Full Description

AutoNation, Inc. (AutoNation), incorporated in 1991, through its subsidiaries, operates as an automotive retailer in the United States. As of December 31, 2008, the Company owned and operated 302 vehicle franchises from 232 stores located in metropolitan markets, predominantly in the Sunbelt region of the United States. Its stores sell 37 different brands of vehicles. During the year ended December 31, 2008, the core brands of vehicles sold by the Company, represented approximately 96% of the vehicles sold by it, were manufactured by Toyota, Ford, General Motors, Honda, Nissan, Chrysler, Daimler and BMW. The Company offers a diversified range of automotive products and services, including new vehicles, used vehicles, parts and automotive services, and automotive finance and insurance products. It also arranges financing for vehicle purchases through third-party finance sources. As of December 31, 2008, the Company had three operating segments: Domestic, Import, and Premium Luxury.

AutoNation’s Domestic segment comprises retail automotive franchises that sell new vehicles manufactured by General Motors, Ford and Chrysler. Its Import segment comprises retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda and Nissan. Its Premium Luxury segment comprises retail automotive franchises that sell new vehicles manufactured primarily by Mercedes, BMW and Lexus. The franchises in each segment also sell used vehicles, parts and automotive services, and automotive finance and insurance products. During 2008, Domestic revenue represented 35% of total revenue, Import revenue represented 39% of total revenue and Premium Luxury represented 26% of total revenue.

Each of the Company’s stores offers a variety of used vehicles. The Company has 15 local brands in its key markets, including Maroone in South Florida; GO in Denver, Colorado; AutoWay in Tampa, Florida; Bankston in Dallas, Texas; Courtesy in Orlando, Florida; Desert in Las Vegas, Nevada; Team in Atlanta, Georgia; Mike Shad in Jacksonville, Florida; Dobbs in Memphis, Tennessee; Fox in Baltimore, Maryland; Mullinax in Cleveland, Ohio; Appleway in Spokane, Washington; Champion in South Texas; Power in Southern California and Arizona, and AutoWest in Northern California. The stores operated by the Company under local retail brands accounted for approximately 68% of its total revenue during 2008.

AutoNation’s stores acquire new vehicles for retail sale either directly from the applicable automotive manufacturer or distributor, or through dealer trades with other stores of the same franchise. The Company generally acquires used vehicles from customer trade-ins, auctions, lease terminations and other sources. It generally reconditions used vehicles acquired for retail sale at its stores’ service facilities. Used vehicles not sold by the Company at its stores are generally sold at wholesale through auctions. AutoNation provides a variety of financial products and services to its customers. It arranges for its customers to finance vehicles through installment loans or leases with third-party lenders, including the vehicle manufacturers’ and distributors’ captive finance subsidiaries, in exchange for a commission payable to the Company by the third-party lender. The Company does not directly finance its customers’ vehicle leases or purchases.

The Company offers various vehicle protection products to its customers, including extended service contracts, maintenance programs, guaranteed auto protection (known as GAP, this protection covers the shortfall between a customer’s loan balance and insurance payoff in the event of a casualty), tire and wheel protection, and theft protection products. The vehicle protection products that its stores offer to customers are underwritten and administered by independent third parties, including the vehicle manufacturers’ and distributors’ captive finance subsidiaries. The Company primarily sells the products on a straight commission basis; however, it also participates in future underwriting profit for certain products pursuant to retrospective commission arrangements. The Company’s stores also provide a range of vehicle maintenance, repair, paint and collision repair services, including warranty work that can be performed only at franchised dealerships and customer-pay service work.

During 2008, AutoNation retailed approximately 440,000 new and used vehicles through its stores. It sells a range of vehicle makes within each of its markets. The Company operates each of its vehicle stores under a franchise agreement with a vehicle manufacturer or distributor. The franchise agreements grant the franchised automotive store a non-exclusive right to sell the manufacturer or distributor’s brand of vehicles, and offer related parts and service within a specified market area. These franchise agreements grant the Company’s stores the right to use the manufacturer or distributor’s trademarks in connection with their operations. The contractual terms of the Company’s stores’ franchise agreements provide for various durations, ranging from one year to no expiration date, and in certain cases, manufacturers undertake to renew such franchises upon expiration.