Item 2.05 Costs Associated with Exit or Disposal Activities.




As part of its continued efforts to reduce costs and increase efficiencies,
AutoNation, Inc. (the "Company") determined, on August 17, 2020, to close its
aftermarket collision parts business, referred to as "AutoNation Collision
Parts" or "ACP," by the end of 2020. The ACP business represented less than 1%
of the Company's parts and service gross profit for the six months ended June
30, 2020. The Company will continue its profitable AutoNation PrecisionParts
business, which includes the sale of branded maintenance and repair parts. Sales
of AutoNation Collision Parts and PrecisionParts are included in the Company's
"parts and service" results of operations. The Company expects substantial SG&A
savings related to the closing of the ACP business and now targets operating
below 68% SG&A as a percentage of gross profit beginning with the third quarter
of 2020.
In connection with the closing of the ACP business, the Company currently
estimates that it will incur charges in the second half of 2020 of approximately
$52 million, of which approximately $12 million will be cash expenditures. The
estimated charges are comprised of approximately $28 million related to
inventory write-downs, approximately $8 million related to contract termination
charges, and approximately $16 million related to other associated costs,
including accelerated depreciation, severance, and closing costs. The Company
also expects additional cash expenditures following the closing of approximately
$9 million related to existing contractual obligations.
The Company continues to prioritize its capital allocation towards opportunities
that it believes will have the greatest return potential. The Company recently
announced the major expansion and acceleration of AutoNation USA stand-alone
used vehicle stores and plans to build at least 20 additional AutoNation USA
stores over the next 3 years.
FORWARD-LOOKING STATEMENTS
This report contains 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 are, or may be deemed to be, forward-looking statements. Words
such as "anticipates," "expects," "intends," "goals," "plans," "believes,"
"continues," "may," "will," "could," and variations of such words and similar
expressions are intended to identify such forward-looking statements. Statements
regarding estimated charges related to the closing of the ACP business and the
planned expansion of our AutoNation USA stand-alone used vehicle stores, as well
as statements regarding our expectations for the future performance of our
business (including with respect to SG&A as a percentage of gross profit) and
the automotive retail industry and other statements that describe our
objectives, goals, or plans, are 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, and achievements expressed or implied by these statements. These
risks, uncertainties, and other factors include, among others: the ultimate net
realizable value of the relevant inventories; the estimated fair values of
certain other assets; actual fees paid in connection with certain contract
terminations; the final closing costs associated with the closing of the ACP
business; our ability to successfully implement and maintain expense controls;
our ability to implement successfully our strategic initiatives, partnerships,
and investments, including the planned expansion of our AutoNation USA stores,
our investments in digital and online capabilities, and other brand extension
strategies; our ability to identify, acquire, and build out suitable locations
in a timely manner; our ability to maintain and enhance our retail brands and
reputation and to attract consumers to our own digital channels; and other
factors described in our news releases and filings made under the securities
laws, including, among others, our Annual Reports on Form 10-K, our Quarterly
Reports on Form 10-Q and our Current Reports on Form 8-K. Forward-looking
statements contained in this report speak only as of the date of this report,
and we undertake no obligation to update these forward-looking statements to
reflect subsequent events or circumstances.

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