies and practices, including the AutoNation, Inc. Corporate Governance Guidelines, our company-wide Code of Business Ethics, our Code of Ethics for Senior Officers, our Code of Business Ethics for the Board of Directors, and the charters relating to the committees of our Board of Directors. You also may obtain a printed copy of the foregoing materials by sending a written request to: Investor Relations Department, AutoNation, Inc., 110 S.E. 6th Street, Fort Lauderdale, Florida 33301. In addition, the Commission’s website is http://www.sec.gov. The Commission makes available on this website, free of charge, reports, proxy and information statements and other information regarding issuers, such as us, that file electronically with the Commission. Information on our website or the Commission’s website is not part of this document.

As a specialty retailer, our business model is focused on developing and maintaining long-term relationships with our customers. The foundation of our business model is operational excellence. We continue to pursue the following strategies to achieve our targeted level of operational excellence:


	•	Deliver a superior customer experience at our stores.

	•	Leverage our significant scale to improve our operating efficiency.


	•	Increase our productivity.

	•	Build a powerful brand in each of our local markets.

Our strategies are supported by our use of information technology. We have used our significant scale to become an industry leader in marketing our stores and vehicle inventory via the Internet. By pursuing our strategies and leveraging information technology to enhance our customer relationships, we hope to convince potential customers who live or work in our markets that an educated vehicle buying decision cannot be made without considering our stores.

A key component of our strategy is to maximize the return on investment generated by the use of the free cash flow that our business generates. We expect to use our free cash flow to make capital investments in our current business, to complete strategic dealership acquisitions in our key markets and to repurchase our common stock pursuant to our Board-authorized share repurchase program. Our capital allocation decisions will be based on such factors as the expected rate of return on our investment, the market price of our common stock, the potential impact on our capital structure and our ability and willingness to complete strategic dealership acquisitions in our key markets. We also divest non-core stores from time to time in order to improve our portfolio of stores and to generate sales proceeds that can be reinvested at a higher expected rate of return.

Our goal is to deliver a superior customer experience at our stores. Our efforts to improve our customers’ experiences at our stores include the following practices and initiatives in key areas of our business:


	•	*Improving Customer Service:* The success of our stores depends in significant part on our ability to deliver positive experiences to our customers. We have developed and continue to implement standardized customer-friendly sales and service processes based on our stores’ demonstrated “best practices.” We expect these processes will continue to improve the sales and service experiences of our customers and position us to obtain significant repeat and referral business. Our commitment to providing an outstanding customer experience is reflected by our adoption during 2004 of the “AutoNation Pledge.” The pledge provides all of our customers with industry-leading disclosure relating to the finance and insurance sales process. We emphasize the importance of customer satisfaction to our key store personnel by basing a portion of their compensation on the quality of customer service they provide in connection with vehicle sales and service.

	•	*Increasing Parts and Service Sales:* Our goal is to develop long-term relationships with our customers so that they rely on us for all of their vehicle service needs. Our key initiatives for our parts and service business are focused on optimizing our processes, pricing and promotion. We continue to implement across all of our stores standardized service processes and marketing communications, which are designed to ensure that we offer our existing and potential customers the complete range of vehicle maintenance and repair services. We expect our service processes and marketing communications to increase our customer-pay service and parts business. As a result of our significant scale, we believe we can communicate more frequently and more effectively with our customers, which we believe will set us apart from our competitors. Our efforts at optimizing our pricing are directed toward maintaining competitive pricing for commonly performed vehicle services and repairs for like-brand vehicles within each of our markets.

	•	*Increasing Finance, Insurance and Other Aftermarket Product Sales:* We continue to improve our finance and insurance business by using our standardized best operating practices across our store network. As noted above, all of our customers are now presented with the “AutoNation Pledge,” which we believe improves our customers’ shopping experience for finance and insurance products at our stores. Additionally, our stores use our customer-friendly electronic finance and insurance menu, which is designed to ensure that we offer our customers the complete range of finance, insurance and other aftermarket products in a transparent manner. We offer our customers aftermarket products such as extended warranty contracts, maintenance programs,


		theft deterrent systems and various insurance products at competitive rates and prices. We also continue to focus on optimizing the mix of finance sources available for our customers’ convenience.

We continue to leverage our status as the largest automotive retailer in the United States to further improve our cost structure by obtaining significant cost savings in our business. The following practices and initiatives reflect our deep commitment to managing cost and leveraging our scale:


	•	*Managing Costs:* We continue to aggressively manage our business and leverage our scale to reduce costs. In September 2004, we implemented a streamlined regional management structure that consolidated our ten districts into five regions, each led by a regional president. We believe our new regional management structure will generate improved operating efficiency and management effectiveness and capitalize on our infrastructure investments. We continue to focus on developing national vendor relationships to standardize our stores’ approach to purchasing certain equipment, supplies and services, and to improve our cost efficiencies. We also leverage our scale at the local-market level to generate cost savings. As an example, we realize cost efficiencies with respect to advertising and facilities maintenance that are generally not available to smaller retailers. We continue to centralize certain key store-level accounting and administrative activities in certain of our operating regions, which we expect will streamline our internal control over financial reporting, reduce our operating costs and improve our operating efficiency.

	•	*Managing New Vehicle Inventories:* We continue to manage our new vehicle inventories to optimize our stores’ supply and mix of vehicle inventory. Through the use of our web-based planning and tracking system, in markets where our stores have critical mass in a particular line-make, we view new vehicle inventories at those same line-make stores in the aggregate and coordinate vehicle ordering and inventories across those stores. Our web-based planning and tracking system and new vehicle purchasing strategy enable us to manage our new vehicle inventory to achieve specific month-end unit inventory targets. We also are targeting our new vehicle inventory purchasing to our core, or most popular, model packages. We are focused on maintaining appropriate inventory levels, which we believe is important in light of high industry-wide new vehicle inventory levels (particularly the domestic brands) and the higher carrying costs associated with the higher interest rates experienced in 2004 and expected in 2005. We expect our inventory management to enable us to (1) respond to customer requests better than smaller independent retailers with more limited inventories and (2) maximize the availability of the most desirable products during seasonal peak periods of customer demand for vehicles.

	•	*Increasing Used Vehicle Sales and Managing Used Vehicle Inventories:* Each of our stores offers a variety of used vehicles. We are leveraging our status as the largest automotive retailer in the United States to develop competitive advantages over our principal used vehicle competitors and to improve our used vehicle business. We believe that, as a result of being the largest automotive retailer in many of our key markets, we have the best access to the most desirable used vehicle inventory and are in a superior position to realize the benefits of vehicle manufacturer-supported certified used vehicle programs, which we believe are improving consumers’ attitudes toward used vehicles. We have implemented a web-based used vehicle inventory tool that enables our stores within each of our markets to optimize their used vehicle inventory supply, mix and pricing. We also are managing our used vehicle inventory to enable us to offer our customers a better selection of desirable lower-cost vehicles, which are often in high demand by consumers. Our used vehicle business strategy is focused on (1) using our customized vehicle inventory management system, which is our standardized approach to pricing, inventory mix and used vehicle asset management based on our established best practices, and (2) leveraging our scale with comprehensive used vehicle marketing programs, such as market-wide promotional events and standardized approaches to advertising that we can implement more effectively than smaller retailers because of


		our size. We continue to utilize the Internet to improve our used vehicle operations by providing consumers an easy-to-navigate means to view on-line our large inventory of used vehicles.

The following are examples of key initiatives we have implemented to increase productivity:


	•	*Managing Employee Productivity and Compensation:* We continue to develop and implement at our stores standardized compensation guidelines and common element pay plans that take into account our sales volume and gross margin objectives, the vehicle brand and the size of the store. We continue to focus on better aligning the compensation of our employees with the performance of our stores to improve employee productivity and to increase the variability of our compensation expense.

	•	*Using Information Technology:* We are leveraging information technology to enhance our customer relationships and increase productivity. We continue to use Compass, our proprietary web-based customer relationship management tool, across all of our stores. We have implemented Showroom Compass, as well as other customer relationship management tools, in all of our stores. We believe these tools enable us to promote and sell our vehicles and other products more effectively by allowing us to better understand our customer traffic flows and better manage our showroom sales processes and customer relationships. We have developed a company-wide customer database that contains information on our stores’ existing and potential customers. We believe our customer database enables us to implement more effectively our vehicle sales and service marketing programs. We expect Showroom Compass and our customer database and other tools to continue to empower us to implement our customer relationship strategy more effectively and improve our productivity.

	•	*Training Employees:* One of our key initiatives to improve our productivity is our customized comprehensive training program for key store employees. We believe that having well-trained personnel is an essential requirement for implementing standardized operating practices and policies across all of our stores. Our training program educates our key store employees about their respective job roles and responsibilities and our standardized best practices in all of our areas of operation, including sales, finance and insurance and fixed operations. Our training program also emphasizes the importance of conducting our operations, including our finance and insurance sales operations, in accordance with applicable laws and regulations and our policies and ethical standards. As part of our training program, we conduct or engage third-party training services to conduct specialized technical training for certain of our store employees in areas such as finance and insurance and fixed operations. We also require all of our employees, from our senior management to our technicians, to participate in our Business Ethics Program, which includes web-based interactive training programs, live training workshops, written manuals and videos on specific topics. We expect our comprehensive training program to improve our productivity by ensuring that all of our employees consistently execute our business strategy and manage our daily operations in accordance with our best practices and policies, applicable laws and regulations and our high standards of business ethics.

In many of our key markets where we have significant market share, we are marketing our stores under a local retail brand. We continue to position these local retail brands to communicate to customers the key features that we believe differentiate our stores in our branded markets from our competitors, such as the large inventory available for customers, the variety of services that we offer to perform within a designated time or provide free of charge to our customer, our extended evening and weekend service hours and the competitive pricing we offer for widely available services. We believe that by having our stores within each local market speak with one voice to the automobile-buying public, we can achieve marketing and advertising cost savings

We have fourteen local brands in our key markets, including “Maroone” in South Florida; “John Elway” in Denver, Colorado; “AutoWay” in Tampa, Florida; “Bankston” in Dallas, Texas; “Courtesy” in Orlando, Florida; “Desert” in Las Vegas, Nevada; “Team” in Atlanta, Georgia; “Mike Shad” in Jacksonville, Florida; “Dobbs” in Memphis, Tennessee; “Fox” in Baltimore, Maryland; “Mullinax” in Cleveland, Ohio; “Appleway” in Spokane, Washington; “Champion” in South Texas; and “Power” in Southern California. The stores we operate under local retail brands as of December 31, 2004 accounted for approximately 61% of our total revenue during fiscal 2004.

Each of our stores acquires new vehicles for retail sale either directly from the applicable automotive manufacturer or distributor or through dealer trades with other stores of the same franchise. Accordingly, we depend in large part on the automotive manufacturers and distributors to provide us with high-quality vehicles that consumers desire and to supply us with such vehicles at suitable quantities and prices and at the right times. Our operations, particularly our sales of new vehicles, are impacted by the sales incentive programs conducted by the automotive manufacturers to spur consumer demand for their vehicles. These sales incentive programs are often not announced in advance and therefore can be difficult to plan for when ordering inventory. We generally acquire used vehicles from customer trade-ins, at the termination of leases and, to a lesser extent, auctions and other sources. We generally recondition used vehicles acquired for retail sale at our stores’ service facilities and capitalize costs related thereto as used vehicle inventory. Used vehicles that we do not sell at our stores generally are sold at wholesale through auctions.

We provide a wide variety of financial products and services to our customers in a convenient manner and at competitive prices. We arrange for our customers to finance vehicles through installment loans or leases with third-party lenders, including the vehicle manufacturers’ and distributors’ captive finance subsidiaries, in exchange for a commission payable to us by the third-party lender. Commissions that we receive from these third-party lenders may be subject to chargeback, in full or in part, if loans that we arrange are defaulted on or prepaid or upon other specified circumstances. However, our exposure to loss in connection with arranging third-party financing generally is limited to the commissions that we receive. Since our mid-1999 exit from the vehicle lease underwriting business and our December 2001 exit from the retail auto loan underwriting business, we have not directly financed our customers’ vehicle leases or purchases.

We also offer our customers various vehicle protection products, including extended service contracts, maintenance programs, guaranteed auto protection (known as “GAP,” this protection covers the shortfall between a customer’s loan balance and insurance payoff in the event of a casualty), credit insurance, lease “wear and tear” insurance and theft protection products, at competitive prices. The vehicle protection products that our stores currently offer to customers are underwritten and administered by independent third parties, including the vehicle manufacturers’ and distributors’ captive finance subsidiaries. We primarily sell the products on a straight commission basis; however, we also may participate in future underwriting profit, if any, pursuant to a retrospective commission arrangement. Commissions that we receive from these third-party providers may be subject to chargebacks, in full or in part, if products that we sell, such as extended service contracts, are cancelled.

Our stores also provide a wide range of vehicle maintenance and repair services, including warranty work that can be performed only at franchised dealerships and customer-pay service work. Additionally, we operate collision repair centers that provide paint and repair services in most of our key markets. We have developed relationships with national insurance companies that establish our stores and collision centers as preferred providers of collision repair services.

We retailed approximately 650,000 new and used vehicles through our stores in 2004. We sell a broad range of well-known vehicle makes within each of our key markets.

Our marketing efforts focus on mass marketing and targeted marketing in our local markets and are designed to build our business with a broad base of repeat, referral and new customers. We engage in marketing and advertising primarily through newspapers, radio, television, direct mail and outdoor billboards in our local markets. As we have consolidated our operations in certain of our key markets under one local retail brand name, we have been able to focus our efforts on building consumer awareness of the selected local retail brand name rather than on the individual legacy names under which our stores operated prior to their acquisition by us. We also continue to develop newspaper, television and radio advertising campaigns that we can modify for use in multiple local markets. We expect to continue to realize cost efficiencies with respect to advertising expenses that are not generally available to smaller retailers, due to our ability to obtain efficiencies in developing advertising campaigns and due to our ability to gain volume discounts and other concessions as we increase our presence within our key markets and operate our stores under a single retail brand name in our local markets.

We also have been able to use our significant scale to market our stores and vehicle inventory via the Internet. According to industry analysts, the majority of new car buyers nationwide consult the Internet for new car information, which is resulting in better-informed customers and a more efficient sales process. As part of our e-commerce marketing strategy, we are focused on (1) developing websites and an Internet sales process that appeal to on-line automobile shoppers; (2) obtaining high visibility on the Internet, whether through our own websites or through strategic partnerships and alliances with other e-commerce companies, including Microsoft’s MSN Autos, America Online, Edmunds, Kelley Blue Book, Yahoo! Autos and others; and (3) developing and maintaining a cost structure that permits us to operate efficiently. In addition, under the terms of our strategic alliances and partnerships with e-commerce companies, we have access to hundreds of thousands of customer leads, which increases our potential for new and used vehicle sales. We respond to and track such customer leads and sales with Compass, as well as other tools.

We have entered into framework agreements with most major vehicle manufacturers and distributors. These agreements, which are in addition to the franchise agreements described in the following paragraph, contain provisions relating to our management, operation, advertising and marketing, and acquisition and ownership structure of automotive stores franchised by such manufacturers. These agreements contain certain requirements pertaining to our operating performance (with respect to matters such as sales volume, sales effectiveness and customer satisfaction), which, if we do not satisfy, are likely to adversely impact our ability to make further acquisitions of such manufacturer’s stores or result in us being compelled to take certain actions, such as divesting a significantly underperforming store, subject to applicable state franchise laws. Additionally, these agreements set limits on the number of stores that we may acquire of the particular manufacturer, nationally, regionally and in local markets, and contain certain restrictions on our ability to name and brand our stores. Some of these framework agreements give the manufacturer or distributor the right to acquire at fair market value, or the right to compel us to sell, the automotive stores franchised by that manufacturer or distributor under specified circumstances in the event of a change in control of our company (generally including certain material changes in the composition of our board of directors during a specified time period, the acquisition of 20% or more of the voting stock of our company by another manufacturer or distributor or the acquisition of 50% or more of our voting stock by a person, entity or group not affiliated with a vehicle manufacturer or distributor) or other extraordinary corporate transactions such as a merger or sale of all of our assets.

We operate each of our new vehicle stores under a franchise agreement with a vehicle manufacturer or distributor. The franchise agreements grant the franchised automotive store a non-exclusive right to sell the manufacturer or distributor’s brand of vehicles and offer related parts and service within a specified market area. These franchise agreements grant our stores the right to use the manufacturer or distributor’s trademarks in connection with their operations, and they also impose numerous operational requirements and restrictions relating to inventory levels, working capital levels, the sales process, marketing and branding, showroom and service facilities and signage, personnel, changes in management and monthly financial reporting, among other things. The contractual terms of our stores’ franchise agreements provide for various durations, ranging from

one year to no expiration date, and in certain cases manufacturers have undertaken to renew such franchises upon expiration so long as the store is in compliance with the terms of the agreement. We generally expect our franchise agreements to survive for the foreseeable future and, when the agreements do not have indefinite terms, anticipate routine renewals of the agreements without substantial cost or modification. Our stores’ franchise agreements provide for termination of the agreement by the manufacturer or non-renewal for a variety of causes (including performance deficiencies in such areas as sales volume, sales effectiveness and customer satisfaction). However, in general, the states in which we operate have automotive dealership franchise laws that provide that, notwithstanding the terms of any franchise agreement, it is unlawful for a manufacturer to terminate or not renew a franchise unless “good cause” exists. It generally is difficult for a manufacturer to terminate, or not renew, a franchise under these laws, which were designed to protect dealers. In addition, in our experience and historically in the automotive retail industry, dealership franchise agreements are rarely involuntarily terminated or not renewed by the manufacturer. From time to time, certain manufacturers assert sales and customer satisfaction performance deficiencies under the terms of our framework and franchise agreements at a limited number of our stores. We generally work with these manufacturers to address the asserted performance issues. For a further discussion, please refer to the risk factor captioned “We are subject to restrictions imposed by, and significant influence from, vehicle manufacturers that may adversely impact our business, financial condition, results of operations, cash flows and prospects, including our ability to acquire additional stores” in the “Risk Factors; Forward Looking Statements May Prove Inaccurate” section of this document.

We operate in a highly regulated industry. A number of state and federal laws and regulations affect our business. In every state in which we operate, we must obtain various licenses in order to operate our businesses, including dealer, sales and finance and insurance licenses issued by state regulatory authorities. Numerous laws and regulations govern our conduct of business, including those relating to our sales, operations, financing, insurance, advertising and employment practices. These laws and regulations include state franchise laws and regulations, consumer protection laws, privacy laws, escheatment laws, anti-money laundering laws and other extensive laws and regulations applicable to new and used motor vehicle dealers, as well as a variety of other laws and regulations. These laws also include federal and state wage-hour, anti-discrimination and other employment practices laws.

Our financing activities with customers are subject to federal truth-in-lending, consumer leasing and equal credit opportunity laws and regulations as well as state and local motor vehicle finance laws, installment finance laws, usury laws and other installment sales laws and regulations. Some states regulate finance fees and charges that may be paid as a result of vehicle sales. Claims arising out of actual or alleged violations of law may be asserted against us or our stores by individuals or governmental entities and may expose us to significant damages or other penalties, including revocation or suspension of our licenses to conduct store operations and fines.

Our operations are subject to the National Traffic and Motor Vehicle Safety Act, Federal Motor Vehicle Safety Standards promulgated by the United States Department of Transportation and the rules and regulations of various state motor vehicle regulatory agencies. The imported automobiles we purchase are subject to United States customs duties and in the ordinary course of our business we may, from time to time, be subject to claims for duties, penalties, liquidated damages or other charges.

Our operations involve the use, handling, storage and contracting for recycling and/or disposal of materials such as motor oil and filters, transmission fluids, antifreeze, refrigerants, paints, thinners, batteries, cleaning products, lubricants, degreasing agents, tires and fuel. Consequently, our business is subject to a complex variety of federal, state and local requirements that regulate the environment and public health and safety.

Most of our stores utilize aboveground storage tanks, and to a lesser extent underground storage tanks, primarily for petroleum-based products. Storage tanks are subject to periodic testing, containment, upgrading and removal under the Resource Conservation and Recovery Act and its state law counterparts. Clean-up or other remedial action may be necessary in the event of leaks or other discharges from storage tanks or other sources. In addition, water quality protection programs under the federal Water Pollution Control Act (commonly known as the Clean Water Act), the Safe Drinking Water Act and comparable state and local programs govern certain discharges from some of our operations. Similarly, certain air emissions from operations such as auto body painting may be subject to the federal Clean Air Act and related state and local laws. Certain health and safety standards promulgated by the Occupational Safety and Health Administration of the United States Department of Labor and related state agencies also apply.

Some of our stores are parties to proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, typically in connection with materials that were sent to former recycling, treatment and/ or disposal facilities owned and operated by independent businesses. The remediation or clean-up of facilities where the release of a regulated hazardous substance occurred is required under CERCLA and other laws.

We incur significant costs to comply with applicable environmental, health and safety laws and regulations in the ordinary course of our business. We do not anticipate, however, that the costs of such compliance will have a material adverse effect on our business, results of operations, cash flows or financial condition, although such outcome is possible given the nature of our operations and the extensive environmental, public health and safety regulatory framework. We do not have any material known environmental commitments or contingencies.

We operate in a highly competitive industry. We believe that the principal competitive factors in the automotive retailing business are location, service, price and selection. Each of our markets includes a large number of well-capitalized competitors that have extensive automobile store managerial experience and strong retail locations and facilities. According to the National Automotive Dealers Association, Manheim Auctions and reports of various industry analysts, the automotive retail industry is served by approximately 22,000 franchised automotive dealerships and approximately 50,000 independent used vehicle dealers. Several other public companies operate numerous automotive retail stores on a national or regional basis. We are subject to competition from dealers that sell the same brands of new vehicles that we sell and from dealers that sell other brands of new vehicles that we do not represent in a particular market. Our new vehicle store competitors have franchise agreements with the various vehicle manufacturers and, as such, generally have access to new vehicles on the same terms as us. Additionally, we are subject to competition in the automotive retailing business from private market buyers and sellers of used vehicles.

In general, the vehicle manufacturers have designated specific marketing and sales areas within which only one dealer of a given vehicle line or make may operate. Under most of our framework agreements with the vehicle manufacturers, our ability to acquire multiple dealers of a given line-make within a particular market is limited. We are also restricted by various state franchise laws from relocating our stores or establishing new stores of a particular line-make within any area that is served by another dealer of the same line-make, and we generally need the manufacturer to approve the relocation or grant a new franchise in order to relocate or establish a store. Accordingly, to the extent that a market has multiple dealers of a particular line-make, as most of our key markets do with respect to most vehicle lines we sell, we are subject to significant intra-brand competition.

We also are subject to competition from independent automobile service shops and service center chains. We believe that the principal competitive factors in the service and repair industry are price, location, the use of factory-approved replacement parts, expertise with the particular vehicle lines and customer service. In addition to competition for vehicle sales and service, we face competition from a broad range of financial institutions in our finance and insurance and after-market products businesses. We believe the principal

Our business exposes us to the risk of liabilities arising out of our operations. For example, liabilities may arise out of claims of employees, customers or other third parties for personal injury or property damage occurring in the course of our operations. We could also be subject to fines and civil and criminal penalties in connection with alleged violations of federal and state laws or regulatory requirements.

The automotive retailing business in general is subject to substantial risk of property loss due to the significant concentration of property values at store locations. In our case in particular, our operations are concentrated in states and regions in which natural disasters and severe weather events (such as hurricanes, earthquakes and hail storms) may subject us to substantial risk of property loss and operational disruption. Under self-insurance programs, we retain various levels of aggregate loss limits, per claim deductibles and claims handling expenses as part of our various insurance programs, including property and casualty and employee medical benefits. Costs in excess of this retained risk per claim may be insured under various contracts with third-party insurance carriers. We estimate the ultimate costs of these retained insurance risks based on actuarial evaluation and historical claims experience, adjusted for current trends and changes in claims-handling procedures. The level of risk we retain may change in the future as insurance market conditions or other factors affecting the economics of our insurance purchasing change. Although we have, subject to certain limitations and exclusions, substantial insurance, we cannot assure you that we will not be exposed to uninsured or underinsured losses that could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Provisions for retained losses and deductibles are made by charges to expense based upon periodic evaluations of the estimated ultimate liabilities on reported and unreported claims. The insurance companies that underwrite our insurance require that we secure certain of our obligations for deductible reimbursements with collateral. Our collateral requirements are set by the insurance companies and, to date, have been satisfied by posting surety bonds, letters of credit and/or cash deposits. Our collateral requirements may change from time to time based on, among other things, our claims experience. We include additional details about our collateral requirements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this document, as well as in the Notes to our Consolidated Financial Statements.

As of December 31, 2004, we employed approximately 27,000 full time employees, approximately 450 of whom were covered by collective bargaining agreements. We believe that we have good relations with our employees.

Our operations generally experience higher volumes of vehicle sales and service in the second and third quarters of each year due in part to consumer buying trends and the introduction of new vehicle models. Also, demand for cars and light trucks is generally lower during the winter months than in other seasons, particularly in regions of the United States where stores may be subject to adverse winter weather conditions. Accordingly, we expect our revenue and operating results generally to be lower in our first and fourth quarters as compared to our second and third quarters. However, revenue may be impacted significantly from quarter to quarter by actual or threatened severe weather events, and other factors unrelated to season, such as changing economic conditions and vehicle manufacturer incentive programs.

We own a number of registered service marks and trademarks, including, among other marks, AutoNation (ARTWORK)® and AutoNation®. Pursuant to agreements with vehicle manufacturers, we have the right to

use and display manufacturers’ trademarks, logos and designs at our stores and in our advertising and promotional materials, subject to certain restrictions. We also have licenses pursuant to various agreements with third parties authorizing the use and display of the marks and/or logos of such third parties, subject to certain restrictions. The current registrations of our service marks and trademarks in the United States and foreign countries are effective for varying periods of time, which we may renew periodically, provided that we comply with all applicable laws.

Mike Jackson has served as our Chairman of the Board since January 1, 2003 and as our Chief Executive Officer and Director since September 1999. From October 1998 until September 1999, Mr. Jackson served as Chief Executive Officer of Mercedes-Benz USA, LLC, a North American operating unit of DaimlerChrysler AG, a multinational automotive manufacturing company. From April 1997 until September 1999, Mr. Jackson also served as President of Mercedes-Benz USA. From July 1990 until March 1997, Mr. Jackson served in various capacities at Mercedes-Benz USA, including as Executive Vice President immediately prior to his appointment as President of Mercedes-Benz USA. Mr. Jackson was also the managing partner from March 1979 to July 1990 of Euro Motorcars of Bethesda, Maryland, a regional group that owned and operated eleven automotive dealership franchises, including Mercedes-Benz and other brands of automobiles.

Michael E. Maroone has served as our President and Chief Operating Officer since August 1999. Following our acquisition of the Maroone Automotive Group in January 1997, Mr. Maroone served as President of our New Vehicle Dealer Division. In January 1998, Mr. Maroone was named President of our Automotive Retail Group with responsibility for our new and used vehicle operations. Prior to joining our company, Mr. Maroone was President and Chief Executive Officer of the Maroone Automotive Group, one of the country’s largest privately-held automotive retail groups prior to its acquisition by us.

Craig T. Monaghan has served as our Senior Vice President and Chief Financial Officer since May 2000. From June 1998 to May 2000, Mr. Monaghan was Chief Financial Officer of iVillage.com, a leading women’s network on the Internet. From 1991 until June 1998, Mr. Monaghan served in various executive capacities for Reader’s Digest Association, Inc., most recently as Vice President and Treasurer. Prior to joining Reader’s Digest, Mr. Monaghan worked in the finance groups of Bristol-Myers Squibb Company and General Motors Corporation.

Jonathan P. Ferrando has served as our Senior Vice President, General Counsel and Secretary since January 2000 and in September 2004 he also assumed responsibility for human resources. Mr. Ferrando joined our Company in July 1996 and served in various capacities within our company, including as Senior Vice President and General Counsel of our Automotive Retail Group from March 1998 until January 2000. Prior to joining our company, Mr. Ferrando was a corporate attorney with Skadden, Arps, Slate, Meagher & Flom from 1991 until 1996.

Kevin P. Westfall has served as our Senior Vice President, Finance and Insurance and Fixed Operations since May 2003. From 2001 until May 2003, Mr. Westfall served as our Senior Vice President, Finance and Insurance. Previously, he served as President of our former wholly-owned captive finance company, AutoNation Financial Services, from 1997 through 2001. He is also the former President of BMW Financial Services for North America.

Our business, financial condition, results of operations, cash flows and prospects, and the prevailing market price and performance of our common stock, may be adversely affected by a number of factors, including the matters discussed below. Certain statements and information set forth in this Annual Report on Form 10-K, as well as other written or oral statements made from time to time by us or by our authorized officers on our behalf, constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. We intend for our forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we set forth this statement and these risk factors in order to comply with such safe harbor provisions. You should note that our forward-looking statements speak only as of the date of this Annual Report on Form 10-K or when made and we undertake no duty or obligation to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that the expectations, plans, intentions and projections reflected in our forward-looking statements are reasonable, such statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The risks, uncertainties and other factors that our stockholders and prospective investors should consider include, but are not limited to, the following:

The automotive retailing industry is cyclical and is sensitive to changing economic conditions and various other factors. Our business and results of operations are substantially dependent on new vehicle sales levels in the United States and in our particular geographic markets and the level of gross profit margins that we can achieve on our sales of new vehicles, all of which are very difficult to predict.

The automotive retailing industry historically has been subject to substantial cyclical variation characterized by periods of oversupply of new vehicles and weak consumer demand, although the impact on retailers has been mitigated in recent years by low interest rates and high manufacturer incentives. We believe that many factors affect industry-wide sales of new vehicles and retailers’ gross profit margins, including consumer confidence in the economy, the level of manufacturers’ excess production capacity, manufacturer incentives (and consumers’ reaction to such offers), intense industry competition, interest rates, the prospects of war, other international conflicts or terrorist attacks, severe weather conditions, the level of personal discretionary spending, product quality, affordability and innovation, fuel prices, credit availability, unemployment rates, the number of consumers whose vehicle leases are expiring, and the length of consumer loans on existing vehicles. Significant increases in interest rates, in particular, could significantly impact industry new vehicle sales due to the direct relationship between higher rates and higher monthly loan payments, a critical factor for many vehicle buyers. The length of consumer auto loans has increased recently and leasing of vehicles has decreased, which may result in customers deferring vehicle purchases in the future. We experienced downward pressure on our new vehicle gross profit margins during 2004, which we believe was largely due to manufacturers’ excess production capacity and significant competition in the industry. Our new vehicle sales may differ from industry sales, including due to particular economic conditions and other factors in the geographic markets in which we operate. A significant decrease in new vehicle sales levels in the United States (or in our particular geographic markets) during 2005 as compared to 2004, or a further decrease in new vehicle gross profit margins, could cause our actual earnings results to differ materially from our prior results and projected trends. Economic conditions and the other factors described above also may materially adversely impact our sales of used vehicles, finance and vehicle protection products, vehicle service and parts and repair services.

We are subject to restrictions imposed by, and significant influence from, vehicle manufacturers that may adversely impact our business, financial condition, results of operations, cash flows and prospects, including our ability to acquire additional stores.

The major vehicle manufacturers have significant influence over the operations of our stores. The terms and conditions of our framework, franchise and related agreements and the manufacturers’ interests and

objectives may, in certain circumstances, conflict with our interests and objectives. For example, manufacturers can set performance standards with respect to sales volume, sales effectiveness and customer satisfaction, and can influence our ability to acquire additional stores, the naming and marketing of our stores, the operations of our e-commerce sites, our selection of store management, the condition of our store facilities, product stocking and advertising spending levels, and the level at which we capitalize our stores. From time to time, we are precluded under agreements with certain manufacturers from acquiring additional franchises, or subject to other adverse actions, to the extent we are not meeting certain performance criteria at our existing stores (with respect to matters such as sales volume, sales effectiveness and customer satisfaction) until our performance improves in accordance with the agreements, subject to applicable state franchise laws. Manufacturers also have the right to establish new franchises or relocate existing franchises, subject to applicable state franchise laws. The establishment or relocation of franchises in our markets could have a material adverse effect on the financial condition, results of operations, cash flows and prospects of our stores in the market in which the franchise action is taken. The framework, franchise and related agreements also grant the manufacturer the right to terminate or compel us to sell our franchise for a variety of reasons (including uncured performance deficiencies, any unapproved change of ownership or management or any unapproved transfer of franchise rights) subject to state laws. From time to time, certain major manufacturers assert sales and customer satisfaction performance deficiencies under the terms of our framework and franchise agreements at a limited number of our stores. While we believe that we will be able to renew all of our franchise agreements, we cannot guarantee that all of our franchise agreements will be renewed or that the terms of the renewals will be favorable to us. We cannot assure you that our stores will be able to comply with manufacturers’ sales, customer satisfaction and other performance requirements in the future, which may affect our ability to acquire new stores or renew our franchise agreements, or subject us to other adverse actions, including termination or compelled sale of a franchise, any of which could have a material adverse effect on our financial condition, results of operations, cash flows and prospects.

In addition, some of our framework agreements give the manufacturer or distributor the right to acquire, at fair market value, our automotive stores franchised by that manufacturer in specified circumstances in the event of our default under the indenture for our senior unsecured notes due August 2008 and the credit agreements for our two revolving credit facilities.

Our stores are dependent on the programs and operations of vehicle manufacturers and, therefore, any changes to such programs and operations may adversely affect our store operations and, in turn, affect our business, results of operations, financial condition, cash flows and prospects.

The success of our stores is dependent on vehicle manufacturers in several key respects. First, we rely exclusively on the various vehicle manufacturers for our new vehicle inventory. The success of our stores is dependent on a vehicle manufacturer’s ability to produce and allocate to our stores an attractive, high quality and desirable product mix at the right time in order to satisfy customer demand. Additionally, manufacturers generally support their franchisees by providing direct financial assistance in various areas, including, among others, advertising assistance and inventory financing assistance. Beyond funds paid directly to their franchisees, the manufacturers also from time to time have established various incentive programs designed to spur consumer demand for their vehicles, such as 0% financing offers. From time to time, manufacturers modify and discontinue these dealer assistance and consumer incentive programs, which could have a significant adverse effect on our consolidated results of operations and cash flows. The core brands of vehicles that we sell, representing approximately 98% of the new vehicles that we sold in 2004, are manufactured by Ford, General Motors, DaimlerChrysler, Toyota, Nissan, Honda and BMW. Any event that has a material adverse effect on our relationships with these vehicle manufacturers or the financial condition, credit ratings, management or designing, marketing, production or distribution capabilities of these manufacturers or others with whom we hold franchises, such as general economic downturns or recessions, increases in interest rates, labor strikes, supply shortages, adverse publicity, product defects, vehicle recall campaigns, litigation, poor product mix or unappealing vehicle design, may result in a material adverse effect on our business, results of operations, financial condition, cash flows and prospects.

We are subject to numerous legal and administrative proceedings, which, if the outcomes are adverse to us, could materially adversely affect our business, results of operations, financial condition, cash flows and prospects.

We are involved, and will continue to be involved, in numerous legal proceedings arising out of the conduct of our business, including litigation with customers, employment-related lawsuits, class actions, purported class actions and actions brought by governmental authorities.

Many of our Texas dealership subsidiaries have been named in three class action lawsuits brought against the Texas Automobile Dealers Association (“TADA”) and approximately 700 new vehicle stores in Texas that are members of the TADA. The three actions allege that since January 1994 Texas dealers have deceived customers with respect to a vehicle inventory tax and violated federal antitrust and other laws as well. In April 2002, in two actions (which have been consolidated) the state court certified two classes of consumers on whose behalf the action would proceed. In October 2002, the Texas Court of Appeals affirmed the trial court’s order of class certification in the state action and we and the other dealership defendants appealed that ruling to the Texas Supreme Court, which on March 26, 2004 declined to review the class certification. The defendants petitioned the Texas Supreme Court to reconsider its denial of review of the class certification and that petition was denied on September 10, 2004. In the federal antitrust case, in March 2003, the federal court conditionally certified a class of consumers. We and the other dealership defendants appealed the ruling to the Fifth Circuit Court of Appeals, which on October 5, 2004 reversed the class certification order and remanded the case back to the federal district court for further proceedings. In February 2005, we and the plaintiffs in both the state and federal cases agreed to settlement terms in the respective cases. The settlements are contingent upon court approval and the hearing on that approval has not yet been scheduled. The estimated expense of the settlements is not a material amount and includes our stores issuing coupons for discounts off future vehicle purchases, refunding cash in certain circumstances, and paying attorneys’ fees and certain costs. Under the terms of the settlements, our stores would be permitted to continue to itemize and pass through to the customer the cost of the inventory tax. If the settlements are not approved, we would then vigorously assert available defenses in connection with the TADA lawsuits. Further, we may have certain rights of indemnification with respect to certain aspects of these lawsuits. However, an adverse resolution of the TADA lawsuits could result in the payment of significant costs and damages and negatively impact our ability to itemize and pass through to the customer the cost of the tax in the future, which could have a material adverse effect on our business, results of operations, financial condition, cash flows and prospects.

In addition to the foregoing cases, we also are a party to numerous other legal proceedings that arose in the conduct of our business. We do not believe that the ultimate resolution of these matters will have a material adverse effect on our business, results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations, financial condition, cash flows and prospects.

Our operations, including, without limitation, our sales of finance, insurance and vehicle protection products, are subject to extensive governmental laws, regulation and scrutiny. If we are found to be in violation of any of these laws or regulations, or if new laws or regulations are enacted that adversely affect our operations, our business, operating results and prospects could suffer.

The automotive retailing industry, including our facilities and operations, is subject to a wide range of federal, state and local laws and regulations, such as those relating to sales of finance, insurance and vehicle protection products, licensing, consumer protection, consumer privacy, escheatment, money laundering, environmental, health and safety, wage-hour, anti-discrimination and other employment practices. Specifically with respect to the sale of finance, insurance and vehicle protection products at our stores, we are subject to various laws and regulations, the violation of which could subject us to consumer class action or other lawsuits or governmental investigations and adverse publicity, in addition to administrative, civil or criminal sanctions. The violation of other laws and regulations to which we are subject also can result in administrative, civil or criminal sanctions against us, which may include a cease and desist order against the subject operations or even revocation or suspension of our license to operate the subject business, as well as significant fines and

Legislative or similar measures have recently been pursued in certain states in which we operate to limit the fees that dealerships may earn in connection with arranging financing for vehicle purchasers, to require disclosure to consumers of the fees that stores earn to arrange financing and to enact other additional regulations with respect to various aspects of our business, including with respect to the sale of used vehicles and finance and insurance products. Recent litigation against certain vehicle manufacturers’ captive finance subsidiaries alleging discriminatory lending practices has resulted in settlements, and may result in future settlements, that could reduce the fees earned by our stores in connection with the origination of consumer loans. The enactment of laws and regulations that impair or restrict our finance and insurance or other operations could have a material adverse effect on our business, results of operations, financial condition, cash flows and prospects.

Our ability to grow our business may be limited by our ability to acquire automotive stores in key markets on favorable terms or at all.

The automotive retail industry is a mature industry. Accordingly, the growth of our automotive retail business since our inception has been primarily attributable to acquisitions of franchised automotive dealership groups. As described above, manufacturer approval of our proposed acquisitions generally is subject to our compliance with applicable performance standards (including with respect to matters such as sales volume, sales effectiveness and customer satisfaction) or established acquisition limits, particularly regional and local market limits. In addition, in the current environment, it has been difficult to identify dealership acquisitions in our core markets that meet our return on investment targets, including due to the acquisition price expectations of sellers, and there can be no assurance that we will be able to identify a significant number of acquisition targets that meet our targeted return thresholds in the future. As a result, we cannot assure you that we will be able to continue to acquire stores selling desirable automotive brands at desirable locations in our key markets or that any such acquisitions can be completed on favorable terms or at all. Acquisitions involve a number of risks, many of which are unpredictable and difficult to quantify or assess, including, among other matters, risks relating to known and unknown liabilities of the acquired business and projected operating performance.

We are subject to interest rate risk in connection with our floorplan notes payable, revolving credit facilities and mortgage facilities that could have a material adverse effect on our profitability.

The interest rates under our revolving credit facilities, mortgage facilities and certain of our floorplan notes payable all increased in 2004, and we anticipate that such rates will increase further in 2005. Although we expect increases in our interest rates under our floorplan notes payable to be partially offset by increases in floorplan assistance from the automotive manufacturers, we cannot assure you that a significant increase in interest rates would not have a material adverse effect on our business, financial condition, results of operations or cash flows. The net inventory carrying benefit that we have realized as a result of floorplan assistance received from the automotive manufacturers has decreased in recent years, and we expect additional net decreases in 2005.

Our revolving credit facilities and the indenture relating to our senior unsecured notes contain certain restrictions on our ability to conduct our business.

The indenture relating to the 9% senior unsecured notes due August 2008 and the credit agreements relating to our two revolving credit facilities contain numerous financial and operating covenants that limit the discretion of our management with respect to various business matters. These covenants place significant restrictions on, among other things, our ability to incur additional indebtedness, to create liens or other encumbrances, to make certain payments (including dividends and repurchases of our shares) and investments, and to sell or otherwise dispose of assets and merge or consolidate with other entities. Our revolving credit facilities also require us to meet certain financial ratios and tests that may require us to take action to

reduce debt or act in a manner contrary to our business objectives. A failure by us to comply with the obligations contained in our revolving credit facilities or the indenture could result in an event of default under our revolving credit facilities or the indenture, which could permit acceleration of the related debt and acceleration of debt under other instruments that may contain cross-acceleration or cross-default provisions. If any debt is accelerated, our assets may not be sufficient to repay in full such indebtedness and our other indebtedness. In addition, we have granted certain manufacturers the right to acquire, at fair market value, our automotive stores franchised by that manufacturer in specified circumstances in the event of our default under the indenture for our senior unsecured notes due August 2008 and the credit agreements for our two revolving credit facilities.

We must test our intangible assets for impairment at least annually, which may result in a material, non-cash write down of goodwill or franchise rights and could have a material adverse impact on our results of operations and shareholders’ equity.

Goodwill and indefinite-lived intangibles are subject to impairment assessments at least annually (or more frequently when events or circumstances indicate that an impairment may have occurred) by applying a fair-value based test. Our principal intangible assets are goodwill and our rights under our franchise agreements with vehicle manufacturers. These impairment assessments may result in a material, non-cash write-down of goodwill or franchise values. An impairment would have a material adverse impact on our results of operations and shareholders’ equity.

We lease our corporate headquarters facility in Fort Lauderdale, Florida pursuant to a lease expiring in 2010. As of February 2005, we also own or lease numerous facilities relating to our operations in 18 states. These facilities consist primarily of automobile showrooms, display lots, service facilities, collision repair centers, supply facilities, automobile storage lots, parking lots and offices. We believe that our facilities are sufficient for our current needs and are in good condition in all material respects.

No matters were submitted to a vote of our stockholders during the fourth quarter of the fiscal year ended December 31, 2004.

Our common stock is traded on The New York Stock Exchange under the symbol “AN.” The following table sets forth, for the periods indicated, the high and low sales prices per share of the common stock as reported on the consolidated transaction reporting system.

On February 18, 2005, the closing price of our common stock was $19.74 per share as reported by the NYSE. As of February 18, 2005, there were approximately 3,000 holders of record of our common stock.

We have not declared or paid any cash dividends on our common stock during our two most recent fiscal years. We do not anticipate paying cash dividends in the foreseeable future. The indenture for our senior unsecured notes and the credit agreements for our two revolving credit facilities restrict our ability to declare and pay cash dividends.

Information about our equity compensation plans is set forth in Item 12 of this Form 10-K.

The table below sets forth information with respect to shares of common stock repurchased by AutoNation, Inc. during the three months ended December 31, 2004. See Note 10 of our Notes to Unaudited Consolidated Financial Statements for additional information regarding our stock repurchase programs.


(1)	Future share repurchases are subject to limitations contained in the indenture relating to the Company’s senior unsecured notes and credit agreements relating to its two revolving credit facilities.


(2)	Shares repurchased under our stock repurchase program announced on May 14, 2003, which authorizes the Company to repurchase up to $500.0 million of shares. This program does not have an expiration date. Additionally, in October 2004, the Company’s Board of Directors authorized an additional $250.0 million share repurchase program.

You should read the following Selected Financial Data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our Consolidated Financial Statements and Notes thereto and other financial information included elsewhere in this Form 10-K.

See Notes 10, 12, 13, 14, and 16 of Notes to Consolidated Financial Statements for discussion of shareholders’ equity, income taxes, earnings per share, discontinued operations, and acquisitions, respectively, and their effect on comparability of year-to-year data. See “Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters” for a discussion of our dividend policy.

You should read the following discussion in conjunction with Part I, including matters set forth in the “Risk Factors” section of this Form 10-K, and our Consolidated Financial Statements and notes thereto included elsewhere in this Form 10-K.

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.

Our parts and service departments provide reconditioning repair work for used vehicles acquired by the used vehicle department and minor preparatory work for new vehicles. The parts and service departments charge the new and used departments as if they were third parties in order to account for total activity performed by that department. In 2004, we determined that the revenue and related cost of sales of both new

The effect of the adjustments was to reduce both revenue and cost of sales for new vehicles by $84 million, $82 million, and $81 million for the years ended December 31, 2004, 2003, and 2002, respectively, and for used vehicles by $195 million, $191 million and $189 million for the same periods, respectively. Accordingly, our revenue-based performance metrics, such as revenue per vehicle, gross profit as a percent of revenue, and selling, general, and administrative expense as a percent of revenue, also have been revised. These revisions do not have a material impact on the amounts for any period or respective trends.

AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of December 31, 2004, we owned and operated 358 new vehicle franchises from 281 dealerships located in major metropolitan markets in 17 states, predominantly in the Sunbelt region of the United States. Our stores, which we believe include some of the most recognizable and well known in our key markets, sell 35 different brands of new vehicles. The core brands of vehicles that we sell, representing approximately 98% of the new vehicles that we sold in 2004, are manufactured by Ford, General Motors, Daimler Chrysler, Toyota, Nissan, Honda and BMW.

We operate in a single industry segment, automotive retailing. 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. We believe that the significant scale of our operations and the quality of our managerial talent allow us to achieve efficiencies in our key markets by, among other things, reducing operating expenses, leveraging our market brands and advertising, improving asset management and sharing and implementing best practices across all of our stores.

During 2004, we experienced revenue growth in each of our business lines while leveraging our cost structure and reducing new and used vehicle inventory levels. The year ended December 31, 2004 was marked by a number of accomplishments, including the implementation of a streamlined operational structure, the successful transition from a low interest rate environment to a rising interest rate environment, especially in regard to inventories, and the launch of the “AutoNation Pledge.” The “AutoNation Pledge” is our commitment to provide our customers with disclosures relating to the finance and insurance sales process. In 2005, we anticipate that new vehicle sales will remain stable in the United States and continue to be highly competitive. However, the level of retail sales for 2005 is very difficult to predict.

For the years ended December 31, 2004 and 2003, we had net income from continuing operations of $396.4 million and $515.2 million, respectively, and diluted earnings per share from continuing operations of $1.45 and $1.80, respectively. During 2004 and 2003, we recorded net income tax benefits in continuing operations totaling $25.8 million and $140.9 million (which includes $127.5 million recognized as a result of an Internal Revenue Service (“IRS”) settlement), respectively, primarily related to resolution of various income tax matters.

During 2004, we had income from discontinued operations totaling $37.2 million, net of income taxes. In 2004, we recognized a $52.2 million gain included in discontinued operations related to the settlement of various income tax matters related to items previously reported in discontinued operations. We also recognized a loss totaling $13.9 million, net of income taxes, related to stores that were sold or for which we have entered into a definitive agreement to sell. Certain amounts reflected in the accompanying Consolidated Financial Statements for the years ended December 31, 2004, 2003, and 2002, have been adjusted to classify the results of the stores described above as discontinued operations. Additionally, 2003 was impacted by a loss from discontinued operations due to an agreement reached with ANC Rental and a charge for the cumulative effect of accounting change for manufacturer allowances, primarily related to floorplan assistance.

During 2004, we acquired 14.1 million shares of our common stock for an aggregate purchase price of $236.8 million. As of February 18, 2005, we repurchased an additional .2 million shares of common stock for an aggregate purchase price of $4.0 million, leaving approximately $304.4 million available for share repurchases under the repurchase program authorized by our Board of Directors. Our revolving credit facilities and the indenture for our senior notes contain restrictions on our ability to make share repurchases. See further discussion under the heading “Financial Condition.” During 2004, 8.7 million shares of our common stock were issued upon the exercise of stock options resulting in proceeds of $94.2 million.

We prepare our Consolidated Financial Statements in conformity with generally accepted accounting principles which require us 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. Actual outcomes could differ from those estimates. Set forth below are the policies that we have identified as critical to our business operations and the understanding of our results of operations or that involve significant estimates. For detailed discussion of other significant accounting policies see Note 1, Summary of Significant Accounting Policies, of Notes to Consolidated Financial Statements.

Intangible and Long-Lived Assets — Our policies related to intangible assets determine the valuation of intangible and long-lived assets, which is a significant component of our consolidated balance sheets. Additionally, these policies affect the amount of future amortization and possible impairment charges we may incur. Intangible assets consist primarily of the cost of acquired businesses in excess of the fair value of net assets acquired, using the purchase method of accounting.

Acquired intangible assets are separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented, or exchanged, regardless of our intent to do so. Our principal identifiable intangible assets are rights under franchise agreements with vehicle manufacturers. We generally expect our franchise agreements to survive for the foreseeable future, and, when the agreements do not have indefinite terms, anticipate routine renewals of the agreements without substantial cost. We believe that our franchise agreements will contribute to cash flows for the foreseeable future and have indefinite lives.

Goodwill and intangibles with indefinite lives are tested for impairment annually at June 30 or more frequently when events or circumstances indicate that impairment may have occurred. We are subject to financial statement risk to the extent that intangible assets become impaired due to decreases in the fair market value of the related underlying business.

We estimate the depreciable lives of our property, plant and equipment, including leasehold improvements, and review them for impairment when events or circumstances indicate that their carrying amounts may be impaired. We periodically evaluate the carrying value of assets held-for-sale to determine if, based on market conditions, the values of these assets should be adjusted. Although we believe our property, plant and equipment and assets held-for-sale are appropriately valued, the assumptions and estimates used may change and we may be required to record impairment charges to reduce the value of these assets.

Revenue Recognition — The majority of our revenue is from the sales of new and used vehicles and commissions from related finance and insurance products. We recognize revenue in the period in which products are sold or services are provided. We recognize vehicle and finance and insurance revenue when a sales contract has been executed, the vehicle has been delivered and payment has been received or financing has been arranged. Revenue on finance and insurance products represents commissions earned by us for: (i) loans and leases placed with financial institutions in connection with customer vehicle purchases financed and (ii) vehicle protection products sold. An estimated liability for chargebacks against revenue recognized from sales of finance and vehicle protection products is established during the period in which the related revenue is recognized. We may also participate in future underwriting profit, pursuant to retrospective commission arrangements, that would be recognized over the life of the policies. Rebates, holdbacks, floorplan assistance and certain other dealer credits received from manufacturers are recorded as offsets to the cost of the vehicle and recognized into income upon the sale of the vehicle or when earned under a specific manufacturer program, whichever is later.

Other — Additionally, significant estimates have been made by us in the accompanying Consolidated Financial Statements including allowances for doubtful accounts, and for accruals related to self-insurance programs, certain legal proceedings and estimated tax liabilities.

The following table details the net floorplan benefit consisting of floorplan assistance, a component of new vehicle gross profit, and floorplan interest expense.

We have presented below our operating results on a same store basis to reflect our internal performance. Same store operating results include the results of stores for identical months in both years included in the comparison, starting with the first month of our ownership or operation.

Reported new vehicle performance for 2004 benefited from the impact of acquisitions when compared to same store performance.

Same store new vehicle revenue for 2004 increased compared to 2003. Although same store revenue per unit increased, it was partially offset by a decrease in same store unit volume. The increase in same store average revenue per unit retailed was attributable to increased dealer incentives and a shift in mix to more expensive trucks and luxury vehicles. The decrease in same store unit volume is consistent with industry trends for our brand and market mix. The same store unit volume decrease was also due in part to the four major hurricanes that caused store closings and substantial disruption of our business throughout Florida and the Southeast during the third quarter of 2004. During the fourth quarter of 2004, we saw improvements in these markets driven by post-hurricane demand and a stronger local economy.

Same store gross profit and gross profit as a percentage of revenue decreased during 2004 due to intense competition at the retail level and high average inventory levels during the year. At December 31, 2004, our new vehicle inventories were at $2.2 billion or 53 days supply, an improvement compared to new vehicle inventories of $2.4 billion or 71 days supply at December 31, 2003. This improvement was due to our continued focus on managing inventory levels and higher sales rates during December 2004, although industry inventory levels remain high. In 2005, we anticipate that new vehicle sales will remain stable in the United States and continue to be highly competitive. However, the level of retail sales for 2005 is very difficult to predict.

New vehicle revenue for 2003 was relatively flat compared to 2002 as the average revenue per unit increase was offset by a decrease in unit volume. The average increase in revenue per unit was attributable to a shift in mix to more expensive trucks and luxury vehicles. The decrease in unit volume is primarily due to lower consumer demand in certain markets in which we operate and for certain brands sold by us. We experienced downward pressure on our new vehicle gross profit margins during 2003, which we believe was largely due to high inventory levels and intense competition in the industry.

The net inventory carrying benefit (floorplan interest expense net of floorplan assistance from manufacturers) decreased in 2004 compared to 2003, primarily as a result of increased floorplan interest expense due to higher interest rates and higher average inventory levels during 2004. In 2005, we expect the net inventory carrying benefit to decrease due to higher interest rates partially offset by expected lower inventory levels.

Reported used vehicle performance for 2004 benefited from the impact of acquisitions when compared to same store performance.

Same store used vehicle revenue for 2004 increased compared to 2003 as a result of an increase in same store average revenue per unit partially offset by a slight decrease in same store unit volume. The decline in used vehicle unit volume is in part due to strong manufacturer incentives for new vehicles. Used vehicle revenue was also impacted by decreased unit sales volume in part due to the effect of the four major hurricanes on our stores in Florida and the Southeast during the third quarter of 2004. During the fourth quarter of 2004, we saw improvements in these markets driven by post-hurricane demand and a stronger local economy. Same store gross profit for 2004 remained relatively unchanged compared to 2003. Same store gross profit as a percentage of revenue for 2004 increased 10 basis points to 11.5% as a result of an improved inventory mix and a strengthening used vehicle market toward the end of 2004.

Used vehicle total revenue for 2003 decreased as compared to 2002 as a result of a decrease in wholesale revenue and lower used vehicle retail unit volume and revenue per vehicle retailed. Wholesale revenue decreased in 2003 compared to 2002 as a result of fewer trade-ins due to decreased new vehicle unit volume and improved management of our used vehicle inventory. The revenue per vehicle retailed decrease reflects lower prices as a function of our shift in inventory to lower cost units. Used vehicle total gross profit increased slightly in 2003 primarily due to increased wholesale gross profit, which was positively impacted by our used vehicle market strategy resulting in fewer vehicles being wholesaled.

Used vehicle inventories were at $295.9 million or 37 days supply at December 31, 2004, which represents a 6 day improvement compared to 2003 driven by our continued focus on stocking a better mix of units through the use of our used vehicle management programs and a strengthening used vehicle market toward the end of 2004.

Parts and service revenue is primarily derived from repair orders for service labor and related parts paid directly by customers or via reimbursement from manufacturers and others under warranties.

Reported parts and service revenue and gross profit for 2004 benefited from the impact of acquisitions when compared to same store performance.

Same store parts and service revenue and gross profit increased during 2004 due to increases in customer-paid work for parts and service, attributable to the continued implementation of our service drive process, maintenance menu and service marketing program, as well as optimization of our pricing models and training programs. Parts and service was also impacted by the effect of the four major hurricanes on our stores in Florida and the Southeast during the third quarter of 2004. During the fourth quarter of 2004, we saw improvements in these markets driven by post-hurricane demand and a stronger local economy. Results in 2004 benefited from an additional service day as compared to the same period in 2003.

Total parts and service revenue and gross profit remained relatively flat in 2003 compared to 2002. This was driven by improved pricing on customer-paid work offset by decreases in warranty repair orders, wholesale parts and our collision repair business. Significant decreases in domestic warranty repair orders offset import and luxury increases realized in 2003.

Reported finance and insurance revenue and gross profit for 2004 benefited from the impact of acquisitions when compared to same store performance.

Same store finance and insurance revenue and gross profit increased for 2004 due to increased vehicle revenue, product penetration and retrospective commissions received on extended warranties. Additionally, our improvement has been driven by our ongoing concentration on our fourth quartile stores and our transparent sales process that is supported by the “AutoNation Pledge.” The “AutoNation Pledge” is our commitment to provide our customers with disclosures relating to the finance and insurance sales process. Finance and insurance revenue and gross profit were also impacted by the effect of the four major hurricanes on our stores in Florida and the Southeast during the third quarter of 2004. During the fourth quarter of 2004, we saw improvements in these markets driven by post-hurricane demand and a stronger local economy. Substantially higher interest rates in the future may negatively impact finance and insurance revenue and gross profit.

Finance and insurance revenue and gross profit increased in 2003 primarily due to increased product penetration as a result of the continued usage of our menu-based finance and insurance sales process. During 2003, we focused on our underperforming fourth quartile stores and provided intensive, ongoing training of finance and insurance associates in all of our stores. In the fourth quarter of 2003, we also substantially completed the transition to manufacturer extended warranty programs and expanded our lender network to include prime and non-prime lenders. In addition, lower interest rates facilitated finance and insurance sales.

During 2004, selling, general and administrative expenses increased $61.8 million or 2.9%. As a percent of total gross profit, selling, general and administrative expenses decreased 50 basis points during 2004. Our cost structure was targeted for vehicle sales volumes and gross margins that did not materialize through the third quarter of 2004. During the fourth quarter, our results benefited from increased vehicle sales, as well as cost-control and productivity improvements. Throughout 2004, we have continued to leverage our cost structure, especially in the areas of compensation and, to a lesser extent, advertising and occupancy costs. Occupancy costs benefited from lease buy-outs completed in 2004. In September 2004, we announced a new streamlined regional structure that is expected to produce an annual reduction in selling, general and administrative expenses of $30 million through cost-control and productivity improvements. Charges associated with the reorganization, primarily severance, totaled $2.9 million for 2004 and are included in Other Losses in the Consolidated Income Statements. Additionally, we continue to centralize certain key store-level accounting and administrative activities in certain of our operating regions, which we expect will reduce our operating costs and improve our operating efficiency.

In 2003, selling, general and administrative expenses decreased compared to 2002 as a result of our continued focus on cost-cutting and operational improvements, particularly in the areas of compensation and other selling, general and administrative expenses, partially offset by increases in advertising expenses.

Other losses for 2003 were primarily the result of a real estate impairment charge totaling $17.6 million related to two underperforming franchised new vehicle stores which currently operate in converted used vehicle megastores. We also recognized an additional real estate impairment charge in 2003 totaling $9.9 million ($6.1 million, net of taxes) included in loss from Discontinued Operations related to an underperforming franchised new vehicle store which operated in a converted used vehicle megastore.

Floorplan interest expense was $81.8 million, $68.9 million and $71.8 million for the years ended December 31, 2004, 2003 and 2002, respectively. The increase is primarily the result of higher average inventory levels and higher interest rates during 2004.

For the years ended December 31, 2004 and 2003, the income statement impact from interest rate hedges was additional expense of $2.9 million and $.6 million, respectively. There were no interest rate hedges in 2002. See discussion in Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The decrease in floorplan interest expense in 2003 compared to 2002 is primarily the result of lower interest rates partially offset by higher average inventory levels.

Other interest expense was incurred primarily on borrowings under mortgage facilities and outstanding senior unsecured notes. Other interest expense was $76.9 million, $71.8 million and $50.5 million for the years ended December 31, 2004, 2003 and 2002, respectively. Other interest expense also includes interest related to the IRS settlement totaling $4.8 million and $12.1 million for the years ended December 31, 2004 and 2003, respectively, and represents interest due under the agreement from the date of the settlement. The increase in other interest expense for 2004 compared to 2003, excluding amounts related to the IRS settlement, is primarily due to higher average debt outstanding.

During 2004, we repurchased $3.4 million (face value) of our 9.0% senior unsecured notes at an average price of 114.3% of face value or $3.9 million. The $.5 million premium we paid for this repurchase was recognized as Other Interest Expense in the accompanying 2004 Consolidated Income Statement.

The increase in 2003 compared to 2002 is primarily due to higher average debt outstanding and increased amortization expense resulting from payments made by us in connection with the November 2002 amendment to our senior unsecured notes partially offset by lower interest rates. Additionally, as a result of completed capital expenditure projects, there was a lower amount of interest expense capitalized to construction in progress in 2003 compared to 2002.

Interest income for 2004 was virtually unchanged compared to 2003. The 2003 decrease compared to 2002 is primarily the result of lower average cash and investment balances combined with lower interest rates.

Other income in 2003 primarily relates to the sale of our interest in an equity-method investment in LKQ Corporation, an auto parts recycling business, for $38.3 million, resulting in a pre-tax gain of $16.5 million.

In September 2002, one of our captive insurance companies terminated a reinsurance agreement with a third-party insurance company and transferred our risk pertaining to certain extended warranty products under the reinsurance agreement back to such insurance company. As a result of the transaction, we liquidated related restricted assets, realizing a $3.1 million gain on the sale. Additionally, in 2002, we converted our remaining restricted investments to restricted cash, realizing a $2.7 million gain on the sale.

Income taxes have been provided based upon our anticipated underlying annual effective income tax rate. The effective income tax rate was 34.7%, 15.0% and 38.3% for the years ended December 31, 2004, 2003 and 2002, respectively.

In March 2003, we entered into a settlement agreement with the IRS with respect to the tax treatment of certain transactions we entered into in 1997 and 1999. As a result of the settlement, during 2003, we recognized an income tax benefit of $127.5 million from the reduction of previously recorded deferred tax liabilities. In 2003, we made a $366.0 million prepayment of the initial installment due March 2004, including interest. Additionally, in 2004, we prepaid the remaining balance due related to the IRS settlement totaling $128.9 million, including accrued interest.

During 2004 and 2003, we recorded net income tax benefits in continuing operations totaling $25.8 million and $140.9 million (which includes $127.5 million recognized as a result of the IRS settlement discussed above), respectively, primarily related to the resolution of various income tax matters. We also recognized a $52.2 million gain included in Discontinued Operations related to the settlement of various income tax matters. Our underlying base effective tax rate for 2004 before adjustments was 39%.

We substantially completed the federal income tax audit for the years 1997 through 2001 and a federal income tax audit for 2002 and 2003 was recently initiated by the IRS. We are routinely audited by the states in which we do business and remain under examination by various states for the tax years discussed above. We expect additional state and federal tax adjustments over the next eighteen months as we continue to work through various tax matters. Once we resolve our open tax matters, we expect our base effective tax rate to be approximately 39%.

See Note 12, Income Taxes, of the Notes to Consolidated Financial Statements for further information.

At December 31, 2004, we had $107.2 million of unrestricted cash and cash equivalents. We have two revolving credit facilities with an aggregate borrowing capacity of $500.0 million. A 364-day revolving credit facility provides borrowing capacity of up to $200.0 million at a LIBOR-based interest rate and was renewed in August 2004 for another 364-day term to August 2005. A five-year facility, which expires in August 2006, provides borrowing capacity of up to $300.0 million at a LIBOR-based interest rate. These facilities are

secured by a pledge of the capital stock of certain subsidiaries, which directly or indirectly own substantially all of our stores, and are guaranteed by substantially all of our subsidiaries. There were no borrowings on these revolving credit facilities during 2004 and 2003. We have negotiated a letter of credit line as part of our multi-year revolving credit facility. The amount available to be borrowed under the $300.0 million multi-year revolving credit facility is reduced on a dollar-for-dollar basis by the cumulative face amount of any outstanding letters of credit, which totaled $77.0 million at December 31, 2004.

We also have $443.2 million of 9.0% senior unsecured notes due August 1, 2008. During 2004, we repurchased $3.4 million (face value) of senior unsecured notes at an average price of 114.3% of face value or $3.9 million. The $.5 million in premium we paid for this repurchase was recognized as Other Interest Expense in the accompanying 2004 Consolidated Income Statement. As of February 18, 2005, we repurchased an additional $3.8 million (face value) of senior unsecured notes at a price of 113.5% of face value or $4.4 million. The $.6 million in premium we paid for this repurchase will be recognized as Other Interest Expense in 2005. The senior unsecured notes are guaranteed by substantially all of our subsidiaries.

Our revolving credit facilities, senior unsecured notes and mortgage facilities contain numerous customary financial and operating covenants that place significant restrictions on us, including our ability to incur additional indebtedness, to create liens or other encumbrances, to make certain payments (including dividends and share repurchases), to make investments, and to sell or otherwise dispose of assets and merge or consolidate with other entities. The revolving credit facilities also require us to meet certain financial ratios and tests, including financial covenants requiring the maintenance of consolidated maximum cash flow leverage, minimum interest coverage, and maximum balance sheet leverage. Over the life of the revolving credit facilities, certain of the financial covenants become more restrictive as prescribed by a predetermined schedule. In addition, the senior unsecured notes contain a minimum fixed charge coverage incurrence covenant, and the mortgage facilities contain both maximum cash flow leverage and minimum interest coverage covenants. In the event that we were to default in the observance or performance of any of the financial covenants in the revolving credit facilities or mortgage facilities and such default were to continue beyond any cure period or waiver, the lender under the respective facility could elect to terminate the facility and declare all outstanding obligations under such facility immediately payable. Under the senior unsecured notes, should we be in violation of the financial covenants, we could be further limited in incurring certain additional indebtedness. Our revolving credit facilities, the indenture for our senior unsecured notes and the mortgage facilities have cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness of ours. At December 31, 2004, we were in compliance with the requirements of all such financial covenants and do not anticipate any events of default.

We maintain corporate credit ratings from rating agencies. During 2004, we received a credit upgrade to investment grade from Standard & Poor’s. Now the Company, our revolving credit facilities and senior unsecured notes carry investment grade ratings from Standard & Poor’s. Although Moody’s credit ratings are currently non-investment grade, they raised the ratings outlook to positive from stable for the Company, our revolving credit facilities and senior unsecured notes. The revolving credit facilities and the senior unsecured notes have provisions linked to credit ratings. The interest rates for the revolving credit facilities are impacted by changes in credit ratings. In the event of a downgrade in our credit rating, we would continue to have access to the revolving credit facilities, although potentially at higher rates of interest. Certain covenants related to the senior unsecured notes would be eliminated with certain upgrades in ratings to investment grade.

At December 31, 2004 we had $318.1 million outstanding under mortgage facilities with automotive manufacturers’ captive finance subsidiaries. The facilities have an aggregate capacity of $400.0 million. The facilities bear interest at LIBOR-based interest rates and are secured by mortgages on certain of our store properties.

We finance our new vehicle inventory through secured financings, primarily floorplan facilities, with automotive manufacturers’ captive finance subsidiaries as well as independent financial institutions. As of December 31, 2004, aggregate capacity of the facilities to finance new vehicles was approximately $3.9 billion, of which $2.5 billion was outstanding at December 31, 2004. We generally do not utilize floorplan facilities to finance our used vehicle inventory.

We sell and receive commissions on the following types of vehicle protection and other products: extended warranties, guaranteed auto protection, credit insurance, lease “wear and tear” insurance and theft protection products. The products we offer include products that are sold and administered by independent third parties, including the vehicle manufacturers’ captive finance subsidiaries. Pursuant to our arrangements with these third-party finance and vehicle protection product providers, we primarily sell the products on a straight commission basis, however, we may sell the product, recognize commission and participate in future underwriting profit pursuant to retrospective commission arrangements. Through 2002, we assumed some of the underwriting risk through reinsurance agreements with our captive insurance subsidiaries. Since January 1, 2003, we have not reinsured any new extended warranties or credit insurance products. We maintain restricted cash in trust accounts in accordance with the terms and conditions of certain reinsurance agreements to secure the payments of outstanding losses and loss adjustment expenses related to our captive insurance subsidiaries.

During 2004, we repurchased 14.1 million shares of our common stock for an aggregate purchase price of $236.8 million. As of February 18, 2005, we repurchased an additional .2 million shares of common stock for an aggregate purchase price of $4.0 million, leaving $304.4 million authorized for share repurchases, including an additional $250.0 million share repurchase authorized by our Board of Directors in October 2004. Repurchases are made pursuant to Rule 10b-18 of the Securities Exchange Act of 1934, as amended. While we expect to continue repurchasing shares, the decision to make additional share repurchases will be based on such factors as the market price of our common stock, the potential impact on our capital structure and the expected return on competing uses of our capital such as strategic store acquisitions and capital investments in our current businesses. Future share repurchases are also subject to limitations contained in the indenture relating to our senior unsecured notes and credit agreements relating to our two senior secured revolving credit facilities.

On June 30, 2000, we completed the tax-free spin-off of ANC Rental Corporation (“ANC Rental”), which operated our former rental business. In connection with the spin-off, we agreed to provide certain guarantees on behalf of ANC Rental. On November 13, 2001, ANC Rental filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court in Wilmington, Delaware. In May 2003, the bankruptcy court approved a settlement agreement among AutoNation, ANC Rental and the Committee of Unsecured Creditors in the bankruptcy that resolved potential claims relating to ANC Rental’s bankruptcy, including potential claims against us arising out of the spin-off of ANC Rental (the “Settlement Agreement”). On October 14, 2003, with the approval of the bankruptcy court, substantially all of ANC Rental’s assets (the “Rental Business”) were sold to an entity controlled by Cerberus Capital Management, L.P.

Following the sale, and pursuant to the Settlement Agreement, we continued to guarantee $29.5 million, and committed to guarantee up to an additional $10.5 million, in surety bonds supporting obligations of the Rental Business until December 2006. On June 30, 2004, we were released from our $29.5 million guarantee obligation, and on August 11, 2004, we were released from our remaining $10.5 million surety bond guarantee obligations. This triggered an obligation under the Settlement Agreement for us to pay $20 million (one-half of the permanent reduction of the surety bond guarantee obligations) to a trust established for the benefit of the unsecured creditors in the bankruptcy, which payment was made on September 10, 2004. We had previously incurred a pre-tax charge of $20.0 million ($12.3 million after-tax) for this liability included in Loss from Discontinued Operations in the accompanying Consolidated Income Statements during 2003.

As a matter of course, we are regularly audited by various tax authorities. From time to time, these audits result in proposed assessments. Other tax accruals totaled $181.3 million and $307.3 million at December 31, 2004 and 2003, respectively, and relate to various tax matters where the ultimate resolution may result in us owing additional tax payments. We believe that our tax positions comply with applicable tax law and that we

have adequately provided for these matters. We substantially completed the federal income tax audit for the years 1997 through 2001 and a federal income tax audit for 2002 and 2003 was recently initiated by the IRS. We remain under examination by various states for the tax years discussed above. We expect additional state and federal tax adjustments over the next eighteen months as we continue to work through various tax matters. Once we resolve our open tax matters, we expect our base effective tax rate to be approximately 39%. See Note 12, Income Taxes, of Notes to Consolidated Financial Statements for additional discussion of income taxes.

Cash and cash equivalents (decreased) increased by $(66.2) million, $(5.9) million and $46.9 million during the years ended December 31, 2004, 2003 and 2002, respectively. The major components of these changes are discussed below.

Cash provided by operating activities was $441.8 million, $365.8 million and $627.5 million for the years ended December 31, 2004, 2003 and 2002, respectively.

Cash flows from operating activities include net income adjusted for non-cash items and the effects of changes in working capital including changes in vehicle floorplan payable, which directly relates to changes in new vehicle inventory. Additionally, we paid portions of the IRS settlement totaling $128.9 million and $366.0 million during 2004 and 2003, respectively, representing the entire balance of the amount due under the settlement.

During 2004, we reclassified certain amounts in the 2003 and 2002 Consolidated Statements of Cash Flows from investing activities to operating activities, including certain items related to our former loan underwriting business, as a result of recent guidance issued by the Securities and Exchange Commission. In December 2001, we decided to exit the business of underwriting retail automobile loans for customers at our stores, which we determined was not a part of our core automotive retail business. In July 2003, we sold all of our finance receivables portfolio for proceeds totaling $52.4 million, resulting in no gain or loss on the transaction. Collections of installment loans receivable and other items related to the wind-down of this business totaled $27.0 million and $86.7 million for the years ended December 31, 2003 and 2002, respectively.

Cash flows from investing activities consist primarily of cash used in capital additions, activity from business acquisitions, property dispositions, purchases and sales of investments and other transactions as further described below.

Capital expenditures, excluding property operating lease buy-outs, were $133.2 million, $122.7 million and $162.9 million during the years ended December 31, 2004, 2003 and 2002, respectively. We will make facility and infrastructure upgrades and improvements from time to time as we identify projects that are required to maintain our current business or that we expect to provide us with acceptable rates of return. We expect 2005 capital expenditures of approximately $130 million, excluding any acquisition-related spending or lease buy-outs.

Property operating lease buy-outs were $77.7 million, $9.8 million and $19.8 million for the years ended December 31, 2004, 2003 and 2002, respectively. We continue to analyze certain of our higher cost operating leases and evaluate alternatives in order to lower the effective financing costs.

Proceeds from the disposal of assets held-for-sale were $37.9 million, $23.1 million and $34.8 million during the years ended December 31, 2004, 2003 and 2002, respectively. These amounts are primarily from the sales of megastores and other properties held-for-sale.

Cash used in business acquisitions, net of cash acquired, was $197.9 million, $48.8 million and $166.5 million for the years ended December 31, 2004, 2003 and 2002, respectively. During 2004, the Company acquired eight automotive retail franchises and other related assets. Cash used in business acquisitions during 2004, 2003 and 2002 includes $3.3 million, $3.2 million and $8.1 million in deferred purchase price for certain prior year automotive retail acquisitions. See discussion in Note 16, Acquisitions, of Notes to Consolidated Financial Statements.

In September 2002, one of our captive insurance companies terminated a reinsurance agreement with a third-party insurance company and transferred our risk pertaining to certain extended warranty products under the reinsurance agreement back to such insurance company. We transferred $66.6 million of restricted assets to the third-party insurance company in exchange for the assumption of the related insurance accruals. See Note 4, Restricted Assets and Reinsurance, of Notes to Consolidated Financial Statements for additional information.

During 2003, we sold all of our interest in an equity-method investment in LKQ Corporation, an auto parts recycling business, for $38.3 million, resulting in a pre-tax gain of $16.5 million.

Cash flows from financing activities primarily include treasury stock purchases, proceeds from mortgage facilities and stock option exercises.

We have repurchased approximately 14.1 million, 39.2 million and 30.7 million shares of our common stock during the years ended December 31, 2004, 2003 and 2002, respectively, for an aggregate price of $236.8 million, $575.2 million and $389.9 million, respectively, under our Board-approved share repurchase programs. Our 2005 target for combined spending on acquisitions and share repurchases is approximately $300 million.

During the years ended December 31, 2003 and 2002, we drew amounts totaling $183.6 million and $7.3 million, respectively, under our mortgage facilities.

During the years ended December 31, 2004, 2003 and 2002, proceeds from the exercises of stock options were $94.2 million, $118.1 million and $78.7 million, respectively.

During 2004, we repurchased $3.4 million (face value) of our 9.0% senior unsecured notes at an average price of 114.3% of face value or $3.9 million.

Other cash used in financing activities totaled $7.8 million in 2003 and primarily includes upfront premium amounts paid in conjunction with interest rate hedge transactions. In addition, other cash used in financing activities totaled $11.8 million in 2002 and includes amounts paid in November 2002 related to consents obtained from the holders of our $450.0 million of 9.0% senior unsecured notes to amend the indenture governing such notes and from the lenders to amend our revolving credit facilities, allowing us to repurchase additional shares of our common stock.

Cash used in discontinued operations was $21.1 million, $4.7 million and $8.4 million during 2004, 2003 and 2002, respectively. A portion of the cash used in 2004 and all of the cash used in 2003 and 2002 relates to payments made in conjunction with property leases assumed from ANC Rental.

We believe that our funds generated through future operations and availability of borrowings under our vehicle floorplan facilities, revolving credit facilities and mortgage facilities will be sufficient to fund our debt service and working capital requirements, payment of tax obligations, commitments and contingencies and any seasonal operating requirements for the foreseeable future. We intend to finance capital expenditures, business acquisitions, and share repurchases through cash flow from operations, revolving credit facilities, and other financings. We do not foresee any difficulty in continuing to comply with covenants of our various financing

We will continue to evaluate the best use of our operating cash flow between capital expenditures, share repurchases, acquisitions and debt reduction, including possible limited repurchases of our senior unsecured notes and/or prepayments of our mortgage facilities. We have not declared or paid any cash dividends on our common stock during our three most recent fiscal years. We do not anticipate paying cash dividends in the foreseeable future. The indenture for our senior unsecured notes and the credit agreements for our revolving credit facilities restrict our ability to declare cash dividends.

The following table summarizes our payment obligations under certain contracts at December 31, 2004 (in millions):

In the ordinary course of business, we are required to post performance and surety bonds, letters of credit, and/or cash deposits as financial guarantees of our performance. At December 31, 2004, surety bonds, letters of credit and cash deposits totaled $107.1 million, including $77.0 million letters of credit. We do not currently provide cash collateral for outstanding letters of credit. We have negotiated a letter of credit line as part of our multi-year revolving credit facility. Under the terms of the letter of credit line, the amount available to be borrowed under this revolving credit facility is reduced on a dollar-for-dollar basis by the cumulative face amount of any outstanding letters of credit.

As further discussed under the heading “Financial Condition,” there are various tax matters where the ultimate resolution may result in us owing additional tax payments.

Our operations generally experience higher volumes of vehicle sales and service in the second and third quarters of each year due in part to consumer buying trends and the introduction of new vehicle models. Also, demand for vehicles and light trucks is generally lower during the winter months than in other seasons, particularly in regions of the United States where stores may be subject to adverse winter conditions. Accordingly, we expect our revenue and operating results to be generally lower in our first and fourth quarters as compared to our second and third quarters. However, revenue may be impacted significantly from quarter to quarter by actual or threatened severe weather events, and by other factors unrelated to season, such as changing economic conditions and automotive manufacturer incentives programs.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) 123R, “Share-Based Payment,” a revision of SFAS 123. The standard

requires companies to expense the grant-date fair value of stock options and other equity-based compensation issued to employees and is effective for interim or annual periods beginning after June 15, 2005. In accordance with the revised statement, we will be required to recognize the expense attributable to stock options granted or vested subsequent to June 30, 2005. We are evaluating the requirements of SFAS 123R. We have not yet determined the method of adoption or the effect of adopting SFAS 123R, and we have not determined whether the adoption will result in amounts that are similar to the current pro forma disclosures under SFAS 123 in Note 1 of the Notes to Consolidated Financial Statements.

As of January 1, 2003, we adopted EITF Issue No. 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor.” EITF 02-16, as it applies to us, addresses the recognition of certain manufacturer allowances and requires that manufacturer allowances be treated as a reduction of inventory cost unless specifically identified as reimbursement for services or costs incurred. The adoption of EITF 02-16 resulted in a cumulative effect of accounting change, net of $9.1 million of income tax, totaling $14.6 million to reflect the deferral of certain allowances, primarily floorplan assistance, into inventory cost during 2003. The impact of this accounting change for the year ended December 31, 2003 was an increase of $3.3 million in Cost of Sales. On a comparable basis, the impact of this accounting change for the year ended December 31, 2002 would have been an increase of $4.7 million in Cost of Sales. Additionally, the adoption of EITF 02-16 impacted the accounting for certain manufacturers’ advertising allowances resulting in a reclassification that increased Selling, General and Administrative expenses and, correspondingly, reduced Cost of Sales by $18.6 million for the year ended December 31, 2003 to now reflect these allowances as a reduction of Cost of Sales. On a comparable basis, the reclassification to increase Selling, General and Administrative Expenses and to reduce Cost of Sales for the year ended December 31, 2002 would have been $19.5 million.

In January 2003, the FASB issued FASB Interpretation No. 46 “Consolidation of Variable Interest Entities, an Interpretation of APB No. 50,” (“FIN 46”). FIN 46 requires certain variable interest entities, as defined, to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46, as amended, is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after December 15, 2003. In December 2003, the FASB issued a revision to FIN 46 (“FIN 46R”) to clarify some of the provisions of the interpretation and defer the implementation date for certain entities to periods ending after March 14, 2004. The adoption of FIN 46R did not have an impact on our consolidated financial position, results of operations or cash flows.

In November 2003, the EITF reached a consensus on EITF Issue No. 03-10, “Application of Issue No. 02-16 by Resellers to Sales Incentives Offered to Consumers by Manufacturers.” EITF 03-10 provides guidance on how to account for sales incentive arrangements provided by manufacturers to consumers and accepted by resellers. The provisions of EITF 03-10 apply to fiscal years beginning after November 25, 2003. The adoption of EITF 03-10 did not have an impact on our consolidated financial position, results of operations or cash flows.

forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that the expectations, plans, intentions and projections reflected in our forward-looking statements are reasonable, such statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The risks, uncertainties and other factors that our stockholders and prospective investors should consider include, but are not limited to, the following:


	•	The automotive retailing industry is cyclical and is sensitive to changing economic conditions and various other factors. Our business and results of operations are substantially dependent in large part on new vehicle sales levels in the United States and in our particular geographic markets and for the brands we represent, as well as the level of gross margins that we can achieve on our sales of new vehicles, all of which are very difficult to predict.

	•	We are subject to restrictions imposed by, and significant influence from, vehicle manufacturers that may adversely impact our business, financial condition, results of operations, cash flows and prospects, including our ability to acquire additional stores.

	•	Our stores are dependent on the programs and operations of vehicle manufacturers and, therefore, any changes to such programs and operations may adversely affect our store operations and, in turn, affect our business, results of operations, financial condition, cash flows and prospects.

	•	We are subject to numerous legal and administrative proceedings, which, if the outcomes are adverse to us, could materially adversely affect our business, results of operations, financial condition, cash flows and prospects.

	•	Our operations, including, without limitation, our sales of finance and insurance and vehicle protection products, are subject to extensive governmental laws, regulation and scrutiny. If we are found to be in violation of any of these laws or regulations, or if new laws or regulations are enacted that adversely affect our operations, our business, operating results and prospects could suffer.

	•	Our ability to grow our business may be limited by our ability to acquire automotive stores in key markets on favorable terms or at all.


(Mark One)
[X]		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2004
		OR
[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from _______________ to ______________


Delaware (State or Other Jurisdiction of Incorporation or Organization)		73-1105145 (I.R.S. Employer Identification No.)

110 S.E. 6th Street, Fort Lauderdale, Florida (Address of Principal Executive Offices)		33301 (Zip Code)


		Page

PART I
Item 1.	Business		1
Item 2.	Properties		15
Item 3.	Legal Proceedings		15
Item 4.	Submission of Matters to a Vote of Security Holders		16
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		17
Item 6.	Selected Financial Data		18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		37
Item 8.	Financial Statements and Supplementary Data		39
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		70
Item 9A.	Controls and Procedures		70
Item 9B.	Other Information		70
PART III
Item 10.	Directors and Executive Officers of the Registrant
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		71
Item 13.	Certain Relationships and Related Transactions
Item 14.	Principal Accountant Fees and Services
PART IV
Item 15.	Exhibits and Financial Statement Schedules		71
Form of Stock Option Agreement
Subsidiaries of the Company
Consent of Deloitte & Touche LLP
Consent of KPMG LLP
Sec 302 Chief Executive Officer Certification
Sec 302 Chief Financial Officer Certification
Sec 906 Chief Executive Officer Certification
Sec 906 Chief Financial Officer Certification


	High		Low

2004
Fourth Quarter	$	19.33	$	16.24
Third Quarter		17.22		15.15
Second Quarter		17.69		15.01
First Quarter		18.37		16.06
2003
Fourth Quarter	$	19.00	$	17.17
Third Quarter		19.19		15.36
Second Quarter		16.45		12.63
First Quarter		13.91		11.61


					Total Number of		Maximum Dollar Value of
	Total Number		Average		Shares Purchased as		Shares That May Yet Be
	Of Shares		Price Paid		Part of Publicly		Purchased Under the
Period	Purchased		per Share		Announced Programs		Program (in millions)⁽¹⁾⁽²⁾

October 1, 2004 to October 31, 2004		—		—		—	$	354.5
November 1, 2004 to November 30, 2004		1,000,000	$	17.90		1,000,000	$	336.5
December 1, 2004 to December 31, 2004		1,500,000	$	18.75		1,500,000	$	308.4
Total		2,500,000				2,500,000

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Table of Contents

Table of Contents


Title Of Each Class Common Stock, Par Value $.01 Per Share		Name Of Each Exchange On Which Registered The New York Stock Exchange


Name	Age		Position

Mike Jackson		56	Chairman of the Board and Chief Executive Officer
Michael E. Maroone		51	President and Chief Operating Officer
Craig T. Monaghan		48	Senior Vice President and Chief Financial Officer
Jonathan P. Ferrando		39	Senior Vice President, General Counsel and Secretary
Kevin P. Westfall		49	Senior Vice President, Finance & Insurance and Fixed Operations


Item 4.	*SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS*


ITEM 5.	*MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES*



		As of and for the Years Ended December 31,

		2004		2003			2002		2001			2000


		(In millions, except per share data)
Revenue		$	19,424.7	$	18,711.4		$	18,701.5	$	19,104.9		$	19,892.0
Income from continuing operations before income taxes		$	606.6	$	605.8		$	615.6	$	388.1		$	506.7
Net income		$	433.6	$	479.2		$	381.6	$	232.3		$	329.9
Basic earnings (loss) per share:
	Continuing operations	$	1.49	$	1.84		$	1.20	$	.71		$	.88
	Discontinued operations	$	.14	$	(.08	)		—	$	(.01	)	$	.04
	Cumulative effect of accounting change		—	$	(.05	)		—		—			—
	Net income	$	1.63	$	1.71		$	1.20	$	.70		$	.91
Diluted earnings (loss) per share:
	Continuing operations	$	1.45	$	1.80		$	1.18	$	.71		$	.88
	Discontinued operations	$	.14	$	(.07	)		—	$	(.01	)	$	.04
	Cumulative effect of accounting change		—		(.05	)		—		—			—
	Net income	$	1.59	$	1.67		$	1.19	$	.69		$	.91
Diluted weighted average common shares outstanding			272.5		287.0			321.5		335.2			361.4
Total assets		$	8,698.9	$	8,823.1		$	8,502.7	$	8,065.4		$	8,867.3
Long-term debt, net of current maturities		$	797.7	$	808.5		$	642.7	$	647.3		$	850.4
Shareholders’ equity		$	4,263.1	$	3,949.7		$	3,910.2	$	3,827.9		$	3,842.5


Item 7.	*MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS*



			Years Ended December 31,


									2004 vs. 2003									2003 vs. 2002

									Variance									Variance
									Favorable/									Favorable/
			2004			2003			(Unfavorable)			% Variance			2002			(Unfavorable)			% Variance
($ in millions, except per vehicle data)
Revenue:
	New vehicle		$	11,891.6		$	11,488.7		$	402.9			3.5		$	11,326.6		$	162.1			1.4
	Used vehicle			4,319.9			4,195.2			124.7			3.0			4,382.5			(187.3	)		(4.3	)
	Parts and service			2,505.3			2,398.6			106.7			4.4			2,388.2			10.4			.4
	Finance and insurance, net			618.5			589.9			28.6			4.8			548.2			41.7			7.6
	Other			89.4			39.0			50.4						56.0			(17.0	)

		Total revenue	$	19,424.7		$	18,711.4		$	713.3			3.8		$	18,701.5		$	9.9			.1

Gross profit:
	New vehicle		$	846.3		$	838.9		$	7.4			.9		$	889.9		$	(51.0	)		(5.7	)
	Used vehicle			401.6			393.6			8.0			2.0			384.0			9.6			2.5
	Parts and service			1,096.8			1,046.3			50.5			4.8			1,039.1			7.2			.7
	Finance and insurance			618.5			589.9			28.6			4.8			548.2			41.7			7.6
	Other			49.5			33.9			15.6						49.2			(15.3	)

		Total gross profit		3,012.7			2,902.6			110.1			3.8			2,910.4			(7.8	)		(.3	)

Selling, general & administrative expenses				2,158.7			2,096.9			(61.8	)		(2.9	)		2,132.4			35.5			1.7
Depreciation				81.9			67.7			(14.2	)					65.5			(2.2	)
Amortization				1.2			1.6			.4						2.4			.8
Other losses (gains)				4.0			10.0			6.0						(10.5	)		(20.5	)

	Operating income			766.9			726.4			40.5			5.6			720.6			5.8			.8

Floorplan interest expense				(81.8	)		(68.9	)		(12.9	)		(18.7	)		(71.8	)		2.9			4.0
Other interest expense				(76.9	)		(71.8	)		(5.1	)		(7.1	)		(50.5	)		(21.3	)		(42.2	)
Interest income				3.5			3.4			.1			2.9			10.4			(7.0	)		(67.3	)
Other income (expense), net				(5.1	)		16.7			(21.8	)					6.9			9.8

	Income from continuing operations before income taxes		$	606.6		$	605.8		$	.8			.1		$	615.6		$	(9.8	)		(1.6	)

Retail vehicle unit sales:
	New vehicle			410,621			406,675			3,946			1.0			415,787			(9,112	)		(2.2	)
	Used vehicle			239,999			238,271			1,728			.7			239,564			(1,293	)		(.5	)

				650,620			644,946			5,674			.9			655,351			(10,405	)		(1.6	)

Revenue per vehicle retailed:
	New vehicle		$	28,960		$	28,250		$	710			2.5		$	27,241		$	1,009			3.7
	Used vehicle		$	14,667		$	14,377		$	290			2.0		$	14,556		$	(179	)		(1.2	)

Gross profit per vehicle retailed:
	New vehicle		$	2,061		$	2,063		$	(2	)		(.1	)	$	2,140		$	(77	)		(3.6	)
	Used vehicle		$	1,669		$	1,642		$	27			1.6		$	1,633		$	9			.6
	Finance and insurance		$	951		$	915		$	36			3.9		$	836		$	79			9.4



				Years Ended December 31,

				% 2004		% 2003		% 2002

Revenue mix percentages:
	New vehicle				61.2		61.4		60.6
	Used vehicle				22.2		22.4		23.4
	Parts and service				12.9		12.8		12.8
	Finance and insurance, net				3.2		3.2		2.9
	Other				.5		.2		.3

			Total		100.0		100.0		100.0

Gross profit mix percentages:
	New vehicle				28.1		28.9		30.6
	Used vehicle				13.3		13.6		13.2
	Parts and service				36.4		36.0		35.7
	Finance and insurance				20.5		20.3		18.8
	Other				1.7		1.2		1.7

			Total		100.0		100.0		100.0

Operating items as a percentage of revenue:
	Gross profit:
		New vehicle			7.1		7.3		7.9
		Used vehicle			11.4		11.4		11.2
		Parts and service			43.8		43.6		43.5
			Total		15.5		15.5		15.6
	Selling, general and administrative expenses				11.1		11.2		11.4
	Operating income				3.9		3.9		3.9

Other operating items as a percentage of total gross profit:
	Selling, general and administrative expenses				71.7		72.2		73.3
	Operating income				25.5		25.0		24.8



		December 31,

		2004		2003

Days supply:
	New vehicle (industry standard of selling days, including fleet)		53 days		71 days
	Used vehicle (trailing 30 days)		37 days		43 days



		Payments Due by Period

				Less than						More than
		Total		one Year		1-3 Years		3-5 Years		5 Years

Vehicle floorplan payable (Note 3)*		$	2,517.3	$	2,517.3	$	—	$	—	$	—
Notes payable and long-term debt (Note 8)*			812.6		14.9		68.6		593.7		135.4
Operating lease commitments (Note 9)*			494.0		60.1		99.8		77.4		256.7
Acquisition purchase price commitments			10.5		10.5		—		—		—
Purchase obligations			140.1		51.2		34.1		27.3		27.5

	Total	$	3,974.5	$	2,654.0	$	202.5	$	698.4	$	419.6


Item 1.	*BUSINESS*


	*Deliver a Superior Customer Experience*


	*Leverage Our Significant Scale*


	*Increase Productivity*