UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2021

or

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

For the transition period from              to             

Commission File Number: 1-13107

AUTONATION, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

73-1105145

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

200 SW 1st Avenue

Fort Lauderdale

,

Florida

33301

(Address of principal executive offices)

(Zip Code)

(954)769-6000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

AN

New York Stock Exchange

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   ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   þ   No  ¨

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

Large accelerated filer

þ

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

As of July 19, 2021, the registrant had 71,595,447 shares of common stock outstanding.

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AUTONATION, INC.

FORM 10-Q

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION
						Page
Item 1.			Financial Statements
			Unaudited Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020			1
			Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020			2
			Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020			3
			Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020			4
			Notes to Unaudited Condensed Consolidated Financial Statements			6
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3.			Quantitative and Qualitative Disclosures about Market Risk			48
Item 4.			Controls and Procedures			48
PART II. OTHER INFORMATION
Item 1A.			Risk Factors			49
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			50
Item 6.			Exhibits			50

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Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)

 

			June 30, 2021						December 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			$	59.5					$	569.6
Receivables, net			773.5						845.2
Inventory			1,756.2						2,598.5
Other current assets			212.7						139.4
Total Current Assets			2,801.9						4,152.7
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $1.7 billion and $1.7 billion, respectively			3,094.7						3,138.1
OPERATING LEASE ASSETS			303.0						309.5
GOODWILL			1,187.0						1,185.0
OTHER INTANGIBLE ASSETS, NET			521.0						521.5
OTHER ASSETS			473.4						580.4
Total Assets			$	8,381.0					$	9,887.2
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Vehicle floorplan payable - trade			$	669.5					$	1,541.7
Vehicle floorplan payable - non-trade			901.8						1,218.2
Accounts payable			396.1						335.2
Commercial paper			200.0						—
Current maturities of long-term debt			7.0						309.2
Accrued payroll and benefits			269.2						225.8
Other current liabilities			597.1						535.8
Total Current Liabilities			3,040.7						4,165.9
LONG-TERM DEBT, NET OF CURRENT MATURITIES			1,790.3						1,792.6
NONCURRENT OPERATING LEASE LIABILITIES			279.1						286.5
DEFERRED INCOME TAXES			75.4						95.9
OTHER LIABILITIES			338.7						310.6
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS’ EQUITY:
Common stock, par value $0.01 per share; 1,500,000,000 shares authorized; 86,562,149 shares issued at June 30, 2021, and 102,562,149 shares issued at December 31, 2020, including shares held in treasury			0.8						1.0
Additional paid-in capital			5.7						53.1
Retained earnings			3,896.4						4,069.4
Treasury stock, at cost; 13,429,134 and 19,078,620 shares held, respectively			(1,046.1)						(887.8)
Total Shareholders’ Equity			2,856.8						3,235.7
Total Liabilities and Shareholders’ Equity			$	8,381.0					$	9,887.2

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

1

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AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2021						2020						2021						2020
Revenue:
New vehicle			$	3,428.3					$	2,261.3					$	6,410.6					$	4,543.2
Used vehicle			2,222.9						1,324.5						3,972.0						2,573.2
Parts and service			950.8						689.9						1,801.8						1,566.2
Finance and insurance, net			369.0						246.4						682.0						482.2
Other			7.4						10.9						15.8						35.2
TOTAL REVENUE			6,978.4						4,533.0						12,882.2						9,200.0
Cost of sales:
New vehicle			3,107.8						2,141.7						5,900.1						4,327.2
Used vehicle			2,020.2						1,207.5						3,629.1						2,365.2
Parts and service			518.3						378.5						980.3						866.0
Other			5.8						10.3						13.6						33.4
TOTAL COST OF SALES (excluding depreciation shown below)			5,652.1						3,738.0						10,523.1						7,591.8
Gross profit:
New vehicle			320.5						119.6						510.5						216.0
Used vehicle			202.7						117.0						342.9						208.0
Parts and service			432.5						311.4						821.5						700.2
Finance and insurance			369.0						246.4						682.0						482.2
Other			1.6						0.6						2.2						1.8
TOTAL GROSS PROFIT			1,326.3						795.0						2,359.1						1,608.2
Selling, general, and administrative expenses			748.9						547.9						1,396.8						1,148.6
Depreciation and amortization			47.9						49.1						95.8						97.2
Goodwill impairment			—						—						—						318.3
Franchise rights impairment			—						—						—						57.5
Other (income) expense, net			(0.7)						(3.4)						(0.6)						4.5
OPERATING INCOME (LOSS)			530.2						201.4						867.1						(17.9)
Non-operating income (expense) items:
Floorplan interest expense			(6.6)						(16.3)						(16.0)						(41.8)
Other interest expense			(20.9)						(23.2)						(42.1)						(46.7)
Other income, net			8.9						214.6						19.9						211.7
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			511.6						376.5						828.9						105.3
Income tax provision			126.7						96.6						204.5						57.6
NET INCOME FROM CONTINUING OPERATIONS			384.9						279.9						624.4						47.7
Loss from discontinued operations, net of income taxes			(0.1)						(0.1)						(0.2)						(0.2)
NET INCOME			$	384.8					$	279.8					$	624.2					$	47.5
BASIC EARNINGS (LOSS) PER SHARE:
Continuing operations			$	4.88					$	3.18					$	7.71					$	0.54
Discontinued operations			$	—					$	—					$	—					$	—
Net income			$	4.88					$	3.18					$	7.71					$	0.53
Weighted average common shares outstanding			78.9						87.9						81.0						89.0
DILUTED EARNINGS (LOSS) PER SHARE:
Continuing operations			$	4.83					$	3.18					$	7.63					$	0.54
Discontinued operations			$	—					$	—					$	—					$	—
Net income			$	4.83					$	3.18					$	7.63					$	0.53
Weighted average common shares outstanding			79.7						88.1						81.8						89.0
COMMON SHARES OUTSTANDING, net of treasury stock, at period end			73.1						87.2						73.1						87.2

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In millions, except share data)

 

			Six Months Ended June 30, 2021
			Common Stock												Additional Paid-In Capital						Retained Earnings						Treasury Stock						Total
			Shares						Amount
BALANCE AT DECEMBER 31, 2020			102,562,149						$	1.0					$	53.1					$	4,069.4					$	(887.8)					$	3,235.7
Net income			—						—						—						239.4						—						239.4
Repurchases of common stock			—						—						—						—						(306.1)						(306.1)
Stock-based compensation expense			—						—						20.8						—						—						20.8
Shares awarded under stock-based compensation plans, net of shares withheld for taxes			—						—						(32.9)						—						37.0						4.1
BALANCE AT MARCH 31, 2021			102,562,149						$	1.0					$	41.0					$	4,308.8					$	(1,156.9)					$	3,193.9
Net income			—						—						—						384.8						—						384.8
Repurchases of common stock			—						—						—						—						(736.1)						(736.1)
Treasury stock cancellation			(16,000,000)						(0.2)						(40.6)						(797.2)						838.0						—
Stock-based compensation expense			—						—						6.5						—						—						6.5
Shares awarded under stock-based compensation plans, net of shares withheld for taxes			—						—						(1.2)						—						8.9						7.7
BALANCE AT JUNE 30, 2021			86,562,149						$	0.8					$	5.7					$	3,896.4					$	(1,046.1)					$	2,856.8

			Six Months Ended June 30, 2020
			Common Stock												Additional Paid-In Capital						Retained Earnings						Treasury Stock						Total
			Shares						Amount
BALANCE AT DECEMBER 31, 2019			102,562,149						$	1.0					$	35.9					$	3,688.3					$	(563.1)					$	3,162.1
Net loss			—						—						—						(232.3)						—						(232.3)
Repurchases of common stock			—						—						—						—						(80.0)						(80.0)
Stock-based compensation expense			—						—						4.5						—						—						4.5
Shares awarded under stock-based compensation plans, net of shares withheld for taxes			—						—						(21.7)						—						14.8						(6.9)
Cumulative effect of change in accounting principle - current expected credit losses			—						—						—						(0.5)						—						(0.5)
BALANCE AT MARCH 31, 2020			102,562,149						$	1.0					$	18.7					$	3,455.5					$	(628.3)					$	2,846.9
Net income			—						—						—						279.8						—						279.8
Stock-based compensation expense			—						—						11.2						—						—						11.2
Shares awarded under stock-based compensation plans, net of shares withheld for taxes			—						—						(0.4)						—						0.2						(0.2)
BALANCE AT JUNE 30, 2020			102,562,149						$	1.0					$	29.5					$	3,735.3					$	(628.1)					$	3,137.7

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

 

			Six Months Ended
			June 30,
			2021						2020
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income			$	624.2					$	47.5
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations			0.2						0.2
Depreciation and amortization			95.8						97.2
Amortization of debt issuance costs and accretion of debt discounts			2.2						2.3
Stock-based compensation expense			27.3						15.7
Deferred income tax benefit			(20.5)						(17.1)
Net gain related to business/property dispositions			(2.4)						(1.5)
Goodwill impairment			—						318.3
Franchise rights impairment			—						57.5
Non-cash impairment charges			1.7						8.6
Gain on equity investments			(10.9)						(214.7)
Other			(8.7)						3.8
(Increase) decrease, net of effects from business acquisitions and divestitures:
Receivables			71.7						244.6
Inventory			849.9						873.3
Other assets			18.6						75.1
Increase (decrease), net of effects from business acquisitions and divestitures:
Vehicle floorplan payable - trade			(880.6)						(621.5)
Accounts payable			60.2						(25.5)
Other liabilities			101.8						30.5
Net cash provided by continuing operations			930.5						894.3
Net cash used in discontinued operations			(0.2)						—
Net cash provided by operating activities			930.3						894.3
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property and equipment			(116.2)						(75.3)
Insurance recoveries on property and equipment			—						1.5
Cash received from business divestitures, net of cash relinquished			4.3						—
Cash used in business acquisitions, net of cash acquired			—						(0.4)
Proceeds from the sale of equity securities			109.4						—
Investment in equity securities			(3.3)						(50.0)
Other			(2.7)						(0.5)
Net cash used in continuing operations			(8.5)						(124.7)
Net cash used in discontinued operations			—						—
Net cash used in investing activities			(8.5)						(124.7)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Continued)

 

			Six Months Ended
			June 30,
			2021						2020
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Repurchases of common stock			(1,021.1)						(80.0)
Proceeds from 4.75% Senior Notes due 2030			—						497.4
Payment of 3.35% Senior Notes due 2021			(300.0)						—
Payment of 5.5% Senior Notes due 2020			—						(350.0)
Proceeds from revolving credit facility			—						1,110.0
Payments of revolving credit facility			—						(1,110.0)
Net proceeds from (payments of) commercial paper			200.0						(170.0)
Payment of debt issuance costs			—						(10.5)
Net payments of vehicle floorplan payable - non-trade			(316.9)						(431.4)
Payments of other debt obligations			(5.6)						(3.1)
Proceeds from the exercise of stock options			28.9						1.0
Payments of tax withholdings for stock-based awards			(17.1)						(8.1)
Net cash used in continuing operations			(1,431.8)						(554.7)
Net cash used in discontinued operations			—						—
Net cash used in financing activities			(1,431.8)						(554.7)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH			(510.0)						214.9
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at beginning of period			569.7						42.5
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at end of period			$	59.7					$	257.4

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share data)

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 June 30, 2021, we owned and operated 312 new vehicle franchises from 228 stores located in the United States, predominantly in major metropolitan markets in the Sunbelt region. Our stores, which we believe include some of the most recognizable and well-known in our key markets, sell 32 different new vehicle brands. The core brands of new vehicles that we sell, representing approximately 90% of the new vehicles that we sold during the six months ended June 30, 2021, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, Mercedes-Benz, Stellantis (formerly FCA), BMW, and Volkswagen (including Audi and Porsche). As of June 30, 2021, we also owned and operated 72 AutoNation-branded collision centers, 6 AutoNation USA used vehicle stores, 4 automotive auction operations, and 3 parts distribution centers.

We offer a diversified range of automotive products and services, including new vehicles, used vehicles, “parts and service,” which includes automotive repair and maintenance services as well as wholesale parts and collision businesses, and automotive “finance and insurance” products, which include vehicle service and other protection products, as well as the arranging of 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; intercompany accounts and transactions have been eliminated. The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Additionally, operating results for interim periods are not necessarily indicative of the results that can be expected for a full year. The Unaudited Condensed Consolidated Financial Statements herein should be read in conjunction with our audited Consolidated Financial Statements and notes thereto included within our most recent Annual Report on Form 10-K. 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 GAAP 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. 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. Such estimates and assumptions affect, among other things, our goodwill, indefinite-lived intangible asset, and long-lived asset valuations; inventory valuation; equity investment valuation; assets held for sale; accruals for chargebacks against revenue recognized from the sale of finance and insurance products; accruals related to self-insurance programs; certain legal proceedings; assessment of the annual income tax expense; valuation of deferred income taxes and income tax contingencies; the allowance for expected credit losses; and measurement of performance-based compensation costs.

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

2.    REVENUE RECOGNITION

Disaggregation of Revenue

The significant majority of our revenue is from contracts with customers. Taxes assessed by governmental authorities that are directly imposed on revenue transactions are excluded from revenue. In the following tables, revenue is disaggregated by major lines of goods and services and timing of transfer of goods and services. We have determined that these categories depict how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors. The tables below also include a reconciliation of the disaggregated revenue to reportable segment revenue.

						Three Months Ended June 30, 2021
						Domestic						Import						Premium Luxury						Corporate and other(1)						Total
Major Goods/Service Lines
New vehicle						$	991.3					$	1,184.2					$	1,252.8					$	—					$	3,428.3
Used vehicle						749.1						604.5						788.8						80.5						2,222.9
Parts and service						257.9						248.5						317.6						126.8						950.8
Finance and insurance, net						125.8						133.2						108.0						2.0						369.0
Other						0.7						4.6						1.3						0.8						7.4
						$	2,124.8					$	2,175.0					$	2,468.5					$	210.1					$	6,978.4
Timing of Revenue Recognition
Goods and services transferred at a point in time						$	1,944.2					$	1,984.7					$	2,204.5					$	129.0					$	6,262.4
Goods and services transferred over time(2)						180.6						190.3						264.0						81.1						716.0
						$	2,124.8					$	2,175.0					$	2,468.5					$	210.1					$	6,978.4

						Three Months Ended June 30, 2020
						Domestic						Import						Premium Luxury						Corporate and other(1)						Total
Major Goods/Service Lines
New vehicle						$	761.7					$	712.6					$	787.0					$	—					$	2,261.3
Used vehicle						436.8						355.8						490.3						41.6						1,324.5
Parts and service						193.3						170.4						223.2						103.0						689.9
Finance and insurance, net						88.0						82.4						64.3						11.7						246.4
Other						6.2						4.1						—						0.6						10.9
						$	1,486.0					$	1,325.3					$	1,564.8					$	156.9					$	4,533.0
Timing of Revenue Recognition
Goods and services transferred at a point in time						$	1,343.2					$	1,187.0					$	1,373.6					$	97.4					$	4,001.2
Goods and services transferred over time(2)						142.8						138.3						191.2						59.5						531.8
						$	1,486.0					$	1,325.3					$	1,564.8					$	156.9					$	4,533.0

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

						Six Months Ended June 30, 2021
						Domestic						Import						Premium Luxury						Corporate and other(1)						Total
Major Goods/Service Lines
New vehicle						$	1,926.7					$	2,142.2					$	2,341.7					$	—					$	6,410.6
Used vehicle						1,312.8						1,089.2						1,431.1						138.9						3,972.0
Parts and service						492.0						462.6						602.8						244.4						1,801.8
Finance and insurance, net						235.1						242.3						194.8						9.8						682.0
Other						4.9						8.3						1.6						1.0						15.8
						$	3,971.5					$	3,944.6					$	4,572.0					$	394.1					$	12,882.2
Timing of Revenue Recognition
Goods and services transferred at a point in time						$	3,625.7					$	3,588.8					$	4,068.1					$	236.3					$	11,518.9
Goods and services transferred over time(2)						345.8						355.8						503.9						157.8						1,363.3
						$	3,971.5					$	3,944.6					$	4,572.0					$	394.1					$	12,882.2

						Six Months Ended June 30, 2020
						Domestic						Import						Premium Luxury						Corporate and other(1)						Total
Major Goods/Service Lines
New vehicle						$	1,500.6					$	1,446.5					$	1,596.1					$	—					$	4,543.2
Used vehicle						841.4						690.3						957.6						83.9						2,573.2
Parts and service						428.9						377.9						500.6						258.8						1,566.2
Finance and insurance, net						171.1						166.4						127.3						17.4						482.2
Other						27.5						6.3						—						1.4						35.2
						$	2,969.5					$	2,687.4					$	3,181.6					$	361.5					$	9,200.0
Timing of Revenue Recognition
Goods and services transferred at a point in time						$	2,654.6					$	2,387.5					$	2,753.8					$	206.7					$	8,002.6
Goods and services transferred over time(2)						314.9						299.9						427.8						154.8						1,197.4
						$	2,969.5					$	2,687.4					$	3,181.6					$	361.5					$	9,200.0
(1) “Corporate and other” is comprised of our other businesses, including collision centers, AutoNation USA used vehicle stores, auction operations, and parts distribution centers.
(2) Represents revenue recognized during the period for automotive repair and maintenance services.

Transaction Price Allocated to Remaining Performance Obligations

We sell a vehicle maintenance program (the AutoNation Vehicle Care Program or “VCP”) under which a customer purchases a specific number of maintenance services to be redeemed at an AutoNation location over a five-year term from the date of purchase. We satisfy our performance obligations related to this program and recognize revenue as the maintenance services are rendered, since the customer benefits when we have completed the maintenance service.

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

The following table includes estimated revenue expected to be recognized in the future related to VCP performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:

						Revenue Expected to Be Recognized by Period
						Total						Next 12 Months						13 - 36 Months						37 - 60 Months
Revenue expected to be recognized on VCP contracts sold as of period end						$	91.0					$	32.8					$	43.2					$	15.0

As a practical expedient, since automotive repair and maintenance services are performed within one year or less, we do not disclose estimated revenue expected to be recognized in the future for automotive repair and maintenance performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period or when we expect to recognize such revenue.

Contract Assets and Liabilities

When the timing of our provision of goods or services is different from the timing of payments made by our customers, we recognize either a contract asset (performance precedes contractual due date) or a contract liability (customer payment precedes performance). Contract assets primarily relate to our right to consideration for work in process not yet billed at the reporting date associated with automotive repair and maintenance services, as well as our estimate of variable consideration that has been included in the transaction price for certain finance and insurance products (retrospective commissions). These contract assets are reclassified to receivables when the right to consideration becomes unconditional. Contract liabilities primarily relate to upfront payments received from customers for the sale of VCP contracts.

Our receivables from contracts with customers are included in Receivables, net, our current contract asset is included in Other Current Assets, our long-term contract asset is included in Other Assets, our current contract liability is included in Other Current Liabilities, and our long-term contract liability is included in Other Liabilities in our Unaudited Condensed Consolidated Balance Sheets.

The following table provides the balances of our receivables from contracts with customers and our current and long-term contract assets and contract liabilities:

			June 30, 2021						December 31, 2020
Receivables from contracts with customers, net			$	572.1					$	595.0
Contract Asset (Current)			$	29.0					$	25.7
Contract Asset (Long-Term)			$	6.8					$	10.2
Contract Liability (Current)			$	33.1					$	32.5
Contract Liability (Long-Term)			$	58.2					$	56.0

The change in the balances of our contract assets and contract liabilities primarily result from the timing differences between our performance and the customer’s payment, as well as changes in the estimated transaction price related to variable consideration that was constrained for performance obligations satisfied in previous periods. The following table presents revenue recognized during the period from amounts included in the contract liability balance at the beginning of the period and performance obligations satisfied in previous periods:

			Three Months Ended June 30,												Six Months Ended June 30,
			2021						2020						2021						2020
Amounts included in contract liability at the beginning of the period			$	8.2					$	10.3					$	16.9					$	18.8
Performance obligations satisfied in previous periods			$	5.7					$	3.9					$	11.1					$	3.9

Other significant changes include contract assets reclassified to receivables of $24.6 million for the six months ended June 30, 2021, and $24.4 million for the six months ended June 30, 2020.

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

3.EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the period, including vested restricted stock unit (“RSU”) awards. Diluted EPS is computed by dividing net income by the weighted average number of shares outstanding, noted above, adjusted for the dilutive effect of stock options and unvested RSU awards.

The following table presents the calculation of basic and diluted EPS:

			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2021						2020						2021						2020
Net income from continuing operations			$	384.9					$	279.9					$	624.4					$	47.7
Loss from discontinued operations, net of income taxes			(0.1)						(0.1)						(0.2)						(0.2)
Net income			$	384.8					$	279.8					$	624.2					$	47.5
Basic weighted average common shares outstanding			78.9						87.9						81.0						89.0
Dilutive effect of stock options and unvested RSUs			0.8						0.2						0.8						—
Diluted weighted average common shares outstanding			79.7						88.1						81.8						89.0
Basic EPS amounts(1):
Continuing operations			$	4.88					$	3.18					$	7.71					$	0.54
Discontinued operations			$	—					$	—					$	—					$	—
Net income			$	4.88					$	3.18					$	7.71					$	0.53
Diluted EPS amounts(1):
Continuing operations			$	4.83					$	3.18					$	7.63					$	0.54
Discontinued operations			$	—					$	—					$	—					$	—
Net income			$	4.83					$	3.18					$	7.63					$	0.53
(1) EPS amounts are calculated discretely and, therefore, may not add up to the total due to rounding.

A summary of anti-dilutive equity instruments excluded from the computation of diluted EPS is as follows:

			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2021						2020						2021						2020
Anti-dilutive equity instruments excluded from the computation of diluted EPS			—						2.4						—						2.7

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

4.RECEIVABLES, NET

The components of receivables, net of allowances for expected credit losses, are as follows:

			June 30, 2021						December 31, 2020
Contracts-in-transit and vehicle receivables			$	397.9					$	445.8
Trade receivables			160.4						138.0
Manufacturer receivables			161.9						210.0
Other			57.1						55.1
			777.3						848.9
Less: allowances for expected credit losses			(3.8)						(3.7)
Receivables, net			$	773.5					$	845.2

Contracts-in-transit and vehicle receivables primarily represent receivables from financial institutions for the portion of the vehicle sales price financed by our customers. Trade receivables represent amounts due for parts and services sold, excluding amounts due from manufacturers, as well as receivables from finance organizations for commissions on the sale of finance and insurance products. Manufacturer receivables represent amounts due from manufacturers for holdbacks, rebates, incentives, floorplan assistance, and warranty claims. We evaluate our receivables for collectability based on past collection experience, current information, and reasonable and supportable forecasts.

5.INVENTORY AND VEHICLE FLOORPLAN PAYABLE

The components of inventory are as follows:

			June 30, 2021						December 31, 2020
New vehicles			$	637.5					$	1,761.9
Used vehicles			923.0						648.4
Parts, accessories, and other			195.7						188.2
Inventory			$	1,756.2					$	2,598.5

The components of vehicle floorplan payable are as follows:

			June 30, 2021						December 31, 2020
Vehicle floorplan payable - trade			$	669.5					$	1,541.7
Vehicle floorplan payable - non-trade			901.8						1,218.2
Vehicle floorplan payable			$	1,571.3					$	2,759.9

Vehicle floorplan payable-trade reflects amounts borrowed to finance the purchase of specific new and, to a lesser extent, used 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, as well as amounts borrowed under our secured used vehicle floorplan facilities. 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.

Our inventory costs are generally reduced by manufacturer holdbacks, incentives, floorplan assistance, and non-reimbursement-based manufacturer advertising rebates, while the related vehicle floorplan payables are reflective of the gross cost of the vehicle. The vehicle floorplan payables, as shown in the above table, will generally also be higher than the inventory cost due to the timing of the sale of a vehicle and payment of the related liability.

Vehicle 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. Vehicle floorplan facilities are primarily collateralized by vehicle inventories and related receivables.

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Our new vehicle floorplan facilities utilize LIBOR-based interest rates, which averaged 1.7% for the six months ended June 30, 2021, and 2.3% for the six months ended June 30, 2020. At June 30, 2021, the aggregate capacity under our new vehicle floorplan facilities to finance our new vehicle inventory was approximately $4.7 billion, of which $1.0 billion had been borrowed.

Our used vehicle floorplan facilities utilize LIBOR-based interest rates, which averaged 1.8% for the six months ended June 30, 2021, and 2.6% for the six months ended June 30, 2020. At June 30, 2021, the aggregate capacity under our used vehicle floorplan facilities with various lenders to finance a portion of our used vehicle inventory was $562.0 million, of which $537.1 million had been borrowed. The remaining borrowing capacity of $24.9 million was limited to $0.2 million based on the eligible used vehicle inventory that could have been pledged as collateral.

6.GOODWILL AND INTANGIBLE ASSETS, NET

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

			June 30, 2021						December 31, 2020
Goodwill			$	1,187.0					$	1,185.0
Franchise rights - indefinite-lived			$	509.0					$	509.0
Other intangibles			19.4						19.6
			528.4						528.6
Less: accumulated amortization			(7.4)						(7.1)
Other intangible assets, net			$	521.0					$	521.5

Goodwill and Other Intangible Assets

Goodwill for our reporting units and our franchise rights assets are tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that impairment may exist.

Under accounting standards, we chose to make a qualitative evaluation about the likelihood of goodwill impairment for our annual impairment testing as of April 30, 2021, and we determined that it was not more likely than not that the fair values of our reporting units were less than their carrying amounts. We elected to perform quantitative franchise rights impairment tests as of April 30, 2021, and no impairment charges resulted from these quantitative tests.

7.LONG-TERM DEBT AND COMMERCIAL PAPER

Long-term debt consists of the following:

Debt Description						Maturity Date						Interest Payable						June 30, 2021						December 31, 2020
3.35% Senior Notes						January 15, 2021						January 15 and July 15						$	—					$	300.0
3.5% Senior Notes						November 15, 2024						May 15 and November 15						450.0						450.0
4.5% Senior Notes						October 1, 2025						April 1 and October 1						450.0						450.0
3.8% Senior Notes						November 15, 2027						May 15 and November 15						300.0						300.0
4.75% Senior Notes						June 1, 2030						June 1 and December 1						500.0						500.0
Revolving credit facility						March 26, 2025						Monthly						—						—
Finance leases and other debt						Various dates through 2040						Monthly						111.1						116.6
																		1,811.1						2,116.6
Less: unamortized debt discounts and debt issuance costs																		(13.8)						(14.8)
Less: current maturities																		(7.0)						(309.2)
Long-term debt, net of current maturities																		$	1,790.3					$	1,792.6

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Senior Unsecured Notes and Credit Agreement

In January 2021, we repaid the outstanding $300.0 million of 3.35% Senior Notes due 2021.

The interest rates payable on our outstanding senior unsecured notes are subject to adjustment upon the occurrence of certain credit rating events as provided in the indentures for these senior unsecured notes.

Under our amended and restated credit agreement, we have a $1.8 billion revolving credit facility that matures on March 26, 2025. The credit agreement also contains an accordion feature that allows us, subject to credit availability and certain other conditions, to increase the amount of the revolving credit facility, together with any added term loans, by up to $500.0 million in the aggregate. As of June 30, 2021, we had no borrowings outstanding under our revolving credit facility. We have a $200.0 million 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 was $39.7 million at June 30, 2021, leaving a borrowing capacity under the revolving credit facility of $1.8 billion at June 30, 2021.

Our revolving credit facility under the amended credit agreement provides for a commitment fee on undrawn amounts ranging from 0.125% to 0.20% and interest on borrowings at LIBOR or the base rate, in each case plus an applicable margin. The applicable margin ranges from 1.125% to 1.50% for LIBOR borrowings and 0.125% to 0.50% for base rate borrowings. The interest rate charged for our revolving credit facility is affected by our leverage ratio. For instance, an increase in our leverage ratio from greater than or equal to 2.0x but less than 3.25x to greater than or equal to 3.25x would result in a 12.5 basis point increase in the applicable margin.

Within the meaning of Regulation S-X, Rule 3-10, AutoNation, Inc. (the parent company) has no independent assets or operations. If guarantees of our subsidiaries were to be issued under our existing registration statement, we expect that such guarantees would be full and unconditional and joint and several, and any subsidiaries other than the guarantor subsidiaries would be minor.

Other Long-Term Debt

At June 30, 2021, we had finance leases and other debt obligations of $111.1 million, which are due at various dates through 2040.

Commercial Paper

We have a commercial paper program pursuant to which we may issue short-term, unsecured commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $1.0 billion. The interest rate for the commercial paper notes varies based on duration and market conditions. The maturities of the commercial paper notes may vary, but may not exceed 397 days from the date of issuance. Proceeds from the issuance of commercial paper notes are used to repay borrowings under the revolving credit facility, to finance acquisitions and for working capital, capital expenditures, share repurchases, and/or other general corporate purposes. We plan to use the revolving credit facility under our credit agreement as a liquidity backstop for borrowings under the commercial paper program. A downgrade in our credit ratings could negatively impact our ability to issue, or the interest rates for, commercial paper notes.

At June 30, 2021, we had $200.0 million commercial paper notes outstanding with a weighted-average annual interest rate of 0.25% and a weighted-average remaining term of 1 day. We had no commercial paper notes outstanding at December 31, 2020.

8.INCOME TAXES

Income taxes payable included in Other Current Liabilities totaled $47.3 million at June 30, 2021, and $13.3 million at December 31, 2020.

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, no tax years are under examination by the IRS, and tax years from 2014 to 2019 are under examination by certain U.S. state jurisdictions. These audits may result in proposed assessments where the ultimate resolution may result in our owing additional taxes.

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

It is our policy to account for interest and penalties associated with income tax obligations as a component of Income Tax Provision in the accompanying Unaudited Condensed Consolidated Statements of Operations.

9.SHAREHOLDERS’ EQUITY

A summary of shares repurchased under our stock repurchase program authorized by our Board of Directors follows:

			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2021						2020						2021						2020
Shares repurchased			7.5						—						11.3						2.5
Aggregate purchase price			$	736.1					$	—					$	1,042.2					$	80.0
Average purchase price per share			$	98.17					$	—					$	91.94					$	31.95

As of June 30, 2021, $155.5 million remained available for share repurchases under the program. In July 2021, our Board of Directors increased the share repurchase authorization by $1.0 billion.

Our Board of Directors authorized the retirement of 16.0 million shares of our treasury stock in April 2021, which assumed the status of authorized but unissued shares. Upon the retirement of treasury stock, it is our policy to charge the excess of the cost of the treasury stock over its par value entirely to additional paid-in capital. Any amounts exceeding additional paid-in capital are charged to retained earnings. This retirement had the effect of reducing treasury stock and issued common stock, which includes treasury stock. Our common stock, additional paid-in capital, retained earnings, and treasury stock accounts were adjusted accordingly. There was no impact to shareholders’ equity or outstanding common stock.

We have 5.0 million authorized shares of preferred stock, par value $0.01 per share, none of which are issued or outstanding. The Board of Directors has the authority to issue the preferred stock in one or more series and to establish the rights, preferences, and dividends of such preferred stock.

A summary of shares of common stock issued in connection with the exercise of stock options follows:

			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2021						2020						2021						2020
Shares issued			0.2						—						0.6						0.1
Proceeds from the exercise of stock options			$	7.7					$	—					$	28.9					$	1.0
Average exercise price per share			$	51.10					$	—					$	50.71					$	18.12

The following table presents a summary of shares of common stock issued in connection with the settlement of RSUs, as well as shares surrendered to AutoNation to satisfy tax withholding obligations in connection with the vesting of restricted stock and settlement of RSUs:

			Three Months Ended												Six Months Ended
			June 30,												June 30,
(In actual number of shares)			2021						2020						2021						2020
Shares issued			7,341						7,340						639,192						502,021
Shares surrendered to AutoNation to satisfy tax withholding obligations			1,616						2,260						224,133						186,600

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

10.CASH FLOW INFORMATION

Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash and cash equivalents reported on our Unaudited Condensed Consolidated Balance Sheets to the total amounts, which include cash, cash equivalents, and restricted cash, reported on our Unaudited Condensed Consolidated Statements of Cash Flows:

			June 30, 2021						December 31, 2020
Cash and cash equivalents			$	59.5					$	569.6
Restricted cash included in Other Current Assets			0.2						0.1
Total cash, cash equivalents, and restricted cash			$	59.7					$	569.7

Non-Cash Investing and Financing Activities

We had accrued purchases of property and equipment of $12.1 million at June 30, 2021, and $8.7 million at June 30, 2020. We had non-cash investing and financing activities related to increases in property and equipment acquired under financing arrangements of $0.8 million during the six months ended June 30, 2020.

			Six Months Ended June 30,
			2021						2020
Supplemental noncash information on adjustments to right-of-use assets, including right-of-use assets obtained in exchange for new:
Operating lease liabilities			$	13.0					$	27.8
Finance lease liabilities			$	17.3					$	26.6

Interest and Income Taxes Paid

We made interest payments, net of amounts capitalized and including interest on vehicle inventory financing, of $63.7 million during the six months ended June 30, 2021, and $83.5 million during the six months ended June 30, 2020. We made income tax payments, net of income tax refunds, of $190.5 million during the six months ended June 30, 2021, and $3.2 million during the six months ended June 30, 2020.

11.FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of judgment, and therefore cannot be determined with precision.

Accounting standards define fair value as the price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and also establishes the following three levels of inputs that may be used to measure fair value:

Level 1			Quoted prices (unadjusted) in active markets for identical assets or liabilities that a reporting entity can access at the measurement date
Level 2			Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly
Level 3			Unobservable inputs

The following methods and assumptions were used by us in estimating fair value disclosures for financial instruments:

•Cash and cash equivalents, receivables, other current assets, vehicle floorplan payable, accounts payable, other current liabilities, commercial paper, and variable rate debt: The amounts reported in the accompanying

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Unaudited Condensed Consolidated Balance Sheets approximate fair value due to their short-term nature or the existence of variable interest rates that approximate prevailing market rates.

•Investments in Equity Securities: In the first quarter of 2021, we sold the remaining shares of our Vroom equity investment for total proceeds of $109.4 million. Our remaining investments in equity securities consist of equity securities that do not have readily determinable fair values. We elected to measure these investments using the measurement alternative as permitted by accounting standards and recorded the equity interests at cost, to be subsequently adjusted for observable price changes. During the second quarter of 2021, we identified an observable transaction for the issuance of similar equity securities of the same issuer and we recorded an upward adjustment to our equity investment of $3.4 million based on the observable price change. As of June 30, 2021, the carrying amount of our equity investments was $56.7 million. We have not recorded any impairments or downward adjustments to the carrying amount of our equity investments as of June 30, 2021. Investments in equity securities are reported in Other Assets in the accompanying Unaudited Condensed Consolidated Balance Sheets. Realized and unrealized gains and losses are reported in Other Income, Net (non-operating) in the Unaudited Condensed Consolidated Statements of Operations and in the “Corporate and other” category of our segment information.

The following is information on gains recognized during the six months ended June 30 related to equity investments:

			2021						2020
Net gains recognized during the period on equity securities			$	10.9					$	214.7
Less: Net gains recognized during the period on equity securities sold during the period			7.5						—
Unrealized gains recognized during the reporting period on equity securities still held at the reporting date			$	3.4					$	214.7

•Fixed rate long-term debt: Our fixed rate long-term debt primarily consists of amounts outstanding under our senior unsecured notes. We estimate the fair value of our senior unsecured notes using quoted prices for the identical liability (Level 1). A summary of the aggregate carrying values and fair values of our fixed rate long-term debt is as follows:

			June 30, 2021						December 31, 2020
Carrying value			$	1,797.3					$	2,101.8
Fair value			$	2,017.5					$	2,341.1

Nonfinancial assets such as goodwill, other intangible assets, long-lived assets held and used, and right-of-use assets are measured at fair value when there is an indicator of impairment and recorded at fair value only when impairment is recognized or for a business combination. The fair values less costs to sell of long-lived assets held for sale are assessed each reporting period they remain classified as held for sale. Subsequent changes in the held for sale long-lived asset’s fair value less cost to sell (increase or decrease) is reported as an adjustment to its carrying amount, except that the adjusted carrying amount cannot exceed the carrying amount of the long-lived asset at the time it was initially classified as held for sale.

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

The following table presents assets measured and recorded at fair value on a nonrecurring basis during the six months ended June 30, 2021 and 2020:

						2021												2020
Description						Fair Value Measurements Using Significant Unobservable Inputs (Level 3)						Gain/(Loss)						Fair Value Measurements Using Significant Unobservable Inputs (Level 3)						Gain/(Loss)
Goodwill						$	—					$	—					$	457.5					$	(318.3)
Franchise rights and other						$	—					$	—					$	26.2					$	(59.9)
Equity investment						$	53.4					$	3.4					$	—					$	—
Right-of-use assets						$	—					$	(0.1)					$	1.4					$	(0.4)
Long-lived assets held and used						$	10.4					$	(1.6)					$	1.8					$	(5.8)

Goodwill and Other Intangible Assets

Goodwill for our reporting units and our franchise rights assets are tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that impairment may exist.

Under accounting standards, we chose to make a qualitative evaluation about the likelihood of goodwill impairment for our annual impairment testing as of April 30, 2021, and we determined that it was not more likely than not that the fair values of our reporting units were less than their carrying amounts. We elected to perform quantitative franchise rights impairment tests as of April 30, 2021, and no impairment charges resulted from these quantitative tests.

During the first quarter of 2020, due to the impact of the COVID-19 pandemic on our results and the decrease in our market capitalization as of March 31, 2020, we recorded goodwill impairment charges of $318.3 million, of which $257.4 million related to our Premium Luxury reporting unit, $41.6 million related to our Collision Centers reporting unit, and $19.3 million related to our Parts Centers reporting unit. We also recorded franchise rights impairment charges of $57.5 million during the first quarter of 2020. The non-cash impairment charges are reflected as Goodwill Impairment and Franchise Rights Impairment, respectively, in the accompanying Unaudited Condensed Consolidated Statements of Operations and in the “Corporate and other” category of our segment information.

The quantitative goodwill impairment test requires a determination of whether the fair value of a reporting unit is less than its carrying value. We estimate the fair value of our reporting units using an “income” valuation approach, which discounts projected free cash flows of the reporting unit at a computed weighted average cost of capital as the discount rate. The income valuation approach requires the use of significant estimates and assumptions, which include revenue growth rates and future operating margins used to calculate projected future cash flows, weighted average costs of capital, and future economic and market conditions. In connection with this process, we also reconcile the estimated aggregate fair values of our reporting units to our market capitalization, including consideration of a control premium, based upon our stock price and/or average stock price over a reasonable period as of the measurement date. We base our cash flow forecasts on our knowledge of the automotive industry, our recent performance, our expectations of our future performance, and other assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. We also make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units.

The quantitative impairment test for franchise rights requires the comparison of the franchise rights’ estimated fair value to carrying value by store. Fair values of rights under franchise agreements are estimated using Level 3 inputs by discounting expected future cash flows of the store. The forecasted cash flows contain inherent uncertainties, including significant estimates and assumptions related to growth rates, margins, working capital requirements, capital expenditures, and cost of capital, for which we utilize certain market participant-based assumptions, using third-party industry projections, economic projections, and other marketplace data we believe to be reasonable.

During the six months ended June 30, 2020, we also recorded non-cash impairment charges of $2.4 million to reduce the carrying value of certain finite-lived intangible assets to estimated fair value, which are included in Other (Income) Expense,

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Net in our Unaudited Condensed Consolidated Statements of Operations and in the “Corporate and other” category of our segment information.

Long-Lived Assets and Right-of-Use Assets

Fair value measurements for our long-lived assets and right-of-use assets are based on Level 3 inputs. Changes in fair value measurements are reviewed and assessed each quarter for long-lived assets classified as held for sale, or when an indicator of impairment exists for long-lived assets classified as held and used or for right-of-use assets. The valuation process is generally based on a combination of the market and replacement cost approaches.

In a market approach, we use transaction prices for comparable properties that have recently been sold. These transaction prices are adjusted for factors related to a specific property. We evaluate changes in local real estate markets, and/or recent market interest or negotiations related to a specific property. In a replacement cost approach, the cost to replace a specific long-lived asset is considered, which is adjusted for depreciation from physical deterioration, as well as functional and economic obsolescence, if present and measurable.

To validate the fair values determined under the valuation process noted above, we also obtain independent third-party appraisals for our properties and/or third-party brokers’ opinions of value, which are generally developed using the same valuation approaches described above, and we evaluate any recent negotiations or discussions with third-party real estate brokers related to a specific long-lived asset or market. 

The non-cash impairment charges related to right-of-use assets and long-lived assets held and used are included in Other (Income) Expense, Net in our Unaudited Condensed Consolidated Statements of Operations and in the “Corporate and other” category of our segment information.

We had assets held for sale in continuing operations of $81.3 million as of June 30, 2021, and $25.5 million as of December 31, 2020, primarily related to property held for sale, as well as inventory, goodwill, and property of disposal groups held for sale. We had assets held for sale in discontinued operations of $1.1 million as of June 30, 2021, and $8.0 million as of December 31, 2020, related to property held for sale. Assets held for sale are included in Other Current Assets in our Unaudited Condensed Consolidated Balance Sheets.

Quantitative Information about Level 3 Fair Value Measurements
Description						Fair Value at March 31, 2020						Valuation Technique						Unobservable Input						Range (Average)
Franchise rights						$	24.6					Discounted cash flow						Weighted average cost of capital						8.5		%
																		Discount rate						11.1% - 14.3% (12.1%)
																		Long-term revenue growth rate						2.0		%
																		Long-term pretax income margin						0.6% - 2.8% (1.4%)
																		Contributory asset charges						4.2% - 12.1% (6.2%)

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, wage and hour and other employment-related lawsuits, and actions brought by governmental authorities. Some of these lawsuits purport or may be determined to be class or collective actions and seek substantial damages or injunctive relief, or both, and some may remain unresolved for several years. We establish accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Our accruals for loss contingencies are reviewed quarterly and adjusted as additional information becomes available. We disclose the amount accrued if material or if such disclosure is necessary for our financial statements to not be misleading. If a loss is not both probable and reasonably estimable, or if an exposure to loss exists in excess of the amount accrued, we assess whether there is at least a reasonable possibility that a loss, or additional loss, may have been incurred. If there is a reasonable possibility that a loss, or additional loss, may have been incurred, we disclose the estimate of the possible loss or range of loss if it is material or a statement that such an estimate cannot be made. Our evaluation of whether

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

a loss is reasonably possible or probable is based on our assessment and consultation with legal counsel regarding the ultimate outcome of the matter.

As of June 30, 2021 and 2020, we have accrued for the potential impact of loss contingencies that are probable and reasonably estimable, and there was no indication of a reasonable possibility that a material loss, or additional material loss, may have been incurred. 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 results of operations, financial condition, or 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 store 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, our liability would be limited by the terms of the applicable agreement.

From time to time, primarily in connection with dispositions of automotive stores, our subsidiaries assign or sublet to the store 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 with expirations ranging from 2022 to 2034 are approximately $10 million at June 30, 2021. We do not have any material known commitments that we or our subsidiaries will be called on to perform under any such assigned leases or subleases at June 30, 2021. There can be no assurance that any performance by AutoNation or its subsidiaries required under these leases would not have a material adverse effect on our business, financial condition, and cash flows.

At June 30, 2021, surety bonds, letters of credit, and cash deposits totaled $100.3 million, of which $39.7 million were 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 compliance with such laws 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 legal and regulatory framework applicable to our business. We do not have any material known environmental commitments or contingencies.

13.BUSINESS AND CREDIT CONCENTRATIONS

We own and operate franchised automotive stores in the United States pursuant to franchise agreements with vehicle manufacturers. During the six months ended June 30, 2021, approximately 64% of our total retail new vehicle unit sales was generated by our stores in Florida, Texas, and California. We are subject to a concentration of risk in the event of financial distress of or other adverse event related to a major vehicle manufacturer or related lender or supplier. The core brands of vehicles that we sell, representing approximately 90% of the new vehicles sold during the six months ended June 30, 2021, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, Mercedes-Benz, Stellantis (formerly FCA), BMW, and Volkswagen (including Audi and Porsche). Our business could be materially adversely impacted by a bankruptcy of or other adverse event related to a major vehicle manufacturer or related lender or supplier.

We had receivables from manufacturers or distributors of $161.9 million at June 30, 2021, and $210.0 million at December 31, 2020. Additionally, a large portion of our contracts-in-transit included in Receivables, net, in the accompanying

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Unaudited Condensed Consolidated Balance Sheets, are due from automotive manufacturers’ captive finance subsidiaries, which provide financing directly to our new and used vehicle customers. Concentrations of credit risk with respect to non-manufacturer trade receivables are limited due to the wide variety of customers and markets in which our products are sold as well as their dispersion across many different geographic areas in the United States. Consequently, at June 30, 2021, we do not consider AutoNation to have any significant non-manufacturer concentrations of credit risk.

14.SEGMENT INFORMATION

At June 30, 2021 and 2020, we had three reportable segments: (1) Domestic, (2) Import, and (3) Premium Luxury. Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by Ford, General Motors, and Stellantis. Our Import segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda, Subaru, and Nissan. Our Premium Luxury segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Mercedes-Benz, BMW, Lexus, Audi, and Jaguar Land Rover. The franchises in each segment also sell used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products.

“Corporate and other” is comprised of our other businesses, including collision centers, AutoNation USA used vehicle stores, auction operations, and parts distribution centers, all of which generate revenues but do not meet the quantitative thresholds for reportable segments, as well as unallocated corporate overhead expenses and other income items.

The reportable 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.

The following table provides information on revenues from external customers and segment income of our reportable segments:

			Three Months Ended																		Six Months Ended
			June 30, 2021																		June 30, 2021
			Domestic						Import						Premium Luxury						Domestic						Import						Premium Luxury
Revenues from external customers			$	2,124.8					$	2,175.0					$	2,468.5					$	3,971.5					$	3,944.6					$	4,572.0
Segment income (1)			$	169.0					$	203.7					$	225.7					$	287.5					$	329.6					$	384.2
			Three Months Ended																		Six Months Ended
			June 30, 2020																		June 30, 2020
			Domestic						Import						Premium Luxury						Domestic						Import						Premium Luxury
Revenues from external customers			$	1,486.0					$	1,325.3					$	1,564.8					$	2,969.5					$	2,687.4					$	3,181.6
Segment income (1)			$	82.1					$	88.3					$	89.2					$	136.2					$	154.2					$	169.4
(1) Segment income represents income for each of our reportable segments and is defined as operating income less floorplan interest expense.

The following is a reconciliation of total segment income for reportable segments to our consolidated income from continuing operations before income taxes:

						Three Months Ended												Six Months Ended
						June 30,												June 30,
						2021						2020						2021						2020
Total segment income for reportable segments						$	598.4					$	259.6					$	1,001.3					$	459.8
Corporate and other						(74.8)						(74.5)						(150.2)						(519.5)
Other interest expense						(20.9)						(23.2)						(42.1)						(46.7)
Other income, net						8.9						214.6						19.9						211.7
Income from continuing operations before income taxes						$	511.6					$	376.5					$	828.9					$	105.3

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AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

15.EXIT OR DISPOSAL COST OBLIGATIONS

On August 17, 2020, we determined to close our aftermarket collision parts (“ACP”) business by the end of 2020. In connection with the closing of the ACP business, we incurred total charges of $36.7 million in 2020. The following is a rollforward of liability balances for exit or disposal cost obligations associated with the closing of the ACP business.

			Contract Termination Charges						Other Associated Closing Costs						Involuntary Termination Benefits						Total
Balance at December 31, 2020			$	0.2					$	2.4					$	0.8					$	3.4
Costs incurred			—						—						—						—
Costs paid or otherwise settled			(0.2)						(2.4)						(0.7)						(3.3)
Balance at June 30, 2021			$	—					$	—					$	0.1					$	0.1

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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 Part I, Item 1 of this Quarterly Report on Form 10-Q. 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.

Overview

AutoNation, Inc., through its subsidiaries, is the largest automotive retailer in the United States. As of June 30, 2021, we owned and operated 312 new vehicle franchises from 228 stores located in the United States, predominantly in major metropolitan markets in the Sunbelt region. Our stores, which we believe include some of the most recognizable and well known in our key markets, sell 32 different new vehicle brands. The core brands of new vehicles that we sell, representing approximately 90% of the new vehicles that we sold during the six months ended June 30, 2021, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, Mercedes-Benz, Stellantis (formerly FCA), BMW, and Volkswagen (including Audi and Porsche). As of June 30, 2021, we also owned and operated 72 AutoNation-branded collision centers, 6 AutoNation USA used vehicle stores, 4 AutoNation-branded automotive auction operations, and 3 parts distribution centers.

We offer a diversified range of automotive products and services, including new vehicles, used vehicles, “parts and service,” which includes automotive repair and maintenance services as well as wholesale parts and collision businesses, and automotive “finance and insurance” products, which include vehicle service and other protection products, as well as the arranging of 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 the AutoNation retail brand and advertising, implementing standardized processes, and increasing productivity across all of our stores.

At June 30, 2021, we had three reportable segments: (1) Domestic, (2) Import, and (3) Premium Luxury. Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by Ford, General Motors, and Stellantis. Our Import segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda, Subaru, and Nissan. Our Premium Luxury segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Mercedes-Benz, BMW, Lexus, Audi, and Jaguar Land Rover. The franchises in each segment also sell used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products.

For the six months ended June 30, 2021, new vehicle sales accounted for 50% of our total revenue and 22% of our total gross profit. Used vehicle sales accounted for 31% of our total revenue and 15% of our total gross profit. Our parts and service operations, while comprising 14% of our total revenue, contributed 35% of our total gross profit. Our finance and insurance sales, while comprising 5% of our total revenue, contributed 29% of our total gross profit.

Market Conditions

In the second quarter of 2021, U.S. industry retail new vehicle unit sales increased 44% as compared to the second quarter of 2020. Vehicle unit sales during the second quarter of 2020 were significantly adversely impacted, particularly in April 2020, by the COVID-19 pandemic and the extensive “shelter in place” and “stay at home” orders enacted by federal, state, and local governments. In the first half of 2021, the demand for vehicles was strong and exceeded supply. While market demand for new and used vehicles remains high primarily due to low interest rates and a consumer desire for personal transportation, there continues to be a shortage of available new vehicles for sale driven largely by certain component shortages in the manufacturers’ supply chains. This demand and supply imbalance has resulted in higher levels of profitability for available new and used vehicles. The reduced levels of new vehicle availability is currently expected to continue into 2022; however, there is still significant uncertainty as to when new vehicle availability will improve, as well as duration and/or degree of the higher levels of profitability being realized during this time.

Results of Operations

During the three months ended June 30, 2021, we had net income from continuing operations of $384.9 million and diluted earnings per share of $4.83, as compared to net income from continuing operations of $279.9 million and diluted earnings per share of $3.18 during the same period in 2020.

Our total gross profit increased 66.8% during the second quarter of 2021 compared to the second quarter of 2020, driven by increases in new vehicle gross profit of 168.0%, used vehicle gross profit of 73.2%, finance and insurance gross profit of

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49.8%, and parts and service gross profit of 38.9%, each as compared to the second quarter of 2020. New and used vehicle gross profit benefited from an increase in unit volume and an increase in gross profit per vehicle retailed (“PVR”) resulting from strong demand and historically low inventory levels due to manufacturer supply shortages. Finance and insurance gross profit benefited from the increase in unit volume and an increase in finance and insurance gross profit PVR. Parts and service gross profit benefited primarily from increases in gross profit from customer-pay service and the preparation of vehicles for sale due to increased volume, improved margin performance, and higher value repair orders.

SG&A expenses increased largely due to performance-driven increases in compensation expense. With improvements in gross profit and our continued focus on cost control, SG&A expenses as a percentage of gross profit decreased to 56.5% during the three months ended June 30, 2021, from 68.9% in the same period in 2020.

Net income from continuing operations during the three months ended June 30, 2021 and 2020, benefited from unrealized after-tax gains of $2.6 million and $160.5 million, respectively, related to changes in the fair value of the underlying securities of our minority equity investments. Net income from continuing operations during the three months ended June 30, 2020, also benefited from an after-tax gain related to a legal settlement of $2.4 million.

Chief Executive Officer Transition

On July 14, 2020, we announced that we entered into a contract with Michael J. Jackson to serve as Chief Executive Officer of the Company until April 12, 2022, or the date that a new chief executive officer commences employment with the Company, if earlier.

Strategic Initiatives

We plan to expand our AutoNation USA used vehicle stores and are targeting to have over 130 stores by the end of 2026. We opened one AutoNation USA store in the second quarter of 2021 and are on track to open four additional new stores in the second half of 2021 and 12 additional new stores in 2022. We anticipate that the initial capital investment will be approximately $10 million to $11 million for each new store on average. The planned expansion may be impacted by a number of variables, including customer adoption, market conditions, availability of used vehicle inventory, and our ability to identify, acquire, and build out suitable locations in a timely manner.

Inventory Management

Our new and used vehicle inventories are stated at the lower of cost or net realizable value on our consolidated balance sheets. We monitor our vehicle inventory levels based on current economic conditions and seasonal sales trends. Our new vehicle inventory units at June 30, 2021 and 2020, were 14,338 and 39,262, respectively. By historical standards, our inventory unit levels were significantly lower at June 30, 2021, driven by strong demand and the component shortages in the manufacturers’ supply chains. Inadequate levels of new vehicle availability could adversely affect our financial results.

We have typically not experienced significant 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 monitor our new vehicle inventory values as compared to net realizable values, and had no new vehicle inventory write-downs at June 30, 2021, or at December 31, 2020.

We recondition the majority of used vehicles acquired for retail sale in our parts and service departments and capitalize the related costs to the used vehicle inventory. We monitor our used vehicle inventory values as compared to net realizable values. Typically, used vehicles that are not sold on a retail basis are sold at wholesale auctions. Our used vehicle inventory balance was net of cumulative write-downs of $2.5 million at June 30, 2021, and $3.4 million at December 31, 2020.

Parts, accessories, and other inventory are carried at the lower of cost or net realizable value. We estimate the amount of potentially damaged and/or excess and obsolete inventory based upon historical experience, manufacturer return policies, and industry trends. Our parts, accessories, and other inventory balance was net of cumulative write-downs of $6.4 million at June 30, 2021, and $6.5 million at December 31, 2020.

Impact of the COVID-19 Pandemic

Although economic conditions have improved subsequent to the first half of 2020, we cannot predict the duration or scope of the COVID-19 pandemic. Negative financial impacts on our financial results and performance could be material in future periods.

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Critical Accounting Estimates

We prepare our Unaudited Condensed Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles (“GAAP”), 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 additional discussion of our critical accounting estimates, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K.

Goodwill

Goodwill for our reporting units is tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that the carrying value of a reporting unit more likely than not exceeds its fair value. Under accounting standards, we chose to make a qualitative evaluation about the likelihood of goodwill impairment for our annual impairment testing as of April 30, 2021, and we determined that it was not more likely than not that the fair values of our reporting units were less than their carrying amounts.

As of June 30, 2021, we have $227.2 million of goodwill related to the Domestic reporting unit, $502.6 million related to the Import reporting unit, and $457.2 million related to the Premium Luxury reporting unit.

Other Intangible Assets

Our principal identifiable intangible assets are individual store rights under franchise agreements with vehicle manufacturers, which have indefinite lives and are tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that impairment may have occurred.

We elected to perform quantitative tests for our annual franchise rights impairment testing as of April 30, 2021, and no impairment charges resulted from these quantitative tests. The quantitative franchise rights impairment test is dependent on many variables used to determine the fair value of each store’s franchise rights. See Note 11 of the Notes to Unaudited Condensed Consolidated Financial Statements for a description of the valuation method and related estimates and assumptions used in our quantitative impairment testing. If the fair value of each of our franchise rights had been determined to be a hypothetical 10% lower as of the valuation date of April 30, 2021, no impairment would have resulted. The effect of a hypothetical 10% decrease in fair value estimates is not intended to provide a sensitivity analysis of every potential outcome.

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Reported Operating Data

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

($ in millions, except per vehicle data)			Three Months Ended June 30,																								Six Months Ended June 30,
			2021						2020						Variance Favorable / (Unfavorable)						% Variance						2021						2020						Variance Favorable / (Unfavorable)						% Variance
Revenue:
New vehicle			$	3,428.3					$	2,261.3					$	1,167.0					51.6						$	6,410.6					$	4,543.2					$	1,867.4					41.1
Retail used vehicle			2,085.8						1,262.5						823.3						65.2						3,729.9						2,424.5						1,305.4						53.8
Wholesale			137.1						62.0						75.1						121.1						242.1						148.7						93.4						62.8
Used vehicle			2,222.9						1,324.5						898.4						67.8						3,972.0						2,573.2						1,398.8						54.4
Finance and insurance, net			369.0						246.4						122.6						49.8						682.0						482.2						199.8						41.4
Total variable operations(1)			6,020.2						3,832.2						2,188.0						57.1						11,064.6						7,598.6						3,466.0						45.6
Parts and service			950.8						689.9						260.9						37.8						1,801.8						1,566.2						235.6						15.0
Other			7.4						10.9						(3.5)												15.8						35.2						(19.4)
Total revenue			$	6,978.4					$	4,533.0					$	2,445.4					53.9						$	12,882.2					$	9,200.0					$	3,682.2					40.0
Gross profit:
New vehicle			$	320.5					$	119.6					$	200.9					168.0						$	510.5					$	216.0					$	294.5					136.3
Retail used vehicle			180.4						105.8						74.6						70.5						305.6						189.3						116.3						61.4
Wholesale			22.3						11.2						11.1												37.3						18.7						18.6
Used vehicle			202.7						117.0						85.7						73.2						342.9						208.0						134.9						64.9
Finance and insurance			369.0						246.4						122.6						49.8						682.0						482.2						199.8						41.4
Total variable operations(1)			892.2						483.0						409.2						84.7						1,535.4						906.2						629.2						69.4
Parts and service			432.5						311.4						121.1						38.9						821.5						700.2						121.3						17.3
Other			1.6						0.6						1.0												2.2						1.8						0.4
Total gross profit			1,326.3						795.0						531.3						66.8						2,359.1						1,608.2						750.9						46.7
Selling, general, and administrative expenses			748.9						547.9						(201.0)						(36.7)						1,396.8						1,148.6						(248.2)						(21.6)
Depreciation and amortization			47.9						49.1						1.2												95.8						97.2						1.4
Goodwill impairment			—						—						—												—						318.3						318.3
Franchise rights impairment			—						—						—												—						57.5						57.5
Other (income) expense, net			(0.7)						(3.4)						(2.7)												(0.6)						4.5						5.1
Operating income (loss)			530.2						201.4						328.8						163.3						867.1						(17.9)						885.0						NM
Non-operating income (expense) items:
Floorplan interest expense			(6.6)						(16.3)						9.7												(16.0)						(41.8)						25.8
Other interest expense			(20.9)						(23.2)						2.3												(42.1)						(46.7)						4.6
Other income, net			8.9						214.6						(205.7)												19.9						211.7						(191.8)
Income from continuing operations before income taxes			$	511.6					$	376.5					$	135.1					35.9						$	828.9					$	105.3					$	723.6					NM
Retail vehicle unit sales:
New vehicle			77,164						54,513						22,651						41.6						146,525						111,252						35,273						31.7
Used vehicle			80,589						58,920						21,669						36.8						152,369						115,069						37,300						32.4
			157,753						113,433						44,320						39.1						298,894						226,321						72,573						32.1
Revenue per vehicle retailed:
New vehicle			$	44,429					$	41,482					$	2,947					7.1						$	43,751					$	40,837					$	2,914					7.1
Used vehicle			$	25,882					$	21,427					$	4,455					20.8						$	24,479					$	21,070					$	3,409					16.2
Gross profit per vehicle retailed:
New vehicle			$	4,153					$	2,194					$	1,959					89.3						$	3,484					$	1,942					$	1,542					79.4
Used vehicle			$	2,239					$	1,796					$	443					24.7						$	2,006					$	1,645					$	361					21.9
Finance and insurance			$	2,339					$	2,172					$	167					7.7						$	2,282					$	2,131					$	151					7.1
Total variable operations(2)			$	5,514					$	4,159					$	1,355					32.6						$	5,012					$	3,921					$	1,091					27.8
(1) Total variable operations includes new vehicle, used vehicle (retail and wholesale), and finance and insurance results.
(2) Total variable operations gross profit per vehicle retailed is calculated by dividing the sum of new vehicle, retail used vehicle, and finance and insurance gross profit by total retail vehicle unit sales.

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			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2021 (%)						2020 (%)						2021 (%)						2020 (%)
Revenue mix percentages:
New vehicle			49.1						49.9						49.8						49.4
Used vehicle			31.9						29.2						30.8						28.0
Parts and service			13.6						15.2						14.0						17.0
Finance and insurance, net			5.3						5.4						5.3						5.2
Other			0.1						0.3						0.1						0.4
Total			100.0						100.0						100.0						100.0
Gross profit mix percentages:
New vehicle			24.2						15.0						21.6						13.4
Used vehicle			15.3						14.7						14.5						12.9
Parts and service			32.6						39.2						34.8						43.5
Finance and insurance			27.8						31.0						28.9						30.0
Other			0.1						0.1						0.2						0.2
Total			100.0						100.0						100.0						100.0
Operating items as a percentage of revenue:
Gross profit:
New vehicle			9.3						5.3						8.0						4.8
Used vehicle - retail			8.6						8.4						8.2						7.8
Parts and service			45.5						45.1						45.6						44.7
Total			19.0						17.5						18.3						17.5
Selling, general, and administrative expenses			10.7						12.1						10.8						12.5
Operating income (loss)			7.6						4.4						6.7						NM
Other operating items as a percentage of total gross profit:
Selling, general, and administrative expenses			56.5						68.9						59.2						71.4
Operating income (loss)			40.0						25.3						36.8						NM
			June 30,
			2021						2020
Inventory days supply:
New vehicle (industry standard of selling days)			14 days						49 days
Used vehicle (trailing calendar month days)			34 days						31 days
NM - Not Meaningful

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Same Store Operating Data

We have presented below our operating results on a same store basis, which reflect the results of our stores for the identical months in each period presented in the comparison, commencing with the first full month in which the store was owned by us. Results from divested stores are excluded from both current and prior periods. Therefore, the amounts presented in the 2020 columns may differ from the same store amounts presented for 2020 in the prior year. We believe the presentation of this information provides a meaningful comparison of period-over-period results of our operations.

			Three Months Ended June 30,																								Six Months Ended June 30,
($ in millions, except per vehicle data)			2021						2020						Variance Favorable / (Unfavorable)						% Variance						2021						2020						Variance Favorable / (Unfavorable)						% Variance
Revenue:
New vehicle			$	3,425.7					$	2,256.8					$	1,168.9					51.8						$	6,403.0					$	4,534.7					$	1,868.3					41.2
Retail used vehicle			2,079.8						1,260.1						819.7						65.1						3,720.6						2,418.9						1,301.7						53.8
Wholesale			136.8						61.9						74.9						121.0						241.7						148.4						93.3						62.9
Used vehicle			2,216.6						1,322.0						894.6						67.7						3,962.3						2,567.3						1,395.0						54.3
Finance and insurance, net			368.6						246.0						122.6						49.8						681.2						481.4						199.8						41.5
Total variable operations(1)			6,010.9						3,824.8						2,186.1						57.2						11,046.5						7,583.4						3,463.1						45.7
Parts and service			949.9						674.8						275.1						40.8						1,799.0						1,528.4						270.6						17.7
Other			7.1						11.1						(4.0)												15.7						35.0						(19.3)
Total revenue			$	6,967.9					$	4,510.7					$	2,457.2					54.5						$	12,861.2					$	9,146.8					$	3,714.4					40.6
Gross profit:
New vehicle			$	320.4					$	119.5					$	200.9					168.1						$	510.0					$	215.8					$	294.2					136.3
Retail used vehicle			179.9						105.8						74.1						70.0						304.8						189.2						115.6						61.1
Wholesale			22.3						11.1						11.2												37.3						18.7						18.6
Used vehicle			202.2						116.9						85.3						73.0						342.1						207.9						134.2						64.6
Finance and insurance			368.6						246.0						122.6						49.8						681.2						481.4						199.8						41.5
Total variable operations(1)			891.2						482.4						408.8						84.7						1,533.3						905.1						628.2						69.4
Parts and service			432.0						307.4						124.6						40.5						820.4						693.0						127.4						18.4
Other			1.4						0.7						0.7												2.1						1.5						0.6
Total gross profit			$	1,324.6					$	790.5					$	534.1					67.6						$	2,355.8					$	1,599.6					$	756.2					47.3
Retail vehicle unit sales:
New vehicle			77,081						54,359						22,722						41.8						146,293						110,958						35,335						31.8
Used vehicle			80,305						58,749						21,556						36.7						151,871						114,658						37,213						32.5
			157,386						113,108						44,278						39.1						298,164						225,616						72,548						32.2
Revenue per vehicle retailed:
New vehicle			$	44,443					$	41,517					$	2,926					7.0						$	43,768					$	40,869					$	2,899					7.1
Used vehicle			$	25,899					$	21,449					$	4,450					20.7						$	24,498					$	21,097					$	3,401					16.1
Gross profit per vehicle retailed:
New vehicle			$	4,157					$	2,198					$	1,959					89.1						$	3,486					$	1,945					$	1,541					79.2
Used vehicle			$	2,240					$	1,801					$	439					24.4						$	2,007					$	1,650					$	357					21.6
Finance and insurance			$	2,342					$	2,175					$	167					7.7						$	2,285					$	2,134					$	151					7.1
Total variable operations(2)			$	5,521					$	4,167					$	1,354					32.5						$	5,017					$	3,929					$	1,088					27.7
(1) Total variable operations includes new vehicle, used vehicle (retail and wholesale), and finance and insurance results.
(2) Total variable operations gross profit per vehicle retailed is calculated by dividing the sum of new vehicle, retail used vehicle, and finance and insurance gross profit by total retail vehicle unit sales.

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			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2021 (%)						2020 (%)						2021 (%)						2020 (%)
Revenue mix percentages:
New vehicle			49.2						50.0						49.8						49.6
Used vehicle			31.8						29.3						30.8						28.1
Parts and service			13.6						15.0						14.0						16.7
Finance and insurance, net			5.3						5.5						5.3						5.3
Other			0.1						0.2						0.1						0.3
Total			100.0						100.0						100.0						100.0
Gross profit mix percentages:
New vehicle			24.2						15.1						21.6						13.5
Used vehicle			15.3						14.8						14.5						13.0
Parts and service			32.6						38.9						34.8						43.3
Finance and insurance			27.8						31.1						28.9						30.1
Other			0.1						0.1						0.2						0.1
Total			100.0						100.0						100.0						100.0
Operating items as a percentage of revenue:
Gross profit:
New vehicle			9.4						5.3						8.0						4.8
Used vehicle - retail			8.6						8.4						8.2						7.8
Parts and service			45.5						45.6						45.6						45.3
Total			19.0						17.5						18.3						17.5

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New Vehicle

			Three Months Ended June 30,																								Six Months Ended June 30,
($ in millions, except per vehicle data)			2021						2020						Variance Favorable / (Unfavorable)						% Variance						2021						2020						Variance Favorable / (Unfavorable)						% Variance
Reported:
Revenue			$	3,428.3					$	2,261.3					$	1,167.0					51.6						$	6,410.6					$	4,543.2					$	1,867.4					41.1
Gross profit			$	320.5					$	119.6					$	200.9					168.0						$	510.5					$	216.0					$	294.5					136.3
Retail vehicle unit sales			77,164						54,513						22,651						41.6						146,525						111,252						35,273						31.7
Revenue per vehicle retailed			$	44,429					$	41,482					$	2,947					7.1						$	43,751					$	40,837					$	2,914					7.1
Gross profit per vehicle retailed			$	4,153					$	2,194					$	1,959					89.3						$	3,484					$	1,942					$	1,542					79.4
Gross profit as a percentage of revenue			9.3%						5.3%																		8.0%						4.8%
Inventory days supply (industry standard of selling days)			14 days						49 days
			Three Months Ended June 30,																								Six Months Ended June 30,
			2021						2020						Variance Favorable / (Unfavorable)						% Variance						2021						2020						Variance Favorable / (Unfavorable)						% Variance
Same Store:
Revenue			$	3,425.7					$	2,256.8					$	1,168.9					51.8						$	6,403.0					$	4,534.7					$	1,868.3					41.2
Gross profit			$	320.4					$	119.5					$	200.9					168.1						$	510.0					$	215.8					$	294.2					136.3
Retail vehicle unit sales			77,081						54,359						22,722						41.8						146,293						110,958						35,335						31.8
Revenue per vehicle retailed			$	44,443					$	41,517					$	2,926					7.0						$	43,768					$	40,869					$	2,899					7.1
Gross profit per vehicle retailed			$	4,157					$	2,198					$	1,959					89.1						$	3,486					$	1,945					$	1,541					79.2
Gross profit as a percentage of revenue			9.4%						5.3%																		8.0%						4.8%

The following discussion of new vehicle results is on a same store basis. The difference between reported amounts and same store amounts in the above tables of $2.6 million and $4.5 million in new vehicle revenue and $0.1 million and $0.1 million in new vehicle gross profit for the three months ended June 30, 2021 and 2020, respectively, and $7.6 million and $8.5 million in new vehicle revenue and $0.5 million and $0.2 million in new vehicle gross profit for the six months ended June 30, 2021 and 2020, respectively, is related to divestiture activity.

Second Quarter 2021 compared to Second Quarter 2020

Same store new vehicle revenue increased during the three months ended June 30, 2021, as compared to the same period in 2020, due to increases in same store unit volume and same store revenue PVR. Same store unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly in April 2020. During the second quarter of 2021, same store unit volume benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.

Same store revenue PVR and gross profit PVR both increased during the three months ended June 30, 2021, as compared to the same period in 2020, primarily due to strong demand and reduced availability of new vehicle inventory.

First Six Months 2021 compared to First Six Months 2020

Same store new vehicle revenue increased during the six months ended June 30, 2021, as compared to the same period in 2020, due to increases in same store unit volume and same store revenue PVR. Same store unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly during the last two weeks of March 2020 through April 2020. During the first half of 2021, same store unit volume benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.

Same store revenue PVR and gross profit PVR both increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to strong demand and reduced availability of new vehicle inventory.

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New Vehicle Inventory Carrying Benefit

The following table details net new vehicle inventory carrying benefit, consisting of new vehicle floorplan interest expense, net of floorplan assistance earned (amounts received from manufacturers specifically to support store financing of new vehicle inventory). Floorplan assistance is accounted for as a component of new vehicle gross profit in accordance with GAAP.

			Three Months Ended June 30,																		Six Months Ended June 30,
($ in millions)			2021						2020						Variance						2021						2020						Variance
Floorplan assistance			$	34.7					$	23.7					$	11.0					$	66.7					$	48.3					$	18.4
New vehicle floorplan interest expense			(6.0)						(14.1)						8.1						(14.9)						(37.2)						22.3
Net new vehicle inventory carrying benefit			$	28.7					$	9.6					$	19.1					$	51.8					$	11.1					$	40.7

Second Quarter 2021 compared to Second Quarter 2020

The net new vehicle inventory carrying benefit increased during the three months ended June 30, 2021, as compared to the same period in 2020, due to an increase in floorplan assistance and a decrease in floorplan interest expense. Floorplan assistance increased primarily due to increases in unit volume. Floorplan interest expense decreased primarily due to lower average floorplan balances.

First Six Months 2021 compared to First Six Months 2020

The net new vehicle inventory carrying benefit increased during the six months ended June 30, 2021, as compared to the same period in 2020, due to a decrease in floorplan interest expense and an increase in floorplan assistance. Floorplan interest expense decreased due to lower average floorplan balances and lower average interest rates. Floorplan interest rates are variable and, therefore, increase and decrease with changes in the underlying benchmark interest rates. Floorplan assistance increased due to increases in unit volume and the average floorplan assistance rate per unit.

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Used Vehicle

			Three Months Ended June 30,																								Six Months Ended June 30,
($ in millions, except per vehicle data)			2021						2020						Variance Favorable / (Unfavorable)						% Variance						2021						2020						Variance Favorable / (Unfavorable)						% Variance
Reported:
Retail revenue			$	2,085.8					$	1,262.5					$	823.3					65.2						$	3,729.9					$	2,424.5					$	1,305.4					53.8
Wholesale revenue			137.1						62.0						75.1						121.1						242.1						148.7						93.4						62.8
Total revenue			$	2,222.9					$	1,324.5					$	898.4					67.8						$	3,972.0					$	2,573.2					$	1,398.8					54.4
Retail gross profit			$	180.4					$	105.8					$	74.6					70.5						$	305.6					$	189.3					$	116.3					61.4
Wholesale gross profit			22.3						11.2						11.1												37.3						18.7						18.6
Total gross profit			$	202.7					$	117.0					$	85.7					73.2						$	342.9					$	208.0					$	134.9					64.9
Retail vehicle unit sales			80,589						58,920						21,669						36.8						152,369						115,069						37,300						32.4
Revenue per vehicle retailed			$	25,882					$	21,427					$	4,455					20.8						$	24,479					$	21,070					$	3,409					16.2
Gross profit per vehicle retailed			$	2,239					$	1,796					$	443					24.7						$	2,006					$	1,645					$	361					21.9
Gross profit as a percentage of revenue			8.6%						8.4%																		8.2%						7.8%
Inventory days supply (trailing calendar month days)			34 days						31 days
			Three Months Ended June 30,																								Six Months Ended June 30,
			2021						2020						Variance Favorable / (Unfavorable)						% Variance						2021						2020						Variance Favorable / (Unfavorable)						% Variance
Same Store:
Retail revenue			$	2,079.8					$	1,260.1					$	819.7					65.1						$	3,720.6					$	2,418.9					$	1,301.7					53.8
Wholesale revenue			136.8						61.9						74.9						121.0						241.7						148.4						93.3						62.9
Total revenue			$	2,216.6					$	1,322.0					$	894.6					67.7						$	3,962.3					$	2,567.3					$	1,395.0					54.3
Retail gross profit			$	179.9					$	105.8					$	74.1					70.0						$	304.8					$	189.2					$	115.6					61.1
Wholesale gross profit			22.3						11.1						11.2												37.3						18.7						18.6
Total gross profit			$	202.2					$	116.9					$	85.3					73.0						$	342.1					$	207.9					$	134.2					64.6
Retail vehicle unit sales			80,305						58,749						21,556						36.7						151,871						114,658						37,213						32.5
Revenue per vehicle retailed			$	25,899					$	21,449					$	4,450					20.7						$	24,498					$	21,097					$	3,401					16.1
Gross profit per vehicle retailed			$	2,240					$	1,801					$	439					24.4						$	2,007					$	1,650					$	357					21.6
Gross profit as a percentage of revenue			8.6%						8.4%																		8.2%						7.8%

The following discussion of used vehicle results is on a same store basis. The difference between reported amounts and same store amounts in the above tables of $6.3 million and $9.7 million in total used vehicle revenue and $0.5 million and $0.8 million in total used vehicle gross profit for the three and six months ended June 30, 2021, respectively, is related to divestiture activity and the opening of a new AutoNation USA store. The difference between reported amounts and same store amounts in the above tables of $2.5 million and $5.9 million in total used vehicle revenue and $0.1 million and $0.1 million in total used vehicle gross profit for the three and six months ended June 30, 2020, respectively, is related to divestiture activity.

Second Quarter 2021 compared to Second Quarter 2020

Same store retail used vehicle revenue increased during the three months ended June 30, 2021, as compared to the same period in 2020, due to increases in same store unit volume and same store revenue PVR. Same store unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly in April 2020. Market demand for used vehicles continued to increase during the second quarter of 2021 due in part to decreased availability of new vehicles.

Same store revenue PVR increased during the three months ended June 30, 2021, as compared to the same period in 2020, primarily due to an increase in market demand for used vehicles and reduced availability of new vehicle inventory.

Same store gross profit PVR increased during the three months ended June 30, 2021, as compared to the same period in 2020, due to increased demand for used vehicles and reduced availability of new vehicle inventory. In addition, gross profit PVR benefited from a shift in mix to trade-ins and used vehicles acquired through our “We’ll Buy Your Car” program, which both have relatively higher average gross profit PVR.

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First Six Months 2021 compared to First Six Months 2020

Same store retail used vehicle revenue increased during the six months ended June 30, 2021, as compared to the same period in 2020 due to increases in same store unit volume and same store revenue PVR. Same store unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly during the last two weeks of March 2020 through April 2020. Market demand for used vehicles continued to increase during the first half of 2021 due in part to decreased availability of new vehicles.

Same store revenue PVR increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to an increase in market demand for used vehicles and reduced availability of new vehicle inventory.

Same store gross profit PVR increased during the six months ended June 30, 2021, as compared to the same period in 2020, due to increased demand for used vehicles and reduced availability of new vehicle inventory. In addition, gross profit PVR benefited from a shift in mix to trade-ins and used vehicles acquired through our “We’ll Buy Your Car” program, which both have relatively higher average gross profit PVR.

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Parts and Service

			Three Months Ended June 30,																								Six Months Ended June 30,
($ in millions)			2021						2020						Variance Favorable / (Unfavorable)						% Variance						2021						2020						Variance Favorable / (Unfavorable)						% Variance
Reported:
Revenue			$	950.8					$	689.9					$	260.9					37.8						$	1,801.8					$	1,566.2					$	235.6					15.0
Gross Profit			$	432.5					$	311.4					$	121.1					38.9						$	821.5					$	700.2					$	121.3					17.3
Gross profit as a percentage of revenue			45.5%						45.1%																		45.6%						44.7%
Same Store:
Revenue			$	949.9					$	674.8					$	275.1					40.8						$	1,799.0					$	1,528.4					$	270.6					17.7
Gross Profit			$	432.0					$	307.4					$	124.6					40.5						$	820.4					$	693.0					$	127.4					18.4
Gross profit as a percentage of revenue			45.5%						45.6%																		45.6%						45.3%

Parts and service revenue is primarily derived from vehicle repairs paid directly by customers or via reimbursement from manufacturers and others under warranty programs, as well as from wholesale parts sales, collision services, and the preparation of vehicles for sale.

The following discussion of parts and service results is on a same store basis. The difference between reported amounts and same store amounts in the above tables of $0.9 million and $2.8 million in parts and service revenue and $0.5 million and $1.1 million in parts and service gross profit for the three and six months ended June 30, 2021, respectively, is related to divestiture activity and the opening of a new AutoNation USA store. The difference between reported amounts and same store amounts in the above tables of $15.1 million and $37.8 million in parts and service revenue and $4.0 million and $7.2 million in parts and service gross profit for the three and six months ended June 30, 2020, respectively, is due to the closure of our ACP business and other divestiture activity.

Second Quarter 2021 compared to Second Quarter 2020

During the three months ended June 30, 2021, same store parts and service gross profit increased compared to the same period in 2020, primarily due to increases in gross profit associated with customer-pay service of $46.3 million, the preparation of vehicles for sale of $33.3 million, and wholesale parts sales of $10.1 million, as well as smaller increases in gross profit associated with collision business, warranty service, and service work outsourced to third parties.

Gross profit associated with customer-pay service and the preparation of vehicles for sale both benefited from an increase in volume, improved margin performance, and higher value repair orders. Gross profit associated with wholesale parts sales benefited from an increase in volume.

First Six Months 2021 compared to First Six Months 2020

During the six months ended June 30, 2021, same store parts and service gross profit increased compared to the same period in 2020, primarily due to increases in gross profit associated with customer-pay service of $51.0 million, the preparation of vehicles for sale of $39.6 million, and wholesale parts sales of $10.3 million, as well as smaller increases in gross profit associated with service work outsourced to third parties and collision business.

Gross profit associated with customer-pay service and the preparation of vehicles for sale both benefited from an increase in volume, improved margin performance, and higher value repair orders. Gross profit associated with wholesale parts sales benefited from an increase in volume.

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Finance and Insurance

			Three Months Ended June 30,																								Six Months Ended June 30,
($ in millions, except per vehicle data)			2021						2020						Variance Favorable / (Unfavorable)						% Variance						2021						2020						Variance Favorable / (Unfavorable)						% Variance
Reported:
Revenue and gross profit			$	369.0					$	246.4					$	122.6					49.8						$	682.0					$	482.2					$	199.8					41.4
Gross profit per vehicle retailed			$	2,339					$	2,172					$	167					7.7						$	2,282					$	2,131					$	151					7.1
Same Store:
Revenue and gross profit			$	368.6					$	246.0					$	122.6					49.8						$	681.2					$	481.4					$	199.8					41.5
Gross profit per vehicle retailed			$	2,342					$	2,175					$	167					7.7						$	2,285					$	2,134					$	151					7.1

Revenue on finance and insurance products represents commissions earned by us for the placement of: (i) loans and leases with financial institutions in connection with customer vehicle purchases financed, (ii) vehicle service contracts with third-party providers, and (iii) other vehicle protection products with third-party providers. We sell these products on a commission basis, and we also participate in the future underwriting profit on certain products pursuant to retrospective commission arrangements with the issuers of those products.

The following discussion of finance and insurance results in on a same store basis. The difference between reported amounts and same store amounts in finance and insurance revenue and gross profit in the above tables of $0.4 million and $0.8 million for the three and six months months ended June 30, 2021, respectively, is related to divestiture activity and the opening of a new AutoNation USA store. The difference between reported amounts and same store amounts in the above tables of $0.4 million and $0.8 million for the three and six months months ended June 30, 2020, respectively, is related to divestiture activity.

Second Quarter 2021 compared to Second Quarter 2020

Same store finance and insurance revenue and gross profit increased during the three months ended June 30, 2021, as compared to the same period in 2020, due to increases in vehicle unit volume and finance and insurance gross profit PVR. The increase in finance and insurance gross profit PVR was primarily due to higher realized margins on vehicle service contracts, including our AutoNation Vehicle Protection Plan product, and an increase in product penetration. Finance and insurance gross profit PVR also benefited from increases in gross profit per transaction associated with arranging customer financing and amounts financed per transaction.

First Six Months 2021 compared to First Six Months 2020

Same store finance and insurance revenue and gross profit increased during the six months ended June 30, 2021, as compared to the same period in 2020, due to increases in vehicle unit volume and finance and insurance gross profit PVR. The increase in finance and insurance gross profit PVR was primarily due to higher realized margins on vehicle service contracts, including our AutoNation Vehicle Protection Plan product, and an increase in product penetration. Finance and insurance gross profit PVR also benefited from increases in amounts financed per transaction and gross profit per transaction associated with arranging customer financing.

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Segment Results

In the following table, revenue and segment income of our reportable segments are reconciled to consolidated revenue and consolidated operating income (loss), respectively. The following discussions of segment results are on a reported basis.

			Three Months Ended June 30,																								Six Months Ended June 30,
($ in millions)			2021						2020						Variance Favorable / (Unfavorable)						% Variance						2021						2020						Variance Favorable / (Unfavorable)						% Variance
Revenue:
Domestic			$	2,124.8					$	1,486.0					$	638.8					43.0						$	3,971.5					$	2,969.5					$	1,002.0					33.7
Import			2,175.0						1,325.3						849.7						64.1						3,944.6						2,687.4						1,257.2						46.8
Premium Luxury			2,468.5						1,564.8						903.7						57.8						4,572.0						3,181.6						1,390.4						43.7
Total			6,768.3						4,376.1						2,392.2						54.7						12,488.1						8,838.5						3,649.6						41.3
Corporate and other			210.1						156.9						53.2						33.9						394.1						361.5						32.6						9.0
Total consolidated revenue			$	6,978.4					$	4,533.0					$	2,445.4					53.9						$	12,882.2					$	9,200.0					$	3,682.2					40.0
Segment income(1):
Domestic			$	169.0					$	82.1					$	86.9					105.8						$	287.5					$	136.2					$	151.3					111.1
Import			203.7						88.3						115.4						130.7						329.6						154.2						175.4						113.7
Premium Luxury			225.7						89.2						136.5						153.0						384.2						169.4						214.8						126.8
Total			598.4						259.6						338.8						130.5						1,001.3						459.8						541.5						117.8
Corporate and other			(74.8)						(74.5)						(0.3)												(150.2)						(519.5)						369.3
Floorplan interest expense			6.6						16.3						9.7												16.0						41.8						25.8
Operating income (loss)			$	530.2					$	201.4					$	328.8					163.3						$	867.1					$	(17.9)					$	885.0					NM
Retail new vehicle unit sales:
Domestic			21,459						18,048						3,411						18.9						43,128						36,375						6,753						18.6
Import			36,136						23,605						12,531						53.1						66,979						48,892						18,087						37.0
Premium Luxury			19,569						12,860						6,709						52.2						36,418						25,985						10,433						40.2
			77,164						54,513						22,651						41.6						146,525						111,252						35,273						31.7
Retail used vehicle unit sales:
Domestic			28,056						21,043						7,013						33.3						52,535						40,930						11,605						28.4
Import			27,128						20,064						7,064						35.2						52,229						39,133						13,096						33.5
Premium Luxury			22,370						15,795						6,575						41.6						41,904						30,938						10,966						35.4
			77,554						56,902						20,652						36.3						146,668						111,001						35,667						32.1
(1) Segment income represents income for each of our reportable segments and is defined as operating income less floorplan interest expense.
NM = Not Meaningful

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Domestic

The Domestic segment operating results included the following:

 

			Three Months Ended June 30,																								Six Months Ended June 30,
($ in millions)			2021						2020						Variance Favorable / (Unfavorable)						% Variance						2021						2020						Variance Favorable / (Unfavorable)						% Variance
Revenue:
New vehicle			$	991.3					$	761.7					$	229.6					30.1						$	1,926.7					$	1,500.6					$	426.1					28.4
Used vehicle			749.1						436.8						312.3						71.5						1,312.8						841.4						471.4						56.0
Parts and service			257.9						193.3						64.6						33.4						492.0						428.9						63.1						14.7
Finance and insurance, net			125.8						88.0						37.8						43.0						235.1						171.1						64.0						37.4
Other			0.7						6.2						(5.5)												4.9						27.5						(22.6)
Total Revenue			$	2,124.8					$	1,486.0					$	638.8					43.0						$	3,971.5					$	2,969.5					$	1,002.0					33.7
Segment income			$	169.0					$	82.1					$	86.9					105.8						$	287.5					$	136.2					$	151.3					111.1
Retail new vehicle unit sales			21,459						18,048						3,411						18.9						43,128						36,375						6,753						18.6
Retail used vehicle unit sales			28,056						21,043						7,013						33.3						52,535						40,930						11,605						28.4

Second Quarter 2021 compared to Second Quarter 2020

Domestic revenue increased during the three months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle unit volume and new and used vehicle revenue PVR. Unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly in April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.

Domestic segment income increased during the three months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle gross profit, which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in finance and insurance gross profit, which benefited from higher unit volume and an increase in finance and insurance gross profit PVR. Domestic segment income also benefited from increases in parts and service gross profit associated with the preparation of vehicles for sale and customer-pay service. Increases to Domestic segment income were partially offset by an increase in performance-driven SG&A expenses.

First Six Months 2021 compared to First Six Months 2020

Domestic revenue increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle unit volume and new and used vehicle revenue PVR. Unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly during the last two weeks of March 2020 through April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.

Domestic segment income increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle gross profit, which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in finance and insurance gross profit, which benefited from higher unit volume and an increase in finance and insurance gross profit PVR. Increases to Domestic segment income were partially offset by an increase in performance-driven SG&A expenses.

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Import

The Import segment operating results included the following:

 

			Three Months Ended June 30,																								Six Months Ended June 30,
($ in millions)			2021						2020						Variance Favorable / (Unfavorable)						% Variance						2021						2020						Variance Favorable / (Unfavorable)						% Variance
Revenue:
New vehicle			$	1,184.2					$	712.6					$	471.6					66.2						$	2,142.2					$	1,446.5					$	695.7					48.1
Used vehicle			604.5						355.8						248.7						69.9						1,089.2						690.3						398.9						57.8
Parts and service			248.5						170.4						78.1						45.8						462.6						377.9						84.7						22.4
Finance and insurance, net			133.2						82.4						50.8						61.7						242.3						166.4						75.9						45.6
Other			4.6						4.1						0.5												8.3						6.3						2.0
Total Revenue			$	2,175.0					$	1,325.3					$	849.7					64.1						$	3,944.6					$	2,687.4					$	1,257.2					46.8
Segment income			$	203.7					$	88.3					$	115.4					130.7						$	329.6					$	154.2					$	175.4					113.7
Retail new vehicle unit sales			36,136						23,605						12,531						53.1						66,979						48,892						18,087						37.0
Retail used vehicle unit sales			27,128						20,064						7,064						35.2						52,229						39,133						13,096						33.5

Second Quarter 2021 compared to Second Quarter 2020

Import revenue increased during the three months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle unit volume and new and used vehicle revenue PVR. Unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly in April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.

Import segment income increased during the three months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle gross profit, which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in finance and insurance gross profit, which benefited primarily from higher unit volume and an increase in finance and insurance gross profit PVR. Import segment income also benefited from increases in parts and service gross profit associated with the preparation of vehicles for sale and customer-pay service. Increases to Import segment income were partially offset by an increase in performance-driven SG&A expenses.

First Six Months 2021 compared to First Six Months 2020

Import revenue increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle unit volume and new and used vehicle revenue PVR. Unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly during the last two weeks of March 2020 through April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.

Import segment income increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle gross profit, which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in finance and insurance gross profit, which benefited primarily from higher unit volume and an increase in finance and insurance gross profit PVR. Increases to Import segment income were partially offset by an increase in performance-driven SG&A expenses.

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Premium Luxury

The Premium Luxury segment operating results included the following:

 

			Three Months Ended June 30,																								Six Months Ended June 30,
($ in millions)			2021						2020						Variance Favorable / (Unfavorable)						% Variance						2021						2020						Variance Favorable / (Unfavorable)						% Variance
Revenue:
New vehicle			$	1,252.8					$	787.0					$	465.8					59.2						$	2,341.7					$	1,596.1					$	745.6					46.7
Used vehicle			788.8						490.3						298.5						60.9						1,431.1						957.6						473.5						49.4
Parts and service			317.6						223.2						94.4						42.3						602.8						500.6						102.2						20.4
Finance and insurance, net			108.0						64.3						43.7						68.0						194.8						127.3						67.5						53.0
Other			1.3						—						1.3												1.6						—						1.6
Total Revenue			$	2,468.5					$	1,564.8					$	903.7					57.8						$	4,572.0					$	3,181.6					$	1,390.4					43.7
Segment income			$	225.7					$	89.2					$	136.5					153.0						$	384.2					$	169.4					$	214.8					126.8
Retail new vehicle unit sales			19,569						12,860						6,709						52.2						36,418						25,985						10,433						40.2
Retail used vehicle unit sales			22,370						15,795						6,575						41.6						41,904						30,938						10,966						35.4

Second Quarter 2021 compared to Second Quarter 2020

Premium Luxury revenue increased during the three months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle unit volume and new and used vehicle revenue PVR. Unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly in April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.

Premium Luxury segment income increased during the three months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle gross profit, which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in parts and service gross profit associated with customer-pay service and the preparation of vehicles for sale. Premium Luxury segment income also benefited from an increase in finance and insurance gross profit due to higher unit volume and an increase in finance and insurance gross profit PVR. Increases to Premium Luxury segment income were partially offset by an increase in performance-driven SG&A expenses.

First Six Months 2021 compared to First Six Months 2020

Premium Luxury revenue increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle unit volume and new and used vehicle revenue PVR. Unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly during the last two weeks of March 2020 through April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.

Premium Luxury segment income increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to increases in new and used vehicle gross profit, which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in finance and insurance gross profit, which benefited from higher unit volume and an increase in finance and insurance gross profit PVR. Premium Luxury segment income also benefited from an increase in parts and service gross profit associated with customer-pay service and the preparation of vehicles. Increases to Premium Luxury segment income were partially offset by an increase in performance-driven SG&A expenses.

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Corporate and other

Corporate and other results included the following:

			Three Months Ended June 30,																								Six Months Ended June 30,
($ in millions)			2021						2020						Variance Favorable / (Unfavorable)						% Variance						2021						2020						Variance Favorable / (Unfavorable)						% Variance
Revenue:
Used vehicle			$	80.5					$	41.6					$	38.9					93.5						$	138.9					$	83.9					$	55.0					65.6
Parts and service			126.8						103.0						23.8						23.1						$	244.4					$	258.8					$	(14.4)					(5.6)
Finance and insurance, net			2.0						11.7						(9.7)						(82.9)						9.8						17.4						(7.6)						(43.7)
Other			0.8						0.6						0.2												1.0						1.4						(0.4)
Revenue			$	210.1					$	156.9					$	53.2					33.9						$	394.1					$	361.5					$	32.6					9.0
Income (loss)			$	(74.8)					$	(74.5)					$	(0.3)											$	(150.2)					$	(519.5)					$	369.3

“Corporate and other” is comprised of our other businesses, including collision centers, AutoNation USA used vehicle stores, auction operations, and parts distribution centers, all of which generate revenues but do not meet the quantitative thresholds for reportable segments, as well as unallocated corporate overhead expenses and other income items.

As of June 30, 2021, we had 72 AutoNation-branded collision centers, 6 AutoNation USA used vehicle stores, 4 AutoNation-branded automotive auction operations, and 3 parts distribution centers that service our wholesale parts sales markets for the sale of original equipment manufacturer parts. We plan to expand our AutoNation USA used vehicle stores and are targeting to have over 130 stores by the end of 2026. We opened one AutoNation USA store in the second quarter of 2021 and are on track to open four additional new stores in the second half of 2021 and 12 additional new stores in 2022. The planned expansion may be impacted by a number of variables, including customer adoption, market conditions, availability of used vehicle inventory, and our ability to identify, acquire, and build out suitable locations in a timely manner.

During the six months ended June 30, 2020, we recorded non-cash goodwill impairment charges totaling $318.3 million, of which $257.4 million related to our Premium Luxury reporting unit, $41.6 million related to our Collision Centers reporting unit, and $19.3 million related to our Parts Centers reporting unit. We also recorded non-cash franchise rights impairment charges of $57.5 million. The non-cash goodwill impairments and franchise rights impairments are reflected as Goodwill Impairment and Franchise Rights Impairment, respectively, in the accompanying Unaudited Condensed Consolidated Statements of Operations, and are reported in the “Corporate and other” category of our segment information. During the six months ended June 30, 2020, we recorded non-cash long-lived asset impairment charges associated with our aftermarket collision parts business of $5.9 million, and non-cash intangible asset impairment charges associated with our collision centers and aftermarket collision parts business of $2.4 million, both of which are reported in the “Corporate and other” category of our segment information.

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Selling, General, and Administrative Expenses

Our Selling, General, and Administrative (“SG&A”) expenses consist primarily of compensation, including store and corporate salaries, commissions, and incentive-based compensation, as well as advertising (net of reimbursement-based manufacturer advertising rebates), and store and corporate overhead expenses, which include occupancy costs, legal, accounting, and professional services, and general corporate expenses. The following table presents the major components of our SG&A expenses.

			Three Months Ended June 30,																								Six Months Ended June 30,
($ in millions)			2021						2020						Variance Favorable / (Unfavorable)						% Variance						2021						2020						Variance Favorable / (Unfavorable)						% Variance
Reported:
Compensation			$	534.0					$	356.3					$	(177.7)					(49.9)						$	975.6					$	730.4					$	(245.2)					(33.6)
Advertising			42.8						28.1						(14.7)						(52.3)						79.5						74.4						(5.1)						(6.9)
Store and corporate overhead			172.1						163.5						(8.6)						(5.3)						341.7						343.8						2.1						0.6
Total			$	748.9					$	547.9					$	(201.0)					(36.7)						$	1,396.8					$	1,148.6					$	(248.2)					(21.6)
SG&A as a % of total gross profit:
Compensation			40.3						44.8						450						bps						41.4						45.4						400						bps
Advertising			3.2						3.5						30						bps						3.4						4.6						120						bps
Store and corporate overhead			13.0						20.6						760						bps						14.4						21.4						700						bps
Total			56.5						68.9						1,240						bps						59.2						71.4						1,220						bps

Second Quarter 2021 compared to Second Quarter 2020

SG&A expenses increased during the three months ended June 30, 2021, as compared to the same period in 2020, largely due to a performance-driven increase in compensation expense. Additionally, gross advertising expenses increased $18.5 million, partially offset by an increase in advertising reimbursements from manufacturers of $3.8 million. As a percentage of total gross profit, SG&A expenses decreased to 56.5% during the three months ended June 30, 2021, from 68.9% in the same period in 2020, primarily due to improvements in gross profit PVR and effective cost management.

First Six Months 2021 compared to First Six Months 2020

SG&A expenses increased during the six months ended June 30, 2021, as compared to the same period in 2020, largely due to a performance-driven increase in compensation expense. Additionally, gross advertising expenses increased $8.7 million, partially offset by an increase in advertising reimbursements from manufacturers of $3.6 million. As a percentage of total gross profit, SG&A expenses decreased to 59.2% during the six months ended June 30, 2021, from 71.4% in the same period in 2020, primarily due to improvements in gross profit PVR and effective cost management.

Goodwill Impairment

During the first quarter of 2020, due to the impact of the COVID-19 pandemic on our results and the decrease in our stock price and market capitalization as of March 31, 2020, we recorded non-cash goodwill impairment charges of $318.3 million.

Franchise Rights Impairment

During the first quarter of 2020, we recorded non-cash franchise rights impairment charges of $57.5 million to reduce the carrying values of certain franchise rights to their estimated fair values.

Other (Income) Expense, Net (Operating)

During the second quarter of 2020, we recognized a gain of $3.2 million related to a legal settlement. During the first quarter of 2020, we recognized asset impairment charges of $8.5 million.

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Non-Operating Income (Expense)

Floorplan Interest Expense

Second Quarter 2021 compared to Second Quarter 2020

Floorplan interest expense was $6.6 million for the three months ended June 30, 2021, compared to $16.3 million for the same period in 2020. The decrease in floorplan interest expense of $9.7 million was the result of lower average vehicle floorplan balances.

First Six Months 2021 compared to First Six Months 2020

Floorplan interest expense was $16.0 million for the six months ended June 30, 2021, compared to $41.8 million for the same period in 2020. The decrease in floorplan interest expense of $25.8 million was the result of lower average vehicle floorplan balances and lower average interest rates. Floorplan interest rates are variable and therefore increase and decrease with changes in the underlying benchmark interest rates.

Other Interest Expense

Second Quarter 2021 compared to Second Quarter 2020

Other interest expense was $20.9 million for the three months ended June 30, 2021, compared to $23.2 million for the same period in 2020. The decrease of $2.3 million was driven by lower average debt balances.

First Six Months 2021 compared to First Six Months 2020

Other interest expense was $42.1 million for the six months ended June 30, 2021, compared to $46.7 million for the same period in 2020. The decrease of $4.6 million was driven by lower average debt balances.

Other Income (Loss), Net (included in Non-Operating Income)

During the three and six months ended June 30, 2021, we recognized a gain of $5.3 million and $8.8 million, respectively, related to increases in the cash surrender value of corporate-owned life insurance (“COLI”) held in a Rabbi Trust for deferred compensation plan participants as a result of improved market performance of the underlying investments. Gains and losses related to the COLI are substantially offset by corresponding increases and decreases, respectively, in the deferred compensation obligations, which are reflected in SG&A expenses.

Additionally, in the first quarter of 2021, we sold the remaining shares of our Vroom equity investment and recorded a realized gain of $7.5 million. During the second quarters of 2021 and 2020, we recorded unrealized gains of $3.4 million and $214.7 million, respectively, related to changes in the fair values of the underlying securities of our minority equity investments. See Note 11 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

Income Tax Provision

Income taxes are provided based upon our anticipated underlying annual blended federal and state income tax rates adjusted, as necessary, for any discrete tax matters occurring during the period. As we operate in various states, our effective tax rate is also dependent upon our geographic revenue mix.

Our effective income tax rate was 24.8% for the three months ended June 30, 2021, and 25.7% for the three months ended June 30, 2020. Our effective income tax rate was 24.7% for the six months ended June 30, 2021, and 54.7% for the six months ended June 30, 2020. The tax rate for the six months ended June 30, 2020, reflects the fact that a significant portion of the goodwill impairment charges taken in the first quarter of 2020 was not deductible for income tax purposes. 

Discontinued Operations

Discontinued operations are related to stores that were sold or terminated prior to January 1, 2014. Results from discontinued operations, net of income taxes, were primarily related to carrying costs for real estate we have not yet sold associated with stores that were closed prior to January 1, 2014, and other adjustments related to disposed operations.

Liquidity and Capital Resources

We manage our liquidity to ensure access to sufficient funding at acceptable costs to fund our ongoing operating requirements and future capital expenditures while continuing to meet our financial obligations. We believe that our cash and cash equivalents, funds generated through operations, and amounts available under our revolving credit facility, commercial

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paper program, and secured used vehicle floorplan facilities will be sufficient to fund our working capital requirements, service our debt, pay our tax obligations and commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future. Depending on market conditions, we may from time to time issue debt, including in private or public offerings, to augment our liquidity, to reduce our cost of capital, or for general corporate purposes.

Available Liquidity Resources

We had the following sources of liquidity available:

(In millions)			June 30, 2021						December 31, 2020
Cash and cash equivalents			$	59.5					$	569.6
Revolving credit facility			$	1,760.3		(1)			$	1,760.3
Secured used vehicle floorplan facilities (2)			$	0.2					$	0.3

 (1)    At June 30, 2021, we had $39.7 million of letters of credit outstanding. In addition, we use the revolving credit facility under our credit agreement as a liquidity backstop for borrowings under our commercial paper program. We had $200.0 million commercial paper notes outstanding at June 30, 2021. See Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

(2)    Based on the eligible used vehicle inventory that could have been pledged as collateral. See Note 5 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

In January 2021, we repaid the outstanding $300.0 million of 3.35% Senior Notes through utilization of available funds.

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 relating to insurance matters. At June 30, 2021, surety bonds, letters of credit, and cash deposits totaled $100.3 million, of which $39.7 million were letters of credit. We do not currently provide cash collateral for outstanding letters of credit.

In February 2019, we filed an automatic shelf registration statement with the SEC that enables us to offer for sale, from time to time and as the capital markets permit, an unspecified amount of common stock, preferred stock, debt securities, warrants, subscription rights, depositary shares, stock purchase contracts, units, and guarantees of debt securities.

Capital Allocation

Our capital allocation strategy is focused on growing long-term value per share. We invest capital in our business to maintain and upgrade our existing facilities and to build new facilities for existing franchises, as well as for other strategic and technology initiatives. We also deploy capital opportunistically to repurchase our common stock and/or debt, to complete acquisitions or investments, and/or build facilities for newly awarded franchises and new AutoNation USA used vehicle stores. Our capital allocation decisions will be based on factors such as the expected rate of return on our investment, the market price of our common stock versus our view of its intrinsic value, the market price of our debt, the potential impact on our capital structure, our ability to complete acquisitions that meet our market and vehicle brand criteria and return on investment threshold, and limitations set forth in our debt agreements.

Share Repurchases

Our Board of Directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary limit. A summary of shares repurchased under our stock repurchase program authorized by our Board of Directors follows:

			Three Months Ended												Six Months Ended
			June 30,												June 30,
(In millions, except per share data)			2021						2020						2021						2020
Shares repurchased			7.5						—						11.3						2.5
Aggregate purchase price			$	736.1					$	—					$	1,042.2					$	80.0
Average purchase price per share			$	98.17					$	—					$	91.94					$	31.95

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In July 2021, our Board of Directors increased the share repurchase authorization by $1.0 billion. As of July 19, 2021, $1.0 billion remained available for share repurchases under the program.

The decision to repurchase shares at any given point in time is based on factors such as the market price of our common stock versus our view of its intrinsic value, the potential impact on our capital structure (including compliance with our maximum leverage ratio and other financial covenants in our debt agreements as well as our available liquidity), and the expected return on competing uses of capital such as acquisitions or investments, capital investments in our current businesses, or repurchases of our debt.

Capital Expenditures

The following table sets forth information regarding our capital expenditures:

			Three Months Ended												Six Months Ended
			June 30,												June 30,
(In millions)			2021						2020						2021						2020
Purchases of property and equipment, including operating lease buy-outs (1)			$	74.3					$	24.6					$	118.7					$	54.6

(1)Includes accrued construction in progress and excludes property associated with leases entered into during the year.

At June 30, 2021, we owned approximately 83% of our new vehicle franchise store locations with a net book value of $2.1 billion, as well as other properties associated with our collision centers, AutoNation USA used vehicle stores, auction operations, parts distribution centers, and other excess properties with a net book value of $502.4 million. None of these properties are mortgaged or encumbered.

We plan to expand our AutoNation USA used vehicle stores and are targeting to have over 130 stores by the end of 2026. We opened one AutoNation USA store in the second quarter of 2021 and are on track to open four additional new stores in the second half of 2021 and 12 additional new stores in 2022. We anticipate that the initial capital investment will be approximately $10 million to $11 million for each new store on average. The planned expansion may be impacted by a number of variables, including customer adoption, market conditions, availability of used vehicle inventory, and our ability to identify, acquire, and build out suitable locations in a timely manner.

Acquisitions and Divestitures

The following table sets forth information regarding cash used in business acquisitions, net of cash acquired, and cash received from business divestitures, net of cash relinquished:

			Three Months Ended												Six Months Ended
			June 30,												June 30,
(In millions)			2021						2020						2021						2020
Cash received from (used in) business acquisitions, net			$	—					$	—					$	—					$	(0.4)
Cash received from (used in) business divestitures, net			$	2.4					$	—					$	4.3					$	—

We divested two stores and two collision centers during the six months ended June 30, 2021. We divested one store and terminated one franchise during the six months ended June 30, 2020.

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Long-Term Debt and Commercial Paper

The following table sets forth our non-vehicle long-term debt, net of debt issuance costs, as of June 30, 2021, and December 31, 2020.

																		(in millions)
Debt Description						Maturity Date						Interest Payable						June 30, 2021						December 31, 2020
3.35% Senior Notes						January 15, 2021						January 15 and July 15						$	—					$	300.0
3.5% Senior Notes						November 15, 2024						May 15 and November 15						450.0						450.0
4.5% Senior Notes						October 1, 2025						April 1 and October 1						450.0						450.0
3.8% Senior Notes						November 15, 2027						May 15 and November 15						300.0						300.0
4.75% Senior Notes						June 1, 2030						June 1 and December 1						500.0						500.0
Revolving credit facility						March 26, 2025						Monthly						—						—
Finance leases and other debt						Various dates through 2040						Monthly						111.1						116.6
																		1,811.1						2,116.6
Less: unamortized debt discounts and debt issuance costs																		(13.8)						(14.8)
Less: current maturities																		(7.0)						(309.2)
Long-term debt, net of current maturities																		$	1,790.3					$	1,792.6

In January 2021, we repaid the outstanding $300.0 million of 3.35% Senior Notes through utilization of available funds.

We had $200.0 million of commercial paper notes outstanding at June 30, 2021, and no commercial paper notes outstanding at December 31, 2020.

See Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information on our long-term debt and commercial paper.

Restrictions and Covenants

Our credit agreement, the indentures for our senior unsecured notes, and our vehicle floorplan facilities 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.

Under our credit agreement, we are required to remain in compliance with a maximum leverage ratio and maximum capitalization ratio. The leverage ratio is a contractually defined amount principally reflecting non-vehicle debt divided by a contractually defined measure of earnings with certain adjustments. The capitalization ratio is a contractually defined amount principally reflecting vehicle floorplan payable and non-vehicle debt divided by our total capitalization including vehicle floorplan payable. The specific terms of these covenants can be found in our credit agreement, which we filed with our Current Report on Form 8-K on March 26, 2020.

The indentures for our senior unsecured notes contain certain limited covenants, including limitations on liens and sale and leaseback transactions.

Our failure to comply with the covenants contained in our debt agreements could result in the 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.

As of June 30, 2021, we were in compliance with the requirements of the financial covenants under our debt agreements. Under the terms of our credit agreement, at June 30, 2021, our leverage ratio and capitalization ratio were as follows:

			June 30, 2021
			Requirement						Actual
Leverage ratio			≤ 3.75x						1.17x
Capitalization ratio			≤ 70.0%						43.3%

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Vehicle Floorplan Payable

The components of vehicle floorplan payable are as follows:

(In millions)			June 30, 2021						December 31, 2020
Vehicle floorplan payable - trade			$	669.5					$	1,541.7
Vehicle floorplan payable - non-trade			901.8						1,218.2
Vehicle floorplan payable			$	1,571.3					$	2,759.9

Vehicle 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. Vehicle floorplan facilities are primarily collateralized by vehicle inventories and related receivables. See Note 5 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information on our vehicle floorplan payable.

Cash Flows

The following table summarizes the changes in our cash provided by (used in) operating, investing, and financing activities:

			Six Months Ended
			June 30,
(In millions)			2021						2020
Net cash provided by operating activities			$	930.3					$	894.3
Net cash used in investing activities			$	(8.5)					$	(124.7)
Net cash used in financing activities			$	(1,431.8)					$	(554.7)

Cash Flows from Operating Activities

Our primary sources of operating cash flows result from the sale of vehicles and finance and insurance products, collections from customers for the sale of parts and services, and proceeds from vehicle floorplan payable-trade. Our primary uses of cash from operating activities are repayments of vehicle floorplan payable-trade, purchases of inventory, personnel-related expenditures, and payments related to taxes and leased properties.

Net cash provided by operating activities increased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to an increase in earnings, partially offset by an increase in working capital requirements.

Cash Flows from Investing Activities

Net cash flows from investing activities consist primarily of cash used in capital additions and activity from business acquisitions, business divestitures, property dispositions, and other transactions.

Net cash used in investing activities decreased during the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to proceeds received from the sale of an equity security in 2021 and a decrease in investments made in equity securities, partially offset by an increase in purchases of property and equipment.

Cash Flows from Financing Activities

Net cash flows from financing activities primarily include repurchases of common stock, debt activity, and changes in vehicle floorplan payable-non-trade.

During the six months ended June 30, 2021, we repurchased 11.3 million shares of common stock for an aggregate purchase price of $1.0 billion (average purchase price per share of $91.94), including repurchases for which settlement occurred subsequent to June 30, 2021. During the six months ended June 30, 2020, we repurchased 2.5 million shares of common stock for an aggregate purchase price of $80.0 million (average purchase price per share of $31.95).

During the six months ended June 30, 2021, we had no borrowings or repayments under our revolving credit facility. During the six months ended June 30, 2020, we borrowed $1.1 billion and repaid $1.1 billion under our revolving credit facility.

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During the six months ended June 30, 2021, we repaid the outstanding $300.0 million of 3.35% Senior Notes due 2021. During the six months ended June 30, 2020, we repaid the outstanding $350.0 million of 5.5% Senior Notes due 2020, issued $500.0 million aggregate principal amount of 4.75% Senior Notes due 2030, and amended and restated our existing unsecured credit agreement. Cash flows from financing activities during the six months ended June 30, 2020, reflect cash payments of $10.5 million for debt issuance costs associated with the senior note issuance and debt refinancing that are being amortized to interest expense over the terms of the related debt arrangements.

Cash flows from financing activities include changes in commercial paper notes outstanding totaling net proceeds of $200.0 million during the six months ended June 30, 2021, and net repayments of $170.0 million during the six months ended June 30, 2020, as well as changes in vehicle floorplan payable-non-trade totaling net payments of $316.9 million during the six months ended June 30, 2021, and net payments of $431.4 million during the six months ended June 30, 2020.

Forward-Looking Statements

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 Quarterly Report on Form 10-Q, including, without limitation, statements regarding our strategic initiatives, partnerships, or investments, including the planned expansion of our AutoNation USA used vehicle stores and our anticipated investments in connection therewith; pending acquisitions; our investments in digital and online capabilities and other brand extension strategies; the impact of the COVID-19 pandemic on our business, results of operations, and financial condition; our expectations for the future performance of our business and the automotive retail industry; as well as other written or oral statements made from time to time by us or by our authorized executive officers on our behalf that describe our objectives, goals, or plans constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact, including statements that describe our objectives, plans or goals are, or may be deemed to be, forward-looking statements. Words such as “anticipate,” “expect,” “intend,” “goal,” “plan,” “believe,” “continue,” “may,” “will,” “could,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Our forward-looking statements reflect our current expectations concerning future results and events, and they involve known and unknown risks, uncertainties and other factors that are difficult to predict and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these statements. These forward-looking statements speak only as of the date of this report, and we undertake no obligation to revise or update these statements to reflect subsequent events or circumstances. The risks, uncertainties, and other factors that our stockholders and prospective investors should consider include, but are not limited to, the following:

•The automotive retail industry is sensitive to changing economic conditions and various other factors, including, but not limited to, unemployment levels, consumer confidence, fuel prices, interest rates, and tariffs. New vehicle unit volume has recently been, and could continue to be, impacted by reduced availability of inventory partially driven by certain component shortages in the manufacturers’ supply chains. Our business and results of operations are substantially dependent on new and used vehicle sales levels in the United States and in our particular geographic markets, as well as the gross profit margins that we can achieve on our sales of vehicles, all of which are very difficult to predict.

•The COVID-19 pandemic has disrupted, and may continue to disrupt, our business, results of operations, and financial condition going forward. Future epidemics, pandemics, and other outbreaks could also disrupt our business, results of operations, and financial condition.

•Our new vehicle sales are impacted by the incentive, marketing, and other programs of vehicle manufacturers.

•We are dependent upon the success and continued financial viability of the vehicle manufacturers and distributors with which we hold franchises.

•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.

•We are investing significantly in our brand extension strategy, and if our strategic initiatives are not successful, we will have incurred significant expenses without the benefit of improved financial results. The planned expansion of our AutoNation USA stores may be impacted by a number of variables, including customer adoption, market conditions, availability of used vehicle inventory, and our ability to identify, acquire, and build out suitable locations in a timely manner.

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•If we are not able to maintain and enhance our retail brands and reputation or to attract consumers to our own digital channels, or if events occur that damage our retail brands, reputation, or sales channels, our business and financial results may be harmed.

•The carrying value of our minority equity investment in Waymo does not have a readily determinable fair value and is required to be adjusted for observable price changes or impairments, both of which could adversely impact our results of operations and financial condition.

•New laws, regulations, or governmental policies regarding fuel economy and greenhouse gas emission standards, or changes to existing standards, may affect vehicle manufacturers’ ability to produce cost-effective vehicles or vehicles that consumers demand, which could adversely impact our business, results of operations, financial condition, cash flow, 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 are subject to extensive governmental laws and regulations. If we are found to be in purported violation of or subject to liabilities under 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.

•A failure of our information systems or any security breach or unauthorized disclosure of confidential information could have a material adverse effect on our business.

•Our debt agreements contain certain financial ratios and other restrictions on our ability to conduct our business, and our substantial indebtedness could adversely affect our financial condition and operations and prevent us from fulfilling our debt service obligations.

•We are subject to interest rate risk in connection with our vehicle floorplan payables, revolving credit facility, and commercial paper program that could have a material adverse effect on our profitability.

•Goodwill and other intangible assets comprise a significant portion of our total assets. We must test our goodwill and other intangible assets for impairment at least annually, which could 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.

•Our largest stockholders, as a result of their ownership stakes in us, may have the ability to exert substantial influence over actions to be taken or approved by our stockholders. In addition, future share repurchases and fluctuations in the levels of ownership of our largest stockholders could impact the volume of trading, liquidity, and market price of our common stock.

•Natural disasters and adverse weather events can disrupt our business.

Please refer to our most recent Annual Report on Form 10-K for additional discussion of the foregoing risks. These forward-looking statements speak only as of the date of this report, and we undertake no obligation to update any forward-looking statements to reflect subsequent events or circumstances.

Additional Information

Investors and others should note that we announce material financial information using our company website (www.autonation.com), our investor relations website (investors.autonation.com), SEC filings, press releases, public conference calls, and webcasts. Information about AutoNation, its business, and its results of operations may also be announced by posts on the following social media channels:

•AutoNation’s Twitter feed (www.twitter.com/autonation)

•Mike Jackson’s Twitter feed (www.twitter.com/CEOMikeJackson)

The information that we post on these social media channels could be deemed to be material information. As a result, we encourage investors, the media, and others interested in AutoNation to review the information that we post on these social media channels. These channels may be updated from time to time on AutoNation’s investor relations website. The information on or accessible through our websites and social media channels is not incorporated by reference in this Quarterly Report on Form 10-Q.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We have market risk exposure to changing LIBOR-based interest rates. Interest rate derivatives may be used to hedge a portion of our variable rate debt, when appropriate, based on market conditions.

We had $1.6 billion of variable rate vehicle floorplan payable at June 30, 2021, and $2.8 billion at December 31, 2020. Based on these amounts, a 100 basis point change in interest rates would result in an approximate change to our annual floorplan interest expense of $15.7 million at June 30, 2021, and $27.6 million at December 31, 2020. Our exposure to changes in interest rates with respect to total vehicle floorplan payable is partially mitigated by manufacturers’ floorplan assistance, which in some cases is based on variable interest rates.

We had $200.0 million of commercial paper notes outstanding at June 30, 2021. Based on the amounts outstanding, a 100 basis point change in interest rates would result in an approximate change to annual interest expense of $2.0 million at June 30, 2021. We had no commercial paper notes outstanding at December 31, 2020.

Our fixed rate long-term debt, consisting of amounts outstanding under our senior unsecured notes and finance lease and other debt obligations, totaled $1.8 billion and had a fair value of $2.0 billion as of June 30, 2021, and totaled $2.1 billion and had a fair value of $2.3 billion as of December 31, 2020.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020, which could materially affect our business, financial condition, or future results.

We are dependent upon the success and continued financial viability of the vehicle manufacturers and distributors with which we hold franchises.

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. Our ability to sell new vehicles is dependent on a vehicle manufacturer’s ability to design, manufacture, and allocate to our stores an attractive, high-quality, and desirable product mix at the right time and at the right price in order to satisfy customer demand. Second, manufacturers generally support their franchisees by providing direct financial assistance in various areas, including, among others, floorplan assistance and advertising assistance. Third, manufacturers provide product warranties and, in some cases, service contracts to customers.

Our stores perform warranty and service contract work for vehicles under manufacturer product warranties and service contracts, and direct bill the manufacturer as opposed to invoicing the store customer. At any particular time, we have significant receivables from manufacturers for warranty and service work performed for customers. In addition, we rely on manufacturers to varying extents for original equipment manufactured replacement parts, training, product brochures and point of sale materials, and other items for our stores. Our business, results of operations, and financial condition could be materially adversely affected as a result of any event that has a material adverse effect on the vehicle manufacturers or distributors that are our primary franchisors.

The core brands of vehicles that we sell, representing approximately 89% of the new vehicles that we sold in 2020, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, Stellantis, Mercedes-Benz, BMW, and Volkswagen (including Audi and Porsche). We are subject to a concentration of risk in the event of adverse events or financial distress, including bankruptcy, impacting one or more of these manufacturers.

Vehicle manufacturers may be adversely impacted by economic downturns or recessions, significant declines in the sales of their new vehicles, natural disasters, increases in interest rates, adverse fluctuations in currency exchange rates, declines in their credit ratings, liquidity concerns, labor strikes or similar disruptions (including within their major suppliers), supply shortages or rising raw material costs, rising employee benefit costs, vehicle recall campaigns, adverse publicity that may reduce consumer demand for their products (including due to bankruptcy), product defects, litigation, poor product mix or unappealing vehicle design, governmental laws and regulations (including fuel economy requirements), tariffs and other import product restrictions, the rise of ride-sharing applications, or other adverse events. These and other risks could materially adversely affect any manufacturer and impact its ability to profitably design, market, produce, or distribute new vehicles, which in turn could materially adversely affect our ability to obtain or finance our desired new vehicle inventories, our ability to take advantage of manufacturer financial assistance programs, our ability to collect in full or on a timely basis our manufacturer warranty and other receivables, and/or our ability to obtain other goods and services provided by the impacted manufacturer. In addition, vehicle recall campaigns could materially adversely affect our business, results of operations, and financial condition.

Vehicle manufacturers worldwide have recently faced production disruptions caused by a shortage of automotive microchips. The shortage is reported to be due to the overall high demand for microchips in the global economy. Prolonged shortages of new vehicle inventory could result in lower new vehicle sales volumes and a decrease in the total amount of gross profit we derive from new vehicle sales, which could adversely affect our business. Additionally, the shortage of new vehicles has increased market demand for used vehicles, raising both revenue and gross profit per used vehicle retailed, but also increasing our costs of acquiring used vehicle inventory. Resolution of the microchip shortage should lead to an increase in the supply of new vehicles, which may adversely affect levels of profitability on both new and used vehicles.

Our business could be materially adversely impacted by the bankruptcy of a major vehicle manufacturer or related lender. For example, (i) a manufacturer in bankruptcy could attempt to terminate all or certain of our franchises, in which case we may not receive adequate compensation for our franchises, (ii) consumer demand for such manufacturer’s products could be materially adversely affected, (iii) a lender in bankruptcy could attempt to terminate our floorplan financing and demand repayment of any amounts outstanding, (iv) we may be unable to arrange financing for our customers for their vehicle purchases and leases through such lender, in which case we would be required to seek financing with alternate financing sources, which may be difficult to obtain on similar terms, if at all, (v) we may be unable to collect some or all of our significant receivables that are due from such manufacturer or lender, and we may be subject to preference claims relating to

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payments made by such manufacturer or lender prior to bankruptcy, and (vi) such manufacturer may be relieved of its indemnification obligations with respect to product liability claims. Additionally, any such bankruptcy may result in us being required to incur impairment charges with respect to the inventory, fixed assets, and intangible assets related to certain franchises, which could adversely impact our results of operations and financial condition.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below sets forth information with respect to shares of common stock repurchased by AutoNation, Inc. during the three months ended June 30, 2021.

Period			Total Number of Shares Purchased (1)						Avg. Price Paid Per Share						Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs						Approximate Dollar  Value of Shares  That May Yet Be Purchased Under  The Plans or Programs (in millions)(1)
April 1, 2021 - April 30, 2021			925,000						$	101.41					925,000						$	797.9
May 1, 2021 - May 31, 2021			2,410,761						$	102.18					2,410,761						$	551.5
June 1, 2021 - June 30, 2021			4,162,626						$	95.13					4,162,626						$	155.5
Total			7,498,387												7,498,387

 

(1)Our Board of Directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary limit. As of June 30, 2021, $155.5 million remained available under our stock repurchase limit. In July 2021, our Board of Directors increased the share repurchase authorization by $1 billion. Our stock repurchase program does not have an expiration date.

ITEM 6. EXHIBITS

Exhibit No.			Description
31.1			Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act.
31.2			Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act.
32.1			Certification of Chief Executive Officer Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350.
32.2			Certification of Chief Financial Officer Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350.
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			XBRL Taxonomy Extension Label Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

						AUTONATION, INC.
Date:			July 21, 2021			By:			/s/ Christopher Cade
									Christopher Cade Senior Vice President and Chief Accounting Officer
									(Duly Authorized Officer and Principal Accounting Officer)

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