UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, ~~2021~~2022


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

For the transition period from to

Commission File Number: 1-13107

AUTONATION, INC.

(Exact name of registrant as specified in its charter)

Delaware

73-1105145

(State or other jurisdiction of incorporation or organization)

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

200 SW 1st Avenue

Fort Lauderdale

Florida

33301

(Address of principal executive offices)

(Zip Code)

(954)769-6000

(Registrant’s telephone number, including area code)

N/A

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

New York Stock Exchange

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

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

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

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of July ~~19, 2021,~~20, 2022, the registrant had ~~71,595,447~~55,983,586 shares of common stock outstanding.

AUTONATION, INC.

FORM 10-Q

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of June 30 ~~2021~~, 2022 and December 31, ~~2020~~2021	1
	Unaudited Condensed Consolidated Statements of Operations for the Three and ~~Six~~ Si x Months Ended June 30 , 2022 and 2021 ~~and 2020~~	2
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended June 30 , 2022 and 2021 ~~and 2020~~	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30 , 2022 and 2021 ~~and 2020~~	4
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2221
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	48
Item 4.	Controls and Procedures	48
PART II. OTHER INFORMATION
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5049
Item 6.	Exhibits	5049

~~Tab~~leTable of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
CURRENT ASSETS:	CURRENT ASSETS:					CURRENT ASSETS:
Cash and cash equivalents	Cash and cash equivalents	$	59.5	$	569.6	Cash and cash equivalents	$	336.5	$	60.4
Receivables, net	Receivables, net	773.5		845.2		Receivables, net	705.4		730.0
Inventory	Inventory	1,756.2		2,598.5		Inventory	1,905.3		1,847.9
Other current assets	Other current assets	212.7		139.4		Other current assets	184.1		173.4
Total Current Assets	Total Current Assets	2,801.9		4,152.7		Total Current Assets	3,131.3		2,811.7
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $1.7 billion and $1.7 billion, respectively		3,094.7		3,138.1
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $1.9 billion and $1.8 billion, respectively						PROPERTY AND EQUIPMENT, net of accumulated depreciation of $1.9 billion and $1.8 billion, respectively	3,466.3		3,419.5
OPERATING LEASE ASSETS	OPERATING LEASE ASSETS	303.0		309.5		OPERATING LEASE ASSETS	287.1		284.0
GOODWILL	GOODWILL	1,187.0		1,185.0		GOODWILL	1,233.3		1,235.3
OTHER INTANGIBLE ASSETS, NET	OTHER INTANGIBLE ASSETS, NET	521.0		521.5		OTHER INTANGIBLE ASSETS, NET	742.8		743.5
OTHER ASSETS	OTHER ASSETS	473.4		580.4		OTHER ASSETS	446.7		449.6
Total Assets	Total Assets	$	8,381.0	$	9,887.2	Total Assets	$	9,307.5	$	8,943.6
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	$	669.5	$	1,541.7	Vehicle floorplan payable - trade	$	556.5	$	489.9
Vehicle floorplan payable - non-trade	Vehicle floorplan payable - non-trade	901.8		1,218.2		Vehicle floorplan payable - non-trade	960.9		967.7
Accounts payable	Accounts payable	396.1		335.2		Accounts payable	371.4		395.9
Commercial paper	Commercial paper	200.0		0		Commercial paper	—		340.0
Current maturities of long-term debt	Current maturities of long-term debt	7.0		309.2		Current maturities of long-term debt	11.8		12.2
Accrued payroll and benefits	Accrued payroll and benefits	269.2		225.8		Accrued payroll and benefits	277.5		279.9
Other current liabilities	Other current liabilities	597.1		535.8		Other current liabilities	601.9		574.2
Total Current Liabilities	Total Current Liabilities	3,040.7		4,165.9		Total Current Liabilities	2,780.0		3,059.8
LONG-TERM DEBT, NET OF CURRENT MATURITIES	LONG-TERM DEBT, NET OF CURRENT MATURITIES	1,790.3		1,792.6		LONG-TERM DEBT, NET OF CURRENT MATURITIES	3,534.7		2,846.2
NONCURRENT OPERATING LEASE LIABILITIES	NONCURRENT OPERATING LEASE LIABILITIES	279.1		286.5		NONCURRENT OPERATING LEASE LIABILITIES	262.8		260.1
DEFERRED INCOME TAXES	DEFERRED INCOME TAXES	75.4		95.9		DEFERRED INCOME TAXES	81.6		78.2
OTHER LIABILITIES	OTHER LIABILITIES	338.7		310.6		OTHER LIABILITIES	323.4		322.3
COMMITMENTS AND CONTINGENCIES (Note 12)		0		0
COMMITMENTS AND CONTINGENCIES (Note 13)						COMMITMENTS AND CONTINGENCIES (Note 13)	0		0
SHAREHOLDERS’ EQUITY:	SHAREHOLDERS’ EQUITY:					SHAREHOLDERS’ EQUITY:

Common stock, par value $0.01 per share; 1,500,000,000 shares authorized; 86,562,149 shares issued at June 30, 2021, and 102,562,149 shares issued at December 31, 2020, including shares held in treasury		0.8		1.0
Common stock, par value $0.01 per share; 1,500,000,000 shares authorized; 86,562,149 shares issued at June 30, 2022, and December 31, 2021, 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, 2022, and December 31, 2021, including shares held in treasury	0.8		0.8
Additional paid-in capital	Additional paid-in capital	5.7		53.1		Additional paid-in capital	5.2		3.2
Retained earnings	Retained earnings	3,896.4		4,069.4		Retained earnings	5,320.2		4,639.9
Treasury stock, at cost; 13,429,134 and 19,078,620 shares held, respectively		(1,046.1)		(887.8)
Treasury stock, at cost; 30,545,724 and 23,951,543 shares held, respectively						Treasury stock, at cost; 30,545,724 and 23,951,543 shares held, respectively	(3,001.2)		(2,266.9)
Total Shareholders’ Equity	Total Shareholders’ Equity	2,856.8		3,235.7		Total Shareholders’ Equity	2,325.0		2,377.0
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	8,381.0	$	9,887.2	Total Liabilities and Shareholders’ Equity	$	9,307.5	$	8,943.6

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

~~Tab~~leTable of Contents

AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Revenue:	Revenue:									Revenue:
New vehicle	New vehicle	$	3,428.3	$	2,261.3	$	6,410.6	$	4,543.2	New vehicle	$	2,935.8	$	3,428.3	$	5,743.0	$	6,410.6
Used vehicle	Used vehicle	2,222.9		1,324.5		3,972.0		2,573.2		Used vehicle	2,520.4		2,222.9		5,092.8		3,972.0
Parts and service	Parts and service	950.8		689.9		1,801.8		1,566.2		Parts and service	1,036.3		950.8		2,040.2		1,801.8
Finance and insurance, net	Finance and insurance, net	369.0		246.4		682.0		482.2		Finance and insurance, net	367.6		369.0		731.5		682.0
Other	Other	7.4		10.9		15.8		35.2		Other	9.1		7.4		14.5		15.8
TOTAL REVENUE	TOTAL REVENUE	6,978.4		4,533.0		12,882.2		9,200.0		TOTAL REVENUE	6,869.2		6,978.4		13,622.0		12,882.2
Cost of sales:	Cost of sales:									Cost of sales:
New vehicle	New vehicle	3,107.8		2,141.7		5,900.1		4,327.2		New vehicle	2,582.3		3,107.8		5,044.5		5,900.1
Used vehicle	Used vehicle	2,020.2		1,207.5		3,629.1		2,365.2		Used vehicle	2,363.9		2,020.2		4,799.7		3,629.1
Parts and service	Parts and service	518.3		378.5		980.3		866.0		Parts and service	554.6		518.3		1,097.4		980.3
Other	Other	5.8		10.3		13.6		33.4		Other	6.7		5.8		9.8		13.6
TOTAL COST OF SALES (excluding depreciation shown below)	TOTAL COST OF SALES (excluding depreciation shown below)	5,652.1		3,738.0		10,523.1		7,591.8		TOTAL COST OF SALES (excluding depreciation shown below)	5,507.5		5,652.1		10,951.4		10,523.1
Gross profit:	Gross profit:									Gross profit:
New vehicle	New vehicle	320.5		119.6		510.5		216.0		New vehicle	353.5		320.5		698.5		510.5
Used vehicle	Used vehicle	202.7		117.0		342.9		208.0		Used vehicle	156.5		202.7		293.1		342.9
Parts and service	Parts and service	432.5		311.4		821.5		700.2		Parts and service	481.7		432.5		942.8		821.5
Finance and insurance	Finance and insurance	369.0		246.4		682.0		482.2		Finance and insurance	367.6		369.0		731.5		682.0
Other	Other	1.6		0.6		2.2		1.8		Other	2.4		1.6		4.7		2.2
TOTAL GROSS PROFIT	TOTAL GROSS PROFIT	1,326.3		795.0		2,359.1		1,608.2		TOTAL GROSS PROFIT	1,361.7		1,326.3		2,670.6		2,359.1
Selling, general, and administrative expenses	Selling, general, and administrative expenses	748.9		547.9		1,396.8		1,148.6		Selling, general, and administrative expenses	754.8		748.9		1,496.2		1,396.8
Depreciation and amortization	Depreciation and amortization	47.9		49.1		95.8		97.2		Depreciation and amortization	48.8		47.9		98.8		95.8
Goodwill impairment		0		0		0		318.3
Franchise rights impairment		0		0		0		57.5
Other (income) expense, net		(0.7)		(3.4)		(0.6)		4.5
OPERATING INCOME (LOSS)		530.2		201.4		867.1		(17.9)

Other income, net										Other income, net	—		(0.7)		(1.5)		(0.6)
OPERATING INCOME										OPERATING INCOME	558.1		530.2		1,077.1		867.1
Non-operating income (expense) items:	Non-operating income (expense) items:									Non-operating income (expense) items:
Floorplan interest expense	Floorplan interest expense	(6.6)		(16.3)		(16.0)		(41.8)		Floorplan interest expense	(5.8)		(6.6)		(11.0)		(16.0)
Other interest expense	Other interest expense	(20.9)		(23.2)		(42.1)		(46.7)		Other interest expense	(34.1)		(20.9)		(63.7)		(42.1)
Other income, net		8.9		214.6		19.9		211.7
Other income (loss), net										Other income (loss), net	(13.7)		8.9		(20.1)		19.9
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	511.6		376.5		828.9		105.3		INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	504.5		511.6		982.3		828.9
Income tax provision	Income tax provision	126.7		96.6		204.5		57.6		Income tax provision	128.0		126.7		243.7		204.5
NET INCOME FROM CONTINUING OPERATIONS	NET INCOME FROM CONTINUING OPERATIONS	384.9		279.9		624.4		47.7		NET INCOME FROM CONTINUING OPERATIONS	376.5		384.9		738.6		624.4
Loss from discontinued operations, net of income taxes	Loss from discontinued operations, net of income taxes	(0.1)		(0.1)		(0.2)		(0.2)		Loss from discontinued operations, net of income taxes	(0.2)		(0.1)		(0.2)		(0.2)
NET INCOME	NET INCOME	$	384.8	$	279.8	$	624.2	$	47.5	NET INCOME	$	376.3	$	384.8	$	738.4	$	624.2
BASIC EARNINGS (LOSS) PER SHARE:	BASIC EARNINGS (LOSS) PER SHARE:									BASIC EARNINGS (LOSS) PER SHARE:
Continuing operations	Continuing operations	$	4.88	$	3.18	$	7.71	$	0.54	Continuing operations	$	6.51	$	4.88	$	12.33	$	7.71
Discontinued operations	Discontinued operations	$	0	$	0	$	0	$	0	Discontinued operations	$	—	$	—	$	—	$	—
Net income	Net income	$	4.88	$	3.18	$	7.71	$	0.53	Net income	$	6.51	$	4.88	$	12.33	$	7.71
Weighted average common shares outstanding	Weighted average common shares outstanding	78.9		87.9		81.0		89.0		Weighted average common shares outstanding	57.8		78.9		59.9		81.0
DILUTED EARNINGS (LOSS) PER SHARE:	DILUTED EARNINGS (LOSS) PER SHARE:									DILUTED EARNINGS (LOSS) PER SHARE:
Continuing operations	Continuing operations	$	4.83	$	3.18	$	7.63	$	0.54	Continuing operations	$	6.48	$	4.83	$	12.25	$	7.63
Discontinued operations	Discontinued operations	$	0	$	0	$	0	$	0	Discontinued operations	$	—	$	—	$	—	$	—
Net income	Net income	$	4.83	$	3.18	$	7.63	$	0.53	Net income	$	6.48	$	4.83	$	12.25	$	7.63
Weighted average common shares outstanding	Weighted average common shares outstanding	79.7		88.1		81.8		89.0		Weighted average common shares outstanding	58.1		79.7		60.3		81.8
COMMON SHARES OUTSTANDING, net of treasury stock, at period end	COMMON SHARES OUTSTANDING, net of treasury stock, at period end	73.1		87.2		73.1		87.2		COMMON SHARES OUTSTANDING, net of treasury stock, at period end	56.0		73.1		56.0		73.1

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

~~Tab~~leTable of Contents

AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In millions, except share data)


		Six Months Ended June 30, 2021																		Six Months Ended June 30, 2022
		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								Amount
BALANCE AT DECEMBER 31, 2020		102,562,149	$	1.0			$	53.1						$	4,069.4			$	(887.8)		$	3,235.7
BALANCE AT DECEMBER 31, 2021																			BALANCE AT DECEMBER 31, 2021	86,562,149			$	0.8		$	3.2		$	4,639.9		$	(2,266.9)		$	2,377.0
Net income	Net income	—	—		—				239.4			—				239.4			Net income	—			—		—			362.1			—			362.1
Repurchases of common stock	Repurchases of common stock	—	—		—				—			(306.1)				(306.1)			Repurchases of common stock	—			—		—			—			(380.9)			(380.9)
Stock-based compensation expense	Stock-based compensation expense	—	—		20.8				—			—				20.8			Stock-based compensation expense	—			—		15.9			—			—			15.9
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	—	—		(32.9)				—			37.0				4.1			Shares awarded under stock-based compensation plans, net of shares withheld for taxes	—			—		(16.7)			(58.1)			46.3			(28.5)

BALANCE AT MARCH 31, 2021		102,562,149	$	1.0	$	41.0			$	4,308.8		$	(1,156.9)			$	3,193.9
BALANCE AT MARCH 31, 2022																			BALANCE AT MARCH 31, 2022	86,562,149			$	0.8	$	2.4		$	4,943.9		$	(2,601.5)		$	2,345.6
Net income	Net income	—	—		—				384.8			—				384.8			Net income	—			—		—			376.3			—			376.3
Repurchases of common stock	Repurchases of common stock	—	—		—				—			(736.1)				(736.1)			Repurchases of common stock	—			—		—			—			(403.9)			(403.9)
Treasury stock cancellation		(16,000,000)	(0.2)		(40.6)				(797.2)			838.0				0
Stock-based compensation expense	Stock-based compensation expense	—	—		6.5				—			—				6.5			Stock-based compensation expense	—			—		5.3			—			—			5.3
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	—	—		(1.2)				—			8.9				7.7			Shares awarded under stock-based compensation plans, net of shares withheld for taxes	—			—		(2.5)			—			4.2			1.7
BALANCE AT JUNE 30, 2021		86,562,149	$	0.8	$	5.7			$	3,896.4		$	(1,046.1)			$	2,856.8
BALANCE AT JUNE 30, 2022																			BALANCE AT JUNE 30, 2022	86,562,149			$	0.8	$	5.2		$	5,320.2		$	(3,001.2)		$	2,325.0


		Six Months Ended June 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								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)
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			—
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
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

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

~~Tab~~leTable of Contents

AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)


		Six Months Ended					Six Months Ended
		June 30,					June 30,
		2021		2020			2022		2021
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	$	624.2	$	47.5	Net income	$	738.4	$	624.2
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		0.2		Loss from discontinued operations	0.2		0.2
Depreciation and amortization	Depreciation and amortization	95.8		97.2		Depreciation and amortization	98.8		95.8
Amortization of debt issuance costs and accretion of debt discounts	Amortization of debt issuance costs and accretion of debt discounts	2.2		2.3		Amortization of debt issuance costs and accretion of debt discounts	3.0		2.2
Stock-based compensation expense	Stock-based compensation expense	27.3		15.7		Stock-based compensation expense	21.2		27.3
Deferred income tax benefit		(20.5)		(17.1)
Deferred income tax provision (benefit)						Deferred income tax provision (benefit)	3.5		(20.5)
Net gain related to business/property dispositions	Net gain related to business/property dispositions	(2.4)		(1.5)		Net gain related to business/property dispositions	(1.0)		(2.4)
Goodwill impairment		0		318.3
Franchise rights impairment		0		57.5

Non-cash impairment charges	Non-cash impairment charges	1.7		8.6		Non-cash impairment charges	1.0		1.7
Gain on equity investments		(10.9)		(214.7)
Loss (gain) on equity investments						Loss (gain) on equity investments	0.1		(10.9)
Loss (gain) on corporate-owned life insurance asset						Loss (gain) on corporate-owned life insurance asset	20.8		(8.8)
Other	Other	(8.7)		3.8		Other	—		0.1
(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:
Receivables	Receivables	71.7		244.6		Receivables	24.3		71.7
Inventory	Inventory	849.9		873.3		Inventory	(63.5)		849.9
Other assets	Other assets	18.6		75.1		Other assets	(0.9)		18.6
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	Vehicle floorplan payable - trade	(880.6)		(621.5)		Vehicle floorplan payable - trade	71.8		(880.6)
Accounts payable	Accounts payable	60.2		(25.5)		Accounts payable	(20.8)		60.2
Other liabilities	Other liabilities	101.8		30.5		Other liabilities	(1.7)		101.8
Net cash provided by continuing operations	Net cash provided by continuing operations	930.5		894.3		Net cash provided by continuing operations	895.2		930.5
Net cash used in discontinued operations	Net cash used in discontinued operations	(0.2)		0		Net cash used in discontinued operations	(0.2)		(0.2)
Net cash provided by operating activities	Net cash provided by operating activities	930.3		894.3		Net cash provided by operating activities	895.0		930.3
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	(116.2)		(75.3)		Purchases of property and equipment	(160.3)		(116.2)

Proceeds from assets held for sale						Proceeds from assets held for sale	18.0		—

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	4.3		0		Cash received from business divestitures, net of cash relinquished	—		4.3
Cash used in business acquisitions, net of cash acquired		0		(0.4)

Proceeds from the sale of equity securities	Proceeds from the sale of equity securities	109.4		0		Proceeds from the sale of equity securities	—		109.4
Investment in equity securities	Investment in equity securities	(3.3)		(50.0)		Investment in equity securities	—		(3.3)
Other	Other	(2.7)		(0.5)		Other	(6.2)		(2.7)
Net cash used in continuing operations	Net cash used in continuing operations	(8.5)		(124.7)		Net cash used in continuing operations	(148.5)		(8.5)
Net cash used in discontinued operations	Net cash used in discontinued operations	0		0		Net cash used in discontinued operations	—		—
Net cash used in investing activities	Net cash used in investing activities	(8.5)		(124.7)		Net cash used in investing activities	(148.5)		(8.5)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

~~Tab~~leTable of Contents

AUTONATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Continued)


		Six Months Ended					Six Months Ended
		June 30,					June 30,
		2021		2020			2022		2021
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	(1,021.1)		(80.0)		Repurchases of common stock	(784.5)		(1,021.1)
Proceeds from 4.75% Senior Notes due 2030		0		497.4

Proceeds from 3.85% Senior Notes due 2032						Proceeds from 3.85% Senior Notes due 2032	698.8		—
Payment of 3.35% Senior Notes due 2021	Payment of 3.35% Senior Notes due 2021	(300.0)		0		Payment of 3.35% Senior Notes due 2021	—		(300.0)
Payment of 5.5% Senior Notes due 2020		0		(350.0)
Proceeds from revolving credit facility		0		1,110.0
Payments of revolving credit facility		0		(1,110.0)

Net proceeds from (payments of) commercial paper	Net proceeds from (payments of) commercial paper	200.0		(170.0)		Net proceeds from (payments of) commercial paper	(340.0)		200.0
Payment of debt issuance costs	Payment of debt issuance costs	0		(10.5)		Payment of debt issuance costs	(6.6)		—
Net payments of vehicle floorplan payable - non-trade	Net payments of vehicle floorplan payable - non-trade	(316.9)		(431.4)		Net payments of vehicle floorplan payable - non-trade	(5.5)		(316.9)
Payments of other debt obligations	Payments of other debt obligations	(5.6)		(3.1)		Payments of other debt obligations	(5.9)		(5.6)
Proceeds from the exercise of stock options	Proceeds from the exercise of stock options	28.9		1.0		Proceeds from the exercise of stock options	2.6		28.9
Payments of tax withholdings for stock-based awards	Payments of tax withholdings for stock-based awards	(17.1)		(8.1)		Payments of tax withholdings for stock-based awards	(29.4)		(17.1)

Net cash used in continuing operations	Net cash used in continuing operations	(1,431.8)		(554.7)		Net cash used in continuing operations	(470.5)		(1,431.8)
Net cash used in discontinued operations	Net cash used in discontinued operations	0		0		Net cash used in discontinued operations	—		—
Net cash used in financing activities	Net cash used in financing activities	(1,431.8)		(554.7)		Net cash used in financing activities	(470.5)		(1,431.8)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(510.0)		214.9		INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	276.0		(510.0)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at beginning of period	CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at beginning of period	569.7		42.5		CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at beginning of period	60.6		569.7
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at end of period	CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at end of period	$	59.7	$	257.4	CASH, CASH EQUIVALENTS, AND RESTRICTED CASH at end of period	$	336.6	$	59.7

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

~~Table~~T ab le of Contents

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 one of the largest automotive ~~retailer~~retailers in the United States. As of June 30, ~~2021,~~2022, we owned and operated ~~312~~339 new vehicle franchises from ~~228~~247 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 3233 different new vehicle brands. The core brands of new vehicles that we sell, representing approximately ~~90%~~89% of the new vehicles that we sold during the six months ended June 30, ~~2021,~~2022, are manufactured by Toyota (including Lexus), Honda, Ford, Mercedes-Benz, BMW, General Motors, ~~Mercedes-Benz,~~ Stellantis, ~~(formerly FCA), BMW,~~ and Volkswagen (including Audi and Porsche). As of June 30, ~~2021,~~2022, we also owned and operated 7256 AutoNation-branded collision centers, 611 AutoNation USA used vehicle stores, 4 AutoNation-branded automotive auction operations, and 3 parts distribution centers.

We offer a diversified range of automotive products and services, including new vehicles, used vehicles, “parts and ~~service,”~~service” (also referred to as “After-Sales”), which includes automotive repair and maintenance services as well as wholesale parts and collision businesses, and automotive “finance and insurance” products, which include vehicle service and other protection products, as well as the arranging of financing for vehicle purchases through third-party finance sources. For convenience, the terms “AutoNation,” “Company,” and “we” are used to refer collectively to AutoNation, Inc. and its subsidiaries, unless otherwise required by the context. Our dealership operations are conducted by our subsidiaries.

The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of AutoNation, Inc. and its subsidiaries; intercompany accounts and transactions have been eliminated. The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Additionally, operating results for interim periods are not necessarily indicative of the results that can be expected for a full year. The Unaudited Condensed Consolidated Financial Statements herein should be read in conjunction with our audited Consolidated Financial Statements and notes thereto included within our most recent Annual Report on Form 10-K. These Unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to fairly state, in all material respects, our financial position and results of operations for the periods presented.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ materially from these estimates. We periodically evaluate estimates and assumptions used in the preparation of the financial statements and make changes on a prospective basis when adjustments are necessary. Such estimates and assumptions affect, among other things, our goodwill, indefinite-lived intangible asset, and long-lived asset valuations; inventory valuation; equity investment valuation; assets held for sale; assessments of variable consideration and related constraints related to retrospective commissions; accruals for chargebacks against revenue recognized from the sale of finance and insurance products; accruals related to self-insurance programs; certain legal proceedings; assessment of the annual income tax expense; valuation of deferred income taxes and income tax contingencies; the allowance for expected credit losses; and measurement of performance-based compensation costs.

~~Table of Contents~~

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

2. REVENUE RECOGNITION

Disaggregation of Revenue

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

Three Months Ended June 30, 2021
Domestic Import Premium Luxury
Corporate and other(1)
Total
Major Goods/Service Lines
New vehicle $ 991.3 $ 1,184.2 $ 1,252.8 $ 0 $ 3,428.3
Used vehicle 749.1 604.5 788.8 80.5 2,222.9
Parts and service 257.9 248.5 317.6 126.8 950.8
Finance and insurance, net 125.8 133.2 108.0 2.0 369.0
Other 0.7 4.6 1.3 0.8 7.4
$ 2,124.8 $ 2,175.0 $ 2,468.5 $ 210.1 $ 6,978.4
Timing of Revenue Recognition
Goods and services transferred at a point in time $ 1,944.2 $ 1,984.7 $ 2,204.5 $ 129.0 $ 6,262.4
Goods and services transferred over time(2)
180.6 190.3 264.0 81.1 716.0
$ 2,124.8 $ 2,175.0 $ 2,468.5 $ 210.1 $ 6,978.4

Three Months Ended June 30, 2020
Domestic Import Premium Luxury
Corporate and other(1)
Total
Major Goods/Service Lines
New vehicle $ 761.7 $ 712.6 $ 787.0 $ 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
6

Table of Contents

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)


	Three Months Ended June 30, 2022
	Domestic		Import		Premium Luxury		Corporate and other(1)		Total
Major Goods/Service Lines
New vehicle	$	858.1	$	852.4	$	1,225.3	$	—	$	2,935.8
Used vehicle	786.8		699.6		904.6		129.4		2,520.4
Parts and service	275.5		266.3		367.0		127.5		1,036.3
Finance and insurance, net	119.4		125.7		118.4		4.1		367.6
Other	1.1		5.7		1.3		1.0		9.1
	$	2,040.9	$	1,949.7	$	2,616.6	$	262.0	$	6,869.2

Timing of Revenue Recognition
Goods and services transferred at a point in time	$	1,848.7	$	1,748.9	$	2,311.4	$	179.5	$	6,088.5
Goods and services transferred over time(2)	192.2		200.8		305.2		82.5		780.7
	$	2,040.9	$	1,949.7	$	2,616.6	$	262.0	$	6,869.2


	Three Months Ended June 30, 2021
	Domestic		Import		Premium Luxury		Corporate and other(1)		Total
Major Goods/Service Lines
New vehicle	$	991.3	$	1,184.2	$	1,252.8	$	—	$	3,428.3
Used vehicle	749.1		604.5		788.8		80.5		2,222.9
Parts and service	257.9		248.5		317.6		126.8		950.8
Finance and insurance, net	125.8		133.2		108.0		2.0		369.0
Other	0.7		4.6		1.3		0.8		7.4
	$	2,124.8	$	2,175.0	$	2,468.5	$	210.1	$	6,978.4

Timing of Revenue Recognition
Goods and services transferred at a point in time	$	1,944.2	$	1,984.7	$	2,204.5	$	129.0	$	6,262.4
Goods and services transferred over time(2)	180.6		190.3		264.0		81.1		716.0
	$	2,124.8	$	2,175.0	$	2,468.5	$	210.1	$	6,978.4

Table of Contents

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)


		Six Months Ended June 30, 2021											Six Months Ended June 30, 2022
		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	$	1,926.7	$	2,142.2	$	2,341.7	$	0	$	6,410.6	New vehicle	$	1,680.6	$	1,734.0	$	2,328.4	$	—	$	5,743.0
Used vehicle	Used vehicle	1,312.8		1,089.2		1,431.1		138.9		3,972.0		Used vehicle	1,609.9		1,407.2		1,820.7		255.0		5,092.8
Parts and service	Parts and service	492.0		462.6		602.8		244.4		1,801.8		Parts and service	544.2		521.8		718.9		255.3		2,040.2
Finance and insurance, net	Finance and insurance, net	235.1		242.3		194.8		9.8		682.0		Finance and insurance, net	238.6		252.1		225.6		15.2		731.5
Other	Other	4.9		8.3		1.6		1.0		15.8		Other	2.0		8.7		1.7		2.1		14.5
		$	3,971.5	$	3,944.6	$	4,572.0	$	394.1	$	12,882.2		$	4,075.3	$	3,923.8	$	5,095.3	$	527.6	$	13,622.0

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	$	3,625.7	$	3,588.8	$	4,068.1	$	236.3	$	11,518.9	Goods and services transferred at a point in time	$	3,699.3	$	3,532.8	$	4,497.7	$	366.1	$	12,095.9
Goods and services transferred over time(2)	Goods and services transferred over time(2)	345.8		355.8		503.9		157.8		1,363.3		Goods and services transferred over time(2)	376.0		391.0		597.6		161.5		1,526.1
		$	3,971.5	$	3,944.6	$	4,572.0	$	394.1	$	12,882.2		$	4,075.3	$	3,923.8	$	5,095.3	$	527.6	$	13,622.0


		Six Months Ended June 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	$	1,500.6	$	1,446.5	$	1,596.1	$	0	$	4,543.2	New vehicle	$	1,926.7	$	2,142.2	$	2,341.7	$	—	$	6,410.6
Used vehicle	Used vehicle	841.4		690.3		957.6		83.9		2,573.2		Used vehicle	1,312.8		1,089.2		1,431.1		138.9		3,972.0
Parts and service	Parts and service	428.9		377.9		500.6		258.8		1,566.2		Parts and service	492.0		462.6		602.8		244.4		1,801.8
Finance and insurance, net	Finance and insurance, net	171.1		166.4		127.3		17.4		482.2		Finance and insurance, net	235.1		242.3		194.8		9.8		682.0
Other	Other	27.5		6.3		0		1.4		35.2		Other	4.9		8.3		1.6		1.0		15.8
		$	2,969.5	$	2,687.4	$	3,181.6	$	361.5	$	9,200.0		$	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	$	2,654.6	$	2,387.5	$	2,753.8	$	206.7	$	8,002.6	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)	314.9		299.9		427.8		154.8		1,197.4		Goods and services transferred over time(2)	345.8		355.8		503.9		157.8		1,363.3
		$	2,969.5	$	2,687.4	$	3,181.6	$	361.5	$	9,200.0		$	3,971.5	$	3,944.6	$	4,572.0	$	394.1	$	12,882.2
(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.											(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.

Table of Contents

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

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

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


	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	$	97.4	$	33.9	$	46.3	$	17.2

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

Contract Assets and Liabilities

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

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

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


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Receivables from contracts with customers, net	Receivables from contracts with customers, net	$	572.1	$	595.0	Receivables from contracts with customers, net	$	516.6	$	539.9
Contract Asset (Current)	Contract Asset (Current)	$	29.0	$	25.7	Contract Asset (Current)	$	31.1	$	30.4
Contract Asset (Long-Term)	Contract Asset (Long-Term)	$	6.8	$	10.2	Contract Asset (Long-Term)	$	8.7	$	14.2
Contract Liability (Current)	Contract Liability (Current)	$	33.1	$	32.5	Contract Liability (Current)	$	34.2	$	33.6
Contract Liability (Long-Term)	Contract Liability (Long-Term)	$	58.2	$	56.0	Contract Liability (Long-Term)	$	63.5	$	60.5

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

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Amounts included in contract liability at the beginning of the period	$	8.8	$	8.2	$	17.8	$	16.9
Performance obligations satisfied in previous periods	$	0.9	$	5.7	$	4.7	$	11.1

Other significant changes include contract assets reclassified to receivables of $30.5 million for the six months ended June 30, 2022, and $24.6 million for the six months ended June 30, ~~2021, and $24.4 million for the six months ended June 30, 2020.~~2021.

Table of Contents

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

3.EARNINGS PER SHARE

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

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


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net income from continuing operations	Net income from continuing operations	$	384.9	$	279.9	$	624.4	$	47.7	Net income from continuing operations	$	376.5	$	384.9	$	738.6	$	624.4
Loss from discontinued operations, net of income taxes	Loss from discontinued operations, net of income taxes	(0.1)		(0.1)		(0.2)		(0.2)		Loss from discontinued operations, net of income taxes	(0.2)		(0.1)		(0.2)		(0.2)
Net income	Net income	$	384.8	$	279.8	$	624.2	$	47.5	Net income	$	376.3	$	384.8	$	738.4	$	624.2

Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	78.9		87.9		81.0		89.0		Basic weighted average common shares outstanding	57.8		78.9		59.9		81.0
Dilutive effect of stock options and unvested RSUs	Dilutive effect of stock options and unvested RSUs	0.8		0.2		0.8		0		Dilutive effect of stock options and unvested RSUs	0.3		0.8		0.4		0.8
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	79.7		88.1		81.8		89.0		Diluted weighted average common shares outstanding	58.1		79.7		60.3		81.8

Basic EPS amounts(1):	Basic EPS amounts(1):									Basic EPS amounts(1):
Continuing operations	Continuing operations	$	4.88	$	3.18	$	7.71	$	0.54	Continuing operations	$	6.51	$	4.88	$	12.33	$	7.71
Discontinued operations	Discontinued operations	$	0	$	0	$	0	$	0	Discontinued operations	$	—	$	—	$	—	$	—
Net income	Net income	$	4.88	$	3.18	$	7.71	$	0.53	Net income	$	6.51	$	4.88	$	12.33	$	7.71

Diluted EPS amounts(1):	Diluted EPS amounts(1):									Diluted EPS amounts(1):
Continuing operations	Continuing operations	$	4.83	$	3.18	$	7.63	$	0.54	Continuing operations	$	6.48	$	4.83	$	12.25	$	7.63
Discontinued operations	Discontinued operations	$	0	$	0	$	0	$	0	Discontinued operations	$	—	$	—	$	—	$	—
Net income	Net income	$	4.83	$	3.18	$	7.63	$	0.53	Net income	$	6.48	$	4.83	$	12.25	$	7.63

(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 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


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2022	2021	2022	2021
Anti-dilutive equity instruments excluded from the computation of diluted EPS	0.1	—	0.1	—

Table of Contents

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

4.RECEIVABLES, NET

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

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


	June 30, 2022		December 31, 2021
Contracts-in-transit and vehicle receivables	$	328.0	$	347.4
Trade receivables	157.7		162.6
Manufacturer receivables	148.4		148.4
Income taxes receivable (see Note 8)	5.5		—
Other	69.4		77.0
	709.0		735.4
Less: allowances for expected credit losses	(3.6)		(5.4)
Receivables, net	$	705.4	$	730.0

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

5.INVENTORY AND VEHICLE FLOORPLAN PAYABLE

The components of inventory are as follows:


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
New vehicles	New vehicles	$	637.5	$	1,761.9	New vehicles	$	579.5	$	515.1
Used vehicles	Used vehicles	923.0		648.4		Used vehicles	1,088.5		1,109.3
Parts, accessories, and other	Parts, accessories, and other	195.7		188.2		Parts, accessories, and other	237.3		223.5
Inventory	Inventory	$	1,756.2	$	2,598.5	Inventory	$	1,905.3	$	1,847.9

The components of vehicle floorplan payable are as follows:


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Vehicle floorplan payable - trade	Vehicle floorplan payable - trade	$	669.5	$	1,541.7	Vehicle floorplan payable - trade	$	556.5	$	489.9
Vehicle floorplan payable - non-trade	Vehicle floorplan payable - non-trade	901.8		1,218.2		Vehicle floorplan payable - non-trade	960.9		967.7
Vehicle floorplan payable	Vehicle floorplan payable	$	1,571.3	$	2,759.9	Vehicle floorplan payable	$	1,517.4	$	1,457.6

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~~may also be higher than the inventory cost due to the timing of the sale of a vehicle and payment of the related liability.

Table of Contents

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

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.

~~Table~~At June 30, 2022, most of ~~Contents~~

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

our new vehicle floorplan facilities utilized LIBOR-based interest rates and a smaller portion utilized Prime-based or SOFR-based interest rates. Our new vehicle floorplan ~~facilities utilize LIBOR-based~~outstanding had a weighted-average interest ~~rates, which averaged 1.7% for the six months ended~~rate of 3.2% at June 30, ~~2021,~~2022, and ~~2.3% for the six months ended~~1.6% at December 31, 2021. As of June 30, ~~2020. At June 30, 2021,~~2022, the aggregate capacity under our new vehicle floorplan facilities to finance our new vehicle inventory was approximately ~~$4.7~~$4.8 billion, of which ~~$1.0~~$0.9 billion had been borrowed.

At June 30, 2022, most of our used vehicle floorplan facilities utilized LIBOR-based interest rates and a smaller portion utilized Prime-based interest rates. Our used vehicle floorplan ~~facilities utilize LIBOR-based~~outstanding had a weighted-average annual interest ~~rates, which averaged 1.8% for the six months ended~~rate of 3.4% at June 30, ~~2021,~~2022, and ~~2.6% for the six months ended~~1.8% at December 31, 2021. As of June 30, ~~2020. At June 30, 2021,~~2022, the aggregate capacity under our used vehicle floorplan facilities with various lenders to finance a portion of our used vehicle inventory was ~~$562.0~~$592.0 million, of which ~~$537.1~~$580.8 million had been borrowed. The remaining borrowing capacity of ~~$24.9~~$11.2 million was limited to ~~$0.2~~$0.1 million based on the eligible used vehicle inventory that could have been pledged as collateral.

6.GOODWILL AND INTANGIBLE ASSETS, NET

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

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

~~Goodwill and Other Intangible Assets~~


	June 30, 2022		December 31, 2021
Goodwill	$	1,233.3	$	1,235.3

Franchise rights - indefinite-lived	$	727.5	$	727.5
Other intangibles	24.0		24.0
	751.5		751.5
Less: accumulated amortization	(8.7)		(8.0)
Other intangible assets, net	$	742.8	$	743.5

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

Under accounting standards, we chose to make a qualitative evaluation about the likelihood of goodwill impairment for our annual impairment testing as of April 30, ~~2021,~~2022, 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,~~2022, and 0no 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

Table of Contents

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	June 30, 2022		December 31, 2021
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
1.95% Senior Notes	August 1, 2028	February 1 and August 1	400.0		400.0
4.75% Senior Notes	June 1, 2030	June 1 and December 1	500.0		500.0
2.4% Senior Notes	August 1, 2031	February 1 and August 1	450.0		450.0
3.85% Senior Notes	March 1, 2032	March 1 and September 1	700.0		—
Revolving credit facility	March 26, 2025	Monthly	—		—
Finance leases and other debt	Various dates through 2041		324.4		330.6
			3,574.4		2,880.6
Less: unamortized debt discounts and debt issuance costs			(27.9)		(22.2)
Less: current maturities			(11.8)		(12.2)
Long-term debt, net of current maturities			$	3,534.7	$	2,846.2

Senior Unsecured Notes and Credit Agreement

~~In January 2021,~~On February 28, 2022, we ~~repaid the outstanding $300.0~~issued $700 million aggregate principal amount of ~~3.35%~~3.85% Senior Notes due ~~2021.~~2032, which were sold at 99.835% of the aggregate principal amount.

The interest rates payable on our ~~outstanding senior unsecured notes~~3.5% Senior Notes, 4.5% Senior Notes, 3.8% Senior Notes, and 4.75% Senior Notes are subject to adjustment upon the occurrence of certain credit rating events as provided in the indentures for these senior unsecured notes.

Under our amended and restated credit agreement, we have a $1.8 billion revolving credit facility that matures on March 26, 2025. The credit agreement also contains an accordion feature that allows us, subject to credit availability and certain other conditions, to increase the amount of the revolving credit facility, together with any added term loans, by up to $500.0 million in the aggregate. As of June 30, ~~2021,~~2022, we had 0no 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~~$39.8 million at June 30, ~~2021,~~2022, leaving a borrowing capacity under the revolving credit facility of $1.8 billion at June 30, ~~2021.~~2022.

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

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

Other Long-Term Debt

At June 30, ~~2021,~~2022, we had finance leases and other debt obligations of ~~$111.1~~$324.4 million, which are due at various dates through ~~2040.~~2041.

Table of Contents

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

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 strategic initiatives, 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.

AtWe had no commercial paper notes outstanding at June 30, 2022. At December 31, 2021, we had ~~$200.0~~$340.0 million commercial paper notes outstanding with a weighted-average annual interest rate of ~~0.25%~~0.47% and a weighted-average remaining term of ~~1 day. We had 0 commercial paper notes outstanding at December 31, 2020.~~10 days.

8.INCOME TAXES

Income taxes receivable included in Receivables, net totaled $5.5 million at June 30, 2022, and income taxes payable included in Other Current Liabilities totaled ~~$47.3 million at June 30, 2021, and $13.3~~$6.9 million at December 31, ~~2020.~~2021.

We file income tax returns in the U.S. federal jurisdiction and various states. As a matter of course, various taxing authorities, including the IRS, regularly audit us. Currently, no tax years are under examination by the IRS, and tax years from 2014 to 2019 are under examination by certain U.S. state jurisdictions. These audits may result in proposed assessments where the ultimate resolution may result in our owing additional taxes.

~~Table of Contents~~

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

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

9.SHAREHOLDERS’ EQUITY

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


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Shares repurchased	Shares repurchased	7.5		0		11.3		2.5		Shares repurchased	3.7		7.5		7.2		11.3
Aggregate purchase price	Aggregate purchase price	$	736.1	$	0	$	1,042.2	$	80.0	Aggregate purchase price	$	403.9	$	736.1	$	784.9	$	1,042.2
Average purchase price per share	Average purchase price per share	$	98.17	$	0	$	91.94	$	31.95	Average purchase price per share	$	109.22	$	98.17	$	109.62	$	91.94

As of June 30, ~~2021, $155.5~~2022, $109.7 million remained available ~~for share repurchases~~ under ~~the program.~~our stock repurchase limit most recently authorized by our Board of Directors. In July ~~2021,~~2022, our Board of Directors increased the share repurchase authorization by $1.0 billion.

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

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

Table of Contents

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

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

Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Shares issued 0.2 0 0.6 0.1
Proceeds from the exercise of stock options $ 7.7 $ 0 $ 28.9 $ 1.0
Average exercise price per share $ 51.10 $ 0 $ 50.71 $ 18.12


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Shares issued (in actual number of shares)	32,064		151,601		54,460		570,670
Proceeds from the exercise of stock options	$	1.8	$	7.7	$	2.6	$	28.9
Average exercise price per share	$	54.63	$	51.10	$	47.88	$	50.71

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


		Three Months Ended		Six Months Ended			Three Months Ended		Six Months Ended
		June 30,		June 30,			June 30,		June 30,
(In actual number of shares)	(In actual number of shares)	2021	2020	2021	2020	(In actual number of shares)	2022	2021	2022	2021
Shares issued	Shares issued	7,341	7,340	639,192	502,021	Shares issued	10,973	7,341	774,085	639,192
Shares surrendered to AutoNation to satisfy tax withholding obligations	Shares surrendered to AutoNation to satisfy tax withholding obligations	1,616	2,260	224,133	186,600	Shares surrendered to AutoNation to satisfy tax withholding obligations	—	1,616	262,951	224,133

10.ACQUISITIONS

We did not purchase any stores during the six months ended June 30, 2022 and 2021. During the second half of 2021, we purchased 20 stores and 4 collision centers operating in South Carolina, Georgia, and Maryland.

The amounts of revenue and earnings of the stores and collision centers acquired during 2021 included in our Unaudited Condensed Consolidated Statement of Operations were $261.7 million and $12.6 million, respectively, for the three months ended June 30, 2022, and $499.5 million and $20.8 million, respectively, for the six months ended June 30, 2022. Our supplemental pro forma revenue and net income from continuing operations for the three and six months ended June 30, 2021, had the acquisition dates been January 1, 2021, are as follows:


Unaudited supplemental pro forma:	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
Revenue	$	7,209.1	$	13,306.2
Net income from continuing operations	$	396.5	$	641.9

We entered into an agreement in July 2022 to acquire CIG Financial, an auto finance company headquartered in Irvine, California.

~~Table of Contents~~

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

~~10.~~11.CASH FLOW INFORMATION

Cash, Cash Equivalents, and Restricted Cash

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


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	59.5	$	569.6	Cash and cash equivalents	$	336.5	$	60.4
Restricted cash included in Other Current Assets	Restricted cash included in Other Current Assets	0.2		0.1		Restricted cash included in Other Current Assets	0.1		0.2
Total cash, cash equivalents, and restricted cash	Total cash, cash equivalents, and restricted cash	$	59.7	$	569.7	Total cash, cash equivalents, and restricted cash	$	336.6	$	60.6

Table of Contents

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Non-Cash Investing and Financing Activities

We had accrued purchases of property and equipment of $22.5 million at June 30, 2022, and $12.1 million at June 30, 2021, and $8.7 million at June 30, 2020. We had non-cash investing and financing activities related to increases in property and equipment acquired under financing arrangements of $0.8 million during the six months ended June 30, 2020.2021.


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
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	$	13.0	$	27.8	Operating lease liabilities	$	23.1	$	13.0
Finance lease liabilities	Finance lease liabilities	$	17.3	$	26.6	Finance lease liabilities	$	12.5	$	17.3

Interest and Income Taxes Paid

We made interest payments, net of amounts capitalized and including interest on vehicle inventory financing, of $62.0 million during the six months ended June 30, 2022, and $63.7 million during the six months ended June 30, ~~2021, and $83.5 million during the six months ended June 30, 2020.~~2021. We made income tax payments, net of income tax refunds, of $252.0 million during the six months ended June 30, 2022, and $190.5 million during the six months ended June 30, ~~2021, and $3.2 million during the six months ended June 30, 2020.~~2021.

~~11.~~12.FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

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

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


Level 1			Quoted prices (unadjusted) in active markets for identical assets or liabilities that a reporting entity can access at the measurement date

Level 2			Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly

Level 3			Unobservable inputs

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

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

~~Table of Contents~~

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

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

•Investments in Equity Securities: Our equity investments with readily determinable fair values are measured at fair value using Level 1 inputs. In the first quarter of 2021, we sold ~~the remaining shares~~one of our ~~Vroom~~minority equity ~~investment~~investments with a readily determinable fair value for total proceeds of $109.4 million. ~~Our remaining~~The fair value of our equity investments ~~in equity securities consist of equity securities that do not have~~with readily determinable fair ~~values. We elected to measure these investments~~values totaled $2.1 million at June 30, 2022 and $2.2 million at December 31, 2021.

Our equity investment that does not have a readily determinable fair value is measured using the measurement alternative as permitted by accounting standards and was recorded ~~the equity interests~~ at cost, to be subsequently adjusted for observable price changes. ~~During the second quarter~~The carrying amount of ~~2021, we identified an observable transaction for the issuance of similar equity securities of the same issuer and we recorded an upward adjustment to~~ our equity investment without a readily determinable fair value was $56.7 million at June 30, 2022, and $56.7 million at December 31, 2021. This equity investment reflects a cumulative upward adjustment of $3.4 million based on ~~the~~an observable price change. ~~As of~~We did not record any upward adjustments during the six months ended June 30, ~~2021, the carrying amount of our equity investments was $56.7 million. We~~2022. Additionally, we have not recorded any impairments or downward adjustments to the carrying amount of our equity ~~investments~~investment as of and for the six months ended June 30, ~~2021.~~ 2022.

Table of Contents

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Investments in equity securities are reported in Other Assets in the accompanying Unaudited Condensed Consolidated Balance Sheets. Realized and unrealized gains and losses are reported in Other Income (Loss), Net (non-operating) in the Unaudited Condensed Consolidated Statements of Operations and in the “Corporate and other” category of our segment information.

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

2021 2020
Net gains recognized during the period on equity securities $ 10.9 $ 214.7
Less: Net gains recognized during the period on equity securities sold during the period 7.5 0
Unrealized gains recognized during the reporting period on equity securities still held at the reporting date $ 3.4 $ 214.7


	Six Months Ended June 30,
	2022		2021
Net gains (losses) recognized during the period on equity securities	$	(0.1)	$	10.9
Less: Net gains recognized during the period on equity securities sold during the period	—		7.5
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date	$	(0.1)	$	3.4

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


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Carrying value	Carrying value	$	1,797.3	$	2,101.8	Carrying value	$	3,546.5	$	2,858.4
Fair value	Fair value	$	2,017.5	$	2,341.1	Fair value	$	3,256.5	$	3,017.8

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.

~~Table of Contents~~

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

The following table presents assets measured and recorded at fair value on a nonrecurring basis during the six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:


		2021				2020					2022				2021
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		$	0	$	0	$	457.5	$	(318.3)
Franchise rights and other		$	0	$	0	$	26.2	$	(59.9)

Equity investment	Equity investment	$	53.4	$	3.4	$	0	$	0	Equity investment	$	—	$	—	$	53.4	$	3.4
Right-of-use assets	Right-of-use assets	$	0	$	(0.1)	$	1.4	$	(0.4)	Right-of-use assets	$	—	$	—	$	—	$	(0.1)
Long-lived assets held and used	Long-lived assets held and used	$	10.4	$	(1.6)	$	1.8	$	(5.8)	Long-lived assets held and used	$	—	$	(1.0)	$	10.4	$	(1.6)

Goodwill and Other Intangible Assets

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, 2022 and 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.

~~During the first quarter~~

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

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.AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

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

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

~~Table of Contents~~

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

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

Long-Lived Assets and Right-of-Use Assets

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

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

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

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

We had assets held for sale in continuing operations of ~~$81.3~~$59.1 million as of June 30, ~~2021,~~2022, and ~~$25.5~~$53.3 million as of December 31, ~~2020,~~2021, primarily related to property held for sale, as well as inventory, goodwill, and property of disposal groups held for sale. We had assets held for sale in discontinued operations of $1.1 million as of June 30, ~~2021,~~2022, and ~~$8.0~~$1.1 million as of December 31, ~~2020,~~2021, related to property held for sale. Assets held for sale are included in Other Current Assets in our Unaudited Condensed Consolidated Balance Sheets.

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

~~12.~~13.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

~~Table of Contents~~

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

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

As of June 30, ~~2021~~2022 and ~~2020,~~2021, 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

Table of Contents

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on our results of operations, financial condition, or cash flows.

Other Matters

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

From time to time, primarily in connection with dispositions of automotive stores, our subsidiaries assign or sublet to the store purchaser the subsidiaries’ interests in any real property leases associated with such stores. In general, our subsidiaries retain responsibility for the performance of certain obligations under such leases to the extent that the assignee or sublessee does not perform, whether such performance is required prior to or following the assignment or subletting of the lease. Additionally, AutoNation and its subsidiaries generally remain subject to the terms of any guarantees made by us and our subsidiaries in connection with such leases. Although we generally have indemnification rights against the assignee or sublessee in the event of non-performance under these leases, as well as certain defenses, we estimate that lessee rental payment obligations during the remaining terms of these leases with expirations ranging from 2022 to 2034 are approximately ~~$10~~$7 million at June 30, ~~2021.~~2022. We do not have any material known commitments that we or our subsidiaries will be called on to perform under any such assigned leases or subleases at June 30, ~~2021.~~2022. There can be no assurance that any performance by AutoNation or its subsidiaries required under these leases would not have a material adverse effect on our business, financial condition, and cash flows.

At June 30, ~~2021,~~2022, surety bonds, letters of credit, and cash deposits totaled ~~$100.3~~$106.5 million, of which ~~$39.7~~$39.8 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.~~14.BUSINESS AND CREDIT CONCENTRATIONS

We own and operate franchised automotive stores in the United States pursuant to franchise agreements with vehicle manufacturers. During the six months ended June 30, ~~2021,~~2022, approximately ~~64%~~62% of our total retail new vehicle unit sales was generated by our stores in Florida, Texas, and California. We are subject to a concentration of risk in the event of financial distress of or other adverse event related to a major vehicle manufacturer or related lender or supplier. The core brands of vehicles that we sell, representing approximately ~~90%~~89% of the new vehicles sold during the six months ended June 30, ~~2021,~~2022, are manufactured by Toyota (including Lexus), Honda, Ford, Mercedes-Benz, BMW, General Motors, ~~Mercedes-Benz,~~ Stellantis, ~~(formerly FCA), BMW,~~ and Volkswagen (including Audi and Porsche). Our business could be materially adversely impacted by a bankruptcy of or other adverse event related to a major vehicle manufacturer or related lender or supplier.

We had receivables from manufacturers or distributors of ~~$161.9~~$148.4 million at June 30, ~~2021,~~2022, and ~~$210.0~~$148.4 million at December 31, ~~2020.~~2021. Additionally, a large portion of our contracts-in-transit included in Receivables, net, in the accompanying

~~Table of Contents~~

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

Unaudited Condensed Consolidated Balance Sheets, are due from automotive manufacturers’ captive finance subsidiaries, which provide financing directly to our new and used vehicle customers. Concentrations of credit risk with respect to non-manufacturer trade receivables are limited due to the wide variety of customers and markets in which our products are sold as well as their dispersion across many different geographic areas in the United States. Consequently, at June 30, ~~2021,~~2022, we do not consider AutoNation to have any significant non-manufacturer concentrations of credit risk.

Table of Contents

AUTONATION, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

~~14.~~15.SEGMENT INFORMATION

At June 30, ~~2021~~2022 and ~~2020,~~2021, 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 Stellantis. Our Import segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda, Hyundai, Subaru, and Nissan. Our Premium Luxury segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Mercedes-Benz, BMW, Lexus, Audi, and Jaguar Land Rover. The franchises in each segment also sell used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products.

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

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

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


		Three Months Ended						Six Months Ended							Three Months Ended						Six Months Ended
		June 30, 2021						June 30, 2021							June 30, 2022						June 30, 2022
		Domestic		Import		Premium Luxury		Domestic		Import		Premium Luxury			Domestic		Import		Premium Luxury		Domestic		Import		Premium Luxury
Revenues from external customers	Revenues from external customers	$	2,124.8	$	2,175.0	$	2,468.5	$	3,971.5	$	3,944.6	$	4,572.0	Revenues from external customers	$	2,040.9	$	1,949.7	$	2,616.6	$	4,075.3	$	3,923.8	$	5,095.3
Segment income (1)	Segment income (1)	$	169.0	$	203.7	$	225.7	$	287.5	$	329.6	$	384.2	Segment income (1)	$	153.1	$	192.5	$	257.5	$	302.5	$	378.7	$	487.0

		Three Months Ended						Six Months Ended							Three Months Ended						Six Months Ended
		June 30, 2020						June 30, 2020							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	$	1,486.0	$	1,325.3	$	1,564.8	$	2,969.5	$	2,687.4	$	3,181.6	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)	$	82.1	$	88.3	$	89.2	$	136.2	$	154.2	$	169.4	Segment income (1)	$	169.0	$	203.7	$	225.7	$	287.5	$	329.6	$	384.2

(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				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Total segment income for reportable segments	Total segment income for reportable segments	$	598.4	$	259.6	$	1,001.3	$	459.8	Total segment income for reportable segments	$	603.1	$	598.4	$	1,168.2	$	1,001.3
Corporate and other	Corporate and other	(74.8)		(74.5)		(150.2)		(519.5)		Corporate and other	(50.8)		(74.8)		(102.1)		(150.2)
Other interest expense	Other interest expense	(20.9)		(23.2)		(42.1)		(46.7)		Other interest expense	(34.1)		(20.9)		(63.7)		(42.1)
Other income, net		8.9		214.6		19.9		211.7
Other income (loss), net										Other income (loss), net	(13.7)		8.9		(20.1)		19.9
Income from continuing operations before income taxes	Income from continuing operations before income taxes	$	511.6	$	376.5	$	828.9	$	105.3	Income from continuing operations before income taxes	$	504.5	$	511.6	$	982.3	$	828.9

~~Table of Contents~~

~~AUTONATION, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

~~15.EXIT OR DISPOSAL COST OBLIGATIONS~~

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

Contract Termination Charges Other Associated Closing Costs Involuntary Termination Benefits Total
Balance at December 31, 2020 $ 0.2 $ 2.4 $ 0.8 $ 3.4
Costs incurred 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

Table of Contents

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 one of the largest automotive ~~retailer~~retailers in the United States. As of June 30, ~~2021,~~2022, we owned and operated ~~312~~339 new vehicle franchises from ~~228~~247 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 3233 different new vehicle brands. The core brands of new vehicles that we sell, representing approximately ~~90%~~89% of the new vehicles that we sold during the six months ended June 30, ~~2021,~~2022, are manufactured by Toyota (including Lexus), Honda, Ford, Mercedes-Benz, BMW, General Motors, ~~Mercedes-Benz,~~ Stellantis, ~~(formerly FCA), BMW,~~ and Volkswagen (including Audi and Porsche). As of June 30, ~~2021,~~2022, we also owned and operated 7256 AutoNation-branded collision centers, 611 AutoNation USA used vehicle stores, 4 AutoNation-branded automotive auction operations, and 3 parts distribution centers.

We offer a diversified range of automotive products and services, including new vehicles, used vehicles, “parts and ~~service,”~~service” (also referred to as “After-Sales”), which includes automotive repair and maintenance services as well as wholesale parts and collision businesses, and automotive “finance and insurance” products, which include vehicle service and other protection products, as well as the arranging of financing for vehicle purchases through third-party finance sources. We believe that the significant scale of our operations and the quality of our managerial talent allow us to achieve efficiencies in our key markets by, among other things, leveraging the AutoNation retail brand and advertising, implementing standardized processes, and increasing productivity across all of our stores.

At June 30, ~~2021,~~2022, we had three reportable segments: (1) Domestic, (2) Import, and (3) Premium Luxury. Our Domestic segment is comprised of retail automotive franchises that sell new vehicles manufactured by Ford, General Motors, and Stellantis. Our Import segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda, Hyundai, Subaru, and Nissan. Our Premium Luxury segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Mercedes-Benz, BMW, Lexus, Audi, and Jaguar Land Rover. The franchises in each segment also sell used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products.

For the six months ended June 30, ~~2021,~~2022, new vehicle sales accounted for ~~50%~~42% of our total revenue and ~~22%~~26% of our total gross profit. Used vehicle sales accounted for ~~31%~~37% of our total revenue and ~~15%~~11% of our total gross profit. Our parts and service operations, while comprising ~~14%~~15% of our total revenue, contributed 35% of our total gross profit. Our finance and insurance sales, while comprising 5% of our total revenue, contributed ~~29%~~27% of our total gross profit.

Market Conditions

In the second quarter of ~~2021,~~2022, U.S. industry retail new vehicle unit sales ~~increased 44%~~decreased 15% as compared to the second quarter of ~~2020. Vehicle unit sales during~~2021, primarily as a result of the limited supply of new vehicles to sell. During the second quarter of 2020 were significantly adversely impacted, particularly in April 2020, by the COVID-19 pandemic and the extensive “shelter in place” and “stay at home” orders enacted by federal, state, and local governments. In the first half of 2021,2022, the demand for vehicles ~~was strong and exceeded~~continued to exceed supply. While market demand for ~~new and used~~ vehicles remains high, ~~primarily due to low interest rates and a consumer desire for personal transportation,~~ there continues to be a shortage of available new vehicles for sale driven largely by ~~certain component shortages~~disruptions in the manufacturers’ supply chains. This demand and supply imbalance ~~has resulted~~continues to result in higher levels of profitability for available new ~~and used~~ vehicles. The reduced levels of new vehicle availability is currently expected to continue ~~into~~throughout 2022; however, there is still significant uncertainty as to when new vehicle availability will improve, as well as the duration and/or degree of the higher levels of profitability being realized during this time. Additionally, rising interest rates and high levels of inflation could adversely impact consumer demand for vehicles.

Results of Operations

During the three months ended June 30, ~~2021,~~2022, we had net income from continuing operations of $376.5 million and diluted earnings per share of $6.48, as compared to net income from continuing operations of $384.9 million and diluted earnings per share of $4.83 ~~as compared to net income from continuing operations of $279.9 million and diluted earnings per share of $3.18~~ during the same period in ~~2020.~~2021.

Our total gross profit increased ~~66.8%~~2.7% during the second quarter of ~~2021~~2022 compared to the second quarter of ~~2020,~~2021, driven by increases in new vehicle gross profit of ~~168.0%, used vehicle gross profit of 73.2%, finance and insurance gross profit of~~

~~Table of Contents~~

~~49.8%,~~10.3% and parts and service gross profit of ~~38.9%,~~11.4%. each as compared to the second quarter of ~~2020.~~2021. New ~~and used~~ vehicle gross profit benefited from ~~an increase in unit volume and~~ an increase in gross profit per vehicle retailed (“PVR”) resulting from strong demand and historically low new vehicle inventory levels due to ~~manufacturer~~disruptions in the manufacturers’ supply ~~shortages. Finance and insurance gross profit benefited from the increase in unit volume and an increase in finance and insurance gross profit PVR.~~chains. Parts

Table of Contents

and service ~~gross profit~~results benefited primarily from increases in gross profit from customer-pay service and the preparation of vehicles for ~~sale~~sale. The increases in gross profit were partially offset by a decrease in used vehicle gross profit of 22.8% due to ~~increased volume, improved~~ margin ~~performance, and higher value repair orders.~~pressure as a result of a decline in used vehicle values.

SG&A expenses increased largely due to ~~performance-driven increases in compensation expense.~~newly acquired and opened stores. With improvements in gross profit and our continued focus on cost control, SG&A expenses as a percentage of gross profit decreased to ~~56.5%~~55.4% during the three months ended June 30, ~~2021,~~2022, from ~~68.9%~~56.5% in the same period in ~~2020~~.2021. Other interest expense increased due to higher average debt balances, partially offset by lower average interest rates.

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

~~Chief Executive Officer Transition~~

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

Strategic Initiatives

We ~~plan~~entered into an agreement in July 2022 to ~~expand~~acquire CIG Financial, an auto finance company headquartered in Irvine, California, for $85 million as well as the assumption of certain liabilities as of the acquisition date. The acquisition of CIG Financial aligns with our ~~AutoNation USA used~~strategic business model and singular focus on personalized finance and mobility solutions that are easy, transparent, and customer-centric. This acquisition will further extend our relationship with our customers beyond the buying experience and throughout the vehicle ~~stores~~ownership life cycle. The transaction remains subject to customary closing conditions and ~~are targeting~~regulatory approvals and is expected to ~~have over 130 stores by~~close within the ~~end of 2026. We opened one AutoNation USA store in the second quarter of 2021 and are on track to open four additional new stores in the second half of 2021 and 12 additional new stores in 2022.~~We anticipate that the initial capital investment will be approximately $10 million to $11 million for each new store on average. The planned expansion may be impacted by a number of variables, including customer adoption, market conditions, availability of used vehicle inventory, and our ability to identify, acquire, and build out suitable locations in a timely manner.next 90 days.

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, 2022 and 2021, were 10,782 and ~~2020, were~~ 14,338, ~~and 39,262,~~ respectively. By historical standards, our inventory unit levels ~~were~~are significantly lower ~~at June 30, 2021,~~ driven by strong demand and ~~the component shortages~~disruptions in the manufacturers’ supply chains. Inadequate levels of new vehicle availability could adversely affect our financial results.

We have typically not experienced significant losses on the sale of new vehicle inventory, in part due to incentives provided by manufacturers to promote sales of new vehicles and our inventory management practices. We monitor our new vehicle inventory values as compared to net realizable values, and had no new vehicle inventory write-downs at June 30, ~~2021,~~2022, or at December 31, ~~2020.~~2021.

We recondition the majority of used vehicles acquired for retail sale in our parts and service departments and capitalize the related costs to the used vehicle inventory. We monitor our used vehicle inventory values as compared to net realizable values. Typically, used vehicles that are not sold on a retail basis are sold at wholesale auctions. Our used vehicle inventory balance was net of cumulative write-downs of ~~$2.5~~$4.3 million at June 30, ~~2021,~~2022, and ~~$3.4~~$3.6 million at December 31, ~~2020.~~2021.

Parts, accessories, and other inventory are carried at the lower of cost or net realizable value. We estimate the amount of potentially damaged and/or excess and obsolete inventory based upon historical experience, manufacturer return policies, and industry trends. Our parts, accessories, and other inventory balance was net of cumulative write-downs of ~~$6.4~~$6.3 million at June 30, ~~2021,~~2022, and ~~$6.5~~$5.8 million at December 31, ~~2020.~~2021.

~~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.

~~Table of Contents~~

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. We may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. When assessing goodwill for impairment, our decision to perform a qualitative assessment for an individual reporting unit is

Table of Contents

influenced by a number of factors, including the carrying value of the reporting unit’s goodwill, the significance of the excess of the reporting unit’s estimated fair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments, macroeconomic conditions, automotive industry and market conditions, and our operating performance.

As of June 30, ~~2021,~~2022, we have ~~$227.2~~$228.7 million of goodwill related to the Domestic reporting unit, ~~$502.6~~$517.9 million related to the Import reporting unit, ~~and $457.2~~$482.1 million related to the Premium Luxury reporting unit, and $4.6 million related to the Collision Centers reporting unit.

Other Intangible Assets

Our principal identifiable intangible assets are individual store rights under franchise agreements with vehicle manufacturers, which have indefinite lives and are tested for impairment annually as of April 30 or more frequently when events or changes in circumstances indicate that impairment may have occurred. We may first perform a qualitative assessment to determine whether it is more likely than not that a franchise right asset is impaired. The quantitative impairment test for franchise rights requires the comparison of the franchise rights’ estimated fair value to carrying value by store. Fair values of rights under franchise agreements are estimated using unobservable (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.

We elected to perform quantitative tests for our annual franchise rights impairment testing as of April 30, ~~2021,~~2022, and no impairment charges resulted from these quantitative tests. The quantitative franchise rights impairment test is dependent on many variables used to determine the fair value of each store’s franchise rights. See Note 11 of the Notes to Unaudited Condensed Consolidated Financial Statements for a description of the valuation method and related estimates and assumptions used in our quantitative impairment testing.

If the fair value of each of our franchise rights had been determined to be a hypothetical 10% lower as of the valuation date of April 30, ~~2021,~~2022, no impairment would have resulted. The effect of a hypothetical 10% decrease in fair value estimates is not intended to provide a sensitivity analysis of every potential outcome.

2423

Table of Contents

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 June 30,							Six Months Ended June 30,							($ in millions, except per vehicle data)	Three Months Ended June 30,							Six Months Ended June 30,
		2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance		2022		2021		Variance Favorable / (Unfavorable)		% Variance	2022		2021		Variance Favorable / (Unfavorable)		% Variance
Revenue:	Revenue:															Revenue:
New vehicle	New vehicle	$	3,428.3	$	2,261.3	$	1,167.0	51.6	$	6,410.6	$	4,543.2	$	1,867.4	41.1	New vehicle	$	2,935.8	$	3,428.3	$	(492.5)	(14.4)	$	5,743.0	$	6,410.6	$	(667.6)	(10.4)
Retail used vehicle	Retail used vehicle	2,085.8		1,262.5		823.3		65.2	3,729.9		2,424.5		1,305.4		53.8	Retail used vehicle	2,362.2		2,085.8		276.4		13.3	4,754.4		3,729.9		1,024.5		27.5
Wholesale	Wholesale	137.1		62.0		75.1		121.1	242.1		148.7		93.4		62.8	Wholesale	158.2		137.1		21.1		15.4	338.4		242.1		96.3		39.8
Used vehicle	Used vehicle	2,222.9		1,324.5		898.4		67.8	3,972.0		2,573.2		1,398.8		54.4	Used vehicle	2,520.4		2,222.9		297.5		13.4	5,092.8		3,972.0		1,120.8		28.2
Finance and insurance, net	Finance and insurance, net	369.0		246.4		122.6		49.8	682.0		482.2		199.8		41.4	Finance and insurance, net	367.6		369.0		(1.4)		(0.4)	731.5		682.0		49.5		7.3
Total variable operations(1)	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	Total variable operations(1)	5,823.8		6,020.2		(196.4)		(3.3)	11,567.3		11,064.6		502.7		4.5
Parts and service	Parts and service	950.8		689.9		260.9		37.8	1,801.8		1,566.2		235.6		15.0	Parts and service	1,036.3		950.8		85.5		9.0	2,040.2		1,801.8		238.4		13.2
Other	Other	7.4		10.9		(3.5)			15.8		35.2		(19.4)			Other	9.1		7.4		1.7			14.5		15.8		(1.3)
Total revenue	Total revenue	$	6,978.4	$	4,533.0	$	2,445.4	53.9	$	12,882.2	$	9,200.0	$	3,682.2	40.0	Total revenue	$	6,869.2	$	6,978.4	$	(109.2)	(1.6)	$	13,622.0	$	12,882.2	$	739.8	5.7
Gross profit:	Gross profit:															Gross profit:
New vehicle	New vehicle	$	320.5	$	119.6	$	200.9	168.0	$	510.5	$	216.0	$	294.5	136.3	New vehicle	$	353.5	$	320.5	$	33.0	10.3	$	698.5	$	510.5	$	188.0	36.8
Retail used vehicle	Retail used vehicle	180.4		105.8		74.6		70.5	305.6		189.3		116.3		61.4	Retail used vehicle	147.6		180.4		(32.8)		(18.2)	272.5		305.6		(33.1)		(10.8)
Wholesale	Wholesale	22.3		11.2		11.1			37.3		18.7		18.6			Wholesale	8.9		22.3		(13.4)			20.6		37.3		(16.7)
Used vehicle	Used vehicle	202.7		117.0		85.7		73.2	342.9		208.0		134.9		64.9	Used vehicle	156.5		202.7		(46.2)		(22.8)	293.1		342.9		(49.8)		(14.5)
Finance and insurance	Finance and insurance	369.0		246.4		122.6		49.8	682.0		482.2		199.8		41.4	Finance and insurance	367.6		369.0		(1.4)		(0.4)	731.5		682.0		49.5		7.3
Total variable operations(1)	Total variable operations(1)	892.2		483.0		409.2		84.7	1,535.4		906.2		629.2		69.4	Total variable operations(1)	877.6		892.2		(14.6)		(1.6)	1,723.1		1,535.4		187.7		12.2
Parts and service	Parts and service	432.5		311.4		121.1		38.9	821.5		700.2		121.3		17.3	Parts and service	481.7		432.5		49.2		11.4	942.8		821.5		121.3		14.8
Other	Other	1.6		0.6		1.0			2.2		1.8		0.4			Other	2.4		1.6		0.8			4.7		2.2		2.5
Total gross profit	Total gross profit	1,326.3		795.0		531.3		66.8	2,359.1		1,608.2		750.9		46.7	Total gross profit	1,361.7		1,326.3		35.4		2.7	2,670.6		2,359.1		311.5		13.2
Selling, general, and administrative expenses	Selling, general, and administrative expenses	748.9		547.9		(201.0)		(36.7)	1,396.8		1,148.6		(248.2)		(21.6)	Selling, general, and administrative expenses	754.8		748.9		(5.9)		(0.8)	1,496.2		1,396.8		(99.4)		(7.1)
Depreciation and amortization	Depreciation and amortization	47.9		49.1		1.2			95.8		97.2		1.4			Depreciation and amortization	48.8		47.9		(0.9)			98.8		95.8		(3.0)
Goodwill impairment		—		—		—			—		318.3		318.3
Franchise rights impairment		—		—		—			—		57.5		57.5
Other (income) expense, net		(0.7)		(3.4)		(2.7)			(0.6)		4.5		5.1
Operating income (loss)		530.2		201.4		328.8		163.3	867.1		(17.9)		885.0		NM

Other income, net																Other income, net	—		(0.7)		(0.7)			(1.5)		(0.6)		0.9
Operating income																Operating income	558.1		530.2		27.9		5.3	1,077.1		867.1		210.0		24.2
Non-operating income (expense) items:	Non-operating income (expense) items:															Non-operating income (expense) items:
Floorplan interest expense	Floorplan interest expense	(6.6)		(16.3)		9.7			(16.0)		(41.8)		25.8			Floorplan interest expense	(5.8)		(6.6)		0.8			(11.0)		(16.0)		5.0
Other interest expense	Other interest expense	(20.9)		(23.2)		2.3			(42.1)		(46.7)		4.6			Other interest expense	(34.1)		(20.9)		(13.2)			(63.7)		(42.1)		(21.6)
Other income, net		8.9		214.6		(205.7)			19.9		211.7		(191.8)
Other income (loss), net																Other income (loss), net	(13.7)		8.9		(22.6)			(20.1)		19.9		(40.0)
Income from continuing operations before income taxes	Income from continuing operations before income taxes	$	511.6	$	376.5	$	135.1	35.9	$	828.9	$	105.3	$	723.6	NM	Income from continuing operations before income taxes	$	504.5	$	511.6	$	(7.1)	(1.4)	$	982.3	$	828.9	$	153.4	18.5
Retail vehicle unit sales:	Retail vehicle unit sales:															Retail vehicle unit sales:
New vehicle	New vehicle	77,164		54,513		22,651		41.6	146,525		111,252		35,273		31.7	New vehicle	57,890		77,164		(19,274)		(25.0)	114,332		146,525		(32,193)		(22.0)
Used vehicle	Used vehicle	80,589		58,920		21,669		36.8	152,369		115,069		37,300		32.4	Used vehicle	77,080		80,589		(3,509)		(4.4)	156,843		152,369		4,474		2.9
		157,753		113,433		44,320		39.1	298,894		226,321		72,573		32.1		134,970		157,753		(22,783)		(14.4)	271,175		298,894		(27,719)		(9.3)
Revenue per vehicle retailed:	Revenue per vehicle retailed:															Revenue per vehicle retailed:
New vehicle	New vehicle	$	44,429	$	41,482	$	2,947	7.1	$	43,751	$	40,837	$	2,914	7.1	New vehicle	$	50,713	$	44,429	$	6,284	14.1	$	50,231	$	43,751	$	6,480	14.8
Used vehicle	Used vehicle	$	25,882	$	21,427	$	4,455	20.8	$	24,479	$	21,070	$	3,409	16.2	Used vehicle	$	30,646	$	25,882	$	4,764	18.4	$	30,313	$	24,479	$	5,834	23.8
Gross profit per vehicle retailed:	Gross profit per vehicle retailed:															Gross profit per vehicle retailed:
New vehicle	New vehicle	$	4,153	$	2,194	$	1,959	89.3	$	3,484	$	1,942	$	1,542	79.4	New vehicle	$	6,106	$	4,153	$	1,953	47.0	$	6,109	$	3,484	$	2,625	75.3
Used vehicle	Used vehicle	$	2,239	$	1,796	$	443	24.7	$	2,006	$	1,645	$	361	21.9	Used vehicle	$	1,915	$	2,239	$	(324)	(14.5)	$	1,737	$	2,006	$	(269)	(13.4)
Finance and insurance	Finance and insurance	$	2,339	$	2,172	$	167	7.7	$	2,282	$	2,131	$	151	7.1	Finance and insurance	$	2,724	$	2,339	$	385	16.5	$	2,698	$	2,282	$	416	18.2
Total variable operations(2)	Total variable operations(2)	$	5,514	$	4,159	$	1,355	32.6	$	5,012	$	3,921	$	1,091	27.8	Total variable operations(2)	$	6,436	$	5,514	$	922	16.7	$	6,278	$	5,012	$	1,266	25.3

(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.

2524

Table of Contents


		Three Months Ended		Six Months Ended			Three Months Ended		Six Months Ended
		June 30,		June 30,			June 30,		June 30,
		2021 (%)	2020 (%)	2021 (%)	2020 (%)		2022 (%)	2021 (%)	2022 (%)	2021 (%)
Revenue mix percentages:	Revenue mix percentages:					Revenue mix percentages:
New vehicle	New vehicle	49.1	49.9	49.8	49.4	New vehicle	42.7	49.1	42.2	49.8
Used vehicle	Used vehicle	31.9	29.2	30.8	28.0	Used vehicle	36.7	31.9	37.4	30.8
Parts and service	Parts and service	13.6	15.2	14.0	17.0	Parts and service	15.1	13.6	15.0	14.0
Finance and insurance, net	Finance and insurance, net	5.3	5.4	5.3	5.2	Finance and insurance, net	5.4	5.3	5.4	5.3
Other	Other	0.1	0.3	0.1	0.4	Other	0.1	0.1	—	0.1
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	24.2	15.0	21.6	13.4	New vehicle	26.0	24.2	26.2	21.6
Used vehicle	Used vehicle	15.3	14.7	14.5	12.9	Used vehicle	11.5	15.3	11.0	14.5
Parts and service	Parts and service	32.6	39.2	34.8	43.5	Parts and service	35.4	32.6	35.3	34.8
Finance and insurance	Finance and insurance	27.8	31.0	28.9	30.0	Finance and insurance	27.0	27.8	27.4	28.9
Other	Other	0.1	0.1	0.2	0.2	Other	0.1	0.1	0.1	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	9.3	5.3	8.0	4.8	New vehicle	12.0	9.3	12.2	8.0
Used vehicle - retail	Used vehicle - retail	8.6	8.4	8.2	7.8	Used vehicle - retail	6.2	8.6	5.7	8.2
Parts and service	Parts and service	45.5	45.1	45.6	44.7	Parts and service	46.5	45.5	46.2	45.6
Total	Total	19.0	17.5	18.3	17.5	Total	19.8	19.0	19.6	18.3
Selling, general, and administrative expenses	Selling, general, and administrative expenses	10.7	12.1	10.8	12.5	Selling, general, and administrative expenses	11.0	10.7	11.0	10.8
Operating income (loss)		7.6	4.4	6.7	NM
Operating income						Operating income	8.1	7.6	7.9	6.7
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	56.5	68.9	59.2	71.4	Selling, general, and administrative expenses	55.4	56.5	56.0	59.2
Operating income (loss)		40.0	25.3	36.8	NM
Operating income						Operating income	41.0	40.0	40.3	36.8

		June 30,					June 30,
		2021	2020				2022	2021
Inventory days supply:	Inventory days supply:					Inventory days supply:
New vehicle (industry standard of selling days)	New vehicle (industry standard of selling days)	14 days	49 days			New vehicle (industry standard of selling days)	11 days	14 days
Used vehicle (trailing calendar month days)	Used vehicle (trailing calendar month days)	34 days	31 days			Used vehicle (trailing calendar month days)	40 days	34 days

NM - Not Meaningful

2625

Table of Contents

Same Store Operating Data

We have presented below our operating results on a same store basis, which reflect the results of our stores for the identical months in each period presented in the comparison, commencing with the first full month in which the store was owned by us. Results from divested stores are excluded from both current and prior periods. Therefore, the amounts presented in the ~~2020~~2021 columns may differ from the same store amounts presented for ~~2020~~2021 in the prior year. We believe the presentation of this information provides a meaningful comparison of period-over-period results of our operations.


		Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended June 30,							Six Months Ended June 30,
($ in millions, except per vehicle data)	($ in millions, except per vehicle data)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance	($ in millions, except per vehicle data)	2022		2021		Variance Favorable / (Unfavorable)		% Variance	2022		2021		Variance Favorable / (Unfavorable)		% Variance
Revenue:	Revenue:															Revenue:
New vehicle	New vehicle	$	3,425.7	$	2,256.8	$	1,168.9	51.8	$	6,403.0	$	4,534.7	$	1,868.3	41.2	New vehicle	$	2,829.5	$	3,425.7	$	(596.2)	(17.4)	$	5,536.9	$	6,403.0	$	(866.1)	(13.5)
Retail used vehicle	Retail used vehicle	2,079.8		1,260.1		819.7		65.1	3,720.6		2,418.9		1,301.7		53.8	Retail used vehicle	2,245.2		2,083.4		161.8		7.8	4,526.3		3,724.2		802.1		21.5
Wholesale	Wholesale	136.8		61.9		74.9		121.0	241.7		148.4		93.3		62.9	Wholesale	151.8		136.9		14.9		10.9	323.8		241.8		82.0		33.9
Used vehicle	Used vehicle	2,216.6		1,322.0		894.6		67.7	3,962.3		2,567.3		1,395.0		54.3	Used vehicle	2,397.0		2,220.3		176.7		8.0	4,850.1		3,966.0		884.1		22.3
Finance and insurance, net	Finance and insurance, net	368.6		246.0		122.6		49.8	681.2		481.4		199.8		41.5	Finance and insurance, net	351.2		368.7		(17.5)		(4.7)	702.2		681.2		21.0		3.1
Total variable operations(1)	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	Total variable operations(1)	5,577.7		6,014.7		(437.0)		(7.3)	11,089.2		11,050.2		39.0		0.4
Parts and service	Parts and service	949.9		674.8		275.1		40.8	1,799.0		1,528.4		270.6		17.7	Parts and service	995.9		937.0		58.9		6.3	1,962.2		1,773.8		188.4		10.6
Other	Other	7.1		11.1		(4.0)			15.7		35.0		(19.3)			Other	8.9		7.1		1.8			14.5		15.7		(1.2)
Total revenue	Total revenue	$	6,967.9	$	4,510.7	$	2,457.2	54.5	$	12,861.2	$	9,146.8	$	3,714.4	40.6	Total revenue	$	6,582.5	$	6,958.8	$	(376.3)	(5.4)	$	13,065.9	$	12,839.7	$	226.2	1.8
Gross profit:	Gross profit:															Gross profit:
New vehicle	New vehicle	$	320.4	$	119.5	$	200.9	168.1	$	510.0	$	215.8	$	294.2	136.3	New vehicle	$	341.4	$	320.4	$	21.0	6.6	$	674.8	$	510.0	$	164.8	32.3
Retail used vehicle	Retail used vehicle	179.9		105.8		74.1		70.0	304.8		189.2		115.6		61.1	Retail used vehicle	140.3		180.2		(39.9)		(22.1)	259.3		305.0		(45.7)		(15.0)
Wholesale	Wholesale	22.3		11.1		11.2			37.3		18.7		18.6			Wholesale	9.4		22.3		(12.9)			21.4		37.3		(15.9)
Used vehicle	Used vehicle	202.2		116.9		85.3		73.0	342.1		207.9		134.2		64.6	Used vehicle	149.7		202.5		(52.8)		(26.1)	280.7		342.3		(61.6)		(18.0)
Finance and insurance	Finance and insurance	368.6		246.0		122.6		49.8	681.2		481.4		199.8		41.5	Finance and insurance	351.2		368.7		(17.5)		(4.7)	702.2		681.2		21.0		3.1
Total variable operations(1)	Total variable operations(1)	891.2		482.4		408.8		84.7	1,533.3		905.1		628.2		69.4	Total variable operations(1)	842.3		891.6		(49.3)		(5.5)	1,657.7		1,533.5		124.2		8.1
Parts and service	Parts and service	432.0		307.4		124.6		40.5	820.4		693.0		127.4		18.4	Parts and service	461.0		426.7		34.3		8.0	902.9		809.9		93.0		11.5
Other	Other	1.4		0.7		0.7			2.1		1.5		0.6			Other	2.3		1.4		0.9			4.5		2.2		2.3
Total gross profit	Total gross profit	$	1,324.6	$	790.5	$	534.1	67.6	$	2,355.8	$	1,599.6	$	756.2	47.3	Total gross profit	$	1,305.6	$	1,319.7	$	(14.1)	(1.1)	$	2,565.1	$	2,345.6	$	219.5	9.4
Retail vehicle unit sales:	Retail vehicle unit sales:															Retail vehicle unit sales:
New vehicle	New vehicle	77,081		54,359		22,722		41.8	146,293		110,958		35,335		31.8	New vehicle	55,889		77,081		(21,192)		(27.5)	110,428		146,293		(35,865)		(24.5)
Used vehicle	Used vehicle	80,305		58,749		21,556		36.7	151,871		114,658		37,213		32.5	Used vehicle	73,211		80,452		(7,241)		(9.0)	149,152		152,018		(2,866)		(1.9)
		157,386		113,108		44,278		39.1	298,164		225,616		72,548		32.2		129,100		157,533		(28,433)		(18.0)	259,580		298,311		(38,731)		(13.0)
Revenue per vehicle retailed:	Revenue per vehicle retailed:															Revenue per vehicle retailed:
New vehicle	New vehicle	$	44,443	$	41,517	$	2,926	7.0	$	43,768	$	40,869	$	2,899	7.1	New vehicle	$	50,627	$	44,443	$	6,184	13.9	$	50,140	$	43,768	$	6,372	14.6
Used vehicle	Used vehicle	$	25,899	$	21,449	$	4,450	20.7	$	24,498	$	21,097	$	3,401	16.1	Used vehicle	$	30,668	$	25,896	$	4,772	18.4	$	30,347	$	24,498	$	5,849	23.9
Gross profit per vehicle retailed:	Gross profit per vehicle retailed:															Gross profit per vehicle retailed:
New vehicle	New vehicle	$	4,157	$	2,198	$	1,959	89.1	$	3,486	$	1,945	$	1,541	79.2	New vehicle	$	6,109	$	4,157	$	1,952	47.0	$	6,111	$	3,486	$	2,625	75.3
Used vehicle	Used vehicle	$	2,240	$	1,801	$	439	24.4	$	2,007	$	1,650	$	357	21.6	Used vehicle	$	1,916	$	2,240	$	(324)	(14.5)	$	1,738	$	2,006	$	(268)	(13.4)
Finance and insurance	Finance and insurance	$	2,342	$	2,175	$	167	7.7	$	2,285	$	2,134	$	151	7.1	Finance and insurance	$	2,720	$	2,340	$	380	16.2	$	2,705	$	2,284	$	421	18.4
Total variable operations(2)	Total variable operations(2)	$	5,521	$	4,167	$	1,354	32.5	$	5,017	$	3,929	$	1,088	27.7	Total variable operations(2)	$	6,452	$	5,518	$	934	16.9	$	6,304	$	5,016	$	1,288	25.7

(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.

2726

Table of Contents


		Three Months Ended		Six Months Ended			Three Months Ended		Six Months Ended
		June 30,		June 30,			June 30,		June 30,
		2021 (%)	2020 (%)	2021 (%)	2020 (%)		2022 (%)	2021 (%)	2022 (%)	2021 (%)
Revenue mix percentages:	Revenue mix percentages:					Revenue mix percentages:
New vehicle	New vehicle	49.2	50.0	49.8	49.6	New vehicle	43.0	49.2	42.4	49.9
Used vehicle	Used vehicle	31.8	29.3	30.8	28.1	Used vehicle	36.4	31.9	37.1	30.9
Parts and service	Parts and service	13.6	15.0	14.0	16.7	Parts and service	15.1	13.5	15.0	13.8
Finance and insurance, net	Finance and insurance, net	5.3	5.5	5.3	5.3	Finance and insurance, net	5.3	5.3	5.4	5.3
Other	Other	0.1	0.2	0.1	0.3	Other	0.2	0.1	0.1	0.1
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	24.2	15.1	21.6	13.5	New vehicle	26.1	24.3	26.3	21.7
Used vehicle	Used vehicle	15.3	14.8	14.5	13.0	Used vehicle	11.5	15.3	10.9	14.6
Parts and service	Parts and service	32.6	38.9	34.8	43.3	Parts and service	35.3	32.3	35.2	34.5
Finance and insurance	Finance and insurance	27.8	31.1	28.9	30.1	Finance and insurance	26.9	27.9	27.4	29.0
Other	Other	0.1	0.1	0.2	0.1	Other	0.2	0.2	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	9.4	5.3	8.0	4.8	New vehicle	12.1	9.4	12.2	8.0
Used vehicle - retail	Used vehicle - retail	8.6	8.4	8.2	7.8	Used vehicle - retail	6.2	8.6	5.7	8.2
Parts and service	Parts and service	45.5	45.6	45.6	45.3	Parts and service	46.3	45.5	46.0	45.7
Total	Total	19.0	17.5	18.3	17.5	Total	19.8	19.0	19.6	18.3

2827

Table of Contents

New Vehicle


		Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended June 30,							Six Months Ended June 30,
($ in millions, except per vehicle data)	($ in millions, except per vehicle data)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance	($ in millions, except per vehicle data)	2022		2021		Variance Favorable / (Unfavorable)		% Variance	2022		2021		Variance Favorable / (Unfavorable)		% Variance
Reported:	Reported:															Reported:
Revenue	Revenue	$	3,428.3	$	2,261.3	$	1,167.0	51.6	$	6,410.6	$	4,543.2	$	1,867.4	41.1	Revenue	$	2,935.8	$	3,428.3	$	(492.5)	(14.4)	$	5,743.0	$	6,410.6	$	(667.6)	(10.4)
Gross profit	Gross profit	$	320.5	$	119.6	$	200.9	168.0	$	510.5	$	216.0	$	294.5	136.3	Gross profit	$	353.5	$	320.5	$	33.0	10.3	$	698.5	$	510.5	$	188.0	36.8
Retail vehicle unit sales	Retail vehicle unit sales	77,164		54,513		22,651		41.6	146,525		111,252		35,273		31.7	Retail vehicle unit sales	57,890		77,164		(19,274)		(25.0)	114,332		146,525		(32,193)		(22.0)
Revenue per vehicle retailed	Revenue per vehicle retailed	$	44,429	$	41,482	$	2,947	7.1	$	43,751	$	40,837	$	2,914	7.1	Revenue per vehicle retailed	$	50,713	$	44,429	$	6,284	14.1	$	50,231	$	43,751	$	6,480	14.8
Gross profit per vehicle retailed	Gross profit per vehicle retailed	$	4,153	$	2,194	$	1,959	89.3	$	3,484	$	1,942	$	1,542	79.4	Gross profit per vehicle retailed	$	6,106	$	4,153	$	1,953	47.0	$	6,109	$	3,484	$	2,625	75.3
Gross profit as a percentage of revenue	Gross profit as a percentage of revenue	9.3%		5.3%					8.0%		4.8%					Gross profit as a percentage of revenue	12.0%		9.3%					12.2%		8.0%
Inventory days supply (industry standard of selling days)	Inventory days supply (industry standard of selling days)	14 days		49 days												Inventory days supply (industry standard of selling days)	11 days		14 days

		Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended June 30,							Six Months Ended June 30,
		2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance		2022		2021		Variance Favorable / (Unfavorable)		% Variance	2022		2021		Variance Favorable / (Unfavorable)		% Variance
Same Store:	Same Store:															Same Store:
Revenue	Revenue	$	3,425.7	$	2,256.8	$	1,168.9	51.8	$	6,403.0	$	4,534.7	$	1,868.3	41.2	Revenue	$	2,829.5	$	3,425.7	$	(596.2)	(17.4)	$	5,536.9	$	6,403.0	$	(866.1)	(13.5)
Gross profit	Gross profit	$	320.4	$	119.5	$	200.9	168.1	$	510.0	$	215.8	$	294.2	136.3	Gross profit	$	341.4	$	320.4	$	21.0	6.6	$	674.8	$	510.0	$	164.8	32.3
Retail vehicle unit sales	Retail vehicle unit sales	77,081		54,359		22,722		41.8	146,293		110,958		35,335		31.8	Retail vehicle unit sales	55,889		77,081		(21,192)		(27.5)	110,428		146,293		(35,865)		(24.5)
Revenue per vehicle retailed	Revenue per vehicle retailed	$	44,443	$	41,517	$	2,926	7.0	$	43,768	$	40,869	$	2,899	7.1	Revenue per vehicle retailed	$	50,627	$	44,443	$	6,184	13.9	$	50,140	$	43,768	$	6,372	14.6
Gross profit per vehicle retailed	Gross profit per vehicle retailed	$	4,157	$	2,198	$	1,959	89.1	$	3,486	$	1,945	$	1,541	79.2	Gross profit per vehicle retailed	$	6,109	$	4,157	$	1,952	47.0	$	6,111	$	3,486	$	2,625	75.3
Gross profit as a percentage of revenue	Gross profit as a percentage of revenue	9.4%		5.3%					8.0%		4.8%					Gross profit as a percentage of revenue	12.1%		9.4%					12.2%		8.0%

The following discussion of new vehicle results is on a same store basis. The difference between reported amounts and same store amounts in the above tables of ~~$2.6~~$106.3 million and ~~$4.5~~$2.6 million in new vehicle revenue and ~~$0.1~~$12.1 million and $0.1 million in new vehicle gross profit for the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$7.6~~$206.1 million and ~~$8.5~~$7.6 million in new vehicle revenue and ~~$0.5~~$23.7 million and ~~$0.2~~$0.5 million in new vehicle gross profit for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, is related to acquisition and divestiture activity.

Second Quarter ~~2021~~2022 compared to Second Quarter ~~2020~~2021

Same store new vehicle revenue ~~increased~~decreased during the three months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, due to ~~increases~~a decrease in same store unit volume, ~~and~~partially offset by an increase in same store revenue PVR. Same store unit volume in the ~~prior~~current year was ~~significantly~~ adversely impacted ~~by the COVID-19 pandemic, particularly in April 2020. During the second quarter of 2021, same store unit volume benefited from an increase in customer demand, partially offset~~ by historically low inventory levels due to manufacturer supply shortages.

Same store revenue PVR and gross profit PVR both increased during the three months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to strong demand and reduced availability of new vehicle inventory.

First Six Months ~~2021~~2022 compared to First Six Months ~~2020~~2021

Same store new vehicle revenue ~~increased~~decreased during the six months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, due to ~~increases~~a decrease in same store unit volume, ~~and~~partially offset by an increase in same store revenue PVR. Same store unit volume in the ~~prior~~current year was ~~significantly~~ adversely impacted by the COVID-19 pandemic, particularly during the last two weeks of March 2020 through April 2020. During the first half of 2021, same store unit volume benefited from an increase in customer demand, partially offset by historically low inventory levels due to manufacturer supply shortages.

Same store revenue PVR and gross profit PVR both increased during the six months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to strong demand and reduced availability of new vehicle inventory.

2928

Table of Contents

New Vehicle Inventory Carrying Benefit

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


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	($ in millions)	2021		2020		Variance		2021		2020		Variance		($ in millions)	2022		2021		Variance		2022		2021		Variance
Floorplan assistance	Floorplan assistance	$	34.7	$	23.7	$	11.0	$	66.7	$	48.3	$	18.4	Floorplan assistance	$	27.3	$	34.7	$	(7.4)	$	54.8	$	66.7	$	(11.9)
New vehicle floorplan interest expense	New vehicle floorplan interest expense	(6.0)		(14.1)		8.1		(14.9)		(37.2)		22.3		New vehicle floorplan interest expense	(5.1)		(6.0)		0.9		(8.8)		(14.9)		6.1
Net new vehicle inventory carrying benefit	Net new vehicle inventory carrying benefit	$	28.7	$	9.6	$	19.1	$	51.8	$	11.1	$	40.7	Net new vehicle inventory carrying benefit	$	22.2	$	28.7	$	(6.5)	$	46.0	$	51.8	$	(5.8)

Second Quarter ~~2021~~2022 compared to Second Quarter ~~2020~~2021

The net new vehicle inventory carrying benefit ~~increased~~decreased during the three months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to a decrease in floorplan assistance as a result of a decrease in unit volume, partially offset by an increase in the average floorplan assistance ~~and~~rate per unit.

First Six Months 2022 compared to First Six Months 2021

The net new vehicle inventory carrying benefit decreased during the six months ended June 30, 2022, as compared to the same period in 2021, due to a decrease in floorplan assistance, partially offset by a decrease in floorplan interest expense. Floorplan assistance ~~increased primarily due to increases in unit volume. Floorplan interest expense~~ decreased ~~primarily due to lower average floorplan balances.~~

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

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

3029

Table of Contents

Used Vehicle


		Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended June 30,							Six Months Ended June 30,
($ in millions, except per vehicle data)	($ in millions, except per vehicle data)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance	($ in millions, except per vehicle data)	2022		2021		Variance Favorable / (Unfavorable)		% Variance	2022		2021		Variance Favorable / (Unfavorable)		% Variance
Reported:	Reported:															Reported:
Retail revenue	Retail revenue	$	2,085.8	$	1,262.5	$	823.3	65.2	$	3,729.9	$	2,424.5	$	1,305.4	53.8	Retail revenue	$	2,362.2	$	2,085.8	$	276.4	13.3	$	4,754.4	$	3,729.9	$	1,024.5	27.5
Wholesale revenue	Wholesale revenue	137.1		62.0		75.1		121.1	242.1		148.7		93.4		62.8	Wholesale revenue	158.2		137.1		21.1		15.4	338.4		242.1		96.3		39.8
Total revenue	Total revenue	$	2,222.9	$	1,324.5	$	898.4	67.8	$	3,972.0	$	2,573.2	$	1,398.8	54.4	Total revenue	$	2,520.4	$	2,222.9	$	297.5	13.4	$	5,092.8	$	3,972.0	$	1,120.8	28.2
Retail gross profit	Retail gross profit	$	180.4	$	105.8	$	74.6	70.5	$	305.6	$	189.3	$	116.3	61.4	Retail gross profit	$	147.6	$	180.4	$	(32.8)	(18.2)	$	272.5	$	305.6	$	(33.1)	(10.8)
Wholesale gross profit	Wholesale gross profit	22.3		11.2		11.1			37.3		18.7		18.6			Wholesale gross profit	8.9		22.3		(13.4)			20.6		37.3		(16.7)
Total gross profit	Total gross profit	$	202.7	$	117.0	$	85.7	73.2	$	342.9	$	208.0	$	134.9	64.9	Total gross profit	$	156.5	$	202.7	$	(46.2)	(22.8)	$	293.1	$	342.9	$	(49.8)	(14.5)
Retail vehicle unit sales	Retail vehicle unit sales	80,589		58,920		21,669		36.8	152,369		115,069		37,300		32.4	Retail vehicle unit sales	77,080		80,589		(3,509)		(4.4)	156,843		152,369		4,474		2.9
Revenue per vehicle retailed	Revenue per vehicle retailed	$	25,882	$	21,427	$	4,455	20.8	$	24,479	$	21,070	$	3,409	16.2	Revenue per vehicle retailed	$	30,646	$	25,882	$	4,764	18.4	$	30,313	$	24,479	$	5,834	23.8
Gross profit per vehicle retailed	Gross profit per vehicle retailed	$	2,239	$	1,796	$	443	24.7	$	2,006	$	1,645	$	361	21.9	Gross profit per vehicle retailed	$	1,915	$	2,239	$	(324)	(14.5)	$	1,737	$	2,006	$	(269)	(13.4)
Gross profit as a percentage of revenue		8.6%		8.4%					8.2%		7.8%
Retail gross profit as a percentage of retail revenue																Retail gross profit as a percentage of retail revenue	6.2%		8.6%					5.7%		8.2%
Inventory days supply (trailing calendar month days)	Inventory days supply (trailing calendar month days)	34 days		31 days												Inventory days supply (trailing calendar month days)	40 days		34 days

		Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended June 30,							Six Months Ended June 30,
		2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance		2022		2021		Variance Favorable / (Unfavorable)		% Variance	2022		2021		Variance Favorable / (Unfavorable)		% Variance
Same Store:	Same Store:															Same Store:
Retail revenue	Retail revenue	$	2,079.8	$	1,260.1	$	819.7	65.1	$	3,720.6	$	2,418.9	$	1,301.7	53.8	Retail revenue	$	2,245.2	$	2,083.4	$	161.8	7.8	$	4,526.3	$	3,724.2	$	802.1	21.5
Wholesale revenue	Wholesale revenue	136.8		61.9		74.9		121.0	241.7		148.4		93.3		62.9	Wholesale revenue	151.8		136.9		14.9		10.9	323.8		241.8		82.0		33.9
Total revenue	Total revenue	$	2,216.6	$	1,322.0	$	894.6	67.7	$	3,962.3	$	2,567.3	$	1,395.0	54.3	Total revenue	$	2,397.0	$	2,220.3	$	176.7	8.0	$	4,850.1	$	3,966.0	$	884.1	22.3
Retail gross profit	Retail gross profit	$	179.9	$	105.8	$	74.1	70.0	$	304.8	$	189.2	$	115.6	61.1	Retail gross profit	$	140.3	$	180.2	$	(39.9)	(22.1)	$	259.3	$	305.0	$	(45.7)	(15.0)
Wholesale gross profit	Wholesale gross profit	22.3		11.1		11.2			37.3		18.7		18.6			Wholesale gross profit	9.4		22.3		(12.9)			21.4		37.3		(15.9)
Total gross profit	Total gross profit	$	202.2	$	116.9	$	85.3	73.0	$	342.1	$	207.9	$	134.2	64.6	Total gross profit	$	149.7	$	202.5	$	(52.8)	(26.1)	$	280.7	$	342.3	$	(61.6)	(18.0)
Retail vehicle unit sales	Retail vehicle unit sales	80,305		58,749		21,556		36.7	151,871		114,658		37,213		32.5	Retail vehicle unit sales	73,211		80,452		(7,241)		(9.0)	149,152		152,018		(2,866)		(1.9)
Revenue per vehicle retailed	Revenue per vehicle retailed	$	25,899	$	21,449	$	4,450	20.7	$	24,498	$	21,097	$	3,401	16.1	Revenue per vehicle retailed	$	30,668	$	25,896	$	4,772	18.4	$	30,347	$	24,498	$	5,849	23.9
Gross profit per vehicle retailed	Gross profit per vehicle retailed	$	2,240	$	1,801	$	439	24.4	$	2,007	$	1,650	$	357	21.6	Gross profit per vehicle retailed	$	1,916	$	2,240	$	(324)	(14.5)	$	1,738	$	2,006	$	(268)	(13.4)
Gross profit as a percentage of revenue		8.6%		8.4%					8.2%		7.8%
Retail gross profit as a percentage of retail revenue																Retail gross profit as a percentage of retail revenue	6.2%		8.6%					5.7%		8.2%

The following discussion of used vehicle results is on a same store basis. The difference between reported amounts and same store amounts in the above tables of ~~$6.3~~$123.4 million and ~~$9.7~~$2.6 million in total used vehicle revenue and ~~$0.5~~$6.8 million and ~~$0.8~~$0.2 million in total used vehicle gross profit for the three ~~and six~~ months ended June 30, 2022 and 2021, respectively, ~~is related to divestiture activity~~ and ~~the opening of a new AutoNation USA store. The difference between reported amounts and same store amounts in the above tables of $2.5~~$242.7 million and ~~$5.9~~$6.0 million in total used vehicle revenue and ~~$0.1~~$12.4 million and ~~$0.1~~$0.6 million in total used vehicle gross profit for the ~~three and~~ six months ended June 30, ~~2020,~~2022 and 2021, respectively, is related to acquisition and divestiture ~~activity.~~activity, as well as the opening of AutoNation USA stores.

Second Quarter ~~2021~~2022 compared to Second Quarter ~~2020~~2021

Same store retail used vehicle revenue increased during the three months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, due to ~~increases~~an increase in same store revenue PVR, partially offset by a decrease in same store unit volume and same store revenue PVR. Same store unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly in April 2020. Market demand for used vehicles continued to increase during the second quarter of ~~2021 due in part to decreased availability of new~~lower-priced entry-level vehicles.

Same store revenue PVR increased during the three months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to ~~an increase in market demand for used vehicles and~~ reduced availability of new vehicle inventory.

Same store gross profit PVR ~~increased~~decreased during the three months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to ~~increased demand for~~margin pressure as a result of a decline in used ~~vehicles and reduced availability of new~~ vehicle inventory. In addition, gross profit PVR benefited from a shift in mix to trade-ins and used vehicles acquired through our “We’ll Buy Your Car” program, which both have relatively higher average gross profit PVR.values.

3130

Table of Contents

First Six Months ~~2021~~2022 compared to First Six Months ~~2020~~2021

Same store retail used vehicle revenue increased during the six months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020~~2021, due to ~~increases~~an increase in same store revenue PVR, partially offset by a decrease in same store unit volume ~~and same store revenue PVR. Same store unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly during the last two weeks~~ of ~~March 2020 through April 2020. Market demand for used vehicles continued to increase during the first half of 2021 due in part to decreased availability of new~~lower-priced entry-level vehicles.

Same store revenue PVR increased during the six months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to ~~an increase in market demand for used vehicles and~~ reduced availability of new vehicle inventory.

Same store gross profit PVR ~~increased~~decreased during the six months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to ~~increased demand for~~margin pressure as a result of a decline in used ~~vehicles and reduced availability of new~~ vehicle inventory. In addition, gross profit PVR benefited from a shift in mix to trade-ins and used vehicles acquired through our “We’ll Buy Your Car” program, which both have relatively higher average gross profit PVR.values.

3231

Table of Contents

Parts and Service


		Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended June 30,							Six Months Ended June 30,
($ in millions)	($ in millions)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance	($ in millions)	2022		2021		Variance Favorable / (Unfavorable)		% Variance	2022		2021		Variance Favorable / (Unfavorable)		% Variance
Reported:	Reported:															Reported:
Revenue	Revenue	$	950.8	$	689.9	$	260.9	37.8	$	1,801.8	$	1,566.2	$	235.6	15.0	Revenue	$	1,036.3	$	950.8	$	85.5	9.0	$	2,040.2	$	1,801.8	$	238.4	13.2
Gross Profit	Gross Profit	$	432.5	$	311.4	$	121.1	38.9	$	821.5	$	700.2	$	121.3	17.3	Gross Profit	$	481.7	$	432.5	$	49.2	11.4	$	942.8	$	821.5	$	121.3	14.8
Gross profit as a percentage of revenue	Gross profit as a percentage of revenue	45.5%		45.1%					45.6%		44.7%					Gross profit as a percentage of revenue	46.5%		45.5%					46.2%		45.6%
Same Store:	Same Store:															Same Store:
Revenue	Revenue	$	949.9	$	674.8	$	275.1	40.8	$	1,799.0	$	1,528.4	$	270.6	17.7	Revenue	$	995.9	$	937.0	$	58.9	6.3	$	1,962.2	$	1,773.8	$	188.4	10.6
Gross Profit	Gross Profit	$	432.0	$	307.4	$	124.6	40.5	$	820.4	$	693.0	$	127.4	18.4	Gross Profit	$	461.0	$	426.7	$	34.3	8.0	$	902.9	$	809.9	$	93.0	11.5
Gross profit as a percentage of revenue	Gross profit as a percentage of revenue	45.5%		45.6%					45.6%		45.3%					Gross profit as a percentage of revenue	46.3%		45.5%					46.0%		45.7%

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

The following discussion of parts and service results is on a same store basis. The difference between reported amounts and same store amounts in the above tables of ~~$0.9~~$40.4 million and ~~$2.8~~$13.8 million in parts and service revenue and ~~$0.5~~$20.7 million and ~~$1.1~~$5.8 million in parts and service gross profit for the three ~~and six~~ months ended June 30, 2022 and 2021, respectively, ~~is related to divestiture activity~~ and ~~the opening of a new AutoNation USA store. The difference between reported amounts and same store amounts in the above tables of $15.1~~$78.0 million and ~~$37.8~~$28.0 million in parts and service revenue and ~~$4.0~~$39.9 million and ~~$7.2~~$11.6 million in parts and service gross profit for the ~~three and~~ six months ended June 30, ~~2020,~~2022 and 2021, respectively, is ~~due~~related to acquisition and divestiture activity, as well as the ~~closure~~opening of ~~our ACP business and other divestiture activity.~~AutoNation USA stores.

Second Quarter ~~2021~~2022 compared to Second Quarter ~~2020~~2021

During the three months ended June 30, ~~2021,~~2022, same store parts and service gross profit increased compared to the same period in ~~2020,~~2021, primarily due to increases in gross profit associated with customer-pay service of ~~$46.3~~$17.3 million and the preparation of vehicles for sale of $33.3 million, and wholesale parts sales of $10.1 million, as well as smaller increases in gross profit associated with collision business, warranty service, and service work outsourced to third parties.$9.1 million.

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

First Six Months ~~2021~~2022 compared to First Six Months ~~2020~~2021

During the six months ended June 30, ~~2021,~~2022, same store parts and service gross profit increased compared to the same period in ~~2020,~~2021, primarily due to increases in gross profit associated with customer-pay service of ~~$51.0~~$38.4 million and 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.~~$25.3 million.

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

3332

Table of Contents

Finance and Insurance


		Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended June 30,							Six Months Ended June 30,
($ in millions, except per vehicle data)	($ in millions, except per vehicle data)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance	($ in millions, except per vehicle data)	2022		2021		Variance Favorable / (Unfavorable)		% Variance	2022		2021		Variance Favorable / (Unfavorable)		% Variance
Reported:	Reported:															Reported:
Revenue and gross profit	Revenue and gross profit	$	369.0	$	246.4	$	122.6	49.8	$	682.0	$	482.2	$	199.8	41.4	Revenue and gross profit	$	367.6	$	369.0	$	(1.4)	(0.4)	$	731.5	$	682.0	$	49.5	7.3
Gross profit per vehicle retailed	Gross profit per vehicle retailed	$	2,339	$	2,172	$	167	7.7	$	2,282	$	2,131	$	151	7.1	Gross profit per vehicle retailed	$	2,724	$	2,339	$	385	16.5	$	2,698	$	2,282	$	416	18.2
Same Store:	Same Store:															Same Store:
Revenue and gross profit	Revenue and gross profit	$	368.6	$	246.0	$	122.6	49.8	$	681.2	$	481.4	$	199.8	41.5	Revenue and gross profit	$	351.2	$	368.7	$	(17.5)	(4.7)	$	702.2	$	681.2	$	21.0	3.1
Gross profit per vehicle retailed	Gross profit per vehicle retailed	$	2,342	$	2,175	$	167	7.7	$	2,285	$	2,134	$	151	7.1	Gross profit per vehicle retailed	$	2,720	$	2,340	$	380	16.2	$	2,705	$	2,284	$	421	18.4

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 inis on a same store basis. The difference between reported amounts and same store amounts in finance and insurance revenue and gross profit in the above tables of ~~$0.4~~$16.4 million and $0.3 million for the three months ended June 30, 2022 and 2021, respectively, and $29.3 million and $0.8 million for the ~~three and~~ six ~~months~~ months ended June 30, 2022 and 2021, respectively, is related to acquisition and divestiture activity, ~~and~~as well as the opening of ~~a new~~ AutoNation USA store. The difference between reported amounts and same store amounts in the above tables of $0.4 million and $0.8 million for the three and six months months ended June 30, 2020, respectively, is related to divestiture activity.stores.

Second Quarter ~~2021~~2022 compared to Second Quarter ~~2020~~2021

Same store finance and insurance revenue and gross profit ~~increased~~decreased during the three months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, due to ~~increases~~a decrease in vehicle unit volume, ~~and~~partially offset by an increase in finance and insurance gross profit PVR. The increase in finance and insurance gross profit PVR was primarily due to higher realized margins on vehicle service contracts ~~including our AutoNation Vehicle Protection Plan product,~~ and an increase in product penetration. Finance and insurance gross profit PVR also benefited from increases in amounts financed per transaction and gross profit per transaction associated with arranging customer ~~financing and amounts financed per transaction.~~financing.

First Six Months ~~2021~~2022 compared to First Six Months ~~2020~~2021

Same store finance and insurance revenue and gross profit increased during the six months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, due to ~~increases~~an increase in ~~vehicle unit volume and~~ finance and insurance gross profit ~~PVR.~~PVR, partially offset by a decrease in vehicle unit volume. The increase in finance and insurance gross profit PVR was primarily due to higher realized margins on vehicle service contracts ~~including our AutoNation Vehicle Protection Plan product,~~ and an increase in product penetration. Finance and insurance gross profit PVR also benefited from increases in amounts financed per transaction and gross profit per transaction associated with arranging customer financing.

3433

Table of Contents

Segment Results

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


		Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended June 30,							Six Months Ended June 30,
($ in millions)	($ in millions)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance	($ in millions)	2022		2021		Variance Favorable / (Unfavorable)		% Variance	2022		2021		Variance Favorable / (Unfavorable)		% Variance
Revenue:	Revenue:															Revenue:
Domestic	Domestic	$	2,124.8	$	1,486.0	$	638.8	43.0	$	3,971.5	$	2,969.5	$	1,002.0	33.7	Domestic	$	2,040.9	$	2,124.8	$	(83.9)	(3.9)	$	4,075.3	$	3,971.5	$	103.8	2.6
Import	Import	2,175.0		1,325.3		849.7		64.1	3,944.6		2,687.4		1,257.2		46.8	Import	1,949.7		2,175.0		(225.3)		(10.4)	3,923.8		3,944.6		(20.8)		(0.5)
Premium Luxury	Premium Luxury	2,468.5		1,564.8		903.7		57.8	4,572.0		3,181.6		1,390.4		43.7	Premium Luxury	2,616.6		2,468.5		148.1		6.0	5,095.3		4,572.0		523.3		11.4
Total	Total	6,768.3		4,376.1		2,392.2		54.7	12,488.1		8,838.5		3,649.6		41.3	Total	6,607.2		6,768.3		(161.1)		(2.4)	13,094.4		12,488.1		606.3		4.9
Corporate and other	Corporate and other	210.1		156.9		53.2		33.9	394.1		361.5		32.6		9.0	Corporate and other	262.0		210.1		51.9		24.7	527.6		394.1		133.5		33.9
Total consolidated revenue	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	Total consolidated revenue	$	6,869.2	$	6,978.4	$	(109.2)	(1.6)	$	13,622.0	$	12,882.2	$	739.8	5.7
Segment income(1):	Segment income(1):															Segment income(1):
Domestic	Domestic	$	169.0	$	82.1	$	86.9	105.8	$	287.5	$	136.2	$	151.3	111.1	Domestic	$	153.1	$	169.0	$	(15.9)	(9.4)	$	302.5	$	287.5	$	15.0	5.2
Import	Import	203.7		88.3		115.4		130.7	329.6		154.2		175.4		113.7	Import	192.5		203.7		(11.2)		(5.5)	378.7		329.6		49.1		14.9
Premium Luxury	Premium Luxury	225.7		89.2		136.5		153.0	384.2		169.4		214.8		126.8	Premium Luxury	257.5		225.7		31.8		14.1	487.0		384.2		102.8		26.8
Total	Total	598.4		259.6		338.8		130.5	1,001.3		459.8		541.5		117.8	Total	603.1		598.4		4.7		0.8	1,168.2		1,001.3		166.9		16.7
Corporate and other	Corporate and other	(74.8)		(74.5)		(0.3)			(150.2)		(519.5)		369.3			Corporate and other	(50.8)		(74.8)		24.0			(102.1)		(150.2)		48.1
Floorplan interest expense	Floorplan interest expense	6.6		16.3		9.7			16.0		41.8		25.8			Floorplan interest expense	5.8		6.6		0.8			11.0		16.0		5.0
Operating income (loss)		$	530.2	$	201.4	$	328.8	163.3	$	867.1	$	(17.9)	$	885.0	NM
Operating income																Operating income	$	558.1	$	530.2	$	27.9	5.3	$	1,077.1	$	867.1	$	210.0	24.2

Retail new vehicle unit sales:	Retail new vehicle unit sales:															Retail new vehicle unit sales:
Domestic	Domestic	21,459		18,048		3,411		18.9	43,128		36,375		6,753		18.6	Domestic	16,760		21,459		(4,699)		(21.9)	33,125		43,128		(10,003)		(23.2)
Import	Import	36,136		23,605		12,531		53.1	66,979		48,892		18,087		37.0	Import	23,612		36,136		(12,524)		(34.7)	48,148		66,979		(18,831)		(28.1)
Premium Luxury	Premium Luxury	19,569		12,860		6,709		52.2	36,418		25,985		10,433		40.2	Premium Luxury	17,518		19,569		(2,051)		(10.5)	33,059		36,418		(3,359)		(9.2)
		77,164		54,513		22,651		41.6	146,525		111,252		35,273		31.7		57,890		77,164		(19,274)		(25.0)	114,332		146,525		(32,193)		(22.0)

Retail used vehicle unit sales:	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	Domestic	25,180		28,056		(2,876)		(10.3)	51,776		52,535		(759)		(1.4)
Import	Import	27,128		20,064		7,064		35.2	52,229		39,133		13,096		33.5	Import	25,786		27,128		(1,342)		(4.9)	52,315		52,229		86		0.2
Premium Luxury	Premium Luxury	22,370		15,795		6,575		41.6	41,904		30,938		10,966		35.4	Premium Luxury	21,381		22,370		(989)		(4.4)	43,330		41,904		1,426		3.4
		77,554		56,902		20,652		36.3	146,668		111,001		35,667		32.1		72,347		77,554		(5,207)		(6.7)	147,421		146,668		753		0.5

(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.
NM = Not Meaningful

3534

Table of Contents

Domestic

The Domestic segment operating results included the following:


		Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended June 30,							Six Months Ended June 30,
($ in millions)	($ in millions)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance	($ in millions)	2022		2021		Variance Favorable / (Unfavorable)		% Variance	2022		2021		Variance Favorable / (Unfavorable)		% Variance
Revenue:	Revenue:															Revenue:
New vehicle	New vehicle	$	991.3	$	761.7	$	229.6	30.1	$	1,926.7	$	1,500.6	$	426.1	28.4	New vehicle	$	858.1	$	991.3	$	(133.2)	(13.4)	$	1,680.6	$	1,926.7	$	(246.1)	(12.8)
Used vehicle	Used vehicle	749.1		436.8		312.3		71.5	1,312.8		841.4		471.4		56.0	Used vehicle	786.8		749.1		37.7		5.0	1,609.9		1,312.8		297.1		22.6
Parts and service	Parts and service	257.9		193.3		64.6		33.4	492.0		428.9		63.1		14.7	Parts and service	275.5		257.9		17.6		6.8	544.2		492.0		52.2		10.6
Finance and insurance, net	Finance and insurance, net	125.8		88.0		37.8		43.0	235.1		171.1		64.0		37.4	Finance and insurance, net	119.4		125.8		(6.4)		(5.1)	238.6		235.1		3.5		1.5
Other	Other	0.7		6.2		(5.5)			4.9		27.5		(22.6)			Other	1.1		0.7		0.4			2.0		4.9		(2.9)
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	Total Revenue	$	2,040.9	$	2,124.8	$	(83.9)	(3.9)	$	4,075.3	$	3,971.5	$	103.8	2.6
Segment income	Segment income	$	169.0	$	82.1	$	86.9	105.8	$	287.5	$	136.2	$	151.3	111.1	Segment income	$	153.1	$	169.0	$	(15.9)	(9.4)	$	302.5	$	287.5	$	15.0	5.2
Retail new vehicle unit sales	Retail new vehicle unit sales	21,459		18,048		3,411		18.9	43,128		36,375		6,753		18.6	Retail new vehicle unit sales	16,760		21,459		(4,699)		(21.9)	33,125		43,128		(10,003)		(23.2)
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	Retail used vehicle unit sales	25,180		28,056		(2,876)		(10.3)	51,776		52,535		(759)		(1.4)

Second Quarter ~~2021~~2022 compared to Second Quarter ~~2020~~2021

Domestic revenue ~~increased~~decreased during the three months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to ~~increases~~decreases in new and used vehicle unit volume, ~~and~~partially offset by increases in new and used vehicle revenue PVR. ~~Unit~~New vehicle unit volume ~~in the prior year~~ was ~~significantly~~ adversely impacted by ~~the COVID-19 pandemic, particularly in April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in customer demand, partially offset by~~ historically low new vehicle inventory levels due to manufacturer supply ~~shortages.~~shortages, which also favorably impacted new and used vehicle revenue PVR. Domestic revenue also benefited from increases in parts and service revenue associated with wholesale parts sales, the preparation of vehicles for sale, and customer-pay service.

Domestic segment income ~~increased~~decreased during the three months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to ~~increases~~a decrease in ~~new and~~ used vehicle gross profit ~~which both benefited from increased demand~~due to margin pressure as a result of a decline in used vehicle values and ~~reduced availability of new~~a decrease in used vehicle ~~inventory, and an increase~~unit volume. Domestic segment income was also adversely impacted by a decrease in finance and insurance gross profit ~~which benefited from higher~~due to the decrease in vehicle unit ~~volume and an increase~~volume. Decreases in ~~finance and insurance gross profit PVR. Domestic~~ segment income ~~also benefited from~~were partially offset by increases in parts and service gross profit associated with the preparation of vehicles for sale, wholesale parts sales, and customer-pay service. ~~Increases to Domestic segment income were partially offset by an increase in performance-driven SG&A expenses.~~

First Six Months ~~2021~~2022 compared to First Six Months ~~2020~~2021

Domestic revenue increased during the six months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to increases in ~~new and used vehicle unit volume and new and~~ used vehicle revenue ~~PVR. Unit volume~~and parts and service revenue. Used vehicle revenue increased due to an increase in used vehicle revenue PVR primarily due to reduced availability of new vehicle inventory. Parts and service revenue benefited from increases in revenue associated with wholesale parts sales, the ~~prior year~~preparation of vehicles for sale, and customer-pay service. Increases in Domestic revenue were partially offset by a decrease in new vehicle revenue, which was ~~significantly~~ adversely impacted by the COVID-19 pandemic, particularly during the last two weeks of March 2020 through April 2020. Unit volume and vehicle revenue PVR in the current year benefited from an increase in customer demand, partially offset by historically low new vehicle inventory levels due to manufacturer supply shortages.

Domestic segment income increased during the six months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to increases in new ~~and used~~ vehicle gross profit, ~~which both~~parts and service gross profit, and finance and insurance gross profit. New vehicle gross profit benefited from ~~increased demand and~~ reduced availability of new vehicle ~~inventory,~~inventory. Parts and service results benefited from increases in gross profit associated with the preparation of vehicles for sale, customer-pay service, and wholesale parts sales. Finance and insurance gross profit benefited from an increase in finance and insurance gross profit PVR, partially offset by a decrease in vehicle unit volume. Increases to Domestic segment income were partially offset by a decrease in used vehicle gross profit due to margin pressure as a result of a decline in used vehicle values, as well as an increase in performance-driven SG&A expenses.

Table of Contents

Import

The Import segment operating results included the following:


	Three Months Ended June 30,							Six Months Ended June 30,
($ in millions)	2022		2021		Variance Favorable / (Unfavorable)		% Variance	2022		2021		Variance Favorable / (Unfavorable)		% Variance
Revenue:
New vehicle	$	852.4	$	1,184.2	$	(331.8)	(28.0)	$	1,734.0	$	2,142.2	$	(408.2)	(19.1)
Used vehicle	699.6		604.5		95.1		15.7	1,407.2		1,089.2		318.0		29.2
Parts and service	266.3		248.5		17.8		7.2	521.8		462.6		59.2		12.8
Finance and insurance, net	125.7		133.2		(7.5)		(5.6)	252.1		242.3		9.8		4.0
Other	5.7		4.6		1.1			8.7		8.3		0.4
Total Revenue	$	1,949.7	$	2,175.0	$	(225.3)	(10.4)	$	3,923.8	$	3,944.6	$	(20.8)	(0.5)
Segment income	$	192.5	$	203.7	$	(11.2)	(5.5)	$	378.7	$	329.6	$	49.1	14.9
Retail new vehicle unit sales	23,612		36,136		(12,524)		(34.7)	48,148		66,979		(18,831)		(28.1)
Retail used vehicle unit sales	25,786		27,128		(1,342)		(4.9)	52,315		52,229		86		0.2

Second Quarter 2022 compared to Second Quarter 2021

Import revenue decreased during the three months ended June 30, 2022, as compared to the same period in 2021, primarily due to decreases in new and used vehicle unit volume, partially offset by increases in new and used vehicle revenue PVR. New vehicle unit volume was adversely impacted by historically low new vehicle inventory levels due to manufacturer supply shortages, which also favorably impacted new and used vehicle revenue PVR. Import revenue also benefited from ~~higher~~an increase in parts and service revenue associated with customer-pay service. Additionally, Import revenue benefited from the acquisitions we completed in 2021.

Import segment income decreased during the three months ended June 30, 2022, as compared to the same period in 2021, primarily due to decreases in used vehicle gross profit and finance and insurance gross profit. Used vehicle gross profit was adversely impacted by margin pressure as a result of a decline in used vehicle values. Finance and insurance gross profit was adversely impacted by a decrease in vehicle unit volume. Decreases to Import segment income were partially offset by an increase in parts and service gross profit associated with customer-pay service. Additionally, Import segment income benefited from the acquisitions we completed in 2021.

First Six Months 2022 compared to First Six Months 2021

Import revenue decreased during the six months ended June 30, 2022, as compared to the same period in 2021, primarily due to a decrease in new vehicle unit volume, partially offset by increases in new and used vehicle revenue PVR. New vehicle unit volume was adversely impacted by historically low new vehicle inventory levels due to manufacturer supply shortages, which also favorably impacted new and used vehicle revenue PVR. Import revenue also benefited from increases in parts and service revenue associated with wholesale parts sales and customer-pay service. Additionally, Import revenue benefited from the acquisitions we completed in 2021.

Import segment income increased during the six months ended June 30, 2022, as compared to the same period in 2021, primarily due to increases in new vehicle gross profit, parts and service gross profit, and finance and insurance gross profit. New vehicle gross profit benefited from reduced availability of new vehicle inventory. Parts and service results benefited from increases in gross profit associated with customer-pay service and the preparation of vehicles for sale. Finance and insurance gross profit benefited from an increase in finance and insurance gross profit ~~PVR.~~PVR, partially offset by a decrease in new vehicle unit volume. Increases to ~~Domestic~~Import segment income were partially offset by an increase in performance-driven SG&A expenses.

Table of Contents

~~Import~~Premium Luxury

The ~~Import~~Premium Luxury segment operating results included the following:


		Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended June 30,							Six Months Ended June 30,
($ in millions)	($ in millions)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance	($ in millions)	2022		2021		Variance Favorable / (Unfavorable)		% Variance	2022		2021		Variance Favorable / (Unfavorable)		% Variance
Revenue:	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	New vehicle	$	1,225.3	$	1,252.8	$	(27.5)	(2.2)	$	2,328.4	$	2,341.7	$	(13.3)	(0.6)
Used vehicle	Used vehicle	604.5		355.8		248.7		69.9	1,089.2		690.3		398.9		57.8	Used vehicle	904.6		788.8		115.8		14.7	1,820.7		1,431.1		389.6		27.2
Parts and service	Parts and service	248.5		170.4		78.1		45.8	462.6		377.9		84.7		22.4	Parts and service	367.0		317.6		49.4		15.6	718.9		602.8		116.1		19.3
Finance and insurance, net	Finance and insurance, net	133.2		82.4		50.8		61.7	242.3		166.4		75.9		45.6	Finance and insurance, net	118.4		108.0		10.4		9.6	225.6		194.8		30.8		15.8
Other	Other	4.6		4.1		0.5			8.3		6.3		2.0			Other	1.3		1.3		—			1.7		1.6		0.1
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	Total Revenue	$	2,616.6	$	2,468.5	$	148.1	6.0	$	5,095.3	$	4,572.0	$	523.3	11.4
Segment income	Segment income	$	203.7	$	88.3	$	115.4	130.7	$	329.6	$	154.2	$	175.4	113.7	Segment income	$	257.5	$	225.7	$	31.8	14.1	$	487.0	$	384.2	$	102.8	26.8
Retail new vehicle unit sales	Retail new vehicle unit sales	36,136		23,605		12,531		53.1	66,979		48,892		18,087		37.0	Retail new vehicle unit sales	17,518		19,569		(2,051)		(10.5)	33,059		36,418		(3,359)		(9.2)
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	Retail used vehicle unit sales	21,381		22,370		(989)		(4.4)	43,330		41,904		1,426		3.4

Second Quarter ~~2021~~2022 compared to Second Quarter ~~2020~~2021

~~Import~~Premium Luxury revenue increased during the three months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to the acquisitions we completed in 2021. Premium Luxury revenue also benefited from increases in new and used vehicle ~~unit volume and~~revenue PVR, partially offset by decreases in 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~~unit volume. New and used vehicle revenue PVR ~~in the current year~~ benefited from ~~an increase in customer demand, partially offset by~~ historically low new vehicle inventory levels due to manufacturer supply ~~shortages.~~shortages, which also negatively impacted new vehicle unit volume. Additionally, Premium Luxury revenue benefited from an increase in parts and service revenue associated with customer-pay service.

~~Import~~Premium Luxury segment income increased during the three months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to increases in new ~~and used~~ vehicle gross profit, ~~which both~~parts and service gross profit, and finance and insurance gross profit. New vehicle gross profit benefited from ~~increased demand and~~ reduced availability of new vehicle ~~inventory,~~inventory. Parts and service results benefited from an increase in gross profit associated with customer-pay service. Finance and insurance gross profit benefited from an increase in finance and insurance gross profit ~~which benefited primarily from higher~~PVR, partially offset by a decrease in vehicle unit ~~volume and an increase in finance and insurance gross profit PVR. Import~~volume. Additionally, Premium Luxury segment income ~~also~~ benefited from ~~increases~~the acquisitions we completed in ~~parts and service gross profit associated with the preparation of vehicles for sale and customer-pay service.~~2021. Increases to ~~Import~~Premium Luxury segment income were partially offset by an increase in performance-driven SG&A expenses.

First Six Months ~~2021~~2022 compared to First Six Months ~~2020~~2021

~~Import~~Premium Luxury revenue increased during the six months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to the acquisitions we completed in 2021. Premium Luxury revenue also benefited from increases in new and used vehicle revenue PVR and used vehicle unit volume, ~~and~~partially offset by a decrease in new vehicle unit volume. New and used vehicle revenue ~~PVR. Unit~~PVR and used vehicle unit volume in the prior year was significantly adversely impacted by the COVID-19 pandemic, particularly during the last two weeks of March 2020 through April 2020. Unit volume and vehicle revenue PVR in the current year benefited from ~~an increase in customer demand, partially offset by~~ historically low new vehicle inventory levels due to manufacturer supply ~~shortages.~~shortages, which also negatively impacted new vehicle unit volume. Premium Luxury revenue also benefited from increases in parts and service revenue associated with customer-pay service, wholesale parts sales, and the preparation of vehicles for sale.

~~Import~~Premium Luxury segment income increased during the six months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to increases in new ~~and used~~ vehicle gross profit, ~~which both~~parts and service gross profit, and finance and insurance gross profit. New vehicle gross profit benefited from ~~increased demand and~~ reduced availability of new vehicle ~~inventory,~~inventory. Parts and service results benefited from increases in gross profit associated with customer-pay service and the preparation of vehicles for sale. Finance and insurance gross profit benefited from an increase in finance and insurance gross profit ~~which benefited primarily from higher~~PVR, partially offset by a decrease in vehicle unit ~~volume and an increase in finance and insurance gross profit PVR.~~volume. Increases to ~~Import~~Premium Luxury segment income were partially offset by an increase in performance-driven SG&A expenses.

Table of Contents

~~Premium Luxury~~

~~The Premium Luxury segment operating results included the following:~~

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

~~Second Quarter 2021 compared to Second Quarter 2020~~

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

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

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

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

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

~~Table of Contents~~

Corporate and other

Corporate and other results included the following:


		Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended June 30,							Six Months Ended June 30,
($ in millions)	($ in millions)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance	($ in millions)	2022		2021		Variance Favorable / (Unfavorable)		% Variance	2022		2021		Variance Favorable / (Unfavorable)		% Variance
Revenue:	Revenue:															Revenue:
Used vehicle	Used vehicle	$	80.5	$	41.6	$	38.9	93.5	$	138.9	$	83.9	$	55.0	65.6	Used vehicle	$	129.4	$	80.5	$	48.9	60.7	$	255.0	$	138.9	$	116.1	83.6
Parts and service	Parts and service	126.8		103.0		23.8		23.1	$	244.4	$	258.8	$	(14.4)	(5.6)	Parts and service	127.5		126.8		0.7		0.6	$	255.3	$	244.4	$	10.9	4.5
Finance and insurance, net	Finance and insurance, net	2.0		11.7		(9.7)		(82.9)	9.8		17.4		(7.6)		(43.7)	Finance and insurance, net	4.1		2.0		2.1		105.0	15.2		9.8		5.4		55.1
Other	Other	0.8		0.6		0.2			1.0		1.4		(0.4)			Other	1.0		0.8		0.2			2.1		1.0		1.1
Revenue	Revenue	$	210.1	$	156.9	$	53.2	33.9	$	394.1	$	361.5	$	32.6	9.0	Revenue	$	262.0	$	210.1	$	51.9	24.7	$	527.6	$	394.1	$	133.5	33.9
Income (loss)	Income (loss)	$	(74.8)	$	(74.5)	$	(0.3)		$	(150.2)	$	(519.5)	$	369.3		Income (loss)	$	(50.8)	$	(74.8)	$	24.0		$	(102.1)	$	(150.2)	$	48.1

As of June 30, ~~2021,~~2022, we had 7256 AutoNation-branded collision centers, 611 AutoNation USA used vehicle stores, 4 AutoNation-branded automotive auction operations, and 3 parts distribution ~~centers that service our wholesale parts sales markets for the sale of original equipment manufacturer parts.~~centers. We plan to expand our AutoNation USA used vehicle stores and are targeting to have over 130 stores by the end of 2026. ~~We opened one AutoNation USA store in the second quarter of 2021 and are on track to open four additional new stores in the second half of 2021 and 12 additional new stores in 2022.~~ The planned expansion may be impacted by a number of variables, including customer adoption, market conditions, availability of used vehicle inventory, availability and cost of building supplies and materials, and our ability to identify, acquire, and build out suitable locations in a timely manner.

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

3938

Table of Contents

Selling, General, and Administrative Expenses

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


		Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended June 30,							Six Months Ended June 30,
($ in millions)	($ in millions)	2021		2020		Variance Favorable / (Unfavorable)		% Variance	2021		2020		Variance Favorable / (Unfavorable)		% Variance	($ in millions)	2022		2021		Variance Favorable / (Unfavorable)		% Variance	2022		2021		Variance Favorable / (Unfavorable)		% Variance
Reported:	Reported:															Reported:
Compensation	Compensation	$	534.0	$	356.3	$	(177.7)	(49.9)	$	975.6	$	730.4	$	(245.2)	(33.6)	Compensation	$	523.5	$	534.0	$	10.5	2.0	$	1,039.3	$	975.6	$	(63.7)	(6.5)
Advertising	Advertising	42.8		28.1		(14.7)		(52.3)	79.5		74.4		(5.1)		(6.9)	Advertising	44.5		42.8		(1.7)		(4.0)	84.4		79.5		(4.9)		(6.2)
Store and corporate overhead	Store and corporate overhead	172.1		163.5		(8.6)		(5.3)	341.7		343.8		2.1		0.6	Store and corporate overhead	186.8		172.1		(14.7)		(8.5)	372.5		341.7		(30.8)		(9.0)
Total	Total	$	748.9	$	547.9	$	(201.0)	(36.7)	$	1,396.8	$	1,148.6	$	(248.2)	(21.6)	Total	$	754.8	$	748.9	$	(5.9)	(0.8)	$	1,496.2	$	1,396.8	$	(99.4)	(7.1)

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	40.3		44.8		450		bps	41.4		45.4		400		bps	Compensation	38.4		40.3		190		bps	38.9		41.4		250		bps
Advertising	Advertising	3.2		3.5		30		bps	3.4		4.6		120		bps	Advertising	3.3		3.2		(10)		bps	3.2		3.4		20		bps
Store and corporate overhead	Store and corporate overhead	13.0		20.6		760		bps	14.4		21.4		700		bps	Store and corporate overhead	13.7		13.0		(70)		bps	13.9		14.4		50		bps
Total	Total	56.5		68.9		1,240		bps	59.2		71.4		1,220		bps	Total	55.4		56.5		110		bps	56.0		59.2		320		bps

Second Quarter ~~2021~~2022 compared to Second Quarter ~~2020~~2021

SG&A expenses increased during the three months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020, largely~~2021, primarily due to ~~a performance-driven increase in compensation expense. Additionally, gross advertising expenses increased $18.5 million,~~newly acquired and opened stores, partially offset by ~~an increase~~divested stores as well as a decrease in ~~advertising reimbursements from manufacturers~~deferred compensation obligations of ~~$3.8 million.~~$19.4 million as a result of changes in market performance of the underlying investments. As a percentage of total gross profit, SG&A expenses decreased to ~~56.5%~~55.4% during the three months ended June 30, ~~2021,~~2022, from ~~68.9%~~56.5% in the same period in ~~2020,~~2021, primarily due to improvements in gross profit PVR and effective cost management.

First Six Months ~~2021~~2022 compared to First Six Months ~~2020~~2021

SG&A expenses increased during the six months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020, largely~~2021, primarily due to a performance-driven increase in compensation ~~expense. Additionally, gross advertising expenses increased $8.7 million,~~expense, as well as newly acquired and opened stores. Increases were partially offset by ~~an increase~~divested stores as well as a decrease in ~~advertising reimbursements from manufacturers~~deferred compensation obligations of ~~$3.6 million.~~$28.9 million as a result of changes in market performance of the underlying investments. As a percentage of total gross profit, SG&A expenses decreased to ~~59.2%~~56.0% during the six months ended June 30, ~~2021,~~2022, from ~~71.4%~~59.2% in the same period in ~~2020,~~2021, primarily due to improvements in gross profit PVR and effective cost management.

~~Goodwill Impairment~~

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

~~Franchise Rights Impairment~~

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

~~Other (Income) Expense, Net (Operating)~~

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

~~Table of Contents~~

Non-Operating Income (Expense)

Floorplan Interest Expense

~~Second Quarter 2021 compared to Second Quarter 2020~~

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

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

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

~~Other Interest Expense~~

Second Quarter ~~2021~~2022 compared to Second Quarter ~~2020~~2021

~~Other~~Floorplan interest expense was ~~$20.9~~$5.8 million for the three months ended June 30, ~~2021,~~2022, compared to ~~$23.2~~$6.6 million for the same period in ~~2020.~~2021. The decrease in floorplan interest expense of ~~$2.3~~$0.8 million was ~~driven by~~the result of lower average ~~debt balances.~~vehicle floorplan balances, partially offset by higher average interest rates.

First Six Months ~~2021~~2022 compared to First Six Months ~~2020~~2021

~~Other~~Floorplan interest expense was ~~$42.1~~$11.0 million for the six months ended June 30, ~~2021,~~2022, compared to ~~$46.7~~$16.0 million for the same period in ~~2020.~~2021. The decrease in floorplan interest expense of ~~$4.6~~$5.0 million was the result of lower average vehicle floorplan balances, partially offset by higher average interest rates.

Table of Contents

Interest Expense

Second Quarter 2022 compared to Second Quarter 2021

Other interest expense was $34.1 million for the three months ended June 30, 2022, compared to $20.9 million for the same period in 2021. The increase in interest expense of $13.2 million was driven by higher average debt balances, partially offset by lower average interest rates.

First Six Months 2022 compared to First Six Months 2021

Other interest expense was $63.7 million for the six months ended June 30, 2022, compared to $42.1 million for the same period in 2021. The increase of $21.6 million was driven by higher average debt ~~balances.~~balances, partially offset by lower average interest rates.

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

~~During~~We recognized a net loss of $14.1 million and a net gain of $5.3 million for the three months ended June 30, 2022 and 2021, respectively, and a net loss of $20.8 million and a net gain of $8.8 million for the six months ended June 30, ~~2021, we recognized a gain of $5.3 million~~2022 and ~~$8.8 million,~~2021, respectively, related to ~~increases~~changes in the cash surrender value of corporate-owned life insurance (“COLI”) ~~held in a Rabbi Trust~~ for deferred compensation plan participants as a result of ~~improved~~changes in 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~~In the first quarter of 2021, we sold the remaining shares of one of our ~~Vroom~~minority equity ~~investment~~investments and recorded a realized gain of $7.5 million. ~~During the second quarters of 2021 and 2020,~~Additionally, we recorded an unrealized ~~gains~~gain of $3.4 million ~~and $214.7 million, respectively,~~during the second quarter of 2021 related to ~~changes~~the change in ~~the~~ fair ~~values~~value of the underlying securities of our minority equity ~~investments. See Note 11 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.~~investment.

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 25.4% for the three months ended June 30, 2022, and 24.8% for the three months ended June 30, ~~2021, and 25.7% for the three months ended June 30, 2020.~~2021. Our effective income tax rate was 24.8% for the six months ended June 30, 2022, and 24.7% for the six months ended June 30, 2021, and 54.7% for the six months ended June 30, 2020. The tax rate for the six months ended June 30, 2020, reflects the fact that a significant portion of the goodwill impairment charges taken in the first quarter of 2020 was not deductible for income tax purposes. 2021.

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

~~Table of Contents~~

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.

Table of Contents

Available Liquidity Resources

We had the following sources of liquidity available:


(In millions)	(In millions)	June 30, 2021			December 31, 2020		(In millions)	June 30, 2022			December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	59.5		$	569.6	Cash and cash equivalents	$	336.5		$	60.4
Revolving credit facility	Revolving credit facility	$	1,760.3	(1)	$	1,760.3	Revolving credit facility	$	1,760.2	(1)	$	1,760.3
Secured used vehicle floorplan facilities (2)	Secured used vehicle floorplan facilities (2)	$	0.2		$	0.3	Secured used vehicle floorplan facilities (2)	$	0.1		$	0.1

(1) At June 30, ~~2021,~~2022, we had ~~$39.7~~$39.8 million of letters of credit outstanding. In addition, we use the revolving credit facility under our credit agreement as a liquidity backstop for borrowings under our commercial paper program. We had ~~$200.0 million~~no commercial paper notes outstanding at June 30, ~~2021.~~2022. See Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information.

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

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

In the ordinary course of business, we are required to post performance and surety bonds, letters of credit, and/or cash deposits as financial guarantees of our performance relating to insurance matters. At June 30, ~~2021,~~2022, surety bonds, letters of credit, and cash deposits totaled ~~$100.3~~$106.5 million, of which ~~$39.7~~$39.8 million were letters of credit. We do not currently provide cash collateral for outstanding letters of credit.

In February ~~2019,~~2022, 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 and new AutoNation USA used vehicle stores, as well as for other strategic and technology initiatives. We also deploy capital opportunistically to ~~repurchase our common stock and/or debt, to~~ complete acquisitions or investments, ~~and/or~~ build facilities for newly awarded franchises, ~~and new AutoNation USA used vehicle stores.~~and/or repurchase our common stock and/or debt. Our capital allocation decisions will be based on factors such as the expected rate of return on our investment, the market price of our common stock versus our view of its intrinsic value, the market price of our debt, the potential impact on our capital structure, our ability to complete acquisitions that meet our market and vehicle brand criteria and return on investment threshold, and limitations set forth in our debt agreements.

Share Repurchases

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

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

~~Table of Contents~~


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions, except per share data)	2022		2021		2022		2021
Shares repurchased	3.7		7.5		7.2		11.3
Aggregate purchase price	$	403.9	$	736.1	$	784.9	$	1,042.2
Average purchase price per share	$	109.22	$	98.17	$	109.62	$	91.94

In July ~~2021,~~2022, our Board of Directors increased the share repurchase authorization by $1.0 billion. As of July ~~19, 2021, $1.0~~20, 2022, $1.1 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.

Table of Contents

Capital Expenditures

The following table sets forth information regarding our capital expenditures:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
(In millions)	(In millions)	2021		2020		2021		2020		(In millions)	2022		2021		2022		2021
Purchases of property and equipment, including operating lease buy-outs (1)	Purchases of property and equipment, including operating lease buy-outs (1)	$	74.3	$	24.6	$	118.7	$	54.6	Purchases of property and equipment, including operating lease buy-outs (1)	$	106.1	$	74.3	$	156.9	$	118.7

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

At June 30, ~~2021,~~2022, we owned approximately ~~83%~~82% of our new vehicle franchise store locations with a net book value of ~~$2.1~~$2.3 billion, as well as other properties associated with our collision centers, AutoNation USA used vehicle stores, ~~auction operations,~~ parts distribution centers, auction operations, and other excess properties with a net book value of ~~$502.4~~$663.5 million. None of these properties are mortgaged or encumbered.

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

Acquisitions and Divestitures

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


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
(In millions)	(In millions)	2021		2020		2021		2020		(In millions)	2022		2021		2022		2021
Cash received from (used in) business acquisitions, net	Cash received from (used in) business acquisitions, net	$	—	$	—	$	—	$	(0.4)	Cash received from (used in) business acquisitions, net	$	—	$	—	$	—	$	—
Cash received from (used in) business divestitures, net	Cash received from (used in) business divestitures, net	$	2.4	$	—	$	4.3	$	—	Cash received from (used in) business divestitures, net	$	—	$	2.4	$	—	$	4.3

We did not purchase or divest stores during the six months ended June 30, 2022. We divested two stores and two collision centers during the six months ended June 30, 2021.

We ~~divested one store and terminated one franchise during the six months ended June 30, 2020.~~

entered into an agreement in July 2022 to acquire CIG Financial, an auto finance company headquartered in Irvine, California.

4342

Table of Contents

Long-Term Debt and Commercial Paper

The following table sets forth our non-vehicle long-term debt, net of debt issuance costs, as of June 30, ~~2021,~~2022, and December 31, ~~2020.~~2021.


				(in millions)
Debt Description	Debt Description	Maturity Date	Interest Payable	June 30, 2021		December 31, 2020		Debt Description	Maturity Date	Interest Payable	June 30, 2022		December 31, 2021
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
1.95% Senior Notes								1.95% Senior Notes	August 1, 2028	February 1 and August 1	400.0		400.0
4.75% Senior Notes	4.75% Senior Notes	June 1, 2030	June 1 and December 1	500.0		500.0		4.75% Senior Notes	June 1, 2030	June 1 and December 1	500.0		500.0
2.40% Senior Notes								2.40% Senior Notes	August 1, 2031	February 1 and August 1	450.0		450.0
3.85% Senior Notes								3.85% Senior Notes	March 1, 2032	March 1 and September 1	700.0		—
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 2040	Monthly	111.1		116.6		Finance leases and other debt	Various dates through 2041		324.4		330.6
				1,811.1		2,116.6					3,574.4		2,880.6
Less: unamortized debt discounts and debt issuance costs	Less: unamortized debt discounts and debt issuance costs			(13.8)		(14.8)		Less: unamortized debt discounts and debt issuance costs			(27.9)		(22.2)
Less: current maturities	Less: current maturities			(7.0)		(309.2)		Less: current maturities			(11.8)		(12.2)
Long-term debt, net of current maturities	Long-term debt, net of current maturities			$	1,790.3	$	1,792.6	Long-term debt, net of current maturities			$	3,534.7	$	2,846.2

~~In January 2021,~~On February 28, 2022, we ~~repaid the outstanding $300.0~~issued $700 million aggregate principal amount of ~~3.35%~~3.85% Senior Notes ~~through utilization~~due 2032, which were sold at 99.835% of ~~available funds.~~the aggregate principal amount.

We had ~~$200.0 million of~~no commercial paper notes outstanding at June 30, ~~2021,~~2022, and no$340.0 million commercial paper notes outstanding at December 31, ~~2020.~~2021.

A downgrade in our credit ratings could negatively impact the interest rate payable on our 3.5% Senior Notes, 4.5% Senior Notes, 3.8% Senior Notes, and 4.75% Senior Notes and could negatively impact our ability to issue, or the interest rates for, commercial paper notes. Additionally, an increase in our leverage ratio could negatively impact the interest rates charged for borrowings under our revolving credit facility.

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 Contents

As of June 30, ~~2021,~~2022, we were in compliance with the requirements of the financial covenants under our debt agreements. Under the terms of our credit agreement, at June 30, ~~2021,~~2022, our leverage ratio and capitalization ratio were as follows:


	June 30, ~~2021~~2022
	Requirement	Actual
Leverage ratio	≤ 3.75x	~~1.17x~~1.53x
Capitalization ratio	≤ 70.0%	~~43.3%~~55.1%

~~Table of Contents~~

Vehicle Floorplan Payable

The components of vehicle floorplan payable are as follows:


(In millions)	(In millions)	June 30, 2021		December 31, 2020		(In millions)	June 30, 2022		December 31, 2021
Vehicle floorplan payable - trade	Vehicle floorplan payable - trade	$	669.5	$	1,541.7	Vehicle floorplan payable - trade	$	556.5	$	489.9
Vehicle floorplan payable - non-trade	Vehicle floorplan payable - non-trade	901.8		1,218.2		Vehicle floorplan payable - non-trade	960.9		967.7
Vehicle floorplan payable	Vehicle floorplan payable	$	1,571.3	$	2,759.9	Vehicle floorplan payable	$	1,517.4	$	1,457.6

Our vehicle floorplan facilities currently primarily utilize LIBOR-based interest rates. In connection with global reference rate reform initiatives, particularly related to LIBOR, in October 2021, we began modifying our floorplan agreements to replace the reference rate from LIBOR to an alternative reference rate. The floorplan agreement modifications will be accounted for by prospectively adjusting the effective interest rate in accordance with accounting standards. We do not expect the change from LIBOR to an alternative reference rate to have a material impact on our annual floorplan interest expense. See Note 5 of the Notes to Unaudited Condensed Consolidated Financial Statements for more information on our vehicle floorplan payable.

Cash Flows

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


		Six Months Ended					Six Months Ended
		June 30,					June 30,
(In millions)	(In millions)	2021		2020		(In millions)	2022		2021
Net cash provided by operating activities	Net cash provided by operating activities	$	930.3	$	894.3	Net cash provided by operating activities	$	895.0	$	930.3
Net cash used in investing activities	Net cash used in investing activities	$	(8.5)	$	(124.7)	Net cash used in investing activities	$	(148.5)	$	(8.5)
Net cash used in financing activities	Net cash used in financing activities	$	(1,431.8)	$	(554.7)	Net cash used in financing activities	$	(470.5)	$	(1,431.8)

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~~decreased during the six months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to an increase in ~~earnings,~~working capital requirements, partially offset by an increase in ~~working capital requirements.~~earnings.

Cash Flows from Investing Activities

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

Net cash used in investing activities ~~decreased~~increased during the six months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020,~~2021, primarily due to a decrease in proceeds ~~received~~ from the sale of ~~an equity security in 2021 and a decrease in investments made in~~ equity securities ~~partially offset by~~and an increase in purchases of property and ~~equipment.~~equipment, partially offset by an increase in proceeds from assets held for sale.

Table of Contents

Cash Flows from Financing Activities

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

During the six months ended June 30, 2022, we issued $700.0 million aggregate principal amount of 3.85% Senior Notes due 2032. Cash flows from financing activities during the six months ended June 30, 2022, reflect cash payments of $6.6 million for debt issuance costs associated with the senior note issuance that are being amortized to interest expense over the term of the senior notes. During the six months ended June 30, 2021, we repaid the outstanding $300.0 million of 3.35% Senior Notes due 2021.

Cash flows from financing activities include changes in commercial paper notes outstanding totaling net payments of $340.0 million during the six months ended June 30, 2022, and net proceeds of $200.0 million during the six months ended June 30, 2021, and vehicle floorplan payable-non-trade totaling net payments of $5.5 million and $316.9 million during the six months ended June 30, 2022 and 2021, respectively.

During the six months ended June 30, 2022, we repurchased 7.2 million shares of common stock for an aggregate purchase price of $784.9 million (average purchase price per share of $109.62), including repurchases for which settlement occurred subsequent to June 30, 2022. During the six months ended June 30, 2021, we repurchased 11.3 million shares of common stock for an aggregate purchase price of $1.0 billion (average purchase price per share of $91.94), including repurchases for which settlement occurred subsequent to June 30, 2021. ~~During the six months ended June 30, 2020, we repurchased 2.5 million shares of common stock for an aggregate purchase price of $80.0 million (average purchase price per share of $31.95).~~

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

~~Table of Contents~~

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

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

Forward-Looking Statements

Our business, financial condition, results of operations, cash flows, and prospects, and the prevailing market price and performance of our common stock may be adversely affected by a number of factors, including the matters discussed below. Certain statements and information set forth in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding our strategic initiatives, partnerships, or investments, including the planned expansion of our AutoNation USA used vehicle stores and our anticipated investments in connection therewith; pending acquisitions; our investments in digital and online capabilities and other brand extension strategies; the impact of the COVID-19 pandemic on our business, results of operations, and financial condition; our expectations for the future performance of our business and the automotive retail industry; our investments in digital and online capabilities; pending acquisitions; 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,” “target,” “project,” “plan,” “believe,” “continue,” “may,” “will,” “could,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Our forward-looking statements reflect our current expectations concerning future results and events, and they involve known and unknown risks, uncertainties and other factors that are difficult to predict and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these statements. These forward-looking statements speak only as of the date of this report, and we undertake no obligation to revise or update these statements to reflect subsequent events or circumstances. The risks, uncertainties, and other factors that our stockholders and prospective investors should consider include, but are not limited to, the following:

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

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

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

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

Table of Contents

•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 various strategic initiatives, including the planned expansion of our ~~brand extension strategy,~~AutoNation USA stores and the planned acquisition of an auto finance company, and if ~~our strategic initiatives~~they 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.

~~Table of Contents~~

•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~~that 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~~in response to climate change, including fuel economy and greenhouse gas emission standards, or changes to existing standards, ~~may affect vehicle manufacturers’ ability to produce cost-effective vehicles or vehicles that consumers demand, which~~ could adversely impact our business, results of operations, financial condition, cash flow, and prospects.

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

•Our operations are subject to extensive governmental laws and regulations. If we are found to be in purported violation of or subject to liabilities under any of these laws or regulations, or if new laws or regulations are enacted that adversely affect our operations, our business, operating results, and prospects could suffer.

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

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

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

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

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

•Natural disasters and adverse weather events, including the effects of climate change, can disrupt our business.

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

Additional Information

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

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

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

The information that we post on ~~these~~our websites and 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~~those websites and social media channels. ~~These~~Our social media channels may be updated from time to time on ~~AutoNation’s~~our investor relations

Table of Contents

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.

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

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

We had ~~$1.6~~$1.5 billion of variable rate vehicle floorplan payable at June 30, ~~2021,~~2022, and ~~$2.8~~$1.5 billion at December 31, ~~2020.~~2021. Based on these amounts, a 100 basis point change in interest rates would result in an approximate change to our annual floorplan interest expense of ~~$15.7~~$15.2 million at June 30, ~~2021,~~2022, and ~~$27.6~~$14.6 million at December 31, ~~2020.~~2021. Our exposure to changes in interest rates with respect to total vehicle floorplan payable is partially mitigated by manufacturers’ floorplan assistance, which in some cases is based on variable interest rates.

We had ~~$200.0 million of~~no commercial paper notes outstanding at June 30, 2022, and $340.0 million at December 31, 2021. Based on the ~~amounts~~amount outstanding, a 100 basis point change in interest rates would result in an approximate change to our annual interest expense of ~~$2.0~~$3.4 million ~~at June 30, 2021. We had no commercial paper notes outstanding~~ at December 31, ~~2020.~~2021.

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~~$3.5 billion and had a fair value of ~~$2.0~~$3.3 billion as of June 30, ~~2021,~~2022, and totaled ~~$2.1~~$2.9 billion and had a fair value of ~~$2.3~~$3.0 billion as of December 31, ~~2020.~~2021.

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.

Table of Contents

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, 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

~~Table of Contents~~

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

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

The table below sets forth information with respect to shares of common stock repurchased by AutoNation, Inc. during the three months ended June 30, ~~2021.~~2022.

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


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, 2022 - April 30, 2022	1,858,043	$	104.45	1,858,043	$	319.6
May 1, 2022 - May 31, 2022	1,658,948	$	114.89	1,658,948	$	129.0
June 1, 2022 - June 30, 2022	181,348	$	106.29	181,348	$	109.7
Total	3,698,339			3,698,339

(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~~2022, $109.7 million remained available under our stock repurchase limit. In July ~~2021,~~2022, our Board of Directors increased the share repurchase authorization by $1$1.0 billion. Our stock repurchase program does not have an expiration date.

ITEM 6. EXHIBITS


Exhibit No.			Description






31.1			Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act.
31.2			Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act.
32.1			Certification of Chief Executive Officer Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350.
32.2			Certification of Chief Financial Officer Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350.
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			XBRL Taxonomy Extension Label Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

5049

Table of Contents

SIGNATURE

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


		AUTONATION, INC.

Date:	July 21, ~~2021~~2022	By:	/s/ Christopher Cade
			Christopher Cade Senior Vice President and Chief Accounting Officer

			(Duly Authorized Officer and Principal Accounting Officer)

5150


	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


	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


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


	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