UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

AUTONATION, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware		73-1105145
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)
110 S.E. 6th Street, Fort Lauderdale, Florida		33301
(Address of Principal Executive Offices)		(Zip Code)

(954) 769-6000
(Registrant’s Telephone Number, Including Area Code)

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  þ  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o No  þ

As of November 3, 2008, the registrant had 176,853,283 shares of common stock outstanding.

 

 

AUTONATION, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2008, and December 31, 2007			1
Unaudited Condensed Consolidated Income Statements for the Three and Nine Months Ended September 30, 2008 and 2007			2
Unaudited Condensed Consolidated Statement of Shareholders’ Equity for the Nine Months Ended September 30, 2008			3
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007			4
Notes to Unaudited Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures about Market Risk			45
Item 4. Controls and Procedures			45
PART II. OTHER INFORMATION
Item 1A. Risk Factors			46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			47
Item 6. Exhibits			48

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AUTONATION, INC.

		September 30,				December 31,
		2008				2007
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	60.8			$	33.0
Receivables, net			467.5				703.5
Inventory			1,967.5				2,262.0
Other current assets			200.1				295.8
Total Current Assets			2,695.9				3,294.3
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $658.7 million and $593.3 million, respectively			1,970.2				1,955.2
GOODWILL, NET (Note 4)			1,147.8				2,736.3
OTHER INTANGIBLE ASSETS, NET (Note 4)			177.6				316.5
OTHER ASSETS			246.7				177.3
Total Assets		$	6,238.2			$	8,479.6
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Vehicle floorplan payable — trade		$	1,481.4			$	1,678.4
Vehicle floorplan payable — non-trade			417.7				448.0
Accounts payable			165.1				208.9
Notes payable and current maturities of long-term obligations			55.7				23.9
Other current liabilities			494.8				543.3
Total Current Liabilities			2,614.7				2,902.5
LONG-TERM DEBT, NET OF CURRENT MATURITIES			1,358.0				1,751.9
DEFERRED INCOME TAXES			—				220.7
OTHER LIABILITIES			137.7				131.0
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS’ EQUITY:
Preferred stock, par value $0.01 per share; 5,000,000 shares authorized; none issued			—				—
Common stock, par value $0.01 per share; 1,500,000,000 shares authorized; 193,562,149 shares issued at September 30, 2008, and December 31, 2007, including shares held in treasury			1.9				1.9
Additional paid-in capital			478.5				461.0
Retained earnings (Note 6)			1,955.9				3,266.1
Accumulated other comprehensive loss			(0.6	)			(0.2	)
Treasury stock, at cost; 16,708,866 and 13,205,583 shares held, respectively			(307.9	)			(255.3	)
Total Shareholders’ Equity			2,127.8				3,473.5
Total Liabilities and Shareholders’ Equity		$	6,238.2			$	8,479.6

The accompanying notes are an integral part of these statements.

AUTONATION, INC.

		Three Months Ended September 30,								Nine Months Ended September 30,
		2008				2007				2008				2007
Revenue:
New vehicle		$	1,974.6			$	2,634.4			$	6,335.4			$	7,615.0
Used vehicle			822.0				1,068.3				2,728.0				3,197.2
Parts and service			612.1				642.7				1,895.6				1,919.0
Finance and insurance, net			119.3				150.9				398.8				445.2
Other			15.4				17.0				49.8				51.0
TOTAL REVENUE			3,543.4				4,513.3				11,407.6				13,227.4
Cost of Sales:
New vehicle			1,844.5				2,448.3				5,916.5				7,075.1
Used vehicle			754.0				981.3				2,496.9				2,916.7
Parts and service			346.3				361.6				1,071.4				1,079.1
Other			6.7				8.0				22.1				21.2
TOTAL COST OF SALES			2,951.5				3,799.2				9,506.9				11,092.1
Gross Profit:
New vehicle			130.1				186.1				418.9				539.9
Used vehicle			68.0				87.0				231.1				280.5
Parts and service			265.8				281.1				824.2				839.9
Finance and insurance			119.3				150.9				398.8				445.2
Other			8.7				9.0				27.7				29.8
TOTAL GROSS PROFIT			591.9				714.1				1,900.7				2,135.3
Selling, general, and administrative expenses			452.7				506.7				1,432.0				1,516.6
Depreciation and amortization			22.7				22.0				68.4				64.0
Goodwill impairment			1,610.0				—				1,610.0				—
Franchise rights impairment			141.4				—				146.5				1.0
Other expenses, net			2.8				0.1				3.2				0.6
OPERATING INCOME (LOSS)			(1,637.7	)			185.3				(1,359.4	)			553.1
Floorplan interest expense			(19.8	)			(32.9	)			(66.2	)			(96.4	)
Other interest expense			(20.9	)			(29.6	)			(69.3	)			(82.4	)
Gain on senior note repurchases			12.1				—				12.1				—
Interest income			0.7				0.8				1.5				2.6
Other gains (losses), net			(2.3	)			(0.9	)			(2.9	)			0.1
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			(1,667.9	)			122.7				(1,484.2	)			377.0
INCOME TAX PROVISION (BENEFIT)			(263.0	)			46.1				(188.1	)			139.1
NET INCOME (LOSS) FROM CONTINUING OPERATIONS			(1,404.9	)			76.6				(1,296.1	)			237.9
Loss from discontinued operations, net of income taxes			(7.8	)			(4.5	)			(14.1	)			(10.9	)
NET INCOME (LOSS)		$	(1,412.7	)		$	72.1			$	(1,310.2	)		$	227.0
BASIC EARNINGS (LOSS) PER SHARE:
Continuing operations		$	(7.95	)		$	0.39			$	(7.27	)		$	1.17
Discontinued operations		$	(0.04	)		$	(0.02	)		$	(0.08	)		$	(0.05	)
Net income (loss)		$	(7.99	)		$	0.37			$	(7.35	)		$	1.11
Weighted average common shares outstanding			176.7				196.1				178.2				203.6
DILUTED EARNINGS (LOSS) PER SHARE:
Continuing operations		$	(7.95	)		$	0.39			$	(7.27	)		$	1.16
Discontinued operations		$	(0.04	)		$	(0.02	)		$	(0.08	)		$	(0.05	)
Net income (loss)		$	(7.99	)		$	0.37			$	(7.35	)		$	1.10
Weighted average common shares outstanding			176.7				197.5				178.2				205.6
COMMON SHARES OUTSTANDING, net of treasury stock			176.9				183.9				176.9				183.9

The accompanying notes are an integral part of these statements.

AUTONATION, INC.

										Additional								Accumulated Other
		Common Stock								Paid-In				Retained				Comprehensive				Treasury
		Shares				Amount				Capital				Earnings				Loss				Stock				Total
BALANCE AT DECEMBER 31, 2007			193,562,149			$	1.9			$	461.0			$	3,266.1			$	(0.2	)		$	(255.3	)		$	3,473.5
Exercise of stock options, including income tax benefit of $0.1 million			—				—				(0.5	)			—				—				1.5				1.0
Stock option expense			—				—				18.0				—				—				—				18.0
Other comprehensive loss			—				—				—				—				(0.4	)			—				(0.4	)
Purchases of treasury stock			—				—				—				—				—				(54.1	)			(54.1	)
Net loss			—				—				—				(1,310.2	)			—				—				(1,310.2	)
BALANCE AT SEPTEMBER 30, 2008			193,562,149			$	1.9			$	478.5			$	1,955.9			$	(0.6	)		$	(307.9	)		$	2,127.8

The accompanying notes are an integral part of these statements.

AUTONATION, INC.

		Nine Months Ended
		September 30,
		2008				2007
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss)		$	(1,310.2	)		$	227.0
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss from discontinued operations			14.1				10.9
Depreciation and amortization			68.4				64.0
Amortization of debt issue costs and discounts			2.7				3.6
Stock option expense			18.0				11.8
Deferred income tax provision (benefit)			(274.8	)			(13.0	)
Goodwill impairment			1,610.0				—
Franchise rights impairment			146.5				1.0
Other non-cash impairment charges, net			3.1				—
Gain on senior note repurchases			(12.1	)			—
Other			0.4				(0.4	)
Changes in assets and liabilities, net of effects from business combinations and divestitures:
Receivables			236.0				124.5
Inventory			299.1				86.8
Other assets			13.8				(6.3	)
Vehicle floorplan payable-trade, net			(197.0	)			(422.9	)
Accounts payable			(43.8	)			(0.3	)
Other liabilities			(14.5	)			23.1
Net cash provided by continuing operations			559.7				109.8
Net cash provided by discontinued operations			7.7				10.2
Net cash provided by operating activities			567.4				120.0
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property and equipment			(76.8	)			(128.6	)
Property operating lease buy-outs			(20.4	)			—
Proceeds from the sale of property and equipment			3.0				4.2
Proceeds from assets held for sale			—				2.6
Cash used in business acquisitions, net of cash acquired			(29.4	)			(4.2	)
Net change in restricted cash			(13.1	)			(3.8	)
Purchases of restricted investments			(2.0	)			(13.7	)
Proceeds from the sale of restricted investments			10.1				21.1
Cash received from business divestitures, net of cash relinquished			39.2				40.5
Other			(0.2	)			(0.3	)
Net cash used in continuing operations			(89.6	)			(82.2	)
Net cash used in discontinued operations			—				(0.4	)
Net cash used in investing activities			(89.6	)			(82.6	)

The accompanying notes are an integral part of these statements.

AUTONATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

(Continued)

		Nine Months Ended
		September 30,
		2008				2007
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Purchases of treasury stock			(58.8	)			(551.4	)
Repurchase of floating rate senior unsecured notes			(46.4	)			—
Repurchase of 7% senior unsecured notes			(28.7	)			—
Payment of 9% senior unsecured notes			(14.1	)			—
Proceeds from revolving credit facility			531.0				995.0
Payment of revolving credit facility			(791.0	)			(829.0	)
Net proceeds (payments) of vehicle floor plan payable — non-trade			(33.7	)			235.2
Payments of mortgage facilities			(4.8	)			(3.3	)
Payments of notes payable and long-term debt			(2.8	)			(2.8	)
Proceeds from the exercise of stock options			1.0				91.9
Tax benefit from stock options			0.1				16.0
Other			7.0				(2.1	)
Net cash used in continuing operations			(441.2	)			(50.5	)
Net cash used in discontinued operations			(8.8	)			(9.9	)
Net cash used in financing activities			(450.0	)			(60.4	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			27.8				(23.0	)
CASH AND CASH EQUIVALENTS at beginning of period			33.0				52.2
CASH AND CASH EQUIVALENTS at end of period		$	60.8			$	29.2

The accompanying notes are an integral part of these statements.

AUTONATION, INC.

1. INTERIM FINANCIAL STATEMENTS

Business and Basis of Presentation

     AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of September 30, 2008, we owned and operated 311 new vehicle franchises from 238 stores located in major metropolitan markets, predominantly in the Sunbelt region of the United States. We offer a diversified range of automotive products and services, including new vehicles, used vehicles, vehicle maintenance and repair services, vehicle parts, extended service contracts, vehicle protection products, and other aftermarket products. We also arrange financing for vehicle purchases through third-party finance sources. For convenience, the terms “AutoNation,” “Company,” and “we” are used to refer collectively to AutoNation, Inc. and its subsidiaries, unless otherwise required by the context. Our dealership operations are conducted by our subsidiaries.

     The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of AutoNation, Inc. and its subsidiaries; all significant intercompany accounts and transactions have been eliminated. The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information related to our organization, significant accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States has been condensed or omitted. These Unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to fairly state, in all material respects, our financial position and results of operations for the periods presented.

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ materially from these estimates. We periodically evaluate estimates and assumptions used in the preparation of the financial statements and make changes on a prospective basis when adjustments are necessary. Significant estimates made by AutoNation in the accompanying Unaudited Condensed Consolidated Financial Statements include certain assumptions related to goodwill, intangible, and long-lived assets, allowances for doubtful accounts, accruals for chargebacks against revenue recognized from the sale of finance and insurance products, accruals related to self-insurance programs, certain legal proceedings, estimated tax liabilities, estimated losses from disposals of discontinued operations, and certain assumptions related to stock option compensation.

     Operating results for interim periods are not necessarily indicative of the results that can be expected for a full year. These interim financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our most recent Annual Report on Form 10-K.

     During the third quarter of 2008, we recorded impairment charges of $1.75 billion ($1.46 billion after-tax) associated with goodwill and franchise rights. See Note 4, Goodwill and Intangible Assets, of the Notes to Unaudited Condensed Consolidated Financial Statements for more information. In addition, we changed our operating segment structure. See Note 14, Segment Information, of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

     Certain reclassifications of amounts previously reported have been made to the accompanying Unaudited Condensed Consolidated Financial Statements in order to maintain consistency and comparability between periods presented. We reclassified certain amounts within the Cash Provided by (Used in) Operating Activities section of our Unaudited Condensed Consolidated Statements of Cash Flows to separately present our deferred income tax provision.

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

New Accounting Pronouncements

     In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), Business Combinations (“SFAS No. 141R”). SFAS No. 141R is a revision to SFAS No. 141 and includes substantial changes to the acquisition method used to account for business combinations (formerly the “purchase accounting” method), including broadening the definition of a business, as well as revisions to accounting methods for contingent consideration and other contingencies related to the acquired business, accounting for transaction costs, and accounting for adjustments to provisional amounts recorded in connection with acquisitions. SFAS No. 141R retains the fundamental requirement of SFAS No. 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141R will be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We are currently evaluating the impact of adopting SFAS No. 141R.

     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115. SFAS No. 159 permits entities to choose to measure certain financial assets and liabilities at fair value. Unrealized gains and losses, arising subsequent to adoption, are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We adopted SFAS No. 159 effective January 1, 2008, and have elected not to measure any of our current eligible financial assets or liabilities at fair value upon adoption.

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which defines fair value and applies to other accounting pronouncements that require or permit fair value measurements and expands disclosures about fair value measurements. SFAS No. 157 was effective for financial assets and liabilities in fiscal years beginning after November 15, 2007. In February 2008, the FASB amended SFAS No. 157 by issuing FASB Staff Position (“FSP”) FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13, which states that SFAS No. 157 does not address fair value measurements for purposes of lease classification or measurement. FSP FAS 157-1 does not apply to assets acquired and liabilities assumed in a business combination that are required to be measured at fair value under SFAS No. 141 or SFAS No. 141(R), regardless of whether those assets and liabilities are related to leases. In February 2008, the FASB also issued FSP FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008, for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. In October 2008, the FASB also issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active, which clarifies the application of SFAS No. 157 in a market that is not active.

     Our adoption of the provisions of SFAS No. 157 on January 1, 2008, with respect to financial assets and liabilities measured at fair value, did not have a material impact on our fair value measurements or our financial statements for the three and nine months ended September 30, 2008. In accordance with FSP FAS 157-2, we are currently evaluating the impact of applying the provisions of SFAS No. 157 to our nonfinancial assets and liabilities beginning in 2009, including (but not limited to) the valuation of our reporting units for the purpose of assessing goodwill impairment, the valuation of our franchise rights when assessing franchise impairments, the valuation of property and equipment when assessing long-lived asset impairment, and the valuation of assets acquired and liabilities assumed in business combinations.

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

2. RECEIVABLES, NET

     The components of receivables, net of allowance for doubtful accounts, are as follows:

		September 30,				December 31,
		2008				2007
Trade receivables		$	102.0			$	118.3
Manufacturer receivables			107.6				137.6
Other			35.6				54.4
			245.2				310.3
Less: Allowances			(6.3	)			(6.4	)
			238.9				303.9
Contracts-in-transit and vehicle receivables			192.5				377.7
Income tax refundable (See Note 6)			36.1				21.9
Receivables, net		$	467.5			$	703.5

     Contracts-in-transit and vehicle receivables primarily represent receivables from financial institutions for the portion of the vehicle sales price financed by our customers.

3. INVENTORY AND VEHICLE FLOORPLAN PAYABLE

     The components of inventory are as follows:

		September 30,				December 31,
		2008				2007
New vehicles		$	1,582.2			$	1,809.0
Used vehicles			242.9				306.0
Parts, accessories, and other			142.4				147.0
		$	1,967.5			$	2,262.0

     The components of vehicle floorplan payables are as follows:

		September 30,				December 31,
		2008				2007
Vehicle floorplan payable — trade		$	1,481.4			$	1,678.4
Vehicle floorplan payable — non-trade			417.7				448.0
		$	1,899.1			$	2,126.4

     Vehicle floorplan payable-trade reflects amounts borrowed to finance the purchase of specific new vehicle inventories with the corresponding manufacturers’ captive finance subsidiaries (“trade lenders”). Vehicle floorplan payable-non-trade represents amounts borrowed to finance the purchase of specific new and, to a lesser extent, used vehicle inventories with non-trade lenders. Changes in vehicle floorplan payable-trade are reported as operating cash flows and changes in vehicle floorplan payable non-trade are reported as financing cash flows in the accompanying Unaudited Condensed Consolidated Statements of Cash Flows.

     During the second quarter of 2008, we entered into separate floorplan credit arrangements with various lenders to provide a total of $180.0 million to finance a portion of our used vehicle inventory, of which $118.3 million was outstanding at September 30, 2008.

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

     Floorplan facilities are due on demand, but in the case of new vehicle inventories, are generally paid within several business days after the related vehicles are sold. Our manufacturer agreements generally require that the manufacturer have the ability to draft against the new floorplan facilities so the lender directly funds the manufacturer for the purchase of new vehicle inventory. Floorplan facilities are primarily collateralized by vehicle inventories and related receivables.

     Our vehicle floorplan facilities, which utilize LIBOR-based interest rates, averaged 3.9% for the nine months ended September 30, 2008, and 6.4% for the nine months ended September 30, 2007. At September 30, 2008, aggregate capacity under the floorplan credit facilities to finance vehicles was approximately $3.7 billion, of which $1.9 billion total was outstanding.

4. GOODWILL AND INTANGIBLE ASSETS

     Goodwill and intangible assets, net, consist of the following:

		September 30,				December 31,
		2008				2007
Goodwill		$	1,147.8			$	3,002.1
Less: accumulated amortization			—				(265.8	)
Goodwill, net		$	1,147.8			$	2,736.3
Franchise rights — indefinite-lived		$	173.6			$	313.0
Other intangibles			7.6				7.9
			181.2				320.9
Less: accumulated amortization			(3.6	)			(4.4	)
Other intangibles assets, net		$	177.6			$	316.5

Goodwill

     Goodwill is tested for impairment annually or more frequently when events or circumstances indicate that the carrying value of a reporting unit more likely than not exceeds its fair value. During 2008, we changed our annual goodwill impairment testing date from June 30 to April 30, as this date provides additional time to complete the impairment testing and report the results of those tests in our June 30 Quarterly Report on Form 10-Q. No goodwill impairment charges resulted from the April 30 goodwill impairment test.

     During the third quarter of 2008, as a result of the continuing challenging automotive retail environment and the decline in our stock price, we determined that the carrying value of our single reporting unit more likely than not exceeded its fair value, as contemplated by paragraph 28 of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). Due to this change in circumstances, we were required to conduct an interim test of our single reporting unit’s goodwill.

     The test for goodwill impairment, as defined by SFAS No. 142 is a two-step approach. The first step of the goodwill impairment test requires a determination of whether or not the fair value of a reporting unit is less than its carrying value. If so, the second step is required, which involves an analysis reflecting the allocation of the fair value determined in the first step (as if it was the purchase price in a business combination). This process may result in the determination of a new amount of goodwill. If the calculated fair value of the goodwill resulting from this allocation is lower than the carrying value of the goodwill in the reporting unit, the difference is reflected as a non-cash impairment loss. The purpose of the second step is only to determine the amount of goodwill that should be recorded on the balance sheet. The recorded amounts of other items on the balance sheet are not adjusted.

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

     We estimated the fair value of our single reporting unit using “market” and “income” valuation approaches. The “market” valuation approach estimates our enterprise value, which is comprised of our market capitalization and our debt. The “income” valuation approach estimates our enterprise value using a net present value model, which discounts projected free cash flows (DCF) of our business at a computed weighted average cost of capital as the discount rate. We also consider a control premium that represents the estimated amount an investor would pay for our equity securities to obtain a controlling interest.

     The requirements of the goodwill impairment testing process are such that, in our situation, if the first step of the impairment testing process indicates that the fair value of the reporting unit is below its carrying value (even by a relatively small amount), the requirements of the second step of the test result in a significant decrease in the amount of goodwill recorded on the balance sheet.

     This is due to the fact that, prior to our adoption on July 1, 2001, of Statement of Financial Accounting Standards No. 141, Business Combinations, and in accordance with applicable accounting standards, we did not separately identify franchise rights associated with the acquisition of dealerships as separate intangible assets. In performing the second step, we are required by SFAS No. 142 to assign value to any previously unrecognized identifiable intangible assets (including such franchise rights, which are substantial) even though such amounts are not separately identified on our Consolidated Balance Sheet.

     As a result of completing the first step of this interim goodwill impairment test, we determined that the carrying value of our single reporting unit exceeded its fair value, which required us to perform the second step of the goodwill impairment test. Due to the fact that we were required to allocate significant value to our franchise rights assets for the purpose of conducting the second step of the impairment testing, but were not permitted to record the franchise rights assets on the balance sheet, the remaining fair value that was allocated to goodwill was significantly reduced. In effect, we were required by the second step of the impairment testing under SFAS No. 142 to reduce our goodwill by the amount of our previously unrecognized franchise rights assets, which are substantial (in addition to other adjustments to goodwill resulting from the impairment testing).

     The second step of the goodwill impairment test indicated that goodwill was impaired and we recorded an estimated non-cash goodwill impairment charge of $1.47 billion ($1.25 billion after-tax).

     Additionally, as discussed in Note 14, Segment Information, to the Notes to Unaudited Condensed Consolidated Financial Statements, we revised our operating segment structure during the three months ended September 30, 2008, and now have Domestic, Import, and Premium Luxury segments. In connection with this revision to our operating segment structure, we were also required to identify the appropriate reporting units for purposes of testing goodwill for impairment under the revised operating segment structure. SFAS No. 142 defines a reporting unit as an operating segment or one level below an operating segment (referred to as a component), and also states that two or more components of an operating segment shall be aggregated and deemed a single reporting unit if the components have similar economic characteristics. We determined that our stores in each of our three operating segments are components, which were then aggregated into three reporting units based on similarities in long-term financial performance expectations, customers, and operating environments of the stores within each segment, among other factors. Accordingly, our segments are also considered our reporting units for the purpose of goodwill impairment testing and we allocated our remaining goodwill (after the aforementioned $1.47 billion non-cash goodwill impairment charge) to our three reporting units based on the relative fair values of those reporting units on the date of this change, determined using a net present value model. Since the resulting carrying value of the Domestic reporting unit exceeded its estimated fair value, we were also required to perform the second step of the goodwill impairment test on the goodwill allocated to the Domestic reporting unit. We recorded an additional non-cash goodwill impairment charge of $140.0 million ($119.0 million after-tax) to write-off a portion of the goodwill assigned to the Domestic reporting unit. Subsequent to these non-cash goodwill impairment charges, we have $1.15 billion of goodwill recorded on our balance sheet as of September 30, 2008, which was allocated by reporting unit as follows: $171.7 million to Domestic, $506.1 million to Import, and $470.0 million to Premium Luxury.

     The aggregate non-cash goodwill impairment charge resulting from the aforementioned single reporting unit impairment test and the non-cash impairment charge related specifically to our Domestic reporting unit totaled $1.61 billion ($1.37 billion after-tax), all of which is classified as Goodwill Impairment in the accompanying Unaudited Condensed Consolidated Income Statement, and is an estimate because we have not finalized the valuation of certain assets and liabilities. We expect to finalize this non-cash goodwill impairment amount during the fourth quarter of 2008, and any adjustment will be reflected in our results for the fourth quarter of 2008.

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

     Goodwill allocated to our reporting units and changes in the carrying amount of goodwill for the nine months ended September 30, 2008, were as follows:

										Premium				Corporate
		Domestic				Import				Luxury				and other				Consolidated
Goodwill at January 1, 2008		$	—			$	—			$	—			$	2,736.3			$	2,736.3
Acquisitions			—				—				—				21.5				21.5
Impairment — Single reporting unit			—				—				—				(1,470.0	)			(1,470.0	)
Allocations			311.7				506.1				470.0				(1,287.8	)			—
Impairment — Domestic			(140.0	)			—				—				—				(140.0	)
Goodwill at September 30, 2008		$	171.7			$	506.1			$	470.0			$	—			$	1,147.8

Intangible Assets

     Our principal identifiable intangible assets are individual store rights under franchise agreements with vehicle manufacturers, which have indefinite lives and are tested at least annually for impairment. We completed our annual impairment test for these intangibles with indefinite lives as of April 30, 2008, as well as interim impairment tests for certain rights under franchise agreements where events or changes in circumstances indicated their carrying amounts may exceed fair value. The impairment test for intangibles with indefinite lives requires the comparison of estimated fair value to its carrying value by store. Fair values of rights under franchise agreements are estimated by discounting expected future cash flows of the store.

     As a result of the continuing challenging automotive retail environment, we also tested our rights under franchise agreements for impairment during the three months ended September 30, 2008, prior to testing goodwill for impairment, as noted above. We recorded non-cash impairment charges of $20.3 million related to rights under certain Domestic stores’ franchise agreements, $16.2 million related to rights under certain Import stores’ franchise agreements, and $104.9 million related to rights under certain Premium Luxury stores’ franchise agreements, for a total of $141.4 million ($87.7 million after-tax). These impairment charges were recorded to reduce the carrying value of those stores’ franchise agreements to estimated fair value. Subsequent to these non-cash franchise rights impairment charges, we have $173.6 million of franchise rights recorded on our balance sheet as of September 30, 2008, of which $5.0 million is related to Domestic stores, $34.1 million is related to Import stores, and $134.5 million is related to Premium Luxury stores.

     During the six months ended June 30, 2008, we recorded $5.1 million ($3.0 million after-tax) of non-cash impairment charges related to rights under certain Import stores’ franchise agreements to reduce the carrying value of those stores’ franchise agreements to estimated fair value. During the nine months ended September 30, 2007, we recorded $1.0 million ($0.6 million after-tax) of non-cash impairment charges related to rights under an Import store’s franchise agreement to reduce the carrying value of that store’s franchise agreement to estimated fair value.

     The decline in the fair value of rights under these stores’ franchise agreements reflects the underperformance relative to expectations of these stores since our acquisition of them, as well as our expectations for the stores’ future prospects. These factors resulted in a reduction in forecasted cash flows and growth rates used to estimate fair value. These non-cash impairment charges are classified Franchise Rights Impairment in the accompanying Unaudited Condensed Consolidated Income Statement.

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

5. NOTES PAYABLE AND LONG-TERM DEBT

     Notes payable and long-term debt consist of the following:

		September 30,				December 31,
		2008				2007
Floating rate senior unsecured notes, due 2013		$	244.6			$	300.0
7% senior unsecured notes, due 2014			267.3				300.0
Term loan facility, due 2012			600.0				600.0
Revolving credit facility, due 2012			—				260.0
9% senior unsecured notes, due 2008			—				14.1
Mortgage facility, due 2017			234.9				239.7
Other debt, due from 2010 to 2025			66.9				62.0
			1,413.7				1,775.8
Less: current maturities			(55.7	)			(23.9	)
Long-term debt, net of current maturities		$	1,358.0			$	1,751.9

     Senior Unsecured Notes and Credit Agreement

     We have $244.6 million of floating rate senior unsecured notes due April 15, 2013, and $267.3 million of 7% senior unsecured notes due April 15, 2014, in each case at par. The floating rate senior unsecured notes bear interest at a rate equal to three-month LIBOR plus 2.0% per annum, adjusted quarterly, and may be redeemed by us currently at 103% of principal, on or after April 15, 2009, at 102% of principal, on or after April 15, 2010, at 101% of principal, and on or after April 15, 2011, at 100% of principal. The 7% senior unsecured notes may be redeemed by us on or after April 15, 2009, at 105.25% of principal, on or after April 15, 2010, at 103.5% of principal, on or after April 15, 2011, at 101.75% of principal, and on or after April 15, 2012, at 100% of principal.

     During the third quarter of 2008, we repurchased $55.4 million aggregate principal amount of our floating rate senior unsecured notes due April 15, 2013, for an aggregate total consideration of $46.7 million. We also repurchased $32.7 million aggregate principal amount of our 7% senior unsecured notes due April 15, 2014, for an aggregate total consideration of $29.7 million.

     We recorded a gain of $12.1 million in connection with these repurchases, net of the write-off of related unamortized debt issuance costs. This gain is classified as Gain on Senior Note Repurchases in the accompanying Unaudited Condensed Consolidated Income Statements.

     We also committed to repurchase an additional $25.8 million aggregate principal amount of our 7% senior unsecured notes for an aggregate total consideration of $23.5 million for which settlement occurred subsequent to September 30, 2008. We have reclassified these amounts from long-term to current debt as of September 30, 2008. We will record a gain in the fourth quarter of 2008 of $2.9 million on the repurchase of these notes, net of the write-off of related unamortized debt issuance costs.

     Under our amended credit agreement which terminates on July 18, 2012, we have a $700.0 million revolving credit facility that provides for various interest rates on borrowings generally at LIBOR plus 0.725% and a $600.0 million term loan facility bearing interest at a rate equal to LIBOR plus 0.875%. We also have a letter of credit sublimit as part of our revolving credit facility. The amount available to be borrowed under the revolving credit facility is reduced on a dollar-for-dollar basis by the cumulative amount of any outstanding letters of credit, which totaled $78.8 million at September 30, 2008. As of September 30, 2008, we had no borrowings outstanding under the revolving credit facility, leaving $621.2 million of borrowing capacity. As of September 30, 2008, this borrowing capacity was limited under the maximum consolidated leverage ratio contained in our amended credit agreement to approximately $197 million.

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

     The credit spread charged for the revolving credit facility and term loan facility is impacted by our senior unsecured credit ratings from Standard & Poor’s (BB+, credit watch with negative implications) and Moody’s (Ba2, with stable outlook). For instance, under the current terms of our amended credit agreement, a one-notch downgrade of our senior unsecured credit rating by either Standard & Poor’s or Moody’s would result in a 25 basis point increase in the credit spread under our term loan facility, a 20 basis point increase in the credit spread under our revolving credit facility, and a 5 basis point increase in the facility fee applicable to our revolving credit facility.

     Our senior unsecured notes and borrowings under the amended credit agreement are guaranteed by substantially all of our subsidiaries. Within the meaning of Regulation S-X, Rule 3-10, AutoNation, Inc. (the parent company) has no independent assets or operations, the guarantees of its subsidiaries are full and unconditional and joint and several, and any subsidiaries other than the guarantor subsidiaries are minor.

     Other Debt

     On August 1, 2008, we repaid $14.1 million of 9% senior unsecured notes that matured on that date.

     At September 30, 2008, we had $234.9 million outstanding under a mortgage facility with an automotive manufacturer’s captive finance subsidiary due December 1, 2017. The mortgage facility was refinanced under a new facility in November 2007 to provide a fixed interest rate (5.864%) and provide financing secured by 10-year mortgages on certain of our store properties. Prior to this refinancing, the facility utilized short-term LIBOR-based interest rates, which averaged 6.7% for the nine months ended September 30, 2007.

     Restrictions and Covenants

     Our amended credit agreement, the indenture for our floating rate and 7% senior unsecured notes, our vehicle floorplan payable facilities, and our mortgage facility contain numerous customary financial and operating covenants that place significant restrictions on us, including our ability to incur additional indebtedness or prepay existing indebtedness, to create liens or other encumbrances, to sell (or otherwise dispose of) assets, and to merge or consolidate with other entities.

     For example, under the amended credit agreement, we are required to maintain a maximum consolidated leverage ratio, as defined (3.0 times through September 30, 2009, after which it will revert to 2.75 times). In March 2008, we amended our credit agreement to provide that non-cash impairment losses associated with goodwill and intangible assets as well as certain other non-cash charges would be excluded from the computation of the maximum consolidated leverage ratio. We are also required to maintain a maximum capitalization ratio (65%), as defined.

     In addition, the indenture for the floating rate and 7% senior unsecured notes contains a debt incurrence restriction based on a minimum fixed charge coverage ratio (2:1), and the mortgage facility contains covenants regarding maximum cash flow leverage and minimum interest coverage.

     Our failure to comply with the covenants contained in our debt agreements could permit acceleration of all of our indebtedness. Our debt agreements have cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness of AutoNation.

     In the event of a downgrade in our senior unsecured credit ratings, none of the covenants described above would be impacted. In addition, availability under the amended credit agreement described above would not be impacted should a downgrade in the senior unsecured debt credit ratings occur. Certain covenants in the indenture for the floating rate and 7% senior unsecured notes would be eliminated with an upgrade of our senior unsecured credit ratings to investment grade by either Standard & Poor’s or Moody’s.

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

6. INCOME TAXES

     Income taxes refundable included in Accounts Receivable totaled $36.1 million at September 30, 2008, and $21.9 million at December 31, 2007.

     We file income tax returns in the U.S. federal jurisdiction and various states. As a matter of course, various taxing authorities, including the IRS, regularly audit us. Currently, the IRS is auditing the tax years from 2002 to 2006. These audits may result in proposed assessments where the ultimate resolution may result in our owing additional taxes. We believe that our tax positions comply with applicable tax law and that we have adequately provided for these matters.

     We adopted the provisions of FASB Interpretation No. 48 (“FIN 48”) on January 1, 2007. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition.  As a result of the implementation of FIN 48, we recognized an increase of approximately $2.0 million (net of tax effect) in the liability for unrecognized tax benefits which was accounted for as a reduction to the January 1, 2007, balance of retained earnings. It is our continuing policy to account for interest and penalties associated with income tax obligations as a component of provision for income taxes in the accompanying Unaudited Condensed Consolidated Financial Statements.

     Subsequent to September 30, 2008, our unrecognized tax benefits were reduced by approximately $35 million (net of tax effect) as a result of the expiration of a statute of limitations in October 2008. This favorable non-cash tax adjustment will be recorded in our fourth quarter 2008 results.

     We recognized a $12.0 million benefit (net of tax effect) during the nine months ended September 30, 2007, related to the resolution of certain tax matters, changes in certain state tax laws, and other adjustments.

7. SHAREHOLDERS’ EQUITY

     During the third quarter of 2008, we recorded impairment charges of $1.75 billion ($1.46 billion after-tax) associated with goodwill and franchise rights. See Note 4, Goodwill and Intangible Assets, of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

     During the three months ended September 30, 2008, we did not repurchase any shares of our common stock. During the nine months ended September 30, 2008, we repurchased 3.8 million shares of our common stock for an aggregate purchase price of $54.1 million (average purchase price per share of $14.37). As of September 30, 2008, $142.7 million remained available for share repurchases under the existing repurchase program approved by our Board of Directors. Future share repurchases are subject to limitations contained in the indenture relating to our senior unsecured notes. As of October 1, 2008, approximately $61 million remained available for share repurchases and other restricted payments under the indenture relating to our senior unsecured notes.

     We issued 0.1 million shares of common stock in connection with the exercise of stock options during the nine months ended September 30, 2008, and 6.4 million shares during the nine months ended September 30, 2007. The proceeds from the exercise of stock options were $1.0 million (average exercise price per share of $10.71) during the nine months ended September 30, 2008, and $91.9 million (average exercise price per share of $14.30) during the nine months ended September 30, 2007.

8. EARNINGS (LOSS) PER SHARE

     Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding adjusted for the dilutive effective of stock options, restricted stock, and other dilutive securities. For the three months and nine months ended September 30, 2008, no options or restricted stock were included in the computation of diluted loss per share because we reported a net loss from continuing operations and the effect of their inclusion would be anti-dilutive. Anti-dilutive options totaling 6.7 million for the three months ended September 30, 2007, and 6.3 million for the nine months ended September 30, 2007, have been excluded from the computation of diluted earnings (loss) per share.

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

     The computation of weighted-average common and common equivalent shares used in the calculation of basic and diluted earnings (loss) per share is as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Weighted average shares outstanding used in calculating basic earnings per share			176.7				196.1				178.2				203.6
Effect of dilutive stock options and awards			—				1.4				—				2.0
Weighted average common and common equivalent shares used in calculating diluted earnings per share			176.7				197.5				178.2				205.6

9. STOCK–BASED COMPENSATION

     On March 14, 2008, our Board of Directors, upon the recommendation of its Compensation Committee, approved a new employee equity and incentive plan (“2008 Plan”), which was approved by our stockholders at our Annual Meeting of Stockholders held on May 7, 2008. The 2008 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based and cash-based awards. A maximum of 12.0 million shares may be issued under the 2008 Plan, provided that no more than 2.0 million shares may be issued pursuant to the grant of awards, other than options or stock appreciation rights, that are settled in shares. The exercise price of all stock options and stock appreciation rights granted under the 2008 Plan, is equal to or above the closing price of our common stock on the date such awards are granted, or if the date of grant is not a trading day, on the next trading day.

     We may also issue stock options to non-employee directors under the AutoNation, Inc. 2007 Non-Employee Director Stock Option Plan (“Non-Employee Director Plan”). The exercise price of all stock options granted under the Non-Employee Director Plan is equal to or above the closing price of our common stock on the trading day immediately prior to the date of grant.

     No additional options may be issued under our other employee stock option plans (“Prior Plans”), pursuant to which employee stock options were previously granted prior to the adoption of the 2008 Plan. Under our Prior Plans, employee stock options were granted with exercise prices equal to or above the closing price of our common stock on the trading day immediately prior to the date of grant.

     Stock Options

     Stock options granted under all plans are non-qualified. Upon exercise, shares of common stock are issued from our treasury stock. Generally, employee stock options have a term of 10 years from the date of grant and vest in increments of 25% per year over a four-year period on the anniversary of the grant date. Stock options granted to non-employee directors have a term of 10 years from the date of grant and vest immediately upon grant.

     We use the Black-Scholes valuation model to determine compensation expense and amortize compensation expense over the requisite service period of the grants on a straight-line basis. Certain of our equity-based compensation plans contain provisions that provide for vesting of awards upon retirement. Accordingly, the related compensation cost for awards granted subsequent to our adoption on January 1, 2006, of SFAS No. 123 (revised 2004), Shared-Based Payment (“SFAS No. 123R”), must be recognized over the shorter of the stated vesting period or the period until employees become retirement-eligible. During the second quarter of 2008, we corrected our expense attribution method to reflect this requirement and recognized $5.3 million ($3.1 million after-tax) of additional stock compensation expense. This correction was immaterial to all prior quarterly and annual periods.

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

     The following table summarizes the assumptions used relating to the valuation of our stock options during the nine months ended September 30, 2008, and 2007:

		2008		2007
Risk-free interest rate		3.24% — 4.87%		3.06% — 4.87%
Expected dividend yield		—		—
Expected term		4 — 7 years		4 — 7 years
Expected volatility		20% — 40%		20% — 40%

     The risk-free interest rate is based on the U.S. Treasury yield curve at the time of the grant. The expected term of stock options granted is derived from historical data and represents the period of time that stock options are expected to be outstanding. The expected volatility is based on historical volatility, implied volatility, and other factors impacting us.

     A summary of stock option activity is as follows for the nine months ended September 30, 2008:

		Stock Options
										Weighted-
										Average
						Weighted-				Remaining				Aggregate
		Shares				Average				Contractual				Intrinsic Value
		(in millions)				Exercise Price				Term (Years)				(in millions)
Options outstanding at January 1			14.2			$	16.68
Granted *			1.4			$	10.66
Exercised			(0.1	)		$	10.71
Forfeited			(0.5	)		$	19.21
Expired			(0.4	)		$	18.91
Options outstanding at September 30			14.6			$	16.02				5.8			$	6.1
Options exercisable at September 30			10.6			$	15.60				4.6			$	4.8
Options available for future grants at September 30			12.3

     The total intrinsic value (which equals the spread between the market value of the stock and the exercise price) of stock options exercised was $0.3 million during the nine months ended September 30, 2008, and $49.6 million during the nine months ended September 30, 2007.

     Restricted Stock

     Restricted stock awards are considered nonvested share awards as defined under SFAS No. 123R. Restricted stock awards are issued from our treasury stock and vest in increments of 25% per year over a four-year period on the anniversary of the grant date. Compensation cost is recognized over the requisite vesting period based on the closing price of our common stock on the date of grant.

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

     The following table summarizes information about vested and unvested restricted stock for the nine months ended September 30, 2008:

		Restricted Stock
						Weighted-Average
		Shares				Grant Date Fair
		(in millions)				Value
Nonvested at January 1			—			$	—
Granted **			0.2			$	10.17
Vested			—			$	—
Forfeited			—			$	—
Nonvested at September 30			0.2			$	10.17

     Compensation Expense

     The following table summarizes the total stock-based compensation expense recognized in selling, general, and administrative expenses in the 2008 and 2007 Unaudited Condensed Consolidated Income Statement:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Stock options (1)		$	5.4			$	3.8			$	17.7			$	11.8
Restricted stock			0.3				—				0.3				—
Total stock-based compensation expense		$	5.7			$	3.8			$	18.0			$	11.8

     As of September 30, 2008, there was $19.0 million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements, of which $17.3 million relates to stock options and $1.7 million relates to restricted stock. These amounts are expected to be recognized over a weighted average period of 1.6 years.

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

10. COMPREHENSIVE INCOME (LOSS)

     Comprehensive income (loss) is as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Net income (loss)		$	(1,412.7	)		$	72.1			$	(1,310.2	)		$	227.0
Other comprehensive income (loss)			(0.4	)			0.1				(0.4	)			0.2
Comprehensive income (loss)		$	(1,413.1	)		$	72.2			$	(1,310.6	)		$	227.2

11. ACQUISITIONS

     We acquired one automotive retail franchise and related assets during the nine months ended September 30, 2008, and eight automotive retail franchises and other related assets during the nine months ended September 30, 2007. Acquisitions are included in the Unaudited Condensed Consolidated Financial Statements from the date of acquisition.

     We paid $29.4 million during the nine months ended September 30, 2008, and $4.2 million during the nine months ended September 30, 2007, for acquisitions.

12. COMMITMENTS AND CONTINGENCIES

     Legal Proceedings

     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.

     We are a party to numerous 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 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 financial condition, results of operations, and cash flows.

     Other Matters

     AutoNation, acting through its subsidiaries, is the lessee under many real estate leases that provide for the use by our subsidiaries of their respective dealership premises. Pursuant to these leases, our subsidiaries generally agree to indemnify the lessor and other related parties from certain liabilities arising as a result of the use of the leased premises, including environmental liabilities, or a breach of the lease by the lessee. Additionally, from time to time, we enter into agreements with third parties in connection with the sale of assets or businesses in which we agree to indemnify the purchaser or related parties from certain liabilities or costs arising in connection with the assets or business. Also, in the ordinary course of business in connection with purchases or sales of goods and services, we enter into agreements that may contain indemnification provisions. In the event that an indemnification claim is asserted, liability would be limited by the terms of the applicable agreement.

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

     From time to time, primarily in connection with dispositions of automotive stores, our subsidiaries assign or sublet to the dealership purchaser the subsidiaries’ interests in any real property leases associated with such stores. In general, our subsidiaries retain responsibility for the performance of certain obligations under such leases to the extent that the assignee or sublessee does not perform, whether such performance is required prior to or following the assignment or subletting of the lease. Additionally, AutoNation and its subsidiaries generally remain subject to the terms of any guarantees made by us and our subsidiaries in connection with such leases. Although we generally have indemnification rights against the assignee or sublessee in the event of non-performance under these leases, as well as certain defenses, we estimate that lessee rental payment obligations during the remaining terms of these leases are approximately $93 million at September 30, 2008. Our exposure under these leases is difficult to estimate and there can be no assurance that any performance of AutoNation or its subsidiaries required under these leases would not have a material adverse effect on our business, financial condition, and cash flows.

     At September 30, 2008, surety bonds, letters of credit, and cash deposits totaled $115.2 million, including $78.8 million of letters of credit. 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. We do not currently provide cash collateral for outstanding letters of credit.

     In the ordinary course of business, we are subject to numerous laws and regulations, including automotive, environmental, health and safety, and other laws and regulations. We do not anticipate that the costs of such compliance will have a material adverse effect on our business, consolidated results of operations, cash flows, or financial condition, although such outcome is possible given the nature of our operations and the extensive legal and regulatory framework applicable to our business. We do not have any material known environmental commitments or contingencies.

13. DISCONTINUED OPERATIONS

     Discontinued operations are related to stores that were sold or terminated, that we have entered into an agreement to sell or terminate, or for which we otherwise deem a proposed sales transaction or termination to be probable, with no material changes expected. Generally, the sale of a store is completed within 60 to 90 days after the date of a sale agreement.

     We received proceeds (net of cash relinquished) of $39.2 million during the nine months ended September 30, 2008, and $40.5 million during the same period in 2007 related to discontinued operations. We classified eight stores during the nine months ended September 30, 2008, and 16 stores during the same period in 2007, as discontinued operations.

     The accompanying Unaudited Condensed Consolidated Financial Statements for all the periods presented have been adjusted to classify these stores as discontinued operations. Assets and liabilities of discontinued operations are reported in the “Corporate and other” category of our segment information in Note 14 below. Selected income statement data for our discontinued operations is as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Total revenue		$	26.1			$	136.4			$	139.7			$	483.8
Pre-tax loss from discontinued operations		$	(3.8	)		$	(1.6	)		$	(9.0	)		$	(3.7	)
Pre-tax loss on disposal of discontinued operations			(3.5	)			(0.6	)			(1.1	)			(2.4	)
			(7.3	)			(2.2	)			(10.1	)			(6.1	)
Income tax expense			0.5				2.3				4.0				4.8
Loss from discontinued operations, net of income taxes		$	(7.8	)		$	(4.5	)		$	(14.1	)		$	(10.9	)

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

     A summary of the total assets and liabilities of discontinued operations included in Other Current Assets and Other Current Liabilities is as follows:

		September 30,				December 31,
		2008				2007
Inventory		$	23.0			$	71.5
Other current assets			5.1				14.6
Property and equipment, net			27.8				45.1
Goodwill			11.9				33.9
Franchise rights			3.4				—
Other non-current assets			0.2				0.2
Total assets		$	71.4			$	165.3
Vehicle floorplan payable-trade		$	12.2			$	45.9
Vehicle floorplan payable-non-trade			7.1				15.9
Other current liabilities			6.1				9.9
Total liabilities		$	25.4			$	71.7

     Our vehicle floorplan payable at the time of divestiture is paid off or assumed by the buyer. Cash received from business divestitures is net of vehicle floorplan payable to the extent assumed by the buyer.

14. SEGMENT INFORMATION

     Prior to the third quarter of 2008, we had a single operating segment. During the third quarter of 2008, in response to changes in the automotive retail market, including the disproportionate decline in revenue and earnings from our domestic franchises relative to our import and premium luxury franchises, we made changes to our management approach that divided our business into three operating and reportable segments: (1) Domestic, (2) Import, and (3) Premium Luxury. This realignment had no effect on our previously reported consolidated results of operations, financial position or cash flows. In connection with this change, we have reclassified historical amounts to conform to our current segment presentation.

     Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by General Motors, Ford, and Chrysler. Our Import segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda, and Nissan. Our Premium Luxury segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Mercedes, BMW, and Lexus. The franchises in each segment also sell used vehicles, parts and automotive services, and automotive finance and insurance products.

     “Corporate and other” is comprised of our other businesses, including collision centers, E-commerce activities, and auction operations, each of which generates revenues, as well as unallocated corporate overhead expenses.

     The operating segments identified above are the business activities of the Company for which discrete financial information is available and for which operating results are regularly reviewed by our chief operating decision maker to allocate resources and assess performance. Our chief operating decision maker is our Chief Executive Officer. We have determined that our three operating segments also represent our reportable segments.

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

     Reportable segment revenues, income (loss), floorplan interest expense, depreciation and amortization, total assets, and capital expenditures are as follows (in millions):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Revenues:
Domestic		$	1,199.9			$	1,723.1			$	3,985.1			$	5,076.6
Import			1,412.5				1,703.4				4,471.3				4,911.6
Premium Luxury			904.1				1,060.5				2,863.7				3,159.4
Corporate and other			26.9				26.3				87.5				79.8
Total revenues		$	3,543.4			$	4,513.3			$	11,407.6			$	13,227.4

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Segment income (loss)*:
Domestic		$	23.1			$	54.2			$	92.8			$	167.9
Import			52.7				68.9				167.6				198.3
Premium Luxury			43.3				55.7				145.6				167.7
Corporate and other			(1,776.6	)			(26.4	)			(1,831.6	)			(77.2	)
Total segment income			(1,657.5	)			152.4				(1,425.6	)			456.7
Other interest expense			(20.9	)			(29.6	)			(69.3	)			(82.4	)
Gain on senior note repurchases			12.1				—				12.1				—
Interest income			0.7				0.8				1.5				2.6
Other gains (losses), net			(2.3	)			(0.9	)			(2.9	)			0.1
Income from continuing operations before income taxes		$	(1,667.9	)		$	122.7			$	(1,484.2	)		$	377.0

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Floorplan interest expense:
Domestic		$	(8.8	)		$	(17.4	)		$	(31.1	)		$	(48.5	)
Import			(6.6	)			(11.5	)			(24.0	)			(35.4	)
Premium Luxury			(4.7	)			(6.2	)			(15.0	)			(19.4	)
Corporate and other			0.3				2.2				3.9				6.9
Total floorplan interest expense		$	(19.8	)		$	(32.9	)		$	(66.2	)		$	(96.4	)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Depreciation and amortization:
Domestic		$	6.6			$	7.0			$	20.2			$	21.1
Import			5.3				5.4				15.9				15.7
Premium Luxury			4.2				3.8				12.3				10.7
Corporate and other			6.6				5.8				20.0				16.5
Total depreciation and amortization		$	22.7			$	22.0			$	68.4			$	64.0

AUTONATION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

		September 30,				December 31,
		2008				2007
Assets:
Domestic		$	1,740.7			$	2,065.1
Import			1,390.6				1,554.7
Premium Luxury			974.0				1,000.2
Corporate and other:
Goodwill			1,147.8				2,736.3
Franchise rights			173.6				313.0
Other Corporate and other assets			811.5				810.3
Total assets		$	6,238.2			$	8,479.6

     As discussed in Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements, we recorded estimated non-cash goodwill impairment charges of $1.61 billion ($1.37 billion, net of tax) and non-cash impairment charges of $141.4 million ($87.7 million after-tax) related to our franchise rights intangible assets during the three months ended September 30, 2008. During the six months ended June 30, 2008, we recorded $5.1 million ($3.0 million after-tax) of non-cash impairment charges related to franchise rights intangible assets. During the nine months ended September 30, 2007, we recorded $1.0 million ($0.6 million after-tax) of non-cash impairment charges related to franchise rights intangible assets. These non-cash impairment charges are recorded in Corporate and other.

     As discussed in Note 5 of the Notes to Unaudited Condensed Consolidated Financial Statements, we recorded a gain of $12.1 million in connection with repurchases of debt, net of the write-off of related unamortized debt issuance costs. This gain is was recorded in Corporate and other.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and notes thereto included under Item 1. In addition, reference should be made to our audited consolidated financial statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our most recent Annual Report on Form 10-K.

     Certain amounts have been reclassified from the previously reported financial statements to conform to the financial statement presentation of the current period.

Overview

     AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of September 30, 2008, we owned and operated 311 new vehicle franchises from 238 stores located in major metropolitan markets, 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 39 different brands of new vehicles. The core brands of vehicles that we sell, representing approximately 96% of the new vehicles that we sold during the nine months ended September 30, 2008, are manufactured by Toyota, Ford, Honda, Nissan, General Motors, Daimler, Chrysler, 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, leveraging our market brands and advertising, improving asset management, implementing standardized processes, and increasing productivity across all of our stores.

     For the nine months ended September 30, 2008, new vehicle sales accounted for approximately 56% of our total revenue, but approximately 22% of our total gross margin. Our parts and service and finance and insurance operations, while comprising approximately 20% of total revenue for the nine months ended September 30, 2008, contributed approximately 64% of our gross margin for the same period.

     We believe that many factors affect sales of new vehicles and automotive retailers’ gross profit margins in the United States and in our particular geographic markets, including the economy, inflation, recession or economic slowdown, consumer confidence, housing markets, fuel prices, credit availability, the level of manufacturers’ 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, employment/unemployment rates, the number of consumers whose vehicle leases are expiring, and the length of consumer loans on existing vehicles. Changes in interest rates could significantly impact industry new vehicle sales and vehicle affordability, due to the direct relationship between interest rates and monthly loan payments, a critical factor for many vehicle buyers, and the impact interest rates can have on customers’ borrowing capacity and disposable income. In periods where there is a decline in the availability of credit, particularly in the sub-prime lending market, the ability of certain consumers to purchase vehicles will be limited, resulting in a decline in sales or profits. Sales of certain new vehicles, particularly larger trucks and sports utility vehicles that historically have provided us with higher gross margins, also are impacted by fuel prices and the level of construction activity.

     During the three months ended September 30, 2008, we had a net loss from continuing operations of $1.40 billion and diluted loss per share of $7.95, as compared to net income from continuing operations of $76.6 million and diluted earnings per share of $0.39, during the same period in 2007. During the nine months ended September 30, 2008, we had a net loss from continuing operations of $1.30 billion and diluted loss per share of $7.27, as compared to net income from continuing operations of $237.9 million and diluted earnings per share of $1.16 during the same period in 2007.

     Results for the three months ended September 30, 2008, were impacted by a non-cash goodwill impairment charge of $1.61 billion ($1.37 billion after-tax), non-cash franchise impairments of $141.4 million ($87.7 million after-tax), and a gain on senior note repurchases of $12.1 million ($7.4 million after-tax). Results for the three months ended September 30, 2007, included favorable tax adjustments of $3.4 million.

     Results for the nine months ended September 30, 2008, were impacted by the non-cash goodwill impairment charge of $1.61 billion ($1.37 billion after-tax), non-cash franchise impairments of $146.5 million ($90.8 million after-tax), the gain on senior note repurchases of $12.1 million ($7.3 million after-tax), as well as a non-cash stock compensation expense adjustment of $5.3 million ($3.2 million after-tax). See further discussion of these adjustments in Note 4, Goodwill and Intangible Assets, Note 5, Notes Payable and Long-Term Debt, and Note 9, Stock-Based Compensation of the Notes to Unaudited Condensed Consolidated Financial Statements. Results for the nine months ended September 30, 2007, included favorable tax adjustments of $12.0 million.

Operating Segments

     Prior to the third quarter of 2008, we had a single operating segment. During the third quarter of 2008, in response to changes in the automotive retail market, including the disproportionate decline in revenue and earnings from our domestic franchises compared to our import and premium luxury franchises, we made changes to our management approach that divided our business into three operating segments: (1) Domestic, (2) Import, and (3) Premium Luxury. This realignment had no effect on our previously reported consolidated results of operations, financial position or cash flows. In connection with this change, we have reclassified historical amounts to conform to our current segment presentation.

     Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by General Motors, Ford, and Chrysler. Our Import segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda, and Nissan. Our Premium Luxury segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Mercedes, BMW, and Lexus. The franchises in each segment also sell used vehicles, parts and automotive services, and automotive finance and insurance products. For additional information regarding our operating segments, see “Segment Results” below and Note 14, Segment Information, of the Notes to Unaudited Condensed Consolidated Financial Statements.

Market Challenges

     Our results of operations for the third quarter of 2008 were adversely impacted by the unfavorable economic conditions in the United States, including the continued turbulence in the credit and housing markets and the high cost of fuel. Tight credit conditions, particularly in the sub-prime market, limited the ability of some of our customers to purchase vehicles, as well as finance and insurance products.  In the third quarter of 2008, Domestic revenue declined 30%, Import revenue declined 17%, and Premium Luxury revenue declined 15%, in each case compared to the third quarter of 2007.  For the three months ended September 30, 2008, Domestic revenue represented 34% of our total revenue, compared to 38% in the third quarter of 2007.  We expect that in the foreseeable future this percentage will continue to decline and that Import revenue and Premium Luxury revenue will represent a higher percentage of our total revenue.

      In July 2008, as part of our continuing response to the ongoing market challenges, we announced a cost reduction plan with a targeted annualized run rate savings of approximately $100 million.  We have made substantial progress in achieving our targeted annualized savings.

     We now anticipate that full-year industry new vehicle sales will decline from the low-16 million unit level in 2007 to the low-13 million unit level for 2008. We expect that the automotive retail market will remain challenging and that adverse market conditions will continue into 2009.

Inventory Management

     Our new and used vehicle inventories are stated at the lower of cost or market in our consolidated balance sheets.

     We have generally not experienced losses on the sale of new vehicle inventory, in part due to incentives provided by manufacturers to promote sales of new vehicles and our inventory management practices. We reduced our new vehicle inventory to 51,607 units at September 30, 2008, from 56,949 units at September 30, 2007. Although we focus on managing our inventory levels in accordance with consumer demand, we believe we must maintain a minimum level of inventory at our lower volume stores that is representative of the full line of vehicles offered by manufacturers. This may result in a higher days supply of inventory than would otherwise result if we were in a better economic environment. However, given our inventory management practices (such as managing our inventory purchases based on our sales forecasts and sharing inventory among our stores within a local market), we do not believe the current business climate is likely to result in material impairment charges related to new vehicle inventory. We continue to monitor our new vehicle inventory levels closely based on current economic conditions and will adjust them as appropriate.

     In general, used vehicles that are not sold on a retail basis are liquidated at wholesale auctions. We record estimated losses on used vehicle inventory expected to be liquidated at wholesale auctions at a loss. Our used vehicle inventory balance was net of cumulative write-downs of $2.2 million at September 30, 2008, and $2.0 million at December 31, 2007.

     Parts, accessories, and other inventory are carried at the lower of acquisition cost (first-in, first-out method) or market. We estimate the amount potential obsolete inventory based upon past experience and market trends. Our parts, accessories, and other inventory balance was net of cumulative write-downs of $6.5 million at September 30, 2008, and $5.8 million at December 31, 2007.

Critical Accounting Policies and Estimates

     We prepare our Unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimates on an ongoing basis, and we base our estimates on historical experience and various other assumptions we believe to be reasonable. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our Unaudited Condensed Consolidated Financial Statements. For a complete discussion of our critical and significant accounting policies and estimates, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2008.

     Goodwill and franchise rights assets are tested for impairment annually or more frequently when events or circumstances indicate that impairment may have occurred. As discussed in Note 4, Goodwill and Intangible Assets, of the Notes to Unaudited Condensed Consolidated Financial Statements, during the third quarter of 2008, we recorded $1.61 billion ($1.37 billion after-tax) of estimated non-cash goodwill impairment charges and $141.4 million ($87.7 million after-tax) of non-cash impairment charges related to franchise rights intangible assets. The aggregate non-cash goodwill impairment charge is an estimate because we have not finalized the valuation of certain assets and liabilities. We expect to finalize this non-cash goodwill impairment amount during the fourth quarter of 2008, and any adjustment will be reflected in our results for the fourth quarter of 2008. Despite these impairment charges, as of September 30, 2008, we were in compliance with the requirements of all applicable financial and operating covenants under our debt agreements, as further discussed below in “Restrictions and Covenants.”

     As a result of the change in our operating segment structure noted above, we were required to reassess the reporting units to which goodwill is assigned for goodwill impairment testing purposes. This reassessment resulted in a conclusion that the Company’s reporting units were comprised of its three operating segments: Domestic, Import, and Premium Luxury.

     We are required to complete interim tests for impairment of goodwill and other intangible assets when events occur or circumstances change between annual tests that indicate that the assets might be impaired. We continue to face a challenging automotive retail environment and an uncertain economic environment in general. As a result of these conditions, there can be no assurance that an additional material impairment charge will not occur in a future period. We will continue to monitor events in future periods to determine if additional asset impairment testing should be performed. If we are required to apply the second step of the goodwill impairment test to the goodwill in any of our three reporting units in future periods, we believe that we could incur another significant non-cash impairment charge related to goodwill, which could have a material adverse impact on our consolidated financial statements and on our ability to satisfy the financial ratios or other covenants under our debt and other agreements.

Reported Operating Data

     Historical operating results include the results of acquired businesses from the date of acquisition.

		Three Months Ended September 30,																Nine Months Ended September 30,
										Variance																Variance
($ in millions, except per										Favorable /				%												Favorable /				%
vehicle data)		2008				2007				(Unfavorable)				Variance				2008				2007				(Unfavorable)				Variance
Revenue:
New vehicle		$	1,974.6			$	2,634.4			$	(659.8	)			(25.0	)		$	6,335.4			$	7,615.0			$	(1,279.6	)			(16.8	)
Used vehicle			822.0				1,068.3				(246.3	)			(23.1	)			2,728.0				3,197.2				(469.2	)			(14.7	)
Parts and service			612.1				642.7				(30.6	)			(4.8	)			1,895.6				1,919.0				(23.4	)			(1.2	)
Finance and insurance, net			119.3				150.9				(31.6	)			(20.9	)			398.8				445.2				(46.4	)			(10.4	)
Other			15.4				17.0				(1.6	)							49.8				51.0				(1.2	)
Total revenue		$	3,543.4			$	4,513.3			$	(969.9	)			(21.5	)		$	11,407.6			$	13,227.4			$	(1,819.8	)			(13.8	)
Gross profit:
New vehicle		$	130.1			$	186.1			$	(56.0	)			(30.1	)		$	418.9			$	539.9			$	(121.0	)			(22.4	)
Used vehicle			68.0				87.0				(19.0	)			(21.8	)			231.1				280.5				(49.4	)			(17.6	)
Parts and service			265.8				281.1				(15.3	)			(5.4	)			824.2				839.9				(15.7	)			(1.9	)
Finance and insurance			119.3				150.9				(31.6	)			(20.9	)			398.8				445.2				(46.4	)			(10.4	)
Other			8.7				9.0				(0.3	)							27.7				29.8				(2.1	)
Total gross profit			591.9				714.1				(122.2	)			(17.1	)			1,900.7				2,135.3				(234.6	)			(11.0	)
Selling, general and administrative expenses			452.7				506.7				54.0				10.7				1,432.0				1,516.6				84.6				5.6
Depreciation and amortization			22.7				22.0				(0.7	)							68.4				64.0				(4.4	)
Goodwill impairment			1,610.0				—				(1,610.0	)							1,610.0				—				(1,610.0	)
Franchise rights impairment			141.4				—				(141.4	)							146.5				1.0				(145.5	)
Other expenses, net			2.8				0.1				(2.7	)							3.2				0.6				(2.6	)
Operating income (loss)			(1,637.7	)			185.3				(1,823.0	)							(1,359.4	)			553.1				(1,912.5	)
Floorplan interest expense			(19.8	)			(32.9	)			13.1								(66.2	)			(96.4	)			30.2
Other interest expense			(20.9	)			(29.6	)			8.7								(69.3	)			(82.4	)			13.1
Gain on senior note repurchases			12.1				—				12.1								12.1				—				12.1
Interest income			0.7				0.8				(0.1	)							1.5				2.6				(1.1	)
Other gains (losses), net			(2.3	)			(0.9	)			(1.4	)							(2.9	)			0.1				(3.0	)
Income (loss) from continuing operations before income taxes		$	(1,667.9	)		$	122.7			$	(1,790.6	)						$	(1,484.2	)		$	377.0			$	(1,861.2	)
Retail vehicle unit sales:
New vehicle			65,698				86,191				(20,493	)			(23.8	)			210,606				247,524				(36,918	)			(14.9	)
Used vehicle			45,629				52,103				(6,474	)			(12.4	)			145,435				155,742				(10,307	)			(6.6	)
			111,327				138,294				(26,967	)			(19.5	)			356,041				403,266				(47,225	)			(11.7	)
Revenue per vehicle retailed:
New vehicle		$	30,056			$	30,565			$	(509	)			(1.7	)		$	30,082			$	30,765			$	(683	)			(2.2	)
Used vehicle		$	15,234			$	16,262			$	(1,028	)			(6.3	)		$	15,716			$	16,388			$	(672	)			(4.1	)
Gross profit per vehicle retailed:
New vehicle		$	1,980			$	2,159			$	(179	)			(8.3	)		$	1,989			$	2,181			$	(192	)			(8.8	)
Used vehicle		$	1,549			$	1,685			$	(136	)			(8.1	)		$	1,617			$	1,783			$	(166	)			(9.3	)
Finance and insurance		$	1,072			$	1,091			$	(19	)			(1.7	)		$	1,120			$	1,104			$	16				1.4