PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
CURRENT ASSETS:	CURRENT ASSETS:					CURRENT ASSETS:
Cash and cash equivalents	Cash and cash equivalents	$	350.5	$	42.0	Cash and cash equivalents	$	59.5	$	569.6
Receivables, net	Receivables, net	682.5		916.7		Receivables, net	773.5		845.2
Inventory	Inventory	2,482.5		3,305.8		Inventory	1,756.2		2,598.5
Other current assets	Other current assets	139.4		146.6		Other current assets	212.7		139.4
Total Current Assets	Total Current Assets	3,654.9		4,411.1		Total Current Assets	2,801.9		4,152.7
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $1.6 billion and $1.5 billion, respectively		3,125.1		3,174.6
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $1.7 billion and $1.7 billion, respectively						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	OPERATING LEASE ASSETS	329.0		333.1		OPERATING LEASE ASSETS	303.0		309.5
GOODWILL	GOODWILL	1,186.5		1,501.9		GOODWILL	1,187.0		1,185.0
OTHER INTANGIBLE ASSETS, NET	OTHER INTANGIBLE ASSETS, NET	521.8		581.6		OTHER INTANGIBLE ASSETS, NET	521.0		521.5
OTHER ASSETS	OTHER ASSETS	752.0		541.0		OTHER ASSETS	473.4		580.4
Total Assets	Total Assets	$	9,569.3	$	10,543.3	Total Assets	$	8,381.0	$	9,887.2
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:	CURRENT LIABILITIES:					CURRENT LIABILITIES:
Vehicle floorplan payable - trade	Vehicle floorplan payable - trade	$	1,467.6	$	2,120.6	Vehicle floorplan payable - trade	$	669.5	$	1,541.7
Vehicle floorplan payable - non-trade	Vehicle floorplan payable - non-trade	841.0		1,455.2		Vehicle floorplan payable - non-trade	901.8		1,218.2
Accounts payable	Accounts payable	344.5		290.3		Accounts payable	396.1		335.2
Commercial paper	Commercial paper	0		170.0		Commercial paper	200.0		0
Current maturities of long-term debt	Current maturities of long-term debt	307.7		355.6		Current maturities of long-term debt	7.0		309.2
Accrued payroll and benefits	Accrued payroll and benefits	214.3		178.4		Accrued payroll and benefits	269.2		225.8
Other current liabilities	Other current liabilities	535.5		530.1		Other current liabilities	597.1		535.8
Total Current Liabilities	Total Current Liabilities	3,710.6		5,100.2		Total Current Liabilities	3,040.7		4,165.9
LONG-TERM DEBT, NET OF CURRENT MATURITIES	LONG-TERM DEBT, NET OF CURRENT MATURITIES	1,782.0		1,578.5		LONG-TERM DEBT, NET OF CURRENT MATURITIES	1,790.3		1,792.6
NONCURRENT OPERATING LEASE LIABILITIES	NONCURRENT OPERATING LEASE LIABILITIES	304.7		305.0		NONCURRENT OPERATING LEASE LIABILITIES	279.1		286.5
DEFERRED INCOME TAXES	DEFERRED INCOME TAXES	110.1		135.1		DEFERRED INCOME TAXES	75.4		95.9
OTHER LIABILITIES	OTHER LIABILITIES	304.0		262.4		OTHER LIABILITIES	338.7		310.6
COMMITMENTS AND CONTINGENCIES (Note 12)	COMMITMENTS AND CONTINGENCIES (Note 12)					COMMITMENTS AND CONTINGENCIES (Note 12)	0		0
SHAREHOLDERS’ EQUITY:	SHAREHOLDERS’ EQUITY:					SHAREHOLDERS’ EQUITY:
Preferred stock, par value $0.01 per share; 5,000,000 shares authorized; NaN issued		0		0
Common stock, par value $0.01 per share; 1,500,000,000 shares authorized; 102,562,149 shares issued at September 30, 2020, and December 31, 2019, including shares held in treasury		1.0		1.0

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						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	Additional paid-in capital	41.3		35.9		Additional paid-in capital	5.7		53.1
Retained earnings	Retained earnings	3,917.9		3,688.3		Retained earnings	3,896.4		4,069.4
Treasury stock, at cost; 14,717,090 and 13,212,974 shares held, respectively		(602.3)		(563.1)
Treasury stock, at cost; 13,429,134 and 19,078,620 shares held, respectively						Treasury stock, at cost; 13,429,134 and 19,078,620 shares held, respectively	(1,046.1)		(887.8)
Total Shareholders’ Equity	Total Shareholders’ Equity	3,357.9		3,162.1		Total Shareholders’ Equity	2,856.8		3,235.7
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	9,569.3	$	10,543.3	Total Liabilities and Shareholders’ Equity	$	8,381.0	$	9,887.2

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)


		Three Months Ended						Nine Months Ended							Three Months Ended				Six Months Ended
		September 30,						September 30,							June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenue:	Revenue:									Revenue:
New vehicle	New vehicle	$	2,748.4	$	2,874.8	$	7,291.6	$	8,141.1	New vehicle	$	3,428.3	$	2,261.3	$	6,410.6	$	4,543.2
Used vehicle	Used vehicle	1,516.9		1,402.9		4,090.1		4,121.9		Used vehicle	2,222.9		1,324.5		3,972.0		2,573.2
Parts and service	Parts and service	852.8		902.6		2,419.0		2,680.8		Parts and service	950.8		689.9		1,801.8		1,566.2
Finance and insurance, net	Finance and insurance, net	281.2		266.2		763.4		757.9		Finance and insurance, net	369.0		246.4		682.0		482.2
Other	Other	5.6		14.7		40.8		85.1		Other	7.4		10.9		15.8		35.2
TOTAL REVENUE	TOTAL REVENUE	5,404.9		5,461.2		14,604.9		15,786.8		TOTAL REVENUE	6,978.4		4,533.0		12,882.2		9,200.0
Cost of sales:	Cost of sales:									Cost of sales:
New vehicle	New vehicle	2,581.2		2,755.9		6,908.4		7,774.8		New vehicle	3,107.8		2,141.7		5,900.1		4,327.2
Used vehicle	Used vehicle	1,370.0		1,310.6		3,735.2		3,842.3		Used vehicle	2,020.2		1,207.5		3,629.1		2,365.2
Parts and service	Parts and service	477.6		493.6		1,343.6		1,461.0		Parts and service	518.3		378.5		980.3		866.0
Other	Other	4.6		13.7		38.0		81.3		Other	5.8		10.3		13.6		33.4
TOTAL COST OF SALES (excluding depreciation shown below)	TOTAL COST OF SALES (excluding depreciation shown below)	4,433.4		4,573.8		12,025.2		13,159.4		TOTAL COST OF SALES (excluding depreciation shown below)	5,652.1		3,738.0		10,523.1		7,591.8
Gross profit:	Gross profit:									Gross profit:
New vehicle	New vehicle	167.2		118.9		383.2		366.3		New vehicle	320.5		119.6		510.5		216.0
Used vehicle	Used vehicle	146.9		92.3		354.9		279.6		Used vehicle	202.7		117.0		342.9		208.0
Parts and service	Parts and service	375.2		409.0		1,075.4		1,219.8		Parts and service	432.5		311.4		821.5		700.2
Finance and insurance	Finance and insurance	281.2		266.2		763.4		757.9		Finance and insurance	369.0		246.4		682.0		482.2
Other	Other	1.0		1.0		2.8		3.8		Other	1.6		0.6		2.2		1.8
TOTAL GROSS PROFIT	TOTAL GROSS PROFIT	971.5		887.4		2,579.7		2,627.4		TOTAL GROSS PROFIT	1,326.3		795.0		2,359.1		1,608.2
Selling, general, and administrative expenses	Selling, general, and administrative expenses	641.4		653.8		1,790.0		1,913.8		Selling, general, and administrative expenses	748.9		547.9		1,396.8		1,148.6
Depreciation and amortization	Depreciation and amortization	51.8		45.2		149.0		133.7		Depreciation and amortization	47.9		49.1		95.8		97.2
Goodwill impairment	Goodwill impairment	0		0		318.3		0		Goodwill impairment	0		0		0		318.3
Franchise rights impairment	Franchise rights impairment	0		0		57.5		9.6		Franchise rights impairment	0		0		0		57.5
Other (income) expense, net	Other (income) expense, net	6.6		(5.1)		11.1		(17.5)		Other (income) expense, net	(0.7)		(3.4)		(0.6)		4.5
OPERATING INCOME		271.7		193.5		253.8		587.8
OPERATING INCOME (LOSS)										OPERATING INCOME (LOSS)	530.2		201.4		867.1		(17.9)
Non-operating income (expense) items:	Non-operating income (expense) items:									Non-operating income (expense) items:
Floorplan interest expense	Floorplan interest expense	(11.1)		(33.0)		(52.9)		(109.4)		Floorplan interest expense	(6.6)		(16.3)		(16.0)		(41.8)
Other interest expense	Other interest expense	(23.6)		(26.1)		(70.3)		(81.6)		Other interest expense	(20.9)		(23.2)		(42.1)		(46.7)

Interest income		0.1		0.1		0.3		0.4
Other income, net	Other income, net	6.4		2.6		217.9		4.2		Other income, net	8.9		214.6		19.9		211.7
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	243.5		137.1		348.8		401.4		INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	511.6		376.5		828.9		105.3
Income tax provision	Income tax provision	60.9		37.1		118.5		108.3		Income tax provision	126.7		96.6		204.5		57.6
NET INCOME FROM CONTINUING OPERATIONS	NET INCOME FROM CONTINUING OPERATIONS	182.6		100.0		230.3		293.1		NET INCOME FROM CONTINUING OPERATIONS	384.9		279.9		624.4		47.7
Loss from discontinued operations, net of income taxes	Loss from discontinued operations, net of income taxes	0		(0.5)		(0.2)		(0.8)		Loss from discontinued operations, net of income taxes	(0.1)		(0.1)		(0.2)		(0.2)
NET INCOME	NET INCOME	$	182.6	$	99.5	$	230.1	$	292.3	NET INCOME	$	384.8	$	279.8	$	624.2	$	47.5
BASIC EARNINGS (LOSS) PER SHARE:	BASIC EARNINGS (LOSS) PER SHARE:									BASIC EARNINGS (LOSS) PER SHARE:
Continuing operations	Continuing operations	$	2.07	$	1.11	$	2.59	$	3.25	Continuing operations	$	4.88	$	3.18	$	7.71	$	0.54
Discontinued operations	Discontinued operations	$	0	$	(0.01)	$	0	$	(0.01)	Discontinued operations	$	0	$	0	$	0	$	0
Net income	Net income	$	2.07	$	1.11	$	2.59	$	3.24	Net income	$	4.88	$	3.18	$	7.71	$	0.53
Weighted average common shares outstanding	Weighted average common shares outstanding	88.3		89.9		88.8		90.1		Weighted average common shares outstanding	78.9		87.9		81.0		89.0
DILUTED EARNINGS (LOSS) PER SHARE:	DILUTED EARNINGS (LOSS) PER SHARE:									DILUTED EARNINGS (LOSS) PER SHARE:
Continuing operations	Continuing operations	$	2.05	$	1.11	$	2.59	$	3.24	Continuing operations	$	4.83	$	3.18	$	7.63	$	0.54
Discontinued operations	Discontinued operations	$	0	$	(0.01)	$	0	$	(0.01)	Discontinued operations	$	0	$	0	$	0	$	0
Net income	Net income	$	2.05	$	1.10	$	2.59	$	3.23	Net income	$	4.83	$	3.18	$	7.63	$	0.53
Weighted average common shares outstanding	Weighted average common shares outstanding	88.9		90.4		89.0		90.4		Weighted average common shares outstanding	79.7		88.1		81.8		89.0
COMMON SHARES OUTSTANDING, net of treasury stock, at period end	COMMON SHARES OUTSTANDING, net of treasury stock, at period end	87.8		89.2		87.8		89.2		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.

AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In millions, except share data)


		Nine Months Ended September 30, 2020																								Six Months Ended June 30, 2021
		Common Stock					Additional Paid-In Capital		Retained Earnings		Treasury Stock				Total	Common Stock				Additional Paid-In Capital		Retained Earnings				Treasury Stock			Total
		Shares	Amount															Shares										Total
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)
BALANCE AT DECEMBER 31, 2020													BALANCE AT DECEMBER 31, 2020	102,562,149		$	1.0	$	53.1	$	4,069.4			$	(887.8)				$	3,235.7
Net income													Net income	—		—		—		239.4		—				239.4
Repurchases of common stock	Repurchases of common stock	—	—		—		—		(80.0)		(80.0)		Repurchases of common stock	—		—		—		—		(306.1)				(306.1)
Stock-based compensation expense	Stock-based compensation expense	—	—		4.5		—		—		4.5		Stock-based compensation expense	—		—		20.8		—		—				20.8
Shares awarded under stock-based compensation plans, net of shares withheld for taxes	Shares awarded under stock-based compensation plans, net of shares withheld for taxes	—	—		(21.7)		—		14.8		(6.9)		Shares awarded under stock-based compensation plans, net of shares withheld for taxes	—		—		(32.9)		—		37.0				4.1
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

BALANCE AT MARCH 31, 2021													BALANCE AT MARCH 31, 2021	102,562,149		$	1.0	$	41.0	$	4,308.8	$	(1,156.9)			$	3,193.9
Net income	Net income	—	—		—		279.8		—		279.8		Net income	—		—		—		384.8		—				384.8
Repurchases of common stock													Repurchases of common stock	—		—		—		—		(736.1)				(736.1)
Treasury stock cancellation													Treasury stock cancellation	(16,000,000)		(0.2)		(40.6)		(797.2)		838.0				0
Stock-based compensation expense	Stock-based compensation expense	—	—		11.2		—		—		11.2		Stock-based compensation expense	—		—		6.5		—		—				6.5
Shares awarded under stock-based compensation plans, net of shares withheld for taxes	Shares awarded under stock-based compensation plans, net of shares withheld for taxes	—	—		(0.4)		—		0.2		(0.2)		Shares awarded under stock-based compensation plans, net of shares withheld for taxes	—		—		(1.2)		—		8.9				7.7
BALANCE AT JUNE 30, 2020		102,562,149	1.0		29.5		3,735.3		(628.1)		3,137.7
Net income		—	—		—		182.6		—		182.6
BALANCE AT JUNE 30, 2021													BALANCE AT JUNE 30, 2021	86,562,149		$	0.8	$	5.7	$	3,896.4	$	(1,046.1)			$	2,856.8

Stock-based compensation expense		—	—		7.2		—		—		7.2
Shares awarded under stock-based compensation plans, net of shares withheld for taxes		—	—		4.6		—		25.8		30.4

BALANCE AT SEPTEMBER 30, 2020		102,562,149	$	1.0	$	41.3	$	3,917.9	$	(602.3)	$	3,357.9

Nine Months Ended September 30, 2019
Common Stock Additional
Paid-In
Capital Retained
Earnings Treasury
Stock Total
Shares Amount
BALANCE AT DECEMBER 31, 2018 102,562,149 $ 1.0 $ 20.8 $ 3,238.3 $ (544.1) $ 2,716.0
Net income — — — 92.0 — 92.0
Repurchases of common stock — — — — (33.5) (33.5)
Stock-based compensation expense — — 13.7 — — 13.7
Shares awarded under stock-based compensation plans, net of shares withheld for taxes — — (9.8) — 7.4 (2.4)
BALANCE AT MARCH 31, 2019 102,562,149 1.0 24.7 3,330.3 (570.2) 2,785.8
Net income — — — 100.8 — 100.8
Repurchases of common stock — — — — (11.2) (11.2)
Stock-based compensation expense — — 4.9 — — 4.9
Shares awarded under stock-based compensation plans, net of shares withheld for taxes — — (4.0) — 6.6 2.6
BALANCE AT JUNE 30, 2019 102,562,149 1.0 25.6 3,431.1 (574.8) 2,882.9
Net income — — — 99.5 — 99.5
Stock-based compensation expense — — 9.5 — — 9.5
Shares awarded under stock-based compensation plans, net of shares withheld for taxes — — (1.0) — 5.8 4.8
BALANCE AT SEPTEMBER 30, 2019 102,562,149 $ 1.0 $ 34.1 $ 3,530.6 $ (569.0) $ 2,996.7


	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.

AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)


		Nine Months Ended							Six Months Ended
		September 30,							June 30,
		2020		2019			2021		2020
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:	CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:					CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income	Net income	$	230.1	$	292.3	Net income	$	624.2	$	47.5
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations	Loss from discontinued operations	0.2		0.8		Loss from discontinued operations	0.2		0.2
Depreciation and amortization	Depreciation and amortization	149.0		133.7		Depreciation and amortization	95.8		97.2
Amortization of debt issuance costs and accretion of debt discounts	Amortization of debt issuance costs and accretion of debt discounts	3.5		3.9		Amortization of debt issuance costs and accretion of debt discounts	2.2		2.3
Stock-based compensation expense	Stock-based compensation expense	22.9		28.1		Stock-based compensation expense	27.3		15.7
Deferred income tax provision (benefit)		(25.0)		36.8
Deferred income tax benefit						Deferred income tax benefit	(20.5)		(17.1)
Net gain related to business/property dispositions	Net gain related to business/property dispositions	(2.4)		(19.1)		Net gain related to business/property dispositions	(2.4)		(1.5)
Goodwill impairment	Goodwill impairment	318.3		0		Goodwill impairment	0		318.3
Franchise rights impairment	Franchise rights impairment	57.5		9.6		Franchise rights impairment	0		57.5
Non-cash impairment charges	Non-cash impairment charges	11.4		2.2		Non-cash impairment charges	1.7		8.6
Unrealized gain on equity investment		(212.7)		0
Gain on equity investments						Gain on equity investments	(10.9)		(214.7)
Other	Other	(4.0)		(4.1)		Other	(8.7)		3.8
(Increase) decrease, net of effects from business acquisitions and divestitures:	(Increase) decrease, net of effects from business acquisitions and divestitures:					(Increase) decrease, net of effects from business acquisitions and divestitures:
Receivables	Receivables	232.7		143.6		Receivables	71.7		244.6
Inventory	Inventory	827.4		319.1		Inventory	849.9		873.3
Other assets	Other assets	81.6		34.1		Other assets	18.6		75.1
Increase (decrease), net of effects from business acquisitions and divestitures:	Increase (decrease), net of effects from business acquisitions and divestitures:					Increase (decrease), net of effects from business acquisitions and divestitures:
Vehicle floorplan payable - trade, net		(661.8)		(288.2)
Vehicle floorplan payable - trade						Vehicle floorplan payable - trade	(880.6)		(621.5)
Accounts payable	Accounts payable	57.5		(37.0)		Accounts payable	60.2		(25.5)
Other liabilities	Other liabilities	78.1		9.7		Other liabilities	101.8		30.5
Net cash provided by continuing operations	Net cash provided by continuing operations	1,164.3		665.5		Net cash provided by continuing operations	930.5		894.3
Net cash provided by discontinued operations		0		0
Net cash used in discontinued operations						Net cash used in discontinued operations	(0.2)		0
Net cash provided by operating activities	Net cash provided by operating activities	1,164.3		665.5		Net cash provided by operating activities	930.3		894.3
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:	CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:					CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property and equipment	Purchases of property and equipment	(113.1)		(186.3)		Purchases of property and equipment	(116.2)		(75.3)

Proceeds from assets held for sale		8.2		6.5

Insurance recoveries on property and equipment	Insurance recoveries on property and equipment	1.9		3.3		Insurance recoveries on property and equipment	0		1.5
Cash received from business divestitures, net of cash relinquished	Cash received from business divestitures, net of cash relinquished	2.2		67.2		Cash received from business divestitures, net of cash relinquished	4.3		0
Cash used in business acquisitions, net of cash acquired	Cash used in business acquisitions, net of cash acquired	(0.4)		(4.7)		Cash used in business acquisitions, net of cash acquired	0		(0.4)
Investment in equity security		(50.0)		0
Proceeds from the sale of equity securities						Proceeds from the sale of equity securities	109.4		0
Investment in equity securities						Investment in equity securities	(3.3)		(50.0)
Other	Other	(0.4)		0.5		Other	(2.7)		(0.5)
Net cash used in continuing operations	Net cash used in continuing operations	(151.6)		(113.5)		Net cash used in continuing operations	(8.5)		(124.7)
Net cash used in discontinued operations	Net cash used in discontinued operations	0		0		Net cash used in discontinued operations	0		0
Net cash used in investing activities	Net cash used in investing activities	(151.6)		(113.5)		Net cash used in investing activities	(8.5)		(124.7)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Continued)


		Nine Months Ended							Six Months Ended
		September 30,							June 30,
		2020		2019			2021		2020
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:	CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:					CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Repurchases of common stock	Repurchases of common stock	(80.0)		(44.7)		Repurchases of common stock	(1,021.1)		(80.0)
Proceeds from 4.75% Senior Notes due 2030	Proceeds from 4.75% Senior Notes due 2030	497.4		0		Proceeds from 4.75% Senior Notes due 2030	0		497.4
Payment of 3.35% Senior Notes due 2021						Payment of 3.35% Senior Notes due 2021	(300.0)		0
Payment of 5.5% Senior Notes due 2020	Payment of 5.5% Senior Notes due 2020	(350.0)		0		Payment of 5.5% Senior Notes due 2020	0		(350.0)
Proceeds from revolving credit facility	Proceeds from revolving credit facility	1,110.0		0		Proceeds from revolving credit facility	0		1,110.0
Payments of revolving credit facility	Payments of revolving credit facility	(1,110.0)		0		Payments of revolving credit facility	0		(1,110.0)
Net payments of commercial paper		(170.0)		(330.0)
Net proceeds from (payments of) commercial paper						Net proceeds from (payments of) commercial paper	200.0		(170.0)
Payment of debt issuance costs	Payment of debt issuance costs	(11.0)		0		Payment of debt issuance costs	0		(10.5)
Net payments of vehicle floorplan payable - non-trade	Net payments of vehicle floorplan payable - non-trade	(609.7)		(180.0)		Net payments of vehicle floorplan payable - non-trade	(316.9)		(431.4)
Payments of other debt obligations	Payments of other debt obligations	(4.6)		(6.2)		Payments of other debt obligations	(5.6)		(3.1)
Proceeds from the exercise of stock options	Proceeds from the exercise of stock options	31.5		8.0		Proceeds from the exercise of stock options	28.9		1.0
Payments of tax withholdings for stock-based awards	Payments of tax withholdings for stock-based awards	(8.2)		(3.0)		Payments of tax withholdings for stock-based awards	(17.1)		(8.1)

Net cash used in continuing operations	Net cash used in continuing operations	(704.6)		(555.9)		Net cash used in continuing operations	(1,431.8)		(554.7)
Net cash used in discontinued operations	Net cash used in discontinued operations	0		0		Net cash used in discontinued operations	0		0
Net cash used in financing activities	Net cash used in financing activities	(704.6)		(555.9)		Net cash used in financing activities	(1,431.8)		(554.7)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	308.1		(3.9)		INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(510.0)		214.9
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at beginning of period	CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at beginning of period	42.5		49.4		CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at beginning of period	569.7		42.5
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at end of period	CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at end of period	$	350.6	$	45.5	CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at end of period	$	59.7	$	257.4

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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 ~~September~~June 30, ~~2020,~~2021, we owned and operated ~~315~~312 new vehicle franchises from ~~230~~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 ~~89%~~90% of the new vehicles that we sold during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, ~~FCA US,~~ Mercedes-Benz, Stellantis (formerly FCA), BMW, and Volkswagen (including Audi and Porsche). As of ~~September~~June 30, ~~2020,~~2021, we also owned and operated 7872 AutoNation-branded collision centers, 56 AutoNation USA used vehicle stores, 4 automotive auction operations, and 163 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, ~~long-lived asset, and~~ indefinite-lived intangible asset, ~~valuation;~~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 ~~effective~~income tax ~~rate;~~expense; valuation of deferred income taxes and income tax contingencies; the allowance for expected credit losses; and measurement of performance-based compensation costs.

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 September 30, 2020																			Three Months Ended June 30, 2021
		Domestic		Import		Premium Luxury		Corporate and other⁽¹⁾		Total			Domestic		Import		Premium Luxury		Corporate and other(1)		Total
Major Goods/Service Lines	Major Goods/Service Lines											Major Goods/Service Lines
New vehicle	New vehicle	$	923.4	$	887.7	$	937.3	$	0	$	2,748.4	New vehicle	$	991.3	$	1,184.2	$	1,252.8	$	0	$	3,428.3
Used vehicle	Used vehicle	478.0		415.0		576.7		47.2		1,516.9		Used vehicle	749.1		604.5		788.8		80.5		2,222.9
Parts and service	Parts and service	233.2		220.4		278.4		120.8		852.8		Parts and service	257.9		248.5		317.6		126.8		950.8
Finance and insurance, net	Finance and insurance, net	97.8		95.2		77.5		10.7		281.2		Finance and insurance, net	125.8		133.2		108.0		2.0		369.0
Other	Other	2.1		3.2		0.1		0.2		5.6		Other	0.7		4.6		1.3		0.8		7.4
		$	1,734.5	$	1,621.5	$	1,870.0	$	178.9	$	5,404.9		$	2,124.8	$	2,175.0	$	2,468.5	$	210.1	$	6,978.4

Timing of Revenue Recognition	Timing of Revenue Recognition											Timing of Revenue Recognition
Goods and services transferred at a point in time	Goods and services transferred at a point in time	$	1,563.4	$	1,443.2	$	1,633.6	$	111.3	$	4,751.5	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⁾	Goods and services transferred over time⁽²⁾	171.1		178.3		236.4		67.6		653.4		Goods and services transferred over time(2)	180.6		190.3		264.0		81.1		716.0
		$	1,734.5	$	1,621.5	$	1,870.0	$	178.9	$	5,404.9		$	2,124.8	$	2,175.0	$	2,468.5	$	210.1	$	6,978.4

Three Months Ended September 30, 2019
Domestic Import Premium Luxury
Corporate and other⁽¹⁾
Total
Major Goods/Service Lines
New vehicle $ 925.4 $ 1,003.8 $ 945.6 $ 0 $ 2,874.8
Used vehicle 456.6 386.4 519.7 40.2 1,402.9
Parts and service 244.7 226.1 283.8 148.0 902.6
Finance and insurance, net 95.1 99.9 70.0 1.2 266.2
Other 6.8 6.3 1.4 0.2 14.7
$ 1,728.6 $ 1,722.5 $ 1,820.5 $ 189.6 $ 5,461.2
Timing of Revenue Recognition
Goods and services transferred at a point in time $ 1,547.1 $ 1,543.1 $ 1,579.0 $ 99.4 $ 4,768.6
Goods and services transferred over time⁽²⁾
181.5 179.4 241.5 90.2 692.6
$ 1,728.6 $ 1,722.5 $ 1,820.5 $ 189.6 $ 5,461.2


	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	$	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		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

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)


		Nine Months Ended September 30, 2020																			Six Months Ended June 30, 2021
		Domestic		Import		Premium Luxury		Corporate and other⁽¹⁾		Total			Domestic		Import		Premium Luxury		Corporate and other(1)		Total
Major Goods/Service Lines	Major Goods/Service Lines											Major Goods/Service Lines
New vehicle	New vehicle	$	2,424.0	$	2,334.2	$	2,533.4	$	0	$	7,291.6	New vehicle	$	1,926.7	$	2,142.2	$	2,341.7	$	0	$	6,410.6
Used vehicle	Used vehicle	1,319.4		1,105.3		1,534.3		131.1		4,090.1		Used vehicle	1,312.8		1,089.2		1,431.1		138.9		3,972.0
Parts and service	Parts and service	662.1		598.3		779.0		379.6		2,419.0		Parts and service	492.0		462.6		602.8		244.4		1,801.8
Finance and insurance, net	Finance and insurance, net	268.9		261.6		204.8		28.1		763.4		Finance and insurance, net	235.1		242.3		194.8		9.8		682.0
Other	Other	29.6		9.5		0.1		1.6		40.8		Other	4.9		8.3		1.6		1.0		15.8
		$	4,704.0	$	4,308.9	$	5,051.6	$	540.4	$	14,604.9		$	3,971.5	$	3,944.6	$	4,572.0	$	394.1	$	12,882.2

Timing of Revenue Recognition	Timing of Revenue Recognition											Timing of Revenue Recognition
Goods and services transferred at a point in time	Goods and services transferred at a point in time	$	4,218.0	$	3,830.7	$	4,387.4	$	318.0	$	12,754.1	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⁾	Goods and services transferred over time⁽²⁾	486.0		478.2		664.2		222.4		1,850.8		Goods and services transferred over time(2)	345.8		355.8		503.9		157.8		1,363.3
		$	4,704.0	$	4,308.9	$	5,051.6	$	540.4	$	14,604.9		$	3,971.5	$	3,944.6	$	4,572.0	$	394.1	$	12,882.2


		Nine Months Ended September 30, 2019																			Six Months Ended June 30, 2020
		Domestic		Import		Premium Luxury		Corporate and other⁽¹⁾		Total			Domestic		Import		Premium Luxury		Corporate and other(1)		Total
Major Goods/Service Lines	Major Goods/Service Lines											Major Goods/Service Lines
New vehicle	New vehicle	$	2,600.9	$	2,740.1	$	2,800.1	$	0	$	8,141.1	New vehicle	$	1,500.6	$	1,446.5	$	1,596.1	$	0	$	4,543.2
Used vehicle	Used vehicle	1,347.0		1,143.9		1,524.2		106.8		4,121.9		Used vehicle	841.4		690.3		957.6		83.9		2,573.2
Parts and service	Parts and service	722.2		675.5		847.7		435.4		2,680.8		Parts and service	428.9		377.9		500.6		258.8		1,566.2
Finance and insurance, net	Finance and insurance, net	265.3		275.8		200.0		16.8		757.9		Finance and insurance, net	171.1		166.4		127.3		17.4		482.2
Other	Other	69.3		10.6		3.5		1.7		85.1		Other	27.5		6.3		0		1.4		35.2
		$	5,004.7	$	4,845.9	$	5,375.5	$	560.7	$	15,786.8		$	2,969.5	$	2,687.4	$	3,181.6	$	361.5	$	9,200.0

Timing of Revenue Recognition	Timing of Revenue Recognition											Timing of Revenue Recognition
Goods and services transferred at a point in time	Goods and services transferred at a point in time	$	4,473.6	$	4,313.3	$	4,654.0	$	290.8	$	13,731.7	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⁾	Goods and services transferred over time⁽²⁾	531.1		532.6		721.5		269.9		2,055.1		Goods and services transferred over time(2)	314.9		299.9		427.8		154.8		1,197.4
		$	5,004.7	$	4,845.9	$	5,375.5	$	560.7	$	15,786.8		$	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, auction operations, AutoNation USA used vehicle stores, and parts distribution centers.
(1) “Corporate and other” is comprised of our other businesses, including collision centers, AutoNation USA used vehicle stores, auction operations, and parts distribution centers.												(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.	⁽²⁾ Represents revenue recognized during the period for automotive repair and maintenance services.																					(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~~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.

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 $ 87.2 $ 31.8 $ 42.0 $ 13.4


	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 ~~maintenance~~ contracts. ~~Performance obligations are satisfied, and revenue is recognized, for VCP maintenance contracts as each underlying service of the multi-year contract is completed during the contract term.~~

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:


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Receivables from contracts with customers, net	Receivables from contracts with customers, net	$	477.2	$	662.0	Receivables from contracts with customers, net	$	572.1	$	595.0
Contract Asset (Current)	Contract Asset (Current)	$	26.1	$	26.7	Contract Asset (Current)	$	29.0	$	25.7
Contract Asset (Long-Term)	Contract Asset (Long-Term)	$	6.8	$	7.0	Contract Asset (Long-Term)	$	6.8	$	10.2
Contract Liability (Current)	Contract Liability (Current)	$	32.1	$	32.6	Contract Liability (Current)	$	33.1	$	32.5
Contract Liability (Long-Term)	Contract Liability (Long-Term)	$	55.4	$	57.7	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 September 30,						Nine Months Ended September 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Amounts included in contract liability at the beginning of the period	Amounts included in contract liability at the beginning of the period	$	5.9	$	7.4	$	24.7	$	28.9	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	Performance obligations satisfied in previous periods	$	9.9	$	2.0	$	13.8	$	8.8	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.

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Other significant changes include contract assets reclassified to receivables of $24.4 million for the nine months ended September 30, 2020, and $27.5 million for the nine months ended September 30, 2019.

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						Nine Months Ended							Three Months Ended				Six Months Ended
		September 30,						September 30,							June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net income from continuing operations	Net income from continuing operations	$	182.6	$	100.0	$	230.3	$	293.1	Net income from continuing operations	$	384.9	$	279.9	$	624.4	$	47.7
Loss from discontinued operations, net of income taxes	Loss from discontinued operations, net of income taxes	0		(0.5)		(0.2)		(0.8)		Loss from discontinued operations, net of income taxes	(0.1)		(0.1)		(0.2)		(0.2)
Net income	Net income	$	182.6	$	99.5	$	230.1	$	292.3	Net income	$	384.8	$	279.8	$	624.2	$	47.5

Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	88.3		89.9		88.8		90.1		Basic weighted average common shares outstanding	78.9		87.9		81.0		89.0
Dilutive effect of stock options and unvested RSUs	Dilutive effect of stock options and unvested RSUs	0.6		0.5		0.2		0.3		Dilutive effect of stock options and unvested RSUs	0.8		0.2		0.8		0
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	88.9		90.4		89.0		90.4		Diluted weighted average common shares outstanding	79.7		88.1		81.8		89.0

Basic EPS amounts⁽¹⁾:	Basic EPS amounts⁽¹⁾:									Basic EPS amounts(1):
Continuing operations	Continuing operations	$	2.07	$	1.11	$	2.59	$	3.25	Continuing operations	$	4.88	$	3.18	$	7.71	$	0.54
Discontinued operations	Discontinued operations	$	0	$	(0.01)	$	0	$	(0.01)	Discontinued operations	$	0	$	0	$	0	$	0
Net income	Net income	$	2.07	$	1.11	$	2.59	$	3.24	Net income	$	4.88	$	3.18	$	7.71	$	0.53

Diluted EPS amounts⁽¹⁾:	Diluted EPS amounts⁽¹⁾:									Diluted EPS amounts(1):
Continuing operations	Continuing operations	$	2.05	$	1.11	$	2.59	$	3.24	Continuing operations	$	4.83	$	3.18	$	7.63	$	0.54
Discontinued operations	Discontinued operations	$	0	$	(0.01)	$	0	$	(0.01)	Discontinued operations	$	0	$	0	$	0	$	0
Net income	Net income	$	2.05	$	1.10	$	2.59	$	3.23	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.	⁽¹⁾ EPS amounts are calculated discretely and, therefore, may not add up to the total due to rounding.																	(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 Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Anti-dilutive equity instruments excluded from the computation of diluted EPS 1.4 2.2 2.3 2.5


	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	0	2.4	0	2.7

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:


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Contracts-in-transit and vehicle receivables	Contracts-in-transit and vehicle receivables	$	338.0	$	506.0	Contracts-in-transit and vehicle receivables	$	397.9	$	445.8
Trade receivables	Trade receivables	128.5		136.4		Trade receivables	160.4		138.0
Manufacturer receivables	Manufacturer receivables	181.6		234.5		Manufacturer receivables	161.9		210.0
Income taxes receivable (see Note 8)		0		1.5

Other	Other	38.1		38.8		Other	57.1		55.1
		686.2		917.2			777.3		848.9
Less: allowances for expected credit losses	Less: allowances for expected credit losses	(3.7)		(0.5)		Less: allowances for expected credit losses	(3.8)		(3.7)
Receivables, net	Receivables, net	$	682.5	$	916.7	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 ~~that have been delivered or~~ 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:


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
New vehicles	New vehicles	$	1,634.9	$	2,490.8	New vehicles	$	637.5	$	1,761.9
Used vehicles	Used vehicles	658.5		570.0		Used vehicles	923.0		648.4
Parts, accessories, and other	Parts, accessories, and other	189.1		245.0		Parts, accessories, and other	195.7		188.2
Inventory	Inventory	$	2,482.5	$	3,305.8	Inventory	$	1,756.2	$	2,598.5

The components of vehicle floorplan payable are as follows:


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Vehicle floorplan payable - trade	Vehicle floorplan payable - trade	$	1,467.6	$	2,120.6	Vehicle floorplan payable - trade	$	669.5	$	1,541.7
Vehicle floorplan payable - non-trade	Vehicle floorplan payable - non-trade	841.0		1,455.2		Vehicle floorplan payable - non-trade	901.8		1,218.2
Vehicle floorplan payable	Vehicle floorplan payable	$	2,308.6	$	3,575.8	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.

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Our new vehicle floorplan facilities utilize LIBOR-based interest rates, which averaged ~~2.0%~~1.7% for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, and ~~3.8%~~2.3% for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. At ~~September~~June 30, ~~2020,~~2021, the aggregate capacity under our new vehicle floorplan facilities to finance our new vehicle inventory was approximately ~~$4.8~~$4.7 billion, of which ~~$2.1~~$1.0 billion had been borrowed.

Our used vehicle floorplan facilities utilize LIBOR-based interest rates, which averaged ~~2.4%~~1.8% for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, and ~~3.8%~~2.6% for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. At ~~September~~June 30, ~~2020,~~2021, the aggregate capacity under our used vehicle floorplan facilities with various lenders to finance a portion of our used vehicle inventory was ~~$482.0~~$562.0 million, of which ~~$193.9~~$537.1 million had been borrowed. The remaining borrowing capacity of ~~$288.1~~$24.9 million was limited to ~~$251.1~~$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:


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Goodwill	Goodwill	$	1,186.5	$	1,501.9	Goodwill	$	1,187.0	$	1,185.0

Franchise rights - indefinite-lived	Franchise rights - indefinite-lived	$	509.0	$	566.5	Franchise rights - indefinite-lived	$	509.0	$	509.0
Other intangibles	Other intangibles	21.2		23.4		Other intangibles	19.4		19.6
		530.2		589.9			528.4		528.6
Less: accumulated amortization	Less: accumulated amortization	(8.4)		(8.3)		Less: accumulated amortization	(7.4)		(7.1)
Other intangible assets, net	Other intangible assets, net	$	521.8	$	581.6	Other intangible assets, net	$	521.0	$	521.5

Goodwill and Other Intangible Assets

Goodwill for our reporting units isand 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 ~~have occurred.~~exist.

During the first quarter of 2020, our stock price, along with the U.S. stock market in general, was adversely impacted by the market reaction to the novel coronavirus disease 2019 (“COVID-19”) pandemic. In light of the uncertainty surrounding the COVID-19 pandemic and the decrease in our market capitalization as of March 31, 2020, we concluded that a triggering event had occurred potentially indicating that the fair values of our reporting units were less than their carrying values as of March 31, 2020. Therefore, we performed quantitative goodwill impairment tests for each of our reporting units as of March 31, 2020. As a result of these impairment tests, during the three months ended March 31, 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. The non-cash impairment charges are reflected as Goodwill Impairment in the accompanying Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2020. See Note 11 of the Notes to Unaudited Condensed Consolidated Financial Statements for information about our quantitative goodwill impairment test.

~~For our April 30, 2020 annual impairment test,~~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 0 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	$	0	$	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	0		0
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

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

~~Goodwill allocated to our reporting units and changes in the carrying amount of goodwill for the nine months ended September 30, 2020, were as follows:~~

Domestic Import Premium
Luxury Collision Centers Parts Centers Consolidated
Goodwill at January 1, 2020 ⁽¹⁾
$ 227.3 $ 498.9 $ 714.9 $ 41.7 $ 19.1 $ 1,501.9
Acquisitions, dispositions, and other adjustments, net ⁽²⁾
(0.1) 3.2 (0.3) (0.1) 0.2 2.9
Impairment 0 0 (257.4) (41.6) (19.3) (318.3)
Goodwill at September 30, 2020 ⁽¹⁾⁽³⁾
$ 227.2 $ 502.1 $ 457.2 $ 0 $ 0 $ 1,186.5

⁽¹⁾ Net of accumulated impairment losses of $1.47 billion associated with our single reporting unit (prior to September 30, 2008, our reporting unit structure was comprised of a single reporting unit) and $140.0 million associated with our Domestic reporting unit, both of which were recorded during the year ended December 31, 2008.

⁽²⁾ ~~Includes amounts reclassified to and from held for sale and related adjustments, which are presented in Other Current Assets in our Unaudited Condensed Consolidated Balance Sheets.~~

⁽³⁾ Net of accumulated impairment losses of $257.4 million associated with our Premium Luxury reporting unit, $41.6 million associated with our Collision Centers reporting unit, and $19.3 million associated with our Parts Centers reporting unit, each of which were recorded during the three months ended March 31, 2020.

~~Other Intangible Assets~~

During the first quarter of 2020, we concluded that, as a result of the impacts from the COVID-19 pandemic, a triggering event had occurred that indicated the fair values of our franchise rights may have been less than their carrying values as of March 31, 2020. We performed quantitative impairment tests as of March 31, 2020, and as a result, we identified 8 stores with franchise rights carrying values that exceeded their estimated fair values, and we recorded non-cash franchise rights impairment charges of $57.5 million. The non-cash impairment charges are reflected as Franchise Rights Impairment in the accompanying Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2020.

For our April 30, 2020 annual impairment test, we elected to perform quantitative franchise rights impairment tests, and 0 additional impairment charges resulted from these quantitative tests. See Note 11 of the Notes to Unaudited Condensed Consolidated Financial Statements for information about our quantitative franchise rights impairment test.

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

7.~~LONG-TERM DEBT AND COMMERCIAL PAPER~~

~~Long-term debt consists of the following:~~

Debt Description Maturity Date Interest Payable September 30,
2020 December 31,
2019
5.5% Senior Notes February 1, 2020 February 1 and August 1 $ 0 $ 350.0
3.35% Senior Notes January 15, 2021 January 15 and July 15 300.0 300.0
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 0
Revolving credit facility March 26, 2025 Monthly 0 0
Finance leases and other debt Various dates through 2039 Monthly 105.3 93.9
2,105.3 1,943.9
Less: unamortized debt discounts and debt issuance costs (15.6) (9.8)
Less: current maturities (307.7) (355.6)
Long-term debt, net of current maturities $ 1,782.0 $ 1,578.5

~~Debt Refinancing Transaction~~

On March 26, 2020, we amended and restated our existing unsecured credit agreement to, among other things, (1) provide for lower commitment fees and loan margins as set forth in the amended and restated credit agreement, (2) extend the maturity date to March 26, 2025, and (3) provide for customary LIBOR replacement provisions.

Senior Unsecured Notes and Credit Agreement

~~On May 21, 2020, we issued $500.0 million aggregate principal amount of 4.75% Senior Notes due 2030, which were sold at 99.479% of the aggregate principal amount.~~ In ~~February 2020,~~January 2021, we repaid the outstanding ~~$350.0~~$300.0 million of ~~5.5% Senior Notes due 2020. Our~~ 3.35% Senior Notes due ~~2021 will mature on January 15, 2021, and were, therefore, reclassified to current maturities during the first quarter of 2020.~~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 ~~September~~June 30, ~~2020,~~2021, we had 0 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 ~~September~~June 30, ~~2020,~~2021, leaving a borrowing capacity under the revolving credit facility of $1.8 billion at ~~September~~June 30, ~~2020.~~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 ~~the~~ 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.

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

Other Long-Term Debt

At ~~September~~June 30, ~~2020,~~2021, we had finance leases and other debt obligations of ~~$105.3~~$111.1 million, which are due at various dates through ~~2039.~~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 ~~September~~June 30, ~~2020,~~2021, we had ~~0 commercial paper notes outstanding. At December 31, 2019, we had $170.0~~$200.0 million of commercial paper notes outstanding with a weighted-average annual interest rate of ~~2.13%~~0.25% and a weighted-average remaining term of ~~12 days.~~1 day. We had 0 commercial paper notes outstanding at December 31, 2020.

8.INCOME TAXES

Income taxes payable included in Other Current Liabilities totaled ~~$25.2~~$47.3 million at ~~September~~June 30, ~~2020. Income taxes receivable included in Receivables, net totaled $1.5~~2021, and $13.3 million at December 31, ~~2019.~~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 ~~2017~~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.

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						Nine Months Ended							Three Months Ended				Six Months Ended
		September 30,						September 30,							June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Shares repurchased	Shares repurchased	0		0		2.5		1.3		Shares repurchased	7.5		0		11.3		2.5
Aggregate purchase price	Aggregate purchase price	$	0	$	0	$	80.0	$	44.7	Aggregate purchase price	$	736.1	$	0	$	1,042.2	$	80.0
Average purchase price per share	Average purchase price per share	$	0	$	0	$	31.95	$	35.51	Average purchase price per share	$	98.17	$	0	$	91.94	$	31.95

As of June 30, 2021, $155.5 million remained available for share repurchases under the program. In ~~October 2020,~~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 ~~$500 million.~~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, NaN 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						Nine Months Ended							Three Months Ended				Six Months Ended
		September 30,						September 30,							June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Shares issued	Shares issued	0.6		0.1		0.7		0.2		Shares issued	0.2		0		0.6		0.1
Proceeds from the exercise of stock options	Proceeds from the exercise of stock options	$	30.5	$	4.9	$	31.5	$	8.0	Proceeds from the exercise of stock options	$	7.7	$	0	$	28.9	$	1.0
Average exercise price per share	Average exercise price per share	$	48.86	$	35.61	$	46.37	$	33.70	Average exercise price per share	$	51.10	$	0	$	50.71	$	18.12

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

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			Nine Months Ended				Three Months Ended		Six Months Ended
		September 30,			September 30,				June 30,		June 30,
(In actual number of shares)	(In actual number of shares)	2020	2019	2020	2019	(In actual number of shares)	2021	2020	2021	2020
Shares issued	Shares issued	10,896	2,045	512,917	306,346	Shares issued	7,341	7,340	639,192	502,021
Shares surrendered to AutoNation to satisfy tax withholding obligations	Shares surrendered to AutoNation to satisfy tax withholding obligations	4,288	899	190,888	85,331	Shares surrendered to AutoNation to satisfy tax withholding obligations	1,616	2,260	224,133	186,600

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:


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Cash and cash equivalents	Cash and cash equivalents	$	350.5	$	42.0	Cash and cash equivalents	$	59.5	$	569.6
Restricted cash included in Current Assets		0.1		0.5
Restricted cash included in Other Current Assets						Restricted cash included in Other Current Assets	0.2		0.1
Total cash, cash equivalents, and restricted cash	Total cash, cash equivalents, and restricted cash	$	350.6	$	42.5	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 ~~$8.1~~$12.1 million at ~~September~~June 30, ~~2020,~~2021, and ~~$25.1~~$8.7 million at ~~September~~June 30, ~~2019.~~2020. We had non-cash investing and financing activities related to increases in property and equipment acquired under financing arrangements of ~~$0.9~~$0.8 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020, and $2.8 million during the nine months ended September 30, 2019.~~2020.


		Nine Months Ended September 30,							Six Months Ended June 30,
		2020		2019			2021		2020
Supplemental noncash information on adjustments to right-of-use assets, including right-of-use assets obtained in exchange for new:	Supplemental noncash information on adjustments to right-of-use assets, including right-of-use assets obtained in exchange for new:					Supplemental noncash information on adjustments to right-of-use assets, including right-of-use assets obtained in exchange for new:
Operating lease liabilities	Operating lease liabilities	$	26.4	$	16.0	Operating lease liabilities	$	13.0	$	27.8
Finance lease liabilities	Finance lease liabilities	$	34.0	$	34.0	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 ~~$108.7~~$63.7 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, and ~~$185.3~~$83.5 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. We made income tax payments, net of income tax refunds, of ~~$116.0~~$190.5 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, and ~~$103.2~~$3.2 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~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.

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

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			~~Observable inputs~~Inputs other than ~~Level 1 prices such as~~ quoted prices in active markets for ~~similar~~identical assets ~~or liabilities; quoted market prices in markets that are not active; or model-derived valuations or other inputs~~and liabilities that are observable either directly or ~~can be corroborated by observable market data for substantially the full term of the assets or liabilities~~indirectly

Level 3			Unobservable inputs ~~that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities~~

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

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.

•~~Investment~~Investments in ~~Security with a Readily Determinable Fair Value:~~Equity Securities: ~~Our minority~~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 ~~Vroom Inc. has a~~equity securities consist of equity securities that do not have readily determinable fair ~~value following Vroom’s initial public offering in~~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 ~~2020.~~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 ~~September~~June 30, ~~2020,~~2021, the carrying amount of our ~~Vroom~~ equity ~~investment~~investments was ~~$288.5~~$56.7 million. ~~The fair value~~We have not recorded any impairments or downward adjustments to the carrying amount of ~~this~~our equity ~~investment is based on the quoted price~~investments as of June 30, 2021. Investments in ~~active markets for the identical asset (Level 1). The~~ equity ~~interest is~~securities are reported in Other Assets in the accompanying Unaudited Condensed Consolidated Balance Sheets. ~~We recognized an~~Realized and unrealized ~~loss related to this investment of $2.0 million during the three months ended September 30, 2020,~~gains and ~~an unrealized gain related to this investment of $212.7 million during the nine months ended September 30, 2020, both of which~~losses are reported in Other ~~Non-Operating~~ Income, ~~net in the respective periods~~Net (non-operating) in the Unaudited Condensed Consolidated Statements of Operations and in the “Corporate and other” category of our segment information.

•~~Investments in Security without a Readily Determinable Fair Value:~~ ~~We elected~~The following is information on gains recognized during the six months ended June 30 related to ~~measure our minority~~ equity investment in Waymo, which does not have a readily determinable fair value, using a measurement alternative as permitted by accounting standards, and we recorded the equity interest at its cost of $50.0 million. The equity interest is reported in Other Assets in the accompanying Unaudited Condensed Consolidated Balance Sheets. We have considered all relevant transactions since the date of our investment through September 30, 2020, and we have not recorded any impairments or upward or downward adjustments to the carrying amount of our investment as of September 30, 2020, as there have not been any indications of impairment or observable price changes in orderly transactions for the identical or a similar investment of the same issuer as of such date.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		0
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:


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Carrying value	Carrying value	$	2,089.7	$	1,934.1	Carrying value	$	1,797.3	$	2,101.8
Fair value	Fair value	$	2,306.0	$	2,001.8	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.

1716

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

The following table presents ~~nonfinancial~~ assets measured and recorded at fair value on a nonrecurring basis during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


		2020						2019							2021				2020
Description	Description	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)		Gain/(Loss)		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)		Gain/(Loss)		Description	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)		Gain/(Loss)		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)		Gain/(Loss)
Goodwill	Goodwill	$	457.5	$	(318.3)	$	0	$	0	Goodwill	$	0	$	0	$	457.5	$	(318.3)
Franchise rights and other	Franchise rights and other	$	26.2	$	(59.9)	$	8.9	$	(9.9)	Franchise rights and other	$	0	$	0	$	26.2	$	(59.9)

Equity investment										Equity investment	$	53.4	$	3.4	$	0	$	0
Right-of-use assets	Right-of-use assets	$	5.0	$	(2.0)	$	0.1	$	(0.2)	Right-of-use assets	$	0	$	(0.1)	$	1.4	$	(0.4)
Long-lived assets held and used	Long-lived assets held and used	$	1.8	$	(6.9)	$	0	$	(0.1)	Long-lived assets held and used	$	10.4	$	(1.6)	$	1.8	$	(5.8)
Long-lived assets held for sale:
Continuing operations		$	0	$	0	$	26.1	$	(1.6)
Discontinued operations		0		0		5.4		(0.5)
Total assets held for sale		$	0	$	0	$	31.5	$	(2.1)

Goodwill and Other Intangible Assets

Under accounting standards, we chose to make a qualitative evaluation about the ~~carrying value~~likelihood of ~~a reporting unit~~goodwill impairment for our annual impairment testing as of April 30, 2021, and we determined that it was not more likely than not ~~exceeds its~~that the fair ~~value.~~ 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 0 impairment charges resulted from these quantitative tests.

During the first quarter of 2020, ~~in light~~due to the impact of the ~~uncertainty surrounding the~~ COVID-19 pandemic on our results and the decrease in our market capitalization as of March 31, 2020, we concluded that a triggering event had occurred potentially indicating that the fair values of our reporting units were less than their carrying values as of March 31, 2020. Therefore, we performed quantitative goodwill impairment tests for each of our reporting units as of March 31, 2020. As a result of these impairment tests, during the three months ended March 31, 2020, we recorded ~~non-cash~~ goodwill impairment charges ~~totaling~~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.

For our April 30, 2020 annual impairment test, we chose to make a qualitative evaluation about the likelihood of goodwill impairment, 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.

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. During the first quarter of 2020, we concluded that, as a result of the impacts from the COVID-19 pandemic, a triggering event had occurred that indicated the fair values of our franchise rights may have been less than their carrying values as of March 31, 2020. Therefore, we performed quantitative franchise rights impairment tests as of March 31, 2020. The quantitative impairment test for franchise rights requires the

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

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.

~~As a result of~~During the quantitative impairment tests, we identified 8 stores with franchise rights carrying values that exceeded their estimated fair values, and we recorded non-cash franchise rights impairment charges of $57.5 million during the threesix months ended ~~March 31, 2020. For our April~~June 30, 2020, ~~annual impairment test,~~ we ~~elected to perform quantitative franchise rights impairment tests, and 0 additional impairment charges resulted from these quantitative tests.~~

For our April 30, 2019 annual impairment test, we elected to perform quantitative franchise rights impairment tests, and we recorded non-cash impairment charges of $9.6 million to reduce the carrying values of certain franchise rights to their estimated fair values.

The non-cash impairment charges recorded during the nine months ended September 30, 2020 and 2019, are reflected as Franchise Rights Impairment in the accompanying Unaudited Condensed Consolidated Statements of Operations and in the “Corporate and other” category of our segment information.

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, ~~during the nine months ended September 30, 2020,~~ which are included in Other (Income) Expense,

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 ~~properties~~long-lived assets classified as held for sale, or when an indicator of impairment exists for ~~properties~~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.

~~During the nine months ended September 30, 2020, we recorded~~The non-cash impairment charges of $2.0 million related to our right-of-use assets, of which $1.7 million was recorded during the three months ended September 30, 2020. During the nine months ended September 30, 2019, we recorded non-cash impairment charges of $0.2 million related to our right-of-use assets. We recorded 0 impairment charges related to right-of-use assets ~~during the three months ended September 30, 2019.~~

~~During the nine months ended September 30, 2020, we recorded non-cash impairment charges of $6.9 million related to our~~and long-lived assets held and used of which $1.1 million was recorded during the three months ended September 30, 2020. During the three and nine months ended September 30, 2019, we recorded non-cash impairment charges of $0.1 million related to our long-lived assets held and used.

We recorded 0 impairment charges related to our long-lived assets held for sale during the three and nine months ended September 30, 2020. During the nine months ended September 30, 2019, we recorded non-cash impairment charges of $1.6 million related to our long-lived assets held for sale in continuing operations, of which $0.5 million was recorded during the three months ended September 30, 2019. During the three and nine months ended September 30, 2019, we recorded impairment charges of $0.5 million related to our long-lived assets held for sale in discontinued operations.

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

~~The non-cash impairment charges~~ 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 ~~$21.3~~$81.3 million as of ~~September~~June 30, ~~2020,~~2021, and ~~$40.6~~$25.5 million as of December 31, ~~2019,~~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 ~~$8.0~~$1.1 million as of ~~September~~June 30, ~~2020,~~2021, and $8.0 million as of December 31, ~~2019, primarily~~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~~

Quantitative Information about Level 3 Fair Value Measurements

Description

Fair Value at March 31, 2020

Valuation Technique

Unobservable Input

Range (Average)

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

Franchise rights

24.6

Discounted cash flow

Weighted average cost of capital

8.5

Discount rate

11.1% - 14.3% (12.1%)

Discount rate

11.1% - 14.3% (12.1%)

Long-term revenue growth rate

2.0

Long-term revenue growth rate

2.0

Long-term pretax income margin

0.6% - 2.8% (1.4%)

Long-term pretax income margin

0.6% - 2.8% (1.4%)

Contributory asset charges

4.2% - 12.1% (6.2%)

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

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 ~~September~~June 30, ~~2020~~2021 and ~~2019,~~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.

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

From time to time, primarily in connection with dispositions of automotive stores, our subsidiaries assign or sublet to the 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 ~~$12~~$10 million at ~~September~~June 30, ~~2020.~~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 ~~September~~June 30, ~~2020.~~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 ~~September~~June 30, ~~2020,~~2021, surety bonds, letters of credit, and cash deposits totaled ~~$101.9~~$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 ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, approximately ~~63%~~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 ~~89%~~90% of the new vehicles sold during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, ~~FCA US,~~ 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 ~~$181.6~~$161.9 million at ~~September~~June 30, ~~2020,~~2021, and ~~$234.5~~$210.0 million at December 31, ~~2019.~~2020. Additionally, a large portion of our contracts-in-transit included in Receivables, net, in the accompanying

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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 ~~September~~June 30, ~~2020,~~2021, we do not consider AutoNation to have any significant non-manufacturer concentrations of credit risk.

14.SEGMENT INFORMATION

At ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, we had 3 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 ~~FCA US.~~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, ~~Lexus,~~ 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.

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

“Corporate and other” is comprised of our other businesses, including collision centers, ~~auction operations,~~ AutoNation USA used vehicle stores, auction operations, and parts distribution centers, all of which generate revenues but do not meet the quantitative thresholds for ~~determining~~ 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										Three Months Ended											Three Months Ended				Six Months Ended
		September 30, 2020										September 30, 2019											June 30, 2021				June 30, 2021
		Domestic		Import		Premium Luxury		Domestic		Import		Premium Luxury			Domestic		Import		Premium Luxury		Domestic		Import		Premium Luxury
Revenues from external customers	Revenues from external customers	$	1,734.5	$	1,621.5	$	1,870.0	$	1,728.6	$	1,722.5	$	1,820.5	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⁾	Segment income ⁽¹⁾	$	111.9	$	123.5	$	143.9	$	70.3	$	86.9	$	89.0	Segment income (1)	$	169.0	$	203.7	$	225.7	$	287.5	$	329.6	$	384.2

		Nine Months Ended										Nine Months Ended											Three Months Ended				Six Months Ended
		September 30, 2020										September 30, 2019											June 30, 2020				June 30, 2020
		Domestic		Import		Premium Luxury		Domestic		Import		Premium Luxury			Domestic		Import		Premium Luxury		Domestic		Import		Premium Luxury
Revenues from external customers	Revenues from external customers	$	4,704.0	$	4,308.9	$	5,051.6	$	5,004.7	$	4,845.9	$	5,375.5	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⁾	Segment income ⁽¹⁾	$	248.1	$	277.7	$	313.3	$	192.4	$	240.9	$	268.6	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.	⁽¹⁾ Segment income represents income for each of our reportable segments and is defined as operating income less floorplan interest expense.																									(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 Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Total segment income for reportable segments $ 379.3 $ 246.2 $ 839.1 $ 701.9
Corporate and other (118.7) (85.7) (638.2) (223.5)
Other interest expense (23.6) (26.1) (70.3) (81.6)
Interest income 0.1 0.1 0.3 0.4
Other income, net 6.4 2.6 217.9 4.2
Income from continuing operations before income taxes $ 243.5 $ 137.1 $ 348.8 $ 401.4


	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

2220

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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 ~~expect to incur~~incurred total charges of ~~$43.7~~$36.7 million ~~including $36.5 million incurred during~~in 2020. The following is a rollforward of liability balances for exit or disposal cost obligations associated with the ~~three months ended September 30, 2020, as follows:~~

Cost Associated with Exit Activity Total Costs Expected to be Incurred Costs Incurred
Three Months Ended
September 30, 2020 Statement of Operations Line Item
Inventory valuation adjustment $ 20.6 $ 20.6 Parts and service cost of sales
Contract termination charges 7.3 7.3 Other (income) expense, net (operating)
Other associated closing costs 4.5 0 Selling, general, and administrative expenses
Accelerated depreciation 3.9 2.9 Depreciation and amortization
Accelerated amortization 3.2 2.1 Selling, general, and administrative expenses
Asset impairment charges 3.0 2.8 Other (income) expense, net (operating)
Involuntary termination benefits 1.2 0.8 Selling, general, and administrative expenses
$ 43.7 $ 36.5

~~Charges incurred are reflected as part~~closing of the ~~“Corporate and other” category of our segment information.~~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	0		0		0		0
Costs paid or otherwise settled	(0.2)		(2.4)		(0.7)		(3.3)
Balance at June 30, 2021	$	0	$	0	$	0.1	$	0.1

2321

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 ~~September~~June 30, ~~2020,~~2021, we owned and operated ~~315~~312 new vehicle franchises from ~~230~~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 ~~89%~~90% of the new vehicles that we sold during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, ~~FCA US,~~ Mercedes-Benz, Stellantis (formerly FCA), BMW, and Volkswagen (including Audi and Porsche). As of ~~September~~June 30, ~~2020,~~2021, we also owned and operated 7872 AutoNation-branded collision centers, 56 AutoNation USA used vehicle stores, 4 AutoNation-branded automotive auction operations, and 163 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 ~~September~~June 30, ~~2020,~~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 ~~FCA US.~~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, ~~Lexus,~~ 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 ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, new vehicle sales accounted for ~~approximately~~ 50% of our total revenue and ~~approximately 15%~~22% of our total gross profit. Used vehicle sales accounted for ~~approximately 28%~~31% of our total revenue and ~~approximately 14%~~15% of our total gross profit. Our parts and service ~~and finance and insurance~~ operations, while comprising ~~approximately 22%~~14% of our total revenue, ~~for the nine months ended September 30, 2020,~~ contributed ~~approximately 71%~~35% of our total gross ~~profit for the same period.~~profit. Our finance and insurance sales, while comprising 5% of our total revenue, contributed 29% of our total gross profit.

Market Conditions

In the ~~third~~second quarter of ~~2020,~~2021, U.S. industry retail new vehicle unit sales ~~decreased 5%~~increased 44% as compared to the ~~third~~second quarter of ~~2019. New vehicle~~2020. Vehicle unit ~~volume has been~~sales during the second quarter of 2020 were significantly adversely impacted, particularly in April 2020, by ~~reduced availability of inventory due to inventory shortages from manufacturer plant closures resulting from~~ the COVID-19 ~~pandemic. We expect that new vehicle inventory shortages will continue into~~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. Used vehicle unit volume increased during~~2021, the ~~third quarter of 2020 compared to the same period in the prior year as~~demand for vehicles was strong and exceeded supply. While market demand for new and used vehicles ~~increased~~remains high primarily due ~~in part~~ to ~~increased affordability compared~~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 ~~decreased availability~~supply imbalance has resulted in higher levels of profitability for available new and used vehicles. The ~~tight supply~~reduced levels of new vehicle ~~inventory and increased demand for used vehicles benefited~~availability is currently expected to continue into 2022; however, there is still significant uncertainty as to when new ~~and used~~ vehicle ~~margins in~~availability will improve, as well as duration and/or degree of the ~~third quarter~~higher levels of ~~2020. While vehicle unit volume and parts and service volume continued to improve~~profitability being realized during the third quarter of 2020, a potential resurgence of COVID-19 cases in the United States, and particularly in states where we have a significant presence, could lead to additional governmental orders and other market disrupting impacts that could materially adversely impact our business. Additionally, any adverse economic impacts resulting from the COVID-19 pandemic, including any potential economic recessions or downturns, could materially adversely impact our business in future periods.

this time.

Results of Operations

During the three months ended ~~September~~June 30, ~~2020,~~2021, we had net income from continuing operations of ~~$182.6~~$384.9 million and diluted earnings per share of ~~$2.05,~~$4.83, as compared to net income from continuing operations of ~~$100.0~~$279.9 million and diluted earnings per share of ~~$1.11~~$3.18 during the same period in ~~2019.~~2020.

Our total gross profit increased ~~9.5%~~66.8% during the ~~third~~second quarter of 2021 compared to the second quarter of 2020, ~~compared to the~~ ~~third~~ ~~quarter of 2019,~~ driven ~~primarily~~ by ~~an increase~~increases in new vehicle gross profit of ~~40.6% and an increase in~~168.0%, used vehicle gross profit of ~~59.2%~~73.2%, finance and insurance gross profit of

49.8%, and parts and service gross profit of 38.9%, each as compared to the ~~prior year, which were largely due to increases~~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 ~~the~~ ~~tight~~strong demand and historically low inventory levels due to manufacturer supply ~~of new vehicle inventory~~shortages. Finance and ~~increased demand for used vehicles, respectively. Increases in~~insurance gross profit ~~were partially offset by a decrease~~benefited from the increase in ~~new vehicle~~ unit volume ~~of 11.0%, due~~and an increase in ~~part to the tight supply of new vehicle inventory,~~finance and a ~~decrease in parts~~insurance gross profit PVR. Parts and service gross profit benefited primarily from increases in gross profit from customer-pay service and the preparation of ~~8.3%, primarily~~vehicles for sale due to increased volume, improved margin performance, and higher value repair orders.

~~an inventory valuation adjustment recorded~~SG&A expenses increased largely due to performance-driven increases in ~~connection with the closing of~~compensation expense. With improvements in gross profit and our ~~ACP business and~~ a ~~decrease in parts and service volume as a result of the COVID-19 pandemic.~~

We implemented various actions during the year to mitigate the financial impact of the COVID-19 pandemic, including reducing our advertising expenses by approximately 17% through the third quarter of 2020, as compared to the prior year, significantly reducing our discretionary spending, and postponing nearly $90 million of capital expenditures through the third quarter of 2020. We also adjusted our sales model to furthercontinued focus on ~~digital and store efficiencies, and in June 2020, we restructured our workforce, mostly in our field operations. As a result,~~cost control, SG&A expenses as a percentage of gross profit decreased to ~~66.0%~~56.5% during the three months ended ~~September~~June 30, ~~2020,~~2021, from ~~73.7%~~68.9% in the same period in ~~2019. Throughout the remainder of the year, we plan to stay focused on cost control and remain prudent with our capital expenditures.~~2020.

Net income from continuing operations during the three months ended ~~September~~June 30, ~~2020,~~ ~~was adversely impacted by $27.7 million of~~ ~~after-tax charges incurred in connection with the closure of our aftermarket collision parts (“ACP”) business~~2021 and an 2020, benefited from unrealized after-tax ~~loss~~gains of $2.6 million and $160.5 million, respectively, related to ~~our minority equity investment in Vroom Inc. of $1.5 million due to a change~~changes in the fair value of the underlying ~~security. N~~etsecurities of our minority equity investments. Net income from continuing operations during the three months ended ~~September~~June 30, ~~2019, was adversely impacted by~~2020, also benefited from an after-tax ~~severance and other~~gain related ~~expenses~~to a legal settlement of ~~$10.2 million in connection~~$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 ~~separation of an executive, and benefited from net after-tax gains related to store/property divestitures, net of asset impairments, of $3.9 million.~~

~~Exit or Disposal Cost Obligations~~

On August 17, 2020, we made the decision to close our ACP business, which we expect to be finalized by the end of 2020. The ACP business represented less than 1% of our parts and service gross profit for the nine months ended September 30, 2020. In connection with the closing of the ACP business, we expect to incur total pre-tax charges of $43.7 million, of which $36.5 million was incurred during the three months ended September 30, 2020, with the remainder expected to be incurred primarily in the fourth quarter of 2020. The charges are comprised of inventory valuation adjustments, estimated contract termination charges and other associated closing costs, accelerated depreciation and amortization, asset impairment charges, and involuntary termination benefits. See Note 15 of the Notes to Unaudited Condensed Consolidated Financial Statements for additional information.Company, if earlier.

Strategic Initiatives

We plan to expand our AutoNation USA used vehicle stores ~~by building approximately 50 additional~~and are targeting to have over 130 stores by the end of ~~2025.~~ 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 ~~our~~the initial capital ~~investments~~investment will be approximately $10 million to $11 million for ~~these stores will exceed $500 million in the aggregate.~~each new store on average. The planned ~~roll-out~~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 ~~as a result, our new vehicle inventory balance was net of cumulative write-downs of $0.2 million at September 30, 2020. We~~ had no new vehicle inventory write-downs at June 30, 2021, or at December 31, ~~2019. We continue to actively manage inventory levels in response to impacts from the COVID-19 pandemic.~~

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 ~~$2.4~~$2.5 million at ~~September~~June 30, ~~2020,~~2021, and ~~$3.2~~$3.4 million at December 31, ~~2019.~~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. ~~During the third quarter of 2020, we also recorded an inventory valuation adjustment in connection with the closing of our ACP business.~~ Our parts, accessories, and other inventory balance was net of cumulative write-downs of ~~$35.7~~$6.4 million at ~~September~~June 30, ~~2020,~~2021, and ~~$11.1~~$6.5 million at December 31, ~~2019.~~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.

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.

During the first quarter of 2020, in light of the uncertainty surrounding the COVID-19 pandemic and the decrease in our market capitalization as of March 31, 2020, we concluded that a triggering event had occurred potentially indicating that the fair values of our reporting units were less than their carrying values as of March 31, 2020. Therefore, we performed quantitative goodwill impairment tests for each of our reporting units as of March 31, 2020. As a result of these impairment tests, during the three months ended March 31, 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. The non-cash impairment charges are reflected as Goodwill Impairment in the accompanying Unaudited Condensed Consolidated Statements of Operations. The quantitative goodwill impairment test is dependent on many variables used to determine the fair value of our reporting units. See Note 11 of the Notes to Unaudited Condensed Consolidated Financial Statements for additional information on how the fair values and carrying values of our reporting units are derived for the quantitative goodwill impairment test. This process also requires that we 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.

As a result of the quantitative goodwill impairment tests, the fair values of our Domestic and Import reporting units substantially exceeded their carrying values, goodwill associated with our Premium Luxury reporting unit was partially impaired, and goodwill associated with our Collision Centers and Parts Centers reporting units was fully impaired. Therefore, the most significant impact of a change in the assumptions used in determining our goodwill impairment as of March 31, 2020, was related to our Premium Luxury reporting unit. As noted above, the goodwill impairment testing process requires the estimated aggregate fair values of our reporting units to be reconciled with 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. The COVID-19 pandemic had a significant adverse impact on the U.S. stock market during the first quarter of 2020, and our closing stock price declined significantly as of March 31, 2020. As a result, as of March 31, 2020, our market capitalization and, therefore, the estimated fair values of our reporting units, significantly decreased. As a measure of sensitivity, a 50 basis point increase in the discount rate would have resulted in an increase to the goodwill impairment charge of approximately $100 million. This result and discussion is not intended to address all potential outcomes that could have resulted if different assumptions had been used in determining our goodwill impairment given the number of assumptions used in determining the impairment and the degree of sensitivity to changes in such assumptions in the determination of the fair value of the Company and its assets and liabilities. We would have been in compliance with the financial covenants in our debt agreements even if we had impaired all of the goodwill associated with all of our reporting units as such charges do not factor into the calculations for those covenants.

As of ~~September~~June 30, ~~2020,~~2021, we have $227.2 million of goodwill related to the Domestic reporting unit, ~~$502.1~~$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. During the first quarter of 2020, we concluded that, as a result of the impacts from the COVID-19 pandemic, a triggering event had occurred that indicated the fair values of our franchise rights may have been less than their carrying values as of March 31, 2020. We performed quantitative impairment tests as of March 31, 2020, and as a result, we identified eight stores with franchise rights carrying values that exceeded their estimated fair values, and we recorded non-cash franchise rights impairment charges of $57.5 million during the first quarter of 2020. The non-cash impairment charges are reflected as Franchise Rights Impairment in the accompanying Unaudited Condensed Consolidated Statements of Operations.

~~For our April 30, 2020 annual impairment test, we~~We elected to perform quantitative tests for our annual franchise rights impairment ~~tests,~~testing as of April 30, 2021, and no ~~additional~~ impairment charges resulted from these quantitative tests. We identified seven stores that, while they each had franchise rights fair value in excess of or equal to carrying value, had lower relative performance compared to our total store population. We will continue to monitor these stores, as well as all stores, for events or changes in circumstances that may indicate potential impairment. The remainder of our stores had franchise rights with calculated fair values that substantially exceeded their carrying values. As of September 30, 2020, we had 56 stores with franchise rights totaling $509.0 million.

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, ~~2020, the resulting incremental charge~~2021, no impairment would have ~~been less than $1 million.~~resulted. The effect of a hypothetical 10% decrease in fair value estimates is not intended to provide a sensitivity analysis of every potential outcome.

~~Impact of the COVID-19 Pandemic on Goodwill and Other Intangible Assets~~

Although economic conditions have improved during the third quarter 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. A change in the conditions, circumstances, or strategy, which influence determinations of fair value, including negative or declining cash flows or a decline in actual or planned revenues for our stores for a prolonged period, and, as it relates to goodwill, a significant decrease in our market capitalization, may result in a need to recognize additional goodwill and/or franchise rights impairment charges in the future.

2724

Reported Operating Data

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


($ in millions, except per vehicle data)	($ in millions, except per vehicle data)	Three Months Ended September 30,																				Nine Months Ended September 30,																			($ in millions, except per vehicle data)	Three Months Ended June 30,						Six Months Ended June 30,
				2020			2019			Variance Favorable / (Unfavorable)		% Variance			2020			2019			Variance Favorable / (Unfavorable)		% Variance		($ in millions, except per vehicle data)	2021			2020			Variance Favorable / (Unfavorable)		% Variance			2021			2020				Variance Favorable / (Unfavorable)			% Variance
Revenue:	Revenue:																						Revenue:
New vehicle	New vehicle	$	2,748.4		$	2,874.8		$	(126.4)		(4.4)		$	7,291.6		$	8,141.1		$	(849.5)		(10.4)	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	Retail used vehicle	1,421.0			1,326.5			94.5			7.1		3,845.5			3,895.5			(50.0)			(1.3)	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	Wholesale	95.9			76.4			19.5			25.5		244.6			226.4			18.2			8.0	Wholesale	137.1			62.0			75.1			121.1		242.1			148.7				93.4			62.8
Used vehicle	Used vehicle	1,516.9			1,402.9			114.0			8.1		4,090.1			4,121.9			(31.8)			(0.8)	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	Finance and insurance, net	281.2			266.2			15.0			5.6		763.4			757.9			5.5			0.7	Finance and insurance, net	369.0			246.4			122.6			49.8		682.0			482.2				199.8			41.4
Total variable operations⁽¹⁾	Total variable operations⁽¹⁾	4,546.5			4,543.9			2.6			0.1		12,145.1			13,020.9			(875.8)			(6.7)	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	Parts and service	852.8			902.6			(49.8)			(5.5)		2,419.0			2,680.8			(261.8)			(9.8)	Parts and service	950.8			689.9			260.9			37.8		1,801.8			1,566.2				235.6			15.0
Other	Other	5.6			14.7			(9.1)					40.8			85.1			(44.3)				Other	7.4			10.9			(3.5)					15.8			35.2				(19.4)
Total revenue	Total revenue	$	5,404.9		$	5,461.2		$	(56.3)		(1.0)		$	14,604.9		$	15,786.8		$	(1,181.9)		(7.5)	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:	Gross profit:																						Gross profit:
New vehicle	New vehicle	$	167.2		$	118.9		$	48.3		40.6		$	383.2		$	366.3		$	16.9		4.6	New vehicle	$	320.5		$	119.6		$	200.9		168.0		$	510.5		$	216.0			$	294.5		136.3
Retail used vehicle	Retail used vehicle	128.8			87.6			41.2			47.0		318.1			262.4			55.7			21.2	Retail used vehicle	180.4			105.8			74.6			70.5		305.6			189.3				116.3			61.4
Wholesale	Wholesale	18.1			4.7			13.4					36.8			17.2			19.6				Wholesale	22.3			11.2			11.1					37.3			18.7				18.6
Used vehicle	Used vehicle	146.9			92.3			54.6			59.2		354.9			279.6			75.3			26.9	Used vehicle	202.7			117.0			85.7			73.2		342.9			208.0				134.9			64.9
Finance and insurance	Finance and insurance	281.2			266.2			15.0			5.6		763.4			757.9			5.5			0.7	Finance and insurance	369.0			246.4			122.6			49.8		682.0			482.2				199.8			41.4
Total variable operations⁽¹⁾	Total variable operations⁽¹⁾	595.3			477.4			117.9			24.7		1,501.5			1,403.8			97.7			7.0	Total variable operations(1)	892.2			483.0			409.2			84.7		1,535.4			906.2				629.2			69.4
Parts and service	Parts and service	375.2			409.0			(33.8)			(8.3)		1,075.4			1,219.8			(144.4)			(11.8)	Parts and service	432.5			311.4			121.1			38.9		821.5			700.2				121.3			17.3
Other	Other	1.0			1.0			—					2.8			3.8			(1.0)				Other	1.6			0.6			1.0					2.2			1.8				0.4
Total gross profit	Total gross profit	971.5			887.4			84.1			9.5		2,579.7			2,627.4			(47.7)			(1.8)	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	Selling, general, and administrative expenses	641.4			653.8			12.4			1.9		1,790.0			1,913.8			123.8			6.5	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	Depreciation and amortization	51.8			45.2			(6.6)					149.0			133.7			(15.3)				Depreciation and amortization	47.9			49.1			1.2					95.8			97.2				1.4
Goodwill impairment	Goodwill impairment	—			—			—					318.3			—			(318.3)				Goodwill impairment	—			—			—					—			318.3				318.3
Franchise rights impairment	Franchise rights impairment	—			—			—					57.5			9.6			(47.9)				Franchise rights impairment	—			—			—					—			57.5				57.5
Other (income) expense, net	Other (income) expense, net	6.6			(5.1)			(11.7)					11.1			(17.5)			(28.6)				Other (income) expense, net	(0.7)			(3.4)			(2.7)					(0.6)			4.5				5.1
Operating income		271.7			193.5			78.2			40.4		253.8			587.8			(334.0)			(56.8)
Operating income (loss)																							Operating income (loss)	530.2			201.4			328.8			163.3		867.1			(17.9)				885.0			NM
Non-operating income (expense) items:	Non-operating income (expense) items:																						Non-operating income (expense) items:
Floorplan interest expense	Floorplan interest expense	(11.1)			(33.0)			21.9					(52.9)			(109.4)			56.5				Floorplan interest expense	(6.6)			(16.3)			9.7					(16.0)			(41.8)				25.8
Other interest expense	Other interest expense	(23.6)			(26.1)			2.5					(70.3)			(81.6)			11.3				Other interest expense	(20.9)			(23.2)			2.3					(42.1)			(46.7)				4.6
Interest income		0.1			0.1			—					0.3			0.4			(0.1)
Other income, net	Other income, net	6.4			2.6			3.8					217.9			4.2			213.7				Other income, net	8.9			214.6			(205.7)					19.9			211.7				(191.8)
Income from continuing operations before income taxes	Income from continuing operations before income taxes	$	243.5		$	137.1		$	106.4		77.6		$	348.8		$	401.4		$	(52.6)		(13.1)	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:	Retail vehicle unit sales:																						Retail vehicle unit sales:
New vehicle	New vehicle	65,998			74,190			(8,192)			(11.0)		177,250			208,219			(30,969)			(14.9)	New vehicle	77,164			54,513			22,651			41.6		146,525			111,252				35,273			31.7
Used vehicle	Used vehicle	64,587			63,581			1,006			1.6		179,656			187,091			(7,435)			(4.0)	Used vehicle	80,589			58,920			21,669			36.8		152,369			115,069				37,300			32.4
		130,585			137,771			(7,186)			(5.2)		356,906			395,310			(38,404)			(9.7)		157,753			113,433			44,320			39.1		298,894			226,321				72,573			32.1
Revenue per vehicle retailed:	Revenue per vehicle retailed:																						Revenue per vehicle retailed:
New vehicle	New vehicle	$	41,644		$	38,749		$	2,895		7.5		$	41,137		$	39,099		$	2,038		5.2	New vehicle	$	44,429		$	41,482		$	2,947		7.1		$	43,751		$	40,837			$	2,914		7.1
Used vehicle	Used vehicle	$	22,001		$	20,863		$	1,138		5.5		$	21,405		$	20,821		$	584		2.8	Used vehicle	$	25,882		$	21,427		$	4,455		20.8		$	24,479		$	21,070			$	3,409		16.2
Gross profit per vehicle retailed:	Gross profit per vehicle retailed:																						Gross profit per vehicle retailed:
New vehicle	New vehicle	$	2,533		$	1,603		$	930		58.0		$	2,162		$	1,759		$	403		22.9	New vehicle	$	4,153		$	2,194		$	1,959		89.3		$	3,484		$	1,942			$	1,542		79.4
Used vehicle	Used vehicle	$	1,994		$	1,378		$	616		44.7		$	1,771		$	1,403		$	368		26.2	Used vehicle	$	2,239		$	1,796		$	443		24.7		$	2,006		$	1,645			$	361		21.9
Finance and insurance	Finance and insurance	$	2,153		$	1,932		$	221		11.4		$	2,139		$	1,917		$	222		11.6	Finance and insurance	$	2,339		$	2,172		$	167		7.7		$	2,282		$	2,131			$	151		7.1
Total variable operations⁽²⁾	Total variable operations⁽²⁾	$	4,420		$	3,431		$	989		28.8		$	4,104		$	3,508		$	596		17.0	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.	⁽¹⁾Total variable operations includes new vehicle, used vehicle (retail and wholesale), and finance and insurance results.																																													(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.	⁽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.																																													(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.

2825


		Three Months Ended			Nine Months Ended				Three Months Ended		Six Months Ended
		September 30,			September 30,				June 30,		June 30,
		2020 (%)	2019 (%)	2020 (%)	2019 (%)		2021 (%)	2020 (%)	2021 (%)	2020 (%)
Revenue mix percentages:	Revenue mix percentages:					Revenue mix percentages:
New vehicle	New vehicle	50.9	52.6	49.9	51.6	New vehicle	49.1	49.9	49.8	49.4
Used vehicle	Used vehicle	28.1	25.7	28.0	26.1	Used vehicle	31.9	29.2	30.8	28.0
Parts and service	Parts and service	15.8	16.5	16.6	17.0	Parts and service	13.6	15.2	14.0	17.0
Finance and insurance, net	Finance and insurance, net	5.2	4.9	5.2	4.8	Finance and insurance, net	5.3	5.4	5.3	5.2
Other	Other	—	0.3	0.3	0.5	Other	0.1	0.3	0.1	0.4
Total	Total	100.0	100.0	100.0	100.0	Total	100.0	100.0	100.0	100.0
Gross profit mix percentages:	Gross profit mix percentages:					Gross profit mix percentages:
New vehicle	New vehicle	17.2	13.4	14.9	13.9	New vehicle	24.2	15.0	21.6	13.4
Used vehicle	Used vehicle	15.1	10.4	13.8	10.6	Used vehicle	15.3	14.7	14.5	12.9
Parts and service	Parts and service	38.6	46.1	41.7	46.4	Parts and service	32.6	39.2	34.8	43.5
Finance and insurance	Finance and insurance	28.9	30.0	29.6	28.8	Finance and insurance	27.8	31.0	28.9	30.0
Other	Other	0.2	0.1	—	0.3	Other	0.1	0.1	0.2	0.2
Total	Total	100.0	100.0	100.0	100.0	Total	100.0	100.0	100.0	100.0
Operating items as a percentage of revenue:	Operating items as a percentage of revenue:					Operating items as a percentage of revenue:
Gross profit:	Gross profit:					Gross profit:
New vehicle	New vehicle	6.1	4.1	5.3	4.5	New vehicle	9.3	5.3	8.0	4.8
Used vehicle - retail	Used vehicle - retail	9.1	6.6	8.3	6.7	Used vehicle - retail	8.6	8.4	8.2	7.8
Parts and service	Parts and service	44.0	45.3	44.5	45.5	Parts and service	45.5	45.1	45.6	44.7
Total	Total	18.0	16.2	17.7	16.6	Total	19.0	17.5	18.3	17.5
Selling, general, and administrative expenses	Selling, general, and administrative expenses	11.9	12.0	12.3	12.1	Selling, general, and administrative expenses	10.7	12.1	10.8	12.5
Operating income		5.0	3.5	1.7	3.7
Operating income (loss)						Operating income (loss)	7.6	4.4	6.7	NM
Other operating items as a percentage of total gross profit:	Other operating items as a percentage of total gross profit:					Other operating items as a percentage of total gross profit:
Selling, general, and administrative expenses	Selling, general, and administrative expenses	66.0	73.7	69.4	72.8	Selling, general, and administrative expenses	56.5	68.9	59.2	71.4
Operating income		28.0	21.8	9.8	22.4
Operating income (loss)						Operating income (loss)	40.0	25.3	36.8	NM

		September 30,						June 30,
		2020	2019				2021	2020
Inventory days supply:	Inventory days supply:					Inventory days supply:
New vehicle (industry standard of selling days)	New vehicle (industry standard of selling days)	43 days	55 days			New vehicle (industry standard of selling days)	14 days	49 days
Used vehicle (trailing calendar month days)	Used vehicle (trailing calendar month days)	39 days	37 days			Used vehicle (trailing calendar month days)	34 days	31 days

NM - Not Meaningful						NM - Not Meaningful

2926

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 ~~2019~~2020 columns may differ from the same store amounts presented for ~~2019~~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 September 30,													Nine Months Ended September 30,													Three Months Ended June 30,				Six Months Ended June 30,
($ in millions, except per vehicle data)	($ in millions, except per vehicle data)	2020		2019		Variance Favorable / (Unfavorable)		% Variance	2020		2019		Variance Favorable / (Unfavorable)		% Variance	($ in millions, except per vehicle data)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance
Revenue:	Revenue:															Revenue:
New vehicle	New vehicle	$	2,748.4	$	2,846.7	$	(98.3)	(3.5)	$	7,287.3	$	8,030.1	$	(742.8)	(9.3)	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	Retail used vehicle	1,421.0		1,312.7		108.3		8.3	3,842.6		3,836.1		6.5		0.2	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	Wholesale	95.9		75.3		20.6		27.4	244.4		223.1		21.3		9.5	Wholesale	136.8		61.9		74.9		121.0	241.7		148.4		93.3		62.9
Used vehicle	Used vehicle	1,516.9		1,388.0		128.9		9.3	4,087.0		4,059.2		27.8		0.7	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	Finance and insurance, net	281.3		263.8		17.5		6.6	763.2		748.4		14.8		2.0	Finance and insurance, net	368.6		246.0		122.6		49.8	681.2		481.4		199.8		41.5
Total variable operations⁽¹⁾	Total variable operations⁽¹⁾	4,546.6		4,498.5		48.1		1.1	12,137.5		12,837.7		(700.2)		(5.5)	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	Parts and service	852.8		885.5		(32.7)		(3.7)	2,408.4		2,619.9		(211.5)		(8.1)	Parts and service	949.9		674.8		275.1		40.8	1,799.0		1,528.4		270.6		17.7
Other	Other	5.5		14.6		(9.1)			40.6		84.9		(44.3)			Other	7.1		11.1		(4.0)			15.7		35.0		(19.3)
Total revenue	Total revenue	$	5,404.9	$	5,398.6	$	6.3	0.1	$	14,586.5	$	15,542.5	$	(956.0)	(6.2)	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:	Gross profit:															Gross profit:
New vehicle	New vehicle	$	167.3	$	118.7	$	48.6	40.9	$	382.9	$	364.6	$	18.3	5.0	New vehicle	$	320.4	$	119.5	$	200.9	168.1	$	510.0	$	215.8	$	294.2	136.3
Retail used vehicle	Retail used vehicle	128.8		87.3		41.5		47.5	318.4		260.0		58.4		22.5	Retail used vehicle	179.9		105.8		74.1		70.0	304.8		189.2		115.6		61.1
Wholesale	Wholesale	18.1		4.9		13.2			36.8		17.6		19.2			Wholesale	22.3		11.1		11.2			37.3		18.7		18.6
Used vehicle	Used vehicle	146.9		92.2		54.7		59.3	355.2		277.6		77.6		28.0	Used vehicle	202.2		116.9		85.3		73.0	342.1		207.9		134.2		64.6
Finance and insurance	Finance and insurance	281.3		263.8		17.5		6.6	763.2		748.4		14.8		2.0	Finance and insurance	368.6		246.0		122.6		49.8	681.2		481.4		199.8		41.5
Total variable operations⁽¹⁾	Total variable operations⁽¹⁾	595.5		474.7		120.8		25.4	1,501.3		1,390.6		110.7		8.0	Total variable operations(1)	891.2		482.4		408.8		84.7	1,533.3		905.1		628.2		69.4
Parts and service	Parts and service	375.6		403.1		(27.5)		(6.8)	1,074.7		1,196.9		(122.2)		(10.2)	Parts and service	432.0		307.4		124.6		40.5	820.4		693.0		127.4		18.4
Other	Other	0.8		1.1		(0.3)			2.4		3.9		(1.5)			Other	1.4		0.7		0.7			2.1		1.5		0.6
Total gross profit	Total gross profit	$	971.9	$	878.9	$	93.0	10.6	$	2,578.4	$	2,591.4	$	(13.0)	(0.5)	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:	Retail vehicle unit sales:															Retail vehicle unit sales:
New vehicle	New vehicle	65,998		73,225		(7,227)		(9.9)	177,191		204,590		(27,399)		(13.4)	New vehicle	77,081		54,359		22,722		41.8	146,293		110,958		35,335		31.8
Used vehicle	Used vehicle	64,587		62,706		1,881		3.0	179,522		183,404		(3,882)		(2.1)	Used vehicle	80,305		58,749		21,556		36.7	151,871		114,658		37,213		32.5
		130,585		135,931		(5,346)		(3.9)	356,713		387,994		(31,281)		(8.1)		157,386		113,108		44,278		39.1	298,164		225,616		72,548		32.2
Revenue per vehicle retailed:	Revenue per vehicle retailed:															Revenue per vehicle retailed:
New vehicle	New vehicle	$	41,644	$	38,876	$	2,768	7.1	$	41,127	$	39,250	$	1,877	4.8	New vehicle	$	44,443	$	41,517	$	2,926	7.0	$	43,768	$	40,869	$	2,899	7.1
Used vehicle	Used vehicle	$	22,001	$	20,934	$	1,067	5.1	$	21,405	$	20,916	$	489	2.3	Used vehicle	$	25,899	$	21,449	$	4,450	20.7	$	24,498	$	21,097	$	3,401	16.1
Gross profit per vehicle retailed:	Gross profit per vehicle retailed:															Gross profit per vehicle retailed:
New vehicle	New vehicle	$	2,535	$	1,621	$	914	56.4	$	2,161	$	1,782	$	379	21.3	New vehicle	$	4,157	$	2,198	$	1,959	89.1	$	3,486	$	1,945	$	1,541	79.2
Used vehicle	Used vehicle	$	1,994	$	1,392	$	602	43.2	$	1,774	$	1,418	$	356	25.1	Used vehicle	$	2,240	$	1,801	$	439	24.4	$	2,007	$	1,650	$	357	21.6
Finance and insurance	Finance and insurance	$	2,154	$	1,941	$	213	11.0	$	2,140	$	1,929	$	211	10.9	Finance and insurance	$	2,342	$	2,175	$	167	7.7	$	2,285	$	2,134	$	151	7.1
Total variable operations⁽²⁾	Total variable operations⁽²⁾	$	4,422	$	3,456	$	966	28.0	$	4,106	$	3,539	$	567	16.0	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.	⁽¹⁾Total variable operations includes new vehicle, used vehicle (retail and wholesale), and finance and insurance results.																														(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.	⁽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.																														(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.

3027


		Three Months Ended			Nine Months Ended				Three Months Ended		Six Months Ended
		September 30,			September 30,				June 30,		June 30,
		2020 (%)	2019 (%)	2020 (%)	2019 (%)		2021 (%)	2020 (%)	2021 (%)	2020 (%)
Revenue mix percentages:	Revenue mix percentages:					Revenue mix percentages:
New vehicle	New vehicle	50.9	52.7	50.0	51.7	New vehicle	49.2	50.0	49.8	49.6
Used vehicle	Used vehicle	28.1	25.7	28.0	26.1	Used vehicle	31.8	29.3	30.8	28.1
Parts and service	Parts and service	15.8	16.4	16.5	16.9	Parts and service	13.6	15.0	14.0	16.7
Finance and insurance, net	Finance and insurance, net	5.2	4.9	5.2	4.8	Finance and insurance, net	5.3	5.5	5.3	5.3
Other	Other	—	0.3	0.3	0.5	Other	0.1	0.2	0.1	0.3
Total	Total	100.0	100.0	100.0	100.0	Total	100.0	100.0	100.0	100.0
Gross profit mix percentages:	Gross profit mix percentages:					Gross profit mix percentages:
New vehicle	New vehicle	17.2	13.5	14.9	14.1	New vehicle	24.2	15.1	21.6	13.5
Used vehicle	Used vehicle	15.1	10.5	13.8	10.7	Used vehicle	15.3	14.8	14.5	13.0
Parts and service	Parts and service	38.6	45.9	41.7	46.2	Parts and service	32.6	38.9	34.8	43.3
Finance and insurance	Finance and insurance	28.9	30.0	29.6	28.9	Finance and insurance	27.8	31.1	28.9	30.1
Other	Other	0.2	0.1	—	0.1	Other	0.1	0.1	0.2	0.1
Total	Total	100.0	100.0	100.0	100.0	Total	100.0	100.0	100.0	100.0
Operating items as a percentage of revenue:	Operating items as a percentage of revenue:					Operating items as a percentage of revenue:
Gross profit:	Gross profit:					Gross profit:
New vehicle	New vehicle	6.1	4.2	5.3	4.5	New vehicle	9.4	5.3	8.0	4.8
Used vehicle - retail	Used vehicle - retail	9.1	6.7	8.3	6.8	Used vehicle - retail	8.6	8.4	8.2	7.8
Parts and service	Parts and service	44.0	45.5	44.6	45.7	Parts and service	45.5	45.6	45.6	45.3
Total	Total	18.0	16.3	17.7	16.7	Total	19.0	17.5	18.3	17.5

3128

New Vehicle


		Three Months Ended September 30,													Nine Months Ended September 30,													Three Months Ended June 30,			Six Months Ended June 30,
($ in millions, except per vehicle data)	($ in millions, except per vehicle data)	2020		2019		Variance Favorable / (Unfavorable)		% Variance	2020		2019		Variance Favorable / (Unfavorable)		% Variance	($ in millions, except per vehicle data)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance
Reported:	Reported:															Reported:
Revenue	Revenue	$	2,748.4	$	2,874.8	$	(126.4)	(4.4)	$	7,291.6	$	8,141.1	$	(849.5)	(10.4)	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	Gross profit	$	167.2	$	118.9	$	48.3	40.6	$	383.2	$	366.3	$	16.9	4.6	Gross profit	$	320.5	$	119.6	$	200.9	168.0	$	510.5	$	216.0	$	294.5	136.3
Retail vehicle unit sales	Retail vehicle unit sales	65,998		74,190		(8,192)		(11.0)	177,250		208,219		(30,969)		(14.9)	Retail vehicle unit sales	77,164		54,513		22,651		41.6	146,525		111,252		35,273		31.7
Revenue per vehicle retailed	Revenue per vehicle retailed	$	41,644	$	38,749	$	2,895	7.5	$	41,137	$	39,099	$	2,038	5.2	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	Gross profit per vehicle retailed	$	2,533	$	1,603	$	930	58.0	$	2,162	$	1,759	$	403	22.9	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	Gross profit as a percentage of revenue	6.1%		4.1%					5.3%		4.5%					Gross profit as a percentage of revenue	9.3%		5.3%					8.0%		4.8%
Inventory days supply (industry standard of selling days)	Inventory days supply (industry standard of selling days)	43 days		55 days												Inventory days supply (industry standard of selling days)	14 days		49 days

		Three Months Ended September 30,													Nine Months Ended September 30,													Three Months Ended June 30,			Six Months Ended June 30,
		2020		2019		Variance Favorable / (Unfavorable)		% Variance	2020		2019		Variance Favorable / (Unfavorable)		% Variance		2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance
Same Store:	Same Store:															Same Store:
Revenue	Revenue	$	2,748.4	$	2,846.7	$	(98.3)	(3.5)	$	7,287.3	$	8,030.1	$	(742.8)	(9.3)	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	Gross profit	$	167.3	$	118.7	$	48.6	40.9	$	382.9	$	364.6	$	18.3	5.0	Gross profit	$	320.4	$	119.5	$	200.9	168.1	$	510.0	$	215.8	$	294.2	136.3
Retail vehicle unit sales	Retail vehicle unit sales	65,998		73,225		(7,227)		(9.9)	177,191		204,590		(27,399)		(13.4)	Retail vehicle unit sales	77,081		54,359		22,722		41.8	146,293		110,958		35,335		31.8
Revenue per vehicle retailed	Revenue per vehicle retailed	$	41,644	$	38,876	$	2,768	7.1	$	41,127	$	39,250	$	1,877	4.8	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	Gross profit per vehicle retailed	$	2,535	$	1,621	$	914	56.4	$	2,161	$	1,782	$	379	21.3	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	Gross profit as a percentage of revenue	6.1%		4.2%					5.3%		4.5%					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 ~~$4.3~~$2.6 million and $4.5 million in new vehicle revenue and ~~$0.3~~$0.1 million ~~in new vehicle gross profit for the nine months ended September 30, 2020, is related primarily to the opening of a new add-point in February 2019. The difference between reported amounts~~ and ~~same store amounts in the above tables of~~ $0.1 million in new vehicle gross profit for the three months ended ~~September~~June 30, 2021 and 2020, respectively, and ~~$28.1~~$7.6 million and ~~$111.0~~$8.5 million in new vehicle revenue and ~~$0.2~~$0.5 million and ~~$1.7~~$0.2 million in new vehicle gross profit for the ~~three and nine~~six months ended ~~September~~June 30, ~~2019,~~2021 and 2020, respectively, is related to divestiture activity.

~~Third~~Second Quarter ~~2020~~2021 compared to ~~Third~~Second Quarter ~~2019~~2020

Same store new vehicle revenue ~~decreased~~increased during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, due to ~~a decrease~~increases in same store unit volume ~~partially offset by an increase in~~and same store revenue PVR. ~~The decrease~~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 ~~is primarily~~benefited from an increase in customer demand, partially offset by historically low inventory levels due to ~~reduced availability of inventory due to inventory shortages from~~ manufacturer plant closures resulting from the COVID-19 pandemic. Same store unit volume was also adversely impacted by a shift in mix to used vehicles. Our used-to-new vehicle unit sales ratio increased to 97.9% for the three months ended September 30, 2020, as compared to 85.6% for the prior year period. New vehicle unit volumes improved over the course of the third quarter of 2020, but overall continued to run below prior year levels through September 30, 2020.supply shortages.

Same store revenue PVR and gross profit PVR both increased during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, primarily due ~~in part~~ to strong demand and reduced availability of ~~inventory and a continued shift in mix toward trucks and sport utility vehicles, which have relatively higher average selling prices. The shift in mix toward trucks and sports utility vehicles is due~~new vehicle inventory.

First Six Months 2021 compared to a combination of improved vehicle fuel efficiency, relatively low average fuel prices, and changing consumer preference. Same store revenue PVR also benefited from a shift in mix away from Import vehicles, which have relatively lower average selling prices.First Six Months 2020

Same store ~~gross profit PVR~~new vehicle revenue increased during the ~~three~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019, primarily as a result of the tighter supply in new vehicle inventory.~~

~~First Nine Months~~ 2020, ~~compared to First Nine Months 2019~~

~~Same store new vehicle revenue decreased during the nine months ended September 30, 2020, as compared to the same period in 2019,~~ due to ~~a decrease~~increases in same store unit volume ~~partially offset by an increase in~~and same store revenue PVR. ~~The~~

Table of ~~incentives as a result of the COVID-19 pandemic.~~Contents

~~decrease in same~~Same store unit volume in the prior year was ~~primarily due to significant declines in new vehicle unit sales,~~significantly adversely impacted by the COVID-19 pandemic, particularly during the last two weeks of March 2020 through April ~~2020, as a result~~2020. During the first half of ~~the COVID-19 pandemic. Same~~2021, same store unit volume ~~was also adversely impacted~~benefited from an increase in customer demand, partially offset by ~~reduced availability of~~historically low inventory ~~and a shift in mix~~levels due to ~~used vehicles. Our used-to-new vehicle unit sales ratio increased to 101.3% for the nine months ended September 30, 2020, as compared to 89.6% for the prior year period.~~manufacturer supply shortages.

Same store revenue PVR and gross profit PVR both increased during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, primarily due ~~in part~~ to strong demand and reduced availability of inventory and a continued shift in mix toward trucks and sport utility vehicles, which have relatively higher average selling prices. The shift in mix toward trucks and sports utility vehicles is due to a combination of improved vehicle fuel efficiency, relatively low average fuel prices, and changing consumer preference. Same store revenue PVR also benefited from a shift in mix away from Import vehicles, which have relatively lower average selling prices, as well as an increase in the manufacturers’ suggested retail prices for Premium Luxury vehicles.

Same store gross profit PVR increased during the nine months ended September 30, 2020, as compared to the same period in 2019, primarily due to increases in gross profit PVR as a result of the tighter supply in new vehicle inventory. ~~Same store gross profit also benefited from increased manufacturer support in the form~~

New Vehicle Inventory Carrying Benefit ~~(Cost)~~

The following table details net new vehicle inventory carrying benefit, ~~(cost),~~ 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 September 30,										Nine Months Ended September 30,											Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	($ in millions)	2020		2019		Variance		2020		2019		Variance		($ in millions)	2021		2020		Variance		2021		2020		Variance
Floorplan assistance	Floorplan assistance	$	28.9	$	28.7	$	0.2	$	77.1	$	81.5	$	(4.4)	Floorplan assistance	$	34.7	$	23.7	$	11.0	$	66.7	$	48.3	$	18.4
New vehicle floorplan interest expense	New vehicle floorplan interest expense	(10.4)		(30.1)		19.7		(47.6)		(101.4)		53.8		New vehicle floorplan interest expense	(6.0)		(14.1)		8.1		(14.9)		(37.2)		22.3
Net new vehicle inventory carrying benefit (cost)		$	18.5	$	(1.4)	$	19.9	$	29.5	$	(19.9)	$	49.4
Net new vehicle inventory carrying benefit														Net new vehicle inventory carrying benefit	$	28.7	$	9.6	$	19.1	$	51.8	$	11.1	$	40.7

~~Third~~Second Quarter 2021 compared to Second Quarter 2020 ~~compared to Third Quarter 2019~~

~~We had a~~The net new vehicle inventory carrying benefit ~~for~~increased during the three months ended ~~September~~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 ~~cost for~~benefit increased during the ~~three~~six months ended ~~September~~June 30, ~~2019.~~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 ~~interest rates~~floorplan balances and lower average ~~floorplan balances.~~interest rates. Floorplan interest rates are variable and, therefore, increase and decrease with changes in the underlying benchmark interest rates. The Federal Reserve cut interest rates three times over the third and fourth quarters of 2019, and in response to the COVID-19 pandemic, the Federal Reserve cut interest rates to near 0% in March 2020. Floorplan assistance ~~slightly~~ increased due to ~~an increase~~increases in ~~the average floorplan assistance rate per~~ unit ~~largely offset by lower new vehicle unit sales.~~

~~First Nine Months 2020 compared to First Nine Months 2019~~

~~We had a net new vehicle inventory carrying benefit for the nine months ended September 30, 2020,~~volume and a net new vehicle inventory carrying cost for the nine months ended September 30, 2019. Floorplan interest expense decreased due to lower average interest rates and lower average floorplan balances. Floorplan assistance decreased due to lower new vehicle unit sales, partially offset by an increase in the average floorplan assistance rate per unit.

3330

Used Vehicle


		Three Months Ended September 30,													Nine Months Ended September 30,													Three Months Ended June 30,			Six Months Ended June 30,
($ in millions, except per vehicle data)	($ in millions, except per vehicle data)	2020		2019		Variance Favorable / (Unfavorable)		% Variance	2020		2019		Variance Favorable / (Unfavorable)		% Variance	($ in millions, except per vehicle data)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance
Reported:	Reported:															Reported:
Retail revenue	Retail revenue	$	1,421.0	$	1,326.5	$	94.5	7.1	$	3,845.5	$	3,895.5	$	(50.0)	(1.3)	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	Wholesale revenue	95.9		76.4		19.5		25.5	244.6		226.4		18.2		8.0	Wholesale revenue	137.1		62.0		75.1		121.1	242.1		148.7		93.4		62.8
Total revenue	Total revenue	$	1,516.9	$	1,402.9	$	114.0	8.1	$	4,090.1	$	4,121.9	$	(31.8)	(0.8)	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	Retail gross profit	$	128.8	$	87.6	$	41.2	47.0	$	318.1	$	262.4	$	55.7	21.2	Retail gross profit	$	180.4	$	105.8	$	74.6	70.5	$	305.6	$	189.3	$	116.3	61.4
Wholesale gross profit	Wholesale gross profit	18.1		4.7		13.4			36.8		17.2		19.6			Wholesale gross profit	22.3		11.2		11.1			37.3		18.7		18.6
Total gross profit	Total gross profit	$	146.9	$	92.3	$	54.6	59.2	$	354.9	$	279.6	$	75.3	26.9	Total gross profit	$	202.7	$	117.0	$	85.7	73.2	$	342.9	$	208.0	$	134.9	64.9
Retail vehicle unit sales	Retail vehicle unit sales	64,587		63,581		1,006		1.6	179,656		187,091		(7,435)		(4.0)	Retail vehicle unit sales	80,589		58,920		21,669		36.8	152,369		115,069		37,300		32.4
Revenue per vehicle retailed	Revenue per vehicle retailed	$	22,001	$	20,863	$	1,138	5.5	$	21,405	$	20,821	$	584	2.8	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	Gross profit per vehicle retailed	$	1,994	$	1,378	$	616	44.7	$	1,771	$	1,403	$	368	26.2	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	Gross profit as a percentage of revenue	9.1%		6.6%					8.3%		6.7%					Gross profit as a percentage of revenue	8.6%		8.4%					8.2%		7.8%
Inventory days supply (trailing calendar month days)	Inventory days supply (trailing calendar month days)	39 days		37 days												Inventory days supply (trailing calendar month days)	34 days		31 days

		Three Months Ended September 30,													Nine Months Ended September 30,													Three Months Ended June 30,			Six Months Ended June 30,
		2020		2019		Variance Favorable / (Unfavorable)		% Variance	2020		2019		Variance Favorable / (Unfavorable)		% Variance		2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance
Same Store:	Same Store:															Same Store:
Retail revenue	Retail revenue	$	1,421.0	$	1,312.7	$	108.3	8.3	$	3,842.6	$	3,836.1	$	6.5	0.2	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	Wholesale revenue	95.9		75.3		20.6		27.4	244.4		223.1		21.3		9.5	Wholesale revenue	136.8		61.9		74.9		121.0	241.7		148.4		93.3		62.9
Total revenue	Total revenue	$	1,516.9	$	1,388.0	$	128.9	9.3	$	4,087.0	$	4,059.2	$	27.8	0.7	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	Retail gross profit	$	128.8	$	87.3	$	41.5	47.5	$	318.4	$	260.0	$	58.4	22.5	Retail gross profit	$	179.9	$	105.8	$	74.1	70.0	$	304.8	$	189.2	$	115.6	61.1
Wholesale gross profit	Wholesale gross profit	18.1		4.9		13.2			36.8		17.6		19.2			Wholesale gross profit	22.3		11.1		11.2			37.3		18.7		18.6
Total gross profit	Total gross profit	$	146.9	$	92.2	$	54.7	59.3	$	355.2	$	277.6	$	77.6	28.0	Total gross profit	$	202.2	$	116.9	$	85.3	73.0	$	342.1	$	207.9	$	134.2	64.6
Retail vehicle unit sales	Retail vehicle unit sales	64,587		62,706		1,881		3.0	179,522		183,404		(3,882)		(2.1)	Retail vehicle unit sales	80,305		58,749		21,556		36.7	151,871		114,658		37,213		32.5
Revenue per vehicle retailed	Revenue per vehicle retailed	$	22,001	$	20,934	$	1,067	5.1	$	21,405	$	20,916	$	489	2.3	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	Gross profit per vehicle retailed	$	1,994	$	1,392	$	602	43.2	$	1,774	$	1,418	$	356	25.1	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	Gross profit as a percentage of revenue	9.1%		6.7%					8.3%		6.8%					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 ~~$3.1~~$6.3 million and $9.7 million in total used vehicle revenue and ~~$0.3~~$0.5 million and $0.8 million in total used vehicle gross profit for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020,~~2021, respectively, is related ~~primarily~~ to divestiture activity and the opening of a new ~~add-point in February 2019.~~AutoNation USA store. The difference between reported amounts and same store amounts in the above tables of ~~$14.9~~$2.5 million and ~~$62.7~~$5.9 million in total used vehicle revenue and $0.1 million and ~~$2.0~~$0.1 million in total used vehicle gross profit for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively, is related to divestiture activity.

~~Third~~Second Quarter ~~2020~~2021 compared to ~~Third~~Second Quarter ~~2019~~2020

Same store retail used vehicle revenue increased during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019~~2020, due to increases in same store ~~revenue PVR~~unit volume and same store revenue PVR. Same store unit ~~volume. Relative market~~volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly in April 2020. Market demand for used vehicles ~~increased as compared~~continued to ~~new vehicles,~~increase during the second quarter of 2021 due in part to ~~increased affordability compared to new vehicles,~~ decreased availability of new vehicles due to lower inventory levels, and shifting dynamics in the used vehicle market. The average age and mileage of used vehicles in the market has decreased, which has provided wider availability of in-demand technology features on used vehicles, resulting in reduced disparity between used vehicles and new vehicles. ~~Our used-to-new vehicle unit sales ratio increased to 97.9% for the three months ended September 30, 2020, as compared to 85.6% for the prior year period.~~

Same store revenue PVR increased during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, primarily due to an increase in market demand for used vehicles ~~a strong used~~and reduced availability of new vehicle ~~pricing environment, and a shift in mix toward Premium Luxury vehicles, which have relatively higher average selling prices.~~inventory.

Same store gross profit PVR increased during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, due to ~~increases in gross profit PVR for vehicles in all three reportable segments as a result of~~ increased demand

for used vehicles and ~~a strong used~~reduced availability of new vehicle ~~pricing environment.~~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 a relatively higher average gross profit PVR.

First ~~Nine~~Six Months ~~2020~~2021 compared to First ~~Nine~~Six Months ~~2019~~2020

Same store retail used vehicle revenue increased during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020 due to ~~an increase in same store revenue PVR, partially offset by a decrease in same store unit volume. The decrease~~increases in same store unit volume and same store revenue PVR. Same store unit volume in the prior year was ~~due to significant declines in used retail vehicle unit sales~~significantly adversely impacted by the COVID-19 pandemic, particularly during the last two weeks of March 2020 through April ~~2020 as a result of the COVID-19 pandemic. These declines were partially offset by an increase in relative market~~2020. Market demand for used vehicles ~~as compared~~continued to ~~new vehicles,~~increase during the first half of 2021 due in part to ~~increased affordability compared to new vehicles,~~ decreased availability of new vehicles due to lower inventory levels, and shifting dynamics in the used vehicle market. The average age and mileage of used vehicles in the market has decreased, which has provided wider availability of in-demand technology features on used vehicles, resulting in reduced disparity between used vehicles and new vehicles. ~~Our used-to-new vehicle unit sales ratio increased to 101.3% for the nine months ended September 30, 2020, as compared to 89.6% for the prior year period.~~

Same store revenue PVR increased during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, primarily due ~~in part~~ to an increase in market demand for used vehicles ~~a strong used~~and reduced availability of new vehicle pricing environment, and a shift in mix toward trucks and sport utility vehicles, which have relatively higher average selling prices. The shift in mix toward trucks and sports utility vehicles is due to a combination of improved vehicle fuel efficiency, relatively low average fuel prices, and changing consumer preference. Same store revenue PVR also benefited from a shift in mix toward Premium Luxury vehicles, which have relatively higher average selling prices.inventory.

Same store gross profit PVR increased during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, due to ~~increases in gross profit PVR for vehicles in all three reportable segments as a result of~~ increased demand for used vehicles and ~~a strong used~~reduced availability of new vehicle ~~pricing environment.~~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 a relatively higher average gross profit PVR.

3532

Parts and Service


		Three Months Ended September 30,													Nine Months Ended September 30,													Three Months Ended June 30,			Six Months Ended June 30,
($ in millions)	($ in millions)	2020		2019		Variance Favorable / (Unfavorable)		% Variance	2020		2019		Variance Favorable / (Unfavorable)		% Variance	($ in millions)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance
Reported:	Reported:															Reported:
Revenue	Revenue	$	852.8	$	902.6	$	(49.8)	(5.5)	$	2,419.0	$	2,680.8	$	(261.8)	(9.8)	Revenue	$	950.8	$	689.9	$	260.9	37.8	$	1,801.8	$	1,566.2	$	235.6	15.0
Gross Profit	Gross Profit	$	375.2	$	409.0	$	(33.8)	(8.3)	$	1,075.4	$	1,219.8	$	(144.4)	(11.8)	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	Gross profit as a percentage of revenue	44.0%		45.3%					44.5%		45.5%					Gross profit as a percentage of revenue	45.5%		45.1%					45.6%		44.7%
Same Store:	Same Store:															Same Store:
Revenue	Revenue	$	852.8	$	885.5	$	(32.7)	(3.7)	$	2,408.4	$	2,619.9	$	(211.5)	(8.1)	Revenue	$	949.9	$	674.8	$	275.1	40.8	$	1,799.0	$	1,528.4	$	270.6	17.7
Gross Profit	Gross Profit	$	375.6	$	403.1	$	(27.5)	(6.8)	$	1,074.7	$	1,196.9	$	(122.2)	(10.2)	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	Gross profit as a percentage of revenue	44.0%		45.5%					44.6%		45.7%					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 ~~$17.1~~$0.9 million and $2.8 million in parts and service revenue ~~for the three months ended September 30, 2019, $0.4~~and $0.5 million and ~~$5.9~~$1.1 million in parts and service gross profit for the three and six months ended ~~September~~June 30, ~~2020~~2021, respectively, is related to divestiture activity and ~~2019, respectively,~~the opening of a new AutoNation USA store. The difference between reported amounts and ~~$10.6~~same store amounts in the above tables of $15.1 million and ~~$60.9~~$37.8 million in parts and service revenue and ~~$0.7~~$4.0 million and ~~$22.9~~$7.2 million in parts and service gross profit for the ~~nine~~three and six months ended ~~September~~June 30, 2020, ~~and 2019,~~ respectively, is ~~related~~due to ~~acquisition~~the closure of our ACP business and other divestiture ~~activity, as well as the opening of a new add-point.~~activity.

~~Third~~Second Quarter ~~2020~~2021 compared to ~~Third~~Second Quarter ~~2019~~2020

During the three months ended ~~September~~June 30, ~~2020,~~2021, same store parts and service gross profit ~~decreased~~increased compared to the same period in ~~2019,~~2020, primarily due to ~~an inventory valuation adjustment of $20.6 million recorded in connection with the closing of our ACP business, as well as decreases~~increases in gross profit associated with customer-pay service of ~~$9.7~~$46.3 million, ~~and collision business of $8.0 million. These decreases in parts and service gross profit were partially offset by an increase in gross profit associated with~~ the preparation of vehicles for sale of ~~$4.7~~$33.3 million, and wholesale parts sales of $10.1 million, as well as smaller increases in gross profit associated with ~~wholesale parts sales~~collision business, warranty service, and ~~warranty service.~~service work outsourced to third parties.

Customer-pay service gross profit was adversely impacted by a decrease in volume as a result of the COVID-19 pandemic, partially offset by higher value repair orders and price increases. Collision business gross profit was adversely impacted by a decrease in volume as a result of the COVID-19 pandemic, partially offset by improved margin performance. 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 due~~orders. Gross profit associated with wholesale parts sales benefited from an increase in ~~part to a shift in unit volume mix from new vehicles to used vehicles, partially offset by a decrease in new vehicle unit~~ volume.

First ~~Nine~~Six Months ~~2020~~2021 compared to First ~~Nine~~Six Months ~~2019~~2020

During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, same store parts and service gross profit ~~decreased as~~increased compared to the

same period in ~~2019,~~2020, primarily due to ~~decreases~~increases in gross profit associated with customer-pay service of ~~$52.1~~$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 of $17.3 million, warranty~~business.

Gross profit associated with customer-pay service ~~of $14.8 million,~~ and the preparation of vehicles for sale ~~of $8.2 million. Parts and service gross profit was also adversely impacted by~~both benefited from an ~~inventory valuation adjustment of $20.6 million recorded during the third quarter of 2020 in connection with the closing of our ACP business.~~

~~Customer-pay service gross profit, collision business gross profit, and warranty service gross profit were adversely impacted by a decrease~~increase in volume, ~~as a result of the COVID-19 pandemic, partially offset by~~improved margin performance, and higher value repair orders. ~~Warranty service gross profit also benefited from improved margin performance largely due to improved parts and labor rates negotiated with certain manufacturers.~~ Gross profit associated with ~~the preparation of vehicles for sale was adversely impacted by the decrease~~wholesale parts sales benefited from an increase in ~~new and used vehicle unit volume, partially offset by higher value internal repair orders due in part to a shift in unit volume mix from new vehicles to used vehicles.~~

volume.

3633

Finance and Insurance


		Three Months Ended September 30,													Nine Months Ended September 30,													Three Months Ended June 30,			Six Months Ended June 30,
($ in millions, except per vehicle data)	($ in millions, except per vehicle data)	2020		2019		Variance Favorable / (Unfavorable)		% Variance	2020		2019		Variance Favorable / (Unfavorable)		% Variance	($ in millions, except per vehicle data)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance
Reported:	Reported:															Reported:
Revenue and gross profit	Revenue and gross profit	$	281.2	$	266.2	$	15.0	5.6	$	763.4	$	757.9	$	5.5	0.7	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	Gross profit per vehicle retailed	$	2,153	$	1,932	$	221	11.4	$	2,139	$	1,917	$	222	11.6	Gross profit per vehicle retailed	$	2,339	$	2,172	$	167	7.7	$	2,282	$	2,131	$	151	7.1
Same Store:	Same Store:															Same Store:
Revenue and gross profit	Revenue and gross profit	$	281.3	$	263.8	$	17.5	6.6	$	763.2	$	748.4	$	14.8	2.0	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	Gross profit per vehicle retailed	$	2,154	$	1,941	$	213	11.0	$	2,140	$	1,929	$	211	10.9	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 isin 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 ~~$0.1~~$0.4 million and $0.8 million for the three and six months months ended ~~September~~June 30, ~~2020, is related to divestiture activity, and the difference of $0.2 million for the nine months ended September 30, 2020,~~2021, respectively, is related to divestiture activity and the opening of a new ~~add-point in February 2019.~~AutoNation USA store. The difference between reported amounts and same store amounts in ~~finance and insurance revenue and gross profit in~~ the above tables of ~~$2.4~~$0.4 million and ~~$9.5~~$0.8 million for the three and ~~nine~~six months months ended ~~September~~June 30, ~~2019,~~2020, respectively, is related to divestiture activity.

~~Third~~Second Quarter ~~2020~~2021 compared to ~~Third~~Second Quarter ~~2019~~2020

Same store finance and insurance revenue and gross profit increased during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, due to ~~an increase~~increases in vehicle unit volume and finance and insurance gross profit ~~PVR, partially offset by a decrease in new vehicle unit volume.~~PVR. The increase in finance and insurance gross profit PVR was primarily due to ~~an increase in product and finance penetration and~~ higher realized margins on vehicle service contracts, including our AutoNation Vehicle Protection Plan ~~product.~~product, and an increase in product penetration. Finance and insurance gross profit PVR also benefited from ~~an increase~~increases in retrospective commissions due in part to lower claim activity. Increases in finance and insurance gross profit PVR were partially offset by a shift in unit volume mix from new vehicles to used vehicles, which have lower average selling prices than new vehicles and therefore typically generate lower gross profit per transaction associated with arranging customer ~~financing. Sales of used vehicles also have lower finance~~financing and ~~product penetration as compared to sales of new vehicles.~~amounts financed per transaction.

First ~~Nine~~Six Months ~~2020~~2021 compared to First ~~Nine~~Six Months ~~2019~~2020

Same store finance and insurance revenue and gross profit increased during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, due to ~~an increase~~increases in vehicle unit volume and finance and insurance gross profit ~~PVR, partially offset by a decrease in vehicle unit volume.~~PVR. The increase in finance and insurance gross profit PVR was primarily due to ~~an increase in product and finance penetration and~~ higher realized margins on vehicle service contracts, including our AutoNation Vehicle Protection Plan ~~product. Increases~~product, and an increase in ~~finance~~product penetration. Finance and insurance gross profit PVR ~~were partially offset by a shift~~also benefited from increases in ~~unit volume mix from new vehicles to used vehicles, which have lower average selling prices than new vehicles~~amounts financed per transaction and ~~therefore typically generate lower~~ gross profit per transaction associated with arranging customer financing. ~~Sales of used vehicles also have lower finance and product penetration as compared to sales of new vehicles.~~

3734

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 September 30,													Nine Months Ended September 30,													Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	($ in millions)	2020		2019		Variance Favorable / (Unfavorable)		% Variance	2020		2019		Variance Favorable / (Unfavorable)		% Variance	($ in millions)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance
Revenue:	Revenue:															Revenue:
Domestic	Domestic	$	1,734.5	$	1,728.6	$	5.9	0.3	$	4,704.0	$	5,004.7	$	(300.7)	(6.0)	Domestic	$	2,124.8	$	1,486.0	$	638.8	43.0	$	3,971.5	$	2,969.5	$	1,002.0	33.7
Import	Import	1,621.5		1,722.5		(101.0)		(5.9)	4,308.9		4,845.9		(537.0)		(11.1)	Import	2,175.0		1,325.3		849.7		64.1	3,944.6		2,687.4		1,257.2		46.8
Premium Luxury	Premium Luxury	1,870.0		1,820.5		49.5		2.7	5,051.6		5,375.5		(323.9)		(6.0)	Premium Luxury	2,468.5		1,564.8		903.7		57.8	4,572.0		3,181.6		1,390.4		43.7
Total	Total	5,226.0		5,271.6		(45.6)		(0.9)	14,064.5		15,226.1		(1,161.6)		(7.6)	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	Corporate and other	178.9		189.6		(10.7)		(5.6)	540.4		560.7		(20.3)		(3.6)	Corporate and other	210.1		156.9		53.2		33.9	394.1		361.5		32.6		9.0
Total consolidated revenue	Total consolidated revenue	$	5,404.9	$	5,461.2	$	(56.3)	(1.0)	$	14,604.9	$	15,786.8	$	(1,181.9)	(7.5)	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⁾:	Segment income⁽¹⁾:															Segment income(1):
Domestic	Domestic	$	111.9	$	70.3	$	41.6	59.2	$	248.1	$	192.4	$	55.7	29.0	Domestic	$	169.0	$	82.1	$	86.9	105.8	$	287.5	$	136.2	$	151.3	111.1
Import	Import	123.5		86.9		36.6		42.1	277.7		240.9		36.8		15.3	Import	203.7		88.3		115.4		130.7	329.6		154.2		175.4		113.7
Premium Luxury	Premium Luxury	143.9		89.0		54.9		61.7	313.3		268.6		44.7		16.6	Premium Luxury	225.7		89.2		136.5		153.0	384.2		169.4		214.8		126.8
Total	Total	379.3		246.2		133.1		54.1	839.1		701.9		137.2		19.5	Total	598.4		259.6		338.8		130.5	1,001.3		459.8		541.5		117.8
Corporate and other	Corporate and other	(118.7)		(85.7)		(33.0)			(638.2)		(223.5)		(414.7)			Corporate and other	(74.8)		(74.5)		(0.3)			(150.2)		(519.5)		369.3
Floorplan interest expense	Floorplan interest expense	11.1		33.0		21.9			52.9		109.4		56.5			Floorplan interest expense	6.6		16.3		9.7			16.0		41.8		25.8
Operating income		$	271.7	$	193.5	$	78.2		$	253.8	$	587.8	$	(334.0)	(56.8)

⁽¹⁾ Segment income represents income for each of our reportable segments and is defined as operating income less floorplan interest expense.
Operating income (loss)																Operating income (loss)	$	530.2	$	201.4	$	328.8	163.3	$	867.1	$	(17.9)	$	885.0	NM

Retail new vehicle unit sales:	Retail new vehicle unit sales:																														Retail new vehicle unit sales:
Domestic	Domestic	21,620		23,227		(1,607)		(6.9)	57,995		66,117		(8,122)		(12.3)	Domestic	21,459		18,048		3,411		18.9	43,128		36,375		6,753		18.6
Import	Import	29,356		34,765		(5,409)		(15.6)	78,248		95,478		(17,230)		(18.0)	Import	36,136		23,605		12,531		53.1	66,979		48,892		18,087		37.0
Premium Luxury	Premium Luxury	15,022		16,198		(1,176)		(7.3)	41,007		46,624		(5,617)		(12.0)	Premium Luxury	19,569		12,860		6,709		52.2	36,418		25,985		10,433		40.2
		65,998		74,190		(8,192)		(11.0)	177,250		208,219		(30,969)		(14.9)		77,164		54,513		22,651		41.6	146,525		111,252		35,273		31.7

Retail used vehicle unit sales:																Retail used vehicle unit sales:
Domestic																Domestic	28,056		21,043		7,013		33.3	52,535		40,930		11,605		28.4
Import																Import	27,128		20,064		7,064		35.2	52,229		39,133		13,096		33.5
Premium Luxury																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.																(1) Segment income represents income for each of our reportable segments and is defined as operating income less floorplan interest expense.
NM = Not Meaningful																NM = Not Meaningful

3835

Domestic

The Domestic segment operating results included the following:


		Three Months Ended September 30,													Nine Months Ended September 30,													Three Months Ended June 30,			Six Months Ended June 30,
($ in millions)	($ in millions)	2020		2019		Variance Favorable / (Unfavorable)		% Variance	2020		2019		Variance Favorable / (Unfavorable)		% Variance	($ in millions)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance
Revenue		$	1,734.5	$	1,728.6	$	5.9	0.3	$	4,704.0	$	5,004.7	$	(300.7)	(6.0)
Revenue:																Revenue:
New vehicle																New vehicle	$	991.3	$	761.7	$	229.6	30.1	$	1,926.7	$	1,500.6	$	426.1	28.4
Used vehicle																Used vehicle	749.1		436.8		312.3		71.5	1,312.8		841.4		471.4		56.0
Parts and service																Parts and service	257.9		193.3		64.6		33.4	492.0		428.9		63.1		14.7
Finance and insurance, net																Finance and insurance, net	125.8		88.0		37.8		43.0	235.1		171.1		64.0		37.4
Other																Other	0.7		6.2		(5.5)			4.9		27.5		(22.6)
Total Revenue																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	Segment income	$	111.9	$	70.3	$	41.6	59.2	$	248.1	$	192.4	$	55.7	29.0	Segment income	$	169.0	$	82.1	$	86.9	105.8	$	287.5	$	136.2	$	151.3	111.1
Retail new vehicle unit sales	Retail new vehicle unit sales	21,620		23,227		(1,607)		(6.9)	57,995		66,117		(8,122)		(12.3)	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																Retail used vehicle unit sales	28,056		21,043		7,013		33.3	52,535		40,930		11,605		28.4

~~Third~~Second Quarter 2021 compared to Second Quarter 2020 ~~compared to Third Quarter 2019~~

Domestic revenue increased during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~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 ~~used vehicle revenue PVR as a result of an increase in market~~customer demand, for used vehicles and an increase in new vehicle revenue PVR due to tighter supply in new vehicle inventory and a continued shift in mix toward trucks and sport utility vehicles, which have relatively higher average selling prices. The shift in mix toward trucks and sport utility vehicles is due to a combination of improved vehicle fuel efficiency, relatively low average fuel prices, and changing consumer preference. These increases were partially offset by ~~the divestitures we completed in 2019 and a decrease in parts and service revenue.~~historically low inventory levels due to manufacturer supply shortages.

Domestic segment income increased during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, primarily due to ~~an increase~~increases in new ~~vehicle gross profit PVR due to tighter supply in new vehicle inventory, as well as an increase in~~and used vehicle gross profit, ~~PVR resulting~~which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in ~~market demand for used vehicles~~finance and ~~a shift~~insurance gross profit, which benefited from higher unit volume and an increase in ~~mix to used vehicles acquired through our “We’ll Buy Your Car” program, which have a relatively higher average~~finance and insurance gross profit PVR. Domestic segment income also benefited from ~~a decrease~~increases in ~~floorplan interest expense as a result~~parts and service gross profit associated with the preparation of ~~lower average interest rates~~vehicles for sale and ~~lower average vehicle floorplan balances and a decrease~~customer-pay service. Increases to Domestic segment income were partially offset by an increase in performance-driven SG&A ~~expenses due in part to the cost-saving actions implemented to mitigate the financial impact of the COVID-19 pandemic.~~expenses.

First ~~Nine~~Six Months ~~2020~~2021 compared to First ~~Nine~~Six Months ~~2019~~2020

Domestic revenue ~~decreased~~increased during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, primarily due to ~~decreases~~increases in new and used vehicle unit volume and ~~parts and service volume as a result of the COVID-19 pandemic and the divestitures we completed in 2019. These decreases were partially offset by increases in~~ new and used vehicle revenue PVR. ~~New~~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 ~~benefited from a tighter supply~~ in new vehicle inventory and a continued shift in mix toward trucks and sport utility vehicles, which have relatively higher average selling prices, as a result of a combination of improved vehicle fuel efficiency, relatively low average fuel prices, and changing consumer preference. Used vehicle revenue PVRthe current year benefited from an ~~increased~~increase in customer demand, ~~for used vehicles.~~partially offset by historically low inventory levels due to manufacturer supply shortages.

Domestic segment income increased during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, primarily due to ~~a decrease~~increases in ~~SG&A expenses resulting from the cost-saving actions implemented to mitigate the financial impact of the COVID-19 pandemic~~new and ~~a decrease in floorplan interest expenses due to lower average interest rates and lower average vehicle floorplan balances. Domestic segment income also benefited from an increase in new~~used vehicle gross profit, ~~PVR due in part to tighter supply in~~which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in ~~used vehicle~~finance and insurance gross profit, ~~PVR due to increased demand for used vehicles~~which benefited from higher unit volume and ~~a shift~~an increase in ~~mix to used vehicles acquired through our “We’ll Buy Your Car” program, which have a relatively higher average~~finance and insurance gross profit PVR. Increases to Domestic segment income were partially offset by ~~a decrease~~an increase in ~~parts and service volume and vehicle unit volume as a result of the COVID-19 pandemic.~~

performance-driven SG&A expenses.

3936

Import

The Import segment operating results included the following:


		Three Months Ended September 30,													Nine Months Ended September 30,													Three Months Ended June 30,			Six Months Ended June 30,
($ in millions)	($ in millions)	2020		2019		Variance Favorable / (Unfavorable)		% Variance	2020		2019		Variance Favorable / (Unfavorable)		% Variance	($ in millions)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance
Revenue		$	1,621.5	$	1,722.5	$	(101.0)	(5.9)	$	4,308.9	$	4,845.9	$	(537.0)	(11.1)
Revenue:																Revenue:
New vehicle																New vehicle	$	1,184.2	$	712.6	$	471.6	66.2	$	2,142.2	$	1,446.5	$	695.7	48.1
Used vehicle																Used vehicle	604.5		355.8		248.7		69.9	1,089.2		690.3		398.9		57.8
Parts and service																Parts and service	248.5		170.4		78.1		45.8	462.6		377.9		84.7		22.4
Finance and insurance, net																Finance and insurance, net	133.2		82.4		50.8		61.7	242.3		166.4		75.9		45.6
Other																Other	4.6		4.1		0.5			8.3		6.3		2.0
Total Revenue																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	Segment income	$	123.5	$	86.9	$	36.6	42.1	$	277.7	$	240.9	$	36.8	15.3	Segment income	$	203.7	$	88.3	$	115.4	130.7	$	329.6	$	154.2	$	175.4	113.7
Retail new vehicle unit sales	Retail new vehicle unit sales	29,356		34,765		(5,409)		(15.6)	78,248		95,478		(17,230)		(18.0)	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																Retail used vehicle unit sales	27,128		20,064		7,064		35.2	52,229		39,133		13,096		33.5

~~Third~~Second Quarter 2021 compared to Second Quarter 2020 ~~compared to Third Quarter 2019~~

Import revenue ~~decreased~~increased during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, primarily due to ~~a decrease~~increases in new and used vehicle unit volume ~~as a result of tighter supply~~and new and used vehicle revenue PVR. Unit volume in ~~new vehicle inventory, as well as~~ the ~~divestitures we completed~~prior year was significantly adversely impacted by the COVID-19 pandemic, particularly in ~~2019. These decreases were partially offset by an increase in new~~April 2020. Unit volume and vehicle revenue PVR ~~due tighter supply~~ in new vehicle inventory and a continued shift in mix toward trucks and sport utility vehicles, which have relatively higher average selling prices, as a result of a combination of improved vehicle fuel efficiency, relatively low average fuel prices, and changing consumer preference. Import revenue alsothe current year benefited from an increase in ~~used vehicle revenue PVR primarily~~customer demand, partially offset by historically low inventory levels due to ~~an increase in market demand for used vehicles.~~manufacturer supply shortages.

Import segment income increased during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~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 ~~new vehicle~~finance and insurance gross profit, ~~PVR due to tighter supply in new vehicle inventory, as well as~~which benefited primarily from higher unit volume and an increase in ~~used vehicle PVR resulting from an increase in market demand for used vehicles~~finance and ~~a shift in mix to used vehicles acquired through our “We’ll Buy Your Car” program, which have a relatively higher average~~insurance gross profit PVR. Import segment income also benefited from ~~a decrease~~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 due in part to the cost-saving actions implemented to mitigate the financial impact of the COVID-19 pandemic, as well as a decrease in floorplan interest expenses due to lower average interest rates and lower average vehicle floorplan balances.expenses.

First ~~Nine~~Six Months ~~2020~~2021 compared to First ~~Nine~~Six Months ~~2019~~2020

Import revenue ~~decreased~~increased during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, primarily due to ~~decreases~~increases in new and used vehicle unit volume and ~~parts and service volume as a result of the COVID-19 pandemic and the divestitures we completed in 2019. These decreases were partially offset by increases in~~ new and used vehicle revenue PVR. ~~New~~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 ~~benefited from a tighter supply~~ in new vehicle inventory and a continued shift in mix toward trucks and sport utility vehicles, which have relatively higher average selling prices, as a result of a combination of improved vehicle fuel efficiency, relatively low average fuel prices, and changing consumer preference. Used vehicle revenue PVRthe current year benefited from an ~~increased~~increase in customer demand, ~~for used vehicles.~~partially offset by historically low inventory levels due to manufacturer supply shortages.

Import segment income increased during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019. SG&A expenses decreased~~2020, primarily due to the cost-saving actions implemented to mitigate the financial impact of the COVID-19 pandemic, and floorplan interest expenses decreased due to lower average interest rates and lower average vehicle floorplan balances. Import segment income also benefited from an increaseincreases in new ~~vehicle gross profit PVR due in part to tighter supply in new vehicle inventory, as well as an increase in~~and used vehicle gross profit, ~~PVR due to~~which both benefited from increased demand ~~for used vehicles~~ and ~~a shift~~reduced availability of new vehicle inventory, and an increase in ~~mix to used vehicles acquired through our “We’ll Buy Your Car” program,~~finance and insurance gross profit, which ~~have a relatively~~benefited primarily from higher ~~average~~unit volume and an increase in finance and insurance gross profit PVR. Increases into Import segment income were partially offset by ~~decreases~~an increase in ~~parts and service gross profit and finance and insurance gross profit due to decreases in parts and service volume and vehicle unit volume, respectively, as a result of the COVID-19 pandemic.~~

performance-driven SG&A expenses.

4037

Premium Luxury

The Premium Luxury segment operating results included the following:


		Three Months Ended September 30,													Nine Months Ended September 30,													Three Months Ended June 30,			Six Months Ended June 30,
($ in millions)	($ in millions)	2020		2019		Variance Favorable / (Unfavorable)		% Variance	2020		2019		Variance Favorable / (Unfavorable)		% Variance	($ in millions)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance
Revenue		$	1,870.0	$	1,820.5	$	49.5	2.7	$	5,051.6	$	5,375.5	$	(323.9)	(6.0)
Revenue:																Revenue:
New vehicle																New vehicle	$	1,252.8	$	787.0	$	465.8	59.2	$	2,341.7	$	1,596.1	$	745.6	46.7
Used vehicle																Used vehicle	788.8		490.3		298.5		60.9	1,431.1		957.6		473.5		49.4
Parts and service																Parts and service	317.6		223.2		94.4		42.3	602.8		500.6		102.2		20.4
Finance and insurance, net																Finance and insurance, net	108.0		64.3		43.7		68.0	194.8		127.3		67.5		53.0
Other																Other	1.3		—		1.3			1.6		—		1.6
Total Revenue																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	Segment income	$	143.9	$	89.0	$	54.9	61.7	$	313.3	$	268.6	$	44.7	16.6	Segment income	$	225.7	$	89.2	$	136.5	153.0	$	384.2	$	169.4	$	214.8	126.8
Retail new vehicle unit sales	Retail new vehicle unit sales	15,022		16,198		(1,176)		(7.3)	41,007		46,624		(5,617)		(12.0)	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																Retail used vehicle unit sales	22,370		15,795		6,575		41.6	41,904		30,938		10,966		35.4

~~Third~~Second Quarter 2021 compared to Second Quarter 2020 ~~compared to Third Quarter 2019~~

Premium Luxury revenue increased during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, primarily due to ~~an increase~~increases in ~~retail~~new and used vehicle unit volume ~~as a result of~~and new and used vehicle revenue PVR. Unit volume in the ~~increase~~prior year was significantly adversely impacted by the COVID-19 pandemic, particularly in ~~market demand for used vehicles, as well as~~April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in ~~new vehicle revenue PVR due in part to increases in the manufacturers’ suggested retail prices and tighter supply in new vehicle inventory. Increases in Premium Luxury revenue were~~customer demand, partially offset by ~~a decrease in new vehicle unit volume~~historically low inventory levels due to ~~the tighter~~manufacturer supply ~~in new vehicle inventory resulting from inventory shortages from manufacturer plant closures.~~shortages.

Premium Luxury segment income increased during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, primarily due to ~~an increase~~increases in new and used vehicle gross profit, ~~PVR resulting~~which both benefited from increased demand and reduced availability of new vehicle inventory, and an increase in ~~market demand for used vehicles~~parts and ~~a shift in mix to used vehicles acquired through our “We’ll Buy Your Car” program, which have a relatively higher average~~service gross profit ~~PVR, as well as an increase in new vehicle gross profit PVR due to tighter supply in new vehicle inventory.~~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 ~~in part~~ to higher unit volume and an increase in finance and ~~product penetration and higher realized margins on vehicle service contracts, as well as a decrease~~insurance gross profit PVR. Increases to Premium Luxury segment income were partially offset by an increase in ~~floorplan interest expenses due to lower average interest rates and lower average vehicle floorplan balances.~~performance-driven SG&A expenses.

First ~~Nine~~Six Months ~~2020~~2021 compared to First ~~Nine~~Six Months ~~2019~~2020

Premium Luxury revenue ~~decreased~~increased during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, primarily due to ~~decreases~~increases in new and used vehicle unit volume and ~~parts~~new and ~~service~~used vehicle revenue PVR. Unit volume ~~as a result of~~in the prior year was significantly adversely impacted by the COVID-19 ~~pandemic. These decreases were~~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 ~~an increase in new vehicle revenue PVR~~historically low inventory levels due ~~in part~~ to ~~increases in the manufacturers’ suggested retail prices and tighter~~manufacturer supply ~~in new vehicle inventory.~~shortages.

Premium Luxury segment income increased during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019. SG&A expenses decreased~~2020, primarily due to ~~the cost-saving actions implemented to mitigate the financial impact~~increases in new and used vehicle gross profit, which both benefited from increased demand and reduced availability of ~~the COVID-19 pandemic,~~new vehicle inventory, and ~~floorplan interest expenses decreased due to lower average interest rates~~an increase in finance and ~~lower average vehicle floorplan balances.~~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 ~~used vehicle~~parts and service gross profit ~~PVR resulting from an increase in market demand for used vehicles, as well as an increase in new vehicle gross profit PVR due~~associated with customer-pay service and the preparation of vehicles. Increases to ~~tighter supply in new vehicle inventory. Increases in~~ Premium Luxury segment income were partially offset by ~~decreases~~an increase in ~~parts and service volume and new vehicle unit volume as a result of the COVID-19 pandemic.~~

performance-driven SG&A expenses.

4138

Corporate and other

Corporate and other results included the following:

Three Months Ended September 30, Nine Months Ended September 30,
($ in millions) 2020 2019 Variance
Favorable /
(Unfavorable) %
Variance 2020 2019 Variance
Favorable /
(Unfavorable) %
Variance
Revenue $ 178.9 $ 189.6 $ (10.7) (5.6) $ 540.4 $ 560.7 $ (20.3) (3.6)
Income (loss) $ (118.7) $ (85.7) $ (33.0) 38.5 $ (638.2) $ (223.5) $ (414.7) NM
NM = Not Meaningful


	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, ~~auction operations,~~ AutoNation USA ~~stand-alone~~ used vehicle ~~sales and service centers,~~stores, auction operations, and parts distribution centers, all of which generate revenues but do not meet the quantitative thresholds for ~~determining~~ reportable segments, as well as unallocated corporate overhead expenses and other income items.

As of ~~September~~June 30, ~~2020,~~2021, we had 7872 AutoNation-branded collision centers, ~~4 AutoNation-branded auction operations, and 5~~6 AutoNation USA used vehicle ~~stores. We also had~~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 and 12 aftermarket collision parts (“ACP”) distribution centers.~~parts. We ~~recently announced that we~~ plan to expand our AutoNation USA used vehicle stores ~~by building approximately 50 additional~~and are targeting to have over 130 stores by the end of ~~2025.~~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 ~~roll-out~~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.

~~As part of our continued efforts to reduce costs and increase efficiencies, we determined, on August 17, 2020, to close our ACP business by~~During the ~~end of 2020. The ACP business represented less than 1% of our parts and service gross profit for the nine~~six months ended September 30, 2020. In connection with the closing of the ACP business, we expect to incur total pre-tax charges of $43.7 million, of which $36.5 million was incurred during the three months ended September 30, 2020. The charges are comprised of inventory valuation adjustments, estimated contract termination charges, other associated closing costs, accelerated depreciation and amortization, asset impairment charges, and involuntary termination benefits. See Note 15 of the Notes to Unaudited Condensed Consolidated Financial Statements for additional information.

~~During the nine months ended September~~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 ~~nine~~six months ended ~~September~~June 30, 2020, we recorded non-cash long-lived asset impairment charges associated with our ~~ACP~~aftermarket collision parts business of ~~$8.7~~$5.9 million, ~~of which $2.8 million was recorded during the third quarter of 2020 and is included in the ACP closing charges described above,~~ and non-cash intangible asset impairment charges associated with our collision centers and ~~ACP~~aftermarket collision parts business of $2.4 million, ~~all~~both of which are reported in the “Corporate and other” category of our segment information.

4239

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 September 30,													Nine Months Ended September 30,													Three Months Ended June 30,			Six Months Ended June 30,
($ in millions)	($ in millions)	2020		2019		Variance Favorable / (Unfavorable)		% Variance	2020		2019		Variance Favorable / (Unfavorable)		% Variance	($ in millions)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance
Reported:	Reported:															Reported:
Compensation	Compensation	$	427.6	$	422.0	$	(5.6)	(1.3)	$	1,158.0	$	1,222.4	$	64.4	5.3	Compensation	$	534.0	$	356.3	$	(177.7)	(49.9)	$	975.6	$	730.4	$	(245.2)	(33.6)
Advertising	Advertising	42.1		48.3		6.2		12.8	116.5		139.8		23.3		16.7	Advertising	42.8		28.1		(14.7)		(52.3)	79.5		74.4		(5.1)		(6.9)
Store and corporate overhead	Store and corporate overhead	171.7		183.5		11.8		6.4	515.5		551.6		36.1		6.5	Store and corporate overhead	172.1		163.5		(8.6)		(5.3)	341.7		343.8		2.1		0.6
Total	Total	$	641.4	$	653.8	$	12.4	1.9	$	1,790.0	$	1,913.8	$	123.8	6.5	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:	SG&A as a % of total gross profit:															SG&A as a % of total gross profit:
Compensation	Compensation	44.0		47.6		360		bps	44.9		46.5		160		bps	Compensation	40.3		44.8		450		bps	41.4		45.4		400		bps
Advertising	Advertising	4.3		5.4		110		bps	4.5		5.3		80		bps	Advertising	3.2		3.5		30		bps	3.4		4.6		120		bps
Store and corporate overhead	Store and corporate overhead	17.7		20.7		300		bps	20.0		21.0		100		bps	Store and corporate overhead	13.0		20.6		760		bps	14.4		21.4		700		bps
Total	Total	66.0		73.7		770		bps	69.4		72.8		340		bps	Total	56.5		68.9		1,240		bps	59.2		71.4		1,220		bps

~~Third~~Second Quarter 2021 compared to Second Quarter 2020 ~~compared to Third Quarter 2019~~

SG&A expenses ~~decreased~~increased during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019, primarily~~2020, largely due to ~~the cost-saving actions implemented to mitigate the financial impact of the COVID-19 pandemic, including restructuring our workforce, reducing our~~a performance-driven increase in compensation expense. Additionally, gross advertising expenses ~~by approximately 13%, and significantly reducing our discretionary spending. Gross advertising expenses decreased $9.7~~increased $18.5 million, partially offset by ~~a decrease~~an increase in advertising reimbursements from manufacturers of ~~$3.5~~$3.8 million. As a percentage of total gross profit, SG&A expenses decreased to ~~66.0%~~56.5% during the three months ended ~~September~~June 30, ~~2020,~~2021, from ~~73.7%~~68.9% in the same period in ~~2019,~~2020, primarily due to improvements in gross profit PVR and effective cost ~~management including the cost-saving actions taken due to the pandemic.~~management.

First ~~Nine~~Six Months ~~2020~~2021 compared to First ~~Nine~~Six Months ~~2019~~2020

SG&A expenses ~~decreased~~increased during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~

~~primarily~~2020, largely due to the cost-saving actions implemented to mitigate the financial impact of the COVID-19 pandemic, including temporarily placing associates on unpaid leave, implementing temporary base pay reductions for our executive officers and associates, temporarily freezing corporate new hiring, reducing oura performance-driven increase in compensation expense. Additionally, gross advertising expenses ~~by approximately 17%, and significantly reducing our discretionary spending. Gross advertising expenses decreased $33.2~~increased $8.7 million, partially offset by ~~a decrease~~an increase in advertising reimbursements from manufacturers of ~~$9.9~~$3.6 million. As a percentage of total gross profit, SG&A expenses decreased to ~~69.4%~~59.2% during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, from ~~72.8%~~71.4% in the same period in ~~2019,~~2020, primarily due to improvements in gross profit PVR and effective cost ~~management including the cost-saving actions taken due to the pandemic.~~management.

Goodwill Impairment

During the first quarter of 2020, ~~we recorded $318.3 million of non-cash goodwill impairment charges primarily~~ due to the ~~impacts to~~impact of the COVID-19 pandemic on our ~~business as well as~~results and the decrease in our stock price and market capitalization as ~~a result~~ of ~~the COVID-19 pandemic. See Note 6~~March 31, 2020, we recorded non-cash goodwill impairment charges of ~~the Notes to Unaudited Condensed Consolidated Financial Statements for more information.~~$318.3 million.

Franchise Rights Impairment

~~We recorded non-cash impairment charges of $57.5 million during~~During the first quarter of 2020, ~~and $9.6~~we recorded non-cash franchise rights impairment charges of $57.5 million ~~during the second quarter of 2019~~ to reduce the carrying values of certain franchise rights to their estimated fair values. ~~See Note 6 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.~~

Other (Income) Expense, Net (Operating)

During the third quarter of 2020, we recognized $7.3 million related to estimated contract termination charges and $2.8 million related to long-lived asset impairment charges in connection with the closure of our ACP business, which were partially

Table of 2019, we recognized $6.1 million related to store/property divestitures, which were partially offset by asset impairments of $0.9 million. During the second quarter of 2019, we recognized net gains of $4.2 million related to store/property divestitures, which were partially offset by an asset impairment of $0.4 million. During the first quarter of 2019, we recognized net gains of $8.5 million related to store divestitures.Contents

~~offset by a gain of $2.9 million related to a legal settlement.~~ 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.

~~During the third quarter~~

Non-Operating Income (Expense)

Floorplan Interest Expense

~~Third~~Second Quarter ~~2020~~2021 compared to ~~Third~~Second Quarter ~~2019~~2020

Floorplan interest expense was ~~$11.1~~$6.6 million for the three months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~$33.0~~$16.3 million for the same period in ~~2019.~~2020. The decrease in floorplan interest expense of ~~$21.9~~$9.7 million was the result of lower average ~~interest rates and lower average~~ vehicle floorplan balances. ~~Floorplan interest rates are variable and therefore increase and decrease with changes in the underlying benchmark interest rates.~~

First ~~Nine~~Six Months ~~2020~~2021 compared to First ~~Nine~~Six Months ~~2019~~2020

Floorplan interest expense was ~~$52.9~~$16.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~$109.4~~$41.8 million for the same period in ~~2019.~~2020. The decrease in floorplan interest expense of ~~$56.5~~$25.8 million was the result of lower average ~~interest rates~~vehicle floorplan balances and lower average ~~vehicle floorplan balances.~~interest rates. Floorplan interest rates are variable and therefore increase and decrease with changes in the underlying benchmark interest rates.

Other Interest Expense

~~Third~~Second Quarter ~~2020~~2021 compared to ~~Third~~Second Quarter ~~2019~~2020

Other interest expense was ~~$23.6~~$20.9 million for the three months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~$26.1~~$23.2 million for the same period in ~~2019.~~2020. The decrease of ~~$2.5~~$2.3 million was driven by lower average debt balances.

First ~~Nine~~Six Months ~~2020~~2021 compared to First ~~Nine~~Six Months ~~2019~~2020

Other interest expense was ~~$70.3~~$42.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~$81.6~~$46.7 million for the same period in ~~2019.~~2020. The decrease of ~~$11.3~~$4.6 million was driven by lower average ~~interest rates primarily due to the repayment of the 5.5% Senior Notes due 2020 and lower average~~ debt balances.

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

~~We recorded an unrealized loss~~During the three and six months ended June 30, 2021, we recognized a gain of ~~$2.0~~$5.3 million ~~during~~and $8.8 million, respectively, related to increases in the ~~third~~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 ~~2020~~2021, we sold the remaining shares of our Vroom equity investment and ~~an unrealized~~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, ~~during the second quarter of 2020~~respectively, related ~~to our minority equity investment in Vroom Inc. due~~ to changes in the fair ~~value~~values of the underlying ~~security. During the period that we hold this~~securities of our minority equity ~~investment, unrealized gains and losses will be recorded as the fair market value of this security changes over time.~~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 ~~25.0%~~24.8% for the three months ended ~~September~~June 30, ~~2020,~~2021, and ~~27.1%~~25.7% for the three months ended ~~September~~June 30, ~~2019.~~2020. Our effective income tax rate was ~~34.0%~~24.7% for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, and ~~27.0%~~54.7% for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~

2020. The tax rate for the ~~nine~~six months ended ~~September~~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

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)	(In millions)	September 30, 2020			December 31, 2019			(In millions)	June 30, 2021			December 31, 2020
Cash and cash equivalents	Cash and cash equivalents	$	350.5		$	42.0		Cash and cash equivalents	$	59.5		$	569.6
Revolving credit facility	Revolving credit facility	$	1,760.3	⁽¹⁾	$	1,421.1	⁽²⁾	Revolving credit facility	$	1,760.3	(1)	$	1,760.3
Secured used vehicle floorplan facilities ⁽³⁾⁽²⁾	Secured used vehicle floorplan facilities ⁽³⁾⁽²⁾	$	251.1		$	0.6		Secured used vehicle floorplan facilities ⁽³⁾⁽²⁾	$	0.2		$	0.3

⁽¹⁾ At ~~September~~June 30, ~~2020,~~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 no$200.0 million commercial paper notes outstanding at ~~September~~June 30, ~~2020.~~2021. See Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

⁽²⁾ ~~As limited by the maximum consolidated leverage ratio contained in our credit agreement.~~

⁽³⁾ 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 ~~September~~June 30, ~~2020,~~2021, surety bonds, letters of credit, and cash deposits totaled ~~$101.9~~$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.~~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						Nine Months Ended							Three Months Ended				Six Months Ended
		September 30,						September 30,							June 30,				June 30,
(In millions, except per share data)	(In millions, except per share data)	2020		2019		2020		2019		(In millions, except per share data)	2021		2020		2021		2020
Shares repurchased	Shares repurchased	—		—		2.5		1.3		Shares repurchased	7.5		—		11.3		2.5
Aggregate purchase price	Aggregate purchase price	$	—	$	—	$	80.0	$	44.7	Aggregate purchase price	$	736.1	$	—	$	1,042.2	$	80.0
Average purchase price per share	Average purchase price per share	$	—	$	—	$	31.95	$	35.51	Average purchase price per share	$	98.17	$	—	$	91.94	$	31.95

In ~~October 2020,~~July 2021, our Board of Directors increased the share repurchase authorization ~~to $500 million.~~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						Nine Months Ended							Three Months Ended				Six Months Ended
		September 30,						September 30,							June 30,				June 30,
(In millions)	(In millions)	2020		2019		2020		2019		(In millions)	2021		2020		2021		2020
Purchases of property and equipment, including operating lease buy-outs ⁽¹⁾	Purchases of property and equipment, including operating lease buy-outs ⁽¹⁾	$	37.3	$	62.6	$	91.9	$	170.1	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 ~~September~~June 30, ~~2020,~~2021, we owned approximately ~~80%~~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, ~~auction operations,~~ AutoNation USA used vehicle stores, auction operations, parts distribution centers, and other excess properties with a net book value of ~~$455.3~~$502.4 million. None of these properties are mortgaged or encumbered.

We ~~took various actions~~plan to ~~mitigate~~expand our AutoNation USA used vehicle stores and are targeting to have over 130 stores by the ~~financial impact~~end of 2026. We opened one AutoNation USA store in the ~~COVID-19 pandemic, including the postponement of nearly $90 million of capital expenditures through the third~~second quarter of ~~2020.~~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 ~~also plan~~anticipate that the initial capital investment will be approximately $10 million to ~~defer capital expenditures of over $30~~$11 million for ~~the remainder~~each new store on average. The planned expansion may be impacted by a number of ~~2020.~~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						Nine Months Ended							Three Months Ended				Six Months Ended
		September 30,						September 30,							June 30,				June 30,
(In millions)	(In millions)	2020		2019		2020		2019		(In millions)	2021		2020		2021		2020
Cash received from (used in) business acquisitions, net	Cash received from (used in) business acquisitions, net	$	—	$	(0.4)	$	(0.4)	$	(4.7)	Cash received from (used in) business acquisitions, net	$	—	$	—	$	—	$	(0.4)
Cash received from (used in) business divestitures, net	Cash received from (used in) business divestitures, net	$	2.2	$	44.9	$	2.2	$	67.2	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 ~~nine~~six months ended ~~September~~June 30, 2020. ~~We purchased two parts distribution centers and divested two Domestic stores, four Import stores, and one collision center during the nine months ended September 30, 2019.~~

4643

Long-Term Debt and Commercial Paper

The following table sets forth our non-vehicle long-term debt, net of debt issuance costs, as of ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019.~~2020.


				(in millions)														(in millions)
Debt Description	Debt Description	Maturity Date	Interest Payable	September 30, 2020		December 31, 2019		Debt Description			Maturity Date			Interest Payable		June 30, 2021		December 31, 2020
5.5% Senior Notes		February 1, 2020	February 1 and August 1	$	—	$	350.0
3.35% Senior Notes	3.35% Senior Notes	January 15, 2021	January 15 and July 15	300.0		300.0		3.35% Senior Notes			January 15, 2021			January 15 and July 15		$	—	$	300.0
3.5% Senior Notes	3.5% Senior Notes	November 15, 2024	May 15 and November 15	450.0		450.0		3.5% Senior Notes			November 15, 2024			May 15 and November 15		450.0		450.0
4.5% Senior Notes	4.5% Senior Notes	October 1, 2025	April 1 and October 1	450.0		450.0		4.5% Senior Notes			October 1, 2025			April 1 and October 1		450.0		450.0
3.8% Senior Notes	3.8% Senior Notes	November 15, 2027	May 15 and November 15	300.0		300.0		3.8% Senior Notes			November 15, 2027			May 15 and November 15		300.0		300.0
4.75% Senior Notes	4.75% Senior Notes	June 1, 2030	June 1 and December 1	500.0		—		4.75% Senior Notes			June 1, 2030			June 1 and December 1		500.0		500.0
Revolving credit facility	Revolving credit facility	March 26, 2025	Monthly	—		—		Revolving credit facility			March 26, 2025			Monthly		—		—
Finance leases and other debt	Finance leases and other debt	Various dates through 2039	Monthly	105.3		93.9		Finance leases and other debt			Various dates through 2040			Monthly		111.1		116.6
				2,105.3		1,943.9										1,811.1		2,116.6
Less: unamortized debt discounts and debt issuance costs	Less: unamortized debt discounts and debt issuance costs								(15.6)			(9.8)			Less: unamortized debt discounts and debt issuance costs					(13.8)		(14.8)
Less: current maturities	Less: current maturities								(307.7)			(355.6)			Less: current maturities					(7.0)		(309.2)
Long-term debt, net of current maturities	Long-term debt, net of current maturities								$	1,782.0		$	1,578.5		Long-term debt, net of current maturities					$	1,790.3	$	1,792.6

~~On May 21, 2020, we issued $500.0 million aggregate principal amount of 4.75% Senior Notes due 2030, which were sold at 99.479% of the aggregate principal amount.~~ In ~~February 2020,~~January 2021, we repaid the outstanding ~~$350.0~~$300.0 million of ~~5.5% Senior Notes. Our~~ 3.35% Senior Notes ~~due 2021 will mature on January 15, 2021, and were, therefore, reclassified to current maturities during the first quarter~~through utilization of ~~2020.~~available funds.

We had $200.0 million of commercial paper notes outstanding at June 30, 2021, and no commercial paper notes outstanding at ~~September 30, 2020. At~~ December 31, ~~2019, we had $170.0 million of commercial paper notes outstanding with a weighted-average annual interest rate of 2.13% and a weighted-average remaining term of 12 days.~~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.

Table of 2020, to the extent that in the future we believe that we would be unable to comply with the covenants contained in our credit agreement, we would seek an amendment or waiver of our credit agreement, which could increase the cost of our debt.Contents

During the nine months ended September 30, 2020, we recorded non-cash goodwill and franchise rights impairment charges of $375.8 million. See Note 6 of the Notes to Unaudited Condensed Consolidated Financial Statements. As of ~~September~~June 30, ~~2020,~~2021, we were in compliance with the requirements of the financial covenants under our debt ~~agreements as such non-cash impairment charges do not factor into the calculations for those covenants.~~agreements. Under the terms of our credit agreement, at ~~September~~June 30, ~~2020,~~2021, our leverage ratio and capitalization ratio were as follows:

~~September~~June 30, ~~2020~~2021

Requirement

Actual

Leverage ratio

≤ 3.75x

~~1.99x~~1.17x

Capitalization ratio

≤ 70.0%

~~46.3%~~43.3%

~~Although economic conditions have improved during the third quarter~~

Vehicle Floorplan Payable

The components of vehicle floorplan payable are as follows:


(In millions)	(In millions)	September 30, 2020		December 31, 2019		(In millions)	June 30, 2021		December 31, 2020
Vehicle floorplan payable - trade	Vehicle floorplan payable - trade	$	1,467.6	$	2,120.6	Vehicle floorplan payable - trade	$	669.5	$	1,541.7
Vehicle floorplan payable - non-trade	Vehicle floorplan payable - non-trade	841.0		1,455.2		Vehicle floorplan payable - non-trade	901.8		1,218.2
Vehicle floorplan payable	Vehicle floorplan payable	$	2,308.6	$	3,575.8	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:


		Nine Months Ended							Six Months Ended
		September 30,							June 30,
(In millions)	(In millions)	2020		2019		(In millions)	2021		2020
Net cash provided by operating activities	Net cash provided by operating activities	$	1,164.3	$	665.5	Net cash provided by operating activities	$	930.3	$	894.3
Net cash used in investing activities	Net cash used in investing activities	$	(151.6)	$	(113.5)	Net cash used in investing activities	$	(8.5)	$	(124.7)
Net cash used in financing activities	Net cash used in financing activities	$	(704.6)	$	(555.9)	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 ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, primarily due to ~~a decrease~~an increase in earnings, partially offset by an increase in working capital ~~requirements and an increase in earnings.~~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 ~~increased~~decreased during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, primarily due to proceeds received from the sale of an equity security in 2021 and a decrease in ~~cash received from business divestitures, net of cash relinquished, and an investment~~investments made in an equity ~~security,~~securities, partially offset by ~~a decrease~~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 ~~nine~~six months ended ~~September~~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. ~~During the nine months ended September 30, 2019, we had no borrowings or repayments under our revolving credit facility.~~

During the ~~nine~~six months ended ~~September~~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 ~~nine~~six months ended ~~September~~June 30, 2020, reflect cash payments of ~~$11.0~~$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 ~~$609.7~~$316.9 million ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, and net payments of ~~$180.0 million for the nine months ended September 30, 2019, as well as changes in commercial paper notes outstanding totaling net payments of $170.0~~$431.4 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020, and net payments of $330.0 million during the nine months ended September 30, 2019.~~

During the nine months ended September 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 nine months ended September 30, 2019, we repurchased 1.3 million shares of common stock for an aggregate purchase price of $44.7 million (average purchase price per share of $35.51).

During the nine months ended September 30, 2020, cash flows from financing activities were also impacted by an increase in proceeds from the exercise of stock options as compared to the same period in 2019.2020.

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 ~~the impact of the COVID-19 pandemic on our business, results of operations, and financial condition, the actions we are taking in response to the COVID-19 pandemic,~~ 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,~~strategies; the impact of the COVID-19 pandemic on our business, results of operations, and ~~other statements regarding~~financial condition; our expectations for the future performance of our business and the automotive retail ~~industry,~~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. ~~Any adverse economic impacts resulting from the~~

•The COVID-19 pandemic ~~including any potential economic recessions or downturns, could materially adversely impact~~has disrupted, and may continue to disrupt, our business, ~~in future periods.~~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.

•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.

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

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

•~~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 ~~as supplemented by our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, and June 30, 2020,~~ 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.

5147

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 ~~$2.3~~$1.6 billion of variable rate vehicle floorplan payable at ~~September~~June 30, ~~2020,~~2021, and ~~$3.6~~$2.8 billion at December 31, ~~2019.~~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 ~~$23.1~~$15.7 million at ~~September~~June 30, ~~2020,~~2021, and ~~$35.8~~$27.6 million at December 31, ~~2019.~~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 no$200.0 million of commercial paper notes outstanding at ~~September~~June 30, ~~2020, and $170.0 million at December 31, 2019.~~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 ~~$1.7~~$2.0 million at June 30, 2021. We had no commercial paper notes outstanding at December 31, ~~2019.~~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 ~~September 30, 2020, and totaled $1.9 billion and had a fair value of $2.0 billion as of~~ December 31, ~~2019.~~

~~Equity Price Risk~~

We are subject to equity price risk with respect to our minority equity investment in Vroom Inc., which has a readily determinable fair value following Vroom’s initial public offering in the second quarter of 2020. During the period that we hold this equity investment, unrealized gains and losses will be recorded as the fair market value of this security changes over time. The fair value of this equity security was $288.5 million at September 30, 2020. A hypothetical 10% change in the equity price of this security would result in an approximate change to unrealized gain or loss of $28.8 million. The selected 10% hypothetical change in the equity price is not intended to reflect a best or worst case scenario, as equity price changes could be smaller or larger due to the nature of equity markets.

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~~��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.

5248

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, ~~2019, and Part II, Item 1A in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, and June 30,~~ 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

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 ~~September~~June 30, ~~2020.~~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~~

~~Programs (in millions)~~⁽¹⁾

~~July 1, 2020 - July 31, 2020~~

—

~~139.0~~

~~August 1, 2020 - August 31, 2020~~

—

~~139.0~~

~~September 1, 2020 - September 30, 2020~~

—

~~139.0~~

~~Total~~

—


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 ~~October 2020,~~July 2021, our Board of Directors increased the share repurchase authorization ~~to $500 million.~~by $1 billion. Our stock repurchase program does not have an expiration date.

ITEM 6. EXHIBITS


Exhibit No.			Description



~~10.1~~			~~Employment Agreement, dated July 14, 2020, by and between AutoNation, Inc. and Michael J. Jackson (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 14, 2020).~~
~~10.2~~			~~Separation Agreement and General Release of All Claims, dated July 14, 2020, by and between AutoNation, Inc. and Cheryl Miller (incorporated by reference to Exhibit 10.~~2 ~~to the Current Report on Form 8-K filed on July 14, 2020).~~
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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